*

Ecopetrol faces governance issues amid staff purges

*

Petro's opposition to fracking affects Ecopetrol's deals

*

Ecopetrol's contributions to national income set to

decline

*

Company faces March decision on Occidental partnership in

Texas

By Nelson Bocanegra

BARRANCABERMEJA, Colombia, Dec 20 (Reuters) - Alleged

interference by Colombian President Gustavo Petro in majority

state-owned Ecopetrol and purges of hundreds of staff to make

way for pro-government replacements are fueling fears about the

energy company's future profits and contributions to the

economy.

The worries, according to interviews with workers,

ex-employees, a former board member and analysts, come ahead of

a March deadline for Ecopetrol to renew - or end - its

joint oil venture with Occidental Petroleum ( OXY ) in Texas.

Petro halted a separate $3.6-billion deal with Occidental to

buy 30% of shale producer CrownRock in August, because of his

opposition to fracking and fears about the company taking on

more debt, according to two former Ecopetrol board members who

resigned over the decision. The leftist president has said he

wants to increase Colombia's use of renewable energy and lessen

its reliance on fossil fuels.

Ecopetrol, Colombia's largest company, has let go hundreds

of staff since CEO Ricardo Roa took over in April 2023, some of

whom were unfairly fired to make way for pro-government

replacements, half a dozen workers and former employees said.

A former leader of Ecopetrol's technology and innovation

section, who was dismissed in August, said about 600 people have

been let go across operations, or 3% of the company's workforce.

The magnitude of the turnover has not previously been

reported.

"There are governance problems at Ecopetrol, but the

fundamental problem is that 88.5% of the company belongs to the

government and President Petro and his ministers don't want oil

or gas," Juan Jose Echavarria, one of the former board members,

told Reuters.

Ecopetrol shares have fallen 28% this year.

Banks Citi, Santander, Goldman Sachs and JPMorgan have cut

their target prices on Ecopetrol and American depositary

receipts, a security that allows a foreign company's shares to

trade in the U.S.

JPMorgan, Ecopetrol's second-biggest shareholder, downgraded

the stock to "sell" twice - in mid-September and late October.

"The top worry is the deterioration of corporate

governance," said Citigroup analyst Andres Cardona.

Petro's office did not respond to questions. Ecopetrol said

Roa had previously answered Reuters questions at press

conferences.

CEO DENIES ALLEGATIONS

Roa has denied accusations of poor management and said Petro

does not meddle in company affairs.

"They want to discredit me, destabilize me and thereby

destabilize the company," he said at a November press

conference.

Roa, who has separately faced scrutiny in an investigation into

Petro's 2022 election campaign that he headed, has highlighted

deals with Brazil's Petrobras and Canada's Parex Resources ( PARXF )

, as well as a 2025 spending plan of up to $6.4 billion,

as evidence of the company's health.

Echavarria said Ecopetrol's recent results have indeed been

positive. Production of 752,000 barrels of oil equivalent per

day is the highest in nine years, and though net profit fell

25.6% between January and September from the year-earlier

period, profits in 2022, 2023 and 2024 are the company's highest

ever.

But Ecopetrol's contributions to national income are set to

plunge in 2025, sources with knowledge of the company's inner

workings and analysts say, as Petro's ban on new oil contracts -

including the CrownRock deal - reduces revenue and reserves.

The dividends paid by Ecopetrol to the government are set to

fall 31% in 2025 to about $1.8 billion, according to an analysis

by investment holding company Corfi.

The biggest risk to Ecopetrol's production figures, Corfi

added, is whether the Texas Permian Basin project with

Occidental is renewed.

Ecopetrol generated more than $13 billion for government

coffers in 2023 - about 11% of the national budget - through

dividends, royalties and taxes, according to the Finance

Ministry. It pumped $5.2 billion more into the economy via

contractors and purchasing.

Petro's government has cut 2024 spending by $6.4 billion amid

lower tax revenues and lawmakers this month blocked a $2-billion

tax-reform proposal.

'A LOT OF FEAR'

The former leader said her opposition to pressure from

senior managers to change long-standing suppliers and hire

people that appeared unqualified made her a target.

"If you aren't on the same page as the government, then you

don't fit in," she said.

"There's a lot of fear," said one engineer who has worked at

the company's refinery in Barrancabermeja for almost three

decades, speaking on condition of anonymity.

Ecopetrol did not respond to questions about turnover and

Roa has said hiring practices follow the law.

The company's joint operation with Occidental in Texas, in

which Ecopetrol holds 49%, accounted in 2023 for a tenth of its

earnings before interest, taxes, depreciation and amortization

and much of the company's increased output in recent quarters.

If Ecopetrol opts out of the deal, it could have a knock-on

effect on Colombia's economy, via reduced income from the

company, said Andres Duarte, financial analysis manager for

investment holding company Corfi.

Ecopetrol's board had already approved the decision to buy

30% of CrownRock before reversing course in August just 24 hours

before the deadline, drawing sharp public critique from

Occidental CEO Vicki Hollub.

"They told us in an informal meeting ... that Petro had told

Ricardo Roa and several members of the board that he didn't

agree with the project because investing in fracking meant

putting Ecopetrol in more debt and it involved sending resources

from Colombia abroad," Echavarria and Luis Alberto Zuleta said

in their August joint resignation letter.

Weeks later, Roa said the deal fell through because of the

debt, denying pressure from Petro. Petro has not commented

publicly on the matter.

"With these messages it's difficult for an investor to trust

in Ecopetrol," Echavarria said in the interview. "It's not the

current results, but the messaging about the future."