The allocation follows capital discipline criteria and maintains investment levels comparable to projected 2025 year-end figures. Approximately 70% of the total budget ($17.2 trillion COP) is designated for core hydrocarbons operations, including production, refining, and transportation. The remaining 30% ($7.1 trillion COP) is slated for energy transition initiatives, power transmission, and corporate investments.

The 2026 financial model is built on an estimated Brent crude price of $60 USD per barrel and an average annual exchange rate near COP 4,050:1 USD. Under these assumptions, the Ecopetrol Group projects an approximate EBITDA margin of 40%, in line with 2025 levels. Transfers to the Colombian government are estimated at approximately $28 trillion COP. To support these financial targets and maintain debt metrics, the group plans to implement a portfolio rotation program.

A profitability and efficiency program is expected to contribute approximately $5.7 trillion COP, impacting EBITDA, investments, and working capital. This program is structured to support performance in total refining costs and transported barrel costs, while sustaining lifting costs below $12 USD per barrel.

Approximately $1.7 trillion COP is allocated to the company’s “SosTECnibility” strategy, focusing on climate change, sustainable territories, materials and waste management, and occupational health.

Hydrocarbons and Midstream Operations

Investment in exploration and production totals $14 trillion COP, constituting the largest single allocation. This is split with 89% dedicated to crude oil and 11% to natural gas, focused on achieving organic production levels of 730–740 thousand barrels of oil equivalent per day (BOED). Production is anticipated to consist of 80% crude, 15% gas, and 5% white products, utilizing recovery technologies to optimize resources. The strategy involves increasing crude oil output in Colombia to offset natural gas field declines.

The Ecopetrol Group plans to drill between 380 and 430 development wells, with 95% located in Colombia and 5% in the US. The exploration program includes 8 to 10 exploratory wells in Colombia, primarily in offshore, Meta, and Putumayo areas. Gas investments are estimated at $1.5 trillion COP, mainly targeting the Llanos Foothills and offshore areas to develop Caribbean gas, contributing an estimated 105–110,000 BOED.

Transport investments total about $1.5 trillion COP, representing 6% of the budget. The funding is primarily for integrity and reliability projects managed by Cenit, Ocensa, Oleoducto de Colombia S.A.), and Oleoducto del Llano S.A. Transported volumes are targeted between 1,110,000 and 1,120,000 barrels per day.

Refining investments are set at close to $1.7 trillion COP (7% of the budget), targeting reliability, availability, and sustainability at the Barrancabermeja and Cartagena refineries, aiming to reduce product imports and improve fuel quality. Combined refinery throughput is forecast between 410,000 and 420,000 barrels per day.

Energy Transition and Transmission Segment Growth

Interconexión Eléctrica S.A. E.S.P. (ISA) (BVC: ISA), an Ecopetrol subsidiary, is allocated between $6.2 and $6.8 trillion COP in 2026, comprising roughly 26% of the group’s annual budget, with approximately 80% dedicated to its electric transmission business.

For the core energy transition efforts, approximately $0.9 trillion COP (3% of the plan) is earmarked for non-conventional renewable energy and energy efficiency projects. This investment seeks to add approximately 750 MW of clean energy generation capacity from projects in operation, construction, and development.

Renewable Energy Acquisition Moves Ecopetrol Closer to 900 MW Target

In a separate announcement, Ecopetrol confirmed the successful conclusion of negotiations on November 28, 2025, with Grenergy Renovables S.A. (BME: GRE), a Spanish renewable energy company. The negotiations concern the potential acquisition by Ecopetrol of seven solar photovoltaic project companies in Colombia, located across the departments of Córdoba (3), Cesar (2), Magdalena (1), and Sucre (1).

Each of the seven companies owns the assets, licenses, agreements, and permits for a solar project with an estimated renewable energy generation capacity of up to ~12.6 MWp. The completion of this acquisition is contingent upon certain conditions precedent and legal requirements.

Upon closing, the transaction would contribute to Ecopetrol’s decarbonization and energy transition goals by adding installed capacity toward its internal target of 900 MW of self-generated renewable energy. These projects are intended to support low-emission energy generation under competitive conditions for the Ecopetrol Group’s self-consumption, reducing the company’s reliance on bilateral energy contracts and mitigating exposure to spot market energy purchases.

Corporate Governance Changes

Ecopetrol also reported changes to its corporate leadership. During a meeting held on November 27, 2025, the board of directors elected Ángela María Robledo Gómez as Chairwoman and Álvaro Torres Macías as Vice Chairman of the Board. Both individuals were elected to the Ecopetrol Board of Directors in a slate that was “proposed by the government” (President Gustavo Petro’s administration).

Additionally, the company reported the resignation of Independent Director Guillermo García Realpe, citing personal reasons. His resignation is effective as of December 12, 2025. Ecopetrol acknowledged his service to the company during his tenure.

Ecopetrol operates as a key integrated energy firm on the American continent. In Colombia, it is responsible for more than 60% of hydrocarbon production and manages the majority of the nation’s transportation, logistics, and hydrocarbon refining systems. Through its 51.4% stake in ISA, the company holds positions in energy transmission across Brazil, Chile, Peru, and Bolivia, as well as road concessions in Chile, and participates in real-time systems management through XM and the Barranquilla – Cartagena coastal highway concession. Internationally, Ecopetrol has drilling and exploration operations in oilfields across the US (Permian basin and the Gulf of Mexico), Brazil, and Mexico.

Ratings Rationale

The downgrade of Ecopetrol’s BCA (a measure of the company’s intrinsic credit risk without support considerations) to b1 from ba3 and the ratings downgrade to Ba1 from Baa3 reflect a shift in the company’s financial policy as leverage has risen concurrently with the ongoing distributions of dividends and the coming implementation of an ambitious capital investment strategy spanning the next three years, which could erode the company’s liquidity position or lead to higher indebtedness. The downgrade also reflects the negative free cash flow posted in 2023 and Moody’s expectations that Ecopetrol will continue to register negative free cash flows by 2025.

Ecopetrol has been increasing debt levels in order to finance its expansion, including the acquisition of Interconexion Electrica S.A. E.S.P.’s (ISA, Baa2 stable). However, Moody’s acknowledges that capital investments have not resulted in a similar increase of the company’s EBITDA. Debt increased at a compound annual growth rate (CAGR) of 22% during the 2019-2023 period, while EBITDA has only grown at an 11% CAGR. Increasing debt has also led to a lower interest coverage of 8.3x in 2023 compared to the 12.6x of 2022. Given that Moody’s expects Ecopetrol to continue funding its ambitious capital spending plan through debt and due to the high interest rates environment, interest coverage will further decline to 7.3x, on average, for 2024 and 2025. Moody’s also recognizes that a number of Ecopetrol’s planned projects, particularly those involving natural gas, carry increased execution risk due to their location in deep-water offshore environments.

The downgrade also takes into account that Ecopetrol has been distributing a higher share of dividends compared to its current policy of 40-60% during the last 3 years, while increasing debt levels, demonstrating a more aggressive financial policy. The cash outflows have been partially compensated by the Government of Colombia’s (Baa2 stable) transfers to reimburse fuel subsidies. However, Moody’s recognizes that instead of reducing debt or strengthening the company’s liquidity position, available cash has been used for dividends.

Ecopetrol’s Ba1 ratings continue to reflect the company’s status as Colombia’s leading oil and gas producer, accounting for over 60% of the country’s production and close to 100% of the supply of oil products, as well its large power transmission business in Colombia and other countries in Latin America. Furthermore, Moody’s assumes high probability of support from the Government of Colombia and a moderate default dependence between the two entities; this assessment results in a three-notch uplift of Ecopetrol’s rating to Ba1 from its b1 BCA.

Ecopetrol’s liquidity position is adequate. During 2023, Ecopetrol registered a negative free cash flow position of $3.4 billion funded through a $3.8 billion increase of debt given its record capex investments. The company’s cash position as of December 2023 equaled $3.6 billion. Moody’s expects that in 2024 the company’s cash generation along with the Government of Colombia’s transfer to compensate fuel subsidies will be enough to cover mandatory cash obligations plus annual capital expenditures of about $6 billion, as per management’s guidance, and dividends. However, Moody’s expects that liquidity will be tight during the next two years per Moody’s expectation that capex will remain around $6 billion, and if dividend distributions continues to outpace the policy range.  The rating action takes into account that while the company took an extended time to refinance 2023 and 2024 maturities, it has already refinanced 2025’s. The next significant debt maturity is in 2026 when $2.8 billion will become due.

Moody’s expects Ecopetrol’s financial obligations will continue to be supported by access to global and Colombian capital markets, and government support. Ecopetrol’s Ba1 ratings also take into consideration the solid and relatively stable cash flow from its power transmission company, Interconexion Electrica S.A. E.S.P. (ISA) and its midstream subsidiary, Cenit SAS, which includes Oleoducto Central S.A.

The stable outlook on Ecopetrol’s ratings reflects Moody’s view that its credit profile will remain mostly unchanged over the next 12-18 months. The stable outlook also reflects the stable outlook on the Government of Colombia’s sovereign rating.

Factors that could lead to a ratings change

An upgrade on Ecopetrol’s Ba1 ratings is unlikely over the next 12-18 months because Moody’s expects the company’s credit metrics to remain relatively stable. However, if the company manages to strengthen its financial policies and simultaneously demonstrates ability to register recurrent positive free cash flow, reduce financial leverage while growing production and keeping proved reserve life at least stable, its ratings could be upgraded. Specifically, its rating could be upgraded if the company’s Leverage Full Cycle Ratio remains at 1.5 times, which would indicate stable finding and development costs, and retained cash flow/net debt would have to be over 40% on a sustained basis.

A ratings downgrade could occur if there is a deterioration in Ecopetrol’s operating performance, including a significant decline of its reserve life on a sustained basis, or increasing liquidity risk or debt leverage from the current levels; or if retained cash flow/net debt declines to around 20%. In addition, because Ecopetrol’s ratings benefit from implicit support from the Government of Colombia, a negative action on the government’s rating or a change in Moody’s assumptions about government support could lead to a negative action on Ecopetrol’s ratings.

Profile

Ecopetrol, 88.5% owned by the Government of Colombia, is the largest integrated oil and gas company in the country. The company has three business segments, namely hydrocarbons, low-emission solutions and transmission and toll roads. Its gross production averaged close to 730 mboed and total assets amounted $65 billion on December 31, 2023.

ISA, headquartered in Medellin, Colombia, is an operating holding company with businesses in the electricity transmission, toll roads, telecommunications, and systems management sectors. The company holds direct and indirect ownership stakes in a portfolio of subsidiaries located in Colombia, Brazil, Peru, and Chile.

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Congress Highlights:

• 200+ decision making executives participate in the Colombia Oil & Gas which is an strategic platform for the leaders of the hydrocarbons industry. Bringing together delegations from national and international companies, as well as government officials, regulatory bodies, academia, project owners, technology and services providers, and international and local investors
• 15+ oil and gas production and exploration investment projects under planning, construction, expansion and modernization with a development term of 2022-2026 in Colombia
• 40+ industry leaders and experts will present and discuss the main topics impacting the industry development in Colombia and Latin America
• Strategic opening session: Recovery of the Hydrocarbon Sector as an Engine of Post-Pandemic Growth – Cooperation of the government, NOC, IOC and international investors to develop Colombia’s oil and gas resources
• Key and Innovative Solutions for Efficiency and Cost Reduction: Get to know the main solutions to the biggest challenges that the oil and gas industry presents in terms of innovation
• Round tables:
• Overview of Gas reserves in Colombia and the Energy transition
• Round table: Infrastructure – Pipelines, Refineries and LNG Plants

Updates and Presentation of the Most Promising Oil & Gas Projects in Colombia: Planning, modernization, and construction of projects in the portfolio of the hydrocarbon sector.

Guarantees for attracting investment in the country’s oil and gas industry: Strategies to attract investment for the development of exploration and production projects with legal and financial guarantees.

Decarbonization of the Oil & Gas Industry: From Theory to Practice – Applicable strategies to make petroleum and industrial processes more sustainable towards the goal of being carbon neutral

• Efficient Production in the Digital Age: Optimization of costs and efficiency through artificial intelligence, data management and other resources
• Dedicated exhibition of cutting-edge equipment and technologies for hydrocarbons industry delivered by local and global leaders
• Ask your burning questions, ask for advice, and share your experience during and after the sessions!
• Unprecedented networking opportunities! 1-2-1 online and face-to-face business meetings, networking round tables, cocktail reception, interactive discussions. Take this opportunity to exchange business cards with ALL conference participants!

Tap here to request more info for free

Organizing Committee:
Catalina Velasco, LatAm Marketing Manager
Email: cvelasco@vostockcapital.com

The 4th International Congress and Exhibition Colombia Oil and Gas will take place at DoubleTree By Hilton Bogota Salitre AR at Carrera. 60 #22-99 in Bogotá

Date: 23-24 June 2022

Organizer: Vostock Capital

Web site: https://bit.ly/3xhxHBS

Request more information

Congress Highlights:

• 200+ decision making executives participate in the Colombia Oil & Gas which is an strategic platform for the leaders of the hydrocarbons industry. Bringing together delegations from national and international companies, as well as government officials, regulatory bodies, academia, project owners, technology and services providers, and international and local investors
• 15+ oil and gas production and exploration investment projects under planning, construction, expansion, and modernization with a development term of 2022-2026 in Colombia
• 40+ industry leaders and experts will present and discuss the main topics impacting the industry development in Colombia and Latin America
• Strategic opening session: Recovery of the Hydrocarbon Sector as an Engine of Post-Pandemic Growth – Cooperation of the government, NOC, IOC and international investors to develop Colombia’s oil and gas resources
• Key and Innovative Solutions for Efficiency and Cost Reduction: Get to know the main solutions to the biggest challenges that the oil and gas industry presents in terms of innovation
• Roundtables:
  • Overview of Gas reserves in Colombia and the Energy transition
  • Round table: Infrastructure – Pipelines, Refineries and LNG Plants
  • Updates and Presentation of the Most Promising Oil & Gas Projects in Colombia: Planning, modernization, and construction of projects in the portfolio of the hydrocarbon sector
  • Guarantees for attracting investment in the country’s oil and gas industry: Strategies to attract investment for the development of exploration and production projects with legal and financial guarantees.
• Decarbonization of the Oil & Gas Industry: From Theory to Practice – Applicable strategies to make petroleum and industrial processes more sustainable towards the goal of being carbon neutral
  • Efficient Production in the Digital Age: Optimization of costs and efficiency through artificial intelligence, data management and other resources
  • Dedicated exhibition of cutting-edge equipment and technologies for hydrocarbons industry delivered by local and global leaders
  • Ask your burning questions, ask for advice, and share your experience during and after the sessions!
  • Unprecedented networking opportunities! 1-2-1 online and face-to-face business meetings, networking round tables, cocktail reception, interactive discussions. Take this opportunity to exchange business cards with ALL conference participants!

Tap here to request more information

For more information, contact:
Catalina Velasco, LatAm Marketing Manager
Email: cvelasco@vostockcapital.com

Sponsored Content

In Colombia, Frontera’s daily production on March 1, 2022 was approximately 42,000 boe/d and the company’s year-to-date average to March 1, 2022 was approximately 40,500 boe/d.

Currently, Frontera has five drilling rigs and five workover rigs active at its Quifa, Coralillo, Corcel, Copa and Guaduas operations in Colombia and at the Perico block in Ecuador. In the fourth quarter of 2021, the company drilled 14 development wells including 12 at Quifa, and 2 at Guatiquia and completed 56 workovers and well services at Quifa, Guatiquia, Canaguaro, Abanico, Corcel, Cajua, Cravoviejo, Cubiro and Casimena. In 2021, the company drilled 42 producer wells, 3 injector wells and completed 148 workovers and well services.

“Frontera continues to deliver on its strategic, operational and financial objectives. In 2021, Frontera generated operating EBITDA of $373.2 million, an increase of 117% compared to 2020 and within the company’s tightened and increased full-year operating EBITDA guidance range. Frontera also averaged 37,818 boe/d, in-line with 2021 guidance. Frontera’s production costs averaged $11.46/boe and its transportation costs averaged $10.43/boe, both within 2021 guidance ranges. The company reported a year end cash position of $320.8 million and released approximately $105.6 million of restricted cash. Frontera increased its uncollateralized credit lines to $89.6 million at year-end and repurchased approximately 3.86 million common shares, or 7.4% of the public float, for cancellation for approximately $21.5 million under its current NCIB as of December 31, 2021,” said Chairman of the Board of Directors Gabriel de Alba.

Frontera Energy was once known as Pacific Rubiales

In 2021, Frontera implemented its “Building a Sustainable Future” ESG strategy and achieved 98% of its ESG goals for the year. The company neutralized 41% of its emissions through carbon credits and preserved and restored 765 new hectares of key connectivity corridors in Casanare and Meta Departments, Colombia. It was awarded the Equipares Gold Seal for the company’s commitment and efforts to close gender gaps in the workplace and in the communities where it operates, increased the purchase of local goods and services to $40 million, and recorded a total reportable incident rate of 1.70.

“Frontera delivered strong fourth quarter results. Production averaged 38,605 boe/d, up 6% compared to the previous quarter and the Company’s year-end production exit rate was 40,457 boe/d excluding Petrosud. Frontera’s daily production on March 1, 2022 was approximately 42,000 boe/d and the Company’s year-to-date average to March 1, 2022 is approximately 40,500 boe/d. Compared to the previous quarter, cash provided by operating activities in the fourth quarter increased by 43%, the Company’s operating netback increased 26%, the Company’s net sales realized price increased 17% and the Company’s transportation costs decreased 12%,” said Frontera CEO Orlando Cabrales.

He continued: “During the fourth quarter, Frontera began early production of ~2,400 boe/d (gross) at the La Belleza discovery on VIM-1, completed the Conciliation Agreement with Cenit and Bicentenario which eliminated more than $1 billion in contingent liabilities, acquired 100% of the issued and outstanding shares in Petroleos Sud Americanos S.A. which added ~1,300 boe/d production and signed an agreement to acquire the remaining 35% interest in el Dificil block held by PCR Investments S.A., adding an additional ~500 boe/d of production when the deal closes in the second half of 2022. Subsequent to year end, we discovered hydrocarbon bearing reservoirs in multiple formations at the Jandaya-1 exploration well in Ecuador and we were awarded Block VIM-46 in the 2021 Colombia Bid Round. Importantly, we discovered approximately 200 feet of net pay within multiple horizons at the company’s potentially transformational Kawa-1 exploration well, offshore Guyana.”

More details can be found in investor filings on Frontera’s website by clicking here.

In words of Felipe Bayón Pardo, CEO of Ecopetrol:

“At the Ecopetrol Group we seek to attain long-term business competitiveness and sustainability. Accordingly, we have made significant progress during 2021 by consolidating our position as a leading energy and infrastructure group in Latin America, supported by our acquisition of ISA.

The Ecopetrol Group’s resilience, its ability to adapt to external impacts, the effort and drive of its more than 18,000 employees, and the coordinated work with diverse actors across the chain allowed us to guarantee the domestic fuel supply, swiftly responding promptly to an increase in demand of more than 25% with respect to pre-pandemic levels. We increased our domestic gas supply, overcoming the supply crisis, weather-related infrastructure issues, and the public order situation that affected our country during the second quarter of the year.

This February we launched our 2040 strategy, named “Energy that Transforms”. Our long-term goals, mapped in the strategy, include consolidating the Ecopetrol Group as a flexible, agile and dynamic organization, capable of rapidly adapting to constant change and the global challenges of a world striving to accelerate the generation and use of clean energy; while continue to pursue profitable growth and sustainable leadership in the Americas.

I am pleased to share the results of our Competitive Returns strategic pillar, which has enabled us to achieve annual consolidated revenues of COP 91.7 trillion, an 83.4% increase as compared to 2020; net income of COP 16.7 trillion, and EBITDA of COP 42.0 trillion (EBITDA margin of 46%), all record high results that allowed us to obtain a return on average capital employed (ROACE) of 13.6%. Fourth-quarter results were also exceptional: our consolidated revenue amounted to COP 31.8 trillion, net income of COP 6.1 trillion, and EBITDA of COP 14.0 trillion with an EBITDA margin of 44%, showcasing better results in 2021 than those years with better average crude prices.

In our Growth with the Energy Transition strategic pillar, we progressed on multiple fronts. Our reserve balance reached 2,002 million barrels of oil equivalent, an increase of 13% in comparison to 2020. For each barrel produced this year, we added two barrels to our reserves, reaching a reserves replacement ratio of 200%, the highest in the last 12 years. The average reserve life increased to 8.7 years, reflecting the Company’s remarkable management, even surpassing levels reached in the past.  Gas represented 28% of total reserve balance and reported an average life of 10.4 years.

Felipe Bayón Pardo, CEO of Ecopetrol (Credit: Ecopetrol)

In exploration, we drilled 13 wells in conjunction with our partners, exceeding the annual target of 9 wells set for 2021. Annual production from exploration assets included 65% derived from oil and 35% from gas. Domestically, in the 2021 Colombia Round, Ecopetrol S.A. was awarded three blocks in the Mid-Magdalena Valley basin, one in the Llanos Orientales basin, and – through Hocol – one in the Sinú San Jacinto basin.

In 2021 we reached an average production of 679 mboed, evidencing a recovery trend and closing the year with production for the quarter reaching 695 mboed. Within the Group’s total production, crude share increased to 79% favored by the successful drilling campaign in the Permian, where we achieved a cumulative number of 132 drilled wells and an operational peak production above 50 mboed, well beyond our expectations.

During 2021 natural gas and GLP production represented 21% of the Group´s total production, driven by the increase seen in supply in the year, reaching a combined EBITDA margin of 53%.

Regarding Unconventional Reservoirs in Colombia, we filed to ANLA the Environmental Impact Assessment for the Integral Investigation Pilot Project Kalé and moved forward in preparing the respective study for the Platero project, which was recently filed in February of this year.

In the Midstream segment, total volumes transported during the year reached 1,007 mbd, leveraged on economic recovery, with an increase of 20% in multipurpose pipelines.

In the Downstream segment, the positive trend seen throughout 2021 allowed us to close the year with a consolidated throughput of 354 mbd and a combined annual gross margin of 10.2 USD/Bl, and a record in the fourth quarter of 12.5 USD/Bl. The outstanding annual results, with record EBITDA for the segment, were supported on our operational stability in the refineries, the recovery of liquid fuel demand and its margins, Esenttia’s historic record results and the segment´s operating cost stability across all business lines.

In the commercial front, we highlight the increase from 34 USD/Bl in 2020 to 67 USD/Bl in 2021 in our crude oil basket realization price, illustrating the success of our strategy to diversify into other export destinations and to strengthen our relationship with clients. Today, the Asian market is our main export destination representing 57% of all exports.

The quarterly results for the Energy Transmission and Toll roads segment, with ISA’s results included in the Group’s fourth quarter consolidated results, amounted to COP 3.1 trillion in revenues, 0.6 trillion in net income and 16% of the EBITDA for the quarter. Some of the highlights of this last quarter for the energy business include the award of the 1,415 km high voltage direct current transmission project with a capacity of 3,000 MW at 600 kV in Chile, a project that will connect the north of the country with the metropolitan area, and the adjudication of the first large-scale energy storage project in Brazil. In the toll roads business, we highlight the completion of the construction stage and start of operations of of 100% of the 4G Cartagena-Barranquilla project.

In our Generate Value Through TESG pillar, the following advances were made:

In the environmental front, in terms of relevant decarbonization developments established the net-zero carbon emissions goal for Scopes 1 and 2 by 2050, as well as reducing by 50% our total emissions (Scopes 1, 2 and 3) by that same year. In line with these achievements, we are pleased with the progress made in renewable energy projects, with: i) the entry into operation of the San Fernando solar park with a capacity of 61 MW in October 2021, making us the largest self-generator of renewable energy in the country; and, ii) the assignment of the construction and start-up of two additional solar parks with a capacity of 66 MW, increasing total renewable capacity to 178 MW.

Consistent with our decarbonization strategy, in December we sold our first shipment of 1.0 mmbls of carbon compensated crude from Castilla Blend® to Asia, offsetting the carbon emitted in dilution, production and transportation by purchasing 32,000 carbon Verra certified carbon credits. 

In 2021 we recorded a positive progress towards our goal to achieve water neutrality, with the reusage of 74% of the water that we require in our operations. We constantly seek a balance between the water required to operate and taking actions that reduce the water footprint and counteract its impact through conservation projects.

In an effort to mitigate climate change, contribute to the protection of flora and fauna, and support the sustainable development of the territories in which we operate, the Ecopetrol Group designated nine additional eco-reserves, reaching a total of 15 zones that will contribute towards the protection of our country’s biodiversity.

Another important milestone was achieved with the awarding of Carbon Neutral certifications by the Colombian Institute of Technical Standards and Certification (Icontec) to our subsidiaries Cenit, Oleoducto de los Llanos and Oleoducto Bicentenario.

In the social front, for 2021, the Ecopetrol Group allocated social investment resources of COP 469 billion to strategic and legal investments. Additionally, investments through the “Works in lieu of Taxes” mechanism reached COP 232 billion allocated through 28 projects completed by year end, including the provision of educational facilities in 18 municipalities in Casanare and Putumayo. Social investment promoted local development to improve quality of life, thus helping to support high levels of trust in the areas in which we operate. These investments seek to boost the dynamics of local economies, promote education and access to public services.

Additionally, in our efforts to encourage economic reactivation and guarantee better living conditions for millions of Colombian families, Ecopetrol initiated a 6-month reduction of 30% in the price of LPG, a fuel used in many homes across remote areas of our country. During 2021, we installed 6.132 new connections of social gas, advancing in our objective of delivering gas to more Colombian families in vulnerable conditions.

On the corporate governance front, during the fourth quarter, Ecopetrol joined the “30% Club” (Colombia chapter), which promotes an increase in the participation of females on boards of directors and management positions in the business sector. The percentage of female participation on the boards of directors of the Ecopetrol Group increased from 18% in 2020 to 22% in 2021. Additionally, the Guidelines for the Boards of Directors of the Ecopetrol Group were updated to take account of the incorporation of new business lines, and to established the succession guidelines for Ecopetrol´s board members and its CEO. For its part, ISA and Ecopetrol were awarded the Equipares Labor Equity Seal for its commitment to implementing measures that seek gender equality.

Regarding the Cutting-edge Knowledge pillar, during 2021 we made significant progress in the Digital Transformation front, specifically in terms of digital reinvention, through a strategic portfolio that captures value and infuses innovation into each one of our processes, exceeding the capture of planned benefits, with compliance close to 137% equivalent to USD 93 million.

This year’s results allow us to begin 2022 in a solid financial position with a favorable pricing environment, a scenario that sets us on positive position to achieve the targets of the 22-24 Plan and provides better options to execute certain milestones included in the framework of our 2040 Strategy. We will continue to challenge ourselves, evolve and move further towards an integrated hydrocarbon chain, as well as towards decarbonization, electrification and diversification”.

To review the full report please visit the following link: https://www.ecopetrol.com.co/wps/wcm/connect/409c1954-ab6d-442d-b5a1-ad5c55c45515/Reporte+4T21+Ecopetrol+-+MASTER+-+ENG.pdf?MOD=AJPERES&attachment=false&id=1646181312192

Table 1: Financial Summary Income Statement – Ecopetrol Group

The figures included in this report were extracted from the Company’s unaudited financial statements. The financial information is expressed in billions of Colombian pesos (COP), or US dollars (USD), or thousands of barrels of oil equivalent per day (mboed) or tons, as noted. For presentation purposes, certain figures in this report were rounded to the nearest decimal place.

In words of Felipe Bayón Pardo, CEO of Ecopetrol:

“The results for the third quarter of 2021 confirm Ecopetrol’s technical, operational, and financial capacity to seize the favorable price environment. They also evidence the benefits of the structural adjustments that we have implemented in response to recent challenges. With the culmination of the purchase of a controlling 51.4% stake in Interconexión Eléctrica (“ISA”), the quarterly figures include the consolidated results of this subsidiary for one month, which represents a transformational milestone that allows us to present the results of the new Ecopetrol Group for the first time.

During this quarter, we continued delivering record results, with a consolidated revenue of COP 23.3 trillion, a net income of COP 3.8 trillion and an EBITDA of COP 10.4 trillion (EBITDA margin of 44%). In the first nine months of the year, our consolidated revenue amounted to COP 60.0 trillion, a net income of COP 10.6 trillion (6.3 times the net income generated throughout 2020), and an EBITDA of COP 28.0 trillion (EBITDA margin of 47%).

On the commercial front, we highlight the improvement in the realization price of our crude oil basket, which went from 38.4 USD/Bl in the third quarter of 2020 to 68.0 USD/Bl in the third quarter of 2021, demonstrating the good results of the strategy for diversification of destinations and close relation with our customers, in addition to the operational flexibility of the company by consolidating the delivery at place (DAP) mechanism. Additionally, we highlight the signing of diesel and motor gasoline supply contracts with wholesale distributors, a milestone that represents a referent for the industry and marks the beginning of a new commercial stage that consolidates the liquid fuels distribution chain in the country.

Exploration

The Liria YW12 well stands out, which proved the presence of hydrocarbons in a new structure near a production field, being a milestone that continues to drive our exploration activity in the Piedemonte Llanero. Ecopetrol and its partners completed 10 wells during the first nine months of the year, exceeding the target of 9 wells for 2021. The accumulated production of the exploratory assets accounted for more than 1.2 million boe at the end of the third quarter of 2021 (4,517 boed on average), with 67% of the production corresponding to oil and 33% to gas. Additionally, in August the Flamencos-1 and Boranda discoveries, located in the Middle Magdalena Valley, were declared commercial, which are part of the “Near Field Exploration” strategy in areas close to existing infrastructure that seeks the incorporation of production and reserves in a short period of time. In the international field, and in line with the growth and geographic diversification strategy of the Ecopetrol Group, our subsidiary, Ecopetrol Óleo e Gás do Brasil, acquired a 30% stake in the block S-M-1709, located in the Santos basin in Brazil during the “Rodada 17” bidding session organized by the National Petroleum Agency (ANP for its Portuguese acronym). The acquisition of this block, which will be operated by Shell, is focused on the basins with the highest potential in the continent.

Production

The Ecopetrol Group continues its recovery path, after experiencing a significant impact during the first half of the year associated with operating restrictions in the Castilla field and the public order situation in Colombia. During the third quarter, production reached 683.6 mboed, accounting for a growth of 3.5% when compared to the second quarter. Some of the relevant milestones of the quarter are: i) full production stabilization in the Castilla field, ii) normalization of production, previously affected by roadblocks due to public order disturbances in the second quarter of the year, and iii) the contribution from the new Flamencos-1 and Boranda commercial discoveries. Given the average production level for the quarter and the projections for the fourth quarter of the year, we estimate the 2021 yearly production to be around 680 mboed.

Natural gas and LPG

Production experienced an increase of 3.5% in the third quarter of 2021 compared to the same period of the previous year, as a result of higher sales volumes from Ecopetrol, Hocol, and Permian, primarily associated with a recovery in demand. During the third quarter, the contribution of gas and LPG to the Group’s total production was 20.6%, with a combined EBITDA margin of 60.0%.

Permian

Operations continue to advance according to plan, employing 4 drill rigs and 2 completion crews. We drilled 22 wells in this quarter, for a total of 69 so far this year. In addition, 16 new wells started production, for a total of 91 wells in production (22 in 2020 and 69 in 2021). It is worth highlighting that the level of production of the operation already exceeds 50.0 mboed, generating 24.4 mboed before royalties for Ecopetrol in the third quarter (equivalent to net 18.9 mboed after royalties).

Unconventionals

In terms of the Comprehensive Research Pilot Projects in Unconventional Reservoirs (PPII) Kalé and Platero, we continue advancing with the work schedules according to plan. On October 29, we submitted PPII-Kalé’s Environmental Impact Assessment (EIA) to the National Authority for Environmental Licensing (ANLA for its Spanish acronym), and on July 8, we conducted the first territorial dialogue and environmental monitoring as requirements for filing PPII-Platero’s EIA. To date, 450 dialogue and educational meetings have taken place within the influence area.

Midstream

In the midstream segment, during the quarter we transported 1,012.2 mbd, which represented a recovery of 52.3 mbd compared to the immediately previous quarter. The volume transported during the first nine months of the year was 993.3 mbd, a decrease of 2.0% compared to the same period of 2020, as a result of a lower production of crude oil in the country, mainly in the Llanos area.

In terms of renewable energy self-generation in the segment, in September we started operating six new solar plants at the stations of Baranoa, Miraflores, Mansilla, Tocancipá, Yumbo, and Pereira, in order to reduce approximately 513 tons of CO2 per year, also in line with our decarbonization targets by 2050. Similarly, we finished the construction of the San Fernando Solar Park last October 22, 2021, which will provide 61 MWp of available capacity and it is considered the largest renewable energy self-generation facility in the country.

Regarding transportation disputes, the agreement announced by Frontera, CENIT and Bicentenario on November 17, 2020, was approved by the Administrative Tribunal of Cundinamarca by means of an order that was notified on November 5 of 2021. It is important to mention that the agreement has a favorable opinion from the Attorney General’s Office (Procuraduría General de la Nación), received on March 24, 2021, also, it puts an end to all disputes between the parties regarding to the transportation contracts for the Bicentenario Pipeline and the Caño Limón – Coveñas Pipeline, as well as other contracts for storage and port services. With this agreement, all existing arbitration proceedings arising from these disputes are concluded.

Downstream

The downstream segment continued with the positive trend observed throughout 2021, with a consolidated throughput of 358.0 mbd and an integrated gross margin of 9.5 USD/Bl as of September 2021. This segment closed the third quarter with a throughput of 353.8 mbd and an integrated gross margin of 9.0 USD/Bl, respectively. These results are largely attributable to: i) the improvement of the refined products basket, in line with the generalized increase in demand due to the reactivation of the productive sector, ii) selling of inventories due to a favorable price environment and the positive operating performance at the Barrancabermeja refinery, iii) the adoption of commercial strategies at Esenttia to mitigate the weakening of the Polypropylene Margin, iv) the stability of Invercolsa as a result of higher natural gas sales and installations, and v) the segment’s cash cost stability. The aforementioned, despite the operational events originated at the Cartagena refinery during the quarter, which have already been solved.

ISA Acquisition

In the new electric power transmission and toll roads segment (which arose out of our acquisition of ISA) only consolidates one month of results into the quarter, we highlight the following: i) in the electric power business, the entry into operation of three projects (in Chile, Brazil, and Colombia), as well as the granting of the Environmental license for the UPME07-2017 Sabanalarga-Bolívar 500 kV project in Colombia, and ii) in the road concessions business, the construction of eight projects continued in Colombia and Chile, which will add 246 km to the existing road network.

It is important to note that a Transition Management Office (TMO) was established, which has made possible the transition process from ISA to the consolidation and reporting of the Ecopetrol Group. The main efforts in the last 12 weeks since the acquisition have been focused on ensuring compliance with the legal and regulatory requirements associated with accounting consolidation, reporting, and financial planning processes, as well as matters related to compliance and corporate governance. The next steps will be aimed at prioritizing opportunities and synergies to accelerate the capture of joint value.

Environmenta, Social, Governance

In TESG, we continued to make progress in each pillar of the strategy throughout the year.

In the environmental front, particularly in renewable energy projects, Ecopetrol was included as a relevant participant in the Colombian Hydrogen roadmap launched by the Ministry of Mines and Energy on September 30. Moreover, we highlight the contract entered with South Pole on August 6, 2021, who will be our structuring partner for the Nature-Based Solutions projects, and the Cooperation Agreement signed with The Nature Conservancy, which seeks to leverage the implementation of the Ecopetrol Group’s decarbonization plan. As of September 2021, we had fulfilled 79% of the goal established for 2021 within the framework of the “Sembrar Nos Une” national initiative with 3,149,716 trees planted.

In the social dimension, during the first nine months of the year, the Company allocated social investment resources for a total of COP 269 billion in strategic and mandatory investments. Similarly, by means of the “Obras por Impuestos” (Works in lieu of Taxes) mechanism, we completed 25 projects by the end of the third quarter, with a total value of COP 201 billion, mainly focused on the improvement of roads and endowments to student residences. Additionally, Ecopetrol’s Diversity and Inclusion Program was granted the Equipares-Icontec Silver Seal, highlighting the communications efforts carried out within the framework of this program due to its coherence, assertiveness, connection, and impact as a fundamental pillar for the strategy.

In corporate governance, the TMO team appointed within the Company has been presenting on a regular basis the developments around the successful incorporation of ISA into the Ecopetrol Group to the Board of Directors, in line with our commitment to advance in a transition that ensures the continuity of the strategy and the robustness of Ecopetrol and ISA’s governance principles. Identifying and aligning the best practices of both companies will ensure the implementation of a corporate governance structure that stands out for its experience and transparency. Last October 22 of 2021, ISA’s extraordinary General Shareholders’ Meeting took place, in which new Directors were appointed and Ecopetrol exercised its right to nominate candidates in virtue of the controlling position it currently holds on ISA.

In digital transformation, we have captured benefits in the digital agenda for a total of USD 36.5 million by the end of the third quarter of 2021, with advancements in the digital agenda, digital factories, intelligence, and innovation projects.”

Ecopetrol is the largest company in Colombia and one of the main integrated energy companies in the American continent, with more than 17,000 employees. In Colombia, it accounts for more than 60% of hydrocarbon production, and most of the hydrocarbon transportation, logistics, and refining systems, and has leading positions in petrochemicals and gas distribution. With the acquisition of 51.4% of ISA’s shares, it participates in energy transmission, management of real-time systems (XM) and the Concesión Costera Barranquilla – Cartagena. At the international level, Ecopetrol focuses on strategic basins on the American continent, with E&P operations in the United States (the Permian basin and the Gulf of Mexico), Brazil and Mexico, and through ISA and its subsidiaries it has leading positions in the transmission business in Brazil, Chile, Peru and Bolivia, in road concessions in Chile, and in telecommunications.

Ecopetrol reports sales down 23.6% year-on-year for the 4^th quarter of 2020, to 14,190 trillion Colombian pesos, or 3.95 billion USD. Full year sales are down 29.4% to 13.8 billion. The company was able to report net income of 1.7 trillion pesos, or $471 million USD.

The financial summary income statement follows below

“2020 was a challenging year for the industry, due to the collapse in oil prices stemming from the oversupply caused by disagreements within OPEC+ and later due to the challenges associated with the Covid-19 pandemic. This pandemic was a health emergency at global and local level that was accompanied by a sharp contraction in demand for crude oil and products with multiple social and economic challenges,” said Ecopetrol CEO Felipe Bayón Pardo (above).

Ecopetrol was able to face this unprecedented challenge demonstrating its resilience and capacity to adapt to an adverse and volatile environment, always prioritizing life and the care of our employees.”

“Our financial results prove it: we closed the year with a COP 16.8 trillion EBITDA and net income of COP 1.7 trillion, being Ecopetrol one of the few companies of the global oil industry with profit for the year. The crisis response plan, which assured operational continuity and led to decisive interventions in costs, prioritization of investments, maximizing revenue and timely financing, allowed to benefit from the recovery of supply and demand of crude oil worldwide in the second half of the year. Thus, leveraged in the business strategy of the Ecopetrol Group (EG) focused on diversifying export destinations and anticipating sales of our crude, we managed to achieve recuperation of realization prices in our export portfolio, which increased 6% between the Q3 and Q4 2020, from 38.4 USD/bl to 40.7 USD/bl.,” Bayón continued.

Some investors fear that Ecopetrol is being pressured by the cash strapped Colombian government to purchase ISA, benefitting the Duque administration at the expense of investors. Bayón defends the pending purchase saying: “The eventual acquisition of the stake in ISA responds to Ecopetrol’s strategic interest of entering into new businesses aligned with the opportunities for electrification and decarbonization, dictated by the energy transition, and which in turn leverage the Group’s profitable growth and improve its business risk profile.”

Bayón’s full comments follow:

2020 was a challenging year for the industry, due to the collapse in oil prices stemming from the oversupply caused by disagreements within OPEC+ and later due to the challenges associated with the Covid-19 pandemic. This pandemic was a health emergency at global and local level that was accompanied by a sharp contraction in demand for crude oil and products with multiple social and economic challenges.

Ecopetrol was able to face this unprecedented challenge demonstrating its resilience and capacity to adapt to an adverse and volatile environment, always prioritizing life and the care of our employees.

Our financial results prove it: we closed the year with a COP 16.8 trillion EBITDA and net income of COP 1.7 trillion, being Ecopetrol one of the few companies of the global oil industry with profit for the year. The crisis response plan, which assured operational continuity and led to decisive interventions in costs, prioritization of investments, maximizing revenue and timely financing, allowed to benefit from the recovery of supply and demand of crude oil worldwide in the second half of the year. Thus, leveraged in the business strategy of the Ecopetrol Group (EG) focused on diversifying export destinations and anticipating sales of our crude, we managed to achieve recuperation of realization prices in our export portfolio, which increased 6% between the Q3 and Q4 2020, from 38.4 USD/bl to 40.7 USD/bl.

Ecopetrol conducted a disciplined monitoring on its costs and expenses, achieving a balance between optimizations and the availability of resources to guarantee a safe and reliable reactivation of the operation. Thus, the total unit cost for the year 2020 was close to 27 USD/bl, a 23% decrease as compared to the previous year, and cost savings of around COP 700 billion.

In the middle of this challenging environment, during 2020 Ecopetrol Group’s maintained a steadfast commitment to the well-being of Colombians and the strengthening of the local economy, in the framework of the health emergency caused by COVID-19. Over COP 88 billion were committed through our social investment program “Apoyo País” (Countrywide Support), of which we allocated 86% as of year-end, benefiting about 252,000 families and 250 institutions. We have supported the strengthening of the health system with medical equipment, personal protection and cleaning items; we have delivered humanitarian and solidarity aid at the national level, promoted innovation and research initiatives and provided technological support to the National Government. Furthermore, Ecopetrol Group has joined Governmental programs such as “Comparto mi Energía” (Sharing my Energy) and “Ayudar nos hace bien” (Helping does us good). Similarly, the Group designed and implemented different commercial flexibility and liquidity programs for suppliers and customers.

Reserves balance reached 1,770 million barrels of oil equivalent (mboe) reflecting a 6.5% reduction, a lower outcome than the initial forecast of a decrease in the range of 15% to 20%, due to fall in prices and less activity during the period. The result reflects the addition of new drilling projects, positive revisions due to good performance in production, recovery, and the optimization of technical-economic variables.  Gas reserves represented 29% of the total balance.

In exploration, Ecopetrol completed the drilling of 18 wells, 3 of which were successful, 9 ended the year under evaluation and 6 were dry. The commercial viability for discoveries Andina (in Colombia) and Esox (in the Gulf of Mexico) was approved in 4Q20. The National Hydrocarbons Agency, ANH, approved the transfer of Ecopetrol’s 50% stake to Shell in three blocks in which the Gorgon and Kronos gas discoveries are located. This association will allow progress the development of these discoveries in the offshore gas province of the Colombian Caribbean.

In regard to production, a cumulative average of 697 mboed was reached in 2020, in line with the goal of achieving levels close to 700 mboed. Compared to 3Q20, production in 4Q20 increased thanks to higher sales of LPG and gas, as well as to better performance at Chichimene and Piedemonte fields, despite the impacts by public order and the closure of Castilla’s water discharge in December.

With respect to natural gas, a strategic priority for Ecopetrol Group, represented 17 % of the total equivalent production. The EBITDA margin for the year was north of 50% and had a contribution by over 30 % of the segment’s EBITDA. The foregoing is supported by the stability of prices in dollars and the good commercial dynamics observed during the period.

In turn, the production of unconventional hydrocarbons in Permian contributed an average of 5.2 Mboed in 2020, increasing its share in the total EG’s production. We closed the year with 22 wells in production and 22 additional wells drilled, which are expected to be completed and put to work during 1Q21.

Regarding the execution of the Comprehensive Research Pilot Projects – PPII for unconventional hydrocarbons, the first Special Contract for Research Projects – CEPI , was signed with the ANH on December 24, for the Kalé project. This enables the start of the licensing and preparation stage for the execution of Ecopetrol’s PPII’s in Colombia. In 2021, we will be focused on obtaining environmental licenses and complying with other requirements as established in the robust regulations in force before starting to operate, always informing, and including our stakeholders and highlighting the scientific and technical nature of the project.

The annual EBITDA of the upstream segment was COP 6.7 trillion, equivalent to an 18% margin. The midstream segment obtained results in line with our expectations, with volumes transported in the amount of1,017 mbd, according to the country’s production. Also noteworthy are the lower maintenance times for repairing the Caño Limón-Coveñas pipeline, which allowed it to operate more days and without any reversal cycles being necessary in Bicentenario pipeline. The segment reported an EBITDA in the amount of COP 9.3 trillion, equivalent to a 76 % margin.

The downstream segment reached a consolidated throughput load of 355 mbd in 4Q20, the highest of the year. Advancing on the path of fuel quality, in December gasoline production with an average sulfur content of maximum 50 ppm, was achieved, which is lower than the levels requited under current regulations. The operational and commercial performance of the refineries enabled competitive margins in a negative environment for the sector. Likewise, Esenttia records in production and sales, stood-out in 2020. The segment reported an EBITDA of COP 0.9 trillion, equivalent to a 3.3% margin.

Despite the challenges faced in 2020, our commitment to TESG was strengthened on different fronts. Accumulated reductions of 1.8 MtCO2e were achieved in energy transition, resulting from the implementation of projects which have been running since 2010, thus achieving in advance the goal that was initially set for 2022. On the front of renewable energy, an agreement was signed for the construction of the San Fernando Solar Eco Park, which will have a capacity up to 59 MW and is expected to start operations in 2Q21. In turn, Castilla Solar Eco Park reported savings in operating costs close to COP 3.8 billion in 2020. On the other hand, GHE emissions produced by routine gas flaring were reduced by 19 % as compared to 2019, thus contributing to the commitment to reduce CO2e emissions.

Digital transformation was a fundamental pillar in the operational continuity during the pandemic. It ensured remote connections for more than 15,000 employees, and to hold more than 8,000 virtual meetings, per day, during the year.

Regarding the commitment of strengthening corporate governance, we adhered to the World Economic Forum’s Stakeholder Capitalism Metrics (SCM) coalition, a global group of more than 61 companies seeking to harmonize sustainability metrics to facilitate comparisons across companies and industries, on various key issues related to people, environment, prosperity, and governance.

In November, Ecopetrol received a 66-point rating on the Dow Jones Sustainability Index (DJSI) scale, ranking 13th in the global integrated oil and gas industry. This score allowed the company to enter the DJSI Latin American Integrated Market – MILA, being the only company in the sector in Latin America to achieve it. In addition, the company received a rating from the CDP Climate Change report in December with a C rating, ranking above the region’s overall average performance.

Reflecting our ability to adapt and to react to the changing conditions of a particularly complex market, we updated our 2021-2023 Organic Business Plan, which aims at ensuring a profitable growth for Ecopetrol on a Brent price path of USD 45 per barrel by 2021, and USD 50 per barrel onwards. The plan also seeks to increase competitiveness, to strengthen the energy transition agenda and to deepen TESG as one of the strategic pillars for our operation.

The following elements stand out within the organic component of the new plan: i) an investment ranging from USD 12,000 to USD 15,000 million, funded mainly with internal cash generation; ii) profitable production levels close to 750 Mboed by 2023 maintaining focus on the development of fields with the greatest impact on our value chain in Colombia, the growth of Permian, the drilling of more than 40 exploratory wells and the continuity of our successful enhanced recovery program; iii) volumes transported in excess of one million barrels per day reflecting positive expectations of economic growth; iv) joint throughput of refineries ranging from 340 to 365 thousand barrels per day in 2021, seeking to reach around 420 thousand barrels per day in 2023, with the IPCC ; v) reduction of 3 MtCO2 as of 2023 and redefining  medium and long term emission reduction goals during 2021; vi) increasing generation capacity with renewable energies  around 400 MW by 2023; and vii) social and environmental investments for COP 1.7 trillion between 2020 and 2024. Similarly, we will invest between USD 100 and USD 150 million in innovation and technology to accelerate the digital transformation. This plan is aligned with our cultural principles: life first, ethics, passion for excellence, making the impossible possible, leadership and inclusion, as well as teamwork. Similarly, it responds to the challenges of the environment with a focus on sustainability and ensures a strategy that adds value to EG and the country.

On the other hand, on January the 27, 2021, the Company announced its interest in acquiring 51.4% of the outstanding shares of ISA, currently owned by the Ministry of Finance and Public Credit.

The eventual acquisition of the stake in ISA responds to Ecopetrol’s strategic interest of entering into new businesses aligned with the opportunities for electrification and decarbonization, dictated by the energy transition, and which in turn leverage the Group’s profitable growth and improve its business risk profile.

The stake in ISA would allow Ecopetrol’s stockholders to achieve a material position in an established company, leader in a strategic sector for the energy transition, with a world-class portfolio, a first-rate leadership team, and proven corporate governance. Through a single transaction, Ecopetrol would position itself in a key link in the electricity business with clear prospects for future growth. Furthermore, a business with similar characteristics to the oil infrastructure one, in which Ecopetrol already participates through its subsidiary Cenit, could also be added to EG’s portfolio.  These businesses are capital intensive, regulated, with significant entry barriers, and margins and competitive capital returns that provide stability to the cash flow, relative to hydrocarbons price volatility.

The acquisition would be partially financed with a stock issuance whose specific purpose is to fund this opportunity of growth and consolidation. This would allow Ecopetrol to undertake a transformational opportunity without changing the investment plans in its core oil & gas business, and without impacting the debt ratios that support its investment grade.

Moving forward, in case of succeeding in the transaction, we envision a more robust Ecopetrol, with a solid position in oil, gas, energy infrastructure and low-emission energy. The Company will continue to focus on the hydrocarbons business, with a growing share of gas. Renewable generation for self-consumption will continue to be key for reducing operating costs and emissions footprint. We will increase our level of ambition in decarbonization in terms of reducing emissions, and we will move forward with the evaluation of new technologies and business models, such as natural climate solutions, CCUS (Carbon Capture, Use and Storage) and green hydrogen.

That said, we have started 2021 with a solid financial position, strengthened after the crisis, with expectations of profitable and sustainable growth on all fronts of the business, and with the clear aspiration to materialize a transformational opportunity for the Company through the potential acquisition of the stake in ISA. This plan addresses the challenges and opportunities of the environment, keeping our promise to create value for our shareholders and stakeholders, leveraged on the pillars of growth, capital discipline and cash protection, all supported on TESG.

Felipe Bayón Pardo

CEO

Ecopetrol SA

* Excluding the effect of expenses associated to the Voluntary Retirement Plan, EBITDA amounts to COP 4,629 billion in 4Q20 and COP 17,471 billion as of year-end.

In the last weeks there were three attacks against the Caño Limón – Coveñas system in the villages of Las Acacias, Guamalito and La Ceiba, in the municipality of Arauquita.

• • Cenit has suffered 7 attacks in the past week against the Caño Limón-Coveñas & Bicentenario pipelines in Arauca, Norte de Santander, & Boyacá.
  • Colombia’s petroleum infrastructure has already suffered 25 attacks in 2020
  • The Coronavirus COVID-19 Pandemic has made it more difficult to access the affected areas.

In addition, on Saturday afternoon there were disturbances in the village of El Consuelo, municipality of Saravena, which are being addressed by “specialized personnel,” according to Cenit.

The attacks also affected the operations of the Bicentenario pipeline, at the Altos Del Paraiso site in the village of Palo de Agua, municipality of Fortul, for a total of five registered attacks against the Arauca oil infrastructure.

Other attacks were confirmed at the village of Puerto Nuevo, municipality of Cubará in Boyaca, and in the village of San Carlos, municipality of El Tarra in Norte de Santander.

There was a total of six attacks perpetrated against the Caño Limón-Coveñas system and one against the Bicentenario pipeline.

Hector Manosalva Rojas, CEO of Cenit, stated that “we emphatically reject these attacks against the country’s pipelines, which are creating negative social, economic and environmental impacts, even more so during the crisis the country is facing due to COVID-19, which makes it more difficult to perform repairs with our technical personnel on site. This stage we are living in

Colombia should encourage us to prioritize people’s lives and integrity, as well as care for the environment.”

Cenit sent technical and operations personnel to the attacked locations to perform inspection activities, guaranteeing the necessary control measures were in place to avoid the spread of COVID-19. Moreover, National Army troops traveled to the sites under siege to provide security and guarantee the personnel’s safe arrival.

As soon as the facts were known, the company advised the municipal risk and disaster management councils and the Autonomous Regional Corporation of Orinoquía, where the corresponding contingency plans were activated.

Furthermore, as part of the contingency plan, the Community Action Councils were contacted to advise the community about the facts and to enable technical personnel’s access to address the issues.

In a statement, Cenit rejected “these illegal actions that jeopardize the integrity of the population, cause serious consequences on the environment, and affect the activities of the community and the oil industry.” The company asked the surrounding community to stay in quarantine and avoid visiting the areas where the attacks were perpetrated.

Oil transportation provider Cenit (Spanish for Zenith), the pipeline operator owned by government controlled Ecopetrol announced last week “relief of up to 50% on pipeline transportation fees for oil producers” according to the headline of a printed statement released by Cenit. Reading the details however, the transporter is only offering delayed terms.

“Producers can pay only 50% of their rates during May and June, and the remaining balance will be due in 2 months,” said the statement.

“Even though this conjuncture also impacts the midstream segment due to the lower volumes transported through the systems due to the drop in demand, we are convinced that it is necessary to support producers and senders in general with financing initiatives so that the industry of hydrocarbons in Colombia continues to be a lever for the country’s economic and social development,” said Héctor Manosalva Rojas, president of Cenit.

Petroleum producers are not impressed

ACP had a very direct response to the initiative, saying that it does practically nothing to address the situation, but is little more than public relations. In a written public response, the ACP said:

1. The proposal of the transporters does not reduce the rates. It is not a 50% decrease in rates, but an offer of financing (for two months) with interest charged on this percentage. The measure does not supply the financial requirements of the senders against the current value of the rates, which, as indicated, are excessively high. This would only increase transportation costs, since after two months the same rate would have to be paid with interest (1.5% annual cash).
2. The financing offered by the carriers does not take into account the reality of the price crisis that the sector is experiencing, the duration of which is not clear. This price situation is leading private companies to close fields and therefore reduce their production. To date, production has been reduced by about 52,000 barrels per day and a further cut of 30,000 barrels per day is expected, starting next month. This not only affects the production of crude with consequences for the energy self-sufficiency of the country, but also reduces important resources of royalties, taxes and economic rights, considerably impacting the finances of the Nation and the contributions to the regions.
3. Regarding specific rate reductions, the real proposal of Ocensa (the pipeline that transports the largest volume of oil in the country) is to decrease rates by only 0.6%. In other words, it goes from a rate of $7.75 USD to $7.70 per barrel; a minimum adjustment when oil prices have fallen 71% since January and 42% in the last two months, and more, if one takes into account that in July 2019 the company increased tariffs by 10%.
4. Considering that the crude oil pipeline transportation rates have an operating cost weight of around 45%, what the industry requires and has requested is a 60% reduction when the Brent reference price is below US $ 45 a barrel.
5. The stage of negotiation between carriers and senders has been exhausted without success, taking into account that the offers presented by the carriers have not been the product of a negotiation, but rather unilateral announcements.
6. It is for this reason that the ACP has requested the Ministry of Mines and Energy to intervene in oil pipeline transportation tariffs, using its powers provided by the Petroleum Code, issuing a resolution that restores an economic balance in the hydrocarbon sector in this period of low prices, as a measure to help mitigate the current crisis.

Finance Colombia was able to reach Alejandro Ospina Angarrita, the president of UTIPEC, Colombia’s principal petroleum workers’ union, who generally is in agreement with the industry association on this topic.

Alejandro Ospina Angarrita is president of UTIPEC, Colombia’s principal petroleum workers’ union

Finance Colombia: What is UTIPEC’s proposal to solve the crisis?

Ospina: An immediate reduction of the pipeline transportation rates that are approved by the Ministry of Mines and Energy, and not just a financing of these costs as the transporters have proposed, in order to make production possible in the fields that are closed today and thus recovering the job that is being destroyed due to the low competitiveness of the Colombian oil industry.

The measure must be adopted immediately, and must be maintained until a revision of the tariff methodology is made, which overcompensates the investments made in these systems, so that it has brought us to the current situation which although in the past was bearable at high oil prices, it clearly does not reflect the reality of the business when compared to nearby competitors, such as in Ecuador, where a system of similar length, which must cross the Andes mountain range, offers rates of less than 30% of those collected in Colombia.

Finance Colombia: What should the administration of Ivan Duque and the ANH do?

Ospina: Pipeline tariffs are currently defined and approved by the Ministry of Mines and Energy, so it must be the national government that takes the exceptional measure, making the temporary adjustments and this same entity, which must carry out a review of the methodology with all market agents, to harmonize it with the reasonable remuneration of the investments.

The ANH, as administrator of the country’s hydrocarbon resource, and therefore promoter of the development of the industry in Colombia, must support producers, both the state controlled Ecopetrol and private companies, in the search for a competitive scheme to keep viable the oil activity. It is important to explain that Ecopetrol is the main entity affected by the current pipeline tariffs and consequently the Colombian state as the main shareholder of the company, since although Ecopetrol it is true, benefits from midstream activity, it is also true that there it only acts as operator of some of the systems, and co-owner of most of them, so in this business, there are other external beneficiaries; meanwhile the adverse impact of the tariffs affects Ecopetrol as the main producer and user of the same.