Ecopetrol S.A.

Good morning. My name is Anna and I will be your conference operator today. At this time, I would like to welcome a quarter 2020 earnings conference call. All lines have been configured to mute to avoid noise. After the speaker comments, there will be a Q&A section. You can send your questions throughout webcast. Please include your name and your attention. Mr. Juan Pablo Crane will be. You may begin your conference.

Good morning everyone and welcome to EcoPetrol's earnings conference call and webcast in which we will discuss the main operational and financial results of EcoPetrol. Before we begin, it is important to take into account the legal disclosure specified in slide 2. The co-operative role who will be joined by Alberto Consuelo, CEO and Jaime Caballero, CFO to EcoPetrol CEO.

Thank you Juan Pablo. This 2021 quarter. The EcoPetrol results conference call. I hope you and your families are safe in the midst of this complex and unprecedented and the world are facing and that has had significant health implications. If. You know, and financial results I would like to share with you. Some of the measures that at the EcoPetrol group we've implemented to address the COVID-19 health emergency. Our employees are most valuable assets and protecting their health is our top priority. I would like. To give you an overview of some of the. First, we promptly implemented remote work

even

prior to the authorities declaration of the mandate. The 13,000 employees that we have in the group, some 9,000 employees are working. This has been possible. That we started some time ago. With the innovation and technology this crisis. Between 15% and 20% of our employees. And they follow. Anywhere from our production fields, the two refining. The product pipelines and the. Make a special recognition. To them today, being able to ensure the continuity of our crude and products to the country. We have developed the concept of the. Through which we can determine. Exactly the number of people we can in order to guarantee that production and supply. Interrupted. Across the group. We have joined the reference in order to cope with this

unprecedented scale. Emergency to date,

we have allocated social social investment. Strengthening of the healthcare. Minutary aid and assistance. To different regions across the country. The only polypropylene producer in the country. Prioritize its production to cover. Used in the. Factoring of essential products require food sectors also. 7000 liters of antiseptic. Alcohol in the department. Cation of the social investment.

And define guideline.

As well as the use of control processes for the verification and delivery. Let's move on to the next slide. These new market conditions have significantly impacted industry performance and results. Will remain and we have uncertainly compared previous crisis. So group in a stronger operational. And financial position. With a profitable investment portfolio rights, the flexibility to navigate. Through this challenging environment. During the first quarter of 2020. We saw a decline in. Prices of more than 65%. In comparison. Or the first quarter of 2020, the average brand price was $51 per barrel. And reached a minimum level of $22 per barrel at the end of the quarter. The measures taken across the countries. To deal with the expansion of the pandemic. Resulted in a contract. Will demand for crude during the quarter. And at 22% of our products as compared to year. During 2019. By the end of the. Spread versus Brent was my. Compared to a minus 7.0. A period in 2019. On the other hand. By the weakening in refined products margins. The spread of. The. Percent improvement as compared. 2019. As we look forward. Price levels. And other pandemic. And it's effects on demand. As well as the impacts. On the curtailment of production report. I open. We can see scenario of Brent prices between 30 and $40 per barrel. And the growth of the market. Please let's move on to the next slide. In order to address the drop in demand for crude. Group as optimized its logistics. Balance the. Groups as well as. And fuel storage. Our sales and marketing strategy. Has been fundamental in order to. Place our current products in the market. And has allowed us to anticipate the experts of groups. For the second. Storage has been another key contributor. In supporting our activities to respond. To the drop in demand. The group. Group has currently storage capacity. From a strategic point of view. Of 2.1 million barrels. In addition. To the normal capacity required for our operating. Alternative floating. Quart. In terms of. Of domestic demand of refined products. Optimal group with of our refineries and storage. To guarantee the minimum levels of crude oil. Underpin our operation. And ensure domestic supply. Let's move on to the next slide. In March. We announced an intervention plan. That included a set of actions. In four fronts. The first news. The second. The third reduction. In the investment plan. And the fourth. Cash protection. In this first stage. We set a target that included a two trillion pesos reduction in costs and expenses. Investment plan. Our majority shareholder. It's dividend. During the second half. Of the year. In an effort. We have already reached and exceeded.

These goals.

We have managed to identify. 0.5 trillion pesos. In terms of capex. We will. Just our levels of investment to arrange between two and a half and three billion. In order to maintain the company's liquidity position. We have raised successfully around three point. In order to preserve the company's long term value. We have maintained our investment. In strategic projects. Which materially support production on to the next slide. On July 31st, 2019. We announced strategic partnership. With oxy. For the development of unconventional. In an area of approximately 97,000 net acres. Located in the permeate. In the U S. We currently have four producing wells and we have achieved the completion and fracturing. Of 18 additional wells. Or which really began in December. Last year. And that will come into production. Very soon. And the knowledge transfer plan for a group. That includes secondies. And that will help us strengthen our knowledge. Unconventional reservoirs. Furthermore. In conjunction. More of the JV agreement. We established a technical and financial. So committee. With the purpose of monitoring the operators performance reviewing and recommending strategies. For the continued improvement of this partnership. The agreement. Allows us to decrease activity in a low price scenario. As the one we're living in. So. In the long term. In its vast majority back 16. JV plan includes investment between a hundred and eighty. Really activities are temporarily. Yearly production between four. For a couple of. I would like to highlight. That one of the key advantages of short cycle. Is there potential to be in better market conditions. Let's now continue to the next slide. For the first quarter. Twenty. Twenty. Despite. During the first quarter of the year we achieved. A net income including. Three billion pesos. And an. EDA of five point three. Really on pesos. And its partners completed the drilling of three wells in Colombia. And really the Gato Doma. For appraisal well. Resolved. In terms. So production. Despite security events and market conditions the company reached. Seven hundred per day. And mid street segment. In the downstream segment. The average throughput. For both refineries was three hundred and forty five thousand barrels per day. Point five dollars per barrel. Quarter. Ruby Canyon. Engineering verified the reduction. Thousand tons of CO2 equivalent. The competitive bidding process. For the San Fernando solar part. Began. Through a PPA. A power purchase agreement. And that with an installed capacity. Of fifty. Will make this the largest self generating solar park. In the country. Lastly. I would like to. Highlight the fact. That we conducted the first ever. General shareholders meeting. In compliance with all the measures dictated by the government in response. To the COVID nineteen pandemic. To Alberto Consuelo. The quarter.

Thanks Felipe. Operational results for the first quarter were stable. Despite. We moved forward. With the maturity of. Aspect discoveries. Which were granted commercial. Were relocated to production. Likewise. Hydrocarbons agency. For commercial viability. And we are assessing the commercial viability in Andina North. During the first. Quarter of twenty twenty. Comparative production of our. Exploration assets. Reached. Three hundred and forty seven thousand barrels of oil. Extensive tests. In the. Oranda. Andina. ESOX. And we are in the discoveries. By the five wells were on drilling phase. However. Those wells were guided to a safe stage. And operations are currently suspended. Put in twenty twenty. Our. Partner shell. Completed. Tomato for well. Sooner than expected. By then the entrance procedures into the project. I would. Like to highlight the implementation of the technical IT project. To conduct their. This allows. The advancement in the identity. Decation and development of exploratory opportunities. We will move on. To the next slide to discuss production results. Reached seven hundred and thirty five per day. These products. Be alice. And Jerry G. Fields successful drilling campaigns. And the second. In Chichime and Castilla. The reversal of Pauta and Florena fields on February twenty nine. Which were operated by a kyun. And one thousand four hundred bottles from the J.V. with oxy in the Permian. Basin. During the period due to. And the decreasing gas sales. Mainly related to operation and the decreasing national. Demand from March. Seventeen. Onwards related to the health emergency that caused a massive reduction in terms of mobility and the reduction in the refining. Nineteen pandemic. We have been working. To maximize the value of our. Production outputs. Our company. As well as the OPEC optimizations which were announced in March. Allow that largest part of the group's production. Early average of twenty nine dollars per barrel. However. Have not met sustainability. Justments in investments by. Have been closed generating lower production levels estimated in the second quarter. Of between six hundred and. Sixty and six hundred and eighty thousand barrels of oil equivalent the next slide to discuss. About gas initiatives. The gas. Raise to one hundred and thirty eight thousand barrels of oil equivalent per day and generate. It close to ten percent of upstream revenues. And gas demand a commercial. Just strategy has been developed to sell gas sources to the thermoelectric sector. In strategic priority highlighting three things it's smooth integration process and it's controlled companies. With the control. And achieving a successful. Legal and financial transition. In section between Hockel and Chevron where participation. In the two chupa and ballena fields located in La Guajira department was acquired the operation transfer was executed on April the thirtieth. Project has been canceled. As part of the capes adjustments announced by the company, however, some investments planned for twenty twenty were the next slide to discuss advances in efficiencies we continue on. On. Force towards efficiency improvements in various fronts, including inization thanks to the crude oil transport strategy with higher viscosity and synergies across segments. The contribution of our refineries to the performance of the upstream segment is not worthy supplying twelve thousand barrels per day of NAFTA applied as crude diluent. The virgin NAFTA produced by the Cartagena refinery meets the dilution. For. As lower volatility, which translates into lower losses and a decrease in gas inhalation risk of those NAFTA has generated savings of three point seven million dollars between. January and March, twenty twenty mainly due to the lower price product, the lifting cost was eight point two dollars per barrel achieving reductions. Which compensated an increase of one offs in. Charges and increased production of liquids going forward. With the measures announced in terms of OPEC efficiencies. We expect that lifting cost will decrease during the year leveraged by optimization and prioritizing activities. We have obtained savings in drilling and completion investments of around one hundred first quarter. We turn now to. Also, the midstream segment. Crude transport had a slight reduction versus the first quarter of twenty nineteen mainly due to lower oil production in the country and a decrease of crude oil deliveries in the southern sub-barrows towards other systems. It is worth. Noticing that the transportation of refined products has been affected by the mandatory national lockdown. The last eleven days of the quarter, an average of one thousand barrels per day were transported through our systems. This is of a strategic storage in our. Crude oil infrastructure network to ensure operational. Let's move on to the results of the downstream segment. In response to the market situation, our disciplined approach. To an efficiency in order to adapt operations. Through the implementation of measures. Such as scheduled shutdown throughputs rescheduling, maintenance and additional. Components and products. Twenty the Cartagena refinery reached a throughput of one. Per day affected by an. Operational event and demand. Refinery maintain. The stable operations performance reaching an average throughput of one hundred and ninety nine thousand bar margins. The barranca vermeja. Cartagena refineries had the. Nineteen percent respectively compared to the previous year due to market conditions. Exhibited an excellent financial safety and operational performance. During the first quarter of twenty two in a favorable environment in terms of price. And market preference for regional products. If the floor to Jaime Caballero. Who will share the group's key financial results.

Thanks Alberto. Challenging market conditions affected reach a hundred and thirty three. Increase versus the net income for the first quarter of twenty nineteen. Can be explained by. The first. Firstly a negative variation of seven hundred and forty buying effect of lower prices and a higher average exchange rate on revenues and purchases. Second. A positive variation of a hundred due to the additional sales of twenty one thousand barrels per day in third one point two. Trillion pesos of higher cost expenses and the DNA charges. Measures and as a result of. Stronger capex execution. On recurrent charges accounting to. Mainly the record. And product inventories and the unrealized loss in the market to market valuation of our financial portfolio. Fifth a one hundred and sixty four billion pesos increase. Due to higher interest payments of the group's dollar denominated debt given that the valuation of the Colombian peso versus the US dollar. Allowing for all these effects net income. And would have been one point one trillions. Given the current market conditions the company performed an impairment test of substantive long term assets which resulted in the recognition of an impairment expense of nine hundred and thirty two billion pesos net of taxes. The upstream segment accounted for forty two percent of that amount. And downstream to fifty eight percent it is key to highlight that these impairment charges do not imply cash dispersal in the future. Groups KPI. edit that margin stood at thirty four point nine percent due to low recruit and product prices and through the quarter. were noticed in the larger relative EBITDA contribution from the downstream and the midstream segments versus the first quarter of 2020 for a contribution by the upstream segment. Net income breakeven was $39.7 billion per barrel, with the implementation of OPEX and the OPEX ratio is expected to trend downward below $30 per barrel. Role play was aligned with the company's expectations. Moving on now to the next slide on the business group's cash flow. The company's cash position remained solid for the first quarter of the year with a operations amounted to $2.6 trillion, including the changes in working outflows totaled $3.5 trillion for the CAPEX program. Financing outflows totaled $0.4 trillion for the payment of dividends to minority shareholders and $0.6 trillion to cover capital and debt service payments. Net $8 trillion mainly due to investment portfolio realizations to meet the company's payment commitments in the face of lower operating generation. $2.7 trillion comprises cash and cash equivalents and the short and long-term investment portfolio of $2.9 trillion. To strengthen its cash position, in April, Ecopetrol disbursed all resources of the contingent line of credit contracted with Scotch-App and subscribed additional short-term financing for a total amount of $1.1 billion equivalent. It also issued a 10-year bond in the international markets, which was described in an amount of $2 billion. Including this additional levita ratio of 1.6, reported for 1Q would stand at two times. The financial portfolio does not consider additional debt. Finally, on April 23, corresponding to 2019 net income, its minority shareholders and the first installment to the ministry for a total disbursement of close to $1.2 trillion. Please go to the next slide to see the projected short-term financial framework. The price scenarios were up-bring in the $30 to $40 range. Accordingly, Ecopetrol has taken expenses by $3.5 trillion pesos that could be further deepened up to $4.5 trillion. The investment plan was further prioritized and adjusted. We now estimate a range between $2.5 to $3 billion for the full year. The company has adjusted its capital discipline criteria in light of lower price expectations in the medium term and is ensuring that all of its prices below $30 per barrel. All these activities would provide cash and net income break-evens below $30 per barrel. Lower EBITDA generation and the greater in-depthness will lead to a temporary increase in the estimated gross -to-EBITDA ratio, up to a range between 3 and 3.8 times by year-end. President, for his closing remarks.

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

At this time, I would like to remind participants, if you have any questions, you can send them through the Webcast. Please include your name and the name of your company and the question.

And I think that if we step back, we've set a business plan for the year and for the next couple of

years.

Given all the level of uncertainty, I think it's important that we started with the implementation of these adjustments that we've done very, very swiftly and promptly and decisively. We come back to the markets in the second half to show what we're thinking in terms of the long term. So that would be the first part. And then I think that, again, we will need to, going on, our view on prices going forward for the mid and long term. And then any potential distribution of dividends will need to abide by the current 40 to 60% of the net income and will be decided by the March of next year. So we will need to, again, that we need to do in terms of BPM. We'll take a view

on

dividends going forward.

Thank you. Our next question comes from Santander, Rodrigo Reyes. Has the diversification significantly reduced?

Sorry about that. Did you listen to

my question?

Yeah, I did.

Okay.

I was having difficulty with the mics. So Rodrigo, thanks for the question. So, the Tajena normally runs at 150 to 155,000 barrels per day. We've been running the refinery at 110,000 barrels. That normally runs at 220 to 230,000 barrels a day. We've been running it for the last weeks. The weekend we've increased that the runs. So we are already seeing an increase, although small, a 22% increase against what we have over the last weeks or so. It's been basically us adapting to the demand numbers that we've seen both in terms of its recovery worldwide. Emphasize that we're seeing some, although small, we're seeing some recovery going forward as we speak in terms of the loads of the refineries. Thanks, Rodrigo.

Thank you. Morgan Stanley, Guillermo Levy. Hi. Thanks for taking the question. The first question I have is, can you tell us the level of discounts being negotiated? And the second question, if we can update on Shell pilots in Colombia, the company, despite the lower oil prices currently. But I would like to know if the idea remains to start our activities later this year. Any update on the regulatory front, it will be great. Thanks.

Guillermo, thanks. I will start with the second pilot and then I'll ask Milena to talk about the midstream business in more detail. Proyectos pilotos investigación integrales, you know, the pilot's projects for investigation or research, comprehensive research. We're convinced it's strategic for the country as well. The government, given everything that's going on with the management of the team, on some of the technical procedures and standards, and we continue our preparation and readiness to be able to do that. As we see this, we'll continue to assess the timing of when this would be possible, given everything that's going on. But we invite the pilots in the next year or so. So clearly, there's been some updates, especially some of the technical standards in the industry for comments. So there's been progress. There's been progress on that for the country. And I'll ask Milena to take the... Milena, go ahead,

please. Thank you, Felipe. Good morning, Guillermo. Thank you for your question. What we have done in the midstream segment is basically offered in order to help producers to get the best results. So we have done that through the specific time period where prices are over the last couple of months. So the first component of the tariffs that's important to bear in mind is that they're temporary. They've been given for two months, and we will wait depending on where oil prices are. They have insert volumetric requirements. There's a minimum volume we need to see through our system in order for the discount to be applicable. We have tailored the discounts. It is... have tariffs based in dollars. So the discounts will range and move depending on how large the fee is, because we have a gain when we look at our income statement in pesos, which is the currency we function in, and as we see a larger tariff in peso terms. So what we have done is link valuation in the FX such that we minimize the impact on financial states. For the month of April, what we've seen given the FX over the past couple of months, discount in each one of our systems, in the Sene system, it's approximately on average around 10%. The discount was approximately five and a half percent. And in the Oleo Colombia system, the discount was approximately a billion and a half percent. So those are the discounts applicable for where the FX was and were priced low. In addition, we offered all of our remittances. And the month of June is that we will be financing up to 50% over this two month period. And this financing can be used for a period between six to 12. We're taking in order to help our remittance through any cash flow difficulties they may have during a temporary measure. However, it's a measure that we believe is designed through the worst of the price curve. And as time goes by, if necessary, we will be re-evaluating or whether it will be solely happening over the next two months. One thing that I think is important in questions that we've seen earlier, missionary measures by each of the companies. So these are discounts and payment facilities that we are offering our clients. However, these are not regulatory requirements. Thank you. Our next question comes from, it's a question for the upstream segment. How much exploratory of the $2.5 trillion, i.e. investments that do not impact 1P proven reserves of B deployed? Is this including OXY-JB? Isn't there more room to cut CAPEX for there if needed? Given that in the past we have seen minus $2 billion per year.

Thanks, Lili. And good morning. Good to have you here in the call. And so clearly we've gone as you write, $3 billion in terms of investment. And we have some 300 to 300 exploration CAPEX. That's to drill three exploration wells in one queue. We have some wells that have been safely, in which operations have been safely suspended for the time being. We're restarting operations in most of those in the next few weeks or so. So clearly we will nation wells, but we will continue our exploration campaign going forward. In terms of priority prioritization that we do on CAPEX, clearly we've taken the view of some of the concepts. The concepts are the ones that you mentioned in your call. Service impacts on production levels. And I would say that of the $2.5 to $3 billion, to E&P, to the upstream. And so we're protecting that part of the business. In terms of being this short cycle investments by the overall nature of the unconventionals, we have the ability to very quickly ramp up activities. So we have some wells that have been drilled. We expect to end the year with some 21 to 23, some 22 wells, which is good. So we've reduced CAPEX in the JV from 800 million gross to 180 to 200 million gross. So that's a significant sort of adjustment that, again, is the nature of the business, of the short cycle. Of the CAPEX has been. We envisage an impact in production. So. Previously, we had. Some 7 to 9,000 barrels of Ecopetrol products. Right now we're thinking it's going to be. 4 to 5. MBD or 4 to 5,000 barrels per year on average. We've adjusted the activity. Provided both by the nature of the short cycle of those businesses. We managed to put in place. And to your question, is there more room to cut CAPEX? There's always more room to cut CAPEX, but I think. Given our view of Brent being between 30 and 40. We feel comfortable. Again, giving everything else we've done. In terms of. The already achieved reductions in CAPEX and OPEX and the financing. Being able to successfully get some finance. Feel comfortable with the 2.5.

Thank you. Our next from Gavin Weil. Are you evaluating any. Counter-cyclical acquisition. At this stage, capital. Expansion internationally. Columbia.

I think it's important again to step back and draw priority. Station that. Health and safety and the lives of our. Employees is at the top of everything in terms as we think about protecting cash. And we've again, very, very quickly moved. And very decisively we've moved to do, and we've given you some. How things are looking forward. There will eventually be. Think on the both the dive. Investment size and potential. And then we'll move to the acquisition side. Potentially the acquisition side. We need to see, you know. A crisis normally. Present themselves with some additional opportunities. Otherwise would have not. Be impossible. So. I think priorities are right now. Ensure that we protect the cash. And we. Remain strong. To whether. The crisis. Is that we still don't know. How much longer it will go. Thanks.

Thank you. Our next question comes from HSBC from really young. With the garden, the selling price. The market. To explain these quarters. Differential to grant. To. If there. Charges in trend on global crude trade flows.

And. Thanks. For the question. So. In terms of. The prices. If you saw that one cute 2020 was an average 51. That March. Clearly shake. Decreasing prices. You know, the top line brand. Not only that. In terms of the differentials. Year on year. It go from. So we have the. And greater differentials. So what we've done. For some. Years now. Is a strengthening our relationship with some of the. Not only in China, but we're also. Going back to India. In the US. So. Definitely. Definitely. We have to change. Probably 50% of our exports. You'll go to China. But we've managed to very successful. These barrels. In those refineries. And the other thing. Is that we've managed to place them. More than a couple of months ahead of time. We've looked at April, May, June. Sure that we can. We've done a lot of work. Honor our contracts, which are term contracts. That we can deliver those barrels. And that we can. In Colombia. Definitely will be, we'll continue to move. Basically we're exporting mainly to. China, the US and now. India as well as a market. That's it. Thanks, Lily.

Our next question comes from. Bank of America from Frank McGann. Could you please provide more detail on. Easy and you mentioned occurred. At the refineries during the.

Thanks, Frank. And obviously Alaska. A one. Who's on the line. To talk about the incidents, but in Cartagena, we had an incident with the. Hydrogen producing unit. That we've. Mechanical repairs. And the midst of. Some of the. Restrictions. Following the COVID-19. It's sort of. Protocols. And we estimate that the unit should be. Restarting in the next couple of weeks or so. Walter, can you go ahead?

Thank you. Thank you. Thank you, Frank. For your question. In the first quarter, in the case of. We did have an. Operation with a few. A plan shutdown. That took. Cartagena. We did have. An event. That took. Out of service. One of the hydrogen plant. The Cartagena. And they are normally at 100% capacity. One of them. The refinery. With only one. Hydrogen plant. And as such, we gave priority to. To the. Hydrogen. And we need to. We need to. Shut down. Or the. Because of. Hydrogen. And because of that. During the first quarter, we did have an impact on. Now we're. Around 9%. And gasoline. 45%. So. And I'm planning then. We did have. In the first quarter of this year. For this event. With. We took. Corrective actions. And now we are following the last. Mechanical repair. May. And start up the unity meeting.

And we are. We are. We are. In the. After after the 20th of May. Thank you.

We have a question. And then we'll start the discussion. From Goldman. Of the lower. In the production outlook for 2020. 21. In case you do 2.5 to 3 billion. In 2021. Onwards.

Bruno, thanks for the question. So I was mentioning, in the second half of the year, we will be presenting to your sales on the market the updated business plan going forward. We need to acknowledge the sort of in-demand that we've seen, the drop in prices and being able to share our views on the mid-term business plan. So we've given some guidance in 2020, particularly around the second quarter and the year, and you saw that they're already in the 2Q and the – I mean, I normally talk about what we've done. We tighten the belt at the same time. So clearly, there will be some impact going forward, but we will have a better – in the second half of the year.

Our next question comes from Santander Rodriguez Almeida. Hi. Thanks for your presentation. Could you please discuss a little bit about the current state of your refining operations? At what level of utilization have you been running in the past few weeks?

So Rodrigo, I'll ask Walter to provide us any more detail, but I was hitting earlier that we normally run Barranca at 220 to 230,000 barrels, running at 115,000. We've increased the runs to 141,000 barrels. We went down to 50% of the runs of the capacity of the refinery to 140,000, 141,000. And I think that's a reflection of the demand. Even though it's marginal, we're seeing some demand increase in the – we normally run the – to 155,000 barrels. We've been running at – we've been able to very quickly adapt and adjust reduction in demand, but also very quickly as we ramp it up again. So mostly clearly as we see the economy and more sort of businesses in country being reopened, you know, construction and some manufacturing and some services. So clearly it's something that we'll need to keep on track. We've been able to ramp it down quickly and again start to ramping it back up as demand goes up.

Thank you. Our next – our next question comes from Fragmagan. Is there much flexibility in your West Occidental adjust cap ex period?

So, Frank, thanks. And I think it will depend largely on – so these short cycle businesses like the unconventionals and the Permian allowed us back in December to very quickly – drill the wells, fractal the wells, get them into production with some very good operational results, comfortable with the rocks and clearly with the operator ship that OXIE is – yeah. Again being short cycle, we've been able to ramp things down. So we've stopped activity right now, but we've managed to continue with the completion and tracking of the wells and we envisage ending up the year with some 21 to 23 wells and some 4 to 5,000 barrels of production. I think that's good, but given where we are, there's uncertainty. Prices have gone up a bit, but we will – and we're working to understand that key milestones we need to hit that will allow us to go further de-fashioned. Good news, I think, is that the – we looked at some 28 different – US was the second best in terms of having the lowest break even, which was very good. It was around time. And OXIE has done a lot of work in prime or put more efficiencies and more optimizations into the operation. So operator and we'll communicate back to the market some more how and when to restart

the operation. Thank you for the question,

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

Thanks Vicente. And I would like to ask you to help us with the answer. Please go ahead.

Hello. And we will be – so I'll break it down. We have four – remittance have two components. They have a discount and then there's a financing component. So the discount is simply less income, less top line sales, and has two components. So the – continue being in our top line and we will have an account receivable which – and at the same time, this financing has an interest rate of 1.5%. Interest rate will be interest income. And that's from a preliminary standpoint how we plan on booking. And just – I'm not sure if that answers the question. So you won't see a difference in our sales figures and you will simply see an increase in interest income corresponding to the interest portion of the invoicing. Thank you. Our next question is from Mackenzie Investments. How do you see the gas demand in the last two weeks in Colombia, U.S. and Brazil?

Thanks, Erika. I will ask Alvaro. Particularly in Colombia, we're – remember, in the U.S. we have – and again, in Brazil, we don't have any production yet. But in Colombia, we saw the equivalent of 25,000 barrels a day reduction in demand. So as some of the industries where the transportation was sort of curtailed, we saw an impact. But we're starting to see some pick up again in demand of gas. So we're seeing an increase in gasoline, an increase in diesel. We've ramped up the levels of the runs at the Barranca refinery. And as such, we're all – Alberto, if you want to give us more detail,

please. Thanks, Felipe. Good morning, Erika. And as Felipe was saying, 97 percent of the group's gas income come from our position in Colombia. 30 percent of the demand signed with take price in dollars. In terms of demand, we're using – and G imports in April or May. We don't have news about gas demand increase. It's slumped earlier this month. In USA, demand is flattening off at lower than normal levels. But actually, we have seen a little slight recovery in Texas, Louisiana, and Michigan. In Colombia, as Felipe was saying, we have experienced a contraction in terms of demand. But – which affected about 27,000 barrels per day during March and April. That and the last – who placed excess gas in the thermal electrical sector, which has provided some – kind of the way we see the scene in terms of gas in – within the group.

Thank you. Question comes from Porvenir, Juan Pablo Diaz. What will be the impact of the OPEX optimization on the upcoming year's production?

Juan Pablo, morning and thanks for the question. So I've – from the second quarter and the full year, in terms of the impact on the production levels. And over the next few weeks, we'll get to work on the updated business plan that we will be sharing in the second half of the year. So at that stage, in that – a better view

on impact – impacts or

potential impacts as we move forward, especially in the next couple of years or so. Thanks for the question.

Our next question from – comes from Luis Carvalho from UBS. Hi, Felipe and team. Hope your families and EcoPetrol team are safe. First of all, thanks for transparency shared in the PPT, mainly on production, free cash flow and income break-in. Very useful. I think this most – a comment from Luis. So I will continue with the next question.

But thanks, Luis. Thanks for the comment. Appreciate it.

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

Erika, well, thanks for the question. I think we've mentioned some of the elements around how we're seeing demand increase very marginally and slowly, but we see some demand increase. As I mentioned, we cut the runs in the refineries from 370,000, 380,000 barrels to somewhere in between 225,000, 230,000 barrels. Right now, we've added 25,000 barrels more of refinery capacity over the last two or three days. So we will continue to be in sync or synchronized with the increases in activity. So clearly, this week, next week are fundamental as the Colombian economy opens up again. We've been able ourselves to operate. There's a lot of essential services that have continued to operate, but now we have more and more industries and people in businesses and different lines and different sectors in the economy actually being able to operate. So we'll continue to watch this, but clearly, there's this need to be mindful and strict with the protocols and how we operate. Maybe we haven't mentioned it here. We've mentioned it in the presentation, but even in the period of less than four weeks, we basically built a biological molecular lab to ensure that we can do our own tests in Barranca Bermeja. So we're moving very, very, very quickly. Things are changing dramatically. One of the things that I've heard over the last few weeks or so is that nobody in the world is an expert on COVID-19. We're all learning. There's a big level of uncertainty. We still don't know how much deeper we will go and for how much longer. One queue was not good. I think two, two queue and three queue will be very, very, very hard. As we've seen demand being destroyed in terms of the lessons, and I appreciate and thank you for the question, Erika. I think we've managed to demonstrate to ourselves that we can adapt very, very quickly. Having 85% of our people working remotely, using technology, doing things that seemed difficult, doing the issuance of a bond remotely or closing our volumetric accounts that traditionally would have taken us two weeks. We closed it in four days, 150 people working remotely. We've learned that we can adapt, we can move. Still, we don't know when the final definitive solution for COVID-19 will be out there. It's a matter of having a vaccine. We'll need to adapt. We'll need to restore some of the, as a country, we'll need to restore some of the activities. But there's still a lot of uncertainty. I think that we've learned about empathy. We've learned about humanity. We've learned about being there for others and sharing and paying it forward. If you think about Colombia, more than 50% of the working force, which is 22 million people, don't have a formal social security system or medical assistance. So we'll need to think about them. Clearly, we see Ecopetrol as part of the backbone of the country as we all jointly work towards recovery. Thanks again. Lots of things that we've learned. We've learned that we can do things differently, that we can be very efficient, and that we can very quickly adapt. I want to thank everyone for being today in the call. Again, given the circumstances, appreciate it that we can have you today join us. We fully, fully appreciate your insights and your questions and your remarks. Again, I think it's important for you guys to know that our IR team will be there. I'm sure there will be more questions and more need for interaction. Again, thanks for being here today. We appreciate you following in such detail the company. We've managed to react very, very quickly to something that unprecedented in terms of the crisis itself, both from the health and economic and social standpoint, as well as from the dropping prices and demand. So we've strengthened the company. We've acted swiftly. We're here ready to withstand the storm in best shape, in much better shape, sorry. We're ready to continue to do what's required to ensure the long term of the company. Once again, thanks. Hope you guys, all of you have a great day. Thank you.

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