Ecopetrol Rating Cut: Moody’s Drops Colombia Oil Giant to Ba2

Moody’s has now joined S&P in downgrading Ecopetrol this month. The agency did not frame the cut as oil-market risk — it framed it as political risk, and specifically as risk that the Colombian state will keep extracting more from its national oil company than the company can afford to give.

The Rio Times, the Latin American financial news outlet, reports that the Moody’s Ecopetrol downgrade announced on Thursday, April 24, cut the state-controlled Colombian oil company’s global credit rating from Ba1 to Ba2. The rating outlook shifted from negative to stable, while Ecopetrol’s individual baseline credit assessment (BCA) was maintained at b1.

The agency’s statement was direct. The downgrade, Moody’s said, reflects “a weaker assessment of support from the Government of Colombia (Baa3 stable), derived from a higher risk of government interference and lower predictability and timeliness of support mechanisms, including payments under the Fuel Price Stabilization Fund (FEPC).” Moody’s revised its government-support assumption for Ecopetrol from “high” to “solid.”

Why the Moody’s Ecopetrol downgrade lands with the FEPC dispute

The FEPC issue matters because it is the specific mechanism through which the Colombian state compensates Ecopetrol for selling fuel domestically below international prices. When Bogotá is late on those compensations, Ecopetrol carries the gap as working capital pressure.

The government had planned to settle outstanding first-quarter 2025 FEPC balances of roughly 1.6 trillion pesos in March 2026. Instead, an alternative settlement structure was agreed — one with a minimum cash payment representing a small fraction of what was owed, with the balance rolling forward.

For Moody’s, that compromise is the operational evidence of the broader thesis. Ecopetrol’s cash flow is being used to finance state priorities other than its own investment plan, and the mechanisms that were supposed to make the company whole are becoming less predictable.

The 2028-2030 maturity wall

The second structural concern Moody’s flagged is the maturity profile of Colombia’s sovereign debt — which affects Ecopetrol because of its exposure to TES (Colombian government bond) holdings and its reliance on sovereign support. Colombia’s TES maturities reach 84.9 trillion pesos in 2028, 107.3 trillion in 2029, and 77.6 trillion in 2030.

The Ministry of Finance has been using a liquidity-management strategy that issues TCO (short-dated) bonds rather than longer TES to ease 2027 cash pressures. Bank of Bogotá analysts told local media the strategy is effective for smoothing near-term flows but weakens visibility of cash flows in the short term.

That visibility loss is what Moody’s is now pricing. The sovereign’s ability to service Ecopetrol’s support mechanisms in a timely way depends on cash-flow predictability Bogotá is trading away.

How the Ecopetrol 2026 situation compounds the downgrade

Moody’s flagged a near-term free cash flow picture that could remain negative through 2026. The drivers are sustained investment spending, continued dividend distributions to the 88.49% government shareholder, and the FEPC payment delays already visible.

The agency expects tighter liquidity across 2026 and 2027. That projection — more than the single-notch cut itself — is the signal to bondholders and to the NYSE-listed ADR market that the Ecopetrol balance sheet is now operating with less buffer than it had a year ago.

Ecopetrol’s dollar bonds across the curve had been trading at weakened levels through April. The company’s 2036 notes hit their lowest price in a week on the day the CEO retreat was announced earlier this month, and have not recovered.

The CEO crisis sits underneath this downgrade

On April 6, Ecopetrol’s Board of Directors authorised the temporary withdrawal of President Ricardo Roa, following his March 11 criminal indictment for influence trafficking related to a Bogotá apartment purchase, and a subsequent April 8 indictment for alleged campaign finance violations tied to his role as Petro’s 2022 presidential campaign manager.

Roa took vacation from April 7 through May 27 and will then take unpaid leave until June 28. The Board named Juan Carlos Hurtado Parra — previously executive vice-president of hydrocarbons since November 2025 — as interim president. The USO oil workers’ union, which had threatened a strike if Roa stayed, dropped that threat once the retreat was confirmed.

The CEO crisis is not directly cited in the Moody‘s decision. But the corporate governance concerns the agency raised — and the specific question of government interference — cannot be fully separated from the fact that the sitting CEO was under dual criminal investigation while managing the national oil company.

The twin downgrade with S&P

Moody’s is the second major rating agency to cut Ecopetrol this month. On April 8, S&P Global Ratings reduced Ecopetrol from BB to BB- with stable outlook, mirroring a Colombia sovereign downgrade.

S&P’s cut focused on similar themes. The agency flagged Ecopetrol’s COP 11.7 trillion in 2025 dividend payouts and a recent COP 1.6 trillion FEPC-related transfer as risks to future financial flexibility. S&P’s stand-alone profile for Ecopetrol remained unchanged at bb+, but the overall rating is capped by Colombia’s weaker sovereign credit.

Fitch has not yet moved. The company’s current Fitch rating is BB+ with a negative outlook.

What to watch after the Moody’s Ecopetrol downgrade

Three variables now matter. The first is the sovereign. Moody’s Ba2 on Ecopetrol sits against Colombia’s Baa3 stable sovereign rating, so a further sovereign downgrade would likely force another company-level cut.

The second is FEPC payment performance through the remainder of 2026. If Bogotá settles the outstanding balances on schedule, the “government support” thesis improves. If payments continue to slip, the next downgrade is priced in.

The third is the Ecopetrol presidency. Roa is formally on leave until June 28, coinciding with the political window of Colombia’s presidential second round. Whether he returns, resigns, or is replaced permanently will shape the governance assessment any agency applies to the next rating review.

For NYSE-listed EC ADR holders, the Moody’s Ecopetrol downgrade is not a surprise — it is confirmation. Two rating cuts in 16 days, a criminally indicted CEO on leave, sovereign-support mechanisms that stopped functioning as agreed, and 2028-2030 debt maturities that have not yet been refinanced together define the Colombian oil company’s operating environment as the Petro government heads into its final budget cycle before the October 2026 presidential vote.

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