AT DECEMBER 31, 2015 AND 2014 AND OPENING BALANCE … OCSA - EF... · Oleoducto Central S. A. Financial Sta tements At December 31, 2015 and 2014 and opening balance sheet at January

Oleoducto Central S. A. Financial Sta tements

At December 31, 2015 and 2014 and opening balance sheet at January 1, 2014.

pwc

Independent auditor's report

To the shareholders of Oleoducto Central S. A.

March 15, 2016

We have audited the accompanying financial statements of Oleoducto Central S. A., which comprise the balance sheet as at 31 December 2013 and the statements of comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management's responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with the accounting and financial reporting standards accepted in Colombia, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether dueto fraud or error.

Auditor's responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the auditing standards generally accepted in Colombia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In maldng those risk assessments, the auditor considers interna] control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

• PricewaterhouseCoopers Ltda., Calle 100 No. 11A - 35, Piso 5, Bogotá, Colombia Tel: (57-1)6340555, Fax: (57-1) 2188544, www.pwc.com/co

pwc

Oleoducto Central S. A. lndependent auditor's report

March 15, 2016

We believe that the audit evidence vve have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements present fairly, in ah material respects, the financial position of Oleoducto Central S. A. as at 31 December 2015, and its financial performance and its cash flows for the year ten ended in accordance with the accounting and financial reporting standards accepted in Colombia.

Emphasis of matter

The financial statements at December 31, 2014 which are not induded in this report, and prepared under accounting principies generally accepted in Colombia in force at such date, were audited by me and I issued an unqualified opinion dated on February 12, 2015. As indicated in Note 2, the accompanying financial statements at December 31, 2014 and January 1, 2014, prepared based on the accounting and financial reporting standards accepted in Colombia, are presented only for comparison purposes. Therefore, my work with them was to selectively review the adjustments made to such statements to adapt them to the new accounting principies with the sole purpose to determine their impact on the financial statements at December 31, 2015 and not to express a separate opinion in relation to them, since it is not required.

aeclo.10 40 Ole Go 13 e• 1410-- Carlos Alberto Lloreda Public Accountant Professional Card No. 63177-T

2 Of

Oleoducto Central S. A.

Certification of the Financial Statements

March 15, 2016

The undersigned Legal Representative and Public Accountant, under whose responsibility the financial statements were prepared, certify:

That, to prepare the statements of the financial posifion at December 31, 2015 and 2014, and of the opening balance sheet at January 1, 2014; the statements of income and other comprehensive income; the statements of changes in equity, and the statements of cash flows, for the periods then ended, which in accordance with regulations are at disposal of shareholders and third parties, the assertions contained therein and the figures truthfully taken from the accounting books have been previously checked.

Such assertions, whether explicit or implicit, are the following:

Existence: Assets and fiabilities of Oleoducto Central S. A. exist on the cut-off date and the transactions recorded have taken place during the year.

Integrity: All economic events carried out have been recognized.

Rights and obligations: Assets represent probable future economic benefits and liabilifies represent probable future economic sacrifices, obtained or in charge of Oleoducto Central S. A. at the cut-off date.

Valuation: All elements have been recognized at appropriate values.

Presentation and disclosure: Economic events have been correctly classified, described and disclosed.

v_z _asen..? Sandra/Ya • e C. as Achury

P ct‘ P ic Accf ntant

sional Card No. 46803-T

Luisa Fernanda Lafaurie Rivera Legal Representative

3


Financial Statements

At December 31, 2015 and 2014 and opening balance sheet at January 1, 2014.

Contents

Statutory Auditor's Report 1 Certificaban of te Financial Statements 3

Financial Statements

Statements of Financial Position 4 Statements of Income and Other Comprehensive Income 5 Statements of Changes in Shareholders' Equity 6 Statements of Cash Flows 7 Notes to Financial Statements 8

s Achury Pu Ni Accountant

ofessional Card No. 46803-T (See attached certification)

a,* 4_1

Luisa Fernanda Lafaurie Rivera Legal Representative

(See attached certification)


Statements of Financial Position

Assets Current assets

Notes

December 31, 2015

December 31, 2014

Restated January 1,

2014 (in thousands of US dollars)

Cash and cash equivalents 8 US$ 319,395 US$ 636,123 US$ 292,035 Trade and other receivables 9 174,663 145,077 141,040 Other assets 10 15,562 18,810 5,248

509,620 800,010 438,323

Non-current assets Property, plant and equipment 11 1,565,927 1,284,354 1,137,741 Intangible assets 12 5,483 8,224 11,042

1,571,410 1,292,578 1,148,783 Total assets US$ 2,081,030 US$2,092,588 US$ 1,587,106

Liabilities and equity Current liabilities

lnterest bearing loans and borrowings 13 US$ 20,121 US$ 20,189 US$ 91 Trade and other payables 14 132,786 114,890 69,279 Income tax and current tax liabilities 15 212,911 237,848 322,259 Other financial liabilities 16 32,171 56,852 Deferred revenues 17 587 1,714 1,866

398,576 431,493 393,495 Non-current liabilities

Interest bearing loans and borrowings 13 478,796 478,249 394 Trade and other payables 14 712 Deferred revenues 17 14,260 14,260 Provisions 18 45,295 39,268 38,187 Deferred tax habilites 15 95,850 165,335 232,068

634,201 697,112 271,361 Total liabilities US$ 1,032,777 US$1,128,605 US$ 664,856

Equity 19 Subscribed and paid capital 81,714 81,714 81,714 Legal reserve 40,857 40,857 40,857 Retained earnings 861,376 796,860 799,679 Other comprehensive income 64,306 44,552

Total equity 1,048,253 963,983 922,250 Total liabilities and equity US$ 2,081,030 US$2,092,588 US$ 1,587,106

Pie accompanying notes are en integral part of the financial statements.

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Statements of Income and Other Comprehensive Income

Continued operations Notas

Year ended at December 31,

December 31, 2014 2015 Restated

(In thousands of US dollars, except net profit per share)

Revenues 20 US$ 1,467,002 US$ 1,418,800 Cost of sales 21 (220,136) (261,587)

Gross profit 1,246,866 1,157,213

Operating and projects' expenses 22 (13,013) (19,915) Administration expenses 23 (28,678) (30,467) Other operating (expenses) income, net 24 2,837 2,325 Operating profit 1,208,012 1,109,156

Finance revenues 25 59,025 4,242 Finance costs 25 (92,533) (61,287) Exchange difference 25 16,580 38,987 Profit before taxes 1,191,084 1,091,098

lncome tax expenses 15 (434,583) (365,757) Net profit for the year from continued operations US$ 756,501 US$ 725,341

Comprehensive income for the year

Other comprehensive income that will be reclassified to profit or loss in subsequent periods Net loss from cash flow hedges, net of taxes (19,144)

Other comprehensive income that will not be reclassified to profit or loss in subsequent periods Net gain for difference in foreign currency translation 38,898 44,552

Other net comprehensive income for the year 19,754 44,552 Total net comprehensive income for the year US$ 776,255 US$ 769,893

Net profit for the year per share 3 US$ 146,637 US$ 140,597

The accompanying notes are an integral part of the financio! statements.

O %°4•34-4--LCL— L sa Fernanda Lafaurie Rivera

Legal Representative (See attached certification)

Sandra amile ár. as Achury Public Accountant

essional Caíd No. 46803-T (See attached certification)

5

Sandr ami Publ'

C as Achury Acc&untant

ofessional Card No. 46803-T (See attached certification)

ag.o -1 Luisa Fernanda Lafaurie Rivera

Legal Representafive (See attached certification)


Statennents ofChanges in Shareholders' Equity

Years ended December 31, 2015 and 2014 and opening balance sheet at January 1, 2014

Subscribed and paid capital

Legal reserve

Retained earnings

Other Comprehensive

income Total equity (In thousands of US dollars)

Balance at January 1, 2014 US$ 81,714 US$ 40,857 US$ 799,679 US$ — US$ 922,250 Distribution of dividends (728,160) (728,160) Profit or loss for the year 725,341 725,341 Other comprehensive income Net gain from difference in foreign currency translation 44,552 44,552

Final balance at December 31, 2014 Restated US$ 81,714 US$ 40,857 US$ 796,860 US$ 44,552 US$ 963,983 Distribution of dividends (691,985) (691,985) Profit or loss for the year 756,501 756,501 Other comprehensive income Net loss from cash flow hedges, net of taxes (19,144) (19,144) Net gain from difference in foreign currency translation 38,898 38,898

Final balance at December 31, 2015 US$ 81,714 US$ 40,857 US$ 861,376 US$ 64,306 US$ 1,048,253

The accompanying notes are an integral pan' of the financial statements.

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Statements of Cash Flows Year ended

December 31, December 31, 2015 2014

Restated (In thousands of US dolIars)

Operating activities Net profit for the year US$ 756,501 US$ 725,341 Adjustment to reconcile net profit for the year with net cash flows:

Depreciation of property, plant and equipment 69,626 60,163 Non-capitalized consumpfion of meteríais and spares 64,806 99,257 Impairment of value of inventories 2 (114) Disposal of property, plant and equipment 370 Amortizafion of intangible assets 4,908 4,452 Recovery of costs and expenses (4) Net deferred taxes (17,722) (22,420) Income tax expense 452,305 388,177 Hedge finance expenses (54,045) 56,852 Finance costs 2,304 1,926 Exchange difference (16,580) (38,987) Changes in operating assets and liabilities:

increase of trade and other receivables (33,994) (26,777) Decrease (increase) of other assets 783 (13,705) Increase of trade and other payables 30,328 49,508 (Decrease) increase of income received in advance (991) 14,282 (Decrease) increase of other financial liabilifies 259 8,598 Decrease of income taz (446,558) (436,699)

Cash from operating activities

investing activities

812,293 869,850

Acquisition of properties, plant and equipment (391,182) (292,544) Acquisition of intangible assets (2,167) (1,634) Cash used in investing activities (393,349) (294,178)

Financing activities Loans received — 500,000 Transaction costs — (5,331) Payments of finance ease liabilifies (128) (82) Interests paid (20,000) (10,000) Dividends paid (691,985) (728,160) Cash used in financing activities (712,113) (243,573) Net (Decrease) increase cash and cash equivalents (293,169) 332,099 Effect of exchange rates fluctuations on cash and cash equivalents

held in foreign currency (23,559) 11,989 Cash and cash equivalents at the beginning of the year 636,123 292,035 Cash and cash equivalents at the end of the year US$ 319,395 US$ 636,123

The accompanying notes are en integral part of the financial statements.

uisa Femanda Lafaurie Rivera Legal Representative

(See attached certification)

Sandra mi e e chury ublic •unt

P • essional Card No. 46803-T (See attached certification)

7


Notes to the Financial Statements

At December 31, 2015 and 2014 and opening balance sheet at January 1,2014

(Amounts expressed in thousands of US dollars, except for foreign currency amounts, exchange rates and the par yalue per share)

1. Corporate information

Oleoducto Central S.A. (the Company) is a mixed-economic company incorporated in accordance with Colombian laws by means of Public Deed No. 4747 of December 14, 1994 at the Notary's Office No. 38 of Bogotá, D.C. lis life period extends up to December 31, 2093. lis corporate purpose includes designing, constructing, operating, managing, commercially exploifing and ownership of a public-use oil transportation system and related facilities without any limitation, whose starting point is located at the Cusiana and Cupiagua stations, in the Department of Casanare, and whose ending point is located in the Coveñas shipment port, in the municipal jurisdicfions of San Antero, Department of Córdoba, and Coveñas, Department of Sucre. Such purpose also includes designing, constructing, operating and managing maritime oil ports or terminals; and providing, directly or indirectly, services related to port operation, particularly storage, terrestrial, maritime management and crude transportation and loading.

The pipeline consists of six pumping stations, one pressure reduction station, one maritime terminal, 836 kilometers of pipeline on shore and 12 kilometers off shore, a base for the coordination of maintenance activities, tanks to store up to five million barreis, and a control center.

To carry out the transportation operation, it has a communication system allowing full control thereof through instruments located along the pipeline and at the stations. This permits controlling the availability of crude, its location and the verification of commitrnents in crude transportation.

The main office of Oleoducto Central S.A. is located in Bogotá, Colombia The Company belongs to Ecopetrol Business Group, which plays a controlling posifion through Cenit Transporte y Logística de Hidrocarburos S.A.S.

2. Basis for preparation

2.1 Statement of compliance and authorization of the financial statements

The Company's financial statements have been prepared in accordance with the accounting and financial information principies and standards accepted in Colombia, based on International Financial Reporting Standards (IFRS), along with their interpretafions, conceptual reference framework, basis for conclusions and application guidelines authorized and issued by the Internafional Accounting Standards Board (IASB) at December 31, 2012 and disclosed in Spanish in August 2013; and other legal provisions applicable to entities supervised and/or controlled by the Colombian General Accounting Office, which may differ in certain aspects from those established by other state control agencies.

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Notes to the Financial Statements (continued)

2. Basis of preparation (continued)

The accompanying financial statements at December 31, 2014 and at January 1, 2014 prepared based on accounting and financial reporting standards accepted in Colombia, are presented for comparative purposes only.

The financial statements at December 31, 2015 were prepared by the Company's management and approved by the Board of Directors on February 19, 2016, for their subsequent approval by the General Shareholders' Meeting on March 15, 2016.

2.2. Basis of measurement

The Company's financial statements have been prepared based on the historical cost, except for financial assets at fair value through profit and loss and/or in other comprehensive income, that are valued at their fair value at each period closing.

2.3. Functional currency and presentation currency

Items included in these financial statements are measured in US dollars, which is the currency of the Company's primary economic environment in which it operates, and in addition, cash is also generated and used in this currency, and presented the same currency.

2.4.Foreign currency

Upon preparing the financial statements, transactions in a currency other than the Company's funcfional currency are recorded using exchange rates prevailing at the dates of the transacfions. At the end of each period, monetary items in foreign currency are translated at exchange rates prevailing at that date and exchange differences arising in the translation are recognized in the net financial result. Non-monetary items recorded at fair value, and denominated in a foreign currency, are translated at the exchange rate effective prevailing at the date in which fair value was determined.

Gains and losses on exchange differences related to loans and cash and cash equivalents are presented in the losses and profits account in caption "Financial income or financial costs." Remaining losses and gains on exchange differences are presented as exchange difference.

2.5.Classifying assets and liabilities into current and non-current

In the Statement of Financial Position, assets and liabilities are classified based on their maturity. Current assets and liabilities are those with a maturity not exceeding twelve months, and non-current assets and liabilities are those with a maturity exceeding twelve months.

2.6.Accounting period

Until December 2012, the term of each accounting period was annual, le., at December 31 of each year. Since 2013, by means of Public Deed No. 238 dated February 1, 2013, registered before the Chamber of Commerce on February 5, 2013, the Company amended and unified its corporate bylaws. Among other matters, by means of such amendment, it was agreed to change accounts cut-off dates to prepare and disclose general purpose financial statements. In this regard, they will be prepared semi-annually as of 2013, i.e., at June 30 and at December 31 each year; consequently, the Company has to make the accounts' cut-off, and prepare and disclose lis financial statements.

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Oleoducto Central S. A. Notes to the Financial Statements (continued)

2. Basis of preparation (continued)

Additionally, a statutory amendment was approved by means of Minutes No. 87 at the general shareholders' meeting held on March 4, 2015. Such amendment consists of a provisional &t'ole indicating that an accounts cut-off will be made at September 30, 2015; therefore, general purpose financial statements will be presented at such date.

3. Summary of significant accounting policies

Below, the significant accounting policies consistently applied by the Company in the preparation of its financial statements in ah l periods are presented:

3.1. Financial instruments

The classification of a financial instrument depends on the nature and purpose of the financial assets and is determined in the initial recognition. All regular purchases or sales of financial assets are recognized and derecognized at the transaction date. Regular purchases or sales are all those purchases or sales of financial assets requiring the delivery of assets within the time framework established by regulafions or market agreements.

Financial assets and liabilities are initially measured at their fair value. Transacfion costs directly attributable to the acquisition or issue of financial assets and liabilities (other than financial assets at fair value through profit and loas) are added or subtracted from the fair value of the financial assets and liabilities, as réquired, in the initial recognition. Transaction costs directly attributable to the acquisition of financial assets and liabilities at fair value through profit and losa are recognized immediately in the statement of income.

Financial assets at a fair value through profit or loss and with changes in other comprehensive income will be recorded subsequently at their fair value. Instruments at amortized costs, loans and trade receivables, other receivables and financial assets held to maturity will be accounted at their amortized cost in accordance with the effective interest rate method.

Fair value

Fair value hierarchy is based on the information level available in the market, which includes assurance of liquidity, availability of exchange prices or indicators generated by market operafions (rates, curves, volatilities and other valuation variables required).

• Level 1: (Unadjusted) quoted prices in active markets for identical assets and liabilities. For the Company, Level 1 includes actively traded securities.

• Level 2: inputs other than Level 1 which are observable, either directly or indirectly. For the Company, Level 2 inputs include prices of similar assets, prices obtained through quotations of stock exchange brokers, and prices that may be substantially corroborated with other observable data with the same term of the contract.

• Level 3: Unobservable inputs. The Company does not use Level 3 for any of its recurring measurements at fair value. Level 3 may be necessary to determine the fair value associated with certain non-recurring measurements of non-financial assets and liabilities. The Company uses Level 3 to determine the fair value of specific non-recurring, non-financial assets.

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3. Summary of significant accounting policies (continued)

Effective interest rate method

The effective interest rate method is used to calculate the amortized cost of a financial instrument and the distribution of financial income throughout the relevant period. The effective interest rate is the discount rafe which exactly matches estimated cash flows receivable or payable (including ah l fees, transaction costs and other premiums or discounts that are included in calculating the effective interest rate) over the expected life of the financial instrument (or when necessary, within a shorter period) with the net carrying amount on the initial recognition.

Impairment

Financial assets at amortized cost are evaluated by impairment indicators at the end of each reporting period. It is considered that financial assets have been impaired when there is objective evidence that, as a result of one or more events occurring after the initial recogniflon, estimated future cash flows of the asset have been affected. The impairment loss of financial assets recorded at cost is the difference between the carrying amount and the present value of estimated future cash flows of the asset, discounted at the original effective interest rate of the financial asset.

Derecogniflon of financial assets and liabilities

A financial asset is derecognized only when contractual rights to the cash flows of the financial asset expire and risks and rewards of financial asset ownership are substantially transferred to another entity. if all risks and benefits inherent to the ownership are not transferred or substantially retained and the control of the asset transferred continues to be retained, the interest in the asset and the associated liability for the amounts to be paid are recognized. If all risks and rewards inherent to the ownership of a transferred financial asset are substantially retained, the financial asset, as well as a collateral loan for income received will continue to be recognized.

Regarding fully derecognition of financial assets and financial liabilities, the difference between the carrying amount and the sum of the consideration received and receivable, as well as accumulated profit or loss that had been recognized in other comprehensive income and accumulated in equity, will be recognized in the Statement of Income.

3.1.1. Cash and cash equivalents

Cash and cash equivalents consist of financial investments and special deposits maturing within ninety (90) days as of their acquisition date and with a low level of risk in changes in their value.

3.1.2. Financial assets at fair value through profit or loss

Financial assets at fair value through profit or losa are financial assets are financial assets acquired mainly to be sold in the short term. Financial assets at fair value through profit and loss are recognized at fair value gains or losses arising from the re-measurement are recognized in the period result.

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3.1.3. Loans and receivables

These are financial assets with fixed or determinable payments, which are not quoted in an active market They are classified under current assets, except for maturifies higher than twelve months as of the date of the balance sheet, which are classified as non-current assets. Loans and receivables include trade and other receivables initially measured at fair value and subsequently at their amortized cost, by using the effective interest method.

3.1.4. Financial liabilities and payables

Financial liabilities correspond to financing sources obtained by the Company through bank loans and bond issues, payables to suppliers and creditors.

Bank loans and bond issues are initially recognized at their fair value, net of transaction costs incurred. The difference between the amount received and its principal value is recognized in profit or loss for the period during the amortization time of the financial obligation by using the effective interest rate method.

Financial obligations are classified as current liabilities unless the Company has an unconditional right to defer settlement for at least twelve months after the date of the statement of financial posifion.

Payables to suppliers and creditors are short-term financial liabilities carried at nominal value, as they do not differ significantly from their fair value.

3.1.5. Derivative instruments

The Company may execute financial hedging agreements to protect itself from fluctuations in prices of crude oil, products, exchange rates and interest rates. The Company does not use these financial instruments for speculative purposes. Control acfivities have been established to evaluate, approve and supervise operations of derivafive financial instruments.

To evaluate the effectiveness of these hedges, their results must be within the range of 80% to 125% of the fair value established in the hedge. In accordance with requirements, hedge accounting is applied and the impact concerning fair value is recognized directly in other comprehensive income.

3.1.6. Hedge accounting

As established in IAS 39 "Financial lnstruments: Recognifion and Measurement", the Company establishes the requirements for hedge accounfing:

a) At the beginning of the hedge relationship, a designation and formal documentation of the hedge relationship and the objective and strategy of the Company's risks management to undertake the hedge exist. This documentafion will include the identification of the hedging instrument, the item or transaction hedged, the nature of the risk that is being hedged, and the form in which the enfity will measure the hedging instrument effecfiveness to offset the exposure to changes in the fair value of the item hedged or changes in cash flows attributable to the risk hedged.

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b) The hedge is expected to be highly effective in offsetting changes in the fair value or cash flows attributable to the risk hedged, thus being consistent with the risk management strategy for such hedging relafionship that has been initially documented.

c) Regarding cash flow hedges, the foreseen transaction subject matter to the hedge must be highly probable and also being exposed to cash flows variations that, could finally affect profit or loss.

d) Hedge effectiveness may be reliably measured, i.e., the fair value or cash flows of the ítem hedged, which are attributable to the risk hedged and the fair value of the hedging instrument, could be reliably measu red.

e) Hedging is evaluated under a going concern context; it could be actually concluded that has been highly effective throughout ah l periods for which it has been designated.

The Company may select a method to evaluate the effectiveness of hedges. The method adopted by the Company depends on the risk management strategy. The documentation shall include the hedging strategy followed by the entity as well as the procedures to evaluate effectiveness. These procedures will establish if the evaluaflon includes all gains of the hedging instrument, or if the temporary value of the instrument is excluded.

To meet hedge accounting requirements, the hedge must relate to a risk specifically designated and identified, and not simply to general risks, and affect Company's results.

The hedge is expected to be highly effective in offsetting changes in the fair value or cash flows attributable to the risk hedged, thus being consistent with the risk management strategy for such hedging relafionship that has been initially documented.

Where the Company does not meet the requirements of hedge effectiveness, it will suspend the applicaflon of hedge accounting as of the last date on which compliance with hedge effectiveness requirements was demonstrated. However, if the Company identifies the event or change in the circumstances which caused the hedging relationship to cease compliance with effectiveness criteria and demonstrates that the hedge was effective before occurrence of the event or change in the circumstances, it will suspend the application of the hedge as of the same date of the event or change of circumstances.

The Company may opt for three types of hedging relationships:

a) Fair value hedge: This is a hedge of the exposure to changes in fair value of recognized assets or liabilities or unrecognized firm commitments, or a component of these items, which could be attributed to a specific risk and could affect profit or loss for the period.

b) Cash flow hedge: This is a hedge of the exposure of cash flows attributable to a specific risk associated with a recognized asset or liability or a component thereof (such as the entirety or a portion of the future payments of interest of a variable rate debt), or a highly probable foreseen transaction, which could affect profit or loss for the period.

c) Net investment hedging of a foreign operation as defined by IAS 21.

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3.2. Property, plant and equipment

Recognition and measurement

Property, plant and equipment are presented at cost, including the abandonment or decommissioning cost, less accumulated depreciation and accumulated impairment losses.

Ah l costs directly attributable to the location of the asset in place and conditions necessary for its operating in the manner intended by the Company are deemed as capitalized costs. Such costs are mainly at: a) its purchase price, including importation duties and non-recoverable indirect taxes, b) costs of employee benefits arising directly from construction or acquisition, c) ah l costs directly attributable to the location of the asset in place and conditions necessary so it may operate in the manner intended by the management, d) interest costs on loans attributable to the acquisition or construction of assets, and e) initial estimate of decommissioning and abandonment costs of the asset.

Significant spare parts and permanent maintenance equipment that the Company expects to use during more than one period are recognized as property, plant and equipment, and will be recognized as expense when consumed.

Any gain or loss on rehrement of any element of property, plant and equipment is recognized in results of the respective period.

Subsequent expenditures

Ah l expenditures made on existing assets in order to increase or extend expected initial useful life, increase productivity or productive efficiency, allow a significant reduction of operating costs, or replace a part or a component of an asset considered critica, for the operation are considered as additions or improvements.

Expenses for repairs, preservation or maintenance of ordinary nature are charged to period results which they are produced in. However, expenditures associated with overhaul are capitalized.

Depreciation

Property, plant and equipment are depreciated according to the straight une method over their estimated useful life. Useful lives are updated annually considering technical reasons such as: Additions or improvements (upon replacement of parts or crifical components for asset operation), technological advances, obsolescence or other factors. The effect of these changes is recognized as of the accounting period in which they occur. Depreciation of assets starts when they are under conditions of use.

The useful life is determined under foreseen asset use criteria, its expected physical wear and tear, technical or commercial obsolescence, and legal limits or restrictions of asset use. The estimated useful lives are within the following ranges:

Ducts, networks and lines 32 — 50 years Buildings 23 — 26 years Transportation equipment 5 — 7 years Fluvial equipment 5— 15 years Other computers equipment 5— 13 years

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Land is recorded separately from buildings or facilities and has an indefinite useful life; therefore, it is not subject to depreciation. The useful life of leased assets depends on contract validity.

Depreciation methods and useful lives are reviewed annually and then adjusted, if necessary.

3.3 Capitalization of borrowing costs

Loan costs related to the acquisition, construction or production of a qualifying asset requiring a substantial period of time to be ready for use are capitalized as part of the cost of such asset where it is probable that future economic benefits will return to the Company and may be reliably measured. Other interest costs are recognized as financial expenses in the period incurred, thus complying with IAS 23 provisions.

The income earned from temporary investment in specific loans pending outstanding to be consumed in qualifying assets is deducted for loans eligible for capitalization.

All other borrowing costs are recognized in the statement of income for the period in which they are incurred.

3.4 Intangibles

Intangible assets acquired separately are carried at cost less accumulated amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis in accordance with their estimated useful lives.

Intangible assets with finite useful lives are amortized over their economic useful lives and are reviewed to determine whether any value impairment has occurred when there is any indicafion that the intangible asset might have been impaired. The amortization period and method for an intangible asset with a finite useful life are reviewed at least at each period closing of each reporting period. Changes in the expected useful life or in the expected consumption pattern of the asset are recorded when the amortization method or term is changed, as appropriate, and are prospectively treated as changes in accounhng estimates. The amortization expense of intangible assets with finite useful lives is recognized in the statement of income as expenses which is consistent with the function of the intangible assets.

Acquired software licenses are capitalized based on costs incurred to acquire and bring the specific program to use. These costs are amortized over their estimated useful lives of 3 years. The port concession is included within the heading of other intangibles with an average useful life of 20 years.

Regarding recognition of intangible assets, the Company will evaluate the probability of obtaining future economic benefits by using reasonable and well-founded assumptions which represent the best eshmates of management in respect to the set of economic conditions that will exist over the useful life of the asset. Its judgment will also be used to evaluate the degree of certainty associated with the flow of future economic benefits attributable to Me use of the asset based on evidence available at the time of initial recognition.

3.5 Leases

Leases are classified as finance leases where all risks and rewards of ownership are substantially transferred to the lessee under the lease terms. AH other leases are classified as operating leases.

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Assets held under finance leases where the Company is the lessee, are recognized at the lower value between the fair value at commencement of the lease and the present value of minimum lease payments. The liability corresponding to the lessor is included in the statement of financial position as a finance lease liability.

Lease payments are apportioned between the finance charge and reducfions of outstanding liability to produce a constant interest rate on the remaining balance of the liability. Financial expenses are charged directly to profit or loss.

Lease payments of operating leases are charged to profit or loss by using the straight-line method during the corresponding lease term, provided that other systematic basis of assessment proves to better reflect the partem of lease benefits for the user. Contingent rents are recognized as expenses in the periods in which they are incurred.

3.6 Impairment of assets

In order to assess the recoverability of tangible assets and intangible assets, their carrying amount is compared to the recoverable amount at least on the period closing date or before, in the event of identifying indications of that an asset may be impaired.

To analyze the impairment, assets are grouped in cash generating units (CGU), provided that such assets, individually considered, do not generate any cash flows which, to a great extent, are independent from those generated by other assets or CGU. Grouping assets in various CGU implies professional judgment and taking into consideration, among other parameters, business segments.

The Company has one single cash generating unit (CGU), corresponding to the crude oil transportation system.

The recoverable amount is the higher amount between fair value less costs of sales and the value in use. Wherever the recoverable amount of an asset (or a CGU) is less than its net carrying amount, its carrying amount (or CGU) is reduced to its recoverable amount, thus recognizing an impairment loss as an expense.

The value in use is estimated as the sum of future discounted cash flows adjusted to the estimated risk. Estimates of future cash flows used to assess the impairment of assets are based on commodity price projections, supply and demand, and product margins.

Upon recognizing an impairment loss, ffie future amortizafion expense is estimated based on the adjusted recoverable amount.

Impairment losses may be reversed only if reversion is related to a change in estimates used after recognition of the impairment loss. Such reversions shall not exceed the carrying amount of depreciation or amortization of net assets that would have been esfimated if the impairment had never been recognized.

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3.7.Provisions and contingent liabilities

Provisions are recognized when the Company has a present obligation (legal or constructive) resulting from a past event and there is probability that outflows will be required to settle the obligation and the value thereof may be reliably measured.

The amount recognized as a provision is the best estimate of the outflows required to settle a present obligation at the end of the reporting period, taking relevant risks and uncertainfles into consideration.

Contingent liabilities are not recognized in the statement of financial posiflon but are subject to disclosure in the explanatory notes when there is probability that outflows will be required, including those whose value cannot be estimated.

It is generally accepted that all provisions are contingent as the time when they are due or the respective amount is uncertain. The term "contingent" is used to for assets and liabilities not recognized in the financial statements because their existence will be only confirmed upon occurrence, or non-occurrence of one or more uncertain future events not entirely under Company's control.

Asset retirement obliqation

Liabilities associated with the retirement of assets are recognized when the Company has obligations, legal or construcflve, related to the retirement of pipelines, real properties and equipment. Such liabilities shall be recognized by applying the discounted cash flows technique and taking the useful life of the relevant asset into consideration. Should accurately estimating the provision during the period in which the obligation arises is not possible, then the provision shall be recognized at the moment where there are enough elements to make the best estimate.

The carrying amount of the provision is revised and adjusted on an annual basis considering changes in the variables used to estimate it. The financial cost of re-measurement of such liabilities is recognized in profit or loss for the period as a financial expense.

3.8.Income taz

The income tax expense is comprised by the income tax payable for the current period (including, when applicable, income tax and income tax for equality - CREE) as well as the effects of deferred taxes in each period.

Current taxes and deferred taxes will be recognized in the statement of income, except where related to items in other comprehensive income or directly in equity, in which case, the current tax or deferred tax will also be recognized in the other comprehensive income or directly in equity, respectively.

3.8.1. Current tax

The Company determines the provision for income tax and income tax for equality —CREE, based on the higher amount between taxable income or presumptive income (the minimum of estimated profitability established law to quantify and settle income tax). Taxable income differs from the income reported in the comprehensive statement of income dueto taxable or deductible revenue or expense items in different taxable periods, special tax deductions, tax losses and recorded items that, according to tax regulations applicable in each jurisdiction, are deemed as non-taxable or non-deductible.

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The current tax is calculated by using tax rates enacted or substantially enacted at the reporting date.

3.8.2. Deferred taxes

The deferred tax is recognized by using the liability method, based on temporary differences between the tax basis and the carrying amount of assets and liabilities included in the financial statements. The deferred tax liability is recognized for ah l temporary tax differences. The deferred tax asset is recognized for all deductible temporary differences and tax losses carry forwards, provided there is probability that the Company will have future tax income against which such deductible temporary differences may be offset.

The Colombian General Accounting Office, by means of the filed communication CGN No.20162000000781 of January 18, 2016, determined that the Company should not apply Paragraphs 38-45 of IAS 12 "Income Taxes" , stating that the deferred tax from the variations in the exchange rate resulting from comparing assets and liabilities in terms of its functional currency (US dallar) with the tax bases in a different currency (Colombian peso) should not be recognized in the financial statements.

The effect of not applying Paragraph 41 of IAS 12 in income tax at December 31, 2014 is of US$41,554, and US$44,278 in 2015.

Deferred tax assets and liabilities are measured using tax rates expected to be applicable during the period in which the assets will be realized or the liability will be settled, pursuant to tax regulations in force during each period.

The carrying amount of a deferred tax asset is reviewed at the closing date of each reporting period and then reduced, provided that Diere is probability that the Company will not have enough future taxable gains that allow recovering the asset, totally or partially.

Deferred taxes are not recognized if they arise from the inifial recognition of an asset or a liability in a transaction (except when they arise from a business combination) not having an impact on the accounting income or on the tax income when it occurs.

3.9.Revenue recognition

Revenues from transportation services are calculated at the fair value of the consideration received or receivable. Revenues are reduced based on discounts arrebates and other similar allowances granted to customers.

Revenues from transportation services are recognized upon transport and deliver products to the purchaser pursuant to selkng terms and conditions. In ah l other cases, revenues are recognized when earned and the true, probable and quanfifiable right to demand payment arises.

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The transaction result may be esfimated reliably when ah l of the following conditions are met:

• The amount of revenue can be measured reliably. • It is probable that the economic benefits associated with the transaction will flow to the entity.

The stage of completion of the transaction at the end of the reporting period may be measured reliably.

• Costs incurred for the transaction and the costs to complete the transaction can be measured reliably.

In all other cases, revenue is recognized when, giving rise to an actual, probable and quantifiable right to demand payment in accordance with IAS 18 "Revenue".

Revenue from delinquency in Interests in collecfion of receivables is recognized following prudence and realization concepts.

Financial revenues are recognized in the statement of income for the period in which they are generated.

Ship-or-pay transactions are recorded as revenue regardless whether transport of total crude oil was effected or not. Ship-and-pay transactions are carried as revenue in the period where transportation is completed.

Under contracts with a term to offset, the revenue is deemed realized upon satisfaction of conditions set forth in each of them.

3.10 Costs and expenses

The Company recognizes its costs and expenses to the extent that economic events occur in such way that such costs and expenses are registered in the accounting period.

Costs and expenses are individually presented by function and detailing, in the relevant notes, the composition of cost of sales and expenses related to administrafion, operafion, projects and other expenses activities.

3.11 Earnings per share

The earnings per share are calculated upon dividing the net profit for de year attributable to shareholders by the weighted average of outstanding ordinary shares during the period.

There were no transactions with ordinary shares between the date of the reporting period and the issue date of these financial statements.

3.12 Cash flows

The statement of cash flows reports cash generation by (operating, investing and financing) activities during a given period. Classification of cash flows according to the aforementioned activities provides information that enables users to assess the impact on the company's financial position, as well as on the final amount of cash and cash equivalents.

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Under international standards, the Company may report its cash flows of transactions by using one of the following methods:

• Direct method: It consists of presenting separately the majar classes of gross cash receipts and gross payments.

• Indirect method: whereby profit or loss is adjusted for the effects of noncash transactions, any deferrals or accruals of past or future operating cash receipts or payments, and items of income or expense associated with investing or financing cash flows.

The Company presents its statements of cash flows under the indirect method.

The main categories include:

Operating activities are the principal revenue-producing activities of Ocensa, such as cash receipts from the rendering of services, cash payments to suppliers for goods and services, cash payments to employees, cash payments of income tax, i.e., ah l those revenue-producing activities performed by the Company.

Investing activities are the expenditures that give rise to the recognifion of an asset in the statement of financial position, such as cash payments, cash receipts from the acquisition of property, plant and equipment, intangible assets and other long-term assets, cash advances and loans to third parties or cash receipts (other than transactions by financial enfifies).

Financing activities are the activities that result in changes in the size and composition of the contributed capital and borrowings of the entity, such as cash proceeds from issuing shares, payments to shareholders or cash repayments of amounts borrowed.

Foreign currency cash flows

Cash flows from transactions in foreign currency will be translated into the functional currency by applying the amount in foreign currency the exchange rate in force at the date of the cash flow.

4. First-time Adoption of the Accounting and Financial Information Standards — NCIF

As part of the adoption process of the International Financial Reporting Standards (hereinafter "IFRS"), as provided by Act 1314 of 2009, Regulatory Decree 2784 of December 2012 and Decrees 3023 and 3024 of 2013 issued in Colombia, the Company was classified as belonging to Group 1 of preparers of financial information and therefore, the issue of its first financial statements under International Financial Reporting Standards is at June 30, 2015 and the opening balance sheet at January 1, 2014, with 2014 as its transition period.

In the Company's opening balance sheet, the functional currency is the Colombian pesa For comparison purposes, the figures were translated at the closing rate of May 2014, the date on which the Company determined that its functional currency was the US dollar.

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4. First-time Adoption of the Accounting and Financial Information Standards — NCIF (continued)

For the preparation of these financial statements, in accordance with IFRS 1 "First-time Adoption of International Financial Reporting Standards" (IFRS 1), the following optional and mandatory exemptions have been applied to the retroacfive applicafion of the IFRS.

4.1. Exemptions to the retroactive application elected by the Company

(a) Use of the fair value as deemed cost for property, plant and equipment— The exemption of IFRS 1 permits the use of the fair value at the transition date to IFRS as deemed cost for property, plant and equipment, intangible assets and investment properties. IFRS 1 establishes the revaluation under the previous Accounting Principies Generally Accepted issued by the Colombian General Accounting Office (RCP) at the transition date or before, may be used as deemed cost at the revaluation date, if at that date it was substanfially comparable:

• at fair value; or • at depreciated cost according to IFRS.

For land, the deemed cost used in the opening balance sheet was at fair value, which was determined by means of the valuation made by independent external experts, in accordance with the requirements established by the International Valuation Standards.

The useful lives of fixed assets were determined with evaluations and technical support of the Company's operating areas; recalculations were made of accumulated depreciation based on these new useful lives; such effects were recognized in the opening balance sheet. For smaller elements in property, plant and equipment, such as furniture and fixtures, computer and transportation equipment, the Company has considered cost depreciated or revalued under RCP as deemed cost at the transition date, as ¡lis comparable with its depreciated cost in accordance with IFRS. See Note 4.4 (4).

(b) Decommissioning liabilities included in the cost of property, plant and equipment— An entity which adopts the IFRSs for the first time may choose upon not meeting the requirements of IFRIC 1 for changes in decommissioning liabilities, restoration and other similar ones. Therefore, the Company may:

i. Measure the liability on the transition date to IFRS in accordance with IAS 37;

To the extent that the liability is within the scope of the IFRIC 1, estimate the amount that would have been included in the cost of the corresponding asset when the liability arose for the first time, by means of the discount of the liability at that date, using lis best estimate of the historical discount rate, adjusted for the risk that would have been applied for that liability along the corresponding period; and

u. Calculate accumulated depreciation on this amount, up to the date of transition to the IFRS, on the basis of the current estimate of the useful life of the asset, using the depreciation policy adopted by the entity in accordance with the IFRS.

The Company opted to apply this exempfion and measure at the transition date the abandonment costs liabilities, and for the corresponding asset, estimate the initial cost of the asset and depreciate it at the transition date. See Note 4.4.

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4. First-time Adoption of the Accounting and Financial Information Standards — NCIF (continued)

(c) Borrowing costs - IFRS 1 allows the Company to opt for capitalizing borrowing costs incurred for the construction of any qualifying asset; or any date before the transition date may be designated and apply the standard of borrowing costs related with ah l qualifying assets so that the capitalization date is that date or a subsequent date.

The Cornpany opted for applying this exemption and adopted as a policy the capitalization of borrowing costs in accordance with IAS 23 as of the transition date, January 1, 2014.

(d) Fair value measurement of financial assets or financial liabilities at initial recognition — The Company prospectively applied the fair value measurement of financial assets and liabilities at the transition date.

(e) Financial assets or intangible assets accounted in accordance with IFRIC 12 "Service Concession Arrangements"— The Company that adopts for the first time, may apply the transitory provisions of the IFRIC 12.

The Company decided to use this exemption and recognizes in its financial position the intangible asset for ports concession.

4.2. Voluntary exemptions not elected by the Company

Voluntary exemptions established by IFRS 1 which were not applied by the Company, are the following:

(a) Designation of financial instruments previously recognized — The Company will classify its financial instruments under the categories defined by the IFRS, considering the events and circumstances existing at the transition date;

(b) Employee benefits— The Company does not have employee benefits in accordance with IAS 19;

(c) Business combinations — IFRS 3 may be applied prospectively from the transition date or from the specific date preceding the transition; in any case, the application of this exemption has impacts regarding the consolidated financial statements and therefore, does not apply for the Company;

Share-based payments— the Company makes no share-based payments;

Insurance contracts — not relevant to the Company's acfivifies;

Finanbe lease contracts — The accounting treatment that the Company has been applying to its lease contracts is consistent with the parameters established by the IFRS;

Cumulative translation differences — The application of this exemption has impacts related to the consolidated financial statements; therefore, it does not apply to the Company;

Assets and liabilities in subsidiarias, joint controlled entities and associates — The application of this exemption has impacts related to the consolidated financial statements; therefore, it does not apply for the Company;

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4 First-time adoption of the Accounting and Financial Information Standards — NCIF (continued)

(i) Compound financial instrumente — The Company has no financial instruments of this type;

Transfers of assets from customers — The Company has not identified transactions of transfers of assets from customers; and

(k) Severe hyperinflation — The Colombian economy which is where the Company develops its main activifies, is not a hyperinflationary economy.

4.3. Mandatory exceptions

Mandatory exceptions applicable under IFRS 1 were considered in the transition of the Company's financial statements taking the following into account:

(a) Derecognition of financial assets and financial liabilities

The Company did not identify situations that involve differences in derecognition of financial assets and financial liabilifies between IFRS and the Colombian GAAP.

(b) Hedge accounting

The Company will apply the hedge accounting as of the transaction date, only for hedging relationships that meet the requirements established in IAS 39 "Financial Instruments: Recognition and Measuremenr. The documentation required will not be retrospectively reconstructed.

(c) Classification and valuation of financial assets

The determination of financial assets and financial liabilities that should be measured at amortized cost was made on the basis of the events and circumstances existing at the date of transition lo IFRS.

(d) Embedded derivatives— The Company did not identify any embedded derivafives.

(e) Accounting estimates — esfimates made by ffie Company for the recognition of provisions under Colombian GAAP are consistent with the IFRS.

4.4. Reconciliation of the statement of financial position

In accordance with the requirements of IFRS 1, an entity should reconcile the balances of its equity and statement of comprehensive income from previous periods, considering tal the most recent annual financial statements of the Company should be taken.

The following reconciliations show the quantification of the impact of the transition te the NCIFs on the financial position.

The reconciliation provides the impact of the transition with the following details:

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4. First-time adoption of the Accounting and Financial Information Standards — NCIF (continued)

Reconciliation of equity at December 31 and January 1, 2014:

December 31, 2014

January 1, 2014

Equity under previous GAAP US$ 4,056,491 US$ 4,208,349 Deferred charges (1) (5,504) (7,625) Deferred tax (2) (186,610) (232,296) Finance lease (3) (108) (75) Property, plant and equipment (4) (2,903,211) (3,045,205) Revenues (5) (898) (898) Hedges (6) (2,579) Exchange difference 6,402

Equity under NCIF US$ 963,983 US$ 922,250

(1) Deferred charges: The requirements of the Conceptual Framework were applied for the opening balance sheet on the definifion of assets as a "resource controlled by the entity as a result of past events, of which the entity expects to obtain, in the future, economic benefits"; and IAS 38 "Intangible Assets", "does not preclude an entity from recognizing a prepayment as an asset, when payment for goods has been made in advance of the entity obtaining a right to access those assets". The items designated as deferred charges do not meet the definition established in the NCIF as asset or as prepayments. The Company does not have access right to goods or services. Accordingly, under the opening balance sheet, the assets that were recorded under the previous accounting principies were not recognized.

(2) Deferred tax assets (liabilities) The variations in deferred tax are generated in the measurement of assets and liabilities upon the applicafion of the NCIF, which have resulted in temporary differences assets (liabilities).

Taxable temporary differences were recognized in the opening balance sheet, generated by the recognifion of assets on which it is inherent that their carrying amount was recovered in the form of economic benefits that the Company will receive in future periods. As the Company recovers the carrying amount of the asset, the deductible temporary difference will be reversed and, therefore, the Company will have a taxable income. This makes probable that the economic benefits come out of the Company in the form of taxes. Within the deductible temporary differences is the accounting basis of property, plant and equipment, generating a higher deferred tax liability.

Additionally, deducfible temporary differences were recognized, generated by the recognition of liabilities, on which the expectation that the corresponding amount will be settled is inherent, in subsequent futures, by means of an outflow of resources that incorporate economic benefits. When such resources effectively come out, a portion of or total amounts could be deductible for the determination of the tax gain, in subsequent periods to the recognifion of the liability. In these cases a temporary difference was generated between the carrying amount of such liability and its tax base that will be recovered in subsequent periods, when the deduction of he liability to determine the tax gain is possible. Within the deductible temporary differences are mainly the dismantling and/or abandonment costs. The reversion of these deductible temporary differences will give rise to reductions in the determination of future tax gains, however, the economic benefits, in the form of tax reductions, were recorded on the basis that the Company is capable of obtaining enough tax gains to cover the possible deducfions.

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4 First-time adoption of the Accounting and Financial Information Standards — NCIF (continued)

The impact from the deferred tax resulting of the main differences of adjustments related with property, plant and equipment, is the following:

December 31, January 1, 2014 2014

Adjustments related to property, plant and equipment US$ 200,191 US$ 243,687

(3) Recognition of finance leases

At the transifion date, it was determined whether there are current agreements on the transifion date to NCIF that contained leases based on events and circumstances exisfing at such date. It was concluded that current agreements contained leases and they were recognized.

(4) Below there is a detail of equity adjustments related to property, plant and equipment:

December 31, 2014

January 1, 2014

Concession (i) US$ 4,011 US$ 5,609 Abandonment costs (ji) (27,723) (25,569) Inventory (iii) 1,103 1,103 Inflation adjustment (iv) (1,431,065) (1,431,065) Valuations (iv) (3,607,442) (3,765,306) Cost of property, plant and equipment (iv) (251,515) (251,515) Recalculation of depreciation (iv) 2,376,898 2,403,788 Capitalizable maintenance (y) 31,606 17,574 Recovery of provisions (vi) 916 176

US$ (2,903,211) US$ (3,045,205)

i. The Company has concession contracts with the Colombian Government. Assets under the concession mode were recognized under RCP, which were fully depreciated. Under IFRS, these assets are intangibles as they do not qualify as concession agreements of utilities in accordance with the IFRIC 12 on which the useful life was Restated, generating an increase in equity.

U. Abandonment and dismantling costs: In the opening balance sheet, under legal and regulatory (environmental) considerations, the Company established that it has the obligation to dismantle, retire and restare the sites where its property, plant and equipment are located. According to IAS 16 "Property, Plant and Equipment", in the cost of an element of property, plant and equipment, the initial estimate of the retirement costs of the service and refirement of the element and ffie restoration of the place where it is located, will be included. For calculation purposes, the elements of property, plant and equipment will be technically abandoned, as is the case of the pipelines and the elements of property, plant and equipment will be dismantled over the surface, as for example, buildings, tanks, machinery and equipment. In both cases drainage and cleaning of tubing and tanks is considered.

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The value included in the opening balance sheet is the net effect of the recognifion of an asset for US$12,918; depreciation for US$4,392 and the recognition of the provision for abandonment cost for US$34,094.

The amounts recorded correspond to the discount at present value of the costs to remove and retire equipment, buildings, warehouses and guard houses from the site. Abandonment and dismantling costs were not discounted under previous GAAP.

Provisions on Me concept of market value in inventories were recognized under the prior accounting principies, which were reversed under IFRS, as inventory was considered as part of property, plant and equipment.

iv. For the opening balance sheet, the cost of property, plant and equipment was adjusted to comply with the NCIF requirements. Certain elements of property, plant and equipment may be included within the asset value if they meet the conditions for their recognifion as assets because they allow the Company to obtain economic benefits. Upon analyzing the cost of property, plant and equipment, inflation adjustments recognized under the prior accounting principies were eliminated in the opening balance sheet and are not permitted by IFRS. Additionally, valuations recorded under RCP were reversed. The decrease of cost is mainly due to the effect of the exchange difference and loans interest that were capitalized under previous GAAP.

The useful lives of property, plant and equipment were determined under tax criteria; while for IFRS, the useful lives of the assets are determined on the basis of technical and economic criteria, and are defined in terms of the profit expected to be contributed to the Company.

For the determination of useful lives under IFRS, a physical inventory was taken to determine quantifies and descriptions. Also, procedures which purpose was to check the physical existence and obtain the technical characteristics of the main assets were performed.

The impact on depreciations was the following:

December 31, 2014

January 1, 2014

Depreciation of computers and communication equipment US$ 2,320 US$ 2,312 Depreciation of vehicies and transportation equipment (8) 83 Depreciation of construcfions and buildings 1,161 1,709 Depreciation of machinery and equipment 31,108 31,828 Depreciation of boats 20 17 Depreciation of pipelines 2,342,297 2,367,839

US$ 2,376,898 US$ 2,403,788

v. Maintenance related to property, plant and equipment is recognized as part of the asset upon complying with the general recognifion rule, i.e., whether is probable that future benefits arising from it and the cost may be valued reliably. As they were initially recognized as an expense, now they are recognized as part of the asset.

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4. First-time adoption of the Accounting and Financial Infomiation Standards — NCIF (continued)

vi. This is the net effect of reversals of the provisions recorded under previous GAAP that do not apply under NCIF.

(5) Under the Ship or Take-and-Pay contract, where the loading and unloading service is used, revenues accrued two months before rendering the service are recognized. In the opening balance sheet, barreis paid but not yet transported were recognized in revenues received in advance.

(6) Hedges were recognized in the Statement of Income. The valuafion at market prices of the portfolio of financial hedges is carried out at the close of each accounting period as well respective entries.

4.5.Reconciliation of net profit

Reconciliation of net profit for the year ended December 31, 2014:

Profit under previous GAAP US$ 734,165 Deferred charges (a) 2,121 Deferred tax (b) (6) Finance leases (32) Property, plant and equipment (c) (15,869) Hedges (d) (2,579) Conversion adjustment (e) 7,541

Profit under NCIF US$ 725,341 Components of other comprehensive income that will not be reclassified to

profit or loss in subsequent periods 44,552 Total comprehensive income under NCIF US$ 769,893

(a) The items designated as amortizations of deferred charges do not meet the definition established in NCIF as assets nor as prepayments and are reversed resulting in an increase in the Statement of Income.

(b) Differences between the deferred tax under IFRS and the previous GAAP are generated, dueto the variations in the measurement of assets and liabilifies upon the application of the IFRS, that have resulted in temporary differences in assets (liabilities) The differences in assets are mainly due to the recognifion of Forward contracts and the differences in tax and IFRS useful lives.

(c) Because of the differences in the useful lives between the previous accounting principies and IFRS, depreciations are recognized in each one of the items of property, plant and equipment (pipelines, constructions and buildings, vehicies and transportation equipment, abandonment costs, among others) (See item iv), Paragraph 4, Note 4.4). Additionally, the impact of capitalization of major maintenances that, had a greater execution in the second half of 2014 (han in the first half of 2014, is included.

(d) During 2014, the Company did not choose for hedging accounting. Accordingly, any impact on the realization of hedges is recognized in the Statement of Income. See Paragraph 6, Note 4.4.

(e) Effects of conversion of items found in the statement of income which are translated monthly to the average rate for presentation purposes.

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4.6. Reconciliation of cash flow

At December 31, 2014, the balance of cash and cash equivalents in the statement of financial posifion under previous GAAP does not show any difference in respect of NCIF balances.

The first payment of US$10,000,000 corresponding to interest accrued was made to the bondholders at December 31, 2014, in accordance with the timetable of payments. The Company is up to date with its obligations deriving from the issue.

The main differences in the cash flow between previous GAAP (RCP) and NCIF are the following:

• In net cash from operating activities, the differences between GAAP (RCP) and IFRS are generated by the Company's functional currency, which is the U.S. dollar.

• In net cash from investing activifies, differences between GAAP (RCP) and NCIF are generated by the consumption of materials used in the operation, as stated in Note 11.

5. Significant accounting judgments, estimates and assumptions

The preparation of the Company's financial statements requires the management to make accounting judgments, estimates and assumptions that affect the amounts of revenues, expenses, assets and liabilities reported and the disclosure of confingent liabilities at the closing date o( the reporting period being. In this sense, uncertainty on these assumptions and estimates that, in the future may give rise to profits or losses, require significant adjustments to carrying amounts of affected assets or liabilities.

5.1.Judgments

Judgments are continuously assessed and are based on the historical experience and other factors, including the expectafion of occurrence of future events considered as reasonable in accordance with the circumstances.

5.2.Estimates and assumptions

Resulting accounting estimates, by definition, will rarely be equal to actual results. Amounts recognized as provisions are the best estimates of expenditures required to settle present obligafion, at the end of the reporting period, taking into account the corresponding risks and uncertainties. Provisions are measured using estimated cash flows to settle the present obligation and its carrying amount represents the present value of such cash flow (when the effect of money in time is material).

Below, there are the critical accounting judgments and estimates with the most significant effect in the preparafion of the accounting statements:

5.2.1. Abandonment of pipes, equipment and other facilities

In accordance with environmental and oil regulations, the Company must recognize the abandonment costs of its fixed assets, which include abandonment of the pipeline, decommissioning of facilities and environmental recovery of affected areas.

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5. Significant accounting judgments, estimates and assumptions (continued)

A provision covering the dismantling and decommissioning costs are recognized in relafion with the oil pipeline system. Dismantling and decommissioning costs are provisioned at the present value of expected costs to discharge the obligation, using estimated future cash flows, and recognized as an integral part of the cost of that particular asset. These cash flows are discounted at a current market rate before taxes, which reflects the risks inherent to the liability. The discount is recorded as expense as incurred and is recognized in the statement of income as financial costs. Estimated future dismantling and decommissioning costs are reviewed annually, and adjusted as appropriate. Changes in estimated future costs or in the discount rate applied are added to or subtracted from the related asset cost.

Abandonment and decommissioning cost estimates of these facilities are recognized in the functional currency. The estimated obligation set up for abandonment and decommissioning is subject to be reviewed at each period closing and adjusted to reflect the best estimate, due to technological changes, and polifical, economic, environmental and security affairs and relationships with stakeholders. The calculafions of these estimates are complex and involve significant judgments by the management, such as internal projections of costs and future inflation and discount rates. We consider that abandonment and decommissioning costs are reasonable, based on the experience and market conditions; however, significant variations in external factors used for the calculation of the estimate could significantly impact the financial statements.

5.2.2. Impairment

At the end of each reporting penad, the Company evaluates carrying amounts of its tangible and intangible assets to determine whether there is any indication that these amounts have had any impairment loss. In such case, the recoverable amount of the asset is calculated to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Company calculates the recoverable amount of the cash-generating unit which such asset belongs to. When a reasonable and consistent basis of distribufion is identified, common assets are also assigned to the individual cash-generating units, or distributed to the smallest group of cash-generating units for which a reasonable and consistent distribution basis may be identified.

The recoverable amount is the higher between the fair value less disposal costs and the value in use. Upon estimating the value in use, estimated future cash flows are discounted at the present value by using a discount rate before taxes which reflects the current market valuafions in respect to the temporary value of money and the risks inherent of the asset for which the estimates of future cash flows have not been adjusted.

If the calculated recoverable amount of an asset (or cash-generating unit) is lower than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. lmpairment losses are recognized immediately in the statement of income, unless the asset is recognized ata revalued amount, in which case, the impairment loss should be considered as a decrease in the revaluation.

When an impairment loss is subsequently reversed, the carrying amount (or cash-generating unit) increases to the reviewed estimated value of its recoverable amount, so that the increased carrying amount does not exceed the carrying amount that had been calculated if the impairment loss of the asset (or cash-generating unit) had not been recognized. The reversion of an impairment loss is recognized automatically in the statement of income, except that the corresponding asset is recorded at the revalued amount, in which case, the reversal of the impairment loss is treatedas an increase in the revaluation.

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5.2.3. Litigation

We are subject to claims for regulatory and arbitration procedures, taz returns and other claims that arise during the ordinary course of business Management and legal advisors evaluate these situations based on their nature, the probability of materialization and the amounts involved, in order to decide about the amounts recognized in the financial statements. This analysis, which may require significant judgments, includes legal proceedings brought against the Company and claims not yet commenced. In accordance with management's evaluation and guidelines established in IAS 37 "Provisions, Confingent Liabilities and Contingent Assets", provisions have been set up to comply with these costs where the contingency is deemed probable and reasonable estimates of such asset may be made.

The Company considers that payments required to settle the amounts relating to claims, if lost, will not vary significantly from estimated costs and, accordingly, will not have a material adverse effect on our financial statements.

5.2.4. lncome tax

Uncertainties exist in respect of the interpretation of complex tax regulations, changes in tax regulations, and amounts and timing in which the future tax result is generated. Given the wide range of internafional business relafions and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or upon the future changes of such assumptions, they could require future adjustments to income and expenses already recorded. The Company calculates provisions based on reasonable estimates, for the possible consequences deriving from the inspections made by the tax authorities of the respective countries it operates in. The amount of these provisions is based on several factors, such as experience in prior tax inspections, and on the various interpretations of tax regulations, made by the enfity subject to tax and by the responsible tax authority. These interpretafion differences could arise in a wide variety of issues, depending on circumstances and conditions existing in the Company's domicile. Since the Company considers as remote the probability of litigation of a tax nature and subsequent expenditures as a result thereof, no contingent liability related to taxes has been recognized.

As established in IAS 12 "Income Taxes", the current tax payable is based on taxable profits recorded during the year. The taxable profit differs from the profit reported in the statement of income and other comprehensive income due to items of income or taxable or deductible expenses in other years and items that are never taxable or deductible. Current taz liabilities are calculated by using tax rates approved by the tax enfity at the closing of the reporting period.

Deferred taz assets and liabilities are recognized for future tax consequences attributable to differences between carrying amounts of existing assets and liabilities in our financial statements and their respective tax basis. Deferred taxes assets and liabilities are calculated based on statutory tax rates that we believe will be applied to our taxable income during the years in which temporary differences between carrying amounts are expected to be recovered.

The carrying amount of an deferred tax asset should be subject to final review at each reporting period and should be reduced to the extent that is probable that it will not have enough tax gain, in the future, to allow total or partial recovery of the asset.

30



The measurement of deferred tax liabilities and deferred tax assets will refiect tax consequences arisen from the manner in which the Company expects -at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilifies.

5.2.5. Useful life of property, plant and equipment

The Company determines esfimated useful lives and depreciation charges corresponding to property, plant and equipment. This esfimate considers the economic life of the oil pipeline and the limitafions of its operation over time. This estimate could change, among other reasons, dueto new oil discoveries, changes in the environmental legislation or in the contracts signed with the Company's shippers. The management periodically reviews useful lives and depreciafion charges.

5.2.6. Hedging accounting

The idenfification of hedging relafionships between objects protected and hedging instruments (derivative financial instruments and/or non -derivatives) involves critical judgments on the actual existence of the hedging relationship and the effectiveness thereof. In addition, the Company continuously evaluates the alignment between the hedging relationships identified and the objectives and strategy of its risk management policy.

6. Information on operation segments

Ah l Company's assets are located in Colombia aimed at one single segment: Crude oil transportation. The management supervises operating results based on the crude oil transportation operation, where its main assets are represented by the oil pipeline, thus becoming the basis to make decisions on the allocafion of resources and evaluate its financial returns. There are no operating segments that should be aggregated to form part of that previously reported.

7. New and amended standards and interpretations

New standards, amendments and interpretations incorporated into the accounting framework accepted in Colombia which application should be evaluated beginning on or after January 1, 2016 or may be early applied

Decree 2615 of December 17, 2014, Decree 2420 of December 13, 2015 and Decree 2496 of December 24, 2015 introduced to the regulatory technical framework of financial reporting, new standards, or amendments issued or carried out by the IASB to the International Financial Reporting Standards during 2013 and 2014, to evaluate their application in financial periods beginning on or after January 1, 2016; however, early application is allowed.

IAS 36 "Impairment of assets"

This amendment eliminates ceitain information to be disclosed on the recoverable amount of cash-generating units that had been included in IAS 36 by IFRS 13. The Company has assessed the standard and it has no impacts until disclosures on impairment of assets are made.

31


7. New and amended standards and interpretations (continued)

IFRIC 21 "Levies"

It provides guidelines about when to recognize levies imposed by a government, for both levies recognized in accordance with IAS 37 "Provisions, Contingent Liabilities and Contingent Assets", and those in which time and the quantity of the levy is certain. The interpretafion clarifies that the obligating event for the recognition of a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy. The following is the guideline on the recognition of a levy liability payable: The levy liability is recognized progressively if the activity that triggers payment occurs over a time period. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that no liability is recognized before the specified threshold is reached. lts early application is permitted. It is effecfive as of January 1, 2014. The Company has assessed the standard and the considerations thereof had been applied consistently as occurred with the treatment applied to the wealth tax, which is being recognized annually.

IAS 39 "Financial Instruments: Recognition and measurement"

This amendment considers legislafive changes to 'over-the-counter' derivatives (OTC derivatives) and the establishment of central counterparties. Under IAS 39, the novafion of derivatives central counterparties would result in the discontinuance of the hedging accounting. The amendment provides relief from discontinuance of hedging accounting when the novation of a hedging instrument meets specific requirements. The Company has assessed the standard and it has no impacts.

IAS 16 "Property, Plant and Equipment", IAS 38 "Intangible Assets"

IAS 16 and IAS 38 establish the principie of the depreciation and amortization base, as the consumption of the future economic benefits of an asset being the expected pattern. In their amendments to IAS 16 and IAS 38 published in May 2014! the IASB clarified that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenues generated by an activity that includes the use of an asset generally refiect factors other tan the consumption of the economic benefits embodied in the asset. The IASB also clarified that revenues generally present an inappropriate base to measure the consumption of the economic benefits embodied in an intangible asset. However, this assumption may only be rebutted in certain limited circumstances. Amendments are applicable as of January 1, 2016. Early application is permitted. The Company has made the evaluation of the standard and it has no impacts.

IAS 24 "Related Paty Disclosures"

Payments to entities rendering administrative services should be disclosed.

IFRS 13 ''Fair Value Measurements"

The issuance of IFRS 13 and the amendment to IFRS 9 and IAS 39 do not intend to remove the ability of measuring short term receivables and payables without a discount. Scope of the exception of receivables. The Company has assessed the standard and it has no impacts.

32



IAS 32 - "Financial Instruments: Presentation"

The amendment clarifies that the right to offset must not be confingent on a future event. Additionally, it must be legally enforceable for ah l counterparties involved in the normal course of business, as well as in the event of default, insolvency or bankruptcy. The amendment also considers offsetting mechanisms. The Company has made the evaluafion of the standard.

IAS 19- "Employee Benefits"

The amendments lo1AS 19, issued in November 2013, are applied to contributions from employees or third parties to defined benefit plans. The purpose of the amendments is the simplification of the accounting for contributions which are independent from the number of years of employee service; for example, employee contributions are calculated in accordance with a fixed percentage of the salary. Amendments are applicable as of July 1, 2014. Early applicafion is permitted. The Company has evaluated the standard and it has no impacts.

IFRS 9 - "Financial Instruments"

It addresses the classification, measurement and recognition of financial assets and financial liabilities. The full version of this IFRS was published in July 2014. It replaces the guidelines in IAS 39 related to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary categories of measurement for financial assets: amortized cost, fair value through other comprehensive income (OCI), and fair value through profit or loss (P&L). The classification base depends on the entity's business model and the contractual cash flows characteristics of the financial asset. It is required that investments in net equity instruments are measured at fair value through profit or loss with the irrevocable option at the inception to present changes in the fair value in other comprehensive income not recycling. Now Hiere is a new model of expected credit losses which replaces the impairment losses model of IAS 39. There were no changes for financial liabilities in classification and measurement, except for the recognition of changes in the own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. IFRS 9 relaxes the requirements for the hedge effecfiveness. Under IAS 39, a hedge should be highly effective, both prospectively and retrospectively. IFRS 9 replaces this line requiring an economic relationship between the item hedged and the hedging instrument and that the ratio covered is the same actually used by the entity for risk management purposes. The contemporaneous documentafion is still required but is different to that previously prepared under IAS 39. The standard is effective for accounting periods beginning on or after January 1, 2018. Its early adoption is permitted. The Company is evaluating the impacts that the stated standard could generate.

IFRS 14- "Regulatory Deferral Accounts"

IFRS 14 - "Regulatory Deferred Accounts", issued in January 2014, is a provisional standard intended for improving the comparability of financial information of entities involved with rete-regulated activities. Many countries have industrial sectors subject to the rate regulafion (for example, gas, water and energy), which could have a significant impact on the recognition of revenues (timing and amount) of the entity. This standard permits the first-time adopters of IFRS to continue recognizing the amounts related to rate regulafion in accordance with the requirements of the previous GAAP when they adopt IFRS, but in a separate form. An entity already applying IFRS should not apply this standard.

33



lis application is effecfive as of January 1,2016 and early application is permitted. The Company has evaluated the standard and it has no impacts.

New standard incorporated to the accounting framework accepted in Colombia whose application should be evaluated as of January 1, 2016 and cannot have an early application

Decree 2496 of December 24, 2015 introduced into the technical regulatory framework the following standard issued by the IASB during 2014, to evaluate its application in financial periods beginning on or after January 1, 2016, and whose application may not be in an early way.

IFRS 15- "Revenues from Contracts with Customers"

IFRS 15 - "Revenues from Contracts with Customers", issued in May 2014, is a new standard applicable to all contracts with customers, except for leases, financial instruments and insurance contracts. This is a joint project with the FASB to eliminate differences in the recognition of revenues between IFRS and US GAAP. This new standard intends to enhance the inconsistencies and weaknesses of IAS 18 and provides a model that will facilitate the comparability of companies from different industries and regions. It provides a new model for the recognition of revenues and more-detailed requirements for multiple-element arrangement. In addition, it requires more detailed disclosures. Its application is effective as of January 1, 2017 and its early application is permitted. The Company is evaluating the impacts that the stated standard could generate.

New standards, amendments and interpretations issued by the International Accounting Standards Board -IASB, which have not yet been incorporated to the accounting framework accepted in Colombia.

Enhancements and amendments to IFRS, as well as the interpretations disclosed during 2015 could be incorporated to the Colombian regulatory framework.

8. Cash and cash equivalents

December 31, 2015

December 31, 2014

Restated January 1,

2014

Cash US$ 18 US$ 27 US$ 37 Banks 299,820 385,805 151,644 Fixed Term Certificates of Deposits 13,434 245,211 131,964 Nafional Tax Refund Securities (TIDIS) 427 2,626 7,143 Investments in commercial paper

(Deitsche Bank) 394 Trusts 5,696 2,454 853

US$ 319,395 US$ 636,123 US$ 292,035

The fair value of cash and its equivalents is approximated to its carrying value due to its short-term nature (less than three months) and its high liquidity. Cash and cash equivalents have no restrictions or liens limiting their disposal.

34



9. Trade and other receivables

December 31, December 31,

2014 January 1, 2015 Restated 2014

Trade receivables US$ 83,107 US$ 45,770 US$ 50,179 Related parties (Note 27) 81,954 85,422 76,929 Other receivables (1) 9,602 13,885 13,932

US$ 174,663 US$ 145,077 US$ 141,040

In connection with terms and conditions regarding receivables aboye, see Note 27.

Receivables are presented at fair value. Trade receivables do not bear interest and their average payment term is of 30 days.

(1) It includes the following details:

December 31, 2015

December 31, 2014

Restated January 1,

2014

Legal seizures US$ 340 US$ 447 US$ 563 Fidualianza 2,087 2,439 2,947 Specific destination fund (a) 4,067 10,078 9,193 Repayments from mandate contracts -

&ribetes and others (b) 3,103 810 1,155 Employees 5 91 50 Industry and commerce tax - 19 15 Balances in favor - Other taxes - 1 9

US$ 9,602 US$ 13,885 US$ 13,932

(a) It decreases dueto the devolution made by Cavipetrol at the end of December 2015 for US$3,515.

(b) It increases due to the record of repayments associated to the mandate contract between the Company and Oleoducto de Colombia S.A. for fuel crude.

See Note 26.2 on credit risk of trade receivables, which explains how the Company manages and measures the credit risk of trade receivables which are not matured or devaluated.

35


10. Other assets

December 31, December 31, 2014 January 1,

2015 Restated 2014

Prepaid expenses (1) Other prepayments (2)

US$ 910 US$ 1,473 US$ 358 14,652 17,337 4,890

US$ 15,562 US$ 18,810 US$ 5,248

(1) It includes all-risk, sabotage and terrorism, material damages, fidelity guarantee and financial risks, civil responsibility and employee insurance policies.

(2) It includes prepayments to suppliers as part of the acquisition of goods and services for each project, mainly for Project P-135, as follows:


2015 Restated 2014

Siemens S.A. US$ 8,022 US$ 5,644 US$ Sulzer Pumps 1,565 - Surtidora de Gas del Caribe S.A. 1,207 - Worleyparsons Group Inc. Sucursal 487 3,311 Soenergy International Corporation - 232 2,113 Others 3,371 8,150 2,777

US$ 14,652 US$ 17,337 US$ 4,890

36


11. Property, plant and equipment, net

Acquisition cost

Plant and equipment

Ducts, networks and

lmes

Ongoing constructions Buildings Land Other (1) Total

At January 1,2014 US$ 71,906 US$1,452,954 US$ 34,728 US$ 68,366 US$ 18,446 US$ 57,736 US$1,704,136 Additions 1,085 13,388 169,515 (328) 762 110,284 294,706 Capitalizahon 18,773 59,160 (85,558) 7,524 101 Capitalized financial interest 11,213 11,213 Non-capitalized consumption of

materials and spare parts (99,257) (99,257) December 31, 2014 Restated 91,764 1,525,502 129,898 75,562 19,309 68,763 1,910,798 Acquisitions 2,000 (339) 335,380 98 1,304 62,086 400,529 Capitalization 1,611 90,770 (93,815) 690 744 Capitalized financial interest 15,848 15,848 Non-capitalized consumption of

materials and spare parts (64,806) (64,806) Sales and disposals (275) (95) (370) At December 31, 2015 US$ 95,375 US$ 1,615,933 US$ 387,036 US$ 76,350 US$ 21,357 US$ 65,948 US$2,261,999

Depreciation and impairment of assets At January 1,2014 US$ (17,733) US$ (538,563) US$ - US$ (822) US$ - US$ (9,277) US$ (566,395) Depreciation charge for period (5,080) (50,599) (2,197) (2,287) (60,163) Impairment 114 114 December 31, 2014 Restated (22,813) (589,162) (3,019) (11,450) (626,444) Depreciation charge for period (5,102) (59,899) (2,268) (2,357) (69,626) Impairment - - (2) (2) At December 31, 2015 US$ (27,915) US$ (649,061) US$ - US$ (5,287) US$ - US$ (13,809) US$ (696,072)

Net carryinq amount At December 31, 2015 US$ 67,460 US$ 966,872 US$ 387,036 US$ 71,063 US$ 21,357 US$ 52,139 US$1,565,927 At December 31, 2014 Restated US$ 68,951 US$ 936,340 US$ 129,898 US$ 72,543 US$ 19,309 US$ 57,313 US$1,284,354

37


11. Property, plant and equipment, net (continued)

(1) It includes materials inventory, abandonment cost of the oil pipeline system, office equipment, computers and telecommunication equipment, transportation equipment and fluvial equipment.

There are no commitments and/or restrictions of acquisitions of property, plant and equipment.

Capitalized borrowing costs

The Company is undergoing a construction process to expand its oil pipehne capacity, by means of Project "P-135." This project is expected to be completed in October 2016. The canying amount of these assets at December 31, 2015 amounts to US$347,938 (December 31, 2014 - US$56,256). The project is being financed with resources obtained from the debt bond whose custody is in charge of The Bank of New York Mellan.

The amount of borrowing costs capitalized during the year ended December 31, 2015 was of US$15,848 and at December 31, 2014 for US$11,213. The rate used to determine the amount of borrowing costs subject to capitalization was of 4.2%, which is the effective interest rate of the debt financed by this project.

Ongoing constructions

Constructions in progress within the periods are a significant item of property, plant and equipment. For 2015, we confinue with projects such as El Porvenir replacement of equipment, optimization of loading/unloading facilities, 600 CST, heat recovery, El Porvenir soundproofing and other minar projects. The project highlighted for investment and development is the Proyecto Potencia 135.

Finance leases

The carrying amount of property, plant and equipment under finance leases and lease to purchase-option agreements at December 31, 2015 amounted to US$107 and December 31, 2014 to US$309. Assets under leases and lease to purchase-option agreements are levied as collateral of the respective finance leases and the obligations under the lease to purchase-option.

Assets under this modality include the following balances:


2015 Restated 2014

Vehicles US$ 89 US$ 240 US$ 305 Computers 18 69 156

US$ 107 US$ 309 US$ 461

38


12. Intangible assests

Acquisition cost

Licenses and software

Service Concess ion Ag reement Total

At January 1,2014 US$ 10,310 US$ 43,620 US$ 53,930 Additions 1,634 — 1,634 At December 31, 2014 Restated 11,944 43,620 55,564 Additions 2,167 — 2,167 At December 31, 2015 US$ 14,111 US$ 43,620 US$ 57,731

Amortization and value impairment At January 1,2014 US$ (7,440) US$ (35,448) US$ (42,888) Amortization charge for period (1,728) (2,724) (4,452) At December 31, 2014 Restated (9,168) (38,172) (47,340) Amortization charge for period (2,184) (2,724) (4,908) At December 31, 2015 US$ (11,352) US$ (40,896) US$ (52,248)

Net carryinq value At December 31, 2015 US$ 2,759 US$ 2,724 US$ 5,483 At December 31, 2014 Restated US$ 2,776 US$ 5,448 US$ 8,224

Service concession agreement

Port Concession Agreement No. 016 dated December 6, 1996, whose purpose is to grant a port concession for the construction and operafion of off-shore facilities of a new oil terminal of Coveñas intended to load exportation crude oil, was initially intended to render a private service.

On October 24, 2011, Additional Clause No. 02 was executed, which changes the status from a private port service to a public port service, intended to handle export crude oil. The payment for this concession as a public port amounting to US$2,885,334 took place in 2011 and is payable over 5 years; the first payment of US$781,735 was made in November 2, 2011 and the remaining payments amounted to US$732,232. At the December 2015 cutoff, its carrying amounts is of US$2,724, with a remaining amortizafion period of one year.

39


13. Interest bearing loans and borrowings

Composition of loans

Loans are recorded at their amortized cost, which corresponds to the present value of cash flows, discounted at effective interest rate.

Short-term loans

December 31, 2015

December 31, 2014 January 1,

Restated 2014

Interest payable for external public debt (1) US$ 20,000 US$ 20,000 US$ Short-term leases 121 189 91

US$ 20,121 US$ 20,189 US$ 91 Long-term loans External Public Bonds US$ 478,734 US$ 478,045 US$ Long-term leases 62 204 394

US$ 478,796 US$ 478,249 US$ 394

(1) Al December 31, 2015, the Company presented debts and loans bearing interest only the amount of payable interest accrued.

Long-term external public credit bonds

By means of Resolution No. 1369 of April 29, 2014, the Ministry of Finance and Public Credit authorized the Company to subscribe, issue and place External Public Debt Bonds, under Rule 144 A/ S Registration of the United States of America Securities Act, in internafional capital markets for up to five hundred million US dollars (US$500,000,000) in order to finance the invesfing needs of future expansion projects (Potencia 135 and Calentamiento).

The characteristics, term and conditions are as follows:

• Repayment term: 10 years, with a maturity date until May 7, 2021 • Issue price: 99.367% • Amortization: Upon maturity • Yield at maturity: 4.105% • Denominafion currency: Denominated in US dollars (US$) • Interest rate: Fixed, in accordance with market conditions prevailing on the bonds placement date,

thus complying with the maximum limits for the external indebtedness interest rates defined by the Banco de la República.

• Denominafions US$200,000 and integer multiples of US$1,000 • Listed at: Luxembourg Stock Exchange

The variance of this obligation corresponds to the recognition of bond issue costs in the statement of income.

December 31, December 31, 2014

2015

Restated

Fair value US$ 483,025 US$ 480,000

40


13. Interest bearing loans and borrowings (continued)

Anide 28 of External Resolution No. 8 of 2000 of the Board of Directors of the Banco de la República establishes that interest rates of foreign currency loans, including securifies placed in international markets, should reflect market conditions and may not exceed the maximum rate applicable generally indicated by the Banco de la República.

Payment dates of interest will be May 7 and November 7 of each year, starting on November 7, 2014.

Settlement date: May 7, 2014 T+5, gross value: US$496,835,000; rate: 4.000%, which is determined on a 30/360 day basis.

Lease agreements

a. It corresponds to the Financial Lease Master Agreement subscribed with Banco de Occidente relating to computer equipment bases. Settlement form: monthly variable fee Variation factor DTF +3 points Term: 36 months

b. It corresponds to the rent of vehicles taken by Cavipetrol with Banco de Bogotá -the long-term portion exceeds 12 months- with the following conditions agreed: Interest rate: DTF + 3 points Term: 36 months

Loans maturity profile

The loans maturity profile is described below

December 31, 2015

Up to 1 year 1 — 5 years More than 5 years

Total

External Public Credit Bonds US$ 20,000 US$70,454 US$ 408,280 US$ 498,734 Lease obligations 121 62 183

US$ 20,121 US$ 70,516 US$ 408,280 US$ 498,917 December 31, 2014

External Public Credit Bonds US$ 20,000 US$78,472 US$ 399,573 US$ 498,045 Lease obligations 189 204 393

US$ 20,189 US$ 78,676 US$ 399,573 US$ 498,438

Guarantees

Assets under lease of vehicles and computers, subscribed with Cavipetrol and Banco de Occidente, respectively, are under pledge without possession.

41


14. Trade and other payables

December 31, 2015

December 31, 2014

Restated January 1,

2014

Suppliers (1) US$ 48,926 US$ 47,349 US$ 22,135 Related parties (1) (Note 27) 5,384 1,951 2,916 Payroll withholdings and contribufions 3 719 730 Costs and expenses payable (2) 64,603 46,793 21,403 Dividends payable Employees labor benefits 967 1,040 1,043 Tax on equity 4,205 Sales tax payable 541 229 268 Transportation tax (3) 6,820 11,781 13,118 Income tax withholding 5,243 4,639 3,195 Other payables - considerafions 712 Industry and commerce tax withholdings 299 389 266

132,786 114,890 69,991 Trade and other long term payables 712

US$ 132,786 US$ 114,890 US$ 69,279

(1) It includes the balance with local suppliers at December 31, 2015 within which there is a higher concentration in suppliers associated to Proyecto Potencia 135.

December 31, 2015

December 31, 2014

Restated January 1,

2014

Soenergy International Colombia US$ 11,620 US$ 54 US$ 22 Consorcio Generación P-135 3,393 Worleyparsons Group Inc. Sucursal 2,746 914 Ismocol 2,633 2,822 GMP Ingenieros S.A.S. 2,004 Delrio S.A. 2,048 10,029 4,807 Others 24,482 33,530 17,306

US$ 48,926 US$ 47,349 US$ 22,135

(2) The increase corresponds mainly to the participation of costs and expenses of the P-135 project which purchases and services amount to 57% of the total item; costs associated to line maintenances and correctives maintenances, supply of fuel crude and DRA among the most significant.

42


14. Trade and other payables (continued)

(3) The related transportafion tax corresponds to actual and estimated crude oil volumes transported during the stated period, plus the amount of the outstanding payment to municipalities whose payment is not ordered upon disposition of the National Department of Planning, as shown below:


January 1,

2015

Restated

2014

Transportafion tax invoiced Estimated transportation tax Payables

US$ 6,446

374

US$ 5,247 6,217

317

US$ 6,354 6,500

264

US$ 6,820 US$ 11,781 US$ 13,118

The accounting amount of trade and other payables approximates to its fair value.

15. Income tax and current tax liabilities

The balance of the current tax liability is as follows:


January 1,

2015 Restated

2014

Income tax, CREE and CREE surcharges US$ 218,954 US$ 238,731 US$ 322,259 VAT discountable from income tax (6,043) (883)

US$ 212,911 US$ 237,848 US$ 322,259

Below, there is the detail of the balance of deferred tax assets and deferred tax liabilities:



Deferred income tax assets US$ 18,991 US$ 23,499 US$ 8,543 Deferred tax assets - CREE surcharge 1,988 2,899 Deferred income tax for equality - CREE assets 6,837 8,458 3,075

27,816 34,856 11,618

Deferred income tax liabilities (88,177) (142,937) (179,181) Deferred tax liabilities - CREE surcharge (3,963) (6,084) Deferred income tax for equality - CREE

liabilities (31,526) (51,170) (64,505) (123,666) (200,191) (243,686)

US$ (95,850) US$ (165,335) US$(232,068)

43


15. Income tax and current tax liabilities (continued)

The net movement of deferred taxes for the penad is included below:

December 31, 2015

December 31, 2014

Restated

lnitial balance Debit to income statement Debit to other comprehensive income Adjustment for currency translation

Final balance

US$ (165,335) US$ (232,068)

17,722

22,420 12,763

39,000 44,313 US$ 95,850 US$ (165,335

The Company had recognized in the financial statements the effect of the application of Paragraph 41 of IAS 12- Income Taxes, since in accordance with the communication CGN No.201600000781 of January 18, 2016 it established that it was not applicable for Ocensa

According to IAS 8- Accounting Policies, Changes in Accounting Estimates and Errors, the application of the regulatory framework of the Colombian General Accounting Office, constitutes a change in an accounting policy not related with judgments of the Management but with the application of the accounting standards by the regulating entity in Colombia, with a retroactive effect on the financial statements.

As a result of the aboye, the Company recognized the following effects on the financial statements already audited.

Statement of Income December 31, 2014

Increase (decrease)

December 31, 2014

Restated

Income tax expenses US$ (402,021) US$ 36,264 US$ (365,757) Net profit for the year from continued

operations US$ 689,077 US$ 36,264 US$ 725,341 Net profit from Exchange difference in

translation 44,552 44,552 Other net comprehensive income for the

year US$ - US$ 44,552 US$ 44,552

Total net comprehensive income for the year US$ 689,077 US$ 80,816 US$ 769,893

Net earnings per share US$ 133,568 US$ 7,029 US$ 140,597

Statement of Financial Position December 31, Increase 2014 (decrease)

December 31, 2014

Restated

Deferred tax habilites US$ 246,151 US$ (80,816) US$ 165,335 Total Liabilities US$ 1,209,421 US$ (80,816) US$ 1,128,605 Retained earnings 760,596 36,264 796,860 Other comprehensive income 44,552 44,552 Total Equity US$ 883,167 US$ 80,816 US$ 963,983

44


15. Income taz and current tax liabilities (continued)

Below, there is a detail of deferred tax assets and deferred taxes liabilities:


2015 Restated 2014 Deferred taz asset Liabilifies from provisions US$ 14,561 US$ 12,245 US$ 11,250 Other liabilities 13,255 22,611 368 Deferred taz asset US$ 27,816 US$ 34,856 US$ 11,618

Deferred taz liability Property, plant and equipment (1) (123,666) (200,191) (243,686) Deferred taz liability US$ (123,666) US$ (200,191) US$ (243,686)

(1) For tax purposes, the item property, plant and equipment has a specific useful life. Under IFRS, the useful life is determined by a technical analysis. This difference results in a different depreciation basis for accounting purposes and tax purposes.

Deferred tax assets pending offsetting are recognized to the extent that the realization of the respective tax benefit through future tax benefits is probable.

Variations of deferred taz balances were recorded in profit or loss the period, except for the following items which were recorded as follows:

'tem December 31, December 31, 2014 January 1,

2015 Restated 2014 Deferred asset- Financial assets US$ 12,763 US$ - $ -

Income tax

Current tax provisions applicable to Oleoducto Central S.A. establish that:

a. As of January 1, 2013, taxable income in Colombia is subject to a 25% income tax rate, except for taxpayers who, upon an express disposition, manage special rates. The basis to determine the income tax may not be lower than 3% of its net equity in the last day of the immediately previous taxable year (presumptive income), except for those taxpayers which, by Law, have different provisions.

b. As of taxable year 2007, and for tax purposes only, taxpayers may readjust annually the cost of tangible assets and real estate deemed as fixed assets. The percentage of adjustment will be set by the Colombian Tax Authority by means of a resolution.

c. As of January 1, 2013, by means of Act 1607 of December 2012, the income tax for equality (CREE) was created in Colombia as a contribution of companies and assimilated legal entities to benefit employees, generate employment and invest in social-related matters. Non-profit organizafions, individuals and companies declared as free trade zones ata 15% rate are not subject to the income tax for equality (CREE).

45


15. Income tax and current tax liabilities (continued)

d. The basis to determine the income tax for equality (CREE) may not be lower than 3% of its net equity on the last day of the immediately previous taxable year.

e. As indicated in the aforementioned Act, as of July 1, 2013, legal entifies and assimilated companies are exempted from the payment of payroll contributions in favor of SENA (National Training Service) and ICBF (Colombian Family Welfare Institute), and, in accordance with Article 31 of such Act, as of January 1, 2014, legal entities and assimilated income tax payers with employees who earn, individually up to ten (10) current monthly minimum wages are exempted from paying contribufions to the health care system. This exemption does not apply to taxpayers not subject to the CREE tax.

Tax Reform

On December 23, 2014, Act 1739 brought a tax reform with the following provisions:

a. The income tax for equality (CREE) is applicable ata 9% rate on a permanent basis as of 2015.

b. A surcharge on income tax for equality —CREE is established for taxpayers defined in Article 20 of Act 1607 of 2012. The surcharge will increase the income tax rate for equality (CREE) as follows: 5% in 2015,6% in 2016, 8% in 2017, and 9% in 2018.

c. The wealth tax, payable by income tax payers, was established and its obligating event is the possession thereof at January 1 of years 2015, 2016 and 2017. The wealth tax is generated by the possession thereof at January 1, 2015, when its value is equal to or higher than COP1,000 million. For purposes of this tax, the concept of wealth is equivalent to the total gross equity at the same date less the debts in force at such date.

d. As of 2015, tax losses and excesses of minimum basis could be offset with future earnings from income tax for equality (CREE), considering the same rules provided for the income tax.

e. A supplementary tax for tax normalization for 2015, 2016 and 2017 is established, which will be payable by taxpayers of wealth taz and voluntary wealth taxpayers having assets omitted andior non-existent liabilities at January 1, 2015, 2016 and 2017, respectively. The tax rate will be the following: 10% in 2015, 11.5% in 2016 and 13% in 2017.

46



15 Income tax and current tax liabilities (continued)

Income tax expense

Below, there is a detall of income tax and income taz for equality (CREE) and CREE surcharge, recognized in penad results:

Current fax

December31, 2015

December 31, 2014

Restated

Provision for income tax for the year US$ 289,081 US$ 285,374 Provision for income tax for equality (CREE) 104,070 102,760 Provision for CREE surcharge 57,804 Adjustment of income tax and income taz for equality (CREE)

from previous years 1,350 43

452,305 388,177 Deferred tax Deferred income tax (15,075) (23,311) Deferred CREE tax (5,427) (8,392) Deferred CREE surcharge 2,780 9,283

(17,722) (22,420) Total income tax expense US$ 434,583 US$ 365,757

Reconciliation of the effective tax rate

The Company's income tax differs from the theoretical amount that would have been obtained by using the tax rate apphcable to profit before tax. Below, there is a detall of the reconciliafion between the accounting profit before taxes and net taxable income, which was the basis to determine the income tax expense, income taz for equality (CREE) and CREE surcharge:

December 31, 2015

December 31, 2014

Restated

Profit before tax US$ 1,191,084 US$ 1,091,098 Tax rate applicable to the Company 39% 34% Taz calculated by the Company 464,523 370,973 Tax effects of:

Non-taxable revenues (33,382) (10,585) Non-deductible expenses 19,814 27,746

Income tax effect from previous years 1,350 43 Provision for income tax, CREE and CREE surcharge US$ 452,305 US$ 388,177 Effective tax rate 37.97% 35.58%

16. Other financial liabilities

December 31 December 31,

2015 2014

Restated January 1,

2014

Hedging agreements US$ 32,171 US$ 56,852 US$

47



16. Other financial liabilities (continued)

Other financial liabilities correspond to the valuation of derivative financial instruments of Oleoducto Central S.A., whose purpose is to mitigate the exchange rete volatility of cash flows required for Company's operations. The balances are classified at fair value with level-2 hierarchy based on observable inputs, using the methodology of forward points.

Taking into account that the Company's functional currency is the US dollar, any transaction in a currency other than the US dollar represents a risk exposure to exchange rete for Company's performance. In order to mitigate the impact on cash flows that could be generated as a result of variations in exchange rates of the Colombian peso versus US dollar, the management evaluates the risk exposure for the rolling 12-month period and makes the decision of contracting hedge instruments for the cash flow in Colombian pesos, within the framework established by the financial risk management policy. The use of three derivative instruments is established in such policy: Forwards, collars and options.

At present, the Company has only entered into hedge operations by means of forward instruments under the non-delivery basis.

The Company mainly hedges the following risks:

• Up to 65% of its Operating Expenses. The main items of operating expenses the Company is hedging are those related to personnel expenses, leases, fees and services, insurance, maintenance and repairs, variable costs, which are denominated in Colombian pesos.

• 100% of the tax payment. The tax items headed correspond to income tax, income tax for equality (CREE), income tax for equality (CREE) surcharge, and wealth tax.

Forward hedging instruments used allow to fixing the sales price in US dollars, which will offset the effect of devaluation or revaluation arising up to the time in which the Company monetizes resources negessary to cover its monthly or specific obligations on operating expenses and tax payments -payable in Colombian pesos.

The fair value of forward operations is US$398,251. Taking into account that the Company seeks to minimize the exchange exposure for the rolling 12-months period, cash flows are expected to be made and payments from January 2016 to December 2016 are expected to be covered.

The dollar-offset method is used to calculate effectiveness. It consists of comparing changes in values observed of the item hedged with the corresponding changes in the hedging instrument according to projections of the forward curve at the cut-off date.

This valuation model is applied both retrospectively and prospectively to measure the effectiveness of the set of instruments over the flows hedged.

The result of the amount recorded in "Other Comprehensive Income" — OCI at the reporting period cut-off amounts to US$31,907 (net of tax is of US$19,144). The loss recorded in the statement of other comprehensive income during 2015 amounted to US$34,063.

48


17. Deferred revenues


2015 Restated 2014

Short term revenues received in advance US$ 587 US$ 1,714 US$

1,866 Long term revenues received in advance (1)

14,260

14,260 US$ 14,847 US$ 15,974 US$ 1,866

(1) Long term advances correspond to the payment of the reserve made of the Pipeline capacity acquired by the companies described in the note, which will begin to be amortized as of 2016, once the capacity expansion operation starts.


2015

Restated

BP Products North América Gunvor Colombia CI S.A.S.

US$

US$

13,051 1,209

14,260

US$ 13,051 1,209

US$ 14,260

18. Provisions

At January 1,2014 Uses

Abandonment cost

Contingencies (1) Total

34,094 4,093 (4)

38,187 (4)

Finance cost 1,926 1,926 Translation adjustment (841) (841) At December 31, 2014— Restated US$ 36,020 US$ 3,248 US$ 39,268 Additions 4,504 4,504 Finance cost 2,304 2,304 Translation adjustment (781) (781) At December 31, 2015 US$ 42,828 US$ 2,467 US$ 45,295

49


18. Provisions (continued)

(1) The table below details the main litigations proceedings recognized in the statement of financial position, which loss expectations are highly probable:


2015 Restated 2014 Claims

Payment for alleged damages caused by the attack to the Cupiagua-Cusiana-Coveñas oil pipeline by ELN (National Liberahon Army) Nacional in the Fraguas, Corregiment of Machuca, Municipality of Segovia (Antioquia). US$ 1,169 US$ 1,539 US$ 1,938

Declare the nullity of writs 2064 and 3082 of 2008 whereby MAVDT (Ministry of Environment, Housing and Territorial Development) rejected investments of 1% made in compliance with the environmental license issued in 2013.

Declare the nullity of Resolution 431 of 2009 whereby MAVDT amended Resolution 952 of 1995 (oil pipeline environmental licenses), including the obligation of 1%. A Ruling as upheld by the Council of State on October 15, 2014.

Declare the nullity of writs 155 and 1981 of 2010 whereby MAVDT rejected the Additional Investment Plan executed to benefit the hydrographic basins. US$ 1,298 US$ 1,709 US$ 2,151

Executive lawsuit for the assumed non-payment of en invoice issued for the provision of transportation service of a truck container for the project 560. US$ — US$ — US$ 4

50


18. Provisions (continued)

Confingent liabilities not provisioned

The Company has contingent Habilites not recognized in the Statement of Financial Position upon considering that their probability of occurrence is eventual. Such contingencies are mainly derived from legal claims related to labor claims brought against Company' contractors, claims for damages caused during the construction of the Pipeline. However, such proceedings are not material and do not affect significantly the Company's financial statements.

Continqent assets not provisioned

The Company does not have assets for contingencies whose probability of occurrence is determined as eventual.

19. Equity

Subscribed and paid capital

Authorized capital corresponds to 5,350,000 shares ata par value of COP $30,104.543412483 each. Subscribed and paid capital corresponds to 5,159,000 shares, thus adding up a subscribed and paid capital for COP$155,309,339 (in thousands of pesos).

The detail of shareholders is as follows:

Subscribed shares 04

Cenit Transporte y Logística de Hidrocarburos S.A.S. 3,747,910 72.64799% Alianza Fiduciaria S.A. — Fideicomiso Acciones Ocensa 1,153,138 22.35197% Banco de Bogotá (Panamá) S.A. — Fideicomiso Acciones 257,949 4.99998% Ocensa. Al Candelaria (Spain), S.L.U. 2 0.00004% Transporte Registrado Servicios, S.A. 1 0.00002%

5,159,000 100%

Equity reserves

December 31, 2015

December 31, 2014 January 1,

Restated 2014

Legal reserve Non-taxable 10% legal reserve

US$ 7,736 US$ 7,736 US$ 7,736 33,121 33,121 33,121

US$ 40,857 US$ 40,857 US$ 40,857

The Colombian Code of Commerce establishes that it is mandatory to appropriate 10% of net annual profits as a legal reserve unfil the balance thereof is equivalent to 50% of subscribed capital. This reserve may be used to offset loases or distributed it in the event of Company's liquidation.

51


19. Equity (continued)

Payment of dividends

Below is the detail of dividends distributed in 2014:

April 1, 2014— profits from October 1 to December 31, 2013 August 28, 2014— profits from January 1 to June 30, 2014 November 4, 2014— profits from July 1 to September 30, 2014

US$ 163,576 380,702 183,882

US$ 728,160 Below is the detall of dividends distributed in 2015:

March 4, 2015— profits from October 1 to December 31, 2014 September 4, 2015— profits from January 1 to June 30, 2015 November 30, 2015— profits from July 1 to September 30, 2015

US$ 160,243 368,786 162,956

US$ 691,985

Other comprehensive income

This item includes effects of the effective portion of cash flow hedging instruments, thus recognizing the effective portion in Other Comprehensive Income. The change in fair value of the hedging instrument, which has been recognized in Other Comprehensive Income, will be reclassified to profit or loss when the hedged ítem affects income. The Company, with this hedge policy, seeks to stabilize cash flows and mitigate economic effects that could arise from fluctuations in market variables, namely, the COP/USD exchange rate and the benchmark of Brent crude. Being between 80% and 125% of the fair value established for the hedge is a policy established by the Company for recognition purposes in Other Comprehensive Income.

The Value at Risk (VaR) methodology is used to measure the effectiveness of the hedge, which uses the EBITDA at Risk as indicator.

Upon carrying out this measurement, Monte Carlo simulations are made; however, other commonly accepted methodologies could be contemplated. They should allow to:

(1) Present potential variances in the COP/USD exchange rate and/or prices of raw materials (Brent).

(2) Measure the impact of these movements in the Company's cash flow.

(3) Measure the impact of these movements in the EBITDA (and/or net profit, if recommended) of the Company.

The specific model to measure risks and their crifical variables, as well as their amounts, will be evaluated monthly at the Audit and Financial Committee.

When the hedge is no longer effective, the hedge accounting will cease.

Additionally, Other Comprehensive Income includes the effect of translating the financial statements into the presentation currency. Upon preparing the financial statements, the presentation currency differs from the funcfional currency and the income statement and statement of financial position are translated into the selected presentation currency -in this case the Colombian peso. Assets and liabilities are translated at the closing rate, revenues and expenses are translated at the average rate, and equity is translated at the rate prevailing at the transaclion date.

52


19. Equity (continued)

December 31, December 31, 2015 2014 January 1,

Restated 2014

Cash hedges US$ (31,907) US$ US$ Deferred tax 12,763 Deferred tax translation adjustment 83,450 44,552

US$ 64,306 US$ 44,552 US$

20. Revenues



Hydrocarbons transportation service US$ 1,409,296 US$ 1,370,644 U n load ing service 32,968 24,394 Other revenues 24,738 23,762

US$ 1,467,002 US$ 1,418,800

Hvdrocarbons transportation services

They comprise the process from transportation of oil from Cupiagua for its exportation through the TLU-2 at Coveñas terminal. The transportation service is invoiced based on the number of barreis transported in each section of the pipeline at the rate fixed by the Ministry of Mines and Energy for each section. The rate authorized by the Superintendence of Ports and Transportation is used at the Coveñas terminal. The average of number of crude barreis transported for 2015 were of 617,988 KBPD and for 2014 of 600,662 KBPD.

Unloadino services

They correspond to oil or diluent unloading at Cusiana stafion unloading facilities. This service is invoiced according to the contractual rates based on barreis unloaded.

Other revenues

They correspond to port services, dilution services, administrative services, and maintenance services.

53


20. Revenues (continued)

Informafion on main clients

Revenues generated as a result of crude oil transportation activities are obtained from the following clients:



Ecopetrol US$ 928,010 US$ 900,164 Meta Petroleum Corp. Sucursal Colombia 270,927 301,331 Others below 10% 268,065 217,305

US$ 1,467,002 US$ 1,418,800

21. Cost of sales

Variable costs

Year ended at

December 31, 2015

December 31, 2014

Restated

Drag-reducing agent US$ 27,324 US$ 36,946 Fuels and lubricants (1) 14,457 17,444 Electric power 7,014 8,233 Gas (2) 11,572 9,678

60,367 72,301 Fixed costs

Operation and maintenance (3) 77,146 102,450 Labor costs 5,450 5,443 Depreciafion and amortization 67,623 58,109 Taxes 274 315 Materials (4) 9,276 22,969

159,769 189,286 US$ 220,136 US$ 261,587

(1) The implementation of the Project to substitute gas fuel in engines of operation units at Caucasia Station and the progressive change of this substitution in other stations of the Pipeline confinue.

(2) The increase is due to the development, as from the first half of 2015, of the Project to substitute fuel for gas in engines of main units at Caucasia station and to the progressive increase of this substitution at other Pipeline stafions.

(3) Its increase corresponds to the maintenance activities foreseen during 2015 related with maintenance of machinery and equipment, maintenance of basic equipment, and line civil maintenance, among others.

(4) Their decrease corresponds to material consumption made in 2015 which are considered capitalized.

54


22. Operating and projects' expenses


December 31, 2014 2015

Restated

Fees and services (1) US$ 6,583 US$ 12,234 Leases (2) 1,482 1,440 Maintenance 943 822 Insurance 1,787 1,921 Miscellaneous (3) 2,218 3,498

US$ 13,013 US$ 19,915

(1) Their decrease, compared to 2014, is due mainly to the assistance rendered for the analysis of the transportation process and the close of gaps, an activity which Fiad less incidence in 2015. Additionally, in 2014, costs were incurred for the ethical and compliance Audit.

(2) Their increase is due mainly to the new negotiation in the Additional Clause signed, with an extension of 10 years and an increase in the rent.

(3) Their decrease is due mainly to the recognition as capitalized of some of the materials used for maintenance. Additionally, the decreases in projects developed by the area of integral responsibility.

23. Administration expenses


December 31, 2014 2015

Restated

Taxes (1) US$ 8,704 US$ 4,938 Labor expenses 15,784 21,890 Depreciation and amortization (2) 4,190 3,639

US$ 28,678 US$ 30,467

(1) Their increase is mainly due to the recognition of the wealth tax, which for 2014 was not applicable.

55


23. Administration expenses (continued)

(2) Below, there is the detall of depreciation and amortizaban:

Year ended at

Depreciation Depreciation

equipment Depreciation Amortizaban Amortizaban Amortization Amortization Amortization

of office equipment of computers and communication

of vehicles and transportation equipment of vehicles leases of computers equipment leases of computer software of leasehold improvements of SAP 6.0 project

December 31, 2015

December 31, 2014

Re-expressed

US$ 65 US$ 64

1,695 1,386 6 95

152 204 50 87

1,863 1,327 38 75

321 401 US$ 4,190 US$ 3,639

24. Other operating income (expense), net

Year ended at

December 31, 2015

December 31, 2014

Restated

Monetization US$ 2,053 US$ 1,954 Indemnity for losses 800 Indemnity for contracts 69 36 Assumed taxes (56) (122) Donations (11) (113) Impairment recoveries (lostes) (2) (4) Recovery of provisions 122 Others (16) 452

US$ 2,837 US$ 2,325

56


25. Financial result, net

Finance income Gains from hedge derivatives (1)

Year ended at

December 31, 2015

December 31, 2014

Restated

US$ 55,747 US$ - Late payment interest 60 32 Returns and interest 2,340 3,719 Returns and interest from deposit certificates 728 362 Returns and interest from contracts 150 129

59,025 4,242 Finance costs

Interest (13) (85) Other finance expenses (2,304) (1,896) Finance costs (406) (294) Losses from hedge derivatives (1) (89,810) (59,012)

(92,533) (61,287) Exchange differences 16,580 38,987 Financial result, net US$ (16,928) US$ 18,058

(1) Below, there is the detall of hedges recognized in profit or loss in 2015 periods, which were subscribed in 2014:

lncome from hedging operations

Year ended at

December 31, 2015

December 31, 2014

Restated

Unrealized gains US$ 53,627 US$ - Realized gains 2,120 -

55,747 _ Expenses from hedging operations

Unrealized loases 418 (59,012) Realized loases (90,228) —

(89,810) (59,012) US$ (34,063) US$ (59,012)

The result of the hedging valuation was recognized in the statement of income, given that the Company did not apply hedge accounting in 2014.

57


25. Financial result, net (continued)

The effechveness of results of hedged items was impacted by the effects of the exchange rate, as shown below:

Period TRM (*) TRM Variation

January 2,441.10 48.64 February 2,496.99 55.89 March 2,576.05 79.06 April 2,388.06 (187.99) May 2,533.79 145.73 June 2,585.11 51.32 July 2,866.04 280.93 August 3,101.10 235.06 September 3,121.94 20.84 October 2,897.83 (224.11) November 3,101.10 203.27 Diciembre 3,149.47 48.37

nRepresentative Market Rafe - American dollar / Colombian peso

Derivative transactions are agreed in US dollars for the hedge cash flows in Colombian pesos, which have a maturity not exceeding December 2016. The amounts of the items hedged in US dollars for 2016 are the following:

Period Sales Purch ase

operations operations

January US$ 492,495 US$ February 486,269 March 569,350 11,738 April 416,024 14,881 May 406,883 14,881 June 191,205 14,881 July 243,080 14,514 August 312,347 8,257 September 336,272 5,833 October 341,019 5,443 November 401,662 5,443 December 390,585 3,143

58


26. Risk management

Because of its financial structure, the Company is directly exposed to exchange, credit and liquidity risks as shown below:

26.1 Exchange rate risk

The exchange risk management is framed-up on the principie that the COP/USD exchange rate is subject to highly-volatile and unpredictable changes. In this sense, the objective of hedging strategies defined by the Company is to mitigate the movements in those variables upon the use of derivafive instruments acquired in financial markets.

The exchange rate risk refers to economic effects resulting from fluctuations of the exchange rate which the Company is exposed to. In the case of Oleoducto Central S.A., most revenues from services rendered are paid and collected in US dollars; however, some expenses and ah l tax obligations are paid in Colombian pesos as the Company operates in Colombia. For this reason, Company's cash flows are exposed to fluctuations in the COP/USD exchange rate ruling in the United States.

For that purpose, Oleoducto Central S.A. uses hedging transacfions upon contracting derivafive instruments, mainly Forwards, aiming to mitigate the effects that, upon variations in the COP/USD exchange rate, are originated in respect of the budget of expenses in Colombian pesos and tax obligations not exceeding one year.

Al December 31, 2015 cut-off, the notional value of the portfolio of current exchange rate hedges amounted to US$387,442,210.24. This represents a decrease of 23% versus the figure reported at December 31, 2015 cut-off. This change is explained, to a great extent, upon the reduction of the hedging percentage on exposed flows projected for 2016.

The USD/COP exchange rate has fluctuated during the last years. The Colombian peso has depreciated by 32% in 2015, with an exchange closing rate at December 31, 2014 of COP2,392.46 to COP3,149A7 at December 31, 2015 per US dollar.

Below, there is the effect that a variation, between 1% and 5%, would have in the COP/USD exchange rate, related to the exposure of financial assets and liabilities in foreign currency at December 31, 2015:

Scenario/ TRM

variation

Effect on results before

taxes (+1—)

1% 5%

2,976

14,314

In order to calculate the effect on profit or loss before laxes, we took the average rate of 2015, which is equivalent to COP2,741.22 per USD1.

59


26. Risk management (continued)

The sensifivity analysis only includes monetary assets and liabilities held in foreign currency at the closing date, as shown below:

December 31, 2015

December 31, 2014

Restated January 1,

2014 (In millions of Colombian pesos)

Cash and cash equivalents $ 279,231 $ 99,132 $ 15,305 Trade receivable and other receivables 83,629 59,433 46,352 Other assets 37,928 24,490 4,989 Assets position $ 400,788 $ 183,055 $ 66,646

Receivables and loans bearing interest (573) (940) (922) Trade and other payables (410,645) (268,672) (126,858) Other financial liabilities (103,597) (136,017) Current tax liabilities (688,467) (571,155) (612,498) Provisions (142,656) (93,948) (72,581) Deferred revenues (1,541) (1,781) (1,841) Liability position $ (1,347,479) $ (1,072,513) $ (814,700) Net position $ (946,691) $ j889,458) $ (748,054)

26.2 Credit risk

The credit risk is the risk acquired by the Company as a result of a default on client obligations, on financial institufions where investments are made or on counterparties with which derivative financial instruments are contracted with.

Permanent monitoring of credit ratings issued by risk rating companies on financial entities which investments are made with or derivative instruments are negotiated with is carried out at Oleoducto Central S.A. in order to guarantee that such companies meet the minimum rating defined by the Company.

An individual analysis of impaired portfolio is made to detect the position of each client and tus determine necessary provisions, such as the aging of receivable to be provisioned. At December 31, 2015, there are no indicabons of impairment for receivables balances.

The Company cardes out administrative and legal acfions necessary to recover overdue receivables, as well as interest recognition of clients not complying with payment policies.

26.3 Liquidity risk

The National Department of Planning, as evidenced in its Communication number SC-20134380757471 of October 15, 2013, issued a favorable opinion for the Company to enter into public credit operations upon the international issue of a bond in US dollars for up to US$1,000,000,000, with 100% of possibility to reopen the remaining amount in order to finance Capex needs of new projects. Based on this favorable opinion, by means of Resolution No. 4254 of December 12, 2013, the Ministry of Finance and Public.

60



Credit authorized the Company to negotiate the issue and placement of bonds in the international capital market for opto one billion US dollars (US$1,000,000,000) in order to finance investing needs of future expansion projects.

By means of Resolution No. 1369 of April 29, 2014, the Ministry of Finance and Public Credit authorized the Company to subscribe, issue and place External Public Debt Bonds, under Rule 144 Al S Register of the US Securities Act, in International capital markets for up to US$500,000,000 in order to finance the investing needs of future expansion projects (Potencia 135 and Calentamiento). This provides the Company with the possibility to reopen the remaining amount, given that Company's financing needs require them and that capital market conditions are favorable.

The liquidity risk is managed based on the application of the Merton Miller and Daniel Orr model ("A Model for the Demand for Money by Firms"), which is a random generation induction model for daily changes in the cash balance, in order to establish minimum cash levels required to meet the liquidity requirements of the organization, including its debt service commitments.

The main purpose of the internal procedures is to ensure sufficient liquidity levels to comply with the Company's financial commitments within its timetable of maturities, as well as the main instruments for their measurement and follow-up. Such instruments are weekly report of the treasury's dashboard, monthly cash flow, and analysis of the rolling annual average of expected cash flow.

The Company has a policy to manage liquidity surpluses. Such policy provides criteria, guidelines and rules for the efficient and safe administration of liquidity surpluses, and establishes limits of exposure by counterparty. At present, the counterparty limit of risk exposure is limited to the higher of the following parameters: A maximum amount of US$150 million or, if the cash balance is lower than this amount, it should be divided at least into three counterparties that meet the minimum rating permitted. In the event issuer and issue limits established herein are exceeded, the portfolio administrator will have 45 calendar days to take the measures necessary to adjust to such limits.

The credit quality of issuers, assets and counterparties of operations is as follows:

Minimum permitted rating:

Foreign financial rating entities

Ratinq Agency Short-term rating Long-term rating Standard & Poor's A-1 A+ Moody's Investors Service P-1 Al Fitch Ratings F-1 A+

National financial entities

Rating Agency Short-tenn ratinq Long-term rating Fitch Ratings Fl+ AAA BRC Investor Services BRC 1+ AAA

61



Furthermore, clients who wish to participate in processes of Firm Transportafion Offers OPS (from the Spanish Oferta de Transporte en Firme, OPS) with the Company have a number of requirements that classify them under 3 rating groups. This classification is made based on elements such as credit risk ratings for their long-term US dollar debt issued by one of the following risk rating agencies: Standard and Poor's Rating Group, a division of McGraw-Hill Companies; Moody's Investor Services, Inc; or Fitch Ratings, Inc., as well as indicators of working capital, net equity, performance guarantees and bank pre-approval of stand-by letters of credit with AAA credit rating are also included in the classification process of each group to evaluate client risks.

26.4 interest rate risk

Oleoducto Central S.A. issued a bond in the international market ata notional amount of US$500 million in 2014. A fixed interest rate of 4% was used in such issue; therefore, there is no risk of interest rate.

26.5 Capital management

The main objective of the Company's capital management is to ensure a financial structure that optimizes the cost of capital, which maximizes the return of its shareholders, and allows access to financial markets ata competitive cost in order to cover its financing needs.

Below, there is the indebtedness ratio of periods reported:



Cash and cash equivalents (Note 7) US$ 319,395 US$ 636,123 US$ 292,035 Loans (Note12) (498,917) (498,438) (485) Net finance debt US$ (179,522) US$ 137,685 US$ (291,550)

Equity US$ 1,048,253 US$ 963,983 US$ 922,250

Gearing ratio (1) 20.66% 16.66% 46.23%

(1) Net finance debt / (Net finance debt + equity).

62



27. Reiated Parties

The main transactions with related parties during the reporting periods are detailed below:

December 2015 Operation and Purchase of

Hydrocarbon Unloading Dilution Administrative maintenance products and transportation service service services services services

Ecopetrol S.A. US$ 924,603 US$ 3,347 US$ — US$ — US$ — US$ 8,236 Cenit Transporte y Logística de Hidrocarburos S.A.S — — — 31 — 302 Hocol S.A. 13,333 130 — — — — Oleoducto de Colombia S.A. 241 — — 744 1,302 1,011 Oleoducto de Los Llanos Orientales — — 3,661 — 265 — Oleoducto Bicentenario de Colombia S.A.S. — — — 147 1,133 2,424

US$ 938,177 US$ 3,477 US$ 3,661 US$ 922 US$ 2,700 US$ 11,973

December 2014 Restated Operation and Purchase of

Hydrocarbon Unloading Dilution Administrative maintenance products and transportation service service services services services

Ecopetrol S.A. US$ 896,818 US$ 3,911 US$ — US$ — US$ — US$ 25,512 Cenit Transporte y Logística de Hidrocarburos S.A.S. — — — — — 4,000 Hocol S.A. 30,415 _ — — — — Oleoducto de Colombia S.A. — — — 922 1,709 1,362 Oleoducto de los Llanos Orientales — — 3,115 — 321 — Oleoducto Bicentenario de Colombia S.A.S. — — — 232 1,245 51

US$ 927,233 US$ 3,911 US$ 3,115 US$ 1,154 US$ 3,275 US$ 30,925

63


27. Related parties (continued)

The most representative balances with related partes at December 31, 2015 and December 31, 2014, are included in receivables and payables, as follows:

December 31, 2015

December 31, 2014

Restated January 1,

2014 Receivables

Ecopetrol S.A. US$ 78,549 US$ 79,948 US$ 70,835 Hocol S.A. 693 2,460 2,916 Oleoducto de Colombia S.A. 892 1,321 2,231 Oleoducto de Los Llanos Orientales 978 974 705 Oleoducto Bicentenario de Colombia S.A.S. 439 719 242 Cenit Transporte y Logística de

Hidrocarburos S.A.S. 403 US$ 81,954 US$ 85,422 US$ 76,929

Payables Ecopetrol S.A. US$ 2,622 US$ 1,487 US$ 1,804 Oleoducto de Colombia S.A. 84 138 307 Oleoducto Bicentenario de Colombia S.A.S. 2,649 146 117 Oleoducto de Los Llanos Orientales 76 Cenit Transporte y Logística de

Hidrocarburos S.A.S. 29 104 688 US$ 5,384 US$ 1,951 US$ .1,916

Outstanding amounts are not guaranteed and will be settled in cash. No guarantees have been granted or received. No expense has been recognized in the current period or in prior periods concerning uncollectable or doubtful debts related to amounts owed by related parties.

Trade purchases and sales transactions of goods and services, concerning the development of the Company's corporate purpose, with related parties are made under general market prices and conditions.

28. considerations to executives

Executives' fees on concept of attendance to the Board of Directors and/or the Committee amount approximately to US$146 for 2015 and US$154 for 2014.

Total considerations paid to directors, executive officers and top executives on concept of salary and other considerations for 2015 amounted approximately to US$3,050 and regarding payment of benefits on concept of free investment loan, Mutual Fund, vehicle leases, prepaid medical insurance to approximately US$424.

29. Subsequent events

No subsequent events affecting the financial staterrients occurred.

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AT DECEMBER 31, 2015 AND 2014 AND OPENING BALANCE … OCSA - EF... · Oleoducto Central S. A. Financial Sta tements At December 31, 2015 and 2014 and opening balance sheet at January