Welcome to the Fourth Quarter and Full-Year 2017 Ecopetrol Earnings Conference Call. My name is Sylvia, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to María Catalina Escobar, Head of Capital Markets. Ms. Escobar, you may begin. María Catalina Escobar: Good morning everyone, and welcome to Ecopetrol's earnings conference call and webcast in which we will discuss the main financial and operational results of Ecopetrol for the fourth quarter and full-year 2017. Before we begin, it is important to mention that the comments in this call by Ecopetrol's senior management can 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 materialize. As a result, Ecopetrol assumes no responsibility in the event that future results are different from the projections shared on this conference call. The call will be led by Mr. Felipe Bayón, CEO of Ecopetrol. Other participants include María Fernanda Suárez, Vice President of Strategy and Finance; Max Torres, Exploration Vice President; Héctor Manosalva, Acting Executive Vice President; Pedro Manrique, Commercialization and Marketing Vice President; Alberto Consuegra, Acting CEO of Cenit; Tomas Hernandez, Vice President of Refining and Processes; Rafael Guzmán, Technical Vice President; and Carlos Alberto Vargas, Vice President of Transformation. We will begin the presentation with the main achievements of the year 2017, followed by the highlights by business segments and financial results under international finance reporting standards. We will close with the outlook for 2018 and a Q&A session. I will now hand over the presentation to Ecopetrol's CEO, Felipe Bayón. Felipe…

Thank you very much. We continue with capital transformations program executing efficiency strategies in the business group. These strategies allowed us to incorporate in the fourth quarter of 2017 COP 1.18 trillion for accumulated efficiencies in the year of COP 2.59 trillion. Results have been achieved in four pillars. Income margins, with a contribution of COP 882 billion of commercial strategies and increase in the refining products. Excellent in CapEx, with a result of COP 724 billion mainly in strategies to improve operational performance and optimized drilling and completion cost; efficiencies in Ecopetrol profit and loss of payment, with a contribution of COP 559 billion mainly in strategies for dilution and operation of oil, maintenance and management of contracts. Strategies with subsidiaries, with efficiencies of COP 423 billion lead by the optimization of operation and maintenance cost in the Midstream segment as well as the strategy implemented in raw material cost and increase in revenues and margins. With this result, the efficiencies accumulated by the business group during the last three 2015 - 2017 reached a total of COP 7 trillion -- energy management of the business group executed in 2017 made it possible synergies between refining and transportation business in order to supply energy using the existing infrastructure, improved margins and savings in the purchase of unregulated refinery and sale of energy surplus. We also continue the operational activities for the commercialization of energy through Ecopetrol ESP that will start operation in fourth quarter of 2018. All of the above is reflected in the improvement of the indicators of our key operational metrics. Now, Max Torres is going to talk about exploration.

During the year, 21 wells were drilled including 19 exploratory and two appraisal wells. So far, nine discoveries have been announced while three other wells are under evaluation. The average success rate for year will be in excess of 50% depending on the results of the evaluation operations. Extending our frontiers to Ecopetrol America as a result of lease sale of 249 during November, we succeeded in adding blocks in Garden Banks, Gulf of Mexico, U.S., 77, 78, 129, 122. Our subsidiary Ecopetrol Brazil acquired 446 square kilometers of 3-D seismic in the offshore block FZA-M-320 in the Foz Amazonas basin. Ecopetrol equity in this block is 70% with our partner JX Nippon, 30%. Currently, Ecopetrol is evaluating blocks operating in Brazil bid grounds 15 and 4. 2017 was a year of intense exploratory activity, which allowed to consolidate us as a leading oil company, and establish a base for future growth of the company. In summary, the following were the main milestones for the year. Highlights were the wells Purple Angel 1 and Gorgon 1 in the block Purple Angel. Both wells operated by Anadarko 50% with Ecopetrol as partner in the block 50%. These wells confirm the existence of a large gas province in the Colombian Caribbean. Well Gorgon-1 is one of the most important discoveries in the country over the past years, and apart from that, it establish an historical record in water that operated in offshore Colombia of 2,316 meters. We also drilled on the well Molusco-1, the first offshore operator well by Ecopetrol through our affiliate Ecopetrol Costa Afuera, ECAS, with 50% working interest on partnership with the ONGC 50%. The well was operationally successful, and prove the presence of non-commercial quantities of gas. In Offshore Colombia drilling of the wells Trogon-1 and Lorito-1 in…

Thank you, Rafael. During the fourth quarter of 2017 we continued achieving positive financial results in the midstream segment. Our EBITDA for the quarter reached COP1.9 trillion as a result of continued implementation of our cost optimization and efficiency agenda across the segment. For the full-year, 2017 EBITDA reached COP7.9 trillion those surpassing last year's results by COP120 billion. Operational results for the fourth quarter included transportation of 116,000 barrels of oil and refined products per day which represents a 1.3% increase compared to the same field in 2016. The total volume of crude oil transported during 2017 was 823,000 barrels per day which represents a reduction of 5% when compared to 2016 due primarily to the disruption of operations at the Cano Limon Covenas pipeline, which was inoperative during 53% of the year. During 2017, approximately 60% of crude oil transported belonged to Ecopetrol and its subsidiaries. The total volume of refined products transported reached 268,000 barrels per day increasing 1.9% in 2017 when compared to 2016 due to increased demand for refined products and the elimination of restrictions in our Pozos Colorados - Galán system approximately 23% of refined products transported belonged to Ecopetrol. It is worth highlighting that in order to comply with transportation commitments a contingent operation to evacuate oil from fields near Cano Limon was established. The contingency plan consists of reversing the flow direction of the Bicentenario pipeline which has been operational in both directions since the end of the first quarter of last year. During 2017, we began transporting heavy crude oil from Apiay to Coveñas at 600 centistokes thus achieving important efficiencies in dilution costs for the upstream segment. Finally, during the fourth quarter of 2017 we accomplished the commissioning and final tests of the San Fernando-Monterrey system which began operations on January 1st of this year. With this, I hand over the call to Tomas Hernandez who will comment on the downstream results.

Thanks, Alberto. We're pleased to report that during the fourth quarter of 2017, the Cartagena Refinery successfully completed its global performance test, maintaining an average throughput of 144,000 barrels per day for 60 days. Throughout 2017 the Cartagena Refinery steadily increased its gross margin obtaining a result of $12.5 per barrel in the fourth quarter which represents a 21% increase compared to the previous quarter. The throughput also showed a quarter-on-quarter increase reaching an average of 147,000 barrels per day in the fourth quarter versus an average of 129,000 barrels per day in the same period of 2016. With the completion of the stabilization phase we have started the operations optimization phase in which we will continue looking for improvements in the crude slate and other operational efficiencies. The Barrancabermeja refinery managed to sustain a higher yield of mid distillates by decreasing its production of fuel oil thanks to the implementation of initiatives to increase valuable products despite the lower availability of light crudes. The refining margin during the fourth quarter reached $12 a barrel compared to $14.8 per barrel in the fourth quarter of 2016. This decrease is mainly explained by the increase in the crude slate price that was not offset by the increase in product prices. It is important to note that both the refinery throughput and utilization factor have been impacted by the effect of the heavier crude slate. It's relevant to highlight that in 2017, Colombia achieved the highest average combined throughput in the history of refining, 345,500 barrels per day, thanks to the operational stability of the two refineries. Of note, on December 20th, a new combined throughput record of 393,300 barrels per day was established between the two refineries. In our petrochemical area, Esenttia reported record sales of polypropylene that partially mitigated the…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Pavel Molchanov from Raymond James.

Thanks for taking the question. We have seen, in January, an acceleration in pipeline attacks by the ELN group, and given the time that has passed since then, can you give some perspective on how those pipeline attacks have disrupted the company's production so far into 2018? Felipe Bayón: Absolutely, Pavel. Thank you so much for your questions. In respect to the Caño Limón Pipeline, which is the one you're referring to, we've seen this year 15 attacks compared to 62 attacks last year. Clearly, if you look at period from January 10, when the bilateral truce fire was ceased, we actually have seen in increase in these terrorist attacks and the activity. We're working [technical difficulty] authorities, the armed forces, police, the local authorities to ensure that we can go into the different areas where we've seen the attacks to assess the situation and the condition on each and every one of these geographically pinpointed areas, and ensure that we can repair the pipeline and bring it back to operation. But I think it's also important to remind ourselves that we have not seen the need or we have not had to stop production or cease production at the Caño Limón field. And the reason for that is that close to 12 to 14 months ago we established the bi-directional 00:02:52] where we can now flow two ways using the Bicentenario [indiscernible], which allows us a lot of flexibility. So bottom line, we've seen the pipeline hit, and we stress the message that the biggest impact that we've seen in to those communities to live around the pipeline, to the environment which sometimes is a very big, or could be a very big impact. But from an operational point of view we haven't seen the need to actually shut down any production from Caño Limón. So we have the flexibility, and in that sense there is no impact in terms of volumes so far.

Okay. And following-up on that, you ended last year with 717 MBOE a day of production. You're guiding to essentially the same in 2018. Given that you're capital budget is increasing by more than 30% what explains the lack of production growth in your production guidance? Felipe Bayón: Thanks, Pavel. And I think there are several things. Context-wise, remember that some of our fields have very steep and sharp declines, that we're fighting day in and day out, so some of those fields will have declines that range from 15% to 25%. Having said that and just case in point, for example, Rubiales, which we took the operation less than 24 months ago, we've actually been able to increase production in Rubiales. So there's things that we're doing that are working. But we need to sort of run very fast to stay still. And in that sense, we've given a guidance of 715,000 to 725,000 barrels per day for 2018. We're in the range for that number. But we do need to acknowledge that, for example, during the last month of February, we did have some impacts in our production in Meta in our areas of operation around Castilla and Chichimene there was some social unrest; there were some attacks to the infrastructure mainly electrical switchgear and some of the other electrical facilities. This was so 10 to 12 days ago. We've now managed to reestablish all of the production from the field. So we do see some challenges. I just want to be very blunt in terms of saying there's always challenges in and around the operation. But we feel very, very comfortable in terms of the guidance we've given of production. To your point, clearly, the challenge that we have and what we'll need to demonstrate is our ability to deploy the CapEx in a way that's efficient that sounds and underpins production growth.

Our following question comes from Leonardo Marcondes from UBS.

Hi, guys. Thanks for the call. I have two questions. The first one is what should we expect from Reficar [ph] in terms of margins and its utilization rates this year? And my second question is a follow-up from the pervious one. Do you have any additional cost by using distinctive auto pipelines that using Caño Limón? And how Meta situation should affect your figures in the first quarter? Thanks.

Leonardo, thanks for your question. This is Tomas Hernandez, Vice President Refining. Yes, your question on the throughput for 2018, we're looking at throughput between 135,000 and 145,000 barrels a day for Reficar. And just as a reminder, we completed the stabilization phase, which was a complete success. We did the global performance tests, and we go into an optimization phase now. And that includes looking at the diets of crudes that we have in the refinery. We're looking at maintaining double-digit margins for 2018, as we did in the fourth quarter. As you know, we had $12.5 a barrel in the fourth quarter of 2017, and we expect that to continue. And as a reminder, Reficar, we completed the stabilization phase in 18 months. Just a reminder, we started the plants, all the plants, in July of 2016. In 18 months we completed the complete stabilization process. And when you look at the industry standard across refining globally, that standard is more like two to three years. So that was a great process we finished, and it was a result of great teamwork at the refinery, and also Ecopetrol's support groups coming together and making that a success. We expect that to continue into 2018 obviously, and continue with the optimization phase. María Catalina Escobar: Leonardo, apologies, can you please repeat your second question to make sure that we understood correctly?

Sure. Do you have any additional thought by using the Bicentenario Pipeline instead of using Caño Limón? And how Meta's situation should affect your production figures in this first quarter? María Fernanda Suárez: Leonardo, thank you for the question. Regarding our operational situation on Bicentenario and Caño Limón, I think that the most important thing to highlight is that on previous times when we had those kinds of issues we needed to stop production, and that has not been the case this time. And in terms of production you can expect if things stay as they are right now. In terms of cost, I will have to say that for the action segment it increases its cost because the action segment has had a cheaper pay with Bicentenario. And when they have to use the other corridor and transfer the crew through Ocensa they have to pay both the cheaper pay at Bicentenario and also the tariff at Ocensa. However, this is highly compensated by the revenues that we get out of Ocensa. So, for the group it does not account for an extra cost, but it does for the action.

And regarding Meta, Meta's present situation? Felipe Bayón: Meta, yes, can you expand a bit in terms of Meta?

Like should it affect your production this quarter? Felipe Bayón: Yes, we should see an impact in the quarter. I think the good news is we've managed to restore production fully. We've actually seen an increase in some of the production. We're doing some things in and around our operating fields, but we may see a small impact in the first quarter because of that situation.

Okay, guys. Thanks for the answers.

Our following question comes from Daniel Guardiola from BTG Pactual.

Hi, good morning guys. Can you hear me well? So, I have a couple of questions here. One related to hedging strategy, the other to CapEx on potential inorganic growth. So the first one is basically, I mean, in the last weeks we saw the finance minister announcing that they were analyzing the possibility of developing an oil hedging strategy in order to smooth to volatility of the oil fiscal income. And in that sense, I wanted to ask you guys if the company is considering to put in place a heading strategy and take advantage of the current high oil price scenario, and somehow locking profit right now? So that's my first question. And my second question is regarding to the already announced potential source of reserves growth coming through inorganic growth. And I would like to know if you guys could share with us more color on what's the strategy that you are looking at right now in terms of metrics, countries, and the main rationale behind the strategy to possibly add reserves in organics? María Fernanda Suárez: Daniel, thank you for the question. Well, regarding our hedging let me tell you two things. First of all, what the minister of finance announced in the last two weeks, it's different from the companies. What the government has said is that they're interested in using or applying a program similar to the one that Mexico has, where they hedged part of the exposure of the national budget to the oil prices. In terms of the companies' hedging strategies, what we said is that we are in the process of making a full analysis regarding the type of hedging policy that we can use. And that will be something that will be ended in the second quarter of 2018, and…

Our next question comes from Frank McGann from Bank of America Merrill Lynch.

Hello, good day. Just a quick question in terms of the [technical difficulty], your production has increased a bit in the quarter. And obviously I assume you're doing a lot of work here. I was just wondering how you're seeing that field, as well as maybe the results of some of the other mature fields that you have. [Technical difficulty] you seeing on costs in order to get the positive results that you're getting? Felipe Bayón: Frank, thank you for your question. The Rubiales Field I think is a successful story for us. We initiated direct operations just recently and embarked on an important investment in the field. And we saw drilling of many wells last year. And with those wells, with that investment we are able to reverse the trend of the field. It was a declining field and we were able to increase production, and you have seen that in the last year. Our goal for the field is to continue more or less the same investment that we have seen last year this year mostly to drilling wells, and also increasing the capacity to inject water in the field. Those are the two priorities we have on the field. And our aim is to maintain the production of this high-potential field for the future.

Okay. And in terms of cost, do the unit costs. Do they rise significantly as you do this work or do they stay similar, or how --? Felipe Bayón: No, we do not expect to have increasing costs. We do produce more water, so with that water we do see an incremental cost. But to efficiencies that we have gained in the operation we were able to offset that incremental cost. So actually if you see, we have seen a reduction in the cost in the field in the unit basis. And we expect to maintain that cost for the future.

Okay. Thank you very much.

Our next question comes from Andres Duarte from Corficolombiana.

Okay. Congratulations for the results, especially the ones related to costs. I have two questions. The first one has to do with reserves and the other one has to do with the refining activity. So what the midterm expectation or forecast of the company related to the certification of offshore gas reserves? That's the first question. And the second question is how long does the optimization stage that the -- Reficar is undertaking takes. And what's the target EBITDA and EBITDA margin for the company, as well as for the activity of refining? Thank you very much. Felipe Bayón: Yes, Andres, thanks for your question. So in terms of reserves, if I may step back for a bit, if you look at 2015 and '16, the overall net reserve result was neutral. Between '15 and '16 we did not advance in our reserves booking. In terms of '17, as we announced last week, we brought our reserves to 1.659 billion barrels, which is a 126 reserves replacement ratio. In terms of offshore gas, we need to think that we've had some very, very good results in terms of discoveries. So 2014 we had Orca, and in '15 we had Kronos, and then, all the way to '17, when we confirmed the presence of a massive, very large gas province. As you will know, these would be contingent resources that need to be moved into reserves once we have development plans in place and once we have sanction of the projects and gas contract. So, there will be a bit of time or a lag between the discoveries and when these are actually booked as reserves. What we are actually doing is pushing very very hard to ensure that some of those discoveries in particular the ones in Guajira, the once [technical difficulty] can be brought to the market quickly. There is a declining production in some of the fields in Guajira. We have the discoveries. We have a very strong partnership in that area. So, that's something that we are working hard to ensure that we can bring those molecules to the market. In terms of refining, and Andres, I'll over to Tomas Hernandez. We have said that since we started the first unit in Reficar, which was October 2015, it took us between 24–26 months before we had the global performance test done on the refinery. This was December 2017. So, 34 individual plants are working very well; more importantly, the whole refinery working extremely well. We have talked about not only the positive EBITDA and profit in Reficar but also in terms of the margins that we closed at $12.5 per barrel. But, I'll let Tomas take the question in terms of how we actually see things moving forward.

All right. Thank you very much, Andres. Yes, the first part of your question is around optimization. And we like to think of the optimization phase as continuous and never ending, right? But having said that, we have defined about 150 to 200 initiates that we prioritize and we are focused on completing those. In this year, we are focusing on diet [ph] initiatives. We are focusing on cost efficiencies. And we are looking are synergies between Barrancabermeja and Cartagena refineries. That's the focus of the optimization phase in 2018. We have many other initiatives that we will continue on and out of years, but that's the focus for 2018. As far as the EBITDA target, we talked about COP 500 billion -- minimum COP 500 billion. However, as you know that depends on international margins for -- in the market and how they work through the year; both refineries expecting to run very well next year. And both expect them in to be in double digit margins for 2018.

Okay, thank you.

Our next question comes from Carlos Rodriguez from [indiscernible].

Good morning, gentlemen. Thank you for the conference call. I have one question given your investment plan between $2.5 billion or $4 billion. Do you have any guidance about the replacement reserve ratio for this year? I mean what number are you expecting for the next year in terms of this ratio? Or, if you have any target about the reserve like index for the near term that you will feel comfortable? Thank you. Felipe Bayón: So in terms of reserve replacement ratio for '18, the way we think about this is that at a minimum we need replace 100% of our reserves each year. Last year, we were successful in basically changing the defining trend in reserves replacement that we have seen over the last couple of years. So, our aim is to ensure that we can replace -- reserves as we did in '17, we not only each and every barrel that they produced but it came at a replacement ratio of 110%. So, I think that's something that's achievable. And we need to look at different sources to replenish the hopper in terms of reserves. There is existing fields in recovery and we have had some very, very successful pilot in terms of EOR, secondary and tertiary recovery in terms of bringing exploration continuing resources much quicker into reserves and production but also in terms of our inorganic focus that we want to deepen in 2018.

Thank you. We have no further questions at this time. I would like to turn the call over to Felipe Bayón for final remarks. Felipe Bayón: Thank you very much and thanks for taking part in the conference call for 4Q and 2017 results. I want to first acknowledge our workers, employees, and everybody who day in and day out is committed to insure that we produce safe, sustainable, operational and financial results. Today we have actually presented what we think is a very solid set of results. It demonstrates that we are actually deploying the strategy in a way that's successful. We have talked about some of the challenges that we have in respect of the operational environment and how we are dealing with them, but I would say that we are very, very comfortable in terms of the direction in which the Group is going. And again, 4Q and 2017 demonstrates that the transportation, the adjustments, the focus on efficiency and continuous improvement pace out. We have a very solid financial position. And we look forward to continue our discussions in the next quarterly results. Thanks again for your participation, and have a great day.

Thank you. You may now disconnect.