Ecopetrol Outlines $7.2B Plan to Balance Oil Output and Green Shift

Colombia’s state-controlled oil and gas producer, Ecopetrol SA, has detailed a plan to invest between $5.9 billion and $7.2 billion in 2026, aiming to sustain hydrocarbon production while dedicating nearly a third of its capital to low-carbon energy projects. The company is targeting a robust EBITDA margin of approximately 40% as it navigates a challenging economic landscape and the Colombian government's ambitious decarbonization goals.

The investment strategy, announced by the company on Thursday, underscores the delicate balancing act faced by national oil companies in emerging markets. Ecopetrol will allocate roughly 70% of its budget, about $4.7 billion, to its traditional oil and gas business. This capital is earmarked to maintain production levels between 730,000 and 740,000 barrels of oil equivalent per day and support refinery throughput of up to 420,000 barrels per day.

The remaining 30% of the budget, over $2 billion, is designated for its energy transition initiatives. This includes investments in renewable energy, hydrogen, and carbon capture, as well as significant capital for its power transmission subsidiary, Interconexión Eléctrica S.A. (ISA). The plan is based on a conservative projection of Brent crude prices averaging $60 per barrel.

“The 2026 Investment Plan reflects our commitment to profitable growth and the advancement of the energy transition,” the company stated in its official release. The strategy aims to ensure the country's energy security and provide substantial transfers to the nation, estimated at around COP 28 trillion (approximately $7.5 billion).

Ecopetrol's announcement comes as the company navigates a complex environment. Its shares (NYSE: EC) have delivered a high dividend yield, recently hovering above 20%, making it an attractive, if volatile, holding for income-focused investors. However, the company's financial performance has been mixed, with strong operational results in the third quarter of 2025 offset by net income that fell short of analyst forecasts. The stock trades at a modest price-to-earnings ratio of around 7.5, reflecting market caution.

This caution is shared by credit rating agencies and market analysts. In October, Fitch Ratings reaffirmed Ecopetrol's 'BB+' rating but maintained a Negative Outlook, signaling potential future downgrades. The consensus among analysts is a 'Hold', with an average price target of $9.45, slightly below its recent trading price of around $9.84 per share. This suggests that while the strategic plan provides clarity, the market remains wary of execution risks and broader macroeconomic headwinds.

The plan’s 70/30 split between fossil fuels and green energy highlights the central tension in Colombia's economic policy. President Gustavo Petro’s administration has championed an aggressive shift away from fossil fuels, yet the nation remains heavily reliant on oil revenue. Ecopetrol’s continued heavy investment in hydrocarbons is essential for funding both the government and the very transition it advocates.

Analysts note that while the commitment to low-carbon projects is significant, the plan ensures the company’s core oil and gas operations remain the primary driver of value for the foreseeable future. The investment in ISA is seen as a key part of this strategy, providing stable, regulated returns that can help de-risk the company's overall portfolio.

For investors, Ecopetrol's 2026 roadmap presents a clear picture of a company at a crossroads. It is shoring up its profitable legacy assets while laying the financial groundwork for a lower-carbon future. The success of this dual strategy will depend on disciplined capital execution, stable energy prices, and the ability to navigate the intricate political landscape of one of Latin America’s largest economies.