The Latin American business scene is vibrant and growing. Its energy stocks should catch your attention, even if you’re someone who rarely gets excited about energy stocks.
So, while the energy transition is expected to be long, some energy companies will be more prepared for it than others.
Here are three Latin American energy stocks for your must-buy list, and they should win regardless of how long the transition takes.
Ecopetrol (EC)
First up is Ecopetrol (NYSE:EC), the largest oil company in Colombia, with operations in eight other countries, including Mexico, Brazil, the United States and elsewhere. Not only is it the country’s biggest producer, with 729,600 barrels of oil daily and 2.01 billion barrels of oil reserves, but it’s also the largest Colombian firm in renewables and energy transmission. In 2022, it transmitted 444,000 GWh and possessed a renewable energy capacity of 208 MW.
It produces energy upstream, ships oil midstream through its 9,000 kilometers of pipeline, and downstream through its Barrancabermeja refinery. In 2023, Ecopetrol had its second-best year in its history, with revenue of 143 trillion Colombian pesos — or $36.5 billion. While its earnings before interest, taxes, depreciation and amortization —otherwise known as EBITDA — of 60.7 trillion Colombia pesos — or $15.5 billion — good for an EBITDA margin of 42%.
In the past year, it invested $803 million in its low-emission solutions business, which accounted for 13% of its investments in 2023. Its transmission and toll roads business invested $1.09 billion in 2023 and $4.4 billion in its hydrocarbons business.
Down 12% in 2023 and 51% over the past five years, Ecopetrol is ready to move higher if only currency and inflation would cooperate.
Petrobras (PBR)
Petrobras (NYSE:PBR) is likely the Latin American energy company most American investors would know. Both the common and preferred American Depositary Receipts have lost 18% in the past month, most of it on March 8, after the board decided to skimp on the dividend. The move caused billions to be wiped off its market capitalization.
Investors expected a Q4 2023 special dividend announcement that would see $3 billion to $4 billion doled out to shareholders in addition to the $2.9 billion for the regular quarterly payment. Instead, the company announced it would not be handing out a special dividend in the fourth quarter.
Pampa Energia (PAM)
Pampa Energia (NYSE:PAM) is Argentina’s leading integrated energy company. Its shares are down 5% since reporting Q4 2023 results on March 6.
Looking at the results more closely, you’ll see that revenues in the fourth quarter were 112% higher to $1.73 billion. However, on a U.S. dollar basis, revenues fell 6% from $1.83 billion in Q4 2022 due to currency.
Revenues were higher due to a 44% increase in gas production to more than 16 million cubic meters daily. Its adjusted EBITDA was $129 million, 30% lower than Q4 2022, due to the devaluation of the Argentine peso relative to the greenback.
It expects oil production to be flat compared to 2023 in 2024, with a 30% increase in gas sales to 13.5 million cubic meters per day.
The best part about Pampa? Its net debt finished 2023 at just $613 million, its lowest level in the past five years. As a result, its net leverage ratio is just 0.9x, lower than most other Latin American energy companies.
The company’s Power Generation business finished 2023 with an installed capacity of 5,332 MW, 5% higher than a year earlier, and approximately 31% new capacity. This business accounts for 37% of the company’s revenue. This makes Pampa the underdog of the three.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
