Oil Stock #4 Ecopetrol (EC)
One Latin American country with huge potential to ramp up oil production is Colombia, which is South America’s third-largest oil producer after Venezuela and Brazil. The only way to play that for U.S.-based investors is to buy Ecopetrol (NYSE: EC), which is listed on the NYSE as an ADR. The company is huge with a market cap of $68 billion, but very little debt. EC plans to invest $80 billion through 2020 to more than double daily output to 1.3 million barrels of crude.
The company’s reserves are primarily concentrated in Latin America, and EC is expanding its search for oil in Colombia, Brazil, Peru and the Gulf of Mexico. In fact, Colombia will use its armed forces to help search for new reserves of oil. And with great progress being made by the government in oil-rich territories previously held by guerillas and drug cartels, I expect Ecopetrol to capitalize nicely on the new opportunities.
The multiple of 12 times forward earnings is cheap based on the expected 58% surge in 2011 profits. Plus, this oil stock pays a nice 2.7% dividend.