Finance

Ecopetrol improved its principals financials indicators during the year 2007, as a result of its operational and administrative management, added to high international crude oil prices. Consequently, the unconsolidated net income amounted to US$2.57 billion, 52.7% above that obtained in 2006.

Income Statement

The unconsolidated operational revenue increased by 21.4%, adding up to US$11.08 billion, 72% of which were generated by local market sales and 28% by exports.

Local sales reached US$7,943 million, 41.6% above that reached in the year 2006, while exports added up to US$3,141 million, excluding the Cartagena refinery; 66% of these were generated by crude oil sales and 34% mainly by products such as fuel oil, gasoline, turbosine and naphtha.

As a result of Resolution No.180414 of March 2007, The Ministry of Mines and Energy established the procedure for payment of a subsidy to regular motor gasoline and diesel refiners and importers oil and gas companies in Colombia, retroactive to January of the
same year, Ecopetrol registered US$883 million in its operational income on account of regular gasoline and diesel subsidies.

The Petroleum Stabilization Fund (FAEP) shows in its 2007 operational income an accumulated saving of nearly US$157 million, which for the company represents deferred income (liabilities), and appreciating the value of the Fund (assets).

Nevertheless, it is noted that in the light of Decree 3238 of August 27, 2007, issued along with Law 1151 of 2007, the property rights that Ecopetrol had in FAEP became the property of the Nation, represented by the Ministry of Finance and Public Credit. Consequently,
the funds corresponding to FAEP were recorded in the company accounts only until August 2007.

Sales gross profit exceeded by 61 % that of the previous year, from US$3,165 million to US$5,099 million in 2007, while the operating income increased by 84.7%, from US$2.360 million to US$4,361 million in 2007.

Total sales cost showed a similar trend compared with the previous year, reaching US$5.985 million, 58% of which correspond to variable costs and 42% to fixed costs.

Capitalization for crude oil and natural gas production (Decree 2625 of 2000) amounted to US$214 million in 2007 ($1,179 million in 2006).

This decree was replaced by Decree 727 of March 7, 2007, and thus it was booked in the accounting until in March, which generated the overall reduction of the variable costs.

Another influencing factor was the variation of crude oil and products inventory, from US$485 million at the beginning of the year to US$679 million at the end of 2007.

Administration expenses increased by 16%, mainly on account of taxes, particularly non deductible VAT, as a result of increased crude oil sales to the Cartagena Refinery.

Non-operational activities generate greater loss, derived principally from exchange rate differences. The Ebitda ratio exceeds by three points that of the immediately preceding
year, reaching 47% in 2007. In absolute values, it is over 26.9%, recording US$5,152 million versus US$4,062 million in 2006.

General Balance Sheet

The company’s capital structure had a material change derived from the recognition of Ecogas’s debt (before was recorder memorandum accounts), the incorporation of the Cartagena Refinery corporation Sociedad Refineria de Cartagena S.A) (before property, plant and equipment), and the distribution of dividends declared by the General Shareholders Assembly in March 2007.

In 2007, (Unconsolidated Balance Sheet), current assets closed at US$7.8 billion and current liabilities added up to US$3.0 billion. The assets cover 2.6 times the current liabilities, versus 1.83 times in 2006. The increase of the current assets and current liabilities ratio is
derived mainly from the increase of investments due to capitalization process.

Total company assets as of 2007 amounted to US$23.9 billion, with an increase of $3.0 billion, that is, a 14% increase.

Total liabilities closed at US$10.6 billion, 0.1 % in adittion to 2006, due to greater deferred income (liabilities) for the recognition of Ecogas’s debt and that already mentioned about Faep, among other things. Liabilities are represented mainly in 51%, by the company’s pension plan obligation, which is 87.77% funded; and the rest corresponds to accounts payable and taxes, and estimated liabilities and provisions.

The equity closed at US$13.3 billion, which means that it increased in US$2.96 billion compared to 2006, as a result of the capitalization process, placement of shares and their additional paid-in capital, plus profits for the year 2007.

In 2007 Ecopetrol consolidated its capital investment in the Cartagena Refinery (Sociedad Refineria de Cartagena S.A.) contributing the assets that made up the old refinery. Similarly, it established the corporation Sociedad Ecodiesel Colombia S.A., with 50% equity share.
The Perú and United States incorporations were added as part of Ecopetrol’s internationalization process into the already established corporation in Brazil, which along with other companies in the sector turned to be jointly successful bidders on some exploration areas in each of those countries.

Ecopetrol consolidates financial statements with those companies where its equity share is more than 50%, such as Black Gold Re Ltda., Oleo é Gas Do Brasil Ltda., Ecopetrol Perú and América Inc.