Ecopetrol’s Long Duration Notes: Buying Political Change at a Discount
The May 31 Colombian presidential election is eight days away. The bond market is pricing the Petro regime in perpetuity. It is wrong. Here is the trade.
As you know, I am a die-hard macro enthusiast. My favorite macro bet for the coming few months is Colombia, of course, next to the Middle East crisis. There are many ways to express your “Long Colombia” view, with equities and ETFs being the most popular. But standalone stocks and index funds are a tiny part of our macro instrumentarium. Consider fixed income, FX, and all kinds of cryptic derivatives.
This is the month of May Fixed Income report for Researchers and Strategists. In this report, I explore how to bet on political change in Colombia using Ecopetrol’s debt instruments.
The setup is a deeply discounted, long-duration note issued by Colombia’s state oil company, Ecopetrol (NYSE: EC). The notes in question trade at 73 cents on the dollar, presenting a highly asymmetric opportunity. The May 31 presidential election is the catalyst. A right-of-center victory changes the narrative about Ecopetrol, compresses spreads violently, and delivers a mark-to-market gain on a long-duration paper. This is the trade in a nutshell.
Today’s report follows a different structure because it is not about classic HY play or distressed debt bet, where extended discussion of liquidation scenarios and windfall estimates is a must. This is a tactical trade, so the most critical aspects here are catalysts, followed by scenarios, and execution. Liquidation and waterfall analysis don’t add much operational value here because this trade has a time horizon limited to a few quarters if right and a few weeks if wrong, and its outcome depends mostly on non-company catalysts.
Before I move to the essence – catalysts, scenarios, and execution – let’s say a few words about Ecopetrol.
Ecopetrol at a Glance
Ecopetrol is an integrated energy company, 88.49% owned by the Colombian government, and Latin America’s fourth-largest oil and gas producer by market capitalization. The business spans four segments. For reference, the chart below (via Ecopetrol March presentation):
EXPLORATION & PRODUCTION
E&P is the revenue engine. In 1Q26, the segment contributed 50% of group EBITDA. Domestic crude production was 520 MBOED (+6 MBOED versus 4Q25), and total group production reached 725 MBOED, tracking the full-year guidance of 730–740 MBOED. The realized crude basket was $68/bbl. Lifting cost fell 14% year-over-year to $12.2/bbl, which is competitive by EM standards. EBITDA margin for the hydrocarbons segment recovered to 40% in 1Q26 from 27% in 4Q25, driven by higher Brent ($78 versus $63/bbl) and meaningful cost discipline. Hydrocarbons EBITDA rose 44% quarter-over-quarter to COP 11.23 trillion.