CORPORATE GROUP FINANCIAL AND OPERATIONAL RESULTS August 2016 2Q 2016
Cautionary Statement This document was prepared by Ecopetrol S.A. with the purpose of providing the market and interested parties certain financial and other information of the Company. This document may include strategy discussions and forward-looking statements regarding the probable development of Ecopetrol’s Business. Said projections and statements include references to estimates or expectations of the company regarding its future and operational results. Potential investors and the market in general should be aware that the information provided herein does not constitute any guarantee of its performance, risks or uncertainties that may occur or materialize. Real results, may fluctuate and differ from those provided herein due to several factors outside of the control of the Company. Neither Ecopetrol nor its advisors, officers, employees, directors or agents, make any representation nor shall assume any responsibility in the event actual performance of the Company differs from what is provided herein. Moreover, Ecopetrol, its advisors officers, employees, directors or agents shall not have any obligation whatsoever to update, correct amend or adjust this presentation based on the information attained or events occurred after its disclosure. This presentation is for discussion purposes only and is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by Ecopetrol. Neither this presentation nor any of its contents may be used for any other purposes without the prior written consent of Ecopetrol. 2
Juan Carlos Echeverry MANAGEMENT CEO PARTICIPANTS Felipe Bayón María Fernanda Suárez CFO COO Hector Manosalva Max Torres VP of Development and VP of Exploration Production Juan Pablo Ospina Thomas Rueda CEO VP of Commerce and Cenit Marketing Adolfo Tomas Hernández Rafael Guzmán VP of Refining and Industrial Technical VP Processes Carlos Alberto Vargas Lina María Contreras Chief Transformation Officer Head of Corporate Finance and Investor Relations (A)
We proved the ability to reinvent ourselves in a challenging environment International Environment Local Environment Brent Price 80 “El Niño” Weather (USD/BL) phenomenon 2015 2016 70 60 Closure of the border Average 2015: 53.7 between Colombia 50 and Venezuela 40 Attacks to Average 1H2016: 41.2 30 transportation Min 27.9 infrastructure 20-Jan-2016 20 ene mar may jul sep nov Jan Mar May Jul Sep Nov Source: Bloomberg 4
We reinvented ourselves to be sustainable and competitive New Leadership Transformation Plan • Management team renewal • Structural savings (e .g. Dilution) • New organizational structure • Operational efficiency • Value over volume • Enhanced Recovery • Renewal of exploratory model Financial Strength Projects • Financial Discipline • Project management standardization • No dividend payment • Secure our projects value • Divestments • New Engineering and Projects Vice- • Funding diversification presidency Procurement Relations with Environment • New procurement model • New relationship model • Contractors staff reduction • Emphasis on environmental sustainability Structural changes that support positive results 5
In 2Q 2016 we obtained strong results Positive Financial Higher efficiency and Operational Results Results lower costs Net Income Additional savings in Reversion of Rubiales and 1H 2016 of COP$0.8 Tn Cusiana fields 2Q 2016 COP$787 Bn Reficar: Successful startup 1H 2016 COL$ 1,150 Bn process Divestments of COP$725 Bn 6
We gained structural operational efficiencies through our transformation plan Efficiency targets in Opex , Capex and Revenues COP$ Tn COP Billions +114% 4.5 3.9 3.5 3.1 2.8 2.4 2.2 1.0 2015 2016 2017 2018 2019 2020 Metas de ahorro iniciales Initial saving targets Real 2015 & Real a Jun 2016 2015 real & 1H 2016 real Transformation Plan - Cost Evolution (P&L) Transformation Plan - Cost Savings (P&L) 9.1 Energy Energía 7.1 Generals Generales 6.1 COP Trillion Materials Materiales BCOP Carrotanques Trucks 2.0 2.8 3.0 Mantenimiento Maintenance Tn COP Tn COP Tn COP 2015 1H 2016 PY 2016 Asociadas Associated Structural Non Structural Contratos Contracts 2014 2015 PY 2016 7
We do things differently, obtaining efficiencies in our operational key metrics UPSTREAM MIDSTREAM Opex Opex Transportation Costo de Mantenimiento maintenance cost Costo Tratamiento Fluido (COP/boe) Fluid treatment cost (COP/boe) -12% -11% -9% -3% Transporte (COP/bl) (COP/bl) Energy cost (COP/KWhr) Costo de Energía (COP/kWhr) -19% -20% -10% 0% Crude oil dilution cost (COP/bl) Costo de Dilución de Crudo (COP/bl) -9% -8% DOWNSTREAM Opex Costo de Transporte (COP/bl) -9% -3% Transportation cost (COP/bl) Costo Mantenimiento de Refining maintenance -13% -38% -30% -20% -10% 0% Refinación (COP/bl) cost (COP/bl) Capex -60% -40% -20% 0% Costo de Perforación (USD/PP) Drilling cost -9% -20% (COP/per foot drilled) ECOPETROL S.A. Contracted Services -40% -30% -20% -10% 0% Costo Gestión Contratos Contract management -57% -23% (COP/boe) cost (COP/boe) -100% -75% -50% -25% 0% 2015 vs 2014 1H 2016 vs 2015 8 Normalize efficiencies to crude oil prices, diluent prices and exchange rate (USD/COP)
Dilution Costs in heavy and extra heavy crude as structural reduction example Optimization Emphasis Dilution Optimization Strategies Dilution factor decrease (% diluent / Normalized heavy crude volume) Viscosity : 200 cSt 300 cSt 405 cSt 600 cSt 1.8 Codilution Ahorro Diluyente Diluent Savings 20.0% KBD MBD 18.5% 12.1 Increase of cSt 16.8% 5.7 2014 2015 Jun-2016 - Years 2014 2015 2016 Dilution total savings Decrease of 210 trucks per 509 903 day and 608,000 Km/year 177 177 COP Bn 332 726 394 Take advantage of the increase in capacity of Pozos- 2015 2016 Acumulado Accumulate Galán pipeline Real efficiency Dec of 2016 Forecast 9
Production New landmark as world-class operators +500 mboed Main fields drilling reactivation Rubiales field reversion in 2016 Additional production ECP as of July: +53 mboed Castilla: 35 wells Active wells: 527 Rubiales: 35 wells Recovery factor: 9.4%* La Cira Infantas: 24 wells 10 * As of June 30, 2016
Production Improvement in our processes generates consistent results Drilling Days Lifting Cost 36 34 USD/bl -42% -44% 26 26 8 21 19 7 -18% 2016 record: 2016 record: 6 18 days 12 days 5 4 Castilla Chichimene 7.4 2014 2015 2016 3 6.1 5.4 4.8 2 Wells Interventions Average Cost (USD/ interventions) 1 0 -31% 2015 1Q 2016* 2Q 2016* LTM** 2015 1T 2016 2T 2016 U12M 1H 2014 1H 2015 1H 2016 I Sem 2014 I Sem 2015 I Sem 2016 1 * Q1 and Q2 lifting cost has low seasonality ** LTM: Last twelve months, July 2015 to June 2016 11
Exploration Pursuing high-value and quality prospects OFFSHORE COLOMBIA ECOPETROL AMERICA 4Q: BEGINNING DRILLING OF • 2Q: APPRAISAL WELL North “PURPLE ANGEL - 1” WELL ‘LEON 2’ UNDER America EVALUATION • 3Q: DRILLING GoM “ WARRIOR” WELL PURPLE ANGEL-1 (OPERATOR: ANADARKO) NISCOTA- PAYERO-1 Brazil ECOPETROL BRASIL CARDON 2Q: PROCESSING 854 ONSHORE COLOMBIA Km2 OF 3D SEISMIC (2Q) POT-M-567 BLOCK • DRILLING “PAYERO - 1” WELL • BEGINNING OF THE CARDON SEISMIC PROGRAM WITH A TARGET OF 228 Km 2D SEISMIC REASSESSMENT OF MATURE FIELDS INTEGRATING EXPLORATION AND PRODUCTION TEAMS 12
Transportation Cash flow generation remains through this segment Transported Volumes Net Income *(kbod) COP$Bn 1400 Refined 1000 Refinados 24% -8.4% Products 900 1200 Crudo Crude 250 800 264 1000 258 700 600 800 500 903 600 400 779 979 952 630 869 300 400 200 200 100 0 0 2Q 2015 1Q 2016 2Q 2016 2Q 2015 1Q 2016 2Q 2016 2T 2015 1T 2016 2T 2016 2T 2015 1T 2016 2T 2016 Higher income versus 2Q 2015 despite a lower transported volume leveraged by: • Optimization in costs and expenses • Foreign exchange rate 13 *Transported volumes correspond to the ECP group and third parties: Percentages were calculated with complete numbers
Refining Completion of Reficar's start up Start up Stabilization Optimal Operation Jul/2016 2H 2016 2017 The start up of the 34 units of the modernization project was completed in July Begin of the stabilization stage and performance tests: o Design capacities test o Performance and operational limit verification o Economic benefit maximization 14
Refining Persistent efforts on segment ´ s efficiency Gross Refining Margin in Cash Operating Cost B/meja (USD$/Bl) ($USD/Bl)* -5% -21% 4.6 4.3 17.2 3.5 14.1 13.5 2T 2015 2Q 2015 1Q 2016 2Q 2016 1T 2016 2T 2016 2Q 2015 1Q 2016 2Q 2016 2T 2015 1T 2016 2T 2016 Lower price differential between the international products and crude oil vs. 2Q 2015 When compared with 1Q 2016, refining margin is impacted by the lower price differential between the fuel oil and crude oil *Figures correspond to ECP Group. Include the operation of B/meja refinery and Essentia (Propilco). Percentages computed without rounded figures 15
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