Ecopetrol Loses Two Board Members on Occidental Oil Deal Fallout

(Bloomberg) -- Two members of Ecopetrol SA’s board quit following the company’s decision to pull out of a $3.6 billion deal to buy a stake in Texas shale-oil assets from Occidental Petroleum Corp.

The deal was “fundamental” to the Colombian oil producer’s future and without the resources it would have provided, its finances will deteriorate, Juan José Echavarría and Luis Alberto Zuleta wrote in their resignation letter, which is dated Aug. 30 but has already been published by local media. Echavarría confirmed by text message that he intends to resign on that date. 

In May, Ecopetrol’s board approved the plan to buy a 30% stake in Permian Basin assets that Oxy bought from CrownRock LP, according to the letter. But after Colombian President Gustavo Petro told Ecopetrol Chief Executive Officer Ricardo Roa and some board members in an informal July 31 meeting that he was opposed to the deal, a majority of the board voted against it, the letter states. 

Petro has called fighting climate change a matter of “life and death,” proposed a ban on fracking and refused to grant licenses to explore new natural gas wells, even as Colombia faces a shortfall of the fuel.

“Some members of the board of directors have expressed some discomfort” with the Occidental acquisition, Roa told W Radio, confirming that the board will meet later this week. The discussion of the deal “was very complex,” he said, adding that it was untrue that the board at one point had approved it. Ecopetrol didn’t immediately reply to a request for comment.

The acquisition was forecast to add 50,000 barrels per day to the state energy company’s production and expand its reserves by around 11%. Echavarría and Zuleta were seen as the only two board members that weren’t political appointees. 

“This message of government interference sends a very bad signal,” said BTG Pactual analyst Daniel Guardiola. “The independence of a company that is publicly listed in the US isn’t being respected.”  

Ecopetrol’s shares fell as much as 1% at the open in Bogotá trading before erasing losses. The company’s American depositary receipts are down 1.1%.

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