Ecopetrol SA (EC) 2014 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Ecopetrol fourth quarter and 2014 year-end earnings call. I would now like to turn the call over Claudia Trujillo, acting head of Investor Relations. Please go ahead.

Good afternoon, everyone, and welcome to Ecopetrol's third [sic] quarter and full year 2014 earnings conference call and webcast.

Before we begin, it is important to mention that the comments by the Ecopetrol senior management could include projections of the company's future performance. These projections do not constitute any commitment as to future results, nor do they take into account risk or uncertainty that could develop. As a result, Ecopetrol assumes no responsibility in the event that future results are different from the projections on the conference call.

The call will be led by Mr. Javier Gutierrez, CEO of Ecopetrol, and also participating will be Hector Manosalva, Vice President of Development and Production; Pedro Rosales, Vice President of Downstream; Adriana Echeverri, Vice President of Growth and Strategy; Magda Manosalva, CFO; Rafael Guzman, Technical Vice President; Max Torres, Vice President of Exploration; Alberto Vargas, Financial Controller; and Thomas Rueda, CEO of Cenit.

We will begin the presentation with the milestones of the fourth quarter and the full year 2014, followed by the highlights by business segment and the financial results. We will close with the outlook for the year 2015.

I will now turn the call to Mr. Javier Gutierrez, CEO of Ecopetrol.

Thanks, Claudia. Good afternoon to all of the participants in this conference call.

I would like to begin by highlighting our achievements in 2014. In exploration, during the fourth quarter we announced the discovery of Orca and Nueva Esperanza, which are, in addition to Tibirita, Golosa, and Cacica wells, in Colombia, and Leon, operated by Repsol, and Rydberg, operated by Shell, located in the US Gulf of Mexico.

In production, after two consecutive quarters of growth, we averaged 765,000 barrels equivalent of production per day in the fourth quarter. Average production of the year reached 755,000 barrels equivalent, a reduction of 32,000 barrels compared to 2013, mainly the result of environmental and security conditions and water management constraints. Deferred production was 64,000 barrels per day.

We also closed out the year with 13 enhanced recovery pilots under execution. Proven reserves of crude oil and gas were 2,084 million barrels, with a 146% reserve replacement index. The average life of reserves increased to 8.6 years.

Let's move on the next slide. We continued strengthening the midstream segment, which shows strong financial results thanks to consolidation of the new transportation business model. In the fourth quarter, we finished increasing the capacity of the Ocensa Delta 35 project and began the operation of an additional 23,500 barrels per day of the Santiago Porvenir system.

In refining, we moved forward toward the completion of the Cartagena refinery expansion project. The segment reported better results, positive EBITDA, thanks to the higher margins and improved operational performance.

In commercialization, we were affected by the sharp drop in the price of the crude oil. Also, there was an important rise in internal fuel demand thanks to the Colombian economic growth. And we continued increasing the participation of Asian markets in our exports.

The next slide, please? Low prices, low production, and increase in costs and expenditures due to external and nonoperational factors reduced the company's financial results. The fourth quarter of 2014 was affected by higher exploratory expenditures, deterioration of all investments in assets, higher financial expenditures, and a higher effective tax rate.

All of these factors caused us to close out the period with net income of COP7.8 trillion, 41% below that of 2013, and the EBITDA was 39%, a competitive level compared to other companies in the industry.

In 2014, we successfully issued debt in the amount of $3.2 billion, and the agencies, Moody's, Fitch, and Standard and Poor's, confirmed our risk rating in foreign currency of Baa2, BBB, and BBB respectively.

We would also highlight the signing of a collective agreement with our unions for a period of four years, and Ecopetrol's confirmation as part of the Dow Jones' World Sustainability Index for four years in a row.

The new price reality has led us to design an adjusted investment budget of $7.86 billion and draw up a cost and expenditure optimization strategy for the year 2015 for a total of $3.6 billion.

Finally, the company continued making progress in revising its corporate strategy, focused on generating value and sustainability.

Let's go to the next slide, please, for a discussion of our investments. Ecopetrol's investments and its participation in the investments of the companies of the group in 2014 were $8.7 billion.

50% of the investment went to production, mainly drilling development campaigns and construction of facilities at the fields of the Llanos Orientales. 21% was for refining, primarily for modernization of the Cartagena refinery and the Barrancabermeja industrial services master plan.

60% went into exploration for the drilling of 28 A3 wells, nine appraisal wells, and six stratigraphic wells, and acquisition of 6,600 kilometers of seismic; 11% for midstream for a number of projects to increase the transportation capacity of crude and refined products and storage; and the remaining 2% into corporate projects.

Now I would like to turn over the discussion to Max Torres, our Vice President of Exploration, who will comment on the main results of his segment.

Thank you, Dr. Gutierrez. In exploration during 2014, 21 wildcat exploration wells were drilled in Colombia. Out of these, 17 wells were drilled by Ecopetrol and four wells were drilled by Hocol. The success rate is 24%, with five discoveries.

The highlights in 2014 are the first hydrocarbon discovery in the deep waters of the Colombian waters with the Orca-1 well, which is located 40 kilometers north off the coast of La Guajira, and Ecopetrol holds a 40% working interest; a significant hydrocarbon discovery in the Nueva Esperanza?1 well in the CPO-9 block in Llanos Basin, where Ecopetrol has 55% working interest and Talisman has 45% working interest.

Other discoveries made in Colombia during 2014 are the Golosa well in the Demares block in Middle Magdalena Valley, the Tibirita 1A well in the block Cano Sur, and the Cacica well, a block within the -- in the Upper Magdalena Valley.

The international activities for Ecopetrol during 2014 consisted of seven exploratory offshore wells, five in the Gulf of Mexico and two in Angola. The success rate for the international operations are 28%, with two successful wells.

The two successful Ecopetrol wells are the Leon well, operated by Repsol 60% and Ecopetrol 40%, and the Rydberg well, operated by Shell with 57.2%, in partnership with Nexen, 14.3%, and Ecopetrol 28.5%, both located in the Gulf of Mexico in the US.

Now I will leave to you Rafael Guzman, who will comment on the production results.

Thank you, Max. Looking into our production results, it shows a decrease of 4.2% in the average production of the group during 2014, reaching 755,000 barrels of oil equivalent per day.

The main factors affecting these results were, first of all, the limitations in water disposal, especially in Rubiales; second, the impacts to the infrastructure; third, the temporary reduction in production in the gas fields of Guajira due to the Gace IV 4 project; and finally the operational difficulties associated with community's blockades, which delayed the entry of new facilities and new wells.

Despite these restrictions, we managed to reverse the decreasing tendency in production, recovering from the full experience at the beginning of the year and getting back to our growth path in the last two quarters of 2014. This was driven mainly by the results in fields like Chichimene, where we reached production records, and in production of Castilla field.

In addition, we've made progress in the Akacias project, taking it to a production level above 10,000 barrels per day. In addition, we successfully executed the Gace IV project in Guajira.

Our subsidiaries increased more than 7.9 their production, supported mainly by the growth of Ecopetrol America's offshore production in the Gulf of Mexico.

With regards to the technical activities in Ecopetrol, we drilled a total of 761 development wells. We also executed 259 workovers.

In drilling, we are focused in the improvement of capital efficiency. Through this initiative, we have reached savings up to 30% in drilling costs.

Another important milestone reached during the year was the increase with our partners of our original oil in place by 4.1%, reaching 53.3 billion barrels of oil equivalent.

All these achievements were supported by the implementation of a new regional operating model for Colombia. This model will allow us to improve our control on operations, while at the same time give us a close and more effective interaction with the communities.

By the end of 2014, we are glad to announce that our net proven reserves raised up to 2,084 million barrels of oil equivalent, which represents a growth of 5.7% compared to end 2013. During the last five years, Ecopetrol has increased its net reserves by 22%, reaching an average replacement ratio of 150%, maintaining a positive growth year after year.

The reserves replacement ratio in 2014 was 146%, up from the 139% reported in 2013 and well above the industry average. Our reserves/production ratio grew to 8.6 years, which mean a 5% increase compared to 2013 rate of 8.1 years. The addition corresponds to 271 million from revisions, 34 million from our recovery program, and 50 million from extensions and discoveries, which added a total of 355 million during the period.

Looking in more detail to our improved recovery program, during 2014 close to 34 million barrels of reserves were incorporated thanks to the results of the pilots we had previously started, in addition to a much larger figure of contingent resource.

We want to highlight that, from the 21 pilots that have already been initiated within the program up to the end of 2014, 11 of them have already shown positive results in pressure and seven of them are already showing an effective oil production increase. Feasibility studies for 15 new projects were also carried out, as well as the sanction of Apiay and Suria expansion projects for water injection.

During this year, we also reached 65% advancement on the construction of the air injection pilot in Chichemene.

Finally, we are strengthening our alliances and capacities to continue our recovery program. For this, during 2014 we signed an agreement with Stanford University for research and development on heavy oil recovery. We also inaugurated our air injection laboratory in Colombia, and it's one of the most advanced of its kind in Latin America.

Now I will leave you with Thomas Rueda, who will comment on the results of the midstream sector.

Thank you, Rafael. Good afternoon. During the fourth quarter of 2014, the transported volumes increased 34,000 barrels per day versus the same period of 2013, reaching 1,233,000 barrels per day. The transported volumes increased 18,000 barrels per day versus 2013.

Crude oil pipeline transportation increased compared to the fourth quarter of 2013, mainly due to the increase in the volumes transported through the Cano Limon, Covenas, and Transandino pipelines as a result of the lower impact of the attacks against the transportation infrastructure.

The crude oil volumes transported by pipelines increased by 0.4% compared to 2013, mainly also due to higher availability of the transportation systems resulting from a lower number of attacks during the second semester.

Out of the total volumes transported during 2014, approximately 74.5% belonged to Ecopetrol.

Transportation of refined products increased by 12.3% versus the fourth quarter of 2013, mainly due to the increase in the naphtha volumes transported in the Galan Apiay system for heavy crude oil dilution. The total volume of products transported by pipelines increased by 5.8% versus 2013, also as a result of more naphtha volumes transported to Apiay for crude oil dilution.

During the year, approximately 49.6% of the total volumes transported through multipurpose pipelines belonged to Ecopetrol.

Regarding crude oil and products transportation capacity, during 2014 it increased by 60,000 barrels a day in crude oil pipelines and by 29,000 barrels per day in products pipelines.

With this, I hand over to Pedro Rosales, who will comment on the downstream results.

Thanks, Thomas. During 2014, the throughput of the Barrancabermeja refinery increased by 12,000 barrels per day compared with 2013, due to the availability and operational stability of the process units.

The gross margin of this refinery was $14.60 per barrel, $3.70 higher than the figure of 2013 as the result of lower crude oil prices and higher spreads. We took advantage of this situation by processing more crude oil.

Further more, at the end of the year the expansion and modernization of the Cartagena refinery reached 96.3% progress, highlighting the partial mechanical completion of 29 units out of 31 included in the project, which allowed starting the pre-commissioning process of these units. In this way, commissioning and startup will be made during the first half of 2015 in order to have the refinery in full operation during the second half.

Domestic sales increased in 44,000 barrels per day, 14% more than in 2013. The reasons for this growth were related to higher natural gas availability and increased thermoelectric and industrial demand of natural gas. In addition, we sold more crude oil volumes to related companies, taking advantage of transport synergies and more fuels due to the growth in the automotive sector.

The exported volume decreased in 2,400 barrels per day due to lower availability of natural gas caused by higher local sales, which were compensated by the increase in fuel oil exports.

During the last quarter of the year, a sharp decline in international oil prices impacted the price of our sales basket, which was indexed to Brent 63%, Maya 34%, and other indicators 3%.

It is important to mention the continued increase of sales to Asia, where we delivered 41% of the crude oil exported volume, and to Europe, where we delivered 15%.

Now I turn the presentation to Magda Manosalva, who will comment on the financial results for the period.

Thanks, Pedro. Please go to the next slide in order to see the main drivers that impacted the financial results for the year 2014.

Income amounted to COP7.8 trillion, 41% less compared to the year 2013. This decline is explained mainly by lower prices and production and the increase in some of our costs, in some cases related to external factors and in others related to the operation.

Revenues decreased 7%, mostly due to the reduction of $10.60 per barrel in the average price of our sales basket and to a lower sales volume of 10,000 barrels per day, mainly of crude oil.

This, however, was compensated by the positive effect on our revenues in dollars resulting from the 7% devaluation of the average exchange rate in 2014.

On the other side, variable costs decreased 2% as a combined result of a lower purchase price of $8.90 per barrel, less purchased volumes, mainly to the ANH, and the negative impact of higher amortization and deflation and higher exchange rate devaluation.

Fixed costs had an increase of 18%, mainly the result of the transportation costs under the ship or pay contracts as part of the implementation of the new transportation model, and greater maintenance costs, mainly in production and refining. It must be noted that additional costs generated by the new transportation model were offset by the operational revenues in our transport subsidiaries.

Regarding operating expenses, the increase is explained mainly by higher exploratory expenses due to a larger exploratory campaign, which represented an additional charge of COP646 million compared to 2013.

In a scenario of low crude oil prices, it was necessary to revise the value of assets, inventories, and oil investments, which resulted in impairment by a total of COP571 billion, which was partially offset by lower provision for pension obligations and the reversal of some legal provisions.

Non-operating income was deteriorated due to the impact from the devaluation of the peso on Ecopetrol's debt position and higher financial expenses resulting from the $3.2 billion increase in the stock of the company.

Midstream subsidiaries reported good results, while exploration and production subsidiaries had lower income due to the unsuccessful exploratory activity in Brazil, Angola, and the US Gulf of Mexico.

Further, Reficar reported a net loss as a result of the impairment of assets from the former refinery and the re-commissioning and commission costs of the new one.

Going now to the next slide, all of the aforementioned items led to a decrease in our pre-tax net income, and therefore to a lower income tax payment provision. In addition, mainly due to the impact of the devaluation of the value of our foreign investments, the effective tax rate increased to 40.4% in 2014 from 34.5% in 2013.

As a result, net income was COP7.8 billion and EBITDA margin 39%.

I pass now to Mr. Javier Gutierrez to present the outlook for the year 2015.

Thank you, Magda. Let's go, please, to the next slide.

With a structuring of our budget for 2015, we have managed to save approximately $3.6 billion, thanks to a variable cost structure which has benefitted from lower crude prices and a streamlining of costs and expenditures without placing operating and safety standards at risk.

We are now working at realizing additional fixed costs and expenditures reductions of up to 30%, optimization up to 25% to variable costs associated with the purchase of the hydrocarbons, and to maintain the highest throughput of the Barrancabermeja refinery, as margins make its operation at full capacity profitable.

Let's go, please, to the next slide to present our outlook for 2015. We are engaged in an offshore exploration campaign with the drilling of two wells in the Colombian Caribbean and one more on the US Gulf Coast. Additionally, we will consolidate the new structure and processes of that by precedent.

We will seek to produce 760,000 barrels per day with the greatest efficiency and at the least cost. We expect to undertake eight new enhanced recovery pilots, including the starting of air injection at the Chichimene field. We will also go forward with the analysis of investment opportunities in Mexico.

In transportation, our main goals will be the startup of operations of Castilla-Monterrey system at 300,000 barrels, and the 1.2 million barrels increase in storage capacity of Covenas.

And in refining, we will initiate the process of getting the new Cartagena refinery up and running under stable conditions by the second half of 2015, and we will complete the Barrancabermeja industrial services master plan.

We will begin reporting in accordance with international financial information standards. Finally, we expect to obtain the necessary approvals to begin the implementation of the new strategy.

Ecopetrol is a solid company that has demonstrated an important capacity for transformation and management of difficult environments with our diversified asset base and a dedicated team, which gives us assurance that we will emerge stronger from the challenge imposed on us by a low price environment to continue making a Ecopetrol a profitable and sustainable company.

I would like now to open up the session to question and answers. Thank you very much.

(Operator instructions.) Daniel Guardiola, LarrainVial.

Hi. Good afternoon. Thank you for taking my questions. I have a couple of questions. My first question is regarding leverage. During the quarter, we saw leverage reaching record highs. And if we assume that in 2015 low oil prices came to stay, we are going to see this figure increasing to levels above 2 times net debt/EBITDA. And I would like to know at what leverage levels would you guys feel comfortable with, and if you are actually planning to do some asset divestitures in order to improve your capital structure.

Hello, Daniel. Excuse me, can you repeat your answer, please -- the question?

Well, my -- sorry?

Excuse me. Can you repeat the question, please, Daniel?

Okay, of course. My question is basically I would like to know at what leverage levels would you feel comfortable with regarding net debt to EBITDA levels. And in that sense, I would like to know if you are planning to do asset divestitures during 2015 in order to improve your capital structure.

Okay. Magda Manosalva is taking the answer. Please, Magda, in relation with the leverage and -- yes.

Yes, Daniel. At this point, or by the end of the 2014, we have debt to EBITDA of 1.02%. Our rating agencies, they say that it's like a healthy level. They want around 2 or 3 times EBITDA.

So, we think that at this point we have kind of the space for having more leverage. I am awaiting [impeachment] that for the year 2015 already our EBITDA is going to be lower, but we think that we are going to be able to keep this ratio around the level the rating agencies watch for.

Sorry, just because, I mean, the connection was not good for the time being. I just wanted to cover it to check something out. Did you just say that levels of 2 to 3 times EBITDA level you should feel comfortable at?

Yes, that's the level that the rating agencies normally watch for. That's like the maximum that they usually revisit in the companies -- in companies like Ecopetrol.

But, the thing is, and this is important to understand also, Daniel, that the rating agencies not only evaluate these kind of ratios, they also have into account other kinds of assets, like for instance the size of the company, the backup we have from the government, and the kind of management we have.

So, it's not only the financial aspects that the rating agencies take into account. They have so many other assets into account.

Okay. Thank you. And just -- my second question is regarding Cenit. I would like to know, guys, what are your thoughts on a possible or a partial divestiture of Cenit during 2015?

Thomas Rueda is taking the answer for this point.

Thank you, Daniel. This is Thomas Rueda speaking here. We're not considering external financing or any strategic investments into Cenit in 2015.

The company will continue to maintain its very healthy financial situation by which it's self-funded. And there is no need for external capital to be invested into the company.

However, how it's going to look into the future, it's something that has to be considered, that strategically. And we're working very hard on the financial health of the company.

To give you some examples, we are working on capital expenditures and rationalizing those figures. We're working on operational expenditure, ensuring that the company is working on healthy levels, and we have the implements to keep the company in that situation.

What's going to happen in the short term is a big, certainly, decision that the Board needs to take in light of the review that has been taken, that has been made at a very high level. And that's, of course, something that, as management, that I wouldn't comment on.

Just to finalize, I would like to highlight that the financial results of Cenit have been very, very strong in 2015, I have to say better than expected and -- in 2014, sorry. And it's looking very good for 2015 as well.

Okay. Thank you.

Gustavo Gattass, BTG.

Hi. Good afternoon, guys. I have a couple of questions here, if I could break it out in three parts. And just to do the first one which is very quick, in the Spanish call you guys mentioned that some part of the reserve growth of last year came from moving away from paying royalty in kind and moving to royalty in cash. I was just wondering if you could quantify that for us just so that we could have an idea of how much was coming from that.

The second question that I had was we've been reading a lot of commentary from the government that they would like to have more activity at the fields, more activity in the sector, and that some kind of, let's say, big action plan was being put together to keep the industry a little bit more active. And I was wondering if you could talk a little bit about how you see that playing out for Ecopetrol and whether or not there are some kind of financial benefits coming that could stimulate a little bit more activity.

And then, my last one, probably more for Magda than anyone else. The fourth quarter ended up being a loss, and we're trying to figure out here just where Ecopetrol's results might have been under the $77.00 oil on a clean basis. So, if we look at impairment, the provision reversals, basically all that's happened, can you guys give us an idea of where you saw your clean profitability in the quarter, and where do you see a base for the results next year? Thank you.

Okay. Gustavo, in relation with the royalties' capitalization, Rafael Guzman is taking the comment about it.

Okay, Gustavo. What we have published is the divisional result in different categories that we are required to publish, to report. Part of the results in the category of the revisions are, as you mentioned, the categorizations of the gas reserves.

However, we don't want to disclose more detail than what we have given already in that. But, it is important to say, and you are quite right in saying so, the categorization of the reserves are a proportion -- a portion of those reserves that are included in dilutions, in the figure of dilutions that you see there.

Okay. Thanks.

Magda is going to comment in relation with the results, the [Q4] results without the impact of some additional factors.

Gustavo, if we have into account that, as a gain of the third quarter of 2014 we have net income of COP8.5 billion, the calculation we have made is that, with nothing of the things that happened in the last part of the year, we think that the net income would be COP10.2 billion. So, the difference is COP1.7 billion.

Okay, thanks.

Responding to your question on what would be the clean result for the year 2014 if nothing of what happened happened.

Okay, perfect.

I don't know, Gustavo, if this is enough.

No, no, it is. It is. That difference is what we were looking for.

In relation with the kind of measures the government is working with the industry to try to incent the activity, maybe the most important to mention is the ideas and the projects that Minister Gonzalez, Minister of Mines and Energy, is working with the National Hydrocarbon Agency. And some of the measures are included in the act for the national development that was just presented to the Congress recently.

And they are mainly oriented to facilitate the activities of the company to certain facilities, delivering them for the obligation to fulfill all the requirements in terms of the commitments introduced in the contracts. This is important, maybe not to eliminate but to possibly change the fulfillment of the commitments. This is part of.

Additionally, it is important to mention the fact that we are receiving from the government terms of high support to facilitate how to obtain the environmental permit. Additionally, it is also important to mention, to generate further conditions in the region, we are acting in relation with the communities and the [legal]. And additionally, it is also important to mention that the government has been totally committed with the activities of the industry.

Additionally, it is also important to mention that maybe we are very positive about the offshore activities that we are going to develop during the present year. Maybe we are going to develop a campaign for this year on three wells, maybe additional four wells for the next year, taking and considering the positive results of the Orca well in the Tayrona, doing this drilling by Petrobras.

Additionally, the government is very positive about the possibility to keep the 1 million barrels of production -- of oil production during the present year, even considering the reduce in the oil price. In that sense, additionally it is important to mention that the consortium that represents the oil companies, the National Association of Oil Companies, yes, it working very hard with the government on how to propose some additional measures to facilitate the activities of the company.

This is maybe the main idea that I can summarize in relation with the work we are developing with the national government, to continue with the activities in the year 2015.

Perfect. Thank you, guys.

David Gamboa, Tudor, Pickering, Holt.

Good afternoon, guys. I just have two quick ones more on the operational side of things. So, we saw how Chichimene broke records during the last two quarters or last months of the year 2014. I'm just wondering how can we think about this field growing in the future? Do you have any estimate of production from Chichimene for 2015, or how can we think about growth in this particular field? If you could also throw out a figure for Castilla, that would be very helpful as well.

And on the second one, you mentioned how 2015 will see international exploration. Well, I mean, exploration offshore, a well in the Gulf of Mexico and another couple in offshore Colombia. I was just thinking about Angola. Have you guys relinquished your participation in those blocks entirely, or how are you thinking about exploration in West Africa? Thanks.

Thank you, David. Rafael Guzman is taking the answer in relation with the production, and Max Torres in relation with the exploratory -- with the offshore exploratory activities. Please, Rafael?

Yes, David. As we reported, we had very good results in the Chichimene field. We have increased our production and reached production targets there.

The reason for this incremental oil is that we were able to complete our facilities, the facilities we acquired throughout this field last year. And so, the outlook for this year is to continue investments, mostly in drilling in Chichimene, to maintain the production of the field between 80,000 to 85,000 barrels per day.

Now, in Castillo, we also continue investing, both to finalize our facilities and also to continue drilling. So, we anticipate reach -- to fill the capacity of the facilities we are building. For that field, our point is to maintain a production rate between 120,000 to 130,000 barrels per day.

So, those are the two -- one of the two most important fields for us. And even in the current oil price, we are going to continue investing throughout the 2015 year to reach and maintain the levels of production I just mentioned.

Thank you, Rafael. Please, Torres?

Good afternoon, David. I will comment on the exploration efforts for 2015. You are asking about the offshore wells, the international offshore wells.

And we are going to drill one well this year in Gulf of Mexico, and we are going to drill two domestic offshore deepwater wells in Colombia. We currently are drilling one well with Anadarko here in offshore Columbia.

And essentially the effort that we put together in 2014 was quite successful. We had a 30% chance of success for the wells we drilled last year. We were referring to the Angola wells. We drilled two dry holes in Angola, unfortunately, with Statoil. And we had two successful wells in Gulf of Mexico, and also we have a successful well offshore Colombia deepwater.

So, overall we are going to continue with this push with the offshore exploration. We feel pretty good about our efforts in Gulf of Mexico, so we will continue our growth there.

And in West Africa, we are still partners in the Angola blocks with Statoil and we are looking for new opportunities in West Africa. So, overall, we will continue our growth in international exploration and the deepwater of West Africa and other parts of the world. Thank you.

Thanks a lot, guys.

Jose Bernal, BBVA.

Hi, everybody. Congratulations on the results. My question is more about the EBITDA margins. The EBITDA margin had been declining gradually, and more drastically in the fourth quarter. The management mentioned some measures they were going to implement this year to reduce some costs, variable and fixed costs. I wonder if you have any guidance for the EBITDA margins, either on a consolidated basis or for the E&P and refining business? Thank you.

Thank you, Jose. Magda is taking the answer.

Yes, Jose. The EBITDA margin at the end of 2014 was about 39%. This is a decrease. And also, what we can say for the year 2015 was we have been taking the measures to improve the costs we have.

The kind of measures we are taking we announced in December, and we said there that we are going to reduce our cost in the order of $3.5 billion for the year of 2015.

And the main reductions in costs are going to come from purchase of fuels and also from purchase of dealings. Those, I would say, are the main measures that we are going to have this year.

But, the truth is that we are going to have -- this year we are going to have low oil prices. We have in this space the price we have in the year 2013. So, already there it's going to be very -- lower than that.

And also, we are going to take additional efforts in the reduction in costs, because we are trying to -- not only working over these budgets we announced in December, which is made with $60.00 per barrel, but also we are trying to work with our guidance of price in the order of $45.00 to $50.00 per barrel. So, we think our costs are going to be very much low than the costs we have in the year 2014.

Thank you.

Thank you. This ends our Q&A for today. I will turn it back to Claudia Trujillo for closing remarks.

Thank you to all the participants in today's conference call. If you have other questions, please feel free to contact us at Investor Relations. Thank you.

Thank you for participating in today's program. This concludes the program. You may all disconnected.