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 First Quarter 2020 Earnings Conference Call. All lines have been completely on mute to avoid noise. After the speaker comments, there will be a Q&A section. You can send your questions throughout webcast, please include your name and the name of your company. Thank you for your attention. Mr. Juan Pablo Crane will begin the conference today. Mr. Crane, you may begin your conference. Juan Pablo Crane de Narváez: Good morning, everyone and welcome to Ecopetrol's earnings conference call and webcast in which we will discuss the main operational and financial results of Ecopetrol for the first quarter of 2020. Before we begin, it is important to take into account the legal disclosure specified on Slide 2. The call will be led by Mr. Felipe Bayon, CEO of Ecopetrol, who will be joined by Alberto Consuegra, COO; and Jaime Caballero, CFO. I will now hand over the presentation to Ecopetrol's CEO, Felipe Bayon.

Thank you, Juan Pablo, and welcome everyone to this 2020 first quarter results conference call. I hope you and your families are safe in the midst of this complex and unprecedented situation that both Colombia and the world are facing, and that has had significant health, economic and social implications. Before presenting the quarterly operational and financial results, I would like to share with you some of the measures at the Ecopetrol Group we've implemented to address the COVID-19 health emergency. Our employees are the most valuable asset and protecting their health is our top priority by ensuring safe operations. I would like to give you an overview of some of these measures that we have adopted. First, we promptly implemented remote work, even prior to the authority's declaration of the mandatory lockdown measures. Currently, out of the 13,000 employees that we have in the Group, some 9,000 employees are working from home. This has been possible, thanks to the digital transformation that we started some time ago. And that now provides us with the innovation and technology required to respond to this crisis. Between 15% and 20% of our employees continue to work on-site and they follow strict safety protocols, anywhere from our production fields, the two refineries, the oil pipelines, product pipelines and the ports. I want to make a special recognition to them today. Thanks to their effort, we have been able to ensure the continuity of our operations and the supply of crude and products to the country. We have developed the concept of the minimum operating vital, through which we can determine exactly the number of people required for each area in the operation in order to guarantee that production and supply of fuel continuous uninterrupted. Across the Group, we have joined our efforts in…

Thanks, Felipe. Operational results for the first quarter were stable despite an atypical industrial environment, we move forward with the maturity of Cosecha and Jaspe discoveries, which were granted commercial viability and consequently were relocated to production. Likewise, we applied to the National Hydrocarbons Agency for commercial viability in the Andina discovery, and we are assessing the commercial viability in Andina Norte. During the first quarter of 2020, cumulative production of our exploration assets reached 347,000 barrels of oil equivalent, as a result of extensive tests in the Boranda, Andina, Esox, and Bullerengue discoveries. By the end of the first quarter, five wells were on the drilling pace. However, due to the health emergency, those wells were guided to a safe stage and operations are currently suspended. As part of the activities planned abroad in 2020, our partner shale completed the drilling of the Gato do Mato-4 well sooner than expected. Currently, Ecopetrol is finalizing the entrance procedures into the project. I would like to highlight the implementation of the petrotechnical IT project which has permitted our personnel to conduct their activities consistently from home. This allows the advancement in the identification and development of exploratory opportunities. We will move on to the next slide to discuss cost production results. Ecopetrol Group's production reached 735,000 barrels of oil equivalent per day. This production level was caused by Rubiales and Yarugui fields successful drilling campaigns and the secondary enhanced recovery program in Chichimene and Castilla. The reversal of Pauto and Florena fields on February 29th, which were operated by Equion, and 1,400 barrels from the JV with Oxy in the Permian Basin. During the period, production was affected mainly due to public order, security incidents and the decrease in gas sales, mainly related to operational aspects in the Cartagena Refinery, and…

Thanks Alberto. Challenging market conditions affected the first quarter net income which reached COP133 billion. The decrease versus the net income for the first quarter of 2019 can be explained by, firstly a negative variation of COF740 billion due to the combined effect of lower prices and a higher average exchange rate on revenues and purchases. Second, a positive variation of COP137 billion due to the additional sales of 21,000 barrels per day in the first quarter. Third, the COP1.2 trillion of higher cost expenses and DD&A charges before implementing the austerity measures, and as a result of stronger CapEx execution. Fourth, certain non-recurrent charges accounting to COP683 billion, mainly the recognition of the fair value of crude and product inventories and the unrealized loss in the mark-to-market valuation of our financial portfolio. Fifth, COP164 billion increase due to higher interest payments of the Group's dollar-denominated debt and exchange rate impact given the devaluation of the Colombian peso versus the U.S. dollar. Allowing for all these effects, net income would have been COP1.1 trillion before impairments. Given the current market conditions, the Company performed an impairment test of substantive long-term assets, which resulted in the recognition of an impairment expense of COP932 billion net of taxes. The upstream segment accounted for 42% of that amount and downstream to 58%. It is key to highlight that these impairment charges did not imply cash disbursements and are susceptible to be reverted in the future. Please turn to the next slide to view the Group's KPIs. EBITDA margin stood at 34.9% due to lower crude and product prices, and increased costs and expenses through the quarter. The benefits of being an integrated company were noticed in the larger relative EBITDA contribution from the downstream and the midstream segments versus the first quarter of…

Thanks Jaime. Certainly, the current environment and the measures adopted to address it will impact the target established in our 2020-2022 business plan which will be reviewed and adjusted to the current price scenario. We will provide an update of this plan to you during the second half of the year. In the meantime, we have adopted our short-term financial and operational framework, providing our best estimate of relevant business metrics for the second quarter of the year as you can see in the presentation. These figures are consistent with the short-term financial framework where protecting the Company's cash balance and capital discipline are fundamental. We will continue to review these numbers as demand and prices' environments evolve. Finally, let me then quickly sum up the key messages that you've heard during today's presentation. First, we are fully committed to our employees' safety and maintaining operational excellence. Second, we have taken prompt, decisive and timely actions demonstrating both flexibility and resilience to confront this crisis. We have adapted our short-term financial framework to ensure a profitable operation and a positive cash flow in our Brent price scenario between $30 and $40 per barrel. Third, we have prioritized those strategic projects, that will allow us to procure a long-term vision and generate value for our shareholders. Again, thank you, everyone, for participating in this call. Given the circumstances, we highly appreciate that you could join us today. I will now open it up for questions and answers.

[Operator Instructions]

Thanks for the question. And I think that if we step back, we've said [technical difficulty] business plan for the year and for the next couple of years. Given all the level of uncertainty, I think it's important that once after we've started with the implementation of these adjustments that we've done very swiftly and promptly and decisively, we come back to the markets in second half to show what we are thinking in terms of the long-term. So that would be the first part. And then, I think that again, we will need to basically contemplate everything that's going on. Our view on prices going forward for the mid and long term and then the - any potential distribution of dividends will need to bide by the current policy that we have in place, which is 40% to 60% of the net income and will be decided by the AGM that will take place in March of next year. So we will need to again, I think, finalize the work that we need to do in terms of the overall plan. And in the AGM, we'll take a view on dividends going forward.

Thank you. Our next question comes from Santander, [Origo Riaz]. How are refining operations in May? [indiscernible] significantly reduced?

Sorry about the --

Did you listen to my question?

Yes,…

Okay. Thanks.

Yes. I did. I was having difficulty with the mic. So, Rodrigo, thanks for the question. So if you look at the refineries and then Cartagena normally run sort of 150,000 to 155,000 barrels per day, we've been running the refinery at 110,000 barrels. And if you look at Barranca, that normally runs at 220,000 to 230,000 barrels a day, we've been running it for the last weeks at 115,000. Over the weekend, we've increased that - the runs to 141,000 barrels. So we are already seeing an increase although small is significant because it's 22% increase against what we have or when compared to what we had over the last weeks or so. So utilization has been reduced. It's been basically us adapting to the demand numbers that we've seen, both in terms of the country and some of the markets worldwide. But I think I would like to again just emphasize that we are seeing some - although small, we're seeing some recovery going forward as we speak in terms of the loads of the refineries. Thanks, Rodrigo.

Thank you. Our next question comes from Morgan Stanley, [Gideon Levy].

The first question I have is on the midstream business. If you can tell us the level of discounts being negotiated with independent producers. And the second question, if you can give us an update on shale pilots in Colombia. I understand, they remain strategic for the Company, despite the lower oil prices currently. But I would like to know is the idea remains to start activities later this year? Also, if you can share with us, any update on the regulatory front, it will be great. Thanks.

Thanks. I will start with the second part of the question in terms of the pilots, and then I'll ask Milena, to talk about the midstream business in more detail. So in terms of the pilots, the Proyectos Piloto de Investigación Integral', pilot projects for investigation or research - comprehensive research are a strategic priority for the Company, recognized as strategic for the country as well, the government given everything that's going on with the management of the crisis has still been working on some of the technical procedures and standards, and we continue internally in our preparation and readiness to be able to conduct the pilots going forward. As we see this, we'll continue to assess the timing of when this would be possible, given everything that's going on, but we envisage ourselves going forward with the pilots in the next year or so. So clearly, there has been some updates, there has been some - especially some of the technical standards and conditions have been issued by Ministry for Commerce. So there has been progress. There has been progress on that. And again, we're convinced it's strategic for the country. And I'll ask Milena to take the question around the midstream. Milena, go ahead, please. Ana Milena López Rocha: Thank you, Felipe. Good morning, Gideon, thank you for your question. What we have done in the midstream segment is basically offer temporary discounts in order to help producers through this specific time period where prices are significantly lower than what they have been over the last couple of months. So the first component of the tariff that's important to bear in mind is that they're temporary. They've been given for two months and we will be reassessing that as time goes by, depending on where oil prices are.…

Thank you. Our next question comes from HSBC from Lily Yang. It's a question for the upstream segment. How much exploratory of the $2.5 billion i.e. investments that do not impact be on the proven reserves and production levels and where will be deployed? Is this including Oxy JV? Isn't there more room to cut CapEx further if needed, given that in the past, we have seen, minus $2 billion per year?

Thanks, Lily, and good morning. Good to have you here in the call. So I'll take this one. So clearly, we've - as you rightly pointed out, we've signaled $2.5 billion to $3 billion in terms of investment, and we have some $300 million to $350 million of exploration CapEx in those numbers. As you saw, we managed to drill three exploration wells in 1Q. We have some wells that have been safely - in which operations have been safely suspended for the time being, where we're restarting operations in most of those in the next few weeks or so. So clearly, we will need to adjust the overall number of exploration wells, but we will continue our exploration campaign going forward. In terms of - sort of the priority - prioritization that we do on CapEx, clearly, we've taken the view of reducing significantly the CapEx. And some of the concepts are the ones that you mentioned in your question around proven reserves impacts on production levels and I would say that of the $2.5 billion to $3 billion, 80% roughly goes to E&P, to the upstream. So we are protecting that part of the business. In terms of the JV with Oxy, being these short-cycle investments by the overall nature of the unconventionals, last year we had the ability to very quickly ramping up activities, so we have some wells that have been drilled to date, and we expect to end the year with some 21 to 23 - some 22 wells, which is good. So we've reduced CapEx in the JV, from 800 gross - $800 million gross to $180 million to $200 million gross. So that significant this sort of adjustment that again is sort of doable because of the nature of the business - of the short-cycle of the business. And even though CapEx has been reduced by 75%, we envisage an impacting production in those assets of around 50%. So previously, we had some 7,000 to 9,000 barrels of Ecopetrol production average for the year. Right now, we're thinking it's going to be somewhere in between 4 to 5 mbd, or 4,000 to 5,000 barrels per year on average. So clearly, we've adjusted the activities in the JV, and I think it's provided both by the nature of the short-cycle of those businesses, but also the nature of the agreements that we managed to put in place. And to your question, is there more room to cut CapEx, there is always more room to cut CapEx. But I think given our view of the average prices for the year on Brent being between 30 and 40, we feel comfortable again giving everything else we've done in terms of the already achieved reductions in CapEx and OpEx and the financing - being able to successfully we get some financing. And we feel comfortable with the $2.5 billion to $3 billion. Thanks, Lily.

Thank you. Our next question comes from Scotiabank from Gavin Wylie. With the Ecopetrol's strong balance sheet, are you evaluating any countercyclical acquisition opportunities? Or is the highest priority at this stage capital preservation, what inorganic expansion internationally, U.S. and Brazil, rank above expanding in Colombia?

Gavin, thanks for the question. So I think it's important again to step back and say that cash protection is our top priority, and ensuring as we've said in the presentation that health and safety and the lives of our employees is at the top of everything in terms of our priorities. But as we think about protecting cash and we've again very, very quickly moved and very decisively we've moved to do what we've done to date, and we've given you some - already some guidance on how things are looking forward, there will eventually be opportunities. I think on the - both the divestment sides and potentially the acquisition side, so we'll need to see, we'll need to see. Crises normally present themselves with some additional opportunities that otherwise would have not been possible. So we'll continue to look at opportunities. But I think priorities are right now, ensuring that we protect the cash and we - as we've done remain strong to weather a crisis that we still don't know how much deeper it will go and how much longer it will go forward. Thanks, Gavin.

Thank you. Our next question comes from HSBC from Lily Yang. Selling price - with regard to the selling price of your crude basket, anything, in particular, to explain this quarter's higher differential to Brent? Some color on where you are exporting to if there are any geographical charges in trend on global crude trade flows?

Thanks, Lily, and thanks for the question. So in terms of the prices, if you saw that 1Q 2020 was on average 51, but March clearly showed a month where we saw a dramatic decrease in prices, the top line Brent prices, not only that from 64 to 51. And then in terms of the differentials, we saw year-on-year it go from 7.6 to 10.5. So we had the combined effect of lower Brent and greater differentials. So what we've done for some years now is strengthening our relationship with some of the clients in Asia particular, not only in China, but we are also going back to India, and we are also looking at some of the refineries in the U.S. So definitely, we've - I don't see there is a massive change, probably 50% of our exports will go to China, but we've managed to very successfully put these barrels or place these barrels in those refineries. And the other thing, Lily, is that we've managed to place them more than a couple of months ahead of time. So we've looked at April, May, June, well in advance to ensure that we can honor our contracts which are term contracts that we can deliver those barrels and that we can ensure by doing that, that we can maintain production in Colombia. So definitely we'll be - we'll continue to move in that direction. But basically, we're exporting mainly to China, the U.S. and now, India as well as a market that's reopening up again for us. Thanks, Lily.

Thank you. Our next question comes from Bank of America from Frank McGann. Could you please provide more detail on incidents you mentioned occurred other refineries during the quarter?

Thanks, Frank. And obviously I'll ask Walter Canova who is on the line to talk about the incidents. But in Cartagena, we had an incident with the hydrogen-producing unit that we've already fixed in terms of all the mechanical repairs. And bear in mind that we've done this in the midst of some of the restrictions following the COVID-19 sort of protocols and everything that has been put in place, and we estimate that the unit should be restart in the next couple of weeks or so. Walter, can you go ahead, please?

Okay. Thank you, Felipe, and thank you, Frank, for your question. I think was mentioned in the first quarter in the case of Barrancabermeja, we did have a stable operation with a few plant shutdowns that took place in the quarter. In the case of Cartagena, we did have on the 17th of January, an event that took out of service one of the hydrogen plant. In the Cartagena refinery, we have two hydrogen plants and they are normally at 100% capacity. And 17th of January, with those one-of-one then, so we needed to adjust the operation mode our refinery to run with only one hydrogen plant. And as such, we gave priority to the diesel hydrotreating units and gasoline hydrotreating units. And we needed to shutdown the hydrocracker unit, because of lack of hydrogen. And because of that, during the first quarter, we did have an impact on our mid-distillator production of around 9% in gasoline production of around 4% to 5%. So that was the only important outline then we did have in the first quarter of this year. For these events took place in Cartagena, we’ll be following with special - an special inspection, and we took all the corrective actions. And now we are following the last steps and we are planning to finish the mechanical repair on the 18th of May, and start-up the unit immediately and normalize operation during the - after the 20th of May. Thank you.

Our next question comes from Bruno Amorim from Goldman Sachs. What is the impact of the lower CapEx in 2020 in the production outlook for 2021, in case you do COP2.5 billion to COP3 billion CapEx in 2020, and resume the prior plan for 2021 onwards?

Bruno, thanks for the questions. So I was mentioning earlier that in the second half of the year, we will be presenting to your sales on the market, the updated business plan going forward. And clearly, we need to acknowledge part of the dramatic reduction in demand that we've seen, the drop in prices. And we'll come back to you guys and be able to share our views on the mid-term business plan. So we've given some guidance in 2020 particularly, around the second quarter and the year. And you saw that there is impact already in the 2Q and the year. We've - I mean, I normally talk about what we've done. We stepped on the brakes and we tightened the belt at the same time. So clearly there will be some impact going forward, but we will have a better view that we can share with yourselves in the second half of the year. Thank you.

Thank you. Our next question comes from Santander, [Almeda].

Thanks for your presentation. Could you please discuss a little bit about the current state of your refining operations, at one level of utilization, have you been running in the past few weeks of April and beginning of May?

So, Almeda, I'll ask Walter to provide us any more detail. But was hitting earlier that if you think about contextually, we normally run Barranca 220,000 to 230,000 barrels. For the last few weeks, we've been running at 115,000 barrels. Over the weekend, we've increased the run to 141,000 barrels. So we went down to 50% of the runs or the capacity of the refinery, we're going back up to 140,000 or 141,000. And I think that's a reflection of the demand. Even though it's marginal, we are seeing some demand increase in the market. In terms of Cartagena, we normally run the refinery at 150,000 to 155,000 barrels. We've been running at 110,000 barrels. So I think we've been able to very quickly adapt and adjust to runs to cope with the reduction in demand. But also very quickly, as we see demand being increase, we've been able to ramp it up again. So we'll - it's something that we follow up closely, clearly, as we see more segments of the economy and more sort of businesses in country being reopened, construction and some manufacturing and some services. So clearly, it's something that we'll need to keep on factoring into our decisions. But we've been able to ramp it down quickly and again start to ramping it back up as demand goes up. Thank you.

Thank you. Our next question comes from Frank McGann from Bank of America. How much flexibility there are long term in Europe with Occidental adjust CapEx? Could capital stay low for an extended period?

So, Frank, thanks. And I think it will depend largely on prices, clearly. So these short-cycle businesses like the unconventionals in the Permian allowed us back in December to very quickly ramp up operations, drilled the wells, fracked the wells, get them into production with some very good operational results. So we're very pleased and comfortable with the quality of the reservoirs, the rocks and clearly, with the operatorship that Oxy is doing. So that's all very good and again being short-cycle, we've been able to run things down. So we've stopped activity, there is no more drilling right now, but we've managed to continue with the completion and fracking of the wells, and we envisage ending up the year with some 21 to 23 wells and some 4,000 to 5,000 barrels of production net to Ecopetrol. So I think that's good. But given where we are, there is uncertainty, prices have gone up a bit, but we will and we are working internally with our partner to understand the key milestones we need to hit that will allow us to restart operations in an orderly fashion. Good news, I think, is that the Permian before we went into the crisis and we looked at some 28 different operational areas in the U.S., was the second-best in terms of having the lowest breakeven, which was very good. It was around $35 WTI. And Oxy has done a lot of work over the last few months to - in prime were put more efficiencies and more optimizations into the operation. So we're going to be reviewing this internally with the operator and we'll communicate back to the markets when we have more defined answers of how and when to restart operations going forward. Thanks again for the question, Frank.

Thank you. Our next question comes from Vicente Falanga from Bradesco BBI. How will you book the financing of transportation costs from Colombian producers?

Thanks, Vicente. And I will ask Milena to help us with the answer. Milena, please go ahead. Ana Milena López Rocha: So when we look at the financing, we will be - so I'll break it down into two parts, the initiatives we have for remittance have two components, they have a discount, and then there is a financing component. So the discount is simply less income, less top line sales, and when we look at the financing, the financing has two components. So the actual invoice will continue being in our top line, and we will have on accounts receivable with each one of our producers. And at the same time, this financing has an interest rate of 1.5%. So the income from that interest rate will be interest income. And that's from a preliminary standpoint how we plan on booking. And just - I'm not sure if that answers the question. So you won't see a difference in our sales figures and you will simply see an increase in interest income corresponding to the interest portion of the invoicing.

Thank you. Our next question comes from [Eric Arakawa] from Mackenzie Investment. How do you see the gas demand in the last two weeks in Colombia, U.S. and Brazil?

Thanks, Eric. And I will ask Alberto Consuegra to help us. But we've seen particularly, in Colombia, where we sell most of our gas remember, in the U.S. we've mostly liquid production, and again in Brazil, we don't have any production yet. In Colombia, we saw the equivalent of 25,000 barrels per day reduction in demand so some of the industries where soft and some of the gas used for vehicle transportation, the transportation was sort of curtailed, we saw an impact. But we're starting to see some pick up again in demand of gas. So overall, and I'll hand over to Alberto, but we are seeing an increase in gasoline and an increase in diesel. We've ramped up the levels of the runs at the Barranca refinery, and as such, we are also seeing an increase in gas. Alberto, do you want to give us more detail, please?

Thank you, Felipe. Good morning, Eric. And as Felipe was saying, 97% of the Group's gas income come from our position in Colombia, where we've 90% of the demand side with take or pay contracts with fixed price in dollars. In terms of demand, what you see in Brazil is that there were no LNG imports in April or May. We don't have news about gas demand increase seen it's slumped earlier this month. In the U.S.A, demand is flattening off at lower than normal levels in most states, but actually, we have seen a little - a slight recovery in Texas, Louisiana and Michigan. With regards to Colombia, as Felipe was saying, we have experienced a contraction in terms of demand, but which affected about 27,000 barrels per day during the month of March and April. But in the last couple of weeks, we've been able to place excess gas in the thermal electrical sector, which has provided some room in terms of increasing demand. That's kind of a - the way we see the scenario, in terms of gasoline within the Group.

Thank you. Our next question comes from Pablo [indiscernible]. What will be the impact of the CapEx cuts, and if there is any of the OpEx optimization on the upcoming year's production?

Hi, Pablo, good morning, and thanks for the question. So I've mentioned that we've given guidance on the second quarter and the full year in terms of what we see right now will be the impact on the production levels. And over the next few weeks and months, we'll continue to work on the updated business plan that we will be sharing and presented to yourselves on the markets in the second half of the year. So at that stage, in that time, we will have a better view on impacts or potential impacts as we move forward, especially in the next couple of years or so. Thanks for the question.

Our next question comes from Luiz Carvalho from UBS. Hi, Felipe, and team, hope your families and Ecopetrol team are safe. First of all, thanks for transparency share in the PPT, mainly on production, free cash flow, and income per cubits, very useful. I think this was a comment from Luiz. So I will continue with the next question.

Thanks, Luiz. Thanks for the comment. Appreciate it.

Thank you. Our next question comes from Eric Arakawa Mackenzie Investment. Thanks for the call and congrats for resilient results in this difficult time. How the oil demand has behaved for the last two weeks since some economies are started to open? And can you please share what is the most important lesson learned during these difficult times?

Eric, well, thanks for the question. And I think we've mentioned some of the elements around how we're seeing demand increased very marginally and slowly, but we see some demand increased. As I mentioned, we cut the runs in the refineries from 370,000, 380,000 barrels to somewhere in between 225,000, 230,000 barrels. Right now, we've added 25,000 barrels more of refinery capacity over the last two or three days. So we will continue to be in sync. We're synchronized with the increases in activity. So clearly this week, next week our fundamental as the Colombian economy opens up again, we've been able ourselves to operate, there is a lot of essential services that have continued to operate but now we have more and more industries and people in businesses and different lines and different sectors in the economy, actually being able to operate. So we'll continue to watch this. But clearly, there is this need to be mindful and strict with the protocols and how we operate. Maybe we haven't mentioned it here. I mean we mentioned it in the presentation, but we've - even in the period of less than four weeks, we basically built a molecular - biological molecular lab to ensure that we can do our own tests in Barrancabermeja. So we're moving very, very quickly, things are changing dramatically. One of the things that I've heard over the last few weeks or so is that nobody in the world is an expert on COVID-19. We are all learning. There is a big level of uncertainty. We still don't know how much deeper we will go and how much longer. 1Q was not good. I think 2Q and 3Q will be very, very, very hard as we've seen demand being destroyed. In terms of the lessons, and…

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