Ecopetrol S.A.

Welcome to Ecopetrol's earnings conference call, in which we will discuss the main financial and operational results for the third 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. Bayón, you may begin your conference.

Good morning, everyone, and welcome to our third quarter 2021 earnings conference call. During this quarter, we continue to deliver record results. As of September, we are now consolidating Interconexión Eléctrica SESA's financial statement. We generated revenues of 23.3 trillion pesos, an EBITDA of 10.4 trillion pesos, a net income of 3.8 trillion pesos. These results highlight our successful commercial strategy, which has allowed us to capture the favorable conditions of international crude oil prices. We achieved important progress in our strategic agenda with the accomplishment of milestones such as the following. The closing of ESA's acquisition and the first consolidation of its financial results into the results of the Ecopetrol Group. materializing this transformational step in our energy transition and decarbonization program. Our first liability management transaction for $2 billion through the issuance of 10-year notes and 30-year bonds to partially prepay the loan disbursed to finance ESA's acquisition. The authorization granted by the Superintendencia Financiera de Colombia to subscribe the program for the issuance and placement of common stocks, enabling Ecopetrol, during five years to execute simultaneous issuance within the local and international markets, providing flexibility and opportunity in our capital structure strategy. And now, more than 86% of our employees have completed their immunization against COVID-19. Let's move on to the next slide. With the acquisition of the controlling stake in ESA, the Ecopetrol Group turns into a leading company in the energy sector of the region. participating across the hydrocarbon value chain, energy transmission, renewable energy self-generation, and infrastructure. After the closing of the transaction, our efforts have been focused on ensuring compliance with legal and regulatory requirements related with accounting consolidation, reporting, and financial planning. We have made progress in matters regarding corporate governance, such as the election of ESA's new Board of Directors, following its AGM held on October 22nd. The new composition of the board will allow Ecopetrol to exercise as controlling party over the company. Also, I would like to highlight that for market reporting purposes, ESA's financial results are now incorporated as a new business line in addition to the existing business segments. ESA will maintain its value promise and independence as we have done with the rest of our subsidiaries. ESA will bring to the table experience and knowledge that will boost new growth opportunities. We are progressing a gradual integration process led by the Transition Management Office, a multidisciplinary team from both companies. This process involves mutual and detailed knowledge between both companies, understanding of both business models, and the construction of a shared vision. After having consolidated an orderly transition, we'll pursue opportunities that allow accelerating the capture of value from our investments. We see potential synergies in opportunities such as energy and fuel storage, development of new and additional renewable energy projects, generation and commercialization of energy in other countries, and growth opportunities in the hydrocarbon business in geographies where ESA already operates. I will now pass on the floor to Alberto Consuegra, who will elaborate on the main operating results for this quarter.

Thank you, Felipe. I will start by highlighting the discovery of hydrocarbons after drilling the exploratory well Lydia YW-12, which confirmed the presence of gas and 49-degree API light oil in a new structure near the Cupiagua's field, a milestone that sets the company exploratory reactivation in Piedemonte, where Ecopetrol is the operator. We also highlight the commerciality of Boranda and Flamenco's WAN discoveries, which are part of the near-field exploration strategy which seeks production and reserves incorporation in a short term. Discoveries are located in Santander department and have produced about 94,000 barrels of crude oil for Ecopetrol's share during the testing stage between January and September of the current year. We continue our international exploratory strategy. During the 17th round of the Brazilian Oil and Gas Agency, the consortium between Ecopetrol Brazil and Shell acquired this SM1709 block located in the Santos Basin, expanding the portfolios among high potential areas with competitive break-evens close to $40 per barrel. Let's move on to the next slide, please. The quarterly production was 683,600 barrels of oil equivalent per day, 22,700 more than the volume achieved in the second quarter. Despite achieving the production stabilization of the fields affected by blockages and also increasing gas sales, milestones of the plan previously announced, there were two climate events during the quarter that limited an additional recovery in the growth of our production. Abroad, the hurricane season in the Gulf of Mexico caused the closure of wells, and in Colombia, the rainy season caused landslides, which affected the Promi-Oriente gas pipeline as well as the flooding of the Karikari Field, causing its temporary closure for 20 days. Other weather impacts were related to increasing power outages. These events impacted production in and around 10,000 barrels of oil equivalent per day. For the fourth quarter, we expect a production around 700,000 barrels of oil equivalent per day, mainly leveraged in the drilling of between 110 and 130 wells, the reactivation of the Promi-Oriente gas pipeline, and the continuity of the operation of the Enare asset, which we received on November 4th after ending the association contract, adding an average of 7,500 barrels of oil equivalent per day. However, some risks associated with climate and public order issues remain and could affect production levels. Gas and LPG contributed 21% to total production. highlighting the signing of the Santiago de las Atalayas gas exploitation and exploration agreement with the National Hydrocarbons Agency, which allowed the beginning of pre-drilling activities in two new wells in the Piedmontes area. Given the effects on gas production due to maintenance and climatic events, a commercial strategy was developed to guarantee gas supply at nationwide, along with the Ministry of Mines and Energy and market agents, through the signing of contingency contracts. On the social front, new gas and LPG connections have been made, allowing near 5,000 new families from Strata 1 and 2 to have this service and improve their quality of life between January and September. Let's move on to the next slide, please. 2021 has been a challenging year in terms of production due to all the factors that we have revealed throughout the year, which have mainly affected the basic curve. Resuming activity on our wells generated higher levels of water versus oil content with a gradual stabilization. The pandemic and public order situations affected our projects in terms of supply chain, delivery deadlines, and execution. This has been partially offset by the implementation of initiatives such as anticipation of 2022 work fronts and strengthening of our commercial gas strategy, with which we expect to restore our growth path. Given all the above, projected production levels for 2021 would be around 680,000 barrels of oil equivalent per day. Let's move on to the next slide, please. On unconventionals, we highlight that on July 8th, the first territorial dialogue was held for the Plateau Comprehensive research pilot project, and on October 29th, an environmental impact study was filed requesting approval of the license for the drilling of Calais. In parallel, progress is being made in the documentation of Platero's environmental study in synergy with what has been filed for Calais. In August, a public survey was carried out by the National Consulting Center in the area of influence of the pilots. evidencing a positive change in perception among communities regarding the industry and the unconventional pilots, Ecopetrol being the oil company that generates the most confidence. In September, Ecopetrol started the operation of a mobile environmental laboratory for the Magdalena Medio region so that communities have a better knowledge of the environmental variables present in their surroundings and that will allow, once the pilot starts, to monitor their behavior. Abroad, Permian reached a gross production level for ecopetrol of 24,400 barrels of oil equivalent per day in the third quarter, evidencing the ramp up of unconventional with a cumulative EBITDA margin of 83%. Let's move on to the next slide, please. The transported volume of refined products increased 63,000 barrels per day compared to the third quarter of 2020 thanks to the recovery of local demand, mainly the Galán-Sebastopol Trench, by supplying the large consumption areas of the country. On the other hand, the volume of crude oil transported decreased by 30,000 barrels per day compared to the same quarter of last year as a result of lower production driven by the previously mentioned causes. In order to secure the evacuation of the Caño Limón field, 11 reversal cycles of the Bicentenario pipeline were carried out. Finally, I want to mention that the conciliation agreement between Frontera, Senate and Bicentenario was approved by the Administrative Tribunal of Cundinamarca to solve the existing disputes regarding the transportation of crude oil in Colombia. As a result of the conciliation, Frontera will recognize to Senate and Bicentenario the outstanding obligations under their agreements as of December 31, 2019. Frontera will transfer to Senate its 43.03% interest in Bicentenario and will transfer to Bicentenario the pending dividends, the funds deposited in a trust as guaranteed for one of the disputes, the advance payments from prior years, and the Bicentenario pipeline line field that they have. As part of the agreement, Frontera will recognize to Bicentenario a portion of Bicentenario's syndicate loan in the amount of $438 billion. Additionally, Senate and Bicentenario signed new ship-for-pay agreements with Frontera, allowing them to receive additional revenues for the payment of obligations included in the conciliation for a value of up to $92 million, subject to adjustment as per the value of the line field. Likewise, ODL, a Senate subsidiary, obtain the execution with Frontera of a new ship-for-pay agreement, which shall allow OTL to receive additional income up to $55.5 million. The financial impacts of the transaction correspond to the total recovery of outstanding debt as of December 31, 2019, for a value of $729 billion. The one-time impact on EBITDA will be approximately $700 billion, which will be reflected in the figures for the fourth quarter of this year. Additionally, financial revenues for approximately 41 billion pesos will be received due to the effect of default interest and returns on trust funds. Let's move on to the next slide, please. We achieved an accumulated EBITDA record result as of September of 2.35 trillion pesos thanks to selling of inventories and benefit from market prices at Barranca Bermeja Refinery, essential commercial strategies, and an inverse cost increase in natural gas sales, which contribute to mitigate impacts derived from operational challenges and keeping the cash cost of the segment under control. Additionally, we are pleased to inform that we achieved the delivery of gasoline at 50 parts per million contemplated by regulation for January 2022. The integrated gross margin of the refineries remain at pre-pandemic levels, despite having a more expensive diet because the recovery of brand price, a challenging scenario for the realization of valuable products, especially in the Cartagena refinery due to the discount on export diesel, and the scheduled maintenance of the petrochemical train and the alkylation unit at the Barranca Bermeja refinery. The consolidated throughput in September was above 365,000 barrels per day, exceeding the throughput restrictions on the refineries affected by public order events at Caño Limón Coveñas oil pipeline, an electrical contingency presented in August, and corrective maintenance planned in the catalytic tracking unit at Cartagena's refinery. These events had an EBITDA impact of 121 billion pesos. A shutdown plan is being implemented with the purpose of improving the reliability of the refineries, which will take the operational availability from 92.5% in 2019 to 94.2% in 2021 and up to international reference levels above the 96% in 2024. Other scheduled maintenance for the flare in Plants 1 and 2 in Essentia will be occurring. Let's move on to the next slide, please. At the end of third quarter, we have delivered efficiencies close to 1.8 trillion pesos, highlighting a reduction of the dilution factor, energy efficiency, and savings obtained with the renewable energies. The total unit cost accrued to September increased $10.3 per barrel as compared to the same period in 2020, mainly due to higher purchase and import costs associated with higher brand prices. On the other hand, the cumulative lifting cost to September increased $0.87 per barrel as compared to the same period in 2020, reaching $8 per barrel. Such anticipated increase is due to greater numbers of well interventions, the execution of process safety and integrity work included in the plan, as well as increasing the cost of oil services due to industry inflation. By the end of the year, we expect to have a lifting cost in the order of $8.5 per barrel. The cost per barrel transported showed a slight decrease as compared to the same period in 2020, reaching $2.9 per barrel, thanks to the control of variable costs given the lower volumes transported. The refining cash costs accumulated to September showed a downward trend as compared to previous years, correlated to gas composition and its supply chain. I will open the floor to Jaime Caballero, who will talk to you about the main financial results of the Ecopetrol Group.