Alejandro Giraldo - Investor Relations Officer Javier Genaro Gutierrez Pemberthy - Chief Executive Officer and President Rafael Guzmán Ayala - Vice President of E&P's Technique & Development Thomas Rueda - Pedro Alfonso Rosales Navarro - Vice President of Downstream Hector Manosalva Rojas - Vice President of Development & Production and Member of Reserves Committee Adriana Marcela Echeverri Gutiérrez - Chief Strategy & Development Officer and Vice President of Strategy & Growth

Frank J. McGann - BofA Merrill Lynch, Research Division Bruno Montanari - Morgan Stanley, Research Division Gustavo Gattass - Banco BTG Pactual S.A., Research Division Caio M.

Carvalhal - JP Morgan Chase & Co, Research Division Anish Kapadia - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division Paula Kovarsky - Itaú Corretora de Valores S.A., Research Division Biraj Borkhataria - RBC Capital Markets, LLC, Research Division Pedro Medeiros - Citigroup Inc, Research Division

Good morning, everyone, and welcome to Ecopetrol's second quarter earnings conference call and webcast. Before we begin, it is important to mention that the comments by Ecopetrol's senior management could include projections on 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 develop. As a result, Ecopetrol assumes no responsibility in the event that future results are different from the projections on the conference call.

The call will be led by Mr. Javier Gutierrez, CEO of Ecopetrol.

Also participating will be Hector Manosalva, Vice President of Development and Production; Pedro Rosales, Vice President of Downstream; Adriana Echeverri, Vice President of Growth and Strategy; Magda Manosalva, CFO; Rafael Guzman, E&P Technical and Development Vice President; Humberto Fuenzalida, Interim Vice President of Exploration; Alberto Vargas, Financial Controller; and Thomas Rueda, interim CEO of Cenit. We will begin the presentation with the milestones of the second quarter of 2014, followed by the highlights by business segments, the financial results and the new structure of Ecopetrol.

We will close with the outlook for the third quarter of 2014. I will now turn the call to Mr.

Gutierrez, CEO of Ecopetrol

Thanks, Alejandro. Good morning to all the participants in today's conference call.

In the second quarter of 2014, the positive trend of international prices helped offset the impact that the difficult environmental conditions had on production, mainly due to disruption of operations in the Caño Limón, Coveñas and Transandino pipelines and repeated communities blockage of production fields. In exploration, we move forward in strengthening our international operations with the discovery of the well in the Deepwater U.S.

Gulf of Mexico operated by Shell, and the acquisition of a 10% participation from Statoil in the blocks 38/11 and 39/11 located offshore Angola. Currently, the well, Dilolo-1, is being drilled in block 39/11.

Introduction, we highlight the beginning of the water injection pilots in Chichimene and Casabe fields, and the agreement reached with Occidental to implement steam injection pilot in the Teca-Cocorná field. Also we highlight the 7% annual increase in production of affiliated and subsidiary companies during the quarter.

Regarding this stream, we completed the basic engineering for the 35,000 barrels expansion of Pozos Colorados–Galán line, which is required to transport important diluent to the central part of the country. In refining, at the end of the first half of the year, we reported 92.3% progress in the expansion and modernization of Cartagena refinery and 84.2% in the Utilities Master Plan at Barrancabermeja refinery.

Regarding financials, it is worth highlighting that $2 billion international bond offering with a 31 year term favorable yield, as well as the unchanged rating of BBB with stable outlook from Standard & Poor's. With respect to the management model, 2 very important changes were implemented starting July 1.

The new organizational structure, with the creation of the Chief Operating Officer and the regionalization model. Please move to the next slide to review our capital expenditures.

CapEx in the first half of 2014 amounted to $3.5 billion comprising investments in both the parent company and affiliates prorated by Ecopetrol's stake. Out of the total invested, 48% was allocated to production, mainly for drilling in Orinoquia region and for constructing facilities at Castilla, Chichimene and Rubiales fields.

16% (sic) [ 17% ] has been allocated to exploration, mainly for acquisition of information by means of seismic programs and drilling of exploratory strat test and appraisal wells. 9% to meet strength.

25% has been allocated to refining, for the modernization of Cartagena refinery and the Utilities Master Plan at Barrancabermeja refinery. The remaining 1% to IT and Research & Development projects.

Now I turn the presentation to Rafael Guzmán, who will comment on the main results of exploration and production.

Thank you. During the first half of 2014, 11 A3 wildcat exploratory wells were drilled in Colombia.

9 of these wells were drilled by Ecopetrol S.A. The well 1A drilled in the Caño Sur block proved the presence of hydrocarbons.

The well, Casabe K, drilled in the middle Magdalena basin is still under evaluation and the remaining 7 wells were dry. Additionally, Hocol drilled 2 wells during the first quarter of the year, which were unsuccessful.

Internationally it's important to highlight that Ecopetrol America Inc. completed the drilling of 2 wildcat during the second quarter.

The well did mention -- proved the presence of hydrocarbons, but it was declared noncommercial. The well, Rydberg, was under evaluation at the end of the quarter.

And it was later confirmed as a success. Similarly, as part of our strategy of diversifying and strengthening our portfolio of international exploration, Ecopetrol reached an agreement with Statoil to acquire a 10% in 2 offshore blocks, 38/11 and 39/11 in the Kwanza basin in Angola.

The agreement includes the participation in the well, Dilolo-1, in block 39/11, which started drilling in June. These agreements are subject to the approval of Sonangol E&P, the Ministry of Petroleum of Angola and the remaining partners in each block.

Now regarding production in the first half of 2014, the corporate group reached 750,000 barrels of oil equivalent per day, which represents a decrease of 4.4% compared to 785,000 barrels of oil equivalent per day of the first half of 2013. The main reasons explaining this situation are attacks on transport infrastructure, community’s blockade, operational issues and pipeline maintenance.

It is worth mentioning that during the first half, our subsidiaries obtained a production increase of 6% with respect to the same period last year, mainly through Hocol and Savia. Finally, we continue with the implementation of our strategy to increase the recovery factor in our field, an important milestone while the agreement reached during the second quarter with Occidental Andina to develop a vapor injection project in the Teca-Cocorná field.

Likewise, we started the water flooding pilot for secondary recovery at the Chichimene field. Our growth path continues focusing on the developments of our fields, especially in the area of Llanos.

Regarding Castilla, we plan to have 20 rigs by the end of the year, working to complete our 400 new wells by 2016. We are also constructing the facilities required to handle 4.4 million barrels of water per day, and to produce 200,000 barrels of oil per day in this field by the end of 2015.

In Chichimene, our drilling campaign plans to reach close to 200 new development wells by 2015. And we are building facilities to treat 360,000 barrels of water per day to achieve a production of 100,000 barrels of oil per day by the third quarter of 2015.

Finally, regarding our recent discoveries at Akacias and Caño Sur, we are currently conducting the activities required to increase the production to 50,000 barrels of oil equivalent per day plus -- and 25,000 barrels of oil per day, respectively, by the end of 2015. Likewise, we maintained our execution plans for the secondary and tertiary recovery non-thermal projects, with our goal to implement 13 pilots during 2014.

We expect the main contribution in terms of production and reserved from this project to be by the end of 2016 to 2019. As we previously mentioned, during this second quarter, we started the water flooding pilot at Chichimene, and we plan to start 6 pilots in Tisquirama, Casabe, Brisas, Tello, Apiay and Suria during the next quarter.

As it can be seen in the images, the pilots that have already started are advancing according to plan, where we hope to be able to determine the viability [indiscernible] towards a stage of implementation in the whole field. In terms of thermal recovery, our air injection pilot in Quifa is currently in its exposed evaluation phase as agreed by the boards of Ecopetrol and Pacific Rubiales.

We continue with our air injection pilot in Chichimene, in which we expect to begin the injection process by the end of this year. On the other hand, in 2014, we plan to complete the conceptual and basic engineering of the vapor injection pilot in Caño Sur.

Finally, as we recently announced, we have reached an important agreement with Occidental Andina to develop a vapor injection project at the Teca-Cocorná field. The initial phase includes a pilot.

With success it will allow the development of a project to increase the production from 1,500 barrels of oil per day to more than 50,000 barrels of oil per day, and improving the recovery factor in this field above 60%. In total, we are planning to invest over $1,300,000,000.

Now I hand over to Thomas Rueda, who will comment on the midstream results.

Thank you. During the second quarter of 2014, the transported volumes decreased by 2.4% versus the same period of 2013, reaching 1,156,000 barrels per day.

Crude oil pipeline transportation decreased by 3.8% compared to the second quarter of 2013, mainly due to the impact of the attacks against the infrastructure in the Caño Limón–Coveñas systems and the U'wa indigenous community blockade that prevented the Caño Limón–Coveñas to be repaired on time. Out of the total volumes transported, approximately 74.6% belonged to Ecopetrol.

Transport of refined products increased by 3.4% versus the second quarter of 2013, mainly due to the increase in the naphtha volumes transported in the Pozos Colorados–Galán system. Out of the total volumes transported, approximately 48.1% belonged to Ecopetrol.

Regarding our projects under execution, during the second quarter of 2014 we completed basic engineering for the Pozos Colorados-Galán project, which will allow us to increase its capacity from 95,000 to 130,000 barrels per day. With this, I hand over to Pedro Rosales, who will comment on the downstream results.

Thanks, Thomas. During the second quarter of 2014, the throughput of Barrancabermeja refinery increased by 11,000 barrels per day compared with the same period of 2013, due to operational stability of the process units and higher availability of crudes for the refinery.

The gross margin of these refinery was $10.09 per barrel, $0.02 per barrel less than the second quarter of 2013, as the result of the decreasing gasoline use due to the processing of heavier crudes. Furthermore, at the end of the second quarter, the expansion and modernization of Cartagena refinery reached 92.3% progress, where construction has advanced of 84.8%.

The units of the refinery remain turned off order to facilitate the completion of the project in safe operating condition. Only the utilities and the logistics systems for the imports and delivery to clients are in operation.

In terms of volumes sold, total sales decreased 70,000 barrels per day, 7.3% less than the second quarter of 2013. The reasons for these reduction were related to lower availability of crude cost by lower production in 36,000 barrels per day and fewer purchases in 17,000 barrels per day, as well as an increase in inventories of 3.1 million barrels due to transportation restrictions.

These effects were partially offset by higher sales of refined products and natural gas. It is important to mention the increase in our domestic sales by 40,000 barrels per day due to higher demand of fuels, mainly gasoline and natural gas.

Meanwhile, the price of our basket of crude and products rose $4.06 per barrel due to stronger prices in the international markets. Now I turn the presentation to Alejandro Giraldo, who will comment on the financial results for the period.

Thank you, Pedro. Please go to the next slide.

Our revenues were reduced due to a lower availability of crude oil to be exported, drilling with a drop in production between the second quarter of 2014 and the same period of last year. This fall was partially offset by a higher average sales price, $3.03 per barrel more than the second quarter of 2013, and by a positive effect of the devaluation on the Colombian Peso over the dollar-denominated revenues in the second quarter of 2014.

Variable costs rose compared with the second quarter of 2013, mainly due to; first, a higher purchase average price of crude oil and products of $10.5 per barrel more, following the benchmark prices, along with a relative high cost due to the devaluation of the exchange rate in the second quarter of 2014. And second, larger transportation costs due to the beginning of operation of the Bicentenario pipeline in November of last year and the services for the dilution of heavy crude oil provided by Oleoducto de los Llanos since July of last year.

Those increases were partially offset by a lower variation of inventories due to the decreased sales in the second quarter of 2014. On the other hand, fixed costs remained almost flat, with a minor growth in maintenance and labor costs and contracted services.

Operating expenses rose slightly, mainly because of greater exploratory expenses, customs and dock services, compensated by lower provisions. Non-operating results declined mainly owing to higher expenses in dry wells from Ecopetrol America and lower income from assets divested, offset by improved results in other affiliates and the impact of the accumulated revaluation of year 2014 over the net liability position of Ecopetrol.

Please go to the next slide. Although costs were relatively stable, lower revenues led to a reduction in the income before taxes and consequently a minor income tax provision.

As a final result, net income and EBITDA were lower in the second quarter of 2014 compared with the second quarter of 2013, but EBITDA margin remains competitive compared to other oil and gas companies. Now I'll turn the presentation to Mr.

Gutierrez, who will comment on the new structure of Ecopetrol.

Thanks, Alejandro. Our organizational structure was adjusted in order to improve the integration of the business chain.

To meet this goal, a Chief Operating Officer was appointed and to whom the Vice President of Exploration, Development and Production, Transportation and Downstream report directly. The new area will streamline decision-making with a view through processes, leveraging higher synergies and seeking assurance of operating results.

Camilo Marulanda was appointed as Chief Operating Officer. He is the former CEO of Cenit, and previously held the positions in Ecopetrol of Vice President of Growth and Strategy and Vice President of Sales and Marketing.

The corporate support and compliance areas will continue to report to the Chief Executive Officer. As mentioned previously, it is also important to highlight the regional model under which the operation was grouped into 4 major regions.

First, Caribbean coasts and Pacific coasts; Second, Central; third, Orinoquia; and fourth Southern. Each will have its own Regional Vice Presidency, which will help provide greater autonomy in decision-making and a more agile response capability.

Now go to the next slide to view the outlook for the third quarter of 2014. Regarding exploration in Colombia, Ecopetrol will drill 3 exploratory, plus 3 appraisal wells and the spud of the offshore well Orca operated by Petrobras, while subsidiaries will drill 3 exploratory wells.

Abroad, 3 exploratory wells will be drilled in the U.S. Gulf of Mexico.

On production, we will have larger water treatment in the storage capacity in Chichimene and new treatment capacity in Akacías fields. We will continue making progress in water flooding, combined water and gas and chemical and has oil recovery pilots in various fields.

Also, we expect to have additional production of around 4,000 barrels per day in Caño Sur with the change in the environmental license. In midstream, we will ensure the oil supply to the Barrancabermeja refinery with the beginning of a 60,000 barrels of expansion in Vasconia-Galan pipeline that we believe it's total capacity in 220,000 barrels.

Regarding refining, we will continue with the modernization of Cartagena refinery, and have a maintenance in the cracking and petrochemical units of Barrancabermeja refinery. We will keep strengthening the regional management model with higher accountability at local levels.

As a closing remark, I want to emphasize that despite the difficult operational environment, we are moving forward our strategic projects and remain optimistic about the future of the company. Now I'll open the session to questions from our participants.

Thank you so much.

Just if you could follow-up a little bit more in terms of your expectations for production in the third and fourth quarter. Obviously, the second quarter was affected by the problems on -- with pipelines and some community issues.

What are you seeing so far in the third quarter, and do you think you can see a rise in production as you go through the next several quarters and go into 2015?

Okay. Hector Manosalva is taking the answer about the expectation for production for the next quarters.

Please, Hector.

Of course, during the first semester, we had production affected by terrorist attacks to the oil infrastructure, blockade by the community and some operational difficulties. We foresee that for the second semester these difficulties have been overcome and we -- this will allowed us to incorporate production according to the targets of the 3Q, third Q and fourth Q from the development of projects in the Castilla and Chichimene fields, where we will incorporate our infrastructure to manage crude oil and water that will enable us to increase the production volumes of these 2 assets.

Likewise, for the second semester, we are expecting for the approval of water disposal for -- that has been expedited for the Rubiales Field and to likewise, this will enable us to increase the production of this asset. And the Caño Limón field has increased fortunately, and we expect that for the second semester, we hope to have a total production of the field almost 70,000 barrels and this will enable an important change in the production and transport in the second semester.

We have foreseen what we have seen for 2015 to consolidate the drilling campaign in the Castilla and Chichimene fields, where we will be drilling almost 600 wells in 2015 and we -- to increase the production of the Castilla field by December next year by 20,000 barrels and Chichimene fields to 100,000 barrels. In addition to the full [indiscernible] we have foreseen the development of the CP0-9 at Castilla field with the possibility of increasing production to 50,000 barrels.

Let's remember that today in the production testing of the Castilla field, we have our production close to 10,000 barrels. Likewise, for the next year, we have foreseen to have in production the Caño Sur East taken into consideration that -- in the current week, we have been approved -- the exploitation license has been approved.

The addition of these activities will enable us to consolidate the targets and to have important changes in the production for the rest of this year and next year.

First, a follow-up on the production question from Frank and then a question on cost. On the production front.

So -- if I understood it right, you're telling us that it's technically possible for Ecopetrol to increase production in the second half of the year by around 20%, so adding, say, 155,000 barrels per day in order to reach the target for the year? And then also reach the 1 million barrel per day targets for 2015, is that correct?

And then on the costs side, we have seen costs gradually moving higher, particularly on the upstream division, so I was wondering if you could give as an update on the cost reduction efforts you were implementing in order to try and recover some of the margins?

Hector Manosalva will tell -- answer to the first question.

Bruno, thanks. It is important to mention that the potential of the Castilla and Chichimene fields, as well as the Rubiales, is present in these assets.

That is backed by incorporating reserves that we have been developing by as of December 31 of the previous year. And from these -- it is fair to mention that we have had some difficulties in executing production projects during the first semester, but for this second semester, with the availabilities and treatment capabilities for crude oil and water.

In addition to the drilling campaigns, we are going to increase the production of these assets during the 2 first quarters next year and clearly, we don't have any difficulties in the transportation infrastructure and social difficulties as well. We have the path and should be able to reach 200,000 barrels and 100,000 barrels.

And this is the potential representative reserves and projects under execution. We have the whole technical path in order to reach these development plans, and reach of these volumes previously mentioned.

Adriana Echeverri will refer to the cost [indiscernible].

Thank you, Bruno. As for our strategy for cost reduction, we have different initiatives for cost reductions that started back in 2009.

From 2009 to 2012, the savings that we made in the leasing cost, of wells in different initiatives that were addressed to the upstream sector, gave us a saving of $109 million. From year 2012 and starting January 1, 2013 until year 2020, we are trying to address the most difficult point for us, which are the streams that we are obtaining in different fields, those are water, as well as the energy that we require, not only for production but only for the treatment of those fluids, and also for the ideal weight for crude oil, since we are producing much more heavy crude oil in the Llanos area.

So our efforts are now concentrated in those high cost impact points or items. The most important ones are supposed to be saving around $5 per barrel up to year 2020 in a very progressive way.

In terms of diluent that we are trying to use different strategies such as, for example, the study for new treatment in the refinery, so that the diluent is more efficient in terms of what we use internally, but also in the strategies for imports of those diluents. And on the other hand, in terms of the strategies for the fluids and -- this is the treatment of water and all that, we are supposed to have some strategies for optimization of around $2.03 per barrel in a progressive way also until year 2020.

The most important strategies on those matters are the reinjection of those fluids or waters, so that the maximization of crude oil production in the fields is better, and in terms of the projects that we are now implementing for agri-industrial use of those waters that are produced. There is also another product for infrastructure that will permit the modernization of current fields, so that we have an improvement in technology that will guarantee some efficiency in the process of water, but also in less production of water.

This last is still in study. However, all in all, the optimization of costs since year 2009 until year 2013, closing December 31st is more than $3.3 billion in terms of savings.

That's the effectiveness of the cost optimization program and also what we are thinking in terms of the new strategies for savings in the future.

I had a couple of questions here. Let me just start with the one that I think is probably a little bit more complex.

It looks like you guys are going to have a tougher year for 2014, but the things are looking quite positive and quite appealing for 2015 onwards. I was wondering if you could talk a little bit about just how you're seeing dividends over this period.

Is there a possibility that we might see a slightly more aggressive dividend policy on 2014 given that 2015 is looking so much better? That's the key question.

And I don't know if this is a quick one to answer or not, but I just wanted to check if the Chichimene water handling project is already reflected in the proven reserves or not? Or if that's an upside in the event that it works well?

In relation with the dividends policy, you know that it's a decision of the Board of Directors to present a proposal to the general assembly. And up to now, we can't express any opinion in relation with this topic.

In relation with Chichimene, Hector Manosalva commented about the impact in terms of the reserves.

Okay. It is important to mention that [indiscernible] of the Chichimene field currently includes reserves in field -- reserves, that is just closed spacing in the reservoir.

The water injection pilot that we implemented in that field is an upside. It is a very important upside to incorporate additional reserves, given the original oil that the Chichimene field has.

So the injection pilot is an important upside for the field.

I have 2 questions. So 1 very specific and another one a little bit broader.

Part of them has already been answered by my colleagues, one more specific, when we look at the third quarter, I know you're mentioning in the release that the number of attacks in the first and the second quarter was about roughly 30 attacks on the pipeline per quarter, so I'd like to know if you could share with us, maybe, you're not going to be willing to share the specific number in the third quarter, but if this trend had increased or decreased quarter-to-date? And also if a bit positive indication that you're also mentioning in the press release about the June production compared to the second quarter average has been confirmed with the July production, so these are the more specific questions.

The more broader question, also referring to production, when I look to the evolution of Ecopetrol's share on the total Colombian production, we see significant decline. 2011 and '12, Ecopetrol has accounted for 67% of the total Colombian production.

It went down to 65% in 2013 and in the first half of 2014, we are looking to 62%, it's a significant decline. So my question would be, the increase related to the problems with the pipeline seems the most affected company is clearly Ecopetrol.

So probably Ecopetrol is being more affected than the other companies in Columbia? Or do we see a new trend and actually we see that maybe we are looking to a new reality on Ecopetrol's share, something close to 62%, 63% rather than 67%?

And what are the company's initiatives to sort of revert the situation? Those are my questions.

Caio, Thomas Rueda will tell the answer to the first question about the attacks to the pipelines and maybe to Caño Limón. Please, Thomas.

In terms of the trend, I guess, the first thing I need to say is it's difficult to assess in terms of how it's going to be behaving. Obviously, we're doing everything that we can on a daily basis, working with the high authorities, with the army, the communities, with everyone that has anything to do with where we transport in order to mitigate the attacks on our infrastructure.

There's many things that I would like to share, but many details that we're working on increasing troops, increasing the fights we're doing over the infrastructure, et cetera, but that's of uttermost importance. I can't tell you about trends, it's difficult to say.

But in terms of the second quarter or the first half of this year versus the first half of last year, we're looking at a decrease this year in 2014, obviously, needless to say, we've had a big impact on the Caño Limón-Coveñas system, given that it was very difficult to repair the system. It took 2 months given the impact or the influence we had from the indigenous communities, the U'was.

That's been sorted out. But we're looking at a downward trend.

We're working on everything possible to fix what's going on. We're installing equipment, we're working with the government and we're doing everything for this trend to decrease in the future and to affect production even less.

Lastly, to say, we're working how to work in this environment and we're working around operational flexibility in order to reduce the impact that these attacks have on the transportation.

Thank you, Thomas, Hector Manosalva will refer to the June's production. Yes, please, Hector.

Certainly in June we saw a change in the production trend. If we take into consideration that we grew 5% versus the production reported in May, in June, we had the highest production during the last 4 months.

It is likewise important to mention that Ecopetrol has production close to the 50% of the activity developed with each field, and all the effect against -- or attacks against the infrastructure that we have in this association contracts affect directly Ecopetrol, whether it is not the operator. The level of this disruption is high.

Likewise, it is important to mention that although Ecopetrol's stake has been decreased versus the national, it is because we are exposed to the associated operation, but it is fair to mention as well that the production of the other companies that had a content with the A and H has also increased. What we have foreseen for the next quarters is a change in the production trend.

Obviously, based on the fact that the risk of attacks against the infrastructure is an important risk in consolidating these results. However, our plans and programs are focused on having growth rate, increasing rates higher, and clearly, for the next 2 quarters, and next year for reaching the target that we have as a company.

Firstly, with the new refinery and the Cartagena refinery upgrade coming onstream, could you give some more timing information in terms of when do you expect the ramp-up to be complete, and also from a margin and EBITDA perspective, what incremental refining margin or EBITDA uplift would you expect from the refinery based on the current condition? And then the second question was just on, again, the Castilla Chichimene ramp-up.

You've missed your target so far over the last year in terms of ramping up those fields, I think there's been some kind of logistical issues with the water handling, what gives you confidence that you'll be able to get the water handling in place on time and what other risks are there in terms of logistical issues that can make you miss your targets?

Pedro Rosales will take the answer to the Cartagena refinery progress and margin.

Anish, about Cartagena. The project, as was mentioned, had an advance of 92% at the end of June with 85% more or less in construction progress.

In July, we closed nearly 88%. It's important to mention that the advance during the second quarter related to the mechanical completion, we finished 9 units of 31 total units that meet the mechanical completion, then we accomplished 29% of the mechanical completion of the whole plans of the refinery.

The plan is to continue receiving the remaining units progressively until late this year or early 2015. Additionally, upon completion of the mechanical construction of units, it is estimated that the process of commission in our startup takes about 6 months, 6 additional months.

Then we expect to have at the middle of the next year or the second part of the next year or the beginning of that halt, the startup completed for the whole refinery. After that, we estimate that vertical will add $16 per barrel in gross margin per year.

That would be accomplished at the beginning of the project guided startup.

Hector, your comments about the question, relation with Castilla, Chichimene, please.

In effect, for the second semester this year, and specifically third Q of the year, we'll have 3 and 4 in the Castilla field will startup and this will help us to increase water treatment up to 500 barrels per day. [indiscernible] 7, will start in second Q of 2015, and then we're going to have additional water treatment of 2,000,400 barrels per day.

And at the end of 2015, we should have water treatment of 4 million barrels. With these projects -- the startup of the these projects doesn't mean that we're going to have an availability of water treatment, but these waters that are being treated, how will they be disposed of?

the Castilla field currently has a discharge license for 250,000 barrels per day. We also have a water injection license approved for 1,300,000 barrels and in addition, we are expecting to receive a water management license, third parties, of 1,000,500 barrels, and that would offer us necessary permits to manage the water that is required in order to increase the production of these fields to 200,000 barrels Castilla, December next year and 100,000 barrels Chichimene, also December next year.

This is Paula Kovarsky here. I just wanted to -- your help to get a better understanding of the process of eventually implementing STAR in the Quifa field.

So you've been through the pilots, there’s a next post analysis of the results, but what would be the next milestones? What kind of licenses are required?

Is there a need to change the contract between Ecopetrol and Pacific Rubiales to any extent? I mean, do you have to have any addition to that contract?

Is this an issue? So how exactly does Ecopetrol expect this start -- project development to continue in the case of Quifa?

Both companies informed recently, basically, right now -- it was officially informed, basically, with all -- with the stop of the pilot, through the process of another great process for that. And right now, we are developing the post study, and we can't say anything additionally until we complete the correspondent study.

This is all the information that we have in relation to the STAR and right now we don't have any additional ideas we can spread in relation with that. That is the information that both companies revealed in the past week.

Yes. Perhaps, I would like to ask the question in a different way.

Let's assume the 2 companies are okay with the results and want to move ahead, what are the next milestones then? What has to be done, what kind of license, what kind of addition to the contracts?

Just in a hypothetical scenario.

No, we must expect.

Just a quick one for me. For the Rubiales and Quifa fields, what levels of production do you see in your production target for 2014 and 2015?

Hector, answer the question.

In the Rubiales field, we have a production forecast for 2014 of 200,000 barrels per day. Currently, production is close to 190,000 barrels, because we're waiting for approval of the water use license for equivalent to 1 million barrels.

And once we receive approval of this license, then we could meet our targets of 200,000 barrels day at the end of the year. The Quifa field has a target production of 600,000 barrels a day, and we're working jointly with Pacific Rubiales, the operator of this field, to consolidate and maintain this target at end of the year.

This is actually Pedro Medeiros from Citigroup. I have a quick question on the recent acquisition in Angola.

From a strategic point of view, you might elaborate the evolution of your international expansion strategy. Ecopetrol is working its entrance to Angola, now targeting pre-salt structure that is after a significant acquisition of exploratory blocks to be operated by Ecopetrol in the Gulf of Mexico.

What can we expect in terms of that strategy in the next 12 months or in 2 years timeframe? Should we wait for new acquisitions or not?

And lastly, do you mind to comment on the impact on your budget from a success case and from the current case towards the Angolan acquisition?

Pedro, may you repeat the last part of your question in relation with the budget?

Yes. Sure, Javier.

If you can estimate the change on your budget on your CapEx plan related to the acquisition on Angola, so for drilling plus the price you paid to acquire the assets, and if you have a significant impact in case there's a successful drilling out of this prospect?

Please, Hector.

In regards the Angola strategy, I'm going to describe the strategy and why we're there. The international investment strategy of Ecopetrol is based on an analysis that we have been carrying out in high potential basins.

In those basins where we still have yet to find material. Now the study that Ecopetrol has been carrying out, the Kwanza basins, is part of the analysis that we have been developing in the past few years.

Now considering that to this basin has the potential and with the complementary analysis from the legal and risk standpoints, we made the decision to do farm-in. It's not really an acquisition, it's a farm-in, in blocks 38 and 39.

And that we -- that there is in Angola and that are currently operated by Statoil. And so we closed a deal with Statoil that allowed us to buy 10% stake in these 2 blocks.

And so this is a strategy that obeys to an exploration test in high potential basins located offshore and that is part of the international investment strategy of Ecopetrol. Likewise, and by using the very same strategy, we have been strengthening our position in the Gulf, where we have milestones [ph], for example, milestones [ph] objectives because these are also high potential basins.

And following this exploration strategy, we have been consolidating the exploration and investment plan in the U.S.A. with results that were -- has been showing reserves, important reserves for Ecopetrol, while developing this international strategy.

Now as to CapEx, we just closed a deal where we agreed a carry in regard drilling of the first Dilolo well -- Dilolo-1 well that is currently being drilled. And in addition, we also signed an agreement for an amount -- a transaction amount that, given the confidentiality agreement with Statoil, we cannot disclose, but maybe it's important to remember that the participation is 10%.

10%, yes.

Okay. Thank you so much, Hector and Javier.

Well, thank you, all, for your participation. For any additional questions, you can contact us at the Investor Relations and have a good afternoon.

Goodbye.