Ladies and gentlemen, good day and welcome to Ecopetrol's Second Quarter 2015 Earnings Release Conference. At this time, all participants are in a listen-only mode. We will have a question-and-answer session later on and the instructions will follow at that time. [Operator Instructions]. As a reminder, this conference may be recorded. Now I would like to welcome our host for today's conference, Ms. Maria Catalina Escobar, Head of Investor Relations and Corporate Finance. Please go ahead, ma'am.

Good morning, everyone, and welcome to Ecopetrol's earnings conference call and webcast in which we will discuss the main financial and operational results of Ecopetrol for the second quarter of this year. Before we begin, it is important to mention that the comments by Ecopetrol's senior management in this call could include projections of the company's future performance. These projections do not constitute any commitment as to future results, nor do they take into account risks or uncertainties that could develop. As a result, Ecopetrol assumes no responsibility in the event that future results are different from the projections shared on this conference call. The call will be led by Mr. Juan Carlos Echeverry, CEO of Ecopetrol; and other participants include Hector Manosalva, Vice President of Development and Production; Orlando Diaz, Interim Vice President of Refining and Processes; Cesar Barco, Interim Vice President of Growth and Strategy; Magda Manosalva, CFO; Max Torres, Vice President of Exploration; Rafael Guzman, Technical Vice President; Juan Pablo Ospina, Vice President of Commercial and Marketing; Alberto Vargas, Financial Controller; and Thomas Rueda, CEO of Cenit. We will begin the presentation with the main achievements of the second quarter, followed by the highlights by business segment and the financial results under International Finance Reporting Standards. We will close with the outlook for the third quarter of 2015 and a Q and A session. I will now turn the call to Mr. Juan Carlos Echeverry, CEO of Ecopetrol.

Thank you, Maria Catalina. Good morning to all the participants in this conference call. I appreciate everyone joining us today. We have already completed the first 100 days of my administration, in the midst of challenging international environment, marked by low oil prices. We also faced an international wave of attacks to our transportation infrastructure, and they have had a profound effect in the environment and the communities where Ecopetrol operates. Yet Ecopetrol has important developments to present. We have a new strategy, a plan for organization transformation and significant savings in costs and expenditures by means of optimization and renegotiation of contracts. Ecopetrol is disciplined in its cost adjustment program, aimed at gaining efficiencies in many areas. Already we have obtained a savings of COP0.6 trillion. These savings are mainly the result of our renegotiations with contractors in which we have solidified our long-term relationship with them. Our allies understand that the current circumstances call for extraordinary actions and a mutual commitment to mitigate the effects of this scenario of low prices. The Barrancabermeja Refinery is now more efficient, thanks to the operation of a new turbo gas unit, which will translate into efficiencies in the energy generation cycle and lower emission of greenhouse effect gases of 200,000 tons equivalent per year. We also improved the cost of drilling by lowering the average number of days required by well in Castilla and Chichimene from 34 days in 2014 to 28 days in 2015. Facing challenging price oil scenarios, Ecopetrol is adopting the adjustments required, based on its recently announced strategy to continue searching for efficient and profitable barrels. In our transformation plan we have identified 630 initiatives throughout the company aimed at saving COP1.4 trillion for 2015. Additionally, we are promoting a strong ethic and transparency strategy in our…

Thank you, Mr. Echeverry. Looking into our results for the development and production segment for the second quarter, we have close to 5% increase in production compared to the second quarter of 2014. This is equivalent to an increase of 33.5 thousand barrels of oil equivalent per day. The 768,000 barrels of oil equivalent per day reached during the period is made up of 4% increase in the production of Ecopetrol SA and a 9% increase in production from our subsidiaries. Once again, the growth in production is due mainly to the good performance in our directly operated fields, Castilla and Chichimene, following the startup of the new facilities and the continuation of the drilling campaign. The average production of these fields during the quarter was 123,000 and 78,000 barrels of oil equivalent per day, respectively. Likewise, the Caño Limón field showed a comparative increase of 15,000 barrels of oil equivalent per day, mainly due to the reduction of attacks to the Caño Limón-Coveñas pipeline compared to the same period in 2014. Also, in the second quarter, the Piedemonte field reached a record production of 41,000 barrels of oil equivalent per day in the month of June. Regarding Rubiales, it is important to mention that we have, together with our partner, reactivated the drilling activity in the field. This will help us offset a decrease in production that we have been experiencing in this field, which is mainly due to the restrictions in the water disposal capacity. Now, with regards to our increased recovery factor program, and in addition to the startup of the water injection pilot in Suria and the chemical injection in Caracara, that Mr. Echeverry already mentioned, we have achieved 80% progress in the facilities for the air injection pilot in the Chichimene field. With this progress, we maintain our plan of starting injection during the fourth quarter of this year. In addition, we would like to mention that during the period, the national hydrocarbons agency, ANH, approved the steam injection project in the Teca-Cocorna field. Our plan, together with our partner and operator OXY, is to start injection pilot phase at the beginning of next year. We would like to highlight the results we are achieving in drilling efficiencies in all of our campaigns in Colombia. For example, we have achieved drilling time reductions of 40% per well in Chichimene and 16% reduction per well in Castilla, with similar results obtained in the rest of the fields in Colombia. These efficiencies will strengthen the development of our reserves and production in these projects even in low price scenarios such as the current one. Now Humberto Fuenzalida will comment on the results of exploration.

Thank you, Rafael. During the second quarter of 2015 in Colombia, the company continued with the drilling of the exploratory well, Kronos, in deep waters offshore of the Caribbean. This well is operated by Anadarko, and Ecopetrol holds a 50% working interest. After finalizing the second quarter, partners reported discovery of hydrocarbons in Kronos. Currently, Kronos results are under evaluation by Anadarko and Ecopetrol’s technical teams. In addition our subsidiary, Ecopetrol America began and finished drilling Sea Eagle well, located in the Gulf of Mexico and operated by Murphy, and where Ecopetrol holds a 50% working interest. Currently, the well is being plugged and abandoned. Now I leave you with Thomas Rueda, who will comment on the midstream results.

During the second quarter, the transported volumes increased by 73,000 barrels per day, equivalent to 6.3% versus the same period of 2014 reaching 1.229 million barrels per day. Crude oil pipeline transportation increased by 7.8% compared to the same period of 2014 mainly due to the increase in the volumes transported through the Caño Limón-Coveñas and Transandino pipelines as a result of an increase of the availability of the transportation infrastructure. Transportation of refined products increased by 0.8% versus the second quarter of 2014, mainly due to the increase in the volumes transported through the Cartagena Barranquilla system due to ongoing product imports to the Cartagena port, intended to cover local demand, also due to the increase in the NAFTA volumes transported in Pozos Colorados-Galan PI system for heavy crude oil dilution. Regarding our projects under execution, in June we completed the construction and connection of a loop in the Apiay-Monterrey system, which allows us to increase the capacity of the San Fernando-Monterrey project 300,000 barrels per day. We currently are working on filling the line. With this, I hand over to Orlando Diaz, who will comment on the downstream results.

Thanks, Thomas. During the second quarter in 2015 the gross margin of the Barrancabermeja refinery was $17.2 per barrel, $6.3 higher than the period of 2014, as a result of operational stability of the unit and processes improvements. These improvements have allowed higher yields of valuable products and the capture of better international markets. It is important to mention the increase of middle distillates production in 3,000 barrels per day with an equivalent increase on imports. Other important fact during in this quarter was the startup of a power generation of 35 megawatts, key milestone of the utilities master plan, which aims to increase the reliability and efficiency of the utilities operation in Barrancabermeja. In addition, at the end of the second quarter of 2015, the expansion and modernization of the Cartagena refinery reached 98.6% progress. Recommissioning, commissioning and startup activities had an advance of 63.1%. Now I turn the presentation to Magda Manosalva, who will comment on the financial results for the period.

Thank you, Orlando. Let's move on please to the next slide where we will examine second quarter financial results. In comparison to the second quarter 2014 we saw a decrease of close to COP3 trillion in revenues, due mainly to more than a 50% decline in crude benchmark prices. Offsetting this somewhat was the positive effect of a 23% devaluation between second quarter 2014 and second quarter 2015 over our dollar revenues and the 59,000 barrels per day increase in volumes sold compared to the second quarter of last year, primarily due to higher exports. With this, we had revenues of COP14 trillion in the second quarter of 2015, 17% less than in the same quarter last year. Regarding the cost, cost of sales fell by 11%, explained by 12% reduction in variable costs due to the lower purchase price of hydrocarbons that offset the negative effects of the exchange rate devaluation on the value of imports and purchases and of the higher purchased volume. Our inventory cost, amortization, depreciation, and deflation were also higher. On the other hand, fixed costs decreased 8%, mainly the result of optimizations obtained in maintaining plants and contracted services. Notice that of the total lift in cost reduction of $4.88 per barrel in the second quarter of 2015 versus the second quarter of 2014 $2.32 per barrel are largely due to optimizations and improvements in subsoil maintenance, equipment reliability, and energy efficiency. To date, we have attained COP0.6 trillion in effective savings from contract renegotiations and supply management, and we continue to define a structural savings objective. Operating expenditures reduced by 27% due to the optimizations of the exploratory activity as well as lower provisions, especially contingencies for legal projects. Our net financial result was a higher loss of COP0.7 trillion between the second…

Thank you, Magda. In the third quarter, we will focus on reaching our production targets, for which we project starting operations of new water disposal facilities in Castilla that will bring higher reliability to the field. We will also initiate two new water and chemical injection projects and expand the area of application of the water injection pilot project in Chichimene, seeking a faster result by mid-2016. In exploration, drilling will start again in Calasu well, located offshore in the Colombian Caribbean. We'll also begin drilling the exploratory well Muérgana Sur in the Llanos Basin, as well as the appraisal well León-2 in the U.S. Gulf of Mexico operated by Repsol. In our refining operation we will advance activities related to Reficar's re-commissioning, commissioning, and startup. As part of these efforts, we will ensure the identification of commercial opportunities and the execution of sales agreements for its production in the international market. Also, we will deliver our first Castilla crude cargo to Japan. In transportation, we will start the line fill of the Apiay-Monterrey system as part of the San Fernando-Monterrey master project. Finally, in order to have a more robust cash flow, we'll continue our cost and expenditure reduction strategy and our non-core asset divestment strategy, by initiating the second stage in the process of divesting our share participation in Empresa de Energia de Bogotá, as well as begin the sale of our stake in Interconexión Eléctrica, S.A. Before we finish, I want to stress that this was a very challenging quarter. The increase in the supply of oil in the United States, the tension with Iran, Greece, and China all then affected the price of oil. On top of that, the war problems in the operation of Pacific international markets, and finally, a series of unfortunate attacks on our transportation infrastructure. However, Ecopetrol demonstrated a very solid organization with a capacity of responding effectively to these types of challenges. The new management team has been already consolidated and has demonstrated the capacity of delivering good results. We thank all of you for participating in this call, and now we'll be happy to answer any questions that you may have.

[Operator Instructions]. And our first question is from the line of Frank McGann from Bank of America. Please - your line is now open.

Okay. Thank you very much. Good day. Two questions, if I could. One, just on cost-cutting, you seem to have begun to move very aggressively on that. I was wondering how much additional impact you expect to see in the second half. And what line specifically does this affect mostly? Is it on the cost of goods sold line? Is it administrative expenses? What - where will we see most of the impact? And then the second question would be just in terms of refining margins, which were very strong in the quarter. How sustainable do you see that as you look out over the next six to 12 months? What factors will you think have the most impact on that?

Thank you very much and good morning. With regards to the cost-cutting, we have already frozen, so to speak, budget in the COP1.1 trillion. The achievements displayed for the first - for the second quarter of COP0.6 trillion are in execution; but for the year, our goal is like COP1.4 trillion of which, as I already said, we have in terms of budget already frozen approximately 1.1 trillion. Of course, this is a dynamic issue, as prices have gone down in the last week. We are reconsidering and strengthening our cost-cutting strategy, of course, trying not to impact the value generation in the key segments, but putting special emphasis on those areas that are not critical either in investments or in maintenance costs or in terms of the payroll. Let me give you an example. The payroll of our contractors has been reduced from 44,300 people to 34,000 people. So more than 10,000 people from contractors have gone down since December last year. And in terms of our direct employees, we have gone from 9,142 to less than 9,000 people, also a reduction which we are consciously working. So we do think that these cost cutting measures are both sustainable and will be continued. We of course, are facing prices of oil below 50, and therefore our management team is working in strategies for reacting in the cost areas. Regarding our results in refining, basically we have several issues. First, a higher efficiency in different areas, especially in Barrancabermeja, which have reduced our costs more than our revenues in that segment. Second, in gasoline the difference in tracking gasoline has gone from $7 to $26. So we have had an increase in - or better, a reduction in the price of oil much higher than the reduction in the prices of refined products. So, basically it's a mix of price effects and quantity effects. So we think that both have to stay but, especially, of course, the efficiencies gained in Barrancabermeja are sustainable. Recall that we will have a completely new facility, a new refinery starting up in the last quarter of this year. So that facility we will be able to drive efficiencies to our whole refining operation. So, therefore, we do think that most of that is sustainable. Thank you.

Okay. Thank you very much.

And our next question is from the line of Bruno Montanari from Morgan Stanley. Please go ahead with your question.

Good morning or good afternoon, everyone. I have a couple of questions. First one, could you share with us the impact of the attacks to infrastructure, both on production and financials into the third quarter, given that these were mostly concentrated into June? So looking for comments on July and what's the impact into the third quarter. And also how should we think about refining margins into the second half of the year? We saw very good and strong margins in the second quarter now, and I was wondering if that type of margin should be sustainable into the next few quarters. Thank you very much.

Thank you, Bruno. With respect to the attacks on our transportation infrastructure, you are correct; we will have an impact on this quarter due to the fact that, especially Cano Limon-Covenas pipeline has been affected. And since 8th of July and until now, we have had the Cano Limon-Covenas pipeline and production of oil under severe restrictions. So that will show in our results this quarter. However, since the 20 of July when the FARC offered a new cease-fire, we have had no attacks. So, of course, the strategy here will be starting the second half of this year, we will try to compensate the effect of Cano Limon-Covenas --or of the Cano Limon field reduced production during these dates when we have been repairing the pipeline. So both things are true, we're still half-way - it's good news that since 30 of July, we haven't had any new attacks. And we know from the first quarter how good that is for production and for the numbers of our operation in different segments, in transportation, exploration, et cetera. But, yes, you're right. We have had almost one month of where the Cano Limon-Covenas production stopped. The second question was, Juan Pablo Ospina will respond about the margins.

Hi, Bruno. We expect to have weak margins through the second half of this year, but the margin will be stronger than the last year. The tendency is due to the high consumed volumes in the United States. Why the margin will be weak from the first half is something related with the seasonality that the second half of this year will have.

Perfect. Thank you very much for that.

And our next question is from Daniel Guardiola from LarrainVial. Your line is now open.

Hi. Good morning. I have a couple of questions here. First of all, I would like to touch base on reserves. An given the weak exploratory campaign we observed in the first half 2015, combined with an environment of low oil prices, I would like to know, guys, if you could please share with us your thoughts on next year's reserves figures. So that's my first question. And my second question is regarding the Rubiales field. I would like to know your thoughts on the profitability profile of this field, considering the high water-cut levels we have seen the last three years. And I would like to know what measures are you planning to put in place to actually revert the declining rate of this field. Thank you.

Thank you, Daniel. In terms of reserves for next year, as you may understand, I will give you indications of what could happen in the positive side, which is, first, we have just received a very favorable license for our CPO-9 field, which is a promising field. We have to do more exploration drilling in CPO-9, with the idea of identifying whether we can add more reserves over there. The same thing is valid for Caño Sur. We have had, as you know, success in Kronos. However, the reserves in that, in gas and offshore will take longer to materialize. And we’ll keep drilling and having success in enhanced recovery in Chichimene and Castilla. So there could be - we have sources of growth, but of course it will take some time until these sources of growth materialize. I will ask Andres Fuenzalida to elaborate on that, and then Rafael Guzman will answer your second question.

Thank you, Daniel. In terms of CPO-9, what we are doing is extending the activity of exploration towards the south of the discovery of Akacias field. And we intend to enhance and intensify the drilling of exploratory wells. Our expectation will depend on how fast we can drill the wells and how fast we can sanction a development and commerciality plan in this area. Ecopetrol's intention is to do it as fast as possible, because essentially all the resources onshore are the ones that can be added faster to our reserve volumes. Regarding offshore, sanctioning the project offshore still depends on being able to develop our appraisal plan for Kronos, Orca and other activities we’ll develop next year offshore. This subject is under discussion with our partners. And we have to agree with the partners and establish these appraisal plans before sanctioning any development program and establishing any kind of reserves offshore. In any case, current results are very promising. We've opened a new frontier in offshore Colombia. And the plan from our side in Ecopetrol is to intensify the activity offshore and try to add resources as fast as possible.

Daniel, this is Rafael Guzman. I would like to add on that, on the reserves that we have, as you know, a very comprehensive increased recovery program where we have already seen very, very significant results. We continue on the primary recovery, sanctioning and drilling wells. And as you saw in the presentation, our response to low oil prices is, of course, efficiency. And we have gained efficiency in drilling wells, reductions of drilling plan by 40%, which translates to a similar figure for costs. And you also see that our record wells are even faster, much faster than the average. In Castilla and Chichimene, you have 15 days for drilling wells, and our approach is to try to reach closer and closer to this target on an average basis. So that's one thing of increasing reserves. In addition to that, our water injection pilots in most of our fields are giving us good results, and increasing production in the pilot area by 15, 20%. And so we will continue to do that and do it efficiently in terms of the investment. Now for the second question regarding Rubiales, we have taken several measures with our partners. The first one is to reduce costs, and reduce costs in all fronts. We have, for example, programs to decrease the cost of disposing of the water and that use of the water for our industrial usage. In addition to that we are also changing the energy source for a cheaper energy source, going from diesel and oil resources expenses to more gas and also buying energy from the grid. There we also have a program to continue developing the field. We have reactivated our drilling campaign in Rubiales with our partner. And once the contract is finished in the next midyear we already have sanctioned new wells for increasing the recovery of the field. We sanctioned a bit more than 1,000 new wells for that field. So in essence, what we're doing is reducing operating costs, reducing CapEx, and also creating a future for Rubiales for continued drilling. Our target is to maintain or increase the production in this field. And also on that, we are also looking in efficiency, and this is an important one, is reduce the cost of diluent and transportation for these heavy crude oils. All of which will add to the continued development of the field in a profitable manner.

Thank you. How do you see the declining curve in Rubiales evolving in the following years?

Sorry. I didn't understand the question.

No, no. I mean regarding Rubiales I would like to know, if you're putting in place all these measures, how do you see the declining rate of the field evolving in the following years?

Okay. Yes, what we plan to do is continue developing the field, trying to maintain the production. What we expect in the long term for the field is to maintain a production of about 150,000 barrels per day from this field, which we'll have 100% interest in the near future.

Okay. Thank you very much.

And our next question is from Luiz Carvalho from HSBC. Your line is now open.

Hello, everyone, thanks for taking the question. I have a first one is the - we are seeing the oil price near term nearly to $50 per barrel. Clearly, the Colombian government has some constraints in terms of the budget. Should the oil price remain at current level, at least in the calculation, the government will still need to bridge a revenue gap of 1.5% of GDP at 2014 prices in order to meet actually the current-year fiscal target. So how do you see the - looking forward, how can I say - further taxes as we saw last year? So that's the first question. And the second question, it's more related to the leverage of the company and the investments looking forward? If I'm wrong, your net debt-to-EBITDA almost reached three times this quarter. With the current oil prices potentially you're not going be able to actually increase in a relevant way your cash generation. So how do you see, if the oil price remained at current level, your investments looking to the future versus, the leverage of the company? Thank you.

Hi, Luiz. The first thing with regard with our relationship with the government, Ministry of Finance, which is the owner of almost 88% of this company, is transparency. They know in real time the situation of the oil price, the impact on our finances and the impact on taxes or expected tax collection from Ecopetrol and expected dividends and royalties. So they do crunch their numbers and evaluate realistically. We, for us, the fact that the government has abided so far to the fiscal rules and has expressed the commitment to the fiscal rule in the upcoming future is critical. Second, the government already presented its 2016 budget; and in that budget the amount of resources derived from our activity is already explicit. Of course, those resources - some of those resources will come from dividends from Ecopetrol, which will be decided definitely in March next year. What we have to do is to implement a strategy that makes our cash flow revert [ph] to any decision. But this caution on dividends, it will not wait until March next year. The Board of Directors of Ecopetrol is already in an undergoing discussion in this regard. So this is an open issue, this is a clear issue. Everybody knows and there is transparency impact of prices on exchange rate on our numbers and therefore on government numbers. So it is regarded as - no, I don't think there won't be surprises. It is just a difficult decision derived from a difficult situation in the cash oil prices. And our cash generation strategy is based on severe cost reductions, in solid financing, in the sale of non-strategic assets. And all this creates a package of measures that will solidify Ecopetrol's cash flow and will make us revert to decisions from one of our shareholders. Magda Manosalva will respond to your second question.

Thank you, Luiz. In regards to the leverage of the company, what we have at this point is that we have around a debt-to-EBITDA ratio of about 2.5 times. And yes, that ratio is going to reduce this year. But as we have said in the past, that this year 2015 is a year of transition for us because we have these low oil prices and also we have this lower EBITDA. The rating agencies, they understand for us this is our transition year; and we are going to make and we are working on all the adjustments we have to do in the cost, cost-cutting we are working on. And also probably what we're going to do next year is try to decrease the total debt we have. But we are going to do that including cost cuts, and also we are going to try to go to another sources of cash. We're going to try to divest more of our assets and also we are going to keep working on our efficiency.

Okay; clear. Just one follow-up on the second question. Any additional asset sale expected for this year?

No. The assets we have for this year is these investments we have in EV [ph]. Also we have ISA. And in our balance, we have another kind of assets, for instance, minor fields and also we have these investments in [indiscernible]. But we are working in the kind of process that we have to make to go and sell these kind of assets.

Okay. Thank you very much.

And our next question is from the line of Pavel Molchanov from Raymond James. Please go ahead.

Hi, thanks for taking the question. Given the current oil price environment, there is a good chance that Ecopetrol will have a net loss for 2015 as a whole. Given that, how would the dividend be calculated in April of 2016?

First, thank you very much, Pavel, for the question. First, we don't consider it's an item, which we have net loss this year. We have had already a fairly acceptable first half of the year, of course, given the circumstances, the fact that we are accumulating more than COP1.5 trillion, COP1.6 trillion in the first half of 2015 gives us a cushion for confronting what comes in the second half. We - facing this is a new challenging oil price in this month, what we are seeing right now, below $50 per barrel in Brent and WTI. What we have to do is to keep reducing costs and reducing investments that are not crucial for our value generation in order to assure our shareholders, our bondholders, our workers, and everyone, and the financial community that follows Ecopetrol that we will be able to keep creating value and a profit for the whole 2015 year. So I haven't considered yet the scenario that you propose. However, since we are paid to worry, in that respect we will have to, let's say, if the scenario you present materializes, God forbid, will simply have the impact on our shareholders. They have to cushion that from their own end. But let's say we are, I think we have still a way to COP1.4 trillion as target of cost cutting. If we materialize that, which is achievable, we don't think, and with the cushion of profits that we have already, revenue that we have already secured this first half, I don't think we realistically will have to face a zero or negative profit generation for the whole year. That's my take. But I will like maybe Alberto Vargas to comment on this to see if I'm being too optimistic. Alberto?

Thank you, Pavel. Thank you, Mr. President. Now, definitely the scenario for the loss is not seen up today. If we continue with the cost cutting program that the President has mentioned, we don't see definitely a loss scenario. So the point is, making a stress on this transformation program, which includes the cost cutting saving, as we have mentioned as well this program to cut costs on diluent, on maintenance, on variable costs, and fixed costs, give us a scenario on no loss for the whole year. So, yes, I comprehend what our President has mentioned now.

Okay; I appreciate the detailed response. Then just one more about Kronos, I realize you are evaluating the results. But if in fact this becomes a significant discovery, what is a realistic timetable for achieving production in the Caribbean?

Andres Fuenzalida, the Vice President of Exploration in charge, will respond.

Pavel, good morning. Thank you for the question. The time frame to achieve production is still under evaluation. As you know, we are partners with Anadarko. We are discussing on, first the appraisal program to be developed. As you may be aware, exploration in the Caribbean is a frontier area. So there's a lot of problems or new situations we have to tackle. I would say in a first estimate production could be between five to seven years. Of course, Ecopetrol has a very high interest to achieve this in a shorter time frame, but there's a lot of issues we need to tackle and resolve in the meantime, starting from the appraisal program and then give different scenarios for development. So this is something we will resolve in the following months and following years as we develop our activity.

Appreciate that.

And our next question is from the line of Veronica [indiscernible] from JPMorgan. Please go ahead with your question.

Actually, here it's Felipe from JPMorgan. I have just one follow-up question on costs. How far you expect to get to this cost-reduction initiative? Should we consider this was the biggest part of this movement? And second question is to your transition program and decrease of recoverable volumes that you have said in the first quarter, how - what are the latest advancements that you have on those fronts? Thank you.

Felipe, thank you very much. We have now in place a very comprehensive program with Boston Consulting Group that we developed in the last, let's say, eight months. The program contemplates more than 600 fronts in which we can either cost cut or enhance efficiency in order to create more value with the same costs. We are asking our segments - for instance the production segment, we're asking them to reduce the cost of drilling the development wells, and they have already reduced the number of days from 34 to 27 from last year to this year. They keep working on that. We have also seen, for example, this quarter a substantial reduction in the cost in the Barrancabermeja refinery. That you know is an old refinery but in which we have invested in the past, and now we're seeing the fruits of those investments in cost cutting. We have asked also our exploration team to focus on those assets that have the highest value and also be very disciplined in the use of capital. So on the corporate, let me just give you a number. I previously mentioned that we have reduced to the payroll of our contractors from more than 44,000 down to 34,000 people. So the payroll costs accruing to Ecopetrol from labor costs have been managed. So if you see the program that we launched with the Boston Consulting Group, which is a three-year program, we contemplate not only the cost-cutting from 2015, but other cost reductions of approximately $1 billion per year in years 2016 and 2017. So it is not only what we're doing this year to face what is happening with prices, but we know that Ecopetrol needs to achieve higher competitiveness and enhanced productivity in its three-year period. So we do think that this is a sustainable approach, which we are already - we keep challenging our management team to beat the irrational prices. Cesar Barco, will enhance these issues.

Felipe, as our President said, we are working on the structural rationalization to continue with the savings in our operations. We have for example, the first one is the standardization of engineering. We are working hard, as in all the world; all the companies are working all the same. The second one is dilution, as somebody mentioned a few minutes ago. We are looking to change or to improve that diluent for our heavy oil. And at the same time we are working on the transportation of extra-heavy oil, thinking to have a more steady production besides of our pipeline. Then we are working on technology and structural things to improve our costs. Thank you.

I would ask you if you can just please repeat your second question to make sure that we understood correctly.

Yes, the second question, just to understand how it's evolving the target to increase the recovery factors in the fields that you have, so we can reach the production targets that you committed to, the long run?

Okay. Hello, Felipe, and thanks for your question. This is Rafael Guzman. The first thing I would like to mention is that, the recovery program we have is something - it is not something of the future, it's something of the present. We are targeting to increase the recovery factor through all means, starting with primary recovery. That's basically our infill drilling program. And what we have seen there is that the number of wells we have drilled in our main fields like Castilla, Chichimene, Rubiales, and the increase of production and reserves you are seeing is basically through that program. For the future, again, we have already planned to drill about 3,500 new wells for primary recovery in all of our main fields. The second area is water injection. Again, there you have seen already good examples of what we are able to do. You have [indiscernible] field, which has increased more than 40,000 barrels a day. Yarigui field which has produced - which is producing currently close to 20,000 barrels a day, which is record production we have not seen for 40 or 50 years. And we have many other projects. Now in terms of the new projects we're launching for enhanced recovery, we have started our 21 pilots and we have seen production increase in 11 of those and we continue to see benefits. The type of production increase we see in the pilot area is between 15%, 20%, 30% production increase, and we are then going to sanction these new projects. Of course, the investment for these projects will depend on the conditions - the market conditions, the price, and the efficiencies we're able to achieve. Which is the third point, I wanted to make, our new strategy is to increase reserves production and so on, but only if it is profitable. We're more focused now on profitability rather than on volume. And we're able to reach this through the application of the proper technology for each field, but also achieving the right conditions in terms of efficiency. As Echeverry already mentioned, achieving reductions in drilling of 40% in some of the fields and still have room to further improve our conditions in drilling, and also the reductions in costs, diluent, transportation, and existing costs which is the whole program for Ecopetrol. That will give us the strength we need to continue with this program.

Okay; thanks so much. Just one follow-up if I may. When you consider the opportunities to expand the company's production and then going to different areas through ramps or M&As, et cetera. How do you - how is the management thinking to balance the opportunities to increase volumes and acreage through M&A and ramps, compared to the opportunity that you consider that you have by increasing the volumes domestically? I mean, is the company thinking to expand faster internationally, or just like say, hey, it's better that we focus here in Colombia? How is the company thinking about this?

Thank you very much for this follow-up question. The symbol of Ecopetrol is the Iguana. And Iguana is an amphibious animal, that is good for the land and good for the water. That means that we come from the land, where we are very, very strong. We are very strong in our drilling, in our exploration, in our enhanced recovery, in the Llanos area, in the Magdalena Medio. But we have already made two great discoveries, one in Orca-1, and one in Kronos in the Colombian Caribbean, which are deepwaters and ultra-deepwaters. And we have had two successes in drilling and exploration recently in the Gulf of Mexico, the U.S. Gulf of Mexico. We have stated that our future is a Pan-American future. That means we will be interested in what happens in Mexico and also in the new developments that we're seeing in Brazil. However, we have to be cautious, because the international price poses a challenge in terms of the things you have - you can do and you should do. So our focus is the same, is a land and water future, either in Colombia, onshore and offshore; it's a future offshore Gulf of Mexico, U.S. Gulf of Mexico; onshore and offshore Mexico, depending on the conditions; and likewise in Brazil. So we are not being constrained. And our Board of Directors and the long-term vision of Ecopetrol is not being constrained just to a Colombian geography. However, we exploit our strengths in the Colombian geography, as part of our strategic positioning. We are a very strong company in Colombia, onshore and offshore. But our goal is to be a Pan-American integrated company with an increasing interest in offshore and in deepwater and ultra-deepwaters revenue. Andres Fuenzalida will comment further.

Thank you, Felipe. As Juan Carlos is mentioning, essentially what we are doing is we don't out-rule any expansion. What we're doing in exploration is evaluate everything in an integrated portfolio analysis. And if the opportunities that we see in different bid rounds or different opportunities, either domestically in Colombia or internationally, are evaluated in an integrated way, and if the opportunities are attractive we will invest either in Colombia or internationally. So basically our view is a global view of all the possible exploration yield opportunities and if the opportunity is attractive in our portfolio, we will make a decision to invest or not.

Thanks so much.

And our next question is from Pedro Medeiros from Citigroup. Your line is now open.

Good morning, everyone. Thank you for taking the questions. I have actually two questions here. The first one is related to Cenit. I understand there has been talks on the Street and discussions even on the Cenit about potential changes in the tariffs for transportation in Colombia. Can you please walk us through that discussion and what's the outlook for changing tariffs on pipelines? The second question is whether you can comment on the scenario for production out of the Gulf of Mexico. I understand you have a project starting up by mid-2016 at Gunflint and Freedom [ph]. I wanted to get the latest on this project and see whether the lower oil price has changed the schedule in any way. Okay. Thank you.

Hi, Pedro. On your first question regarding Cenit, you're absolutely right; we're in the middle of reviewing the tariffs. That's part of the regulation that suggests that every four years you have to forgo that process. This year, the Ministry of Mines has suggested that we forgo an additional process, which is that the shippers and the transporters get together in order to review potential negotiations or discussions in order to reach a tariff that works out better for both. We're in the middle of that discussion. Both sides have expressed their views and the plan is to reach some sort of agreement by the end of August. This is part of the process. Of course, there are views, both sides. And we're working towards having an agreement in the next few weeks hopefully.

Okay. Is there any possibility that there will be a cut to tariffs given the discussion?

We don't see that at this stage. We're simply following the regulations. The regulation is very clear on how the process works going forward. We don't expect any cuts as such. It's just a conversation regarding the efficiencies and the different variables that go into the tariffs. However, it's not a conversation regarding cuts as such.

Okay. Thank you.

Yes, Pedro, regarding the Gulf of Mexico, we have several developments there. On our K2 investment operated by Anadarko, we have just completed a new well, so production will ramp up there. Our current share of production is 1,300 barrels per day, and that could go up as high as doubling that production. In the Dalmatian and Dalmatian South development where Murphy is an operator, again we're drilling one well we expect to put on production in August, September; and a second well next year. The production from that field is close to 4.5000 barrels a day Ecopetrol’s share and we will plan to increase that a little bit higher or maintain the production. Then we have a third development in the Gunflint discovery which is operated by Noble. That still the target to initiate production the second quarter of next year, and that will give us roughly about 11,000 barrels per day, Ecopetrol's share, reaching a total for the affiliate company for about 20,000 barrels per day next year. And the plans are going ahead; the developments are going ahead, even with this low price scenario at the moment.

Okay, very clear. Thank you.

And our next question is from Anish Kapadia from TPH. Your line is now open.

Hi, I had a couple of questions as well, please. Just in the current oil price environment, I'm just wondering - can I say about $50 Brent or below, what kind of oil price are you currently realizing? And how does that make you think about drilling more wells in this environment, doing improved recovery? Just wondering if those things make economic sense down at these kind of oil prices. And then the second question is to do with your CapEx. I'm just wondering in terms of your 2015 CapEx, I think you're running a bit below your guidance run rate for the year. Where would you expect 2015 CapEx to be? And looking forward to 2016, how low could you potentially take CapEx without seeing production decline? Thank you.

Okay. In terms of the drilling CapEx and how it continues there, we have mentioned we're focusing on having efficiencies on drilling, so that's our response to a low price scenario. We are reducing and our target is to reduce drilling costs by about 40%, and we have already seen that in some fields. In the slide presentation you saw some of that. So we are continued drilling. We, of course, are focusing our investment only in the profitable fields and profitable projects we have. In terms of the price realization, Juan Pablo will complement on that.

Hi, Anish. We think that the high price volatility will persist during the second half of 2016 in response to supply and demand imbalance, economic challenge in Greece and the Eurozone; Iran's nuclear agreement [ph] China's de-acceleration and the strengthening in the U.S. dollar. So that is the landscape that we are facing in the future.

With respect to CapEx in 2015, 2016, so far this year we have been executing according to plan. However, we have cut in our budget since the beginning of the year according to the perspective of the [indiscernible]. Now for example, since we are facing a new challenge in prices, what we're seeing today in recent days, we again asked our management team to consider where are areas in which we could or we should cut in either investment, or maintenance costs, or operating costs, without affecting the value generation of the company. For 2016, as you already understand, there is a high uncertainty on prices. We have to be very conservative. The Board of Directors is aligned with us in terms of being conservative in prices for next year. And we'll budget. We are working now, in the upcoming months, we will be working on the budget for this year. And considering the price expectations, we will be conservative without, of course, affecting the value generation. So this balance, which actually is what every oil and gas company is doing around the world, is striking a balance between the price expectations and the value generation. So we're working on that. We have been aggressive in cost cutting and we'll keep doing that, not only for this year, but as I said for the upcoming years. And so we'll get our goals in 2018. So we'll be advancing our transformation program, and so far the second quarter of 2015 has shown that we can deliver in that front.

Just a quick follow-up on that. In terms of that cost cutting that's coming through, can you just give some idea about the number of rigs you've been operating onshore, say at the beginning of this year and then where you'd expect to end the year in terms of the number of rigs, given the higher efficiency you're seeing?

Okay. Our current usage of rigs, we have 13 rigs today in Castilla and Chichimene, and we have three other rigs in the rest of Colombia. And that has been the number that we have kept throughout the year. For Castilla actually for the second half of the year we'll see an increase of drilling rigs. These are new rigs that were built for Ecopetrol. They are on purpose designed for Ecopetrol. Those new rigs will help us continue on our efficiency program and reducing part of the drilling costs. So that's the number of rigs we have and maintain perhaps and drill a bit for the remainder of the year. We will focus - and that's our direct operations. Of course we have more rigs with our partners, and most of them are in the Rubiales and Quifa fields in the East part of Colombia. So in total, we have about 28 rigs, including the rigs operated by our partners.

Thanks very much.

Okay. The next question is from the line of Ken Lee from TCW [ph]. Please go ahead with your question.

Hi. Thanks for giving me the opportunity. Just in terms of your dividends pay for the first half of this year compared to last year…

Excuse me. Mr. Lee, can you please speak a little bit louder, because we can't hear your questions.

No problem. So in terms of the dividends paid for the first half of this year compared to last year, I mean, obviously, you're going to have a lower absolute number because of the net income. But I was just wondering, do you see it in pace for the rest of the year, or do you feel that you may have to pay out an amount that’s slightly greater because of the fiscal pressures of the Colombian government?

Thank you, Mr. Lee. As I understand, your concern is regarding our dividends and what could happen on that front, given lower net income for this year. What we have said is we will have a very robust policy, financial policy, to whatever decision comes in from the Board of Directors and from our shareholders regarding dividends. We have first to produce dividends - first, produce a profit, and then to have a discussion, an open discussion in the Board of Directors and especially with the Colombian government in terms of their needs and our needs. This discussion is currently undergoing. We are openly discussing these issues. The government already presented its 2016 budget, and the amount of dividends they contemplate and taxes they contemplate are aligned with our capacity of generating revenues this year. So we don't see there is a strong misalignment. But of course, we still have five months to go in this year and the international prices are not helping. So we have to be very cautious. We have to be very conservative. And we have to have an open discussion with the government, so that both are flexible in order to guarantee a smooth cash generation in Ecopetrol. I hope I have answered your question.

Thank you.

And our next question is from Bruno Montanari from Morgan Stanley. Please go ahead with your question.

Hi, a couple of follow-ups. Sorry to return to the same subject, but just to be clear on the dividend. So if necessary, in a scenario where you have a lower net income, would you change your payout as a percentage of net income to a fixed dollar or Colombian peso per share amount, to sustain whatever level of dividends works for the government? Or does it need to be actually tied to net income? Just wanted to know if you do have the options to pay more.

No, the discussion with the government currently is, of course, a flexible percentage aligned with our needs. And of course, they will defend their end on the financial stress they have. There is no decision. Of course, that's up to the Board of Directors and the shareholders decision. It is not a decision by the administration. But however, the administration has the capacity to let's say transparently discuss this with the Board members so as to cut balance between our internal needs and the needs of our shareholders. So we work for a good dividend distribution for our shareholders; but in times of tight international prices we have to be very cautious in that balance. So there is no straight rule still, fixed or anything, in terms of the dividend distribution, and the discussion has been postponed until March this year. This is a discussion, an ongoing discussion, as I said. So we expect to have a more constructive decision for the upcoming year.

All right, thank you.

Thank you, ladies and gentlemen. That's all the time we have for Q&A. I would like to turn back the call to Dr. Juan Carlos Echeverry, CEO of Ecopetrol, for final remarks.

Okay. Thank you to you all for participating and for paying so close attention to our developments in this quarter. I think that we have demonstrated that we have the capacity to respond to challenges. This quarter we not only had a complicated development in the international arena from oil production, from the agreement with Iran, from what happened in Greece, even from what happened with one of our partners, Pacific Rubiales, in the operations they were undertaking. We also had a very challenging times in terms of attacks from guerilla groups until July 20 when a cease fire was agreed. We have demonstrated also that Ecopetrol, for example, in the first quarter the segment that produced most of the - or the best result was the transportation segment. In the second quarter, was production and refining were the segments that helped us producing good results. So my message here is that this is an integrated, balanced company where one of the four key segments have - or two of them have the capacity to lead the way and produce a solid financial result. We have capacity to grow. We have now CPO-09 field in which we have a very good response from the environmental agency that produced already a license for our drilling campaign. And we expect to have that CPO-09, a very promising field which is a continuation of Akacias and Chichimene. Second, we have Cano Sur, which is another source of growth. We have had discoveries in offshore Colombia, in the Caribbean, also discoveries in the U.S. Gulf of Mexico. We have a very good result from our enhanced recovery campaign recently. And we will be turning on a new refinery in Cartagena in the last quarter of this year. So we are cautious in what comes ahead because challenges will be still affecting us from the price issues etc. But I think we are creating a company that is more compact, more solid, more efficient with a lower cost, with a very good financing, and good cash generation, so as to go towards 2016 and further down with a capacity upgrade in value for our shareholders. Thank you. Thank you very much for participating in this conference call, and have a good day to you all. Goodbye.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program and you may all disconnect. Have a wonderful day everyone.