Good morning. My name is Hilda and I will be your operator today. Welcome to the Ecopetrol Group 2nd Investor Day. Today, we will discuss the financial and operational results for the second quarter of 2020 and the 2020 and 2022 business plan update. All lines have been muted. There will be a Q&A session at the end of the presentation. Before we begin, it is important to mention that the comments in this call by Ecopetrol’s senior management includes 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 future results are different from the projections shared in this conference call. The call will be led by Mr. Felipe Bayón, CEO of Ecopetrol, Alberto Consuegra, COO, and Jaime Caballero, CFO. Thank you for your attention. Mr. Bayón, you may begin your conference. Felipe Bayón: Good morning everyone. And thank you for joining us during the 2nd Ecopetrol Investor Day 2020, where we will discuss operating and financial results for the second quarter of the year and the 2020, 2022 business plan update. On behalf of Ecopetrol, we hope you and your families are keeping safe during this very difficult time. We reiterate our gratitude for your participation in this conference call and your permanent support in other events hosted by the company, especially under the current circumstances. First of all, I would like to highlight that the life and wellbeing of our employees remain as our main priority to cope with the current challenges caused by this pandemic. Currently, about 80% of our employees continue to work remotely thanks to our digital transformation. In order to ensure the wellbeing of…

Thanks, Felipe. On exploration, we completed the drilling of seven wells during the first half of the year, highlighting the successful completion of the Gato do Mato-4. Hocol announced the successful discovery of gas in the Merecumbé-1 well in the Colombian department of Atlántico in July. Additionally, I would like to mention the official approval granted on June 12 by the Brazilian Ministry of mines, and the National Petroleum agency to Ecopetrol’s 30% interest in the Gato do Mato discovery. On production despite volatility in the price of crude and the impact of the pandemic and public order events, we reached 706,000 barrels of oil equivalent per day, during the first half of the year. Drilling campaigns were impacted, so that we completed 148 wells during the first half of the year, in contrast to the 311 drilled and completed in the first semester 2019. The key milestones were the closing of the acquisition by Hocol or 43% of the offshore gas assets in our [Indiscernible] the entry into production of 18 wells in May in the Permian Basin, as well as the upturn of 11,000 barrels of oil equivalent per day in June that were closed due to sustainability criteria in our Colombian fields. Our current production remains profitable at less than $30 per barrel. Gas remains as a strategic pillar in our energy transition strategy, as well as in our production portfolio. During the quarter, we provided financial relief to end users in the amount of COP160 8 billion. Additionally, we rapidly reacted to lower demand and the country's energy requirements in order to supply the thermal power sector. With regards to the midstream segment, the transport of crude and refined products decreased, reflecting the effect of lower local production. Midstream companies offered commercial reliefs such as discounts…

Thanks Alberto. EBITDA margin stood at 31% mainly due to the price juncture and the effects of declining demand. EBITDA per barrel was $15.3 and was adversely affected by decreasing sale volumes partially offset by lower prices and purchase volumes. Despite the challenging market and operating conditions, production only decreased 3% as compared to the first half of 2019. The cash breakeven dropped to $19.9 per barrel, taking into account financing raised during the semester, which increased gross debt to EBTIDA ratio to 2.4 times. CapEx remains steady as compared to the first half of 2019. 68% of investments were allocated to growth projects within the E&P segment. During the first half of 2020, net income decreased versus 2019 mainly due to, firstly, a negative impact of COP5.95 trillion from the effect of lower prices. And secondly, a negative variation of COP3 trillion primarily driven by inventory fluctuations and higher operational expenses that were partially offset by lower costs as a result of austerity measures implemented and the refacing of activities due to diminished operation levels. Financial expenses, increased COP490 billion due to the increase in debt levels, and peso devaluation. Tax provisions in 2020 were COP3.1 trillion less than in 2019, prior to non-recurring events. Income before impairment and non-recurring events reached COP80 billion. Non-recurring events for the first half of 2020 represented a positive effect of COP1 trillion. It is important to highlight the income from business combination arising from the acquisition of offshore gases in [Indiscernible] partially offset by the voluntary retirement plan that was initially accepted by 122 employees and the contributions to support the communities during the pandemic. Net income for the first half of 2020 after the impairment of long term assets recognized during the first quarter amounted to COP158 billion. I will hand…

Thank you.[Operator Instructions] We have a question from Frank McGann from Bank of America. Please go ahead.

Okay, thank you very much. I was wondering if perhaps you could provide just a little bit more detail on the cash, breakeven that you mentioned. What drives the increase from the below $30 this year to the higher range that you're using for the plan. Secondly, in terms of natural gas, how big do you see that getting in terms of as a portion of production over the plan period and perhaps longer term, what do you what do you see as the possible upside there and as a percentage of EBITDA? And then third, just on renewables, what clearly that has been, it's becoming a bigger focus how, how much upside is there beyond what you have in the current plan if you wanted to become more aggressive in renewable investments? Thank you. Felipe Bayón: Thanks, Frank, and good morning. Thanks for being here. I'll start with the last one on renewables. And then I'll ask Jaime to talk about the cash breakeven and Alberto to talk about the natural gas. So in terms of renewables, what we've said Frank, is that we want to be in a place by 2022. We'll be have 300 megawatts of power generation capacity, that will be used for our own operations. So right now, we have 21 megawatts of our first solar plant. It's been working since October of last year. And both, both on the sides of reducing emissions. We're very pleased with that, but also in terms of the economics of the plant, and eventually the savings could be at around $1 million per year. So from that point of view, we're very happy was our first entry if you will into using renewables. And as people ask me, so you're using solar energy to produce oil and gas? And the answer is absolutely, yes. We can combine both things and things actually coexist. We're currently in the midst of looking at the second project, which would be around 50 megawatts, and you should be hearing from that soon. And we're very enthused with that, because if that comes through, it'd be the largest solar park for self-generating power in Colombia. And then we already have a lot of projects in the pipeline, both solar and wind. So that's roughly where we are. It's important for us, as I was saying, it's not only important for the environmental side of things and reduction in emissions, but also for cost savings. And clearly where we are and with crisis where we are, it's good to have a sources of efficiency as well, from energy as such. So, Jaime, why don't you go ahead and take the breakeven one and then Alberto.

Thanks, Frank. Thanks for your question. So with regards to cash breakeven, so firstly, firstly, I'd start with kind of a couple of brief definitions. The cash breakeven that we refer to both in the KPIs and in the, in the kind of in the plan metrics are, we refer to the all in a price that we need in order to sustain our minimum level of cash. And what I mean by minimum level of cash is according to our analysis of our treasury position and the liquidity that we need. How do we sustain a level that gives us confidence that we can respond to a no volatility and unexpected conditions, that level currently is somewhere around $800 million at a group level? Right? So that's kind of the baseline that we set ourselves that we don't want to go a belief. And the other component of this is that typically when we refer to this, certainly when we were referred to it in the plan targets, we refer to it as an annual target. So, we expect to be under 30 in 2020, and we expect to be in the range of 30 to 40, throughout the plan duration. Felipe Bayón: Jaime. I think we may have lost Jaime. Alberto, why don't you take the question on natural gas and will allow Jaime to come back.

Again, going back to the definitions -- that we see over…

Sorry. Hello. Felipe Bayón: Lost you for a minute.

Okay, you lost me there. So I'm a -- I don't know exactly where they were getting me, but I was explaining that we have growth in that metric from 2020 to 2022 to the next year's in the plan, basically because we have incremental CapEx over the next couple of years. So, CapEx is going to grow in 2021 and 2022. That has an effect on the metric. And we also have debt payments through that period. And, and the relative impact that the initial cash position and the financing flow has on the metric is reduced in 2021, and 2022. So basically, those are those are the components of, of cash, breakeven evolution.

Frank, good morning. With regards to gas. Gas is indeed absolutely strategic in our agenda. We see gas as the hydrocarbon for energy transition. And right now, in our plan, to 2020 to 2022 gas would represent about 17% of the production share. We'll see us a slight increase in terms of volume for a production 2020 about 120 MVVs equivalent and going to 135 in 2022. But when you see our strategy, we want gas to represent about 30% to 35%. So we will be in investing a lot in terms of exploration in order to ensure that volumes will begin to increase the pace expected in the period 2024 to 2030. So gas in terms of EBITDA when you compare to our numbers in 2019, it represents about 11% of the upstream EBITDA. But when you look at the period of April to -- June this year, it represented about 53% of the EBITDA. So EBITDA will basically be depending on oil price behavior, but in the long term we -- we're seeing that gas could be representing a very high portion of our upstream EBITDA.

Okay, thank you very, very much.

Thank you. Our next question comes from Barbara Halberstadt from JPMorgan.

Hi, good morning. So I had like two questions in your presentation, the indications for operating cash flow. And considering what's the CapEx plan, it's suggested that we might see the negative free cash flow for the next year. So just wanted to confirm that and if you could provide additional color from that perspective, and also on a second point on working capital, like this quarter, you had a build-up in inventory. So just wanted to confirm with if we could expect a reversion for years end of the year? Thank you. Felipe Bayón: Thanks for the question. Thanks for being here. I’ll as Jaime to take the questions, both your questions. Jaime, please go ahead.

Thank you, Barbara. Thanks for the question. With regards to the first question around a cash flow. So there's two components of that. The first thing that I would say is, kind of where are we here mid-year, right. And what we've seen is positive operating cash flow from the business over the first half of the year. But indeed, we have seen a negative free cash flow, that's going beyond the operational cash flow and including the CapEx, outflows. That's been basically an outcome associated to the market conditions that we had on particularly during the second quarter. And also the delayed effect of the cost optimization measures that we have been taking. By that I mean that as you know, we enacted an intervention plan by the end of March and early April, and the results, the full results of that are actually weighted towards the second half of the year. The outlook that we see for the second half of the year is one where the operating cash flow and free cash flow is actually positive, both in 3Q and in 4Q. And for 2021 and 2022, we will continue with that trend. We will continue with that trend. Obviously, this is a highly linked to the market conditions that we have, as you know, we have some price assumptions in this plan going from 38 average this year to 45 next year on 50, the year after that. And of course, it's also linked to the success that we have with our cost optimization measures that we have announced That's the overall picture with regards to cash. With regards to your second question was around inventories, right? And basically, let me set that baseline in. We did have some movements in inventory around in the second quarter. The context for this is that in late 1Q, we did make a significant provision around inventory, devaluation associated to the drop in prices that we're seeing. So basically, from an accounting standpoint, we basically were recognizing in our financial statements, that the value of that inventory would likely fall over time, over the period, right. What we've seen is that with the up picking in prices, we have recovered a significant amount of that. We still have about COP120 billion in an accounting provision associated to that. We expect to recover a significant amount. I would say at this stage, possibly somewhere between COP70 billion to COP90 billion of that 120 should be recovered over the next six months. I hope this answers your questions. Thank you, Barbara.

Thank you.

The next question comes from Picardo [Indiscernible] from JPMorgan.

Hi, Felipe, Jaime, Alberto. Thanks so much for taking the question. I hope everything is well with you and your families. So, a couple questions on my side. First one is on lifting costs. If you look at the numbers that you guys reported on the second quarter, and they were very, very much lower than what you were running before around $6 per barrel. So that a normalized level going forward should expect some kind of normalization from those $6 per barrel? And then the second question would be on the realized prices. I know that you were still only a month on the third quarter. But if you could give us some color on how you're selling and marketing your crude? If we should see a discount narrowing on the third quarter in the fourth quarter compared to what you had in second quarter, that'll be great. Thank you. Felipe Bayón: Picardo, thanks. I'll ask Alberto to take the first one, and give us his view on forward trends and how do we see lifting costs moving on? And in terms of the second question, I’ll ask Jaime [ph] to provide a bit more color, but I'd like to give you the sense that we are seeing coupled with the increase in the brand, as such we have, as you were mentioning a strengthening of the differentials and they're actually looking better, even though we're only beginning or in the middle of 3Q or such. So Alberto, why don't you take the first one and then Pedro, you take the second one.

Thanks Ricardo. Good morning, and thanks for the question. Our estimate is that lifting costs will be around $7 per barrel at year end. Indeed, we were able to lower lifting down to $6. Given that we faced a substantial reduction in activity, because of the combined effects of both the pandemic and the oil price. We had to reduce operations to minimum vitals suspended and postpone well work activities as well as surface maintenance work, close production, optimize energy cost and contracting services. Going forward, lifting costs should increase given that we will have to bring production back re-initiate will work, also facilities maintenance works. But given the level of interventions optimization that we're doing in several fronts like energy types optimization of contract services especially will work, water treatment and what we should and we are -- we should see the benefit of the implementation of our digital projects. All-in-all, we should see a lift in cost in the range of $7 to $9 during the period hoping to be closer to the lower end of the range.

Thank you, Alberto. And Carlos, thank you for the question. Let me take the one the marketing of the crudes and realize price both for this quarter. Our commercial strategy has been very successful at this meeting sales and focusing on our long-term customers and market diversification. That's what is we've been doing for a while and actually worked during the second quarter where we have the prices are and the main prices. And but as opposed to the second quarter, we basically focus on placing everywhere on the market. On the third quarter, while we saw the demand was picking up and there was a lot of appetite for our crudes. And we have already because we are dissipating sales we have already placed all our programs throughout the quarter. And that looks pretty strong. And that's basically in this lower single digits on average. However on the fourth quarter, this week we already offering and we're seeing that the demand it's weakening a little bit. So, we are expecting that the fourth quarter might be somewhere in between what we already saw in the third quarter and the second quarter. And that's basically what we're seeing in the market. Thank you. Carlos Rodríguez: Okay, thank you so much Felipe.

Our next question comes from Lilyanna Yang from HSBC.

Hi, thank you for taking the call. Hope all is well with you all. And could you talk a little bit about your CapEx plan. If you had to prioritize a rank deposit or if you had to let's say $6 billion as opposed to $12 billion on the period 2022, 2032. What will be the one that come first as priorities like, can you then give us an idea of for instance how much is maintenance CapEx as well to keep production or to believe that the production had the very half for the near term. And give us it.

Lily, thanks. Is that your only question, can we start at it?

No, actually I had a lot but let me put that altogether. The other one is on Brazil Deepwater, right. You made the first exploration well Saturno, right. And it came out dry by Oleo e Gas, Brazil. It worked but next steps there for Saturno area, right. And if you can give us an idea how much was the cost of the well or how much you actually pay for the 10% of the block and what would you need to see before you would consider to write-off such investment, that’s one also on Brazil, right. On the same, if you can give us an update on the bid process for the FPSO for Gato do Mato which have where you have a 30% stake. There's another one which is part of the bigger one. If you can give other a color about the JV with Oxy. If you can tell us about the breakeven for this to the barrel and what have you been able to learn thus far with the joint venture that you think could be using Columbia on your pilot projects for the unconventionals. That'd be one set of question. Thank you, Felipe.

Thanks, Lily. Thanks for being here, thanks for participating. So, I'll provide some context around the first one on the CapEx. And first thing is that we what we actually did when we with retesting the business plan for 2020, 2022, is precisely do a detail prioritization of opportunities. So, should there be more space going forward and should there be additional inflow into the company in terms of revenues, we'll have the optionality to look at is it going to be investment in CapEx, I was going to do something else with the debt. So, we have the flexibility from that point-of-view. But we've been very disciplined in terms of how we deploy the capital and how we actually execute the capital. And we have the ability to react very quickly. And I like Alberto provide to expand a bit on this in a second. And we were as Alberto was mentioning, we have prioritized the exploration. We want to keep on exploring gas. It's a very big part to what we do. A EOR Enhance or Recovery, nearfield, so we can we've been very successful with nearfield in the past few years or so. So, we want to do that. And as you rightly point out, we have a presence both in the U.S. and Brazil. And I'll talk about Brazil a bit and I'll talk about the Oxy deal and then I'll go back to Alberto for the CapEx exploratory CapEx. And in terms of Brazil a two things. And you talked about Gato do Mato and you talked about Saturno. So, in terms of Saturno, the well from an operations point-of-view, extremely successful, very pleased with the performance in terms of the time and everything else and has provided very significant information around the potential of…

Can you hear me? Lily, good morning. First of all, in terms of upstream CapEx breakdown during the period. We're going to be spending $1.5 billion in exploration. In terms of production growth, it will be about $5.5 billion. And I think in terms of facilities maintenance it would be about $2.5 billion. Specifically in exploratory CapEx, we will be prioritizing investment in Columbia, that's in onshore gas and specifically Piedemonte and the offshore gas Columbia. And then, we will also have to fulfil our exploratory commitments in Brazil. So, that covers up with planning to spend in terms of exploration. Thanks, Lily.

Thank you. [Operator Instructions] Our next question comes from Bruno Montanari from Morgan Stanley.

Hi, thanks for taking my question and for being transparent in communicating the changes in strategy on the back of all the market developments, it's very helpful. First questions about the sale lease in the Permian a quick one. Are you considering hedging the U.S. sale price by taking advantage of the nice rebounding in WTI crisis? Second question is about long-term production trends. I need to understand the production trajectory a little bit better. It's understandable that the 725 yet is lower than the prior year spend declining the oil price. But if we assume that the JV in the U.S. will contribute with growth. We incurred that your output in Columbia will actually be declining. Is that a fair assessment and what could make you revise your domestic production curve higher in the middle to long-term? And the third question is about asset sales. You have a very strong balance sheet, so different from many other companies don’t really need to have a material disposal program. But would it make sense to divest any reasons which you had purely on the perspective of them not contributing for the required return on capital invoice within the current portfolio? Thank you, very much.

Thanks for being here, thanks for attending the call and thanks for the question. I'll take the last one on the assets and then I'll ask Jaime to talk a little bit about the hedging and then Alberto to talk about the production trajectory. So, one of the things that we've developed over the last few years is the ability to understand in detail the portfolio that we have. And that allowed us largely to recast the plan very quickly, the '20, 2022 plan. So, in terms of any potential divestments, we have a very good understanding of the portfolio. We continuously look opportunities and should they happen going forward we'll communicate it into time. As you may remember Bruno that a couple of years back we talked about potential acquisitions and we've done well quite a few things over the last 18 to 24 months. So, in similar way should something happen in terms of divestments, we'll communicate them promptly. Jaime, can you please respond or answer the first one, fast.

Bruno, hi. Thanks for your question. With regards to hedging, all the decisions around hedging are under the umbrella of our general hedging strategy. I think the which is evolving, right. Over the course of a 2Q, we did use hedges with a view to ensure our floor for pricing an adequate floor for pricing that could ensure the flow of possible barrels for the organization. And as we look forward, then at a group level we're basically focused on two things. We are focused on from a brand standpoint particularly because that's where we have the largest exposure as a group to see if there is a business case to ensure or to get some downside protection if there is productivity. And what I mean by business cases, of course you need to see what is the cost of the hedges and what level of protection do the give us and of course in the context of so much volatility, whether we'll feel comfortable with that. And that's one focus here then. The other focus area is around the kind of tactical hedges that we doing support of a specific point to transactions and we do a lot of those. And basically what they do is they give us a risk protection for changes between the date when we negotiate a particular transaction and the day where that transaction is executed. That's the umbrella for this number six. And what do -- in that. The level of exposure that we have a group level is relatively low, right. So, the group's exposure to WTI when you see at a group level, is relatively low compared to other to Brent for instance or to Diesel. Therefore it is not a priority at this time. Having said that, we have been -- we've started to look at whether hedges in the Permian transaction would make sense over the long run, right. And it's something that we need to study in more detail going forward. I hope these addresses your question, Bruno. Thank you.

Sure does, thank you.

Thank you. Our next question comes from Anne Milne from Bank of America.

Before that, we're going to answer Bruno's question around production. Bruno, good morning and thanks for your question. What we are considering in the plan with regards to Permian production is that production will be a slight increasing from the range of 5000 to 6000 barrels per day. Oil equivalent this year to about 20,000 to 25,000 barrels per day in 2022. So, that means that our production in Columbia will remain flat. We're assuming in the plan a decline factor of about 17% in our mature fields. So, in terms of growth for the future, we see several alternatives. One is being successful in our exploration efforts specifically in offshore and onshore gas. Secondly, we want to be successful in the secondary and tertiary recovery projects. We have 61 projects in the plan. But if assume success, we'll bring additional production. And also, we are within on mature provinces both with steel, half a space for growth. So by 2023 onwards, we'll see that the Columbian production will be increasing as well.

Thank you. We will now move to Miss Anne Milne question. Please go ahead.

Thank you very much for the call today. A couple of questions. The first one is I know you had this quarter to reduce your refinery output due to lower demand. And I was just wondering if you could explain to us how you decide what level each refinery is going to be and what the advantages and disadvantages of each of them are. Second question is I wanted to know if you have any new targets for leverage or liquidity. Ecopetrol's liquidity is still strong and your leverage is still below your peer group. And so I was just wondering if you have any new targets since your leverage did go up this quarter. And then, just a quick. There was a new loan that was dispersed was a treasury loan, is that from the Columbian treasury and was that for a specific project? Thank you.

Anne, thanks for the question. I'll take the first one, and Alaska whether to give a little bit more detail around and then Jaime can help us with leverage or liquidity and the treasury loan. In terms of refinery, here is what happened. We started the year with both Barrancabermeja and Cartagena running at capacity. Well, Barranca a little bit less than capacity but mainly some 220,000 and Cartagena a 150,000 to a 160,000. And then in March, backend of March and April we saw the dramatic reduction and destruction of demand. And so, we had to adapt very quickly to cope with the new demand levels in the country. And we've talked about it but roughly. Sales for products in a month would be around 300,000 barrels; that's the main products; diesel, gasoline and jet. And in April, we were doing a 100,000 barrels. So, that let up to adapt very quickly. And what we said and we have a lot of flexibility in Barranca. And we have well one of the most advanced refineries in Cartagena. So, that combination proved to be very appropriate and we were very that we were able to cope with that need to reduce demand. So, Barranca out of the 50 plans we had at some stage some eight plans or nine plans running and out of 5000 or 6000 people that we would see every day. In the refinery we had 600 people. So, we have to adapt very quickly. Demand and also all the biosafety and biosecurity protocols to operate. And so Walter, Walter why don’t you give us a little bit more color around that?

So, thank you Felipe. Thank you Anne for your question. As Felipe said, we will run in both refineries at full range by the middle of March. We the demand for our Talos dropped significantly. And then, we need to reduce Barranca to Bilan through their local demand, so that refinery was running around 50% capacity during second part of March, April, and part of May also. And they after that, local demand started to go to grow. And we have started to increase rate of the Barrancabermeja following the local demand. Margin has been positive, so from that one to we didn’t have a problem. The problem was mainly a local demand for Barrancabermeja and now we're running it on. And they're making KBD which is around 80% of the capacity of that refinery. In the face of Susquehanna, we need to reduce rates to around 70% of normal capacity. And that took place compared to March, April, and also May. Since that, we have been going up in rates following the local demand but mainly the ability to export. Our commercial group have been doing a great job. We export our product at the Cartagena refinery. And these has allowed us to maintain that refinery running all the units and currently we are around 90% of capacity supported mainly by exports. I hope I answered your question.

Walter, thanks. And before handing over to Jaime, I just like to add and that we're also able to perform our some of our key maintenance on both refineries. Even though some of them were in the middle of the response to the pandemic and everything else, we're able to adapt and incur them through not only 2Q but 3Q as well. Jaime, please go ahead.

And Felipe -- thanks Anne, thanks for your question. Let me provide a bit of color on liquidity and the loans. So, I guess firstly, and with regards to leverage, 2Q was a very active quarter. We actually subscribed about $3.1 billion of loans through the period and there was a combination of them. There were basically three elements on that. There was a bond placed in international markets of about $2 billion. There was a line of credit that we had for about $600 million that we pulled in. and it was an existing line of credit. And there were about $400 million to $500 million of what we called a treasury lines which I think there's a translation issue. And that, effectively there are short-term loans that have that that have a 12 to 24 months duration actually typically less than 12 months. And in Spanish, they are called gratis del tesoro araria [ph] which can be loosely translated as "treasury loans." These are not loans that are received from the government. They are received from private banks like effectively. So, that I think that answers a bit the treasury loan question. With regards to leverage targets, as you know, probably this crisis took us in a very strong both liquidity and a kind of gearing position compared to our peers. And with these and lines of credit that we pulled over the second quarter, we are seeing our leverage increase and put forward [indiscernible] and we think that actually over the rest of the year we are actually that leverage ratio is probably going to grow keeping under 3.5 times that to EBITDA, right. The reason why that growth is basically when you look at the mix of our operating cash flow and the CapEx requirements that we have a plus dividend payments that we're going to make over the second half of the year, that ratio deteriorates a bit. When we look longer term, what we see is that a by 2022 as our operating cash flow improves and our free cash flow improves actually on a sustained basis, we see that ratio is going to be a below 2.5 times back to EBITDA. When we look at that we feel comfortable with that, we feel comfortable with that both from a context of the flexibility that we have within the plan to make changes. We believe that we have a lot of flexibility around that the primary driver for this increase in leverage is actually discretionary CapEx. So, we can always pull on that lever if we need to. So, that's one reason why we're comfortable. And I think the other reason why we're comfortable is that when we look at it from a peers standpoint, we despite this increased leverage we continue to be probably in the high second quartile of a companies in the sector with the lowest leverage ratios. I hope this answers your question. Thank you.

That's correct, thank you. Very correct, thank you.

Our next question comes from Christian Audi from Santander.

Hi Felipe, hi Jaime. Just two questions, please. The first one on ROACE, the second one on dividends. The ROACE, you have always stood out in terms of generating a very impressive return on capital implied. Could you talk a little bit about the evolution you expect during the length of the plan and any color as the differences you expect in ROACE between upstream, midstream and downstream. And then secondly, on the dividend front. If you could talk a little bit given all the adjustments that you have made to protect the company from market conditions. What should we expect in terms of your dividend payout for this year in during the duration of the plan? Thank you.

Thanks, Christian. And thanks for your question, thanks for being today in the call. I'll ask Jaime to be with a bit more color around the ROACE and how we're looking it at the plan. And also if he wants to rap on guidance. But I just wanted to say in terms of dividends we have a policy around dividends which is very clear. And the ultimate dividend decision will be based on the decision of the AGM, you know of considerations and the assessments and then the final decision of the AGM that will take place in 1Q of next year. Having said that, obviously it will depend on how we end up the year. And we've managed to go through a very complicated and tough second quarter. We're seeing a little more support for prices. You've seen how we've adjusted some of the operations that we're conducting. So, it will depend on all those assets. But Jaime, if you want to talk about ROACE and then expand on dividend, please go ahead.

Thank you, Felipe. Hey Christian, thank you and thanks for your question. With regards to ROACE and as we discussed in the past, our goal in Ecopetrol has been to deliver our return that exceeds cost of capital, fundamental Llanos. Where the last number of years, we had a very good run with regards to creating actually a growing spread between that cost of capital and the ROACE that we deliver. With this plan, we continue with that aim, right. It is challenging, it will be extremely difficult to sustain ROACE's of double digits in the market price that we were in the prices that were [indiscernible]. It is very challenging. But we can see with this investment plan, we can see ourselves in 2022 with ROACE's in the very high single digits. I mean, 8% to 10%, which it competes favorably with the cost of capital that we have as a company. That's what we're expecting. Obviously to the extent that we have a price upside to our plan assumptions which and I might recall there are 38, 45, 50 to the extent that we have upside to that ROACE is going to improve in a very direct way. That's what we're seeing. If I were to give you a bit of color with regards to segment behavior on that, in the very near term and I mean kind of 2020, right. A clearly both the upstream and the downstream are challenged because they did the contribution this year relative to historical, it's going to be lower, right. At the current pricing environment, midstream remains essentially unchanged with regards to their historical contribution. And what we're seeing from an outlook standpoint '21 and '22 is a very growing contribution from the upstream a stable contribution from the midstream and a gradual recovery from the downstream particularly us at the Cartagena interconnection takes in that project which I'm sure that Walter's going to give us a little bit more color on kicks in. And we're going to see that the down, the ROACE in the downstream improve. That's the general color of that. And with regards to dividends, Felipe has laid out the general framework and from a planning standpoint what I would say is that as we look at that range of 40% to 60% payouts, we believe that we move within that range closely linked to the actual price environment, right. So, given the price environment that we see for 2020 and 2021 which is 38 and 45, we see from a planning standpoint we believe that we should be in the lower end of that range. And as we go to 2022, we're going to be on the high end of that range. But again as Felipe said, this is going to be determined by the shareholders in due time. I hope this answers your question. Thank you, Christine.

Very helpful, thank you Felipe and Jaime.

Thank you. Our next question comes from Luiz Carvalho from UBS.

Hi everyone, hi Felipe, hi Jaime. Thanks for taking the question. And congratulations to be for being selective by addressing due to the company progression through the so during the crisis. I also had three questions. I'd like to come back on the dividend policy. It's clear that second quarter was very challenging so just how the -- CapEx allocation and to the capital allocation would match with the dividend policy that the company currently has, that's the first one. The second question is about potential acquisitions in M&A. I mean the company has quite active trying to increase production and keep the reserves in a very healthy level but what you're taking potential acquisitions, junior companies or I don't know some fields in a more advantage stage that could boost your production/reserves life in the more short term. And the third question is more about the lower activity that we are seeing on the U.S. ship bill. I mean when we look to the recount over the last let's say a couple, I'd say 18 months there's much lower activity so just trying to understand what would be the potential benefit that this is bringing to your I don't know partnership with Oxy in the USA. These are the questions from my end. Thank you. Felipe Bayón: [indiscernible] and thanks for being here. I'll take the number two and three on acquisitions and the U.S. And then I will ask Jaime to provide a bit more context on dividends and tax allocation. So in terms of M&A and you've mentioned that we've been quite active and we've, I think demonstrated that we've followed strategy in terms of where we want to go. We've gone into Brazil. We've gone into the Permian in the U.S. and we've done a few…

Thank you Felipe. Thank you Louis. Thanks for your questions. So with regards to dividend and how we think about it, I'd say firstly we look at that mix between dividends and CapEx in the context of our capital structure right and when we look at that capital structure, what's the baseline position, low gearing ratio, relative to our peers as Annie was asking before, space to improve that gearing level importantly and growing operating cash generation over the next months and years that's our expectation, right? In that context 2Q is a tough quarter but it's one that we believe that's the worst that should be expected and it's in the past. The outlook going forward is a better outlook. So in that context when we look at what should be the right level of capital allocation and what should be the right dividend assumption for the plan and again recognizing that we don't necessarily decide that but what we would like to propose from a plan standpoint. What we saw is that we as a company we have a full ability to honor the dividend commitments that have already been made importantly, associated to the 2019 performance. So we had that capacity and we also had the capacity to sustain a CapEx levels when we compare them to the previous years and of course there is a strong value proposition associated to sustaining that level of CapEx as I think it was asked before to the extent that we can sustain that level of CapEx we protect reserves. We generate between $5 billion to $6 billion of MPV associated to that too and it is actually what drives the [indiscernible] target or aspiration that I spoke about later of being a somewhere between 8% to 10% and in any case a returning to our shareholders more than the cost of capital over the long run. So that's the way that we thought about it and I think thirdly it is not part of our plan but I think it's an important consideration is that when you look at our price assumptions 38, 45 and 50 depending on where you sit but I think that most of the feedback that we received so far is that it could be conservative. It certainly looks conservative in the short term. We feel good about that because of the uncertainties and risks that Felipe has spoken about but if these risks do not materialize certainly there is significant a price upside and therefore cash upside associated to this plan. Ultimately using the price assumptions what you can see is that by the end of the 2022 period we have $17 billion of available cash of which between $11 billion and $13 billion go to CapEx even on a high case. So that allows for $4 billion to $5 billion of excess cash in potential distributions if the shareholders see fit. I hope this answers your questions.

Yes. Pretty clear. Thank you very much Jaime and Felipe.

Thank you. [Operator Instructions] Our next question comes from Guilherme Levy from Morgan Stanley.

Hi good afternoon. I have just one question actually. If you could elaborate on the opportunities to increase the cash reduction, particularly in Columbia and I will first let you the slide and chart on slide 17, if you can explore what can be done in [indiscernible] that wasn't tried before. And also if you can elaborate on the timeline for the off shore projects? Just so we can have -- on when potential prediction from there could enter the margin. And likely if those amounts in the charts, those include any kind of production coming from Columbia? Felipe Bayón: Guilherme thanks for the question. And I will give a very brief context and I will ask Alberto to expand. But there is a few things that I think are important. One, in Piedemonte over the years we have become the 100% owner of the [mine] fields Cupiagua 2011, Cusiana 2016 and this year the Piedemonte, the Florena and Pauto fields. So now we have a full alignment in terms of ownership and operatorship of the full trend of the Piedemonte gas opportunity. So I think that's one element. And the second one in [indiscernible] we now have operatorship. So [indiscernible] about the equity or the ownership from Chevron Ecopetrol was partner then. So now Ecopetrol and [indiscernible] and we have a company that's operating off shore in these very important gas fields. So there is those two elements that I wanted to highlight because they changed a bit the landscape and clearly provide I think more not only alignment but opportunities going forward. So I will ask Alberto to give us a bit more detail around your specific question. Alberto go ahead.

Guilherme, good morning. Thanks for your question. So in terms of production what we are including in our plan in terms of gas production when you look at 2020 our current production is around 120,000 barrels of oil equivalent and we want to increase production by 15,000 barrels by 2022. In order to do so we will have to cope the declining production into two [indiscernible] assets recent year and operated by [Hoko] the declining ratio will be about 17% by 2022, so we need to specifically do something in terms of ensuring reliability and I am trying to cope in terms of reducing pressure in compression facilities. In Piedemonte what we are planning is increase our activity in terms of bringing new wells that's in Florena and Pauto and also the bottle making treatment and transportation systems that will allow us to bring additional molecules of gas and also there will be activity in the Caribbean on-shore by [Hoko] where we are planning to increase our production by 10,000 barrels of oil equivalent. Going forward when you look beyond 2022 we want to basic [indiscernible] in terms of our exploration activities and there are two areas of prioritization. One is off-shore and when you look at our plan by 2024 we would like 2024, 2025 we would like to bring the ultra project on screen and also in Piedemonte there will be an aggressive activity in terms of exploration looking to see all the trends. This is going from the [indiscernible] areas. So there is going to be a lot of [indiscernible] on gas delivery definitely.

Thanks.

Thank you. And we have a question from Lily Yang from HSBC.

Hi. thank you very much again. All very good questions and great answers. What in terms of [indiscernible] the CapEx of 1.2 billion, 1.3 billion for the 2020 period seems a bit high but as Jaime mentioned I think you guys have a little bit of flexibility here. So could you give us a break down of the investment in the refining meaning how much is for CapEx, sorry capacity expansion, if any and timing if you have any FID for the capacity refinery expansion projects? And how much of that would be for increasing the refinery CapEx complexity with production of the [indiscernible] which looks like is made up by the end of next year. So anything on that front would be great. And on transportation mid stream in second quarter you announced that you are helping with the working capital. Those were under condition of [indiscernible] being very low below 40. So what is the [indiscernible] did you end up negotiating any of the crude transportation contract or the tariffs and in which terms and also if you can talk about what we can expect on the rate reviewfor few transportation for next year. Thanks. Felipe Bayón: Okay. Thanks for your questions. So I will ask Walter Canova to let's a bit more detail on some of the investments and the CapEx that we are seeing forward. And then I will ask [indiscernible] to help us with the transportation. Walter?

Thank you, Felipe. And thank you Lily for your question. Regarding CapEx allocation for the [indiscernible] of $1.2 billion, $1.3 billion that you mentioned. Our focus for the [indiscernible] has been the CapEx has been the focus on [indiscernible] a legal compliance, and to ensure we have reliable operation for the following years. And as such of that amount, I would say 50% to 55% is allocated on turnaround activities and available improvement process. In this area, I would say that for example in the case of [indiscernible] we are running in 2021 and 2022 in the first cycle of -- for the main process units and as such we need to make sure that we secure them properly and we have our CapEx allocated for that. In the case of [indiscernible] also we have got CapEx allocated for the main activities apparent mainly we focus on the SCC those units are running into their junior cycle and as such they need important CapEx allocation to make sure that -- allow proper operations for those units in the following years. So that is 50% to 55% of the CapEx. Then we have around 25% of the CapEx allocation into SCC process and we welcome compliance mainly the [indiscernible] to make sure that we keep compliance of the legal requirements -- local requirements in terms of what is the position and missions. And then we have another 25% of this 1.2 billion, 1.3 billion that is growth process and for quality an indication of growth is we are talking about mainly the [indiscernible] refinery crude interconnection process and also we do have some growth process at the [indiscernible] quality the main focus is in some improvement we are going to do in following year -- as I said the case of…

Thank you so much.

Hi Lily, thank you for your question. So I'm going to break the question up into three components in terms of what we have done to support producers through this period. And basically one could break up what we have done into three different things. There were discounts offered over a two-month period. There were financing and then there was alterations to a couple of contracts which more than alterations to the contract I would say sort of flexibilizations of volumes for the year. So in terms of the discounts we had discounts during a two-month period. That two month period had already expired. There were three requirements in order for the discounts to be in place which were basically a minimum level of volumes going through the systems where there were discounts offered. Discounts were only offered if the FX rate was above a certain level which was 3,600 Pesos to the dollar and there was a moving scale where discounts depended on where the FX was and oil had to be below 40. So that took place through that two-months period. We do not foresee any discounts going forward at this point in time with the market where it is right now. The second measure we had was we offered financing to our remittance and this basically had six months where we financed up to 50% of their bill. That financing is up to 12 months with a six month grace period after which you began amortizing the financing and the financing had an interest rate associated with it. And then the third thing we did was in a couple of specific cases where clients were not able to meet the volumetric requirements of shippable contracts what we basically did was over those couple of months where they delivered fewer volumes and then were expected they need to compensate those volumes later on in the year. So basically when you look at this from a full year perspective the impact is marginal and we basically gave them this flexibility given the current environment. So it's not a change in the terms of the contracts of our shipper paty contracts. It's not a facility that is recurring. It was something we flexibilized so to speak at this specific point in time in order to accommodate producers. So these were the three measures. So when you look at the flexibilization of contract and the financing there is no impact in terms of revenue for the company because the volumes you don't receive now you receive later and from the financing perspective we still have an account receivable from all these companies and as a matter of fact revenues go slightly up because we charge an interest on this and then the discounts which only were valid during a two month period.

Right. I got it right. So the level of EBITDA dropped by first quarter and second quarter part of it is because of these issues but part is also because the regular contract provision that allows for lower volume. So in third fourth quarter can I already expect a recovery on the revenue EBITDA to something more like last year's numbers or it should still be kind of closer to what we saw in the first half or second quarter?

So when you look at the change in revenues for the midstream and you compare first quarter to second quarter there's really a two large drivers in terms of what you see. The first one is, it's important to remember and these are rough numbers because they change with the FX rate approximately 80% of the revenues come from dollar denominated tariffs which are oil pipelines between 20 and 25 depending on where the FX is comes from refined product pipelines whose target is in Pesos. So the big impact between first quarter and second quarter is basically a reduction in volumes which is not associated to shipper pay contracts really. It's associated because the shipper pay contract flexibilization was marginal. It's really associated from lower transported volumes both because there was lower production and because in the refined product pipeline the measures taken by government requiring people to stay at home reduced our transportation volumes of gasoline, diesel, etc. significantly during that period. So when we look at what's going to happen going forward you're going to see a sharper recovery in refined products transportation just because of the dynamics of people no longer being under a stay-at-home order so to speak and then a gradual recovery of volumes in line from much of what to what you have heard from the upstream segment. Those are really the two largest moving factors between first quarter and second quarter. It's not related to the shipper pay contracts or the flexibilization.

Thank you. We have reached the allotted time that we have for questions. I would now like to turn the call back to Mr. Bayón for any final remarks. Felipe Bayón: Thank you and thanks everyone for participating. We have over 170 connections that's something we appreciate your interest and participation in following what we do at Ecopetrol. Your questions are very important to us. They can provide us some additional lenses that we need to use to see how we're doing what we need to do, things that we need to adjust. So we really appreciate it. We expect that you remain safe, that you take care of yourself and that you and your families are safe throughout these very trying and difficult times. We've gone through a very tough second quarter. You saw that in the results. We hope that for the worst is behind us. We've managed to prepare what we think is a very comprehensive plan for the rest of the year and the next couple years and obviously we'll continue to monitor conditions, how they evolve, how things change and will continue to communicate promptly with you and we appreciate the comments that some of you have made around the transparency of our communications, the frequency of our communications and we also value your feedback. So with that thanks again for participating and I hope that everyone has a very good rest of the day. Goodbye.

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