EC: Pump And Dump

This week on the podcast, I did a deep dive into **Ecopetrol SA (EC)**, the company I’ve dubbed "The Golden Goose in the Wolf’s Den." It’s a story of "magical realism" meeting the oil markets, a national oil giant with a pipeline monopoly and a massive electricity grid, all while being run by a president who has a public vendetta against fossil fuels. It’s a bit like owning a steakhouse where the landlord is a militant vegan. # The Origin Story The roots of Ecopetrol go back to the early 20th century and the "De Mares Concession," a deal so old it involved a general who nearly went to war with the U.S. over Panama. It eventually became the national oil company of Colombia in 1951. Today, the Colombian government still owns about 88.5% of the shares, but it’s listed on the NYSE for the rest of us to play along. But here is where the "magical realism" kicks in: the current President, Gustavo Petro, is a former guerrilla fighter who is an outspoken critic of fossil fuels. He’s banned new exploration contracts, yet his government relies on the company’s revenue to keep the lights on. It’s a delicate, slightly dysfunctional dance. # The "Pipeline Monopoly" The secret weapon here isn't just the drilling; it’s the infrastructure. Because of Colombia’s geography, three branches of the Andes and dense jungles, moving oil by truck is dangerous and expensive. Ecopetrol owns **Cenit**, a wholly-owned subsidiary that controls the pipelines. If you drill oil in Colombia, you have to pay Ecopetrol to move it. Better yet, they own the maritime terminals and storage at the ports. It’s a classic "toll bridge" moat that generates cash regardless of what the spot price of oil is doing. # The "Spider Net" Pivot They aren't just sitting on their oily laurels, though. In 2021, they bought a 51.4% stake in **ISA**, which is essentially the high-voltage transmission grid for much of Latin America (Colombia, Brazil, Chile, and Peru). They are effectively using "dirty" oil money to buy a clean electricity monopoly. It’s their lifeboat for the energy transition. If the oil runs out or gets regulated into oblivion, they’ll still control the power grid. # Why is it so cheap? If you look at the chart, the market has been punishing the share price for a couple of years. Why? * **The "Petro" Risk**: Investors are terrified that the President will prioritize ideology over profits or replace the board with "Yes Men" (which is already starting to happen). * **The Taxman Cometh**: They are currently contesting a massive **$1.3 billion** tax bill for unpaid VAT and penalties. * **Scandal PTSD**: They are still dealing with the fallout of the "Reficar" refinery scandal, a project that went billions over budget and famously included **$16 million** in "labor relations" that were actually prostitution services for executives. # The Value Play Despite the drama, the numbers hit the top of my QAV buy list: * **Huge Yield**: It boasts a dividend yield around **9%**. * **Low Pr-OPCF**: The price to op cash is 2.74. * **Also ticks a lot of our other boxes:** Price<=Book+30%, high Quality Rank, Stock Rank and F Score on Stockopedia, Book Value Growth positive, Yield>Bank Debt, etc. # Final Verdict This is a "Golden Goose" living in a very dangerous neighborhood. You’re buying a pipeline and electricity monopoly at a deep discount because the market hates the political theater surrounding it. **Disclaimer**: This is not financial advice. I’m just a guy with a spreadsheet and a fondness for Colombian magical realism. I added this to my portfolio earlier this week but a couple of days later the oil price became a sell. If it stays that way, my rules say I have to sell this stock too.