Good morning. My name is Hilda, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ecopetrol First Quarter 2019 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. Thank you for your attention. Ms. María Catalina Escobar will begin the conference call today. Ms. Escobar, you may begin your conference. María Catalina Escobar: Good morning, everyone, and welcome to Ecopetrol's Earnings Conference Call and webcast in which we will discuss the main financial and operational results of Ecopetrol for the first quarter of 2019. Before we begin, it is important to mention that the comments in this call by Ecopetrol senior management can include projections of the company's future performance. These projections do not constitute any commitments after future results nor do they take into account risk or uncertainties that could materialize. As a result, Ecopetrol assumes no responsibility in the event that future results are different from the projections shared on this conference call. The call will be led by Mr. Felipe Bayón, CEO of Ecopetrol. Other participants include, Jaime Caballero, CFO; Alberto Consuegra, Executive Vice President; Milena Lopez, CFO of Cenit; Jorge Calvache, Exploration Vice President; Jorge Osorio, Vice President of Development and Production; and Tomás Hernández, Vice President of Refining and Industrial Processes. We will begin the presentation with the main achievements of the first quarter of 2019 followed by the highlights by business segment and financial results under international finance reporting standards. We will close with the Q&A session. I will now hand over the presentation to Ecopetrol's CEO, Felipe Bayón. Felipe Bayón: Thank you, Maria Catalina. And welcome everyone to our first quarter 2019 results conference call. I am…

Thank you. Felipe. First quarter operating results were solid and aligned with 2019 targets. This gives us a good basis to continue leveraging the profitable growth stage in the Ecopetrol Group’s segments. The business Group's average production for the first quarter was 728,000 equivalent barrels of oil per day in line with the production target for 2019. Thanks to the continuity the increase and results of the drilling campaigns and the good response of the secondary and tertiary recovery programs that leveraged the production and reserves growth strategy. The 2019 exploration campaign has produced satisfactory results. Ecopetrol and its business partners completed the drilling of three exploratory wells of which one was declared successful, achieving a success rate of 33% to date. Additionally, with the signing of two exploration and production contracts, a new impetus is given to the reactivation of exploratory activities in the Colombia and offshore by Ecopetrol. On the international front, we are strengthening our portfolio through the revising of strategies in the Gulf of Mexico and Mexico and the execution of the approved plan in Brazil to evaluate prospectivity. In the transportation segment, we can highlight the increase in transported volumes of crude oil by 10.6% compared to the same period of 2018. Additionally, during this quarter, the effects on the pipeline infrastructure decreased significantly 49% compared to the same period of 2018, allowing more days of operation at the Caño Limón-Coveñas pipeline. In the refining segment, scheduled maintenance program shutdowns were carried out at the Barrancabermeja refinery, which allowed us to ensure the operation to deliver clean fuels to the country. However, this maintenance impacted the refineries throughput during the quarter and the Cartagena refinery that was a stable operation, thanks to the implementation of initiatives that allowed eliminating bottlenecks, which is reflected in the refinery throughput and refined the production. Additionally, we achieved the highest level of national throughput composition with 87% in the quarter, maintaining the positive trend of the last periods. We reaffirm our commitment to safety to the environment and to the country. We continue working to maximize the creation of value on the renewed criteria of sustainability, competitiveness, and profitability. Now, I will hand it over to Mr. Jorge Calvache who will comment about the results in exploration.

Thank you, Alberto. On exploration strategy for 2019 is focused on the drilling of wells in the Colombian onshore close to 15 fields with the aim of increasing reserves in the shortest timeframe possible to take advantage of the current crude oil price levels. During the first quarter, three exploration wells were drilled and completed in the Colombia onshore the appraisal well Jaspe-8 was an exploration success close to the Quifa field. This success confirmed the extension of the Jaspe discovery in the Barrancabermeja formation sand by finding crude oil of 12.5 degrees API. The second well drilled was the exploration well Cira-7000 ST in the La Cira Infantas blocks which was declared dry. And the third exploration well Provenza-1 drilled in the block CPO 8 was also declared dry. Moving forward with this year’s exploration campaign, two wells are currently being drilled and operated by parties Andina Norte-1 located in the [indiscernible] foothills close to the Capachos field. And for Boranda-2 we traded in the Medio del Magdalena Valle in the Playón block. In both of them Ecopetrol has 50% working interest. Following the near field exploration strategy in the second half of 2019 Ecopetrol plans to operate and drill three wells. Flamenco 1 situated south of [indiscernible] field; Liria YW-12 we traded the near the CUPIAQUA field and Lorito-1 close to Casabe, Chichimene and Castilla fields. Additionally, our subsidiary HOCOL plans to drill León 1 well situated near to the [indiscernible] oil field. A significant milestone in the first quarter was achieved by being a water new blocks in the Colombian Caribbean offshore. Exploration and production contract were signed for [indiscernible] fully operated by Ecopetrol and Guajira OFF-1 operated by Repsol with 50% working interest and Ecopetrol holding the remaining 50%. This is a positive side of their…

Thanks Jorge. We have started the year in line with our plans to reach production between 720,000 and 730,000 barrels per day. Our production in the first quarter was 728,000 barrels equivalent per day, 27,000 barrels more compared to the same quarter of the previous year. Of the total production, Ecopetrol’s fields with recovery program contributed 30% and the subsidiaries 9% reaching 63,000 barrels per day. Gas production increased 6.8% because of better availability of the Cupiagua processing plant and increased gas commercialization. In the first quarter, we highlight the good results of the drilling campaign in Rubiales field and the increase in the Akacias field production, which reached 20,000 barrels per day in the month of March achieving 17,000 barrels per day as the average for the quarter. Akacias field in the new CPO 09 block and it's in a growing stage. We operate this field and owned 55% share. This light also illustrates the production of the Cupiagua, Chichimene, and Yarigui fields which have an increase compared to the first quarter of the previous year after achieving normality in the social environments and positive results coming from projects. Now I’ll turn to Milena Lopez, who will comment on the results of the transport segment.

Thank you, Jorge. During the first quarter of 2019, the midstream segments continued achieving positive financial results with an EBITDA reaching COP 2.5 trillion. During the first quarter of 2019, the segment transported higher volumes of crude and refined products achieving 1,140,000 barrels per day, which represents a growth compared to the same period last year. The volume of crude transported reached 880,000 barrels per day, representing 11% growth over the first quarter of 2019 due to higher oil production and additional barrels of oil captured from alternative transportation system. Approximately 73% of the volume we are transported is owned by Ecopetrol Group. Higher volumes of transported crude compensated for the lower volumes of transported refined products which decreased 5% when compared to the first quarter of 2019 reaching 260,000 barrels per day due to the prolonged maintenance of the HDT unit of Barrancabermeja refinery. This situation generated operative challenges and significance efforts during the first quarter of this year, in order to attend the demand for refined products in the [indiscernible] enabled the import of two [indiscernible] loaded with approximately 100,000 barrels of gasoline and 140,000 barrels of diesel, approximately 35% of the volume transported by pipeline corresponded to Ecopetrol owned price. During the first quarter of 2019, operational expenses decreased compared to the first quarter of 2018 as a result of the recognition of a nonrecurring income [indiscernible] associated with a favorable ruling of a litigation process related to the pipeline [indiscernible]. During the first quarter of this year, the number of attacks caused by third parties on our pipeline infrastructure decreased by 49% compared to the same period of 2018. As a result, there were eight reversion cycles in the recent scenario pipeline compared to the 12th that took place during the same period of last year.…

Thank you, Tomás. The financial results achieved in the first quarter of 2019 continue along the profitable growth path in line with the business plan announced a couple of months ago. This past quarter, we reached an EBIDTA of COP 7.4 trillion and a net profit of COP 2.7 trillion, a positive trends versus the first quarter of the previous year. I would like to highlight the significant contribution of the upstream to the EBITDA which contributed 62% compared to 60% in the first quarter of 2018. EBITDA margin continues at very competitive levels standing at 46.1% higher than the 45.4% recorded for 2018. This margin was achieved despite a challenging price spread environment for refined products, primarily gasoline given market conditions and scheduled maintenance at the diesel hydrotreatment unit at Barrancabermeja refinery which will allow us to produce cleaner fuels going forward. In terms of the soundness of our balance sheet, our main leverage ratios remain healthy with gross debt to EBITDA stable at 1.2 times while net debt to EBITDA reduced to 0.9 times. These levels were the result of solid EBITDA generation and debt prepayments made in 2018 which as of this quarter allow us to capture significant savings in financial expenses. Likewise, I would like to highlight the solid cash generation during the quarter as reflected in a closing cash position of COP 16.3 trillion. EBITDA per barrel declined slightly mainly due to higher spread on the crude oil and refined products basket versus Brent and higher imported volumes of refined products, given the scheduled maintenance of the hydrotreatment unit partially offset by higher production. Our growth remains profitable. Net profit break even close at $33.6 per barrel showing a favorable trend compared to previous periods, partly enabled by lower financial expenses and a lower tax…

[Operator Instructions] We have a question from Frank McGann from Bank of America.

Hello, good day. And thank you. Two questions if I could. One, just in refining, looking out over the next couple of quarters now that the maintenance is completed at Barrancabermeja. How do you see profitability there? I mean, should we be looking at a better environment and now the things would be back to normal and you'll have everything operating normally? And then secondly, in terms of the sense of ruling, I perhaps you could just go through a little bit of the details on that and how much did that help the expense lines? Tomás Hernández: Yes thanks for the question, Frank Tomás Hernández, Vice President of Refining. Yes, I’ll tell you a little bit about the Barranca oil refinery, what happened in the first quarter, we had two major turnarounds in the first quarter we had one of our largest crude units it was down for 44 days, and we had our hydro treating diesel – hydro treater for diesel that was down for 41 days. Extended turnarounds, major turnarounds, much more activity than any other quarter in the last couple of years, obviously that impacted not only crude throughput, but also margins because we weren't able to produce a high value products. Those turnarounds were completed in the first quarter. Going forward, we see – we established throughputs at the refinery. As a matter of fact, we forecast 220,000 barrels per day for the average for the year. In the last three quarters we're going to pick up the charge for the plants. So basically that was a big impact that we had in the first quarter. We also had low navigability of the Magdalena River, which impacted throughput. So going forward, we see a price environment that should be improving because of the closer we get to Marpol in 2020, we see diesel prices improving, we see gasoline prices tending to improve based on our forecast. So that would suggest that we were going to recover and do better in both crude throughput and also margins for the refiners. We also have been taking actions in improving our optimization of our diets in Barrancabermeja, looking for the optimum crude slate and also looking at improving the internal routing of intermediate streams to allow us to maximize margin in the second half of the year. And also we will be fully recovered from the turnarounds that we had in the first quarter of the year.

Great. Thank you.

So onto the Ocensa ruling. The Ocensa ruling was regarding the line fill of the Ocensa pipeline. [Indiscernible], which is different from the rest of the pipelines in the midstream segment, the line fill belongs to the investment that is remunerated by the tariffs. What happens is the line fill over time, changes in quality as remittance take the crude at export facilities and no crude comes into the system. The difference in the qualities of the crude within the pipeline have to be compensated to Ocensa, who has this authority as it’s remunerated. When you look at the ruling, it's important to realize that the ruling is between Equion and Ocensa. So when you look at this from a corporate role group on a consolidated basis, you have a COP 50 billion net income, this is after taxes and after minority interests. When you look at it on a segment per segment basis, which you're basically seeing is in the midstream in particular after taxes you have approximately COP 41 million as extraordinary net income. But on a group level, it's important to realize that these two net out because of the two different participations.

Okay, fantastic. Thank you very much. Very clear.

We have a question from Pavel Molchanov from Raymond James.

Thanks for taking my question. I saw headlines a few weeks ago that there was a new offshore exploration partnership with Repsol, can you talk about how those exploration opportunities are different, or perhaps if they are similar to what you were drilling with Anadarko in the deep water two or three years ago? Felipe Bayón: Good morning, this is Felipe. And I'll start the answer and then I'll pass on to Jorge. So, if you can imagine the map of Columbia, the Northern Coast, the Caribbean coast Anadarko's activity with Ecopetrol was in what we call the Gulf of Morrosquillo, which is closer to the boundary with Panama. So it's on that side of the country. If you look at the activity we've done on Guajira, which is what we've normally done with Repsol historically, is on the, near the border with Venezuela if you will. So it's two different areas, the lateral is more, sort of a shallow to intermediate water depths and the ones that we did with Anadarko the 1,500 to 2,500 liter water depths. Second thing I'd like to add is that for some time we have been waiting for the ANH the regulator to come out with the minute. So the formal text of the ENP contract for offshore activities. This is something that was done recently and in light of that happening is that we moved forward and we signed the contract in partnership with a Repsol. I'll pass on to Jorge who can tell us a bit more about some of the technical details and what we're actually looking for. Jorge?

Thank you, Felipe. Thank you Pavel for your question. Yes indeed we have with Repsol is just a part of the strategy of Ecopetrol exploring save on the basins in the off shore Columbia. As Felipe mentioned before with Repsol we are focusing more in the exploration of our interior basin in front of the Guajira area, where as you know there are the previous discoveries in the 70s to Papua New Guinea. But together we have identified several opportunities in that area. Also where you see that the these acreage with their Repsol is close to the – also the blocks that were awarded to Shale and Novel. So this is some area that is used not only by Ecopetrol, but also for other companies like a Shale, Novel. And top of that we have a very aggressive campaign with Petrobras in the Saturno block, which is south of the Pre-Salt block. And one of the plans is to drill that well next year in that area. And also not only looking for gas, but also looking for a liquid in that area. So we are basically after – the image published a new model contract for the offshore areas. I think there's some huge reactivation of the exploration activities in this area. And part of these reactivation is not only by a Ecopetrol, but they are a company.

Okay. Can you just clarify in addition to Repsol what other offshore partners do you currently have? So Anadarko was in the past that's finished, who are you working with now?

So as mentioned before, we have currently partnered with a Petrobras in the Saturno Block. We have Repsol in the Guajira Offshore 1. And basically this is the old partner that we have in the offshore at the moment.

Okay. Very clear. Thank you. Felipe Bayón: Hi, Pavel if I may, this is Felipe just building on what Jorge was mentioning, two more things on the areas you were referring to, which we had with Anadarko. We're now actually committed to hold those areas at 100% equity and will be – Jorge was talking during the presentation, we're going to be opening day rooms to ensure that we bring one or two partners who help us one continue to appraise and decide how to develop those areas. So those were the Anadarko areas. And it's probably worth putting in the radar that there's an ongoing – well it would be a coming exercise by the ANH to lease or to offer some additional offshore blocks in the next weeks or so. So we'll be also looking at that in detail. So some things that we have today on our plate, something that will be happen in the next few weeks or months.

Thank you.

We have a question Andrés Duarte from Corficolombiana. Andrés Duarte: Hey, good morning. Thank you for taking my call. I have two short questions. The first one is I wanted to know if there is a limit for the percentage of a local crude oil that can be processed by the by Reficar and Barranca [indiscernible] according to their diets. And the question is related to tax. Have you considered a mechanism in order to compensate part of the accumulated fiscal losses from a Reficar and other companies, at least the ones that are located in Columbia? Those sorts of questions. Thank you very much.

Thank you Andrés, thanks for the questions. In terms of the national or the local crude that we have in the refineries and I'll start with the answer and then I'll ask Tomás to give us a further technical view on that. And the ask Jaime to talk about taxes. So in terms of the refineries, if you think about Barranca, traditionally or historically, it has been receiving a diet which is a 100% local crudes. So that's the history of Barranca refinery that soon will be turning 90, how many years?

96. Felipe Bayón: 96 years. So for the last 95 years in a bit, it's been taken mostly local crudes. Having said that, we've already done some testing with imported crudes in Barranca. Just again to understand the flexibility and further opportunities to generate margin. So we're looking at that. In terms of Reficar, when we started the plant back in 2015, October 2015, we basically started with 40% local crudes at some stage when we did the test, the performance test, we used 100% imported crudes and we've actually taken the refinery to 100% local crudes. So as you can see, we've tested sort of the operational capability of Reficar with different loads and different diets for Reficar. Clearly there's a lot of benefit when we increase the level of local crudes as we can a get more of the value extracted by being integrator our self. But I’ll ask Tomás to talk a bit about the technical side of the loads in the refineries. Tomás? Tomás Hernández: Thank you, Felipe. Yes, we look at diets and throughputs, national crudes versus imported, we look at the optimum balance of imported versus national crudes. And the way we do that is we look at what are the different – production of the different high value products from the crude slate that we're charging, we look at obviously at the prices, the product prices and the crude prices in that particular run. What we're seeing, that sweet spot in Cartagena we're seeing between 80% and 90% based on the current prices, as you saw in this quarter we were at 87%. That was a record. But that's really set by the economic optimum of the refinery, which is done on a planning basis every month. And we look at the right balance of crudes based on which plants are available in the units and the different limitations that we may have in the refineries. Now that's Cartagena. So we're looking at 80%, 90%, but that varies obviously with the economic optimum. In Barranca, obviously we're limited to the availability of crudes in the area. But as the President mentioned, we have imported crudes now they have become economic to import some crudes and we're looking at about a 3%, mix in the Barrancabermeja crude slate. But again that is determined by an economic optimum for the refinery. We have obviously one of the economic advantages for Barrancabermeja as the proximity of the crudes to the refinery, which tend to be heavier. So we look for lighter, intermediate crudes in what we import.

Okay. Hi Andrés with regard to the taxes question yes, probably as a matter of context, we have four relevant entities that have accumulated fiscal losses primarily Reficar we have other three BP Energy, Ecopetrol America and Brazil, these accumulated fiscal losses are a reflection of where they are. In the case of Brazil and Ecopetrol America, it's a reflection of the exploration stage in which they’ve been over the last number of years primarily. And in the case of Reficar energy is a reflection of kind of their startup and optimization process. Really the biggest lever to compensate for this accumulated fiscal losses is performance. And to that regard all of these entities have business plans that take them to profitability and to the extent that that profitability is achieved we start capturing those fiscal benefits. Now having said that, I'm thinking about optionality while we have looked into East, I would say two or three considerations. The first one is, are there mechanisms that can allow us to retain the fiscal stability contracts that these entities have? That's important. And on to the extent that we haven't found them that's why we haven't done anything about them, it's very important that these entities should retain those fiscal stability contracts. The other consideration here is when we think about inorganics, particularly with regards to Ecopetrol America and Brazil, as we look into inorganic options, we have factored in those accumulated fiscal losses, they have become part of the analysis. And hopefully as these eventual transactions materialize, we will accelerate the capture of that benefit. And thirdly, there is some something about group structure which I think it's in the back burner, it's not a priority, but over time we make sure that the structure that we have in the group is one that allows us to compensate for this. Obviously I think the most important thing in this conversation is that we make sure that we account properly for this. We spend a lot of time making sure that a proper accounting treatment is made of this accumulated fiscal losses. It relates to differed tax, it also relates to some of the impairment conversations that we have at the end of the year. And that's an area where we put a lot of attention. Hopefully this addresses your question?

[Operator Instructions] The next question comes from Pedro Medeiros from Citigroup.

Good morning guys. Thank you so much for taking my questions and congratulations with the results. I have three questions. Okay, the first one is if you could give some extra color on the pipeline tariff review process and what management expects for the adjustments blend for 2019, okay. My second question is if you could comment on potential hedging strategies for both prices or any attempt to lock in the improvements seen in realization spreads for the Vasconia Blend that we saw here today. I understand that there had – there had been a debate about creating a hedge policy in the past months. So any update on that will be a welcome. And considering the higher oil price that we're seeing on the screen right now, does the company consider accelerating development CapEx further? And my last question is if it's possible to disclose Ecopetrol’s oil production exit or average levels for the month of April, okay, just to understand the trend for production after the numbers reported on first quarter. Okay, thank you so much. Felipe Bayón: Thanks, Pedro. This is Felipe. And I'll start with the last couple of questions and then I’ll ask Milena and Jaime to talk about the other ones. So in terms of April production, we do not provide any data on that. We'll talk around the second quarter results in due time. In terms of considering any acceleration or increasing CapEx, if you remember, we've given the guidance of $3.5 billion to $4 billion. We want to remain very discipline. We want to remain focused. We want to ensure that as we sanctioned our investments, we've done all the technical work that underpins those decisions. So from that point of view, there may be some room in terms of that range, the $3.5 billion to $4 billion. I think the one – the first quarter was good in terms of our expenditure or investment of almost $650 million. So, I think we're in a good trend for the year, but we don't want to rush ourselves and we don't want to then start investing without having all the right technical assurances underpinning those investments. Milena, do you want to talk about tariffs?

Yes. Hi, Pedro. This is Milena Lopez, the CFO for Midstream. Regarding tariff, the current tariff period was set in 2014 with the last resolution that was issued by the Ministry of Mines and Energy. This period ends on the 30th of June. As such, we have already proceeded to provide the ministry with our tariff filing, which basically gives the Ministry of Mines and Energy all the information in terms of our forecast of crude production investment and costs with which they will make all the necessary tariff calculation. In addition to that, in mid-April, the ministry published for comments a draft resolution that would open a negotiation period between all the oil transporters and the crude – and the refined product pipeline transporters and the Ministry of Finance. This would potentially open a negotiation period for tariffs that would take place between the time this resolution is fully issued and would end on the 1st of July. We expect tariffs to remain at levels at which we have them today and we will be informing you as this process evolves.

Hey, Pedro, this is Jaime. With regards to potential hedging strategies, the update that I will give you at this time is actually we have been looking at this over the last year or so. I think we've spoken about this in previous calls. There is some news in that. In that we have actually updated our policy, our group policy with regards to hedging. With the board, we've had a number of conversations with the board on that regard. And essentially we now have a framework that allows us to engage in hedging if we see a business case for it. I think the key principles associated to that policy are firstly that we do have a bias for natural coverage. We have natural hedges given our integrated nature. Secondly, a hedging that we do is focused on risk management rather than speculative or profit seeking. And thirdly, we think about hedging in two dimensions. There is strategic hedging, which would be on a group level, seeking basically coverage to brand exposure. And then we have transactional tactical hedging, which is on our day to day transactions that we do on the commercial and trading line.And so, that's where we are. To this date, we haven't engaged in such. We are looking at a number of options. It is possible that throughout the course of this year, we implement something on this regard. And to the extent that we do, so we will share that with you guys.

Okay, very good. Thank you so much for the color and all the explanations. Thank you so much.

Thank you. The next question comes from Lisa Chua from Man Group.

Yes, hi. Thank you for the call. I just wanted to fallow up a bit on the last question with regard to – specifically with regard to reserve replacements and production and kind of run rate CapEx. How to think of this? I know you've reiterated the CapEx guidance at $3.5 billion to $4 billion for this year. I think your three year plan with kind of $12 billion $15 billion that you gave at the end of last year to maybe the potential to kind of increase the closer to $5 billion over the next couple of years. But when I think about reserve replacements, a lot of the improvements in the last couple of years have come from revisions and improved recoveries. How do we think about maybe a potential run rate CapEx going forward? And how this translates to the production guidance is maybe based on what your three year plan was maybe 2% improvements per year or so for targets? How do we think about when to see the positive impact from the higher CapEx? What to think about a run rate CapEx going forward when we kind of thinking about the need for more E&P discoveries and also kind of run rate target targets to production? Felipe Bayón: Thanks, Lisa. This is Felipe and I'll take the question. So, a couple things. So if you think about the contextual envelope rightly, so we're talking about $12 billion to $15 billion organic CapEx. That's the first point I would make. So these would not include any inorganic activity and I can make some reference to that in a bit. Please bear in mind that all of these is at $65 per barrel. So that's how we've laid out the 2019 2021 plan, $12 billion to $15…

Thank you. I appreciate it. That’s good.

There are no further questions at this time. I like to turn the call over to Mr. Bayón for closing remarks. Felipe Bayón: Well, thanks. And I want to thank each and every one of you for taking part of the call today and especially thank you for your – you constantly following the company, doing the reviews, providing us with your views on how we should think about, how the external world, the analysts, the shareholders look at a company such as ours. So we value that. We appreciate the insights. It helps us probably look at things that we need to look in more detail, so that's very good and that's very helpful. We've started this year, I think, on the right foot in terms of our plan for the year and our business plan for 2019-2021. We're off, I think, to a good start. We're committed to conducting safe operations, ethical operations, efficient operations that provide value to shareholders and the areas and communities in which we operate. So thanks again for being today with us and I hope you all have a great day.

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