Maria Catalina Escobar - Head, Corporate Finance & IR Felipe Pardo - President Maria Suárez - CFO Thomas Ehrhardt - Cenit's President Carlos Vargas - Vice President, Transformation Max Torres - VP of Exploration Luisa Lafaurie - CEO, Cenit Rafael Ayala - Former Technic VP Tomas Hernandez - VP, Refining & Industrial Processes

Felipe Santos - JPMorgan Chase & Co. Pavel Molchanov - Raymond James & Associates Andres Cardona - Citibank

Good morning, everyone, and welcome to Ecopetrol's earnings conference call and webcast in which we will discuss the main financial and operational results of Ecopetrol for the third quarter of 2017. Before we begin, it is important to mention that the comments in this call by Ecopetrol's senior management can 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 on this conference call.

The call will be led by Mr. Felipe Bayón, CEO of Ecopetrol.

Other participants include María Fernanda Suárez, Vice President of Strategy and Finance; Max Torres, Exploration Vice President; Héctor Manosalva, Vice President of Development and Production; Pedro Manrique, Commercialization and Marketing Vice President; Luisa Lafaurie, CEO of Cenit; Tomas Hernandez, Vice President of Refining and Processes; Rafael Guzmán, Technical Vice President; and Carlos Alberto Vargas, Vice President of Transformation. We will begin the presentation with the main achievements of the third quarter of 2017, followed by the highlights by business segments and financial results under international finance reporting standards.

We will close with the outlook for the remainder of 2017 and a Q&A session. I will now hand over the presentation to Ecopetrol's CEO, Felipe Bayón.

Thank you, Maria Catalina, and welcome, everyone, to our third quarter 2017 results conference call. We had a solid set of results, a reflection of the discipline we have applied in pursuing our corporate strategy.

We have surpassed the initial goals that we set for ourselves, and we have a financially stronger company, operating at high standards. The business group's commercial strategy continues to generate value.

This is reflected in our economic returns. Furthermore, the markets' demand for our crudes continues to grow, and this has allowed us to become more competitive in the region.

The export basket spread in the third quarter for 2017 was $6 per barrel, the best of the past 7 years, and a reduction of 50% compared to the same period 2 years earlier. Note the increasing Brent prices and the exchange rate have benefited us, yielding higher revenues.

We have achieved stable and profitable operations despite certain security problems, particularly in the Caño Limón Coveñas pipeline. Let's look at the next slide to review some of the quarterly highlights.

Year-to-date, Ecopetrol has reported operating and financial results considerably higher than in the same period of last year. This result reflects success and consistency in terms of improved operating and commercial approach, greater efficiency and cost reductions [Technical Difficulty].

Good morning, again, and thanks for your patience. We're very sorry for the inconvenience.

We've sorted out the technical difficulties that we've had, and for the benefit of everybody who was listening to the call, we're going to restart the remarks, so we can be sure that everybody gets the full content. Thank you.

Good morning, everyone, and welcome to Ecopetrol's earnings conference call and webcast in which we will discuss the main financial and operational results of Ecopetrol for the third quarter of 2017. Before we begin, it is important to mention that the comments in this call by Ecopetrol's senior management can 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 on this conference call.

The call will be led by Mr. Felipe Bayón, CEO of Ecopetrol.

Other participants include María Fernanda Suárez, Vice President of Strategy and Finance; Max Torres, Exploration Vice President; Héctor Manosalva, Vice President of Development and Production; Pedro Manrique, Commercialization and Marketing Vice President; Luisa Lafaurie, CEO of Cenit; Tomas Hernandez, Vice President of Refining and Processes; Rafael Guzmán, Technical Vice President; and Carlos Alberto Vargas, Vice President of Transformation. We will begin the presentation with the main achievements of the third quarter of 2017, followed by the highlights by business segments and financial results under international finance reporting standards.

We will close with the outlook for the remainder of 2017 and a Q&A session. I will now hand over the presentation to Ecopetrol's CEO, Felipe Bayón.

Thank you, Maria Catalina, and welcome, everyone, to our third quarter 2017 results conference call. We had a solid set of results, a reflection of the discipline we have applied in pursuing our corporate strategy.

We have surpassed the initial goals that we set for ourselves, and we have a financially stronger company, operating at high standards. The business group's commercial strategy continues to generate value.

This is reflected in our economic returns. Furthermore, the markets' demand for our crudes continues to build, and this has allowed us to become more competitive in the region.

The exports basket spread in the third quarter for 2017 was $6 per barrel, the best of the past 7 years, and a reduction of 50% compared to the same period 2 years earlier. Note the increase in Brent prices and the exchange rates have benefited us, yielding higher revenues.

We have achieved stable and profitable operations despite certain security problems, particularly in the Caño Limón Coveñas pipeline. Let's look at the next slide to review some of the quarterly highlights.

Year-to-date, Ecopetrol has reported operating and financial results considerably higher than in the same period of last year. This result reflects success and consistency in terms of improved operating and commercial approach, greater efficiency and cost reductions, focus on capital discipline and better crude prices.

We end up the quarter with a cash position of COP 12.8 trillion, demonstrating our financial strength and allowing us to continue accessing inorganic growth opportunities. We have succeeded in maintaining our EBITDA margins at 43%, one of the highest in the industry.

The risk rating agency, Moody's, has upgraded Ecopetrol's outlook to stable and maintained its investment-grade rating, acknowledging the company's successes and financial strength. The business group's year-to-date net profit amounts to COP 3.2 trillion, which represents twice the benefit for the full year 2016.

The Group's average production for the year has reached 715,000 barrels equivalent of oil per day, in line with 2017 production targets. The third quarter has been the best of the year for the new Cartagena Refinery, which has completed 100% of its individual unit test and achieved a 2-digit refining margin of $10.30 per barrel.

In the Midstream and Transportation segments, we exceeded operating milestones by transporting all of Colombia's domestic crude on the same corridor, thanks to the directionality of the Bicentenario pipeline and the capacity of the Ocensa system. Our purpose is to continue strengthening safety as one of our fundamental pillars in all of our operations.

Year-to-date, we have a total recordable injury frequency, or TRIF, of 0.61. This is 0.61 accidents per million man hours worked, an improvement of 38% compared to the same period in 2016.

With the aim of aligning our practices with the global standards, we obtained the OHSAS 18001 certification in occupational health and safety and the ISO 14001 certification in environmental management. This allows us to ratify high standards in health, safety and environment and expand our competitiveness in the market.

The certification will be received at the end of November. I will now pass the floor to Carlos Vargas who will comment about the results of our efficiency and transformation programs.

Thank you, Felipe. Ecopetrol's transformation program continues with the identification, development and execution of initiatives to obtain efficiencies.

These initiatives have allowed to incorporate in this third quarter of the year COP 795 billion and COP 1.41 trillion of related efficiencies this year. Efficiencies have been leveraged through revenue generation, improving margins and continued drilling dilution cut and CapEx optimization of drilling completions and facilities.

[indiscernible] generation focused on commercial strategies to improve the spread of our crude oil and the maturity of the most important projects of our investment portfolio. One aspect to highlight is the beginning of the initiatives of direct energy commercializations presently approved by our Board of Directors as well as the consolidation of the unique energy strategies for Ecopetrol group.

These strategies focused on energy efficiency, optimization of the energy cost and the reduce of sale of any existing energy [indiscernible] from the group operations. Finally, we established a CapEx efficiency goal of 10% this year.

Through that, we are focusing on 2 topics: improving our drilling and completion times and in the facilities cost. These strategies have allowed a reduction of 19% in well cost and 10% in facilities cost.

Now Max Torres is going to talk about exploration.

Thank you, Carlos. During the third quarter, the Colombia shore exploration campaign continued with the drilling of the well Brama-1 located in the Tayrona block.

This block is operated by Petrobras in partnership with Ecopetrol, 30%; Repsol, 20% and Statoil. The well is flagged as abandoned because it failed to prove up commercial quantities of hydrocarbons.

Drilling of the well Molusco-1 in the block RC-9 in the Colombian Caribbean offshore commenced. This will mark one of the most important milestones in the history of Ecopetrol, being the first well drilled as operated through the affiliate, Ecopetrol Costa Afuera, ECAS, and ONGC as partner.

The well is expected to finalize during the second half of the year. Internationally, in the Green Canyon area, Gulf of Mexico U.S., the well Warrior-2 confirmed presence of hydrocarbons.

And during the third quarter, was side tracked to confirm additional pay in the Miocene transports. Evaluation is ongoing, and assessment of the resource is associated with the Warrior-1 discovery.

The well operated by Anadarko with Ecopetrol as partner was flagged as abandoned. On September 26, the respected contracts for blocks area 6 and area 8 are signed in Mexico City.

These blocks were awarded to Ecopetrol last June on the lease sale for CNH Round 2 together with its partners, Pemex and Petronas, with the aim to explore and exploit hydrocarbons in shallow waters of offshore Mexico. This yet another milestone for Ecopetrol is in line with the strategy to strengthen and diversify the exploration and production activities in Colombia and abroad aims to - are increasing these hydrocarbon reserves.

As to the onshore Colombia activities, by the end of September, drilling of the well Trogon-1 block CPO-9 operated by Ecopetrol in partnership with Repsol commenced. [indiscernible] Ecopetrol in partnership with Parex has operated - reentered the well Coyote-1 in block De Mares.

Currently the well is testing and undergoing hydraulic fracturing. The drilling of the appraisal well Bullerengue Sur-3 finalized.

The well is located in block SSJN 1 operated by Lewis in partnership with Hocol. The well is temporarily suspended.

Equally, drilling of the well Bonifacio-1, finalized by the affiliate of Hocol in block Lla-65. The well is currently under evaluation.

Furthermore, drilling of the well Lunera-1 in the block VSM-9 commenced and is expected to finalize during the month of November. As for seismic activities, Hocol finalized its seismic campaigns in blocks SN-8 and SN-18.

A total of 518 kilometers 2D seismic was acquired. For the fourth quarter, finalization of the wells in progress is expected, among others, Molusco-1, and the commencement of 7 additional wells is planned.

The wells are: Infantas Oriente-1, Venganza-45H, Landero-1, Pollera-1, Lorito-1, Búfalo-1 and Godric Norte-1. In Brazil, a 3D seismic campaign is planned in the Foz de Amazonas Basin.

[indiscernible] Round 3 is currently being evaluated. In the U.S., Ecopetrol America is awaiting the outcome for the Lease Sale 249.

These activities are in line with the strategy to strengthen and diversify the exploration activities overseas, with the aim to position Ecopetrol as a Pan-American company. It is important to say that at the closure at September 2017, the exploration expenditure as compared to the same period of accounting in 2016 is at the same level of execution, however, with a higher rate of investment, demonstrating the efficient use of the resources applying toward exploration.

I will hand the floor to Rafael Guzman who's going to comment about the production activities.

Thank you, Max. The cumulative production up to the third quarter has been 715,000 barrels of oil equivalent per day, in line with this year's goal.

In the following slides, we will present how production has been maintained due to both new investments and operational well work expenses. The sustained reduction in drilling cost has allowed the continuation of the campaigns in Castilla and Rubiales, allowing the maintenance of production in this field as shown in the production figures for those fields.

The company has achieved a reduction in drilling times up to 46%, which translates in decreases of more than 50% of the cost per foot drilled when compared to 2014. This is illustrated also in the slide.

The reduction in cost per foot drilled from 2016 to 2017 has been close to 24%, despite the fact that we have recorded increases in services and drilling rig fees from 10% to 25%. This shows that the reductions are resilient to an increase in price like the ones that we have observed in the recent months.

Additionally, it is important to highlight the company's effort to maintain current production levels through a larger execution of well work by OpEx. This has allowed the mitigation of the decline rate of several of our fields without the need of new investment.

The example of this results are the productions obtained in Apiay, Casabe, Tibú and other fields. This additional execution has been possible, thanks to the structural efficiencies obtained in our operating expenses.

Part of these savings come from the reduction in the failure rate of the lifting systems in the wells. This failure rate is the frequency at which we have to present the replacement of the lifting system.

As shown in the current graph, and regardless of the lifting system used, the reductions generated in this index have been between 9% and 22% since 2015. This translates into accumulated savings of over COP 200 billion.

Regarding the recovery program, it continues its maturation towards an expansion phase for those pilots who have successfully completed their analysis stage. The objective is to increase the contribution to production to improve recovery which, today, represents 13% of the total production.

An example of the above is the case of one of our main fields, Chichimene which, this year, ends its pilot phase with the results in the high range of what was planned for the pilot allowing its expansion to start in 2018 and seeking to replicate the good results in all of the reservoir. We also continue with the detailed engineering, purchasing and contracting processes required for the execution of the expansion of the tertiary recovery project with cross-linked polymer technology in the Dina K field.

We expect to be drilling in this field towards the end of this year. Lastly, thanks to our results obtained by the company in this area, the International Energy Agency has added Ecopetrol as a member of the directing group for the recovery technology led by this agency.

This recognition gave us the opportunity to continue advancing in the application of recovery technologies through learning and experiences obtained from other countries. Now I pass the floor to Luisa Lafaurie who will comment on the results of the transport segment.

Thank you, Rafael. During the third quarter of 2017, we continued achieving positive financial results in each of the segments.

Our EBITDA remained in COP 6 billion despite a reduction on transported volumes of 5% as a consequence of continuing implementing our efficiency agenda across the segment. By the end of the third quarter of 2017, we have transported approximately 1,086,000 barrels, a 6.5 reduction when compared to the same period of 2016, driven by a lower oil production.

I would like to highlight that thanks to the 2-way operational scheme of Bicentenario, we continue to enable transportation of Caño Limón volumes through Ocensa, minimizing production's impact. Out of the total volume transported through our pipeline, 66% are owned by Ecopetrol.

On the other hand, total volume transported refined products have increased 2% when compared to 2016, mainly as a result of the eliminations of restrictions in our Pozos Colorados - Galán system as well as demand increase which offset lower dilutant volumes. Approximately 18% of refined products transported belonged to Ecopetrol.

Regarding our projects under execution, we continued transporting crude oil from Apiay to Coveñas with increased viscosity of 600 centistokes, and we continued the crude oil pumping from the operational stabilization from the San Fernando station. With these, I hand over to Thomas Hernandez who will comment on the downstream's result.

Thanks, Luisa. During the third quarter of 2017, the Cartagena refinery completed one of the most important milestones related to its operation and stabilization, all the individual unit performance test.

In the last quarter, we're going to initiate the global refinery performance test, which is the final step in the refinery stabilization process. During 2017, the Cartagena Refinery has started to increase its margin reaching, during the third quarter, a result of $10.3 per barrel average, representing a 34% increase compared to the previous quarter.

The throughput also has grown, reaching an average of 136,000 barrels per day in this quarter versus an average of 120,000 barrels per day in the same period of 2016. The Barrancabermeja refinery continues performing as a profitable and efficient refinery.

The refinery margin during the third quarter reached $14.60 per barrel, compared to $13.40 per barrel during the same period of 2016. This increase was based on operational stability of the refinery and the good performance of international margins between fuels and crude oil.

It is important to note that during 2017, the throughput and utilization factor of the Barrancabermeja refinery have been impacted by lower availability of light crudes in the processed crude slate. Now I turn the presentation over to María Fernanda Suárez who will comment on the financial results for the period.

Thank you, Thomas. Ecopetrol continues to demonstrate the benefits of being an integrated company.

Diversification is reflected in its continuous financial strength. Year-to-date, our revenues have increased 16% versus the same period in 2016.

Year-to-date, the export crude basket was strengthened by 36%, equivalent to $12 per barrel, going from $33.60 per barrel in 2016 to $45.60 per barrel in 2017. This increase is explained by 2 reasons.

First, an increase of around $9.30 per barrel in the Brent side; and secondly and even more significant, a better differential over our basket of crudes improving $2.70 per barrel in this period. The sales team's ability to respond to an end customer and take advantage of market opportunities has had a positive effect on the prices of our crude basket versus Brent.

The export basket improved its spread, and international refining prices has had a positive impact on the Asian and Russian segments, as have higher efficiencies of refineries in the production of diesel and gasoline. For its part, the midstream continued to leverage the result of the group despite posting a slight decline in revenue compared to 2016 primarily due to the lower crude national volumes transported by oil pricing.

Let's now move on to the next slide to examine the business group's EBITDA performance. The business group increased its EBITDA by 28% over 2016, earning COP 17.3 trillion in 2017 this far.

Our financial and operational strength allowed us to achieve a stable EBITDA margin of 43% year-to-date. These results have positioned Ecopetrol as having one of the highest EBITDA margins among oil and gas company peers.

The highest contribution to EBITDA in 2017 comes from the upstream segment. This result is leveraged on $3 per barrel decline in the pricing spread of our crude export basket compared to the same period in 2016 as well as higher crude price.

In turn, costs were up as a result of the increasing maintenance and workover activities in several fields, supporting our production target for the year with a lower decline rate over our basic production curve. The EBITDA of the downstream segment remained stable compared to the previous year despite higher cost of raw materials, largely seen by the recovery of hydrocarbon prices.

I will also highlight the Cartagena Refinery's contribution to our EBITDA generation of around COP 60 billion due to its production of diesel and gasoline to supply the domestic market. The midstream segment remains critical to the business group's positive financial performance.

It represents 35% of the company's EBITDA with a margin of 77%. Now let's go to the next slide to examine the evolution of net profit.

Year-to-date net profit as of September 2017 dulled the results of 2016. We achieved the highest operating and net margins of the past 3 years, an indication of our operating efficiency.

Cost of sales, excluding depreciation, was up COP 1.8 trillion, largely due to better international oil prices, higher volumes of crude purchases and the increasing maintenance and workover activities. Operating expenses were down some COP 0.4 trillion due to a lower world tax and the resulting income of the sales of minor fields in 2016.

Depreciation was up COP 0.8 trillion, largely due to the start of operations of Ecopetrol America's Gunflint field in August 2016 and the incorporation of fewer reserve by the end of 2016. It is worth noting that this year's third quarter saw the incorporation of the total monthly reserves from offshore fields in the depreciation rate, reflecting a better ratio between the investment level and the useful life of assets.

The exchange rate spread had a negative change of COP 1 trillion. The exchange rate year-to-date is up around 2% and has resulted in an expense due to the exchange rate spread given the business group net asset position.

It is important to note that during the same period last year, the business group posted a gain on the exchange rate spread given the 8.6% appreciation and its net asset position in dollars, both with no impact on the company's cash. The change in the net dollar position from one period to the other was the result of the implementation of net investment hedge in June 2016.

Net financial income improved COP 0.5 trillion, largely due to a lower interest expense. The business group debt level fell 15% versus 2016, strengthening its capital structure.

The effective tax rate was 53%, with higher tax spending as a result of improved financial result. It is important to note that both operating expenses and the provision for income were impacted by our extraordinary COP 160 billion items as a result of the reconciliation of the adjustable expenses, with the Colombian national taxes and customs authority on the Hocol income tax return.

Net profit attributable to Ecopetrol shareholders for 2017 was COP 3.2 trillion, more than double for all of 2016. In the next slide, we will have a look at the group's cash flow.

Ecopetrol closed the third quarter with a solid liquidity position of COP 12.8 trillion, including cash and cash equivalents and short and long-term financial investments. Operating cash flow for the quarter was COP 4.7 trillion, a result of the group's efficient operating management and the recovery of hydrocarbon prices.

Capital investment during the quarter reached COP 1.4 trillion, driven by the resumption of activity in our main fields, the shift in growth investments for 2018 will not impact the production goal of 715,000 barrels of oil equivalent per day. Ecopetrol will deliver on its target as a result of a lower decline rate on the fields, explained by efficiency and operational excellence through maintenance activities.

It is also worth highlighting the efficiency reached in 2017 in terms of production and development cost for this segment. Cash flow from financing activities totaled COP 0.7 trillion, 93% for sponsor interest payments and 7% for amortizations.

October ended with the sale of the remaining shares of Empresa de Energía de Bogotá, closing now the financial divestment cycle which totaled COP 1.8 trillion between 2015 and 2017. The group's financial strength is reflected in the significant improvement of its debt metrics with gross debt to EBITDA at 2.1x at the close of the third quarter versus 3.1x at the third quarter of 2016.

This strength allows Ecopetrol to progress along the path of organic growth and capturing organic growth opportunities. I will now hand the floor over to our CEO for final conclusion.

Thank you, María Fernanda. We have achieved stable and safe operations on all of our segments.

This was possible due to the operational discipline and compliance with our HSE policies. For the end of this year 2017, we will focus, amongst several things, on the following: the performance test at the Cartagena Refinery; completing the drilling operations of 17 exploration wells which includes the drilling of the Molusco offshore well, a milestone in our operations, the first well operated directly by Ecopetrol; maintaining our production levels at 715,000 barrels of oil equivalent per day; sanctioning the expansion stage of the enhanced recovery pilots that have been so successful to date; and maintaining our high HSE operating standards.

Ecopetrol is a company focused on growth and development for the country, the care of its workers and the communities in which we operate, all of this whilst we seek shared prosperity and operational safety at all levels. Our commitment with the environment and adding value to our shareholders are fundamental pillars of our goals of delivering outstanding results to promote the company's sustainability.

I will now open the floor to questions and answers. Thank you very much.

Just a few questions. First, did you expect that your refining margins to sustain these levels going forward and all the plants are running at full, across the full capacity?

And the second one is, could you detail you beat your expectations for the next quarters in terms of the investments to increase the recovery of the production assets in Colombia? And what would be the blend to reach at the end of next year the recovery ratio?

Or can you guide us any [indiscernible] you can provide in this sense?

Felipe, many thanks for your question. And to everyone on the call, again, we apologize for the inconveniences that we had earlier during the call.

In terms of refining margins, and I'll ask Thomas to chime in and give us his view as well, but I think it's important to just acknowledge that the new Cartagena Refinery is now at double-digit margin, which is good. So, it's a combination of the feed that we're actually putting into the refinery and we have slowly shifted to a feed that it's more based on local crudes, Colombian crudes, and that has helped.

And obviously, having all the funds - all the plants running is very helpful in terms of seeing the margins. They will depend on the cracks that we've seen internationally as well.

So, we must not forget that. But we do think that, in particular, Cartagena, very well positioned in terms of its geography, the markets, Caribbean and the U.S., and lots of appetite for the low sulfur products that we have on that refinery.

So, we do envisage the margins to continue to improve. And I think the other part of the story, which is equally successful, is that Barrancabermeja has increased its margins as well, a little bit of south of 10% over the quarter.

But at 14.6%, we have a very, very stable operation. I'll ask, Tom, do you have anything that you want to add?

Thank you. Just to add a little bit, Felipe.

Thanks for the question. We see margins progressing in line with our international margins for coking refineries in the Gulf Coast, which are double-digit.

We see double-digit margins going forward. Our focus in Reficar has been continued focused on stabilization process which we're finalizing working on at this quarter, right, and efficiency, cost efficiency and also focus on the stability of the crudes that we get to the refinery, focusing more national crudes.

So, all that's going to have an impact on improved margins over time, but that's what we see. We see very much in line with international coking margins in the Gulf Coast.

In terms of your second question, expectation of 4Q increasing recovery rate of production. And I think Rafael was mentioning this during the presentation, but we have seen very, very good performance from the base production in our key assets.

So, we've managed to arrest and reduce the rate of decline that we see in those assets. And that's fundamental.

So, we've had, despite a lower level of CapEx this year, we've seen no impact to production. So those 715,000 barrels per day as a guidance remains.

And in addition to that, so we've seen very good performance from the base, we've done a lot more interventions in terms of OpEx as well, but we've basically stepped on the accelerator a bit and ensured that we have more activity in the fields. So, I think that's one thing.

So, guidance has not changed, but we do see that, as we go now into budget period and 2018, 2 things I want to mention: 80% to 90% of our CapEx will go into exploration and production, which is great; and we're sanctioning a lot of the pilots that help us with the enhanced recovery, secondary and tertiary recovery. I will hand over to Rafael in case he wants to add anything in terms of this recovery rate of production.

Just a little. Thanks for the question.

Perhaps what I would like to add is that for the fourth quarter, we will start investing on our first tertiary recovery project in Colombia, at the Dina K Field in the south of Colombia. This year, we have been investing, but modestly investing in Chichimene with water injection wells, but for next year, you will see much more investment in Chichimene water injection or polymer flops and all other injection projects, like in Castilla, Apiay, [indiscernible] and so on.

So, we are currently going from investing main primary recovery to investing mostly in secondary and tertiary recovery.

Just two quick questions here. From the lifting costs, the higher number, the [indiscernible] basis, can you provide [indiscernible] how much of that is [indiscernible]?

And if this $7.80 a barrel is sustainable going forward? And then can you already provided the guidance for prediction next year in orders to keep the trend and reach the 706,000 [indiscernible] for the year 2020?

That's it.

Yes, Julia, thanks, and I'll hand over to Rafael a bit for details. But in terms of lifting costs, there's several things that I'd like to highlight.

So, we've had an increase in maintenance, some of the maintenance operations in the field. These are minor maintenance.

So, we're ensuring that integrity of the equipment and the reliability and availability of the equipment is kept at its highest. And as I was saying earlier, we've managed to have a very, very good performance from the base of our main fields despite a lower investment in CapEx.

And part of that is because we've used some of the OpEx to do interventions. So, we've done optimizations in terms of levels of our pumps submergence over the different pumps in the fields.

So, this is looking at each and every well in the different fields in which we operate to ensure that we can optimize operational conditions that, at the end, result in increased production, and that's what we've seen from the base. How much of this is sustainable?

I think that we have demonstrated that for the transformation program, we can achieve large savings across the board, not only in terms of OpEx, but also in terms of CapEx. There is, though, potential risk that as some of the prices of crude go up, you may be seeing some of the inflation hitting the field.

But our view is that most of the cost, and let us remind ourselves that it's not only the lifting cost, it's the dilution cost that's also an important, and we've seen massive reductions in that space. A combination of those two makes us, one, very competitive.

We do think that a lot of these costs are going to be sustained through time, but I just want to be very straightforward. And we may see some of the impacts of oil field inflation at some stage in the near term.

Julia, can you help me with the second question, something around production? I just want to make sure that I captured it well.

Yes, actually, just if you already have a guidance for 2018 production? Is it going to stable at [indiscernible] barrels per day?

Or something higher in order to be closer to the long-term guidance of reaching 660,000 barrels in 2020.

Yes, so I think there's two things that it's important to put in context. One, if we go back to the business plan that we launched on September 30, 2016, we signaled that at $50 per barrel, we would see a production growing from 715,000 to 760,000 roughly.

If we see the prices higher at $70 per barrel, we would see an increase of production north of 800,000 barrels. So that guidance has not changed.

So that's still in play, the midterm view of being able to grow production. The other thing is that we have envisaged, and we're still in the process of formulating budgets and getting all the approvals in place, but we are envisaging a higher level of investment, especially in exploration and production combined.

80% or 90% of our CapEx will go to exploration and production. And from that point of view, just to give you a sense of what we're thinking, we drilled last year 100 development wells.

This year, we're at 500 development wells. We want to be north of 600 development wells next year.

So clearly, there's an increase of pace in terms of the investment, and we see that production will eventually be north of 715,000. We will, in due course, communicate this to the markets because we're still working on all the budget process and everything else.

You were highlighting the first-ever Ecopetrol-operated deepwater well at the Molusco prospect, but I wanted to ask, is there any activity that's been taking place as part of your deepwater JV with Anadarko? And if not, what is the plan for resuming that JV in 2018?

Thank you, Pavel. Thanks for the question.

So, two things. One, Molusco, as you rightly point out, the first-ever operated well, offshore well by Ecopetrol.

So, this is clearly a big milestone for us. We're still in operations, so that's ongoing, and we'll see where we end up.

But clearly, I think, a very good step in the direction of us enhancing our capability to become an offshore operator. It's starting with a well, exploration well, but we are confident that this is the right track in which we need to be.

The second thing in terms of Anadarko, and if we go back to the 2 very successful wells that we drilled earlier in the year, Purple Angel and Gorgon, that we announced earlier in the first part of the year, we've demonstrated that the concept of the play is a good concept. We are working right now with Anadarko, and this is part of your question, so what is the JV actually focusing itself in.

We're working with Anadarko to ensure that we have a joint view on the potential of the area, and you know that we have not disclosed any numbers in terms of potential, so we're doing a lot of technical work with Anadarko in that space. And in the meantime, we're actually doing a lot of work with them to define the appropriate development concept.

We've told publicly that we see this 7, 8 or 10 years down the road in terms of having the molecules reaching the market. So, a lot of good alignment with Anadarko.

We had a lot of activity this year. We're just taking a bit of a pause to ensure that we can assess all the information that we have and ensure that we can jointly depict the right track in terms of how do we move forward with the development.

Okay. And on the call, any significant discussion about unconventional activity and a new focus on areas like the middle Magdalena shale?

Is that still the plan to accelerate in 2018? Or have you been rethinking that?

Yes, so we've said before, and this has not changed, that there are 4 things that we are doing. So, there's four tracks that we are following.

The first one is exploration, and we've talked about that in-depth. The second one is increasing the recovery factors of the conventional plays and the conventional fields, and Rafael was talking about that when he talked about the pilots and such.

The third thing is unconventionals. And the fourth thing is M&A and acquiring reserves going forward.

In terms of the unconventionals, just to give you the context, we've - and these are Ecopetrol's numbers and views, we think that the middle mag has around 2 to 7 billion barrels of reserves, recoverable reserves. There's different numbers from different consultants and experts that this is our view, clearly, a view that has to be proven.

So, what we're actually suggesting we need to do is to start what we've described as a pilot. And it's a pilot that will be obtained, it's self-contained, it's limited.

It provides the ability to have something that's measured, where people that have apprehensions, I mean, probably all the right apprehensions and there's a lot of myths around unconventionals, that they can actually be part of a pilot, and this will allow us to do several things. First one is to create the environmental baseline in the area.

Second, to understand from a hydraulic point of view in terms of water and where the aquifers are and everything else and potential risks to aquifers. The third thing is, is there a risk of induced seismicity?

The fourth thing, to do a lot of work around communication and basically helping people understand through science and data and facts, some of the truths around unconventional development, and there's some good examples, both in the U.S. and Canada, for example, around that.

And the fourth thing is - or the last thing is, how do we ensure that the authorities in Colombia are up to speed and actually have developed the capability to ensure that we can look at this in a way that's constructive? At the end of the day, we do see unconventionals as a very important part of Colombia's future.

If we want to maintain energy sufficiency and energy security, we want to be able to load our refineries in 10 or 15 years with crude that we produce in country and not be exposed to the fluctuations and uncertainty of international prices. Clearly, unconventional provides a very, very good opportunity that can change not only the area, but could change the country overall.

I wanted to ask specifically about reserves and current perception of the state of reserves, and the fact that the reserve life has been falling, and also how you might grow those in the future. I know that you've been looking at opportunities outside of Colombia, so any guidance on long-term targets or strategies would be helpful.

Sarah, thank you. A very key fundamental question that we actually ask ourselves all the time.

And I want to acknowledge that probably reserves and reserves replacement and getting our R to P ratio to a different place, it's probably one of the biggest challenges that we have facing the company. Having said that, it's important to remember that reserves have a technical component and a commercial or economic component.

Over the last couple of years, we've had to move from our proved reserves books some volumes because of price. So what has happened?

There are several things. One, prices have gone up a bit, which is helpful.

Two, we've become more efficient in terms of our own operations, which means that we can enable and make feasible a lot of the volumes that were not economic before. So with this in mind and acknowledging that reserves is not something that you fix in 1 quarter, but you need some time, we see ourselves, and obviously the intention would be, to at least replace 100% of your reserves every year going forward.

But we have, I think, very good understanding of the opportunity set. We're also very conscious that improving our reserves lives will be a combination of exploration, ensuring that we can push those contingent resources into reserves and later production, increasing the recovery factors, and we've touched on that quite a bit.

For reference, if you think that Colombia has 50 billion barrels of oil in place and we produced 19%, with our current reserve level, we could go to 23%. We see ourselves going to 27%, 28%, combination of some of the things that I've mentioned before.

1% increase in recovery factor, and this is a proxy, it's probably 500 million barrels. Country produces 320 million barrels, Ecopetrol probably 250 million, 260 million.

So that's another area. So it's a combination of exploration; it's a combination of recovery factors.

It will eventually be also a combination of unconventionals, and it will be a combination of M&A. So everything is in play.

There's not one thing. We need to do everything, understanding that there will be some uncertainty, and also acknowledging that this will take some time.

But I think we have internally a good flight plan in terms of getting into a different place of our R to P.

A question which is, I guess, particularly on the M&A, maybe on the exploration as well. Do you have a vision, maybe more for the medium and long term, for what of those activities will be concentrated in Colombia and what will be outside of Colombia?

Yes, so thanks for the question. And I think that if you look - and I think Max was mentioning this during his remarks, we see ourselves and have defined ourselves as a Pan-American company.

So we will stay in continent, right. And this includes most of the attractive basins in country.

So we have some presence in the U.S, in the Gulf of Mexico, in the offshore. We're producing close to 12,000 barrels per day.

And in the future, we will be doing some other activity in that area. This year, we entered into 2 exploration contracts in Mexico, one with Pemex and one with Petronas.

So those will require some activity initially, some G&G and seismic and eventually getting to drilling some wells, so we will see some activity there. We were actually prequalified for a round 3 in Brazil, and we did a lot of technical work, we had some consortiums already formed and - but at the end, we did not participate.

So that's not off the table. We will continue to look at Brazil.

It's a country where we're interested. And you can imagine that there's a lot of countries knocking on our door, both in terms of wanting us to operate in some of those countries, wanting some of them to come and operate in Colombia, more importantly, seeing a potential of teaming up with us or partnering with us to ensure that we can cross-pollinate, and share lessons learned.

But I think the ultimately, we will continue to be mainly a company that operates in Colombia. We still think that there's potential.

We've done a lot of work this year in terms of understanding the different basins in country. We've had our exploration teams look at our production data, so there's a lot of near field opportunities that are coming up the pipeline.

And in terms of M&A, we're looking at both, just to round up, things in Colombia and things outside.

I have just one question. At the [indiscernible], you mentioned that Caño Sur and Castilla already moved to a first development stage.

What does it mean in terms of investment in facilities and production capacity at this first stage? And maybe a second one regarding the same issue is, does it mean this both projects which are heavy oil become feasible at around $60 per barrel?

And that's all.

Yes, these two fields, Caño Sur and Castilla, have been exploration successes of the past and now we're moving into development. The main reason they have become, first of all, are the efficiencies we have gained in CapEx both in terms of drilling and also facilities.

Caño Sur also is helped by the - is benefited by the synergies that you have when you operate the Rubiales Field, and again, for the Castilla, it also has synergies with the Chichimene Field that is right next door. So to round up, yes, we're pretty happy that we have started the development at Caño Sur and that we will start development of Castilla next year, both for efficiencies and synergies in the field.

We don't need a $60 barrel to make them economical. Barrels close to $50, which is our business plan, is okay for the development.

In terms of total development for these 2 fields, it's about COP 2 billion of investment for loan development of the field.

Well, thank you very much, and again, thanks to everyone who participated in today's call, and thanks for the questions. We're very pleased with the results of the year to date, of the quarter.

We think the company has demonstrated its ability to go through a massive transformation program and ensure that we can see the end of the light - the light at the end of the tunnel, especially in terms of long-term financial strength and our ability to grow sustainably going forward. As we close the year, we need to ensure that we finish our exploration program aggressive in terms of the budget and aggressive in terms of the number of wells.

And how do we actually flow that program into 2018? We need to finalize our maturity process for a lot of the investments that we're undertaking right now.

We discussed earlier the fact that we've invested less in CapEx this year. We have a robust plan for next year, and we'll be talking about that promptly in due course with the fact that 80% to 90% of the investment on the CapEx side will go into exploration and production.

Downstream, we have some very good news. Cartagena, actually, doing double-digit numbers in terms of its margins.

Barranca continuously improving, recently included by Salomon as one of the best refineries in Latin America. And all of the other segments, transportation, all the marketing side of business, working very, very well.

So I think we have - we're very well placed to close the year, demonstrating our ability to fulfill what we've committed to do and what we've shared with you on the market. We acknowledge that there are some things that we need to work, especially reserves replacement, and I think we've talked sufficiently about that and what are our views.

But especially, I mean, very, very encouraged by what we're seeing in terms of our results today. I want to take the opportunity to reinvite or invite you guys again to the session that we will have at the Cartagena Refinery on November 29, Investor Day.

I'm sure between now and then, you'll have the opportunity to further understand the numbers, assess some of the issues that we've discussed, bring more questions, and the management will be there to host you, and I'm sure we'll have a very, very productive day in, again, one of the pieces of the company in one area of operations that we're very proud of, which is the Cartagena Refinery. So with that, thanks again for participating in the call, and good day to everyone.