Good morning. My name is Anna, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ecopetrol 2019 Results Conference Call. [Operator Instructions] After the speakers' remarks, there will be a question-and-answer session. Thank you for your attention. Mrs. María Catalina Escobar, Manager of Corporate Finance and Investor Relations will begin the conference call today. Mrs. Escobar, you may begin your conference. María Catalina Escobar: 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: Alberto Consuegra, Executive Vice President; Jaime Caballero, CFO; Jorge Calvache, Exploration Vice President; Jorge Osorio, Vice President of Development and Production; Milena Lopez, CFO of Cenit; and Tomás Hernández, Vice President of Refining and Industrial Processes. We will begin the presentation with the main achievements of the second quarter of 2019, followed by the highlights by business segments and financial results under International Finance Reporting Standards. We will close with the Q&A session. I will now hand over the presentation to Ecopetrol's CEO, Felipe Bayón. Felipe Bayón: Thank you, María Catalina and welcome everyone to our second quarter 2019 results conference call. I am very pleased with the results we delivered yesterday to the market. Despite a challenging environment, the numbers for the second quarter reflect the sustainability of our results. Thanks, amongst other things to the operational and financial strength of…

Thank you, Felipe. In the first half of 2019 operating results were positive and strengthened our position against the 2019 targets, in spite of a challenging price environment, the impact of scheduled maintenances and public order situations faced throughout the period. The average production of the group for the second quarter 2019 was 723,000 barrels of oil equivalent per day, 2,000 barrels more compared to the second quarter of 2018, despite having successfully executed the maintenance plan schedule for the period. During the quarter there were an average of 37 rigs in operation, six rigs more than the number used in second quarter 2018. The operation of these rigs led to the drilling and completion of 147 development wells. As of the first half of 2019, 311 development wells have been drilled 17.4% more than in the first semester 2018. On the exploratory front, during the second quarter the presence of hydrocarbons was confirmed in the Andina Norte-1 light crude and gas and Boranda-2 sidetrack medium crude wells. The cumulative total during the first semester is 10 wells drilled in the Colombian onshore, expecting that by year end we will have exceeded the target of 12 wells set in the plan. On another note, I am pleased to mention that the Ecopetrol group obtained five of the 11 exploratory blocks awarded in Colombia by the ANH during the Permanent Area Assignment Process 2019. On the international front, the MC 904 block located in the Gulf of Mexico of the United States was awarded to Ecopetrol in consortium with Fieldwood Energy as operator and Talos energy. In the midstream, there was a good performance and contribution to the business group cash, due to the production increase, the commercial strategy to transport higher volumes by pipelines and more days of operation at…

Thank you, Alberto. In the second quarter, the exploration campaign continues achieving good results along with our partners. We completed the drilling of six exploratory wells totaling 10 during the year. With these results, we are very close to achieving our target of 12 exploration wells for 2019. During the quarter we confirmed the presence of hydrocarbon in Andina Norte-1 well operated by Parex with a 50% stake and Ecopetrol with the remaining 50%, finding oil in Guadalupe and formations. Initial test in the Guadalupe formation confirm light oil crude of 40º API and gas. Additionally the Une formation proved the presence of oil of 37º API and gas. Likewise the drilling of Boranda-2 ST well was completed in May where initial product test confirm the presence of oil of the 23º API in the Emerald formation of Eocene base. These discoveries benefit from being located close to existing infrastructure, allowing us to leverage our strategic target of increasing reserves and production through exploration in a short period of time. On the other hand, I am pleased to inform that the Ecopetrol group obtained five out of the 11 exploration blocks awarded in Colombia by the National Hydrocarbon Agency during the 2019 bidding round process. Of those sites, Gua-Off 10 block on the Colombian Caribbean offshore correspond to Ecopetrol and the other four to our subsidiary Hocol. Internationally, we have strengthened our portfolio in areas of high potential. Ecopetrol America with a working interest of 31 5% in consortium with Talos Energy with 9.56%, and Fieldwood Energy as an operator with a 58.94%, working interest with MC 904 block located in the Gulf of Mexico of the United States, bring a 252 Gulf of Mexico lease sale round process. On the other hand Ecopetrol Brasil purchased an additional 341 square kilometers of 3D seismic which will allow us to evaluate the prospectivity of Pau Brasil and 1,600 square kilometers of 3D high resolution seismic to evaluate the participation in this [indiscernible] handed over during the second semester. Additionally, Ecopetrol Hidrocarburos México acquired the license of 88,015 square kilometers of 3D side meets from the Campeche program for a period of 24 months. Finally, I would like to highlight that on July 17, the Brazilian Ministry of Mines and Energy approved Ecopetrol’s participation with 10% working interest in Saturno block located in the Santos basins. In the new partnership, Ecopetrol keeps 10% of working interest while Shell, as an operator has 45% and Chevron, the other 45%. I will now pass the floor to Jorge Osorio who will talk about the production achievement during the quarter.

Thanks Jorge. During 2019 we have been in line with our plan to achieve production between 720,000 and 730,000 barrels equivalent per day. Our production in the second quarter was 723,000 barrels equivalent per day, 2,000 barrels more than the second quarter of the previous year. Of the total production, Ecopetrol’s fields with recovery programs contributed 30% and the subsidiaries 8.3%, reaching 60,200 barrels per day, compared with the first quarter of the year, the oil and gas production decreased in line with the planned maintenance activities for the period. This quarter highlights, the good results of the drilling campaign of River Valley’s field compensating for the decline of the field and the drilling in the Akacias field block CPO-09 were production was triple, reaching 2,000 barrels per day average for the quarter. This slide also illustrates the production of the Castilla, Cupiagua and Yarigui fields, which show an increase from the second quarter of the previous year. Now I turn to Milena Lope, who will tell you about the results of the Transport segment.

Thank you, Jorge. During the second quarter of 2019 the midstream segment continued achieving positive financial result with an EBITDA reaching COP2.5 trillion, this represented an increase of 10.8%, compared to the EBITDA for last year’s second quarter and achieving a 78% EBITDA margin. During the second quarter of 2019, the segments transported higher volumes of crude and refined products, achieving 1,158,000 barrels per day, which represented 3.8% growth compared to last year’s second quarter figures. The volume of crude transported, increased 4.3%, mainly due to additional barrels captured from alternative transportation system and the injection of crude at Ayacucho from the Acordionero oil field. The transported volume of refined products increased 2.5, compared to the second quarter of 2018, mainly due to the inventory replenishment process that took place after the maintenance of the HDT unit at the Barrancabermeja refinery, which took place during the first quarter of 2019. During the second quarter 2019, the number of attacks on our pipeline infrastructure decreased by 48%. As a result, there were 12 reversion cycles in the Bicentenario pipeline, compared to the 18 cycles that took place during the same period of last year, resulting in more operational days for the Caño Limón-Coveñas pipeline. Lastly, it is important to highlight that during the second quarter, the Ministry of Mines and Energy published tariffs that have been in place since July, 2019, and will be valid through June 30th, 2023. This year, the Ministry set a negotiation process between producers and transporters, who had a chance to negotiate directly. In some cases, agreements were reached and endorsed by the Ministry of Mines and Energy. In cases where an agreement was not reached, the ministry set targets according to the existing regulatory framework. The new tariffs will result in a moderate increase in…

Thank you, Tomás. In the first half of 2019, we continue to deliver solid financial results. We achieved an EBITDA of COP15.7 trillion and a net profit of COP6.2 trillion. The group's EBITDA margin has shown a rising trend since 2016 and it’s now at 45.7%. Our main gearing metrics remain sound and are in line with many industry peers that grows depth to EBITDA and net debt to EBITDA ratios where at 1.2 times and 1 time respectively. EBITDA per barrel was down slightly compared to 2018, largely due to lower international prices for crude oil and refined products and the impact of scheduled maintenance, especially at the refineries, whilst Brent has fallen $5.5 per barrel in the first semester of the year, our EBITDA per barrel fell only $2.2 which in net terms leaves us being $3.3 per barrel more profitable. The net profit breakeven close at $31.9 per barrel, showing a favorable trend versus previous periods, also with a larger spread against Brent. We highlight the results below the operational line due to a lower effective tax rate and a reduction in our financial expenses. Likewise, we also kept our ROACE above 13%, reflecting the efficiency and operational profitability of the capital allocated by the company. The group’s total EBITDA remains stable. It is worth to highlight the rise of the midstream segment EBITDA to COP5.1 trillion, mainly as a result of the increasing volumes carried by pipeline that were previously carried by tanker trucks. This increase help mitigate the impacts of lower international prices of Brent, NAFTA and gasoline and the effect of scheduled major maintenance at both refineries, as well as in some producing fields during the first half of the year. Now let's move onto the next slide to see the business group’s cash…

[Operator Instructions] And we have a question from Carlos Rodríguez from Ultraserfinco. Please go ahead. Carlos Rodríguez: Good morning, everyone and thank you for the conference call. I have two questions. The first one is related to the cost and – I mean if we should see this behavior for the rest of the year, I mean, what is the rationale behind that costs that I believe are mostly in pesos are rising faster than revenues, that are in dollars and actually are boosted by the weakness of the currency. Felipe Bayón: [Foreign Language] Carlos Rodríguez: Okay. And my second question is another topic, I mean, it’s regarding the Saturno block that you currently have 10% of stake. I want to know what are the terms of intellectual property with the – all the engineering developed there? And is it similar as the agreement reach in the Permian in order to bring this knowhow to Columbia, when you start operating the offshore?

Thanks for the questions, Carlos. With regards to the first question around cost, I think the frameworks for thinking about costs and its link to currencies that around 60% to 65% of our revenues are straight dollar-based and around 40% of our cost structure is peso-based. So that gives you and obviously, there's some kind of natural balances between them but it does create an overall effect whereby peso devaluation actually benefits the group. So broadly speaking, a change of COP100 in the representative exchange rate, it has an effect of around COP400 billion to COP600 billion in EBITDA so that’s the way to think about it. Now when you think about the outlook for the remainder of the year, I think you need to go back to the fundamentals of the guidance that we have provided. Generally, when you see our integral cost structure, there's only two places where you're actually seeing increase in cost. One, you're seeing a cost related to the product imports that we've made associated to the maintenances in refineries over the second part of the year. That's very episodic. That's something that we don't see as a sustained effect over the coming six months. And secondly, when you see at the lifting cost structure in E&P, Alberto has spoken about the increase that we've seen going from $8.5 per barrel to $9.1 per barrel. We see that as a result of the increased activity levels associated to maintenance but we believe that's not going to fundamentally change over the coming months. We believe that our year-end position around this is going to be anywhere between $8.5 to $9.5 per barrel, which is in line with the guidance that we have provided in the business plan. I think exchange rate is going to be a…

And we have a question from Luiz Carvalho from UBS. Please go ahead.

Yes. Hey, how are you? It’s Luiz Carvalho from UBS here. I have basically three questions, if I may. The first one and then we acknowledge due to the recent movements that you made on the upstream part of the business, which I mean was part of our concern in terms of the reserve life and so on. So how can we see these movements looking forward in terms of reserve level, I mean, is there any target or internal target that you can share with us that you would be more comfortable in terms of reserve life for – in terms of production growth sustainability in the long-term. So that's the first one. The second one is more on the downstream part of the business. I mean, recently the government announced some changes or some plans on the stabilization fund because of the deficit. And by the way, I have to say, the IR team that provided of great help for us here trying to descend. But how the company see these looking forward, because now, we’re understanding that there’s not an easy solution, in terms of reducing the deficit, I mean, someone has to pay for that either the population or the government or – it’s the companies you’re covering the process? And the third one, the third question is about you’d say potential for the acquisitions, I mean, when it look to the balance sheet of the company. You’re still in a very comfortable situation that one-time net debt-to-EBITDA. So, I was wondering if you looking to acquire potential some companies or even more assets looking forward. Thank you very much. Felipe Bayón: Thanks, Luiz. And I’ll take the first one and the third one and then I’ll ask Jaime to talk about the FEPC on this…

Luiz, thanks for your question. And with regards to the FEPC, the stabilization fund for fuels. And I think, there has been a number of announcements lately, but I think it’s important that we start with the facts. I think what the government has stated and our understanding from conversations with the government, is that – what the government seeks is the sustainability of this system, right? It’s not about eliminating necessarily the system, it’s about how do you make it sustainable? And in particular, how do you lower the fiscal burden associated to the system? I think, when it was designed it had contemplated some compensation mechanisms that due to a recent market dynamics, by reason, I mean over the last couple of years, it has actually created an increasing burden for the government. And I think the way that we look at it in Ecopetrol; I think there’s kind of three or four a key principles in the way that we engage with that conversation. I think firstly, when you look at the market outlook that deficit that the government is in a way taking care of should reduce over time. It should not become more ample. It should actually reduce. I think that’s going to help. That’s one consideration. The second consideration is that the government already has taken some steps in that regard such as the change that we discussed in the previous call with regards to the treatment of VAT associated to the value chain – to the fuels value chain in particular, you might recall that we spoke about that change of the 19% to 5%, which is actually reducing the burden that the government needs to carry. As we look forward, I think there’s two or three principles that the government is taking…

Thank you very much. Very clear explanation. If I just may come back to the first question – the first and third question that you, I mean, you just comment on, I mean a knowledge you attribute the great efforts that the company made over the past, mainly the couple of months and we believe that there is very, in the right direction we premature that. But I mean, despite the current liquidity of the stock, are there any blends that, I mean from a capital market’s perspective that you might considering to actually increase the free flow of the company. Felipe Bayón: Yes, Luiz. well, let me take that one. In terms of what we’ve said before, and this hasn’t changed in the last few quarters or so. We understand that there may be appetite for increased liquidity in the market, which is good. It’s acknowledgement of what the company’s doing, what it’s done in terms of the value that it can provide. but rightly pointing out at this stage, we’re in a very good position in terms of our leverage and how much depth we have in terms of our ability to generate in terms of us being able to continue to be self-funded, which is fundamental. So, from that point of view, there’s no – if you will, immediate action that we would take in this arena or in this area. So, yes, no changes to what we’ve said before. Thanks, Luiz.

Okay. Thank you very much. Sorry for the long questions. Thank you.

And we have a question from Pavel Molchanov from Raymond James. Please go ahead.

Thanks for taking my question. My first one is about the shale pilot that I know you had in the Guane area that I believe was recently blocked by the court and by the environmental regulator. Can you give us an update on what exactly happened with the guane-A and what the next steps are for you to actually begin drilling operations there? Felipe Bayón: Yes. Hi, Pavel. This is Felipe here and let me take that one. And I’m assuming you probably said you wanted to have a couple of questions. So, first thing, and let me step back for a second, when we presented to the market to yourselves, the 2019-2021 business plan, we highlighted that as part of our forward investment, we had included $500 million to do the pilots for the unconventionals that has not changed. So, we are – we continue to view that as something that we will do, but you’re rightly pointing out, there’s a few things that happen. So, I’ll spend just a few minutes trying to provide a bit more color and clarity around this. So recently, there was a commission of experts like Comisión de Expertos that’s how it’s called. That was put together by basically, the Ministry of Mines and Energy on the Ministry of the environment. So, government created these group of 13 experts, both national and international in many different fields and the experts provided a report. And the report basically is saying, there is something called [Foreign Language], so its pilot projects for unconventionals that would allow us to do research in a way that's holistic, that's basically the intent. And they said, yes, those can be done, but there are some caveats. And the caveats are basically around how the companies would, how the relationships…

Yes, I do. Thank you for that. On offshore exploration, so you've talked, quite a bit about the Brazilian opportunity, but of course, the domestic opportunity in Colombia on the Caribbean has seems to have been sidelined or not a central for you as maybe a two or three years ago. I'm curious what the next steps are to kind of continue or revive offshore exploration along the Caribbean coast? Felipe Bayón: Thanks for the question, Pavel. Great question. And I think it's important to mention a few things. So we remain committed to Colombia. I think that's the first thing. We've made some very important discoveries in the next to the border with Panama, so, Kronos, Purple Angel, Gorgon and it's an area that we've now retained 100%, that's Ecopetrol and recently you may have followed this in the news that we signed the transition from a sort of study area to an E&P contract. So I think that is in line with our continuous commitment to find the right way to develop those resources. So we're actually currently conducting a data room exercise around those discoveries. We want to bring one or two partners that can bring expertise, remember these are large gas reservoirs that have a water depth of between 1,500 and 2,500 meters of water. So we will require expertise, technical knowledge, some of these could be at least complicated from a technical point of view. So we are finding through these processes the right partner to bring those molecules to the market. So that hasn't changed. We recently signed another off shore next to La Guajira, so that’s in the other side of the country and the other side of the Caribbean. So that's something that we will pursue. And we continue to look at opportunities, so a Caribbean in Colombia, clearly a focus area and very important for us in the future in terms of developing additional resources. In parallel, we continue to do our activities in Brazil and as you rightly pointed out, we've talked quite a bit about that. We continue with our presence in Mexico and we continue with a good presence in the Gulf of Mexico, in the U.S., where we were producing roughly 14,000 to 15,000 barrels a day. And also very importantly, we continued to develop a lot of expertise around offshore exploration and development. Thanks, Pavel.

Thank you.

We have a question from Andrés Cardona from Citi Group. Please go ahead. Andrés, your line is now open and unmuted. Please go ahead. Andrés Cardona: All right, good morning guys. Sorry I was mute. My first question has to do with the dilution factor, what drives it up in the second quarter to something around 50%. And the second question has to do with the divestment of some non-core assets at the upstream segment. Are you still working underneath and targeting to sell the asset or are you pursuing some farming's on, that's it guys. Thank you very much. Felipe Bayón: Thanks, Andrés I'll ask Alberto to talk a bit more about dilution, but if you look at our dilution factor, and I think we did include a graph in the material that we shared with you today. It's moved from a 20% in 2014 to 14.6% in the first six months of the year. So dilution factor stays in line with what we've envisioned and clearly a fundamental area of focus in terms of what we want to do. It's allowed us to continue to transform the company. We're transporting heavier, much heavier crudes and it's given us, I think an expertise that it's valued outside of Colombia as well. So we're working with some with some NLCs outside Colombia to – in all of our expertise on heavy crudes. And I will ask Alberto to comment on that. But in terms – and then the second thing, I have the mic, so I’ll go on. In terms of divestments of non-core assets, we’ve said before that over the last two or three years we’ve strengthen our muscle around acquisitions on divestments. Couple of weeks ago, we announced the JV with Oxy, which I think demonstrates that we’ve…

Good morning, Andrés and thanks for your question. Actually what we are seeing is a reduction in the dilution factor, mainly attributed to that we are transporting the crudes with higher viscosity throughout our pipelines. Secondly, we are substituting diluent, with lighter crudes that we have available locally. And thirdly, we have cheaper costs of the NAFTA imported. So in total, we are seeing actually a reduction as I mentioned in our dilution factor. Andrés Cardona: Alberto, if I may, I know the long-term trend is the one you are describing, but it seems at least to me that in the second quarter in particular, there was an increase of this dilution factor. And I wanted to understand what is driving needs and if it affects the long-term trends, growth trend is very positive. But my question is more about second quarter.

No. But in reality, we don’t see any affectation of our long-term view on dilution factor. On the contrary, we are seeing a steady reduction through the implementation of the co-dilution strategy, which is actually sit to the NAFTA with propane that we will see that effect broadly to 2020 or 2021. Andrés Cardona: Okay, thank you very much. Felipe Bayón: Andrés, if I may – this is Felipe, again. If you actually look at the report, our dilution cost has gone down. If you look at the second quarter 2018 to the second quarter 2019, there is a 4.9% reduction in the costs. So, and again, maybe there’s a follow-up, follow on, you can reach out to the team, the IR team and I’m sure they will be able to provide more context around some more specifics. Thanks, Andrés.

And we have a question from Christian Audi from Santander. Please go ahead.

Thank you. Hello, Felipe. Hi, Ecopetrol team. I have three questions. The first one, Felipe, if you could talk a little bit, given your continued growth in Brazil, we have this important upcoming auction in November, related to the transfer of rights. How interesting is that opportunity for you or do you currently have just too much, particularly with the Oxy joint venture to be pursuing yet additional growth in that country? The second question also Felipe, with regards to unconventional, given how attractive this JV with OXY has been and how time consuming and lengthy the development of unconventionals in Colombia is bound to be for the reasons you explained earlier. Would it make more sense for you to just continue to grow your unconventional presence in the U.S. rather than focusing Colombia, given that it may take so long and you have to overcome so many barriers there? And the third and final question had to do with refining margins. I was just wondering, given what we saw in the second quarter, in July and August, have you seen already an improvement or continually difficult refining margin situation? Has that changed at all vis-à-vis what we saw in the second quarter. Thank you. Felipe Bayón: Thanks. Thanks for the question. So, yes, I’ll take the Brazil one first. So, if you step back for a second, our strategy has been that we will operate in the Americas, so we’ll operate in the continent. So that hasn’t changed. And clearly, I think we’ve demonstrated recently with our two entries into the Pre-salt in Brazil, that we are able to compete and we’re able to be part of a very, very competitive consortiums’ with top-notch and world-class partners, which is great. I’ve mentioned earlier in the call that we’ve actually…

Great. Thank you.

And we have no further questions at this time. I will now turn the call over to Felipe Bayón for final remarks. Felipe Bayón: Well, thank you. And thanks again to everyone who participated in today’s call. It’s always great to be able to understand some of the lenses and some of the things that you are interested in, some of the things that we need to further continue to assess and understand and deepen in terms of our – not only the assessments but the way in which we actually communicate and some of other focus areas. So we value that. We value your insights and we value the questions and we value the reports as well. So thanks again for participating today. I think as Ecopetrol, we continue to demonstrate that we’re delivering against the plan that we’ve shared in the past. We continue to deliver very strongly against strategy. We’ve had some good news around our international operations and the opportunities in the past few weeks and months. And hopefully we’ll be able to spend some more time in the next quarters or so. So thanks again and have a great day.

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