Bear of the Day: Ecopetrol (EC)

Ecopetrol Company OverviewZacks Rank #5 (Strong Sell) stock Ecopetrol (EC) is a Colombian-based integrated oil and gas company with global operations in areas including the United States, Brazil, and Peru. The company is focused on identifying energy extraction opportunities primarily within the easter Llanos Basin of Colombia, and in other areas in Colombia and Northern Peru. EC’s operations include extracting, collecting, treating, storing, and pumping or compressing hydrocarbons. In addition, Ecopetrol has over 160 production fields concentrated in Magdalena, the eastern Caribbean, and the provinces of Putumayo, Cesar and Norte de Santander. Recently, Ecopetrol began purchasing renewable energy assets as the company looks to diversify beyond its traditional oil and gas operations.Trump Administration Seeks to Roll Back Alaska Oil RestraintsA hot political point of contention in the United States has been whether to allow oil drilling in Alaska. Environmentalists on the left have argued against drilling to preserve wildlife and the environment, while conservatives have pushed for an easing of restrictions. Monday, the Trump administration announced that it will be removing the Biden-era ban on oil drilling (as promised and expected). Though Alaska’s ~9 billion barrels of recoverable oil pale in comparison to oil-rich countries like Saudi Arabia and Canada, the news will help Donald Trump deliver on his promise to let companies “Drill, baby, drill.” More oil supply on the global market will increase oil supply and pressure prices.EC Exhibits Relative Weakness Versus Stock Market and OilThe most straightforward way to determine whether a stock is a winner is to monitor its relative price action versus the general market and the industry. EC shares have flushed 30% over the past year. Meanwhile, the Global X MSCI Colombia ETF (GXG) is up 7%, and the United States Oil Fund ETF (USO) is essentially flat. Zooming into the short-term, and the technical picture does not get any brighter. On Monday, crude oil jumped by 3.5%, and EC mustered a gain of just 0.35%. To make matters worse, the stock is carving out a dangerous-looking bear flag chart pattern.Image Source: Zacks Investment ResearchEcopetrol Acquisitions Lead to High DebtThe debt-to-equity ratio measures a company’s long-term debt divided by total shareholder equity. While Ecopetrol’s renewable energy acquisitions have yielded little in the way of earnings thus far, they have led to a soaring debt-to-equity ratio.Image Source: Zacks Investment ResearchEcopetrol's Governance & Social Impact Cause IssuesSeveral shakeups within the EC management team have occurred in recent months, which is never a welcome sign for investors. In addition, the company faces an internal debate about how much it wants to balance its legacy fossil fuel energy business with its new and costly renewable energy transition efforts.Bottom LineGiven Ecopetrol’s Zacks Rank #5 (Strong Sell) and the numerous headwinds it faces – from underperforming the broader market and oil prices to mounting debt from its renewable energy ventures and recent management instability – investors should exercise extreme caution.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Ecopetrol S.A. (EC): Free Stock Analysis Report United States Oil ETF (USO): ETF Research Reports Global X MSCI Colombia ETF (GXG): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks