Ecopetrol S.A. (EC) Q1 2013 Earnings Report, Transcript and Summary

Welcome to the Q1 2013 Ecopetrol S.A. Earnings Conference Call. My name is Sandra, and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Mr. Alejandro Giraldo, Investor Relations Officer. Mr. Giraldo, you may begin.

Good morning, everyone, and welcome to Ecopetrol's First Quarter 2013 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 Gutierrez, CEO of Ecopetrol. Also participating will be Hector Manosalva, Executive VP of Exploration and Production; Pedro Rosales, Executive VP for Downstream; Adriana Echeverri, CFO; Jaime Bocanegra, Acting VP of Transportation and Logistics; and Enrique Velásquez, Vice President of Exploration. I will now turn the call to Mr. Gutierrez.

Thanks, Alejandro. Good morning to all of our participants today. Initially, we will see the main results of the first quarter, followed by the highlights by business segment and a summary of our financial results and internal initiatives. Finally, we will present the outlook for the second quarter of 2013. After the remarks, we will have a Q&A session. So let's turn to Slide 5 to review our milestones in the first quarter of 2013. Our performance in the first quarter was in line with our plans. The group reached a new record in production, averaging 791,000 barrels per day, 6% more than in the first quarter of 2012. The growth came mainly from Rubiales, Chichimene, Castilla and Quifa fields. We carried out our exploration activities as planned, resulting in 3 discoveries in Colombia, 2 from Ecopetrol and one from Hocol. Also our U.S. affiliate, Ecopetrol America Inc., placed the most competitive bids for 6 blocks in the central planning area Lease Sale 227, in the U.S. Gulf of Mexico. Regarding our main transport initiatives, the construction of the Oleoducto Bicentenario reported 66% progress. It is worth to highlight that Ecopetrol completed the transfer of the hydrocarbon Transport and Logistics assets to its wholly-owned subsidiary CENIT. In our main refining projects, Cartagena ended the first quarter with a 79.4% progress, while Barrancabermeja reached a 15% progress. Regarding our shareholders, on March 21, we hosted our Annual Meeting with an attendance of more than 13,000 people. Moving to HSE, the accident frequency index in the first quarter of 2013 was lower than in the same quarter of last year. Finally, Fitch upgraded the outlook of our credit rating from stable to positive. Please move on to Slide 7 to review our CapEx in the first quarter of 2013. CapEx deployed in the first quarter of 2013 amounted to $1.5 billion, allocated as follows. 48% to production due to the approval of more environmental licenses mainly in Castilla and Rubiales fields, 34% to affiliates and subsidiaries as a result of the approval of resources for the modernization project of the Cartagena refinery, 10% to transport to be used for the Oleoducto Bicentenario and San Fernando-Monterrey projects, 4% to Exploration, 3% to Refining in petrochemical and 1% to others. Now I turn the conference to Enrique Velasquez who will comment about the main results of our E&P segment.

Let's start by Exploration results. In the first quarter, we had 3 discoveries in Colombia: Venus, [indiscernible] and Caño Sur. The first 2, drilled by Ecopetrol, and the third one, drilled by Hocol. In addition, 2 strat wells drilled by Ecopetrol had hydrocarbon [indiscernible]. These findings are located in the Janus [ph] region. We also continue building our international Exploration portfolio. Our subsidiary Ecopetrol America Inc. submitted the most competitive bid for 6 blocks in the Lease Sale 227, in the Gulf of Mexico. Ecopetrol America Inc. partnered with Murphy exploration in 2 blocks, with Anadarko, MCX, and JX Nippon Oil exploration in 2 blocks, and in the remaining 2 blocks with 100% interest. Now please turn to Slide #9 to review production results. In the first quarter of the year 2013, gross average production of Ecopetrol as a group had a new record of 791,000 barrels of oil equivalent per day. The rise was driven primarily by the increase in the following fields. 21,000 barrels in Rubiales, 12,000 barrels in Chichimene, 11,000 barrels in Castilla and 5,000 barrels per day in Quifa. Let's move now to the financial results of the E&P segment. In the first quarter of the year 2013, the revenues of the segment decreased 11% compared with the first quarter of the year 2012. Due to the reduction of the international crude oil prices, causing a drop of 7% in the explored crude oil bucket price. On the other hand, operating costs increased mainly due to larger volumes awarded to be treated, especially in Rubiales field, and a higher cost of estimation in the middle Magdalena oilfields. Therefore, for this quarter, the net income amounted to COP 3.5 trillion and the EBITDA, COP 6.5 trillion. Now Jaime Bocanegra will comment on Midstream results.

Thanks, Enrique. First, let's review our operational results. In the first quarter of 2013, total transport volume rose to 1.25 million barrels per day at 2.5% increased, compared with the first quarter of 2012, as a result of a higher volume of heavy oil moved through the pipelines, mainly from the Janus region. We carry out many expansion project, including the increase of 40,000 barrels per day in Apiay-Monterrey and of 30,000 barrels per day in Vasconia-Coveñas pipelines. Also, capacity of the [indiscernible] facility at Ayacucho increased by 10,000 barrels per day. The construction of the Phase 1 of Oleoducto Bicentenario reached a 66% progress at the end of the first quarter, and we expect to start line field by next June. As of April 1, 2013, Ecopetrol completed the transfer of hydrocarbon Transport and Logistics assets to CENIT. The total assets transferred are valued at COP 13.6 trillion. Additionally, starting April 1st, CENIT began its operation under the new business model, by which Ecopetrol will continue to operate the transport infrastructure and CENIT will allocate and plan capacity requirements to the oil companies in Colombia. Please move now to Slide 12 to provide more detail on CENIT. As mentioned, CENIT will perform hydrocarbon transport activities pursuant to transport agreements with oil producers and distributors in Colombia, including Ecopetrol. Ecopetrol will be responsible for the operation, maintenance, emergency response and risk management, as well as project management. CENIT will provide Ecopetrol with comparative service for the transport, storage, loading and unloading of hydrocarbons as [indiscernible] the capacity to meet each transportation needs. With the incorporation of CENIT, we will achieve clear rules and transparency to the market, by separating Ecopetrol's role as owner, planner, operator and user of transportation systems. CENIT will operate with an open model, allowing third parties to access to Transportation infrastructure. Fees for the use of the infrastructure are established by the Ministry of Mines and Energy to all users. With the new scheme, Ecopetrol has shifted from a cost-sharing model to a profit-center model. Now let's review the financial results of the segment. During the first quarter of 2013, an increase in the earnings of the segment was generated due to the growth in the production of crude in the Janus region compared to the same period in 2012. Also, the barrel cost were reduced mainly due to the lower charges in the consumption of crudes in the third parties' stations. The activities addressed to assure the integrity of the transportation systems to prevent damage to the infrastructure generated and increase in the fixed costs, particularly in maintenance and contract services. With these, I will turn the presentation over to Pedro Rosales, who will present Downstream results.

Thanks, Jaime. Please go to Slide 14. In the first quarter of 2013, there was an increase in Barrancabermeja refinery throughput due to a higher operational availability because of lower maintenance activity than those carried out during first quarter last year. Cartagena throughput also increased when compared with the first quarter of 2012 when there was less availability of light crude oil. Gross margins in Barrancabermeja in the first quarter of 2013 increased significantly compared with the same period of 2012 due to the lower cost of crude oil and barrel international prices for gasoline and diesel, which were 65% of the total production of the refinery. Similar behavior was observed in Cartagena, but in lower proportion, taking into account its configuration, less flexible than that of Barrancabermeja refinery. Regarding the main refining projects, at the end of the first quarter of 2013, the modernization of the Barrancabermeja refinery reached 15% progress and the utilities master plan, 67%. In addition, the Cartagena refinery modernization and expansion plan reached 79.4% progress as follows. Detail engineering, 99.9%; procurement, 97.9%; modules fabrication, 100%; and construction, which began in October 2011, 44.7%. It is worth mentioning that the construction weekly progress in 2013 has doubled when compared to 2012. Let's move on to the financial results of the Refining segment. In the first quarter, the segment had an EBITDA of COP 261 billion, higher than in the same period last year and in line with a higher gross Refining margin observed. Despite good operational results, we generated a net loss of COP 157 billion due mainly to losses in Reficar. Now please turn to Slide 16 to review the sales and marketing results. Total sales volume increased in 14,000 barrels per day between the first quarter of 2013 and 2012, mainly due to higher sales to the free trade zone and more local sales of crude oil for blending of bunkers. Our exports fell 2.6% due to less availability of Caño Limón, Magdalena and Vasconia crude oil, and a reduction in deliveries of natural gas due to the increased demand from power generators in Colombia. The prices of the export basket of crude and products decreased compared with the first quarter of 2012 in line with the international market trends, driven by the uncertainty on the economic recovery of Europe and lower demand of crude oil from U.S. refineries. The main destination of our crude oil exports was U.S., followed by the Far East and Central America. In the last 12 months, the share of the Far East rose from 20% to 36%, becoming an increasingly important market for our heavy crudes. Regarding crude pricing, during the first quarter of 2013, oil export basket was referenced at 62% to Brent, 37% to Maya and 1% to other benchmarks. Now I turn the presentation to Adriana Echeverri, who will comment on the financial results of Ecopetrol. Adriana Marcela Echeverri Gutiérrez: Thanks, Pedro. Please, let's turn to Slide 18. In spite of the higher volume sold, total sales went down 4% in the first quarter of 2013 when compared with the same period of 2012, mainly due to the lower average prices of crude oil and products of 5.7%. At the end of the first quarter of this year, close to 2 million barrels of crude oil exported to India were in-transit and around 1 million barrels were being loaded in our export port. All those will be booked in our sales for the second quarter of this year. Let's turn to Slide 19 where we will review the main financial results in the first quarter of this year. As mentioned, our revenues were lower than those in the first quarter of 2012, mainly due to the decrease in sale prices. Regarding costs, viable charges rose mainly due to the following factors. First, we had a higher cost of Transportation services as a result of the implementation of the tariff set by the Ministry of Mines and Energy for Ocensa pipeline, given the new profit center model for Transportation; second, the rising volumes of imported products, mainly diesel and gasoline; and third, we had a larger cost of amortization and depletion due to higher capitalizations and production. Fixed costs also increased due to the following activities from our operations. First, we had higher maintenance of the Transportation infrastructure as part of the integrity plan that began in 2012 and that will continue until year 2016, as well as the maintenance of the electro-submersible and artificial lifting systems in Chichimene and Castilla fields. Second, in the last quarters, we have been a rising contracted services because of graded sub-soil selectivity, water volumes management and higher bottom sediment and water, primarily at the Rubiales and Quifa fields. Third, there was an additional negative affect coming from the recent tax reform in Colombia by which gasoline, diesel and asphalt are now exempt from value-added tax, causing that VAT paid of those used, not to be deductible for income tax as before, and now, therefore, has to be accounted as a higher cost. And fourth, higher labor costs due to the increasing headcount, retaining program actions and the regular of increase of salaries effective from July 1, 2012. Regarding the operating expenses, there was a decrease when compared with the first quarter of 2012. This was due mainly to a lower provision for pension liabilities and less exploration and product expenses. This offset the higher cost of agreements for infrastructure protection and surveillance. Consequently, operating income amounted to COP 5.7 trillion in the first quarter of this year, equivalent to an operating margin of 38.5%. The nonoperating result improved mainly due to a reduction of COP 409 billion in the exchange rate loss in the first quarter of 2013. This effect was partially offset by first, the lower result of the subsidiaries accounted under the equity method, amounted to COP 154 billion in the first quarter of 2013, compared to COP 444 billion in the first quarter of last year. And second, a decline in the net financial income due to lower returns on bank deposits and higher interest expenses compared to the first quarter of last year. The lower tax expense is explained mainly by the decline in net income in the first quarter of this year, compared with the first quarter of 2012. Accordingly, net income amounted to COP 3.5 trillion, equivalent to an net margin of 24%. EBITDA was COP 6.9 trillion, equivalent to an EBITDA margin of 47%. Let's move on to Slide #20. Here, we present the company's cash flow and balance sheet as of the end of March of this year. The initial cash balance was COP 10.7 trillion. Internal cash generation in our resources added COP 15 trillion that funded the operation, the CapEx and the payment of the third installment of the 2011 ordinary dividend and the extraordinary dividend to the nation. So the ending balance of cash and cash investments was COP 8.6 trillion. The indebtedness during this year remains low with a 12-month debt-to-EBITDA ratio of 0.21. As previously mentioned, in the first quarter of the year, Fitch ratings confirmed that we're local and international ratings at BBB and BBB-, respectively, and improved the outlook of Ecopetrol from stable to positive after the upgrade in the outlook of the Republic of Colombia. In addition, Moody's confirmed our BAA 2 rating with outlook stable. On Slide #21, we find an overview of the financial results of the corporate group. In the first quarter of 2013, group's net income amounted to COP 3.4 trillion and EBITDA was COP 7.4 trillion, while EBITDA margin was 44%. EBITDA decreased mainly as a result of lower revenues of the group in the first quarter of 2013. In general terms, affiliates and subsidiaries from E&P and Refining reduced their net results. Among Transportation companies, Ocensa begun to operate it under the new profit center model, starting in the first quarter of this year. The higher revenues without eliminations came from Reficar with COP 1,938,000,000,000 followed by Hocol with COP 771 billion and Ocensa with COP 467 billion. The higher EBITDA, net of noncontrolling interest came from Ocensa with COP 270 billion, followed by Hocol with COP 200 billion and Equion with COP 94 billion. The higher net income, net of noncontrolling interest, came from Ocensa with COP 174 billion, Hocol with COP 91 billion and ODL with COP 37 billion. On the other hand, the higher losses were reported by Reficar with COP 118 billion and Ecopetrol America Inc. with COP 51 billion. Now I turn the presentation back to Mr. Gutierrez, who will comment on the milestones in internal consolidation and the corporate social responsibility.

Thanks, Adriana. Please go to Slide 23. The accident frequency rate in the first quarter of 2013 was 0.98 accidents per million working hours compared with 1.03 in the first quarter of 2012. We also reduced the number of environmental incidents from operational causes, falling from 6 in the first quarter of 2012 to 4 in the same quarter of 2013. Regarding our shareholders, on March 21, we hosted our Annual Meeting with an attendance of more than 13,000 people. The key decisions of the meeting were first, the approval of a dividend of COP 291 per share, which was paid in one installment to the minority shareholders starting on April 15. Second, the approval of the 2012 unconsolidated and consolidated financial statements. Third, PriceWaterhouseCoopers was appointed as the external auditor for a 12-month period. And fourth, the members of the Board of Directors were reelected for a new 12-month period. Now please go to Slide 25 to present the outlook for the second quarter of 2013.

In Exploration, our activities are summarized as follows. First, we are going to drill 4 A3 wells, 3 of them by Ecopetrol and 1 by Hocol. Second, we are going to drill 3 A1 wells, 2 of them in Colombia and one in the United States Gulf Coast. And third, we are going to drill 4 stratigraphic wells, 2 of them by Ecopetrol, and the remainder by Hocol. In production, we plan to keep up the pace of growth led by Castilla, Chichimene, Rubiales, Quifa, Piedemonte and La Cira-Infantas fields. In addition, we're going to increase the capacity of the fluids treatment facilities in Chichimene in 40 million barrels. Finally, we're going to request the licenses to dispose 1.2 million barrels per day in Castilla and to inject 1 million barrels per day in Rubiales. In Refining, we plan to keep up the construction pace in the Cartagena refinery achieved during the first quarter. Meanwhile, in the Barrancabermeja refinery, we are ensuring the proper preparation for the revamping of the new 250 crude unit scale in the third quarter, and we're going to implement a technology to reduce carbon emissions. In Transportation, we expect to start line field in Oleoducto Bicentenario in June and begin its operations by July. In summary, we will keep up the dynamic of the first quarter, reaching key milestones and moving forward at a good pace in our key projects in order to accomplish the goals set for the year. Now I open the session to the questions from our participants.

[Operator Instructions] And the first question is from Paula Kovarsky from Itaú BBA. Paula Kovarsky - Itaú Corretora de Valores S.A., Research Division: I have 2 questions. The first one regarding production, and indeed this quarter, you guys managed to post a significant increase over last quarter and over the first quarter of 2012. So I would like to understand how does that feed into the targets for this year? Are you, I mean, are you confident that the target for this year is achievable? What would be the main milestones? And still regarding the main field, Castilla, Chichimene, Rubiales, Quifa, Piedemonte and La Cira, especially here, perhaps concentrating more on the ones that are 100% operated by Ecopetrol, if you could provide us a little bit of an update on what's going on with the initiatives to improve recovery factors in those fields, and how do you expect those initiatives to affect both production and reserves additions this year?

Thank you, Paula. I would like to make a comment in relation with the production target. We keep our level of 798,000 barrels per day as our goal for this year. And Enrique is going to refer in detail to the participation of the main fields in addition, are we looking in terms of the reserve addition. Please, Enrique.

We feel pretty confident that we'll be able to achieve production, the target during the rest of the year. So we really are not expecting any changes. Regarding just your question about the main fields, how they will behave, I can give you some numbers, which explain in detail the main goals that we expect to achieve by the end of the year. [indiscernible] Rubiales, we expect to reach an amount of 210,000 barrels gross production, okay, and Castilla, 140,000; Chichimene, 60,000; Quifa, 55,000; Casabe, 28,000; La Cira-Infantas, 38,000. So you can see we expect to keep running the oil fields as we expected. So as I mentioned before, no any big changes were expected for the rest of the year, okay? Paula Kovarsky - Itaú Corretora de Valores S.A., Research Division: Okay. But regarding the second part of the question, which relates to Ecopetrol's initiatives to improve recovery factors in the main fields, could you perhaps give us a bit of an update on how things are evolving in, especially in Castilla, Chichimene and then Piedemonte and La Cira. So what's the current recovery factor in those fields? And what are Ecopetrol's expectations in terms of how much more can you get in terms of recovery factors from those fields?

Okay, Paula, let's put it this way. We continue running some pilots. For instance, we will run chemicals in San Francisco [indiscernible]. As you are aware, we are running, at this moment, in situ combustion pilot in Chichimene and Quifa. For water injection, we'll run some pilots in Chichimene, [indiscernible], Apiay, Bonanza and Provincia. So in other words, we continue... Paula Kovarsky - Itaú Corretora de Valores S.A., Research Division: This is steamed, right? This last one is steamed?

But in the short to mid-term and the long term, and of course, the EOR that I mentioned before. Also, I would like to give you an update what's going on in the -- some EOR pilots. For instance, in Chichimene, the status we expect to inject air by December of this year, okay? And in Quifa, as you are aware, on February of this year, we started the air injection. We expect results for this activity, maybe in the next, let's say, 12 months. And in order a task to increase our recovery factor, is to continue our infill drilling, in which we'll complete around 742 wells this year. Paula Kovarsky - Itaú Corretora de Valores S.A., Research Division: Okay. And -- okay, but you don't have value or perhaps, could you share with us what's the level of recovery that you have today, and how much do you expect to achieve?

The number, Paula, by end year is around 18%, 1.0%. Paula Kovarsky - Itaú Corretora de Valores S.A., Research Division: Okay. This is today, right?

Yes. Paula Kovarsky - Itaú Corretora de Valores S.A., Research Division: And is there a target for the future?

Well, Paula, as a general guidance, we are considering, in our strategic plan, is going from 18%, the current number to 34% in 2020. This is the general items of the recovery factor with the different initiatives we are undertaking right now. Going from 18% to 34%.

And the next question is from Bruno Montanari from Morgan Stanley.

So looking at your crude baskets and the Brent preference had been on a consistent average of 75%, but declined now to 62% in the first quarter. What was the driver of the step change? And what will be the trend for the basket going forward? And also, if you could comment on the expectations for crude differential levels of [indiscernible] versus Brent or WTI, in the near-term future, it would be great?

Thank you, Bruno. Pedro Rosales is referring to your question.

Okay, Bruno. About our basket, we are seeing a movement in our destinations. Moving to Asia, the Brent is about 62% of our total basket, and what we expect is to continue moving to the exports for Asia. We are seeing that in the U.S., there are more production and less space for our crudes. And what we expect is a similar trend about the differential between our basket and Brent, around $8 or $9 of this count of our basket about a Brent benchmark.

Okay. Just so -- just to confirm, you do not expect Brent to go above 70% in the future again?

No. It could be but, really, we are moving about the market trends. Then what we expect is to continue moving around the number that we have now, but it's not a definite position because it considers the situation of the markets in the -- for our exports.

The next question is from Gustavo Gattass from BTG.

I have a couple of questions. The first one was, I think, was much more for Adriana. I just wanted to have a view on CapEx. If I'm not mistaken, the guidance for CapEx this year was for about COP 9.6 billion. First quarter was COP 1.5 billion. I just wanted to have an understanding from you guys if you are seeing the possibility of spending less during 2013 than before? So that's the first one. The second one, as well for Adriana, a very quick one. I just wanted to understand on the VAT change, the $27 million hit that you had because of the rules. I just wanted to understand if that's already a full quarter figure? And whether or not, let's say, that increases in pace in the future? And if I could, just the last one, we saw the refining results being stronger this quarter, but you also changed a little bit of the accounting moving the sales and marketing into Refining and into E&P. I just wanted to have an understanding, should we be expecting because of this move of sales and marketing, a stronger base for Refining results for the future? Or is that going to be somewhat erratic?

Thank you, Gustavo. Adriana is taking the answers. Adriana Marcela Echeverri Gutiérrez: Thank you, Gustavo. Regarding the CapEx, what you see here is the result for the first quarter of the year. But if you take a look to the general behavior of CapEx of Ecopetrol throughout the years, you find that the first quarter of the year is usually the one that presents the less of execution. Why? Because this is the first quarter when we are making the contracts and elaborating all the things to put the contracting strategy in place, that you know here is annually, that we have to do that. So that's why. Anyway, what you see in this case, is that we are improving our CapEx execution year-by-year and in this quarter, we executed $1.4 billion, almost $1.5 billion, while last year it was $1.1 billion only. So that's more or less the general behavior in what happened this special quarter. On your second question, which is the VAT. Let's remember that, I guess, it was December 28 of last year, the Congress issued a new tax reform that happens very frequently in Colombia, almost yearly. So one of the most important things that happened to us was the VAT change for gasoline and diesel. Let's remember that there has been kind of a discussion on the composition of the price internally of crude oil, of gasoline and diesel, and people are kind of making show up and things like that. So that's why they decided to make gasoline and diesel VAT exempt. But for us, that are the producers, it has a different effect. Why? Because when you have a VAT in the production of certain item, whatever it is, in this case gasoline and diesel, you then can discount that from your income tax. So in this case, if they make that exempt, that means that you have not that discount. The total effect that we are forecasting for the full year is COP 157 billion, which means that for each one of the quarters, if we make kind of a normalization, it could be around for COP 40 billion per quarter. So in our case, that's material but not material, as we expected at the very beginning when they were going to make exempt many other products, and not only gasoline and diesel. So that's for the part of the VAT explanation. And in terms of the segment and Refining results, because of the elimination of the trading and commerce realization segment, what we did was trying to make some changes in the last year or 1.5 years in the company, trying to make that more look like more this kind of companies that are integrated where the commercialization trading activities are addressed to make that in service for the production in the Refining segment. So in this case, for the particular case of Refining, it has no effect. I can send you the effect of the -- before the elimination of the segment and right after, we can post it in our website for you to have the difference. So it's mainly nothing, in terms of margins or anything like that. The effect will be seen, or is now seen, in the production segment since they are now taking the account of certain things that were not, let's say, allocated to that segment when the commercialization segment existed. So that's why you find a decrease in the EBITDA margin for production. But in the case of Refining, there is no effect.

The next question is from Anish Kapadia from TPH. Anish Kapadia - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: I had a question, just first of all, on your improved recovery plan. It seems from your 20F that your plan is to spend $35 billion to increase your reserves by 3.5 -- 3.4 billion barrels. So it implies CapEx barrel of only $10 for the improved recovery. I was wondering if you could give some details about the cost per barrel that you expect for the different improved recovery techniques, so infill drilling, water injection, the in situ combustion, if you can just kind of break that down? And then related to that, I was just wondering if you could give what your base decline is on your existing assets? And then out of your 2015 production target, how much of that target comes from EOR projects or Exploration?

Enrique will take you the answers.

Anish, let me explain one by one. The first one, you would like to know the cost per barrel and different methods that we are using in that recovery factor. Let me give you, let's say, numbers. For instance, infill drilling, of course, is around 8 to 10, for water injection, is around 10 to 12. And potential recovery is about 25, more or less, okay? This is your first question. Second question is, what exactly is your question, Anish? Anish Kapadia - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Yes, so the second question was if you could give, what's the underlying decline rate of your existing assets, so of your proved reserve base, what would you say the underlying decline rate is? And then within your 2015 production target, how much of that target comes from Exploration, and how much of that comes from improved recovery?

Okay, for our existing assets, base decline is around 25%, okay? And for the goal, for the year 2015, let me give you some, also ranges, in which we expect to meet the goal. For instance, let's just start it by production and let's start it by going fields. For instance, Castilla, we expected between 150 to 170; Rubiales, 110 to 125; Chichimene, 65 to 75; Casabe, 25 to 35; La Cira, 25 to 30. In Exploration, as a second part of the breakdown for the figures, let's put it this way. The Castilla's field, we expected between 10,000 to 20,000; Caño Sur, 10,000 to 20,000; and Quifa, 5,000 to 10,000. Unconventional, we still work, dealing with the numbers. We can say 5 to 10, but as you know, we are just in our asset [indiscernible] stages, okay? Also the contribution for the subsidiaries, it could be something between Ecopetrol America Inc., between 5,000 to 10,000; Hocol, 30,000 to 35,000; Equion, 20,000 to 25,000; and Savia, let's say, 7,000 to 12,000 barrels equivalent per day. I mean, so I don't know if -- I mean, let's say, you see that the numbers is around 1 million, which is our goal for 2015. I don't know with these numbers, Anish, you feel comfortable with that. Anish Kapadia - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Yes. So just -- I mean, just thinking about those numbers, so your kind of current number in 2013 is about 800,000 barrels a day. I'm just struggling to see where the kind of 200,000 barrels a day of incremental production comes from, most of -- there's a bit of growth in the big fields, but it doesn't seem to add up to anywhere near to 200,000 barrels a day.

I mean, yes, you're right. The main fields, Castilla, Chichimene, Rubiales, will be the responsible for the, let's say, the big numbers. Anish Kapadia - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: And so the loss of growth that's kind of implied for new exploration, is that what it suggests?

Yes, I mean, as I mentioned before, the number is 50 to 70, and in those numbers, are included, not just Quifa and Castilla's, but also discoveries completed by the Ecopetrol, as well as Hocol subsidiary. Anish Kapadia - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Right. Okay, just one sort of very quick follow-up question. On CENIT, is there -- are there any plans to sell down the stake in that IPO and bring it public?

Anish, right now, our plans is to continue with 100% of the charge in the hands of Ecopetrol.

The next question is from Colin Smith from VTB Capital.

Just on the balance sheet, on my numbers, your debt to total cap went to just under 11%, which was about a 3% deterioration from the end of the year. We obviously got oil prices down. I think you said you were planning to push CapEx up. I mean, what's your feeling about the way the balance sheet is developing? It's clearly under-leveraged at the moment, but it's actually -- the gearing is growing quite rapidly? That's my question.

Colin, thank you. Excuse me, can you repeat the question, Colin, please?

Yes. On my calculations for the consolidated group, net debt-to-total capital went to 10.8% and that's up about 3% from the beginning of the year, so from the end of last year. And you were running quite heavily cash-flow negative in the quarter. And obviously, while that's not a big number, it's a number that has been growing -- that is the level of gearing has been growing fairly consistently through the course of last year, and I just wondered how you felt about that? Adriana Marcela Echeverri Gutiérrez: Colin, remember that what you have here in the presentation on Slide #20, that's the general balance sheet of Ecopetrol, right? So it doesn't have the consolidated debt for the total, let's say, corporate group. In addition to Ecopetrol's debt, that it's already remarked in the press release, you find our indebtedness that is going to be increased this year, heavily as you can say. We expect to initiate the withdrawals from Eximbank facility. But when we take that into account -- and also we were expecting to go to the local markets for bonds and some other internal financing for our local requirement. In terms of the consolidated debt of the group, the most important debt is coming from Reficar. Let's remember that they have at least $3.5 billion coming from a U.S. Eximbank financing, also, that was granted last year and that which is -- was granted in 2011. And we deferred in the main portion last year, in 2012. This year, there is a little withdrawal from that, Eximbank financing of Reficar. But that's the big number. The second number comes from Bicentenario pipeline. They have a debt of around $600 million also. Those are the big numbers that are consolidating currently with the debt of Ecopetrol.

Okay. And a quick follow-on, is -- should we expect to see the quarterly contribution from CENIT look pretty like the number that we are seeing in Transport or is that going to change? Adriana Marcela Echeverri Gutiérrez: There will be a change that you will see next quarter because ending this first quarter of March 31st, you see there the Transportation segment, which is still being held by that time by Ecopetrol. But since CENIT started operating from last April the 1st, it means that by the end of June the 3rd, in the next quarter, you will see the consolidated results for Transportation segment, which will be CENIT, in fact, that CENIT. The cash coming from CENIT will be in the form of dividends that are going to be declared if everything goes well, next year, and will be paid next year. In a proportion that goes along with how the investments are going and the cash flow needs that they have and, et cetera. So we currently do not have a number for dividends of CENIT for year 2014, but for this year, what you will see starting June 30 of this year, in terms of the Transportation segment, will be the operation of CENIT.

So you'll fully consolidate the financials for CENIT but the cash flow will represent the dividends to be paid and you get those next year? Is that right? Adriana Marcela Echeverri Gutiérrez: They have -- as a company, the final result, the net income [indiscernible] and after that, as every company does, secure the dividend for next year.

In addition, maybe, it is important to mention that CENIT is a conform, not only with Ecopetrol's Transportation assets, but maybe more important are the participation of Ecopetrol groups in companies like Ocensa, Poliducto, [indiscernible], [indiscernible], Oleoducto Bicentenario and Oleoducto de Colombia. CENIT has concentrated all of our participation in the Transportation assets, not only assets, but also as capital participations. And [indiscernible], it is important to remember that CENIT began its commercial operation in the 1st April recently, and just we are having the results of the first month of its commercial operation.

I will now turn the call over to Alejandro Giraldo for closing remarks.

Thank you all for your participation. For any additional questions, you can contact us at Investor Relations, and have a good day. Bye.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.