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 fourth quarter and full year of 2021. All lines have been muted. There will be a question and answer 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 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, 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 fourth quarter and full year 2021 conference call. This presentation is framed in the context of a new corporate strategy, energy that transforms. Committed to our culture of principle, live first, I want to begin highlighting that in 2021, we had zero fatalities in our operations and achieved the lowest ever total recordable injury frequency rate, fifth in the company's history. In 2021, we generated revenues of 91.7 trillion pesos, a record EBITDA of 42 trillion pesos, as well as the highest net income in the history of our company of 16.7 trillion pesos. Even excluding the contribution of Interconexión Eléctrica S.A. during the last four months of the year, Ecopetrol's results are still the highest in our history. These remarkable results were levered by the recovery of crude oil prices and magnified by our ability to adapt and respond to the challenges in the environment. The tenacity, efforts, and commitment to keep safe operations of all the employees of the Ecopetrol Group, who make the impossible possible, allow us to achieve a solid and resilient operational performance across all of our business segments, while outstanding commercial strategy materialized into better crude and product spreads. Let's move on to the next slide, please. The financial results for 2021 exceeded the targets we set for the year, creating value to all the shareholders. We highlight the solid operating cash flow generation, which funded our organic investment plan for the year, and the progress in the development of our strategic assets. On the operational front, we're able to guarantee domestic fuel supply, even with an increase of more than 25% in demand when compared to pre-pandemic levels. Also, we ensure domestic gas supplies, overcoming the supply crisis, climate-related infrastructure impacts and the public order situation that affected Colombia during the second quarter of year 2021. Our financial results, in particular the EBITDA margin, the ROCHI, and the annual growth of net income, posted an outstanding performance as compared to our peers in industry. It demonstrates once again the advantages of being a diversified energy group capable of combining the benefits of the integrated hydrocarbon businesses with those of the energy transmission and infrastructure segments. Let's move on to the next slide. These historic results are aligned with and propel our long-term strategy, Energy That Transforms, which is based on four pillars, aims at consolidating the group as an agile, dynamic, resilient, and flexible organization capable of rapidly adapting to constant changes. During 2021, we made important progress in our strategic agenda with the accomplishment of several milestones, some of which I want to highlight. We grew with the energy transition, resuming the positive growth path in our core businesses and diversifying those with the acquisition of ESA. We generated value through TESG, technology, environmental, social, and governance, setting ambitious decarbonization targets by 2030 and 2050, with significant progress in water management and contributing to economic reactivation through social investments in more than 287 projects. In terms of cutting edge knowledge, we advance in our digital transformation with a strategic portfolio that adds value through innovation in different processes. In 2021, we captured benefits for some $93 million in our digital agenda. Finally, In the pillar of competitive returns, we achieved a ROG that widely exceeded our cost of capital. Let's go to the next slide. ESA's integration to the Ecopetrol Group is now a reality. Its results, potential for growth and synergies, have proven its value to our shareholders. In 2021, ESA reported solid operational results and continued its inorganic growth plan. The most important milestone of the year was the awarding to build and operate the Quimal-Loaguirre transmission line, a project that comprises more than 1,400 kilometers and one of the most important electric power transmission projects in the continent. This will be the first direct current line in Chile that will connect the renewable projects in the north to the center and south of the country, leveraging the decarbonization of its energy mix. I would also like to highlight the acquisition of the 100% stake in the Brazilian Power Transmission Company, PBTE, and the approval of the first large-scale energy storage project in the Brazilian transmission system, which is expected to begin operations in November of the current year. During the last six months, we have made progress in the integration of ESA to the Ecopetrol Group. By year-end, we are fulfilled with all the milestones set for the financial consolidation of ESA and for the contractual obligations established in the inter-administrative agreement that supported the transaction between Ecopetrol and the Colombian government. In addition to aligning the strategic KPIs between both companies, we established working groups to identify, prioritize, evaluate and develop potential synergies in the following areas. new ventures in energy transition, ESAS entry into the U.S. market, savings in procurement, optimization of Ecopetrol's electric power infrastructure, linear infrastructure through Senate, science, technology, and innovation, environmental, social, and environmental management, information technologies, and cybersecurity. ESA's potential for growth is very relevant, and Ecopetrol will contribute to identify and materialize inorganic alternatives as part of its $36 billion capex pipeline already identified until year 2030. I will now open the floor to Alberto Consuegra, who will tell us about the main operational achievements of the year.

Thank you, Felipe. In 2021, we drilled 13 exploratory wells, exceeding the initial plan by four. Eleven were in Colombia, one in the United States, and one in Mexico. By the end of the year, three wells were declared successful. Lydia YW-12, located in Piedemonte, which as of December 31st, had a cumulative production of 29,725 barrels of oil. Oranda Zoo 2 declared commercial and Flamenco 3 about to start its extensive tests. In January 2022, the HACOL subsidiary announced the discovery of the Ibamaca 1 exploratory well with 17 degrees API oil. This finding is close to the existing infrastructure in the Tolima block, which will allow the entry to production from extensive tests in the first half of the year. As a result of the 2021 round of the National Hydrocarbons Agency, Ecopetrol obtained three technical evaluation areas in the Middle Magdalena Valley and one exploration and production block in the Llanos Orientales region. In addition, HOKOL obtained an exploration and production block in the Sinusa and Jacinto Basins. The cumulative production of the exploratory assets in initial tests, extensive tests, and wells in post-commerciality reached about 1.5 million barrels of oil equivalent at the end of the year, with an average flow of 4,364 barrels per day, out of which 65% of the production corresponded to crude oil and 35% to gas. According to the 2022-2024 investment plan previously announced to the market, this year we expect to carry out a program that includes 22 onshore wells and two offshore wells with an investment of approximately $391 million. With the drilling of the Gorgon II well, we hope to define the development of this discovery and enable other exploratory opportunities identified in the area. Let's move on to the next slide, please. 2021, as we pointed out, was a challenging year in terms of production, given a combination of factors that negatively affected us, including operational restrictions in the Castilla field, Public orders were stressed during the second quarter of the year, the rainy season in Colombia and the hurricane season in the Gulf of Mexico. In line with the recovery expectations and due to the growing contribution of assets such as Permian, the production for the fourth quarter increased by 11,000 barrels equivalent per day as compared to the third quarter. With this production, we closed the year at 679,000 barrels equivalent per day. We highlight the extraordinary result in terms of reserves incorporation, which registered an addition of 462 million barrels as compared to 2020, out of which more than 60% correspond to the company's performance, and the remaining 40% is the product of a favorable price scenario, closing with a replacement rate ratio of 200%. For 2022, we expect primary crude oil production to remain predominant, but we will preserve efforts towards secondary recovery expansion with water injection, mainly for heavy crude oil assets and tertiary recovery pilots. Unconventionals will continue to increase their contribution to production, and we expect this participation to be 5% out of the company's total production for this year, thanks to the activities in the Permian. We highlight its reserves contribution as well, which alongside the Co-Petrol America accounts for 11%. During 2022, we will focus on overcoming the challenges that may arise due to the logistics and international supply difficulties and the public order situations. On the other hand, the average production of gas and LPG stood at 150,000 barrels of oil equivalent per day in 2021, which represents a growth of 7% from 2020 driven by the recovery of demand. We expect a similar growth for this year in domestic demand. Gas and LPG business delivered solid financial results with a combined EBITDA generation close to $807 million and a margin of 53%, representing an increase close to 21% compared to the previous year. The gas supply to the Colombian market was strengthened with an additional potential of around 84 gigabit use per day, equivalent to 9% of the national demand in 2021. We highlight the exploratory success of the Lydia YW-12 well and the appraisal and development wells in the North Caribbean by Hochul. The work covers in Chuchupa and Gibraltar, self-consumption optimizations, and new offer from Campo Floreña. Aligned with our TESG pillar, in 2021, Ecopetrol promoted the reduction of LPG prices by 30% in benefit of final users and managed to connect more than 6,100 low-income households to domestic natural gas networks to improve their life quality, thus adding more than 10,000 connections since 2019. Let's move on to the next slide, please. Regarding unconventional reservoirs, on October 29, 2021, CALE's environmental impact study was filed, launching the process of evaluation and approval of the environmental license for the execution of the project. And on February 15 of this year, the same study was filed for the Platero pilot, complying with the milestones of the plan. An exhaustive fieldwork exercise was carried out independently for approximately nine months for the formulation of each of the environmental impact studies, including monitoring of more than 200 environmental parameters and the analysis of information by interdisciplinary teams of more than 150 people. The public environmental hearing regarding the CALEADS pilot took place despite the acts of vandalism that sought to prevent its realization. The environmental hearing was held from a satellite point, giving the possibility to the community for more than seven hours to be heard virtually or through telephone calls. We remain committed to an open dialogue, addressing the concerns from groups of interest in the forums arranged for this purpose. Regarding our activities in the Permian Basin, 2021 concluded with 82 new wells in production for a total of 104 online wells. an average of 19,300 barrels of oil equivalent per day were produced, and for 2022, an increase is expected, reaching levels between 32,000 and 34,000 barrels of oil equivalent per day net for ecopetrol prior to royalties. The construction of the water recycling facility was concluded with the capacity to treat 65,000 barrels per day and a storage capacity of 3 million barrels, allowing the joint venture to recycle and use around 7.7 million barrels in completion operations. During the fourth quarter of the year, this plant allowed Permian to reuse 100% of the water at South Curtis Ranch. Continuing with the strengthening of our strategy with cutting-edge knowledge, we increased to 25 the number of Ecopetrol employees assigned as secondees in the association's operations. Similarly, I would like to highlight a few operational milestones achieved by the Permian during 2021, such as optimizations in spot-to-rig release, improvements in average drilling time, and a record pumping time exceeding in some of these parameters our peers' performances. Let's move on to the next slide, please. During 2021, the transported volume of refined products increased by 20% as compared to the previous year, thanks to the recovery of local demand, mainly in the Galán-Sebastopol corridor. The transported volume of crude oil in 2021 decreased 7% because of a lower production mainly in the Llanos areas. The fourth quarter presented a similar level to the previous year, highlighting higher volumes evacuated in the southern corridor. Eight reversal cycles of the Bicentenario pipeline were carried out during the quarter to ensure the evacuation of the Caño Limón field after the pipeline's damage caused by third parties and by floods emergencies. After the repair work, the pipeline resumed operations on November 29th. Along with the reception of the Nari Association fields from Manzanova in November, Senate implemented a successful action plan to achieve the evacuation of such fields, guaranteeing the safety of the processes and the integrity of the equipment at the Basconia Station, with another value from the dilution system, which we used to guarantee mixtures from NAFTA at the quarries dispatchable to the Barranca Bermeja Refinery and Obliducto de Colombia to Cobeñas. Additionally, the transported volume in the Vasconia system through Barranca Bermeja Refinery increased 10,000 barrels of oil per day. The co-dilution projects in Apiai and Cusiana enabled the use of LPG as a diluent for crude oil. This service allowed the use of a cheaper diluent with a higher dilution power and lower logistic costs. On December 7th, the delivery of fuels at the API filler came into operation, relieving the flow of heavy load on the road to the Llano by around 600 tank trucks per month and enabling an alternative supply option to ensure reliability in the supply to the Meta Department and to reduce CO2 emissions. During November and December, CENIT, Oleoducto de los Llanos, and Oleoducto Bicentenario received the carbon neutrality certification granted by the Colombian Institute of Technical Standards, becoming the first companies in the Colombian oil and gas sector to receive this certification. Our target for 2022 is for all the companies of the segment to achieve this certification. Let's move on to the next slide, please. Downstream's operational integrity prevailed, achieving exceptional financial results. In the same way, the segment ensured the supply of fuels at a local level, satisfactorily addressing the reactivation of the productive sector and reassuring the country's energy security. The segment achieved an annual record EBITDA of 3.5 trillion pesos and the highest annual EBITDA margin since 2016, reaching 6.9%, leveraged by financial discipline and cost control. During the fourth quarter of 2021, the segment achieved the highest integrated gross margin of refineries in the last three years, standing at $12.5 per barrel. In Barranquilla-Bermeja, we highlight the satisfactory execution of the shutdown plan at the petrochemical train and the crude and alkylation units of the refinery. At Cartagena's refinery, we expect the start of the first shutdown cycle since the beginning of its operations, which will continue during 2022 altogether with the entrance in production of the interconnection project of the original crude unit of the Cartagena Refinery with the new refinery, planned for the second quarter of this year, along with its corresponding gradual incorporation of benefits. In Essentia, polypropylene production reached an annual all-time record of around 500,000 tons, thanks to the development of efficiency projects and its operation rate maximization, which started back in 2020. Let's move to the next slide, please. As of 2021, we achieved efficiencies for 2.9 trillion pesos, out of which 1.4 trillion offset the pressure on OPEX caused by inflation and the reactivation of operations. This is reflected in the total unit cost of $39.1 per barrel at the end of the year, which represents an increase of 6.5% as compared to 2020 in normalized terms and contrasts with a growth of 10.6% if efficiencies had not been implemented. The efficiency initiatives achieved in CAPEX for 833 billion pesos are aligned to the significant reduction achieved in drilling and completion costs. Although cumulative lifting cost of 2021 registers an increase when compared to the previous year, the strict cost control of the company allowed it to reduce the unit values of cost per barrel transported because of the lower consumption of materials and also the cost of refining due to the deployment of strategies identified as part of the zero-based budget methodology implemented by the end of 2020. I will open the floor to Jaime Caballero, who will walk you through the main financial results of the Ecopetrol Group.