Ladies and gentlemen, we'd like to welcome you to the Fourth Quarter and Full Year 2012 Ecopetrol S.A. Earnings Conference Call.

Good afternoon, everyone, and welcome to Ecopetrol's Fourth Quarter and Year 2012 Earnings Conference Call and Webcast. Before we begin, it is important to mention that the comments by Ecopetrol's senior management could include projections of the company's future performance. These projections do not constitute any commitment as to future results nor do they take into account risks or uncertainties that could develop. As a result, Ecopetrol assumes no responsibility in the event that future results are different from the projections on the conference call. The call will be led by Mr. Javier Gutiérrez, CEO of Ecopetrol; also participating will be Hector Manosalva, Executive Vice President for E&P; Pedro Rosales, Executive Vice President for Downstream; Alvaro Castañeda, Vice President of Transportation and Logistics; and Enrique Velásquez, Vice President of Exploration; and Alberto Vargas, Financial Comptroller. I will now turn the call to Mr. Gutiérrez.

Thanks, Alejandro. Good afternoon to all our participants today. Initially we will point out the key results of last year, followed by the highlights by business segment, a brief of our financial results and our internal consolidation initiatives, then we will review the outputs of the strategic plan launched in 2008 and finally, we will present the outlook for 2013. After the remarks, we will have a Q&A session. So let's start with Slide 5 to review our milestones in the year 2012. 2012 was a challenging year for the oil and gas companies in Colombia. In spite of these, Ecopetrol achieved a profitable growth and a safe operation, in line with the guidelines of its strategic plan. Starting with our operational results, in 2012, the Ecopetrol's production, including interests in subsidiaries and affiliates, reached 754,000 barrels of oil equivalent per day, led by the increase in production at Chichimene, Quifa and Piedemonte fields, as well as by our affiliate, Equion. We continued with a strong exploratory activity in Colombia and abroad. It is worth highlighting the 11 successful exploratory wells in 2012, out of which 9 were located in Colombia and 2 in the U.S. Gulf of Mexico. In addition, the corporate group was awarded 16 exploratory blocks in the 2012 Columbian round, including 3 the Caribbean offshore and 3 with potential on unconventional resources in partnership with the ExxonMobil. As mentioned, Ecopetrol strengthened its exploration portfolio in the Caribbean offshore with the 3 blocks granted in the 2012 round. One, in partnership with Repsol exploration and the other 2 with Anadarko. On the other hand, Anadarko joined Ecopetrol in the offshore blocks Fuerte Norte and Fuerte Sur as operator with a 50% stake and the remaining 50% held by Ecopetrol. Regarding the proven reserves balance as of the…

Please move on to Slide 7, which summarizes the highlights of the E&P segment. Let's begin with our production results. In the last quarter or last year, gross production of Ecopetrol, including its interest in subsidiaries and affiliates, reached a total of 762,000 barrels of oil equivalent per day, and on average production reached 754,000 barrels per day, a 4% growth versus the one in the year 2011. The rise was driven mainly by the increase of 12,000 barrels per day in Chichimene field, 6,000 barrels in the Piedemonte fields and 6,000 barrels in the Quifa field. Additionally, our subsidiary, Equion, complete a successful development campaign leading our production growth of 25% in the year 2012. In exploration, we reported hydrocarbon presence in 11 exploratory wells, 9 drilled in Colombia and 2 in the U.S. Gulf of Mexico. Mapalé 1 was drilled in the Caribbean offshore and the wells Parmer and Dalmatian in the U.S. Gulf of Mexico. In addition, oil shales were found in 24 strat test. Ecopetrol was also pretty active in bid rounds during the year, 2012. 3 out of 4 blocks offer for unconventional resources were granted to Ecopetrol in the Colombia bid round. Last year, the strat test Coyote and La Luna reached total depth, and 3 oil wells are scheduled to evaluate unconventional resources during the present year. In addition, in the resale 216/222, Ecopetrol was granted with 6 new blocks in the U.S. Gulf of Mexico, increasing our participation in this highly prospective hydrocarbon base. Regarding the financial results of the upstream segment, EBITDA of the segment rose 2.7% between the year 2011 and 2012, due mainly to a high production and barrel sales price. However, higher maintenance, water management and service cost reduced the margin of the segment. Please go now to Slide 8 to review the reserves balance as of December 31 of the year 2012. Proven reserves balance at the end of the year 2012 amounted to 1,877 million barrels of oil equivalent after royalties. There was an increase of 252 million barrels of proven reserves and the net production came to 232 million barrels. Then the reserve ratio replacement was 109%. From the year 2010 to 2012, Ecopetrol has added 981 million barrels and has produced 643 million barrels. The increase in proven reserves was mainly due to extensions of the proven area of existing fields, enhanced recovery and the revisions of previous estimates in some fields. It's important to mention that our proven reserves have been estimated according to Securities and Exchange Commission, technical standards and methodology, and 99% were audited by 3 specialized independent firms. Now Alvaro Castañeda will comment on Transportation results.

Thanks, Enrique. Let's review our operational results. Due to the optimal use of the infrastructure and utilization of alternative transports in 2012, transported volumes of crude oil remained almost flat in spite of some attacks on the pipelines. In the last quarter, a slightly increased was seen due to larger volumes transported mainly in the Janus [ph] region. In line with the plans to develop the infrastructure, we completed main expansion projects, raising crude oil transportation capacity by 91,000 barrels. Also, expansion in lines for diluents and natural gas, and truckload the facilities for heavy crude oil were finished. The construction of the Phase 1 of Bicentenario pipeline at the end of this year reported at 51% progress. We expect to start line field in the first half of 2013. With regards to CENIT-Ecopetrol sales in ODL, Ocensa, ODC, OBC and Serviport, were already transferred to the new subsidiary. With a new scheme, Ecopetrol is making a transition from a cost selling model to a profit unit model supporting the future developments with other investors. Since last year we have been implementing world-class practice and initiatives to reinforce the integrity of our infrastructure. With this, we were able to reduce the risk of the Transportation infrastructure by 50% for high and very high risk levels, and by 56% for medium risk levels. We also carried all activities in a large number of communities to reduce the potential impact of any incident of the Transportation infrastructure. To conclude, let's review the financial results of the segment in 2012. Our revenues increased in 2012 due to larger transported volumes of imported naphtha and gasoline, as well as crude oil from [indiscernible]. Second, higher fees due to the new methodology for tariff approved. And third, the contract signing for providing service to Oleoducto Bicentenario. However, the higher maintenance cost and the development of the integrity program led to a reduction of the net income and the EBITDA. With these, I will turn the presentation over to Pedro Rosales, who will present downstream results.

Thanks, Alvaro. Please go to Slide 10. In the last quarter of 2012, there was an increase in both refinery throughput and utilization factor in Barrancabermeja refinery thanks to higher operational availability. For the whole year 2012, the throughput of the refinery decreased 3% mainly as a consequence of the maintenance made in the first quarter of the year. The gross margin of both refineries decreased 6% in 2012, mainly due to the higher cost of crude oil. In the case of Barrancabermeja, as consequence of the better crude oil export prices of Ecopetrol. In Cartagena, it was necessary to process import crude oil to deal with the lower availability of local light crudes, causing a minor output of valuable products. For these reasons, net income in 2012 was lower than in 2011. However, EBITDA remained positive, amounting to COP 131 billion in 2012. Regarding the main refining projects, at the end of 2012, the modernization of the Barrancabermeja refinery reached 14% progress and the utilities master plan, 61%. In addition, the Cartagena refinery modernization and expansion plan reached 74% progress as follows: Detail engineering, 99.7%; procurement, 95.8%; modules fabrication, 100%; and construction, which begun in October 2011, 35.8%. An important milestone for 2012 was the start of operations of the central operational control room in Barrancabermeja refinery. This center with leading-edge technology integrates all the control, protection, monitoring and communication systems of the processing unit in one single location within the refinery. Now please turn to Slide 11 to review the sales and marketing results. Total sales volume increased 2.7% between 2012 and 2011, mainly due to higher crude exports of 31,000 barrels per day. Additionally, in 2012, our exports reached a new record of 521,000 barrels per day. In the last quarter of 2012, we reached exports of 531,000 barrels per day with the growth in sales to the Far East. In addition, we delivered ultra-low sulfur diesel with less than 50 ppm in all of Colombia. Total reduction in sulfur content has been around 98% during the last 3 years. Lastly, although revenues of the sales and marketing segment rose, we reported a reduction in the net income and EBITDA in 2012 compared with 2011, due to higher cost of Transportation of purchased crude oil and import diluent. Now I turn the presentation to Alberto Vargas, who will comment on the financial results of Ecopetrol.

Thanks, Pedro. Please, let's turn to Slide 13. Revenues, operating income and net income in the last quarter of 2012 improved compared with those of the previous quarter of the same year, but were lower than in the fourth quarter of 2011. In this last quarter, prices and volumes saw locally were higher than in the fourth quarter of 2012. Reviewing our annual results. In 2012, we benefited from higher prices and exports, offsetting lower sales to the Colombian market and the free-trade zone. However, the financial margins decreased due to a growth in our sales, lower than that on the operational costs. Fixed costs rose due to higher maintenance activities, greater cost to increase the integrity and reliability of our facilities, as well as larger costs linked to the management of higher water cuts and sediments required to maintain the production, mainly in the Rubiales and Quifa fields. Labor costs increased due to the updating of actuarial assumptions of actual workers. Valuable costs rose mainly due to a higher cost of amortization and depletion, and greater cost of transportation services. On the operating expenses, there was a 21% increase mainly caused by the devaluation of COP 160 billion, as a result of the technical evaluation of fixed assets that has to be run every 3 years. And also, abandonment cost of COP 95 billion. As a result, operating income amounted to COP 22.9 trillion in 2012, equivalent to an operating margin of 38%. In the nonoperating part, the loss of COP 1.3 trillion was mainly due to the updating of actuarial assumption for health services of retired workers, amounting to COP 946 billion, and an exchange rate loss of COP 438 billion. The group's subsidiaries under the equity method reported an income of COP 477 billion in 2012 compared…

Thanks, Alberto. Please go to Slide 17. Let's start by the remarkable results in HSE. The accident frequency rate in 2012 decreased to 0.79 accidents per million working hours, a new record in Ecopetrol. In the last quarter of 2012, the index reached 0.67. We feel very proud of the continuous improvement trend on the last year's. We also reviewed the number of environmental incidents from operational causes, falling from 41 in 2011 to 27 in 2012. Regarding science and technology, during the last quarter, we were granted 6 patents in Colombia and 1 in Peru, totaling 21 new patents in 2012. It is worth mentioning that Ecopetrol was the first Colombian company recognized by its knowledge transfer practices, with the MAKE Americas, Most Admired Knowledge Enterprises prize. To conclude this part, I would like to emphasize that in 2012, for the second year in a row, Ecopetrol was part of the Dow Jones Sustainability World Index. Now let's review the results of the strategic plan of Ecopetrol since 2008 and the outlook for 2013. Please go to Slide 19. During the last 5 years, Ecopetrol has undergone a significant transformation, which has led to achieve significant growth in the scale of this operation. The growth has been driven by historically high CapEx investment, primarily to E&P, thus we focused in increasing the heavy crude oil production, the recovery factor and mature fields, and the natural gas supply. In Refining, our main goal was modernizing existing facilities to increase conversion factors and adapting to the new qualities of crudes and deliver clean fuels. In Transportation, we undertook the expansion of pipelines, ports and facilities to support the expected growth in production. After 4 years of execution we can say that the company accomplished most of the targets sales, delivering on…

[Operator Instructions] The first question comes from Nathan Piper from RBC Capital Markets.

Two quick questions for me, please. First of all, your production target for 2013, and in particular, the 750,000 clean barrels a day coming from Ecopetrol, does that assume that the approval process in Colombia improves? Or are you taking into account the relatively slow approval process in Colombia, and therefore, your ambitions for your production are reduced as a result?

Nathan, this is your first question?

Yes, that's my first question. And then my second question...

Okay. It's okay. in terms of the first question, what is important to mention is that I also have already mentioned in the Spanish session that we practically have the approval of all the permits to allow us to reach the goal for 2013. And in terms of the exploration, we have right now several permits awarded and some of them under process. But in terms of the production, I could not say that we are practically ready.

Will you say the approval process has now improved? Have you seen a material improvement in the speediness of approvals and being able to progress?

Yes, I definitely believe that we are getting a better answer in terms of the times and also of the discussions and the process with the national environmental authority.

So you have water handling approval for Castilla, for instance? You can increase the water handling there?

Yes, yes. We have the approval for the Castilla also.

Okay. And then just quickly on to the second question, if I may.

But anyway, I want to be absolutely clear. We have the approvals for production, but we still have some of the permits under process for the exploration activity. We have some ready, but some of them are still under processing.

Crystal clear. And the second quick question, given the relatively limited reserves growth this year and also your relatively low reserves life index compared to other majors, are you considering acquisitions to accelerate your reserves growth position?

This is Enrique Velasquez. I would like to complement the answer from Mr. Gutierrez regarding the Castilla. That's in approval. It was awarded last year, December 2012. Regarding your second question, as you are aware, in our ST [ph] plan, the inorganic growth is considered. So maybe not in the short term, but it is considered in the medium term, depending on the results in the organic operations.

[Audio Gap] the space is too expensive or do you see better opportunity than your own portfolio?

I would say both. I mean, we are monitoring any new business opportunity in the [indiscernible] arenas.

Okay. And then maybe I'll announce the final question. It should be a quick one. In terms of equity financing and whether you go back to the international markets to, I guess, broaden your shareholder base, what approximate timing would there be on that? And should we assume that it's not going to happen in 2013?

In terms of going to the shareholders?

Yes.

Definitely, really no.

We have Paula Kovarsky from Itaú BBA. Paula Kovarsky - Itaú Corretora de Valores S.A., Research Division: I would like to go back to the question on the reserves addition. You mentioned the achievements of growing reserves since 2007, but if we think about the target of adding 6 billion barrels until 2020, which are required to support the production growth targets, the company is, I'd say, lagging a little bit behind. So I would like to understand how comfortable you are with that target of 6 billion? And what exact -- where do you think those reserves may come from? Are you comfortable with the current level of reserves addition? If you could give us a little bit more color on that. And the second question relates to the extraordinary dividend paid to the government. Is this supposed to be a practice? Do you expect this to continue happening? Is there anything -- any additional dividend to be paid this year or next year that we should expect?

Let me begin with the last -- with your last question. What is important to mention that up to now, our Board of Directors haven't discussed about the proposal to the General Assembly. It is going to be decided in the next Board of Directors. And in addition, what is important to precise is that the extra dividend is not only to the government. It's for all shareholders. But the difference is that it was paid to the rest of the shareholders in one payment, in one installment in April last year, yes? But of the government, it has been paid through several installments, okay? That is important to mention. And we haven't had yet a proposal. We have a Board of Directors in the next days that is going to take the decision of the proposal to the General Assembly. And at that time, you want to know about what is the proposal. Enrique is taking the question about the reserves.

Regarding your question, how confident is Ecopetrol regarding to achieve the growth, I would like to make some comments. First of all, the 252 million barrels added during the year 2012 are calculated using fake rules, which means that, that does not include royalties, okay? The second comment that I would like to give is the reserve addition for the period 2011 to 2020 of 6.2 billion includes royalties. So the reserve addition, including royalties -- I mean, for the year 2012 was 330 million barrels, okay? And for the period, let's say, for 2011, was 408 million. That means that in total, we have added about 740 million barrels out of the 6.2 billion. So in that sense, you can see why Ecopetrol is still very confident to reach the goal. And by the way, the goal for that period of time has been changed.

Does that answer your question, Paula? Paula Kovarsky - Itaú Corretora de Valores S.A., Research Division: Yes.

We have Christian Audi from Santader online with a question.

This is actually Vicente. I have basically 2 questions here. First, we saw that some costs increased during this quarter. We were wondering what is the recurring level of EBITDA margin we can expect looking forward? What were the nonrecurring costs during this quarter? And should we see them repeating themselves in the next quarter? And then the second question is, after the modernization of Reficar is concluded, and how much does the company expect to increase its levels of profitability?

Alberto Vargas is taking the question about the cost increase.

Well, let's -- yes, let's get this way. The total increase in cost for this year were like circa COP 4 billion. Now from those COP 4 billion, almost 70% are related to variable cost, meaning that are driven by higher volume and higher price. Now if we go to the fixed cost, which is the other [ph] part of this increase, which is circa COP 1.5 billion, main reasons are higher maintenance costs due to higher sediment and weather that we found for the Rubiales and Quifa fields. Then all points to [ph] our integrity plan that we are developing during 2012 and that we are going to continue developing during 2013 and 2014. Additionally, we got a kind of a cyclical overhaul cost in our refineries and our facilities for production. Now in terms of what is recurring and what is nonrecurring, we expected to still maintain our integrity plan for at least 2 additional years. And in terms of maintenance, we are depending on the order or the public order situation.

Okay. Christian, about question about the second question, with respect to Reficar and its profitability after the project, it's important to mention that the modernization projects will improve their margin in the refinery based mainly in a more economical crudes increasing the conversion factor and the production of high-quality products. Those factors on the weak international cracks would improve the margins in more than $10 per barrel. But it's important to have in mind that these numbers depend largely on the behavior of price differentials in the international market. But we expect gross margins increase in more than $10 in the refinery. Additionally, that number converted into EBITDA would give more than $800 million per year for that refinery.

[Spanish] Now Gustavo Gattass from BTG.

I have 2 questions and actually going to follow-up on one of the reserves question as well. But if I could, I would start just with the dividend as well and the sustainability. I just wanted to understand and I understand that the dividend hasn't been set yet for this year. But if we look at 2012, paying the COP 300 has effectively led to an increase in the net debt of about COP 4 billion. I just wanted to understand, are you guys comfortable with letting the net debt increase a lot just to have a stronger dividend? Or is cash flow neutrality on the dividend something that matters to Ecopetrol? That's question #1. Question #2, I just really want to touch base on the reserve addition, with a particular focus on improved recovery. The impression we get is an improved recovery had a big contribution, well, 2009 and 2010, and it is a very, very large part of what you guys have to 2020. And there really hasn't been that much. So I just wanted to understand, is there anything missing here or is some concept that still has to be proved? Is there a reason for such a sluggish, I would say, increase on the improved recovery part of things?

Felipe Munera is taking the answer in relation with the dividends sustainability.

Regarding to your first question, it is important to clarify that the indebtedness of Ecopetrol didn't raise during 2012. The indebtedness that the group [indiscernible] got last year was to our affiliate Reficar. And regarding to the second part of the question, we are confident, not only confident, but comfortable with our level. Our levels of indebtedness, our indicators, the indebtedness against EBITDA still are among the strongest among the peers in the market. Is that good to your question? Gustavo? Did you hear the question, Gustavo?

No, I didn't. For some reason I was cut off for a little while. But even when I look at Ecopetrol S.A., if I adjust for the unpaid dividends at the end of the year, so if I think balance sheet in January, I would have had an increase. So I just wanted to understand if you guys are comfortable with that, letting that increase happen every year?

In any case, Gustavo, the levels of the indebtedness that Ecopetrol maintains are still the limits we have calculated and estimated. We haven't envisaged any risk of problems ahead. We have our financing plan very well designed. We have a lot of sources, not only in Colombia, but abroad to get the cash we have and still we maintain a strong cash generation within the company. So we are confident with that.

But simply complementing on Felipe, it is important to clarify that we didn't have any increase of indebtedness during 2012.

No, not at all.

We didn't go to the markets for new -- at Ecopetrol S.A.

Yes, importantly, to clarify, probably the figure you have seen is the reserve we have at the end of each year of, in particular, 2012, in order to pay the last installment to our main shareholder, which is the state of Colombia, which is around COP 4 billion.

Gustavo, regarding your first question, I would like to explain to you that water injection plays an important role in the reserve addition. What happened is, as you are aware, water injection is in a medium-term results, so we will see the results in the medium term. But also, I would like to mention that there are some earmarked pilots, which we are conducting currently. For instance, chemicals in San Francisco, Dina [indiscernible] and Tello fields located in the Upper Magdalena Valley. Also, then in situ combustion, which we are in pilots in the Chichimene and Quifa fields. And maybe just for your reference, when I mention the water injection, maybe the most outstanding projects are Chichimene and in Apiay in Llanos and Llanito, Bonanza and Provincia oil fields located in the Middle Magdalena Valley.

Are those already being implemented? The real question here is if those are being implemented, why aren't we seeing some kind of an impact on the reserves already? That's the issue.

Yes, since we mentioned that they're pilots, so we're in the process to seeing the results. For instance, let's talk about the Chichimene and Quifa. In spite of we are in this moment in the air injection and maybe very close to ignite the formation, the results won't be seen before the next 12, 14 months.

Okay. So it takes time?

Yes, yes, Gustavo.

The next question comes from Fernando Vale from Citi.

My first question was on CENIT. I just wanted to understand what you can expect from cost increases after you consolidate all the Transportation properties into CENIT, how will that impact your cost on Transportation. The second question was on CapEx. I noticed that over the past few years, you've had a much higher CapEx in the fourth quarter than in the remaining quarters. So I just wanted to understand what's the phenomenon that's leads to that higher CapEx. And that's it.

This is Alberto Vargas. Let's take first our question about CENIT. What can we expect in cost in Transportation after their consolidation? Well, in general, after their consolidation, just because of this transaction, the impact on cost is going to be neutral. Nevertheless, we have to take into consideration that by doing this new scheme, Transportation tariffs are going to be increased because we're going to enter into the Ministerio de Transporte tariffs, which are a little bit -- Ministerio de Minas, sorry. Ministerio de Minas tariffs, which are a little bit higher than that we are covering now. But the clarification here is that just because of that transaction, impact on P&L is neutral. Okay, now why higher CapEx in the fourth quarter versus the rest of the year? Mainly, the reason is that during fourth quarter, basically, we had 2 issues here. We've got higher capitalizations on the Llanos area, I mean the Castilla and Chichimene area in terms of production facilities. But also, we have to take into consideration the issue that during fourth quarter, basically, during December, we had to recall the valuation study that we received from technical expertise on the market value of our assets. Is that clear, Fernando?

Yes.

The next question comes from Matt Portillo from Tudor Pickering. Matthew Portillo - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Just a few questions for me on production. I was wondering if you could provide us an update on where our current production is for you bigger fields, including Castilla, Chichimene and Rubiales, on a gross basis and where you expect that production to average in 2013? And then I have a second follow-up question.

Okay. This is Enrique Velasquez. The current production from our bigger fields are as follows: Chichimene is around 65,000 barrels; Piramonte, [ph] 22,000 -- I'll round out the numbers, okay? Quifa, 22,000 barrels per day; Rubiales, 115,000 barrels; San Francisco is 9.7 [ph]; Casabe, 28,000 barrels per day; Gibraltar equivalent is around 6,300 barrels per day; and finally, Castilla is around 128,000 barrels of oil per day. Okay, it's important to mention that these figures are Ecopetrol net working interest. Matthew Portillo - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Chichimene and Rubiales, where do you think those will average for 2013?

It's around the numbers that I already gave you: Chichimene, 65,000, and Rubiales, 115,000. Matthew Portillo - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Okay. So you don't see much growth in those fields from here?

Okay, the number is the average year-end production. And yes, basically, that number. Matthew Portillo - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Okay, great. And then just on the gas side of the story, I was just curious if you could comment at all on how you guy see gas production volumes increasing in 2013?

Yes, Mark (sic) [Matt]. The gas production from the different fields, including Chuchupa in the North Coast will increase. And also gas coming from Cusiana, Cupiagua fields, the net increase is around 60 standard cubic feet of gas per day -- 60 million, 60 million standard cubic feet per day.

It is important to remember that the Cupiagua project was completed, was entering in operation around December 18 with a total capacity of 210,000 cubic feet per day and in its initial stage is going to be around at 140,000 cubic feet per day. That is an important increase in terms of the capacity.

Matt, does that answer your question? Matthew Portillo - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Yes.

And I would like to turn the call back over to Mr. Giraldo for any closing remarks.

Okay. Well, thank you all for your participation. For any additional questions, you can contact us at Investor Relations. Have a good afternoon. Bye.

Thank you, ladies and gentlemen, for your participation. You may now disconnect.