Ecopetrol S.A.

Good morning. My name is Hilda, and I will be your operator today. Welcome to Ecopetrol's earnings conference call, in which we will discuss the main financial and operational results for the second quarter 2021. All lines have been muted. There will be a Q&A session at the end of the presentation. Before we begin, it is important to mention that the comments in this call by Ecopetrol Senior Management 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 materialize. As a result, Ecopetrol assumes no responsibility in the event that future results are different from the projections shared in this conference call. The call will be led by Mr. Felipe Bayón, CEO of Ecopetrol, Alberto Consuegra, COO, and Jaime Caballero, CFO. Thank you for your attention. Mr. Bayon, you may begin your conference.

Good morning, everyone, and welcome to our second quarter 2021 results conference call. We hope you and your families are well and continue to stay safe as the world aims to recover from the effects of the COVID-19 pandemic. The results of the second quarter and the first half of the year reiterate our ability to capture value in a favorable fundamental scenario. And despite challenging environment conditions, we keep our commitment to cost optimization, efficiencies, and improvement in our commercial strategies. Social unrest during May and June caused a complex situation locally, resulting in mobility restrictions and some operational disruptions. Ecopetrol activated a contingency plan to guarantee the security and continuity of its operations and mitigate the impacts across our valley chain. During the quarter, we generated a consolidated revenue of 19.4 trillion pesos, an EBITDA of 9.4 trillion pesos, a 49% EBITDA margin, and a net income of 3.7 trillion pesos. These financial results are historically high on a quarterly basis for Ecopetrol. These outstanding results ratify the resilience that the company has consistently demonstrated amidst challenging environment conditions to which the following milestones can be added. We joined the program of the Asociación Nacional de Empresarios, ANDI, that allowed the acquisition of vaccines by the private sector, ratifying our commitment to the protection of life and care of our workers, their families, and our allies. Under this program, we acquired nearly 26,000 doses of Sinovac vaccine, with which, to date, more than 3,400 first doses have been administered. With this program, along with the government's national vaccination plan, around 40% of our employees have completed their immunization program. We announced the creation of a new trading company based in Singapore. This to consolidate the position of our crude and refined products in the Asian markets. capitalizing on our diversification strategy. We announced to the market the extension until the end of August of the exclusivity agreement with the Ministry of Finance and Public Credit for the potential acquisition of 51.4% of the shares in ISA. In addition, on July 30th, pursuant to an authorization from our board of directors, we submitted a binding offer to the ministry. Its conditions are subject to reserve due to the non-disclosure agreement that governs the process. We resumed normal operations in the Castilla field with an increase in production of 9,000 barrels at the end of June compared to the production of the field at the end of May. Let us now turn to the next slide to see some aspects of the market context. In line with the progress of the vaccination plans and the progressive reactivation of the economic activity at a global level, we observed a significant recovery of the market. During the second quarter, domestic demand for natural gas averaged 945 giga BTUs per day. In June, there was an 8% recovery in demand compared to May, a month in which demand was most affected by the public order situation in-country. As for LPG, demand reached an average of 22,300 barrels per day during the quarter and in June, an increase of 30% compared to the previous month. In terms of our product sales in the domestic market, there was a reduction of around 5% during the second quarter versus the one observed in the first quarter of 2021. In general, we have observed a recovery in demand to around pre-pandemic levels, except in jet fuel where there is still room for recovery. It is worth highlighting the improvement in the realization prices of our crude oil basket, which have recovered significantly against the Brent price. After having registered levels close to $30 per barrel during the first half of 2020, our crews were sold to close to $62 per barrel for the same period in year 2021. Please, let's move on to the next slide. There are different actions that allowed us to generate a counterweight to the effects of the operative disruptions and deliver positive results in this quarter. Our commercial strategy contributed with more than $120 million to the Group's EBITDA during the quarter, mainly as a result of the purchase of new crudes for the refineries, increased asphalt sales, and energy cost savings. Also, we observed a strengthening of around $45 per barrel in absolute prices of crude oil exports, as compared to the second quarter of 2020, stable flow of exports to the U.S. Gulf Coast and greater share of market volume in the Asian continent. As an integrated company, Ecopetrol materialized synergies between its different segments in the different business, giving us the flexibility to face volatile contexts. An example of this is the strategy to maximize Cartagena's refineries throughput with their own domestic crude oil versus imported crude oil. These allowed us to capture benefits of around $5.5 million in EBITDA during the first half of the year 2021. The diversification of our production and reserves portfolio through the consolidation of business lines such as gas and the unconventional reservoirs in the United States. In the case of the Permian Basin, in Texas, we can observe its outstanding results. We registered an average net production for Ecopetrol of 21,200 barrels per day during this quarter. Our gas and LPG business showed an EBITDA growth of 32% compared to the same period of the previous year and reached an EBITDA margin of 54%. It also represented 21% of our total production. Our cost efficiency plan aligned with strict capital discipline standard has allowed us to incorporate efficiencies for approximately 1 trillion pesos during the first semester of this year. To date, we have captured 197 billion pesos derived from the implementation of the serial-based budgeting pilots applied in different subsidiaries of the group. I will now pass on the word to Alberto Consuegra, who will elaborate on the main operating milestones for the quarter.

Thank you, Felipe. On exploration, Three exploratory wells were drilled and completed, with a total of eight wells year-to-date. By the end of the year, we estimate a total of 14 wells, five additional wells compared to the plan set for 2021. Cumulative production in initial tests, extensive tests, and exploratory wells in post-commercialization reached 908,000 535 barrels of oil equivalent, an increase of 15% as compared to the first half of 2020. Regarding gas, the Arecife 3 well, appraisal of the Arecife first sidetrack discovery, confirmed the presence of gas. Initial testing yielded gas production between 2.5 and 9.5 million cubic feet per day. Extensive tests will be carried out to determine its commerciality. The drilling campaign for the remainder of the year will be focused mainly on gas exploration in northern Colombia and Piedmont. On the other hand, we highlight the strengthening of the partnership between Ecopetrol and PADEX resources through the assignment of 50% of the Ecopetrol's stake in the Arauca and Llanos 38 blocks, promoting the reactivation of exploration in an important oil area of the country. In the Arauca block, it is expected to resume production of light crude between 38 and 41 degrees API by drilling two development wells. Meanwhile, initial activity in the Llanos 38 block will be focused on drilling an exploratory well in 2022 and acquiring 3D seismic data to assess the area's potential. Let's move on to the next slide, please. During the second quarter, Ecopetrol Group's production was 661,000 barrels equivalent per day, reaching 668,000 barrels equivalent per day year-to-date. When compared to the same period of the previous year, production decreased 5.3% due to the lower production of the Castilla field and the public order issues mentioned by Felipe. The operating restrictions related to water management in the Castilla field were resolved in June, allowing a production increase of 9,700 barrels per day at the end of the second quarter. Production has restored its growth path with levels above 680,000 barrels equivalent per day by the beginning of July, maintaining an estimated production range between 690,000 and 700,000 barrels equivalent per day for 2021. Gas and LPG production increased 8% compared to the same quarter of the previous year, leveraged mainly on higher production from Piedemonte, Permian, and Jocos fields. A 7% decrease versus the previous quarter due to the effects on the evacuation of LPG in Piedemonte caused by the social unrest which led to the maximum levels of storage of this product. As of today, there is a recovery in production due to higher demand. Let's move on to the next slide, please. On the Colombian unconventional reservoirs front, on June 17th, the National Hydrocarbons Agency approved the alliance with ExxonMobil for the development of research pilots. The assignment of cross-participation interest with ExxonMobil in the Calais and Platero special research project contracts was also approved, resulting in Ecopetrol as operator with a 62.5% participation interest in Calais and 37.5% in Platero. Regarding Calais, we continue to make progress on the environmental impact studies. As for Platero, the first territorial dialogue was held. and the monitoring and environmental impact studies began. As for the Permian Basin, during the second quarter, 26 wells were drilled, for a total of 47 wells drilled so far this year, reaching a net production after royalties for Ecopetrol of 16,100 bottles of oil equivalent per day. In line with our TESG commitment, Rodeo has adapted both drilling and completion equipment aiming to reduce diesel consumption by up to 20%. In addition, we are continuing with our zero-routing-flaring initiative. With the production levels and efficiencies obtained during the first half of the year, Ecopetrol Premium generated a cumulative EBITDA of $74 million, an EBITDA margin of 79%, and a CAPEX execution of $371 million in accordance with the plan. Let's move on to the next slide, please. The volume of transported refined products increased by 86,000 barrels of oil equivalent per day as compared to the second quarter of 2020 due to the recovery of local demand. On the other hand, the volume of crude transported decreased by 52,000 barrels of oil equivalent per day. As a result of operating restriction caused by the public order situation in the country, it was necessary to suspend pumping in some refining systems. In response to the aforementioned, a contingency plan was executed in order to mitigate the impact of fuel supply to the different regions of Colombia. In this period, no reversal cycles of the bicentennial pipeline were conducted. completing 19 consecutive months in which the contingent alternative is not used. On April 27, the new TLU-2 platform for loading crude oil was inaugurated at the Cobeñas terminal, the country's main crude export port. This new infrastructure allowed to almost double the monthly cargo capacity of ships from 18 to 34. Those transferring heavier crude oils and incorporating the highest technology to serve 2 million barrel tankers for the next 20 years in harmony with the environment. Next slide, please. The integrated gross margin of the refineries remained at pre-pandemic levels as a result of the strengthening of the product basket, despite the more expensive feedstock, the lower availability of domestic fruit, and the execution of the first cycle of scheduled major maintenance at the Cartagena refineries. The highest quarterly EBITDA in the last seven years was achieved, supported by the capture of good margins, stable throughputs, strict operating cost control, outstanding performance of the Barranca Bermeja refinery and Essentia margins, and good performance of Invercolsa and the Cartagena refinery, managing to mitigate potential effects derived from the public order situation. Essentia achieved a historical quarterly EBITDA of 210 billion pesos, quarterly polypropylene margin of 437 billion, dollars per ton, results underpinned by leveraging market conditions, sales volume, and cost and expense control. Let's move on to the next slide, please. During the first half of the year, we achieved efficiencies close to one trillion pesos. The total unit cost increased $7.4 per barrel as compared to the same period in 2020. Of this increase, 84% is explained by a higher viable cost due to the recovery of the Brent price. 11% is associated with production impacts during the first half of the year, and the remaining 5% by the recovery of operational activity in fields, refineries, and transport systems. The lifting costs increased versus the same period in 2020, mainly explained by the increase in subsoil maintenance and higher energy costs. We highlight the execution of efficiency measures such as continuity of the dilution strategy, fee optimization, and contract renegotiation. The cost per barrel transported was $2.9 per barrel. remaining stable compared to the previous period, thanks to the control of fixed and variable costs given the lower transported volumes. By the end of the year, this cost is expected to be around $3.3 per barrel. The refining cash cost decreased by 13% compared to the first half of 2020, mainly explained by the increase in throughput and the control of fixed and variable costs of operational activity. Efficiency levers include savings in energy management and industrial services, operations logistics, and maintenance costs. For the second half of the year, we foresee an increase in costs associated with greater activity and within the ranges established in the business plan for the year. I will open the floor to Jaime Caballero, who will talk to you about the main financial results of the Ecopetrol Group.