Board of Directors and Ecopetrol Management Report

Letter to the Shareholders

Worth highlighting in 2007 was the association of nearly half a million Colombians as stockholders of Ecopetrol, as part of the largest democratization process in Colombian history, resulting in share sales worth $5.7 trillion (some US$2,8 billion), equivalent to 10.1% of the capital stock.

The capitalization of Ecopetrol represented a milestone for the Colombian stock market and for the future of the first company of the country, now having as partners citizens from all walks of life, residents in 32 different provinces, the capital District, and 1,092 municipalities of the country.

Beyond the visible results of the stock issue, the capitalization is a significant change of Ecopetrol S.A’s legal structure, now transformed into a mixed economy corporation.

This step engenders a significant autonomy in the budgetary, administrative and financial areas, in a framework free of limitations that had impeded the company’s equal competitive edge in global oil markets.

This capitalization should be interpreted as an additional step in the transformation of the hydrocarbon sector, activated in 2003, year in which due to the leadership of the government, the Ministry of Mines and Energy, and the President of Ecopetrol at the time, Law 1760 was issued and the foundation for many of the changes and results produced in the last five year period were laid.
The transformation began with the creation of the National Hydrocarbon Agency (ANH), entity in charge of the administration and allocation of oil resource areas,
which converted Ecopetrol in a corporation with a strictly commercial character, committed to be competitive versus other oil companies.

The changes undertaken in the year 2003, which meant the introduction of a new exploration and production contracting system in Colombia, led to greater competitiveness of the country, the consolidation of the oil industry as an attractive destination for direct foreign investment, and an unprecedented exploration activity in the last two decades, as evidenced in the figures reported by the ANH.

The increased petroleum activity evidences the presence of over one hundred companies in Colombia, where Ecopetrol has played a major role through record investments in all tiers of the hydrocarbon chain, from the exploration to the commercialization of crude and its products. Furthermore, 2007 was not only significant for Ecopetrol due to its capitalization process, but also because of the rise in the majority of the financial and operative indicators.

The results the company yielded were challenged by an international milieu of high oil prices, an increased demand from China, India and Russia, and a mayor production of alternative energy sources and biofuels.

Growth in Sales and Profits

The company’s net income in 2007 amounted to US$2.57 billion, compared with $1.68 billion obtained in 2006. By the same token, the Ebitda (income before taxes, depreciations and amortizations) was US$5.11 billion as compared with US$4.06 billion in 2006.

The revenue reaching US$11.1 billion, representing an increase of 21% vis-à-vis US$9.1 billion reported previous year. Of the revenue, foreign sales represented
28% while the remaining 72% corresponded to domestic sales.

National transfers increased too, closed in US$6,16 billion. Ecopetrol’s net worth in 2007 closed at US$13.3 billion representing an increase of US$3 billion as compared to 2006, due to the capitalization process and the profits produced during the year. The total company´s asset was US$23.9 billion, again $3 billion more than the previous year, representing an increase of 14%.