Oleoducto Central S.A....EY Buildinqabetter working world Statutory Audítor's Report Tothe Srareholders of Olecducto Central S,A, Ihave audited lre accorrpanying financial statements

Oleoducto Central S.A.

Financial StalementsPenoos el lhree monlhs ended Seplember 30 and June 30, 2016

with Statutory Audilor's Report


Financial Statements

Periods 01three mor,ths endeo September 30 and June 30, 2016

Contents

Stalutory Auditor's ReportCertili<;ation 01 the Financial Slatemenls

Financial Slatements

Statemenl, 01 Firancial Posit.cn ",.," ,.," ,..,' ,.," ,... ,,...Stalemenls 01Ccmprehensive Income ,Stalemenls 01Changes in Shareholoers. EquitySlstemenls 01Cash FlowsNotes lo Financial Statements.

13

,;e,

"" ..""" ...,,8

EYBuildinq a betterworking world

Statutory Audítor's Report

To the Srareholders ofOlecducto Central S,A,

I have audited lre accorrpanying financial statements 01Oleoducto Central S.A" which comprise Ihestatemerts 01 financia! position al Ser'tember 30, and June 30, 2016 and the related statements 01ccmprehensive income, el Chiln~e\ in 5horeholders equity, and cash flow, for the lhree month periodslhen ended, ar.d the s~mmary al significan! accounlinQ policies amI olner explanatory notes,

The Company's acministratior i5 re,ponsible ler the preparation ""d fair presentallan 01 lhe fi~ancialstatements, in accordance with accounting and financlal information stancarC5 accepted in Colombiaand statements ollhe Contadurfa Gereral de la ~ación; 01 designing, imptemenling. and maintainingthe internal corlrol releva nI to the preparatlon and t"ir pre,entation 01 financialstalements thal arefree Iram materia I m isstate:nents whetrer due lo Iraud or error; ot seleding and applying appro priateaecounHnr; policies; anc of eslablishin~ accountin~ estimates lhat are rea,on"ble in lhe circumstances.

My responsicility is to express ar opinion on lhese linancial,tatements based on my audits. I obtainedthe nec~s,ary informaticn lo camply wilh my lunclions and perlormed my examinations in accordancewi(h international audiling stJr'dords, These standards require that I meet ethical requirements. planand performed my audit lo abtoir' 'ea,Qnoble assurance whether the financial statements are Iree frommaterial misstatement.

A~ audit includes developing piOcedure, lo oblain audit evidence supportin~ amounts and disclosuresin (he lirancial statemen!s. The procedures seleded depend en Ihe auditar's judgment, incl udin ~ theassessment of the risk af meterial rri"tolements in the financial slatements, In makinQ those risxassessments. the auditor cor',ider, lhe inlerral controls relevant lo the entity's preparation and fairpresenlatian 01 the lirancial statemerts in order te design audit procedur~s thaf are appropriate in lh~circumstar,ces, An aucit alse includes eyalLatin~ the appropriateness 01 accounting principies used andthe red'Gfl¿blefless el 5i<;nificarl e,timates mode by mana~~ment, a, well as eyalu"lin~ lhe overaltpresenlation el the Hrancial statements. I believe lhat my audits providc a rcasonablc basis far myaudit opinio~.

In my o"inion, the acccmpanying finareial slatements present lairly, in all material res"ects, Ihelinancial position af Olecducto Central S.A. at September 30 and June 30. 2016, Ihe resulls 01 itsoperalions and ifs ce,h Ilow, fQr tne three month ;¡eriods then ended. in accordance with accountingand !ir,ancial inlormation standarcs accepled in Colombia and stafements 01 the Contaduria General delo Nación,

e, ,.,.", , , ,." ,,-l,." '".1. , ,...., ",4 ' .."',""",1;';";;

"",. """ Aod' '.A.'"c,' .",", " .,

".' .,"-,C .y.,., ."

Eco'" Yo'"'.,'" H.'""''',~d"'',,,A'.., oc'., N,,,,, , .....,., ,_[M ...". S'", "', ere ..,.", C.CO-"'. '-,e; -"~o,e" ,,'ro" ";,'76" .OC"

""". Yo,", .,'" "'.,'oc,,,,,,." ,'.",-'",~, Ib"',oO.",'.'.""""--",""'" ,'", Ll-..,,-'-"-,""f .. , '<.70."",,,, ...,

EYBuilding a betterworking world

Further, based O" the sccpe 01 ¡ny 2udits, I am no! aware 01 situations indicating lhat lhe ComDany hasno!: 1) kept minute books, the shareholcers' re~iste¡ and Ihe accountinG records in accordance withlegal requirements and accol,ntin<; technique: 2) carried out jls o~eration, in accorcance wilh lhe by-laws ""d lhe C~(isicns el the Shareholders' and Board 01 Director,' meetings, and lhe rules related withthe integral social security s'/stem: 3) retained correspondence and the accounting vouchers; and, 4)acopted internol coclra! measures IOf the maintenance and custody 01 the Company's assets and those01 third "arties he d by il. Add,tio"" Iy, there is ,,~reement between lhe accom panyi no fina neialstatemenls and!re accourting intormation included In lhe mana"Ement report prepared by theCompany's adminislraticn, which includes Managem nt presentation on th~ free circulation ofinvoices Viitr, endorsement issuec by vendors or S plier

Raul Virgili Alar ón PorraStal tory AuditorProf ssional Card 28021-TDesi ated by Ernst & Young Audit S.A.S. TR-530

Boyotá. D.e .. ColombiaOctober 31, 2016


Certification of the Financial Statements

October31,2016

The unders'gned lega, Representative and Public Accountant, under whose responsibilily the flnancialstatements were prepared, certlty

That for ¡he issuance 01the statements 01the Ionancial position al September 30 and June 30, 2016, and01 the statements 01 comprehensive income, 01changes in shareholders equily, and 01cash Ilows. lar theIhree monlh periods lhen ended, which in accordance with regulations are made available toShareholders and lhird parties, the assertions contained therein and ¡he Iogures truthlully taken from thebooks have been prevlously checked

Those explicit and implicit assertlons are aslollows:

Exislence: Assets and Iiabllltles 01Oleoducto Central S A exist on the cul.off date and the lransaclionsrecorded have taken place aurirg each quarter

Integrity: AII ecor,omic tacts carried out nave been recognized

Rights and obligations; Assets represent probable future economic benelits and liabililies represenlprobable fulure eccnomic sacnf.ces, obtained or in charge 01Oleodocto Central S, A, on the cut-off date

Valuation; AII elements nave been recognized al appropriate values

Presenfation and disclosuro: Economic lacts have been correctly classified, descnbed and djsclosed

Thomas Rueda EhrharatLegal Representatlve

Sandra uryPublic AcoeÍuntan

Professional CaM No, 803-T


Slatements of Financial Posilion

September 3D, June 30,Notes 2016 2016

(In Ihousands 01dollars)AssetsCurrent assetsCash and ca.h equivalenl. , "" 151,855 USO 99,203Trade deblar. and alher accounls receivable , 157,880 139,931Olher financial assets, net , 18,180 9,580OIMerasset. OC 6,637 7,338

334,552 266,062Non-current assetsProperly. planl and equipmenl nel " 1,639.799 1.630,652Inlangibles r.el 12 2,416 3,377

1,642,215 _~~ _l.~_~!,.9X~_Total assets "" 1,976,767 USO 1,890,081

Llabilitles and equilyCurrent liabilitiesDebts and loans bearing inleresl " U" 20,051 USO 20.075Trade accounls and olher accounls payable " 210,010 244,730Income tex peyable 15 84,496De/erred revenues 15 2,409 '"316,966 265,536

Non-current liabilitiesDebts and laans bearing inlerest " 4B4,290 479,112Deterred revenues 15 14,260 14,260PlOvisians H 49,297 51,319Deferred lax liabilities 15 134,~67 128,016

682,,!l14 672¿QLTotalliabilities 999,780 938,243Equity 18Subscribed and paid-in capital 81,714 81,714Legal reserve 40,858 40,858Accurnulaled prolils 789,907 759,408Other compreMensivei""ome . 64,508 69,858

Total equity 976,987 951,838Totalliabilities and equity "" 1,976,767 ce, 1,890,081

See accompanying notes,


Statamants of Comprahansiva lncoma

Perlad fromJuly 1 lo April 1 lo

September 30, June 30,NOles 2016 2016

(In Ihousands of US dollars, excepl"el prolil per share)

Conlinued operalionsRevenues fmm ordinary activifies " US$ 311,449 US$ 277.707Cosf 01sales 20 (52,374) (49,455)

Gross profit 259,075 228.252

Operations and projecl expenses " (3,520) (2,902)Administrative expenses " (6,039) (6,731)Other operaftng income (expenses). "" " "a (641)_Operaling profit 249,754 217.S78Financial income " 26,936 35.322Financial expenses " (8,378) (26,316)Gain (Ioss) from exchange dlfference "" " (3,032) 4-185Profit belore Income lax 265,280 231,169

Income tax expense " (111,985) (108.373)Net proflt 01 Ihe period Irom continued operalions US$ 153,295 U50 122,796

Other comprehensive income 01 the periodOther comprehenslve income lhal will be reclassilied loresulls in subsequenl periodsNet (1055)lrom hedSes 01cash Ilow, net 01faxes US$ (4,515) U50 (S07)

Other comprehensive income Ihal will not bereclassilied lo resulls in subsequenl perlodsNet loss lrom exchange dlfference in translalion (835) (3,502)

Other nel comprehensive income of the period (5,350) (4,409)Tolal nel comprehensive Income of the perlod US$ 147,945 USS 118,387Nel prolit 01 the period per share , US$ 29,714 USS 23,802

Sea accompanying noles


Statements of Changes in Shareholders' Equity

Subscribed OIherand Paid-in Legal Accurnulated Comprehensive TolalCapital Reserve Profits Income Equity

(In Ihollsands of dollars)

At March 31, 2016 US$ 81,714 US$ 40,858 US$ 792,061 US$ 74,267 US$ 988,900Dislribulion 01 dividends (155,449) (155.449)Nel profil 01 lhe period 122,796 122,796Olher comprehensive incomeNel loss from cash fiow hedges, nel of laxes (907) (907)Nel loss from exchange difference in lranslalion (3,502) (3.502)

At June 3G, 2G16 81,714 4G,858 759,408 69,858 951,838Distribulion 01 dividends (122,796) (122,796)Nel profil 01 lhe period 153,295 153,295Olhe¡ comprehensive incomeNelloss Irom cash fiow hedges, nel 01 laxes (4,515) (4,515)Nelloss 110mexchange difference in lranslalion (835) (835)

At September 30, 2G16 USS 81,714 US$ 40,858 USS 789,907 USS 64,5G8 USS 976,987

See accompanying notes.

Oleoducto Central S,A.

Statements of Cash Flows

Period fromJuly 1 lo Aprill lo

Seplember 30, June 3D,2016 2016

(111Ihousallds o, dollars)Operating activitiesNel profit 01 the period "" 153,295 U" 122,796Adjustmants to reconclle net protlt of the period with nelcaah flows from Operaling activities:Depreciation of property, plant and equipmenl 18,526 18,468Consumplion of malerials and nen-capitalizable spare

parts 10,938 8,496Wrile-oll retirement 01 property. planl and equipment , '"Amortizalion 01 intangible assets .., '"Recovery 01 cosls and expenses ,Delerred laxes, net 9,392 10,009Income tax expense 102,593 98,364Financial income (expenses) (16,811) (12,538)Financial expense (1,425) '"Gain (Ioss) from exchange difference (4,451) 7,764

Changes in operating asselS and lIabitities(Increase) decrease 01trade debtors and other acoounls

receivable (17,441) (3,254)Increase 01 olher assets m 4,890Increase (decrease) 01trade accounts and other accountspayable 4,472 (20,116)Increase (decrease) 01other linaneialliabililies nel " "Increase (decrease) 01 inceme received in advance 1,672 '"Inleresl received '" 1,462

Income lax paid (20,110) (396,190)Cash provlded from (used in) operaling activities 242,576 (151.108)Investing activitiesAcquisilion 01 property, plant and equipmenl (34,681) (58,984)Acquisition 01 inlangibles (31) 146Cash used in investing activities (34,718) (58,838)Financíng activitiesPayments 01 liabilities lrom linancialleasing (27) (72)Interes! paid (10,000)Dividends paid (15~L"-"-~)Cash used In financlng activities (155,476) (10,072)Nat Increase of cash and cash equivalents 52,382 (226,618)Effec! 01 Ihe variation in exchange rates on cash and cashequivalenls mainlained in lorelgn currency '" 1,300

Cash and cash equiva'enls al lhe beginning 01 the periad 99,203 324.521Cash and cash equlvalents at the end ofthe period "SS 151,855 USS 99,203

See accompallying no/es

9


Notes to Financial Statements

For the perioas of three mor.ths ended September 30 and June 30, 2016(AII amounls are axprassed in fhousands of dollars. axcepf foraign curraney amounfs, axehange ratasand fha par vaJue offhe share)

1. Corporate tntormation

Oleoducto Central SA (the Comeany) ISa mixed-economic company incorporated in accordanee withColombian laws by means el Publie Deed No 474701 Deeember 14, 1994 al the 36'" Notary's Office 01Bogot:'3, D.C. with a lorasaen duration unlil December 31, 2093 and which corparate purpose includesdesigning, constructing, operahng, managing, commercially exploiting and be the owner 01a public-useoit transportation system and related lacillt<es without any timitation, whose starting point is tocated in theCusiana and Cupiagua stations, Department 01Casanare, and whose linal point is locatad in theembarkation port 01Covenas, In the municipal jurisdictions 01San Antera, Department 01Córdoba, andCaven as, Department cl Sucre. Such purpose €lIso includes designing, construeting, operating andmanaging mari time eil ports or terminals and providing, directing or indirectly, services related to portoperation, particularly storage, lerrestrial, mari lime management and crude transportation and Ioading

The Pipeline consists el six pumping stations, a pressure reduction station, one maritime terminal, 836kilometers 01ground tub:ng and 12 kilometers in the sea, a base lar the coordination 01mainlenaneeactivities, tanks la store up to five m,lllon barreis, and a control center

To carry oul the transportation operation, It has a communication system allowing total control thereolthrough instruments localea alang the tubing and al the stations This permils controlling the availability 01crude, its locat:on and the veriliealion ot commilmenls in crude transportation,

The main offlce 01Oleoducto Certral SA is tocated in Bogolil, Colombia, The Company belongs to theEcopetrol BUSiness Gro"p whieh plays a controlling positlon through Cenit Transporte y Loglstiea deHrdrocarburcs S.A S

2. Basis 01 Preparation

2.1. Statement 01 Complianee and Authorization of the Financiat Statements

The Campany's linancial stalements have been prepared in accordance wilh the Accounling andFinanciallnlormation Standards Accepted in Colombia (NCIF), based on International Financial ReportingStandards (IFRS), together with their inlelpretations, conceptual relerence lramawork, conclusion basesand application guidelir,es autharrzed and issued by the Internalional Accounling Standards Board (lASB)as established by decree 2615 of December 17, 2014, decree 2420 01 December 14, 2015, amended bydecree 2496 01December 23. 2015; and other legal provisions applicable lo entities supervised andlorconlrolled by the Supelinlendenca of Corporations, and by the Conladurla General de la Nación thal maydlffer in certaln aspects 110mthose established by other State control bod ies.

The financlal statements at September 30, 2016 were preparad by the Company's management andappraved lar circulation by the Board of Directors, on October 21, 2016, to be subsequently approved bythe General Sharero!ders' Meeting on October 31. 2016,

10

Oleoducto Central S. A.


2.2. Basis 01 Measuremenl

The Company's financial slafemen!s have been prepared based on the historical cost. excepl lorfinancial assels at fair value w,th changes in results andlor changes in olher comprehenswe income, Ihatare valued at lheir fair value al each period clos'ng

2.3. Funclional Currency

Items included in these f,nanc'al statements are initially valued in lhe functional currency which is lhe U.Sdollar, tMat is the currency 01the main economic environmenf the Company operates in and in addifionthe one in which ,t regularly generates and uses cash

In transactions w,th a currency differenl from lunctional currency they are lranslated al lhe exchange rateof Ihe fransaction date or, in I'eu thereol, at the monthly average exchange rate

2.4. Foreign Currency

Upon prepanng the financial stafelr,ents, fransaction$ in a currency other than Ihe Company'sfunctionalcurrency are recor(jed using currenl exchange rates on Ihe (jales operations take place. Allhe end 01each period, monelary items rn loreign currency are lranslated al currenl exchange rales in torce on thatdate and variations arising in the translation are recognized in the nelfinancial result. Non-monetaryitems recorded at fair value, dencminated in lore'gn currency, are translaled at the exchange rate in forceon the date Ihe fair vaiue was determined

Profils an(j losses Imm exchange dillerences felate(j fa ioans, and cash and cash equivalenls arepresented in lhe income sfatement accounl in line entilled "Financial ¡ncome or financial expense:Remaining losse$ and gai~s Irom exchange d,fferences are presented as exchange difference

2.5. Classilication of Assels and Liabilities as Currenl and non_Currenl

The Company plesents assets and liabil,ties in lhe Slatement 01Financial Pos'lion based on ils currentor non-current classilicafion An assef is current when:

• It is estimated that it will ce cancelled or Ihe expectafion is thal it will be sold ar consumed in thenormal operating cyel!! of lhe business

• If is mainly maintained far pUfposes 01 being negofiated

1 1



2.5. Clasaificalion 01 Aasets and L1abllltles as Cu rrant ano' non-Cu rrant (contlnued)

• The expectatoon is thal it wlll be realized within twelve monthslollowing the reporting dale; oro• It 15cash or cash equlvale~t u~less il is restricled to be exchanged 01 used to paya liability for at

least twelve months from Ihe reporting dale

AII olher liabilities are c1assJied as ~on-current

A liability is curre~t when

• It 15estimated that It wlll be sett'ed m the normal operating cycle of the bus'ness• It 15mainta'ned malnly In arder to be negoltated• It 15expected that it Vlill be car,celled w,thin the twelve months subsequent to lhe reporting dale; or,• There is no uncondlt'onal rigr.t to deler the payment 01the liabilily lar a least twelve months

subsequenllo the reportirg date.

AII other liabililies are c1assilied as non-curren\.

2.6.Accounting Period

Unt,1December 2012, the term of each accounling periao' was annual. Le,. at December 31 01 each yearAs 012013, by means 01 Public Deed No 23801 February 1, 2013, registered wilh the Chamber 01Commerce 01Boycla on February 5, 2013. the Company changed ano' unilied their colporale bylawsAmong other malters, by means 01 such amendmenl, it was agreed to change account.s' cut-oll dales toprepare ano' publlSh generar purpose linancial slatemenls, which as 012013 will be prepared semi-annually, ¡,e" at June 30 ano' at December 31 each year, on which lhe Company should make a cut-ollolits accounts, prepare ano' publish its financial stalements

Ao'dltlonally, at lhe General Shareholdels' Meeting held on September 30, 2016 a stalutory reform wasapproved by means or Minute No, 96, formalized by public deed No. 2983 01October 20, 2016, consislingof a transiloly artlc'e indicat,ng that an accounts' cut-off will be made at September 30, 2016 ano' tha!general-purpose linancal s:atements will be presented at such cut-off date

3. Surnmary 01 Significant Accounting Policies

Below are sig nificant accou nting policies conSlstently applieo' by the Company in the preparation 01 ilslinancial statements conSlstently presenled lor all presented periads

3.1. Flnanciallnst,uments

The classilicalion 01a f,nanc,al ir.strument depends on the nature ano' purpose of lhe fmancial assets ano'is delermined at lhe trme 01 initia,' reccgnit'on, AII regular purchases or sales ollinancial assets arerecognized ano' wrilten off at the transaclion date, Regular purchases or sales are alllhose purchases orsales ollinancial assets requiring the o'elivery 01as.ets wilhin Ihe lime Iramework €stablisheo' by aregulalion or in accomance with the market

12



3.1. Financiallnstrumants (continuad)

Financial assels and liabllltles are initially valued al lheir lair value Transaclion cosls directly atlributableto lhe acquisilion or issue 01linancial assels and liabililies (other lhan linancial assel5 al fair value wilhchanges in lhe 5lalemen! of income) are added or reduced Irom lhe lair value 01 lhe linancial a5sels andliabililies, a5 required, in lhe i",llal recognilion, Transaction cosls directly allribulable to lhe acquisilion 01financial assels and liabililie5 al their lair value wilh changes in Ihe stalemenl 01 income are recognizedimmediately in result5

Financiai asset5 al falr value wilh changes in income and wilh changes in other comprehensive incomewill be recorded subsequent'y at their fair value Inslrumenls al amortized cost, loans and trade accountsreceivable other accourts rece vable and financial assels mainlained until lheir matufily will beaccounled lor at lheir amortizec ccst in accordanes wilh lhe effective inleresl rate melhod.

Fal, Value

The hierarchy 01 lhe fair value is based on lhe informalion level available in lhe markel, which includesliquidily securily, avai:abilily 01 exchange prices or indicators generaled lram markel operations (rates,curves, volatililies and olher valuafon variables requrred),

• Level 1, (Non.adlusted) q uotal;on priess 01active markets for idenlical assels and liabililies For lheCompany, Level 1 includes tradable secunt'es act>vely transacted

• Level 2: Enlries olher lhan Level 1 which are ob5ervable, eilher diree!ly or indifectly, For lheCompany, entrres 01 Level 2 include priess 01similar a55els, priesa oblained lhrough quotalions 01slock exchange brokers, and priess lhal may be substanlially corrobofated wilh olher observabledata with the same term cl the contrae!

• Level 3: Nol observable dala entry, TMe Company doea not use Level 3 Ior any 01 its recurringmeaSUfements at fair val~e, Level 3 may be necessary fo determine the fair value associaled withcerta;n non.recurrent measurements 01non-financial assets and liabil'l'es, The Company uses Level3 to determine the lair va'ue 01 specific non-recurrent, non.financial assets

Effective Interest rata Malhod

The effective mlerest rate Iretr,od ia used lo calculale the amortized cost 01a flnancial in5trument and thedislribution 01linancial income lhroughoul the relevant period, The effeclive inlerest rate is lhe discountrale which exactly matches eslimated ca5h Ilows receivable or payable (including all commissioM,tfansaction costs and other pfem,ums or discounts lhal are included in calculating fhe effective intefeslrate) during the expected lile 01 l~e linancial inslrumenl(or when necessary wilhin a shorter period) wilhthe nel carrying value in l~e initial recognition,

Impairment

Financial a55ets al amortized rosl are assessed by impairment indicators al the end 01each reportingpenod, It is considered tha! linancial assets have been Impaired when lhere is objective evidence tha!. asa resull 01One or more events occurring after the inilial recognilion, estimated Mure cash liows 01!heasset have been affecled

13



3.1. Flnanclal Inslrumenls (conlinued)

/mpairment (continued)

The impairment 105501Ilnarcial assets recorded al cosl is lhe difference betwaen lhe carrying value amithe present value 01 eslirra:ad tuture cash tlows of Ihe assel, discounled at the original effective inlereslrale ot lhe I,nancial asset

Derecognition in Account of Financial Assets and Líabilities

A financial asset is derecognised only when contractual rights over cash Ilows 01 tha linancial assetmalure and ri5ks and advantege5 'nherent lo the ownership 01 lhe financial assel are 5ubslantiatlytranslerred lo enolher enlily. II all risks and advanlages inherenl to Ihe ownership ere not lranslerred orsubstanhally reta,ned and the control 01 lhe 855et lran51erred conlinues to be reteined, Ihe participellon inlhe essel and lhe essociated obllgation lar Ihe amounls it would have lo pay is recognized

II atl risks and advartege5 Inherent to the ownership 01a financial asset translerred are sub51antoallyretained, the liranClel a55et a5 well a5 a collateralloan 101revenues received will conlinue lo berecognlzea

In the lotal dereccgnilion in accounts 01Ilnancial asse15 and hebililies, Ihe difference between Ihe carryingvalue and the sum 01 the valuable consideration received and receivable, as well a5 accumulated resultsIhat hall been recognized in arother 5tatemenl 01comprehensive income and eccumulatell in equity, willbe recognized in the Statement ollncome and in Other Comprehensive Income

3.1.1. Cash and Cash Equivalenls

Cash and cash equivalerts ccrsist 01Ilnanc;al investmen15 and special dep05its maluring within ninety(90) days as 01 Iheir accu's t cn dale and wllh a low level 01 risk in changes 01their value

3.1.2. Finandal Assets al fair Value wilh Changas In Resulls

Financial assel5 acquired mainly lo be sold within the shorl term are linancial aS5et5 al lair value withchange5 In results. Financial a55ets at lair value with change5 in resul15 are recognized at Iheir lair value,gain5 or 1055e5arising in Ihe re-measuremenl are recognized in Ihe period result

3.1.3, Loans and Accounls Reccivable

These are financial assets with fixed or determinable paymenl5, nol quoted in an active markel Theyareclassified under current assets except lor those matunties exceeding twelve months Irom lhe date 01lheslatement of rirancial pc5,ticr, which are clas5ified as non-currenl asse15, loans and accounl5 recelvableinelude trade accounts ane other acccunts receivable initislly mes5ured al their lair value and5ubsequenlly al their amortlZeo cosl, using Ihe effective inferesf melhod

14


Notes to Financial Stalements

3.1.4. Financlal Liabilities and Accounts Payable

Financialliabililias correspond to financing sources secured by the Company through bank credits andbond issues, acco~nts payable to suppliers and credltors,

Bank cred,ts and bond issues are initially reeognized af their fair valua, net al transaction cosls incurredThe difference betwaan lhe amount raceived and ils main value is recognized in the penad resull duringthe amortization time 01the IlnanClal obligation by using the effective interest rate msthod

Financ'al obligations are class,f,eo as current liabililies unless lhe Company has an unconditional rig ht lodeler lhe,r Ilquidat'cn d urirg at least twelve months afler Ihe date of the statemenl 01 finaneial posilion

Accounto payable to suppliers and credilors are short-Ierm financialliabilities recorded allheir par value,as they do not differ signilicantly from their lair value

3,1.5 Derivative Instrumenls

The Company may axecule Ilnar.cial hedge agreements lo proleet ilsell fmm Iluctuations in priees 01crude oil, products exchange rates and interesl rates. The Company does not use these financialinstruments for speculative purposes. Control activilies have been eSlabllshed to evaluate, approve andsupervise operat:ons 01der:va~ive I naneral instruments

To eonsider the effectivenBss of these hedges, lheir results should range Irom 80% lo 125% 01 lhe lairvalue eslablished in tha hadge In accordanee with requirements, hedge accounting is applied and lheimpact on fair value is reeognlled dlrectly in olher complehensive income

3.1.6.Hedge Accounling

As established ,n lAS 39. FinanClallrstruments Recogn,t'on and Measuremenl, the Company establishestha requiremants ler hadge accounting:

a) Al the baginntng 01 tha hedge relationship, a designation and lormal documenlation 01 the hedgerelationship a~d the objective and strategy of lhe Company's risks managemenf la undertake fhehedge exis!. Th,s documenfalion will inelude the idenfifieation 01 the hedge instrumen!, of lhe item orlransaction hedged, al the nalure 01 lhe risk that is being hedged, and 01lhe Imm Ihe entity willmeasure lhe hedge irstrument effectiveness 10 offsel!tle exposure lo changes in the lair value 01lhe ilem hecged 01 lo tha changes in cash fiows anributable lo the nsk hedged

b) The hedge is expected to be highly effective in securing the offsetting 01changes in the lair valus orin lhe eash flows attributable to the risk hedged. thus being consistent with lhe risk managementslrategy lor such hedge relatlonship lhal has been inilially documented

ej For eash flow hedges. lhe foreseen transaction subject to the hedge should be highly probable andalso be exposed to variat'ons in cash fiows that coufd linally affect resulto

15



3.1.6. l'edge Aceounting (conlinuad)

d) The effectiveness 01the hedge may be reliably measured, i.o., the lair value or cash tlaws 01 the ilemhedged, which ere attributeble lo the risk hedged and lhe fair value 01the hedge, could be reliablymeasured

e) The hedge is evaluated under a going roncern conlext; i( cauld be really concluded that has beenhighly eflective lhraughout all periods lor which it has been designated,

The Company may select a rr.ethod to evaluate (he effectiveness 01 hedges, The method adopled by theCompany depends on the risk managemenl strategy. The documentalion will inelude Ihe hedge strategylollowed by lhe entity as well as the procedures to evaluale effectiveness. These procedures will establishir Ihe evaluatlon covers all the gain ot lhe hedge instrumenl, ar ¡Ithe lemporery value 01the inslrument isexcluded,

To meel henge eccounling requiremenls the heclge should refer to a risk specitically designated andidenhfted. and not Slmply to general risks, and affect Company's resulls

The hedge is expecled to be highly effective in securing the oflsetting 01changes in the lair value or in thecash flows altribulable 10 the risk hedged. thus being consislent wilh the risk management slralegy Iorsuch hedge relationship thet has teen initially documenled

When the Company cloes nol meet requiremenlS ot hedge effectiveness, il will suspend the applicalion 01hedge accounling as 01 the lasl dale compliance wilh hedge eflectiveness requirements wasdemonslraled However, il the Company identilies lhe evenl or change in the cireumstences which led thehedge relalionship to cease campliance wilh eflectiveness criteria and demonstrales thal the hedge waseffecltve befare occurrence 01 the evenl 01 change in the Circumstances, il will suspend the applicalion 01lhe hedge as ot lr,e same dete 01the event or change 01c;rcumstances

The Company may opllor linee types 01 hedge relationships'

a) Hedge ot fair v~lue; This is a hedge 01 the exposure to changes in lair value 01 asselS or liabililiesrecognized or 01 f"m ccmmitmenls nol r8cognized, or 01 a componen! 01 lhese ilems, which could bealtribuled to a specilie ris~ ard could affee! penad resull

b) Hedge 01 cash flaws: This is a hedge al the exposure 01cash tlows altribuled to a specific riskassacieted wilh a recognized assel or liabil'ly or a componenl 01 bolh (such as lhe tolal or some 01the future peyments al inlerest 01one debl at variable inleresl), or a Ioreseen Iransaclian highlyprobable, which could effect penod result

el l'edge 01 nel investment 01a bUSiness abroad as denned by lAS 21

16



3.2. Property, Planl and Equipmenl

Rscognifion and Measursment

Property, planl and equipment are presented al cosl. including Ihe abandonmenl or dismanlling cosl, lessaccumulated depreciatlon and accumulated impairmenllosse.

AII co.l. direclly attributable to l~e location of lhe asset in lhe place and conditions necessary to be ablelo operafe in the way toreseen by the Company are considered capital,zable. Such costs are mainly al. alTheir acquisilion pnce, Includlng impcrtafion farifls and non-recoverable ind"ect taxes, b) costs 01 benelilslo employee., derivin~ main Iy from con.frucfion 01 acquisilion. e) all eosls d irectly altribulable lo lhelocation 01 the a.set in the p!ace and conditions necessary lo te able to operate in the way foreseen bythe management. d) irterest costs cf loans altnbutable to lhe acquisition or conslruchon 01 asselS. and e)initial eslimalion 01d Ismantllng and abandonmenl costs 01 lhe element

Signilicant spare parf pieces and permanenl maintenance equipmenl the Company expecfs lo use duringmore than one period are recognized as property, planl and equipmenl, and will be recognized asexpense when consumed

Any gain or loss on retiremenl 01 any element 01property planl and equipmenf is recognized in resulls 01the respective period

Subsequenl Disbursemenls

AII disbursements made on exisling assets in order to increase or extend expecfed inifial usefullile.increase produetivity or productlve elflciency, allow a significant feduclion 01operating eosts, or replace apart or component 01 an asset considered crilical Ior the opefation are considered additions orimprovements

Expenses 01 repairs, conservat;on or mainlenance of ordinary nalure are charged to period results whichlhey are prod uced In However, dlsbufsements associated with overhaul are capitalized

Deprecialion

Property, planl and equ,pment are depreciated by following lhe linear metMd ouring tne estimaled uselullile. Technical use fui lives are updated annually considering reasons sueh as: Add'tions or improvements(upon replacemenl 01 parts or cntical componenls Ior assel operation), lechnologlcal advances,obsolescence or other lactors. The elfed 01 lhese ehanges is recognized as 01the accounting period inwhich occurs. Depreciation 01 assels starts when lhey are under eonditions 01 use

The usefullile is determlned under loreseen assel use crileria, its expected physieal wear and tear,lechnical o' commercial obsolescence, and legallimils or restrictions 01 asset use, The eslimated uselullives range between the lollow,ng ranks:

Ducts. networks and iinesBuildingsTran.portation eQuipmenlFluvial equipmenlGlher compulers

32 - 50 years23 - 26 years5-7years5-15years5-13years

17



3.2. Property, Plant and Equipment lcontinued)

Deprecia/ion (continued)

Land is recorded independently from buildings ar facililies and has an indefinile lile; lherelore it is nolsubject lo deprecialion. The uselullile 01 leased assels depends on oonlracl duration

Depreciallon melhods and uselullives are reviewed annually and lhen adjusled, if necessary

3.3 Capltallzatlon of loan Costs

Loan costs relaled to the acquisi\ion, construction or production of a qualilied assel requiring substanlialtime to be ready lor use are capltalized as part 01 the cast 01such asset when it is probable that lutureeconomic tenefits return lo the Company and may be reliably measured Other interest COSlSarerecognized as linancial expenses in lhe period incurred, Ihu. complying with lAS 23 provisions

The income perceived upon temporary investmenl in specific loans pending to be consumed in qualiliedassels is deduCled lor loans able lor capitalization,

AII other loan cosls are recognized in the stalement al income during the periad lhey are incurred

3.4 Intangibles

Intangible assets acquired separately are recorded at cost less accumuleted amortizalion andaccumulaled impairment losses. Amortizalion is recognized on a straight-Iine basis in accordance withlheir estimated usefullives

Intangible assels wilh linite usetullives are amortized throughout their economic uselullives and arereviewed lo determine il lhey had any value impairmenl, to lhe extent that an indication exists Ihallheintangible assel could have suffered such impairment. The pe~ad and the amortization method lor anintangible assel with a finile uselullile are reviewed at least at eaeh period closing on which il is reported.Changes in Ihe expecled uselullife or in the expeeled eonsumption pattern 01the asset are reeordedwhen the amortizatian methad or term is changed, as approp~ate, and are prospectively treated aschanges in accour.ting estimates. The amortizatian expense al intar.gible assets with tinite usetullives isrecognized in the stalement 01 income as expenses resulting consistent with the lunetion al the intangibleassets

LiC€nses lor inlormalion pragrams acquired are capitalized based on costs incurred to aequire andprepare lhem lo use the specific pragram. These casts are amartized during their estimated usefullives013 years The port concessian is included wilhin the heading 01olher intangibles wilh an average uselullite 0120 years

Oleoduc10 Central S. A.


3.4 Inlangibles (conlinued)

Regarding recog nilion of infangib:es, Ihe Company will evaluale Ihe probabilily of oblaining fulureeconomie benelits by usi~g reasonable ano supported hypolheses whieh represent the besl estimates 01managemenl in respeel to the set 01 economic conditions that will exisl during lhe uselullile 01the asset115judgment will also be used to evaluale the degree 01certainty associated with Ihe fiow oltulureeconomic benelils attributable to the use ollhe assel based on evidence available at the time 01 init'alrecognition,

3.5 leases

leases are classified as lirancial when all risks ano benelits inherenl to lhe property are subslanliallylransferred to lhe 'essee under lease terms. AII other leases are elassifieo as operative

Assets malntaired urder flnare.al leasing when the Company acts as the lessae are recognized al thelower between the fair value at eommeneement 01 the lease and the presenl value 01 lease minimumpayments. The liatil'ty eorrespcnding to Ihe Isssm is included in Ihe slatemenl 01 nnane'al posilion as alinaneialleasing I;atility

lease payments are dlstrlbuted cetween financial expenses and reouctions 01 leasing obligations in arderto reaeh a constant irterest rate on the remaining balance of the liabillty. Flnancial expenses are ehargeddireclly lo results

Payments 01 cperating leasing rents are eharged to results by using the straighl.hne method during theeorrespondirg lease term, previded that other systematie prarating base results more representative toapprepriately relleet trie pallern of lease benel,ts 101Ihe user Contingent rents are recognized asexpenses in lhe periods Irey are i~eurred

3,6 Assels Value Impairmenl

In arder te assess the reeoverability 01tang.ble assels and intangible assets, Iheir carrying value iscompared te the value recoverac'e thereol at leasl on Ihe period closing date or earlier in the event 01idenlilying mdieations 01asset impairmenl

To analyze the impairment, assets are grouped in cash generating units (CGU), provided Ihat suchassets ind'vldually consldered do nel generate any cash Ilows which, lo a great extent, are ¡ndependenttrom those generated by ether asselS er CGU. Grouping assets in various CGU implies professionaljudgmenl and taking inte cons deralion, among other paramelers, business segmenls

The Company has one single eash generaling uni! (CGU), colresponding lo the erude oil transportsystem

The recave rabie value is the higher of the lair value less sales costs and the value in use. Wherever therecoverable amount 01an asset (or a CGU) is less than ils nel aecounling value, lhe earryjng valuethereof (or the CGU's) lS reduced la its reeoverable value, thus recognizing an impairment loss asexpense

19


Notes to Financial Stalements

3.6 Anets Value Impairment (continuad)

The value in use is eslimated as tt',e aggregate 01 lutura discounted cash Ilows adjusted lo the Iorecastedrisk. Eslimabons 01 future cash flows used to assess the asset impairment are based on the lorecastedprices 01 baslc products, afler and demand, and product margins

U¡;on recording of a 1055from impairment the future amortizafion expense is estimated based on theadjusted reccveratle vaue

Impa,rment losses may be reversed only wherever lhe reversal is related to a change in eslimafions usedafler recognilion 01lhe 1055from Impa"ment. Such reversals shall nof exceed fhe carrying value 01depreciafion or amortization net assefs Ihal would have been eslimafed if Ihe impairment had never beenrecognized.

3.7. Contlngenl Provisions and líabílitíes

Provísions are recognized wherever Ihe Company has an actual obligatíon (whether legal or implicit)'esulting from a past e~ent and there is probabilily thal outflows will be required to sellle the obligationand the value thereef may be accurately measured.

The amcunt recognizec as prc~ision is lhe besl estimation 01the outflows required to sellle an actualobligatlon al the ene of lre reporting period, taking relevant risks and uneertainlies inlo consideration

Conlingenlliabililies are not recognized but are subjecl to diselosure in the explanatory notes whereverthere is probabilily lhal oulflows will be requlred, ineluding those whose value eannot be estimated

It is gene rally accepted lhat all provisions are 01 a eontingent nature as the time when thay are due or therespective amount is uncertain The term "contingenf' is used lo name assels and liabilities nolrecognized in Ihe financial stalements beeause their existenee will only be confirmed upon oceurrenee ortheir lailure lo occur, 01 ore or more uncertain future evenls nol enlirely under Company's rontrol

As provided lor in lAS 37.92, tne Company has as a policy not diselosing in detail information related wlthdisputes w,th relatee part es coneerning s,\uations involving provisions, conlingenlliabil,lies. andeontingent assels, insofar as thal irformation seriously damages the Company's posilion. In Ihese cases,Ihe Company prov,des irlormation 01a generie nature and explains the reasons (hat have led lo makethis decision

Obliga/ion o, Retiremem ofAssets

liabilities associated wilh the retirement of assels are recognized wherever the Company has obligat'ons.whether legal o, ronstructive. relaled lo lhe retlrement 01ducts, properties and equipment. Suchobligations shall be recognized by apply'ng the discounted cash IlolI'S techniqua and taking the uselullife01lhe relevanl asset inlo consideration. Should accurately estimating Ihe provision during the period inwhich the obligat'on anses is irrpossib'e. then Ihe provision shall be reoognized al lhe momenl wherethere are enough e-ements lo make lre besl estimate

20



3.7. Conlingenl Prov;sions and Liabilities (continued)

The carrying value 01 the provision is revised and adjusled On an annual basis considering changes in Ihevariables used to estimate it The linancial cost 01 re-measuremenl 01 such Iiabilities is recognized duringthe period as a linancial expense

3.8. Employeea' Benelita

Oleoduclo Cenlral SA recores short.term benellts, sueh as salary, vaealions, bonuses and others, OnIhe earneo tesis

Senefits fmm Terminalion of Labor Conlrocls

Compenset'ons lor incemnlty, In levor 01the Company"s employees in eccordance wilh eppliceble legelprovisions, are demandab:e in case 01 termination withoul just cause

The payment;s based on proportLons applied on Ihe average bese 01salaries earned Oleoducto CentralS,A records Ihe payments made against expenses

3.9. Income lax

The income tax expense is comprised by the income lax payable lor lhe current pericd (ineludes, asapplicable, income tax and income tax for CREE equality) and the eflect 01delerred lax in eaeh period

Current and de/erred taxes will te recognized in proMs or losses, except when lhey relate wilh ilems inother comprehens;ve income or directly in equily, in which case the currenl or delerred lax is alsorecognized in Ihe other comprehensive income or dlrectly in equity, respectively,

3.9.1. Currenl Tu

The Company determires Ihe provision lar income tax and income tax lo, CREE equality based on thehigher value between taxable income or presumplive income (Ihe minimum est;mated prolilability amounttmeaeen by law lo quantlly and co",pute income tex), Taxeble income diflers Irom the income reported jnthe slatement 01comprehensive Income due to laxable revenue o' deduetible expense ,tems in dtflerenltax and accounting periads apeClel tax deduct,ons, lex iosaes and recorded items thal, according lo laxregulahons applicable in eech junsdlc!ion, ere deemed non.taxable or non-deductlble

The current lax ¡s calculated by uSlng tex rates eneeted or substantielly approved at the end 01 the perrodbeing reported, The current tex is shown netoalter deducting advences pajd end tex withholdings in lavor.

3.9.2. Deferred Taxes

The delerred tax is recognized by using the liability method, based on lemporary differences between Ihetax basis and the carrying velue 01 essets and liabilities included in the linancial statemenls, The delerredtax liabiljty is recognized lor all temporary lax diflerences, The delerred tax assel is recognized Ior alldeductible temporary differences and lax losses pending amortization, provided there is probabililY thalIhe Company will have lulure tax income agatnst which such deduclible temparary differences may bededucled

21



3.9.2. Deferred Taxes (continued)

The "Contadurla General de la Nación" by means 01 the tiled communicalion CGN NO.2015200000078101January18. 2016, determlned that the Company should not apply lAS 12 Income lax, paragraphs 38 to45, staling thal the deterred tax Irom the varialions in the exchange rate resulting lrom comparing assetsand liabifit;es in terms 01 ils lunctional currency (U.S. dollar) lo fhe fax bases in a diflerent currency(Colomblan pesos) should not be fecognized in the financial statements

The eflect 01 the non- applicalion 01paragmph 41 ollAS 12 in the delerred income tax at September 30.2016 is US$6,499 (at June 30, 2016 US$17,272) and in retalned earnings is US$59,040 (atJune 30,2016 US$76.311)

Delerred tax assets and I,abilities are measured using lax rates expected to be applicable during theperiod in which the assels will be realizad or the Iiabilily witl be settled, pursuant to tax regulalions in forceduring each penod

The carrying value 01a delerred tax asset, is subject to review at fhe end 01 each reporting penod andlhen reduced, provlded that trere 's probability that the Company will not have enough luture taxableincome that allows reccver,ng the asset, totally or partially

Delerrea taxes afe not recognlzed II they anse Irom the initial recognition 01 an assel or a liabillly in atransaclion (except In a buslress combination) that at the transaction date neither aflects aCC<luntingincome or the accountlng profit or tax 9aln

3.10. Recognil;on 01 Revenues

Revenues Irom trenspcrt servlces are ca:culated at fhe lair value 01 the cons,deration charged or lo becharged Revenues are reduced based on discounts or rebales and other sjmilar assignments granted tocuslomers

Revenues lram transport serv,ces a'e recognized upon transport 01 producl5 and del,very to the buyerpursuant to selllng lerm" and cond,t ons. In all other ca5es, reVenue5 are recognized when earned andIhe tn;e, probab~e and quantlllab~e "ght to demand payment arise5

The tmnsactlon result may be est:mated reliably when all 01the lollowing conditions are me!.

The amount 01 revenue Ircm ordinary activlties can be mea5ured rellablyIt is probable that the economic benelits associated with Ihe lransaclion are received by the entjtyThe degree 01complet'on 01 the transaction may be measured reliably at the cl05ing date ollhereporting periodThe costs incurred or to be incurred in respect 01the transaction until completion can be measuredreliably,

In all other cases, revenue '5 recognized when earned and the true, probable and quantifiable righl lodemand payment arises pursuant to lAS 18, Revenue lrom Ordjnary Aclivities

Income Irom interests on lale payment;s recognized by following the principies 01 prudence andrealization

22



3.10. Recognilion 01 Revenues (conlinued)

Financial revenuas are racogni~ad in the statement 01 income dunng the relevanl generat'on period,

Sh,p or pay transactions are recorded as revenue regardless lhat Ihe crude oil be ef!eetively transportedin lul!' Ship and pay operat.cns are accn.Jed as revenue in the period where transport is compleled,Under contracls with a term to offset the revenue is deemed realized upon salislaction 01 conditions selforth 'n each 01them,

3.11. Cosls and Expenses

The Company reccgnizes ils costs and expenses as economic events laka place 50 they are recordedwithin lhe accounling period

Cosls and expenses are ind,v:dually presenled by lunetion and delailing. in the relevanl notes, Ihecomposilion 01 cesl 01 sales and expenses relaled lo adminislralion, operalion, projects and olherexpenses

3.12. Nel Prolit per Share

The prol'I per share is calcuiated upon dividing lhe nel profil 01Ihe period attributable lo sh~reholders byusing Ihe weighled average al oulslanding ordinary shares during Ihe period,

There were no lransact'ons with crd'nary shares lrom Ihe date 01lhe period being reported lo Ihe issuedate 01these linancial statements

3.13. Cash Flows

The slalemenl 01casn Ilows informs Ihe generalion 01cash by categories (operation, investment andlinancing) during a given periodo Class,fication 01 fiows ac¡;ording lo lhe aforemenlioned act;vitiesprovides 'nformalion Ihat enables users lo assess Ihe impacl on lhe Company's financial posilion, as wellas on the linal amounl 01 ,ts cash and other cash equivalents

Under intern~tional stand~rd5, the Company may report ils cash Ilows lrom operations by using one ofthe following melhods

• Direcl method: it conSlsts 01 presenting separately the ma'n categories 01colleclions and paymenls ingross terms,

• Indirect method: it starts presenting the gain or 1055in net terms, an amount which is later corlectedby the elleets 01 non.monetary transactions, lor alllype 01 delerred payment items and accruals(revenue) whieh are the cause lor collections and payments in the past or in the luture, as well asloss or gain items associated wilh eash Ilows 01operalions classified as 01 inveslment or financing

The Company presents its statements 01cash llows under the indireet method

23



3.13. Cash flows lcontinued)

The main categories inelude

Operatinll activíties are the actLvlties thal make the most signitieant source ot Ocensa's operatingrevenue. such as colleetior,s lrom the provision 01 serviees, payments to suppliers for the provision ofgoods and services, payrrents to employees, income tax payments, in other words, all transaclionslhat represenl the "'ost important souree of revenue from ordinary aetivilies performed by theCompany

Investinll aclivilies are tre disbursements lhat result in recognilion 01 an assel in the slatement off,nancial pesition, sueh as payments, revenue from lhe acqu's'tlon 01 property, plant and equipment,intangible assets and ctrer long-term assels, cash advances and loans lo third parties or collections(other than lransacl ons enlered by flnancial ent'bes)

financing activities afe aetlvllles that result in changes in lhe size and composilion 01 company-owned funds and menies borrowed, such as inflows ¡rom the issue of shares, payments toshareholders or reim bursemenls 01 the funds laken as loans.

Cash Flows in foreilln Currency

Cash flows from lransac!'ons in foreign eurrency will be translated into the lunctional currency by applyingthe amount in foreign curreney al the exchange rate belween bolh currencies prevailing on lhe dale eaehrelevanl ea5h Ilow took p'ace

4, Judllments, Estimates, and Significan! Accounting A5sumptíons

The Company's preparat en of the finaneial stalements requires thal managemenl makes judllments,estimalions and accounting assumptions affecting the amounts 01 reported revenues, expenses, assetsand liabilities and lhe disclosure ef contingenl liabililies al lhe close 01!he period being reported. In lhissen se, the uncertainty on such assumptions and estimates could give rise in the Mure to results thalcould require significant adjustmenls lo the carryong values of assets or liabilities affected

4.1.Judgmen!s

Judgments are Cúntinuously assessed and are based on the historical experience and other factors,ineluding the expectalion 01 occurrence of future events that are considered reasonable in accordancewith the circumSlances

4.2. Estimates and Assumptions

The resultlng accounling e51lmates, by deflnition, ,n lew occasions will be equat to actual results.Amounts reecgnized a5 provi5ions are the best estimates ot disbursements neeessary lo pay lhe presentcbligalion, at the end 01the period being reponed, laking into aecount lhe corresponding r;sks anduncertainlie5. Prov.S en5 are rreasL;red by using lhe cash ftow estimated to cancel lhe present obligationand the" carryirg amounl represenls lhe current value 01 such fiow (when lhe effect 01money in time;smalenal),

24


Notes to Flnancial Statements

4.2. Esllmales and Assumplions (conlinued)

Below sre the crlllcsl sccountlng judgments and estimates wilh the most signilicanl effect in theprepsration 01the accounting slatemenls

4.2.1. Abandonmenl of Tubes, Ec¡ulpmenl and Olher Facilities

In accordance with enwonmentsl and 0'1 regulat,ons, the Compeny must recagnize costs on thesbsndonment 01 ItSproperty. plant and equipment. which include sbsndonmenl 01 lhe pipeline,dismsntling al lacilities and ervironmentsl reoovery 01sffected sress

A provisian that COvers d,smsntling costs snd service retirement has been recognized in relation wilh thepipeline system Dismsntllng cosls and service reliremenl are accrued lor lhe presenl vslue 01 expectedcosts lo csncel the obligJtion, using luture eslimJled cssh llows, snd sre recognized ss sn integrsl psr! 01the cost 01 such asset in particular. These cssh Ilows sre discounted sI a current markel rate beloretsxes, which rellects lhe specilic risks 01 the lisbility. The discount is recorded as expense as incurred andis recogn'zed in the statement el income S5 linsncisl COSt5.Eslimsted future costs 01 dismantling andservice relirement are reviewed snnusliy, snd sdjusted as appropriate. Changes in estimated luture COSl5or in the discount rste spplied are added to or sublracled Irom the relaled asset c051

The eSlimate 01costs lor abandonlr.enl and dismanlling ollhese facilities sre recorded in lhe lunctionalcurrency. The estlmated obJ'gstion 5et up lor sbsndonmenl snd dismanlling is subject lo review at eachpenod c10slng ano adjusted to rellecl the best estimste, due to technological changes and political,economic. envlronmentsl matters. a5 well a5 changes of security and 01 re!alions with stakeholder5. Thecalculatrons 01 these estlmates are comp!ex and involve significant judgments by the msnsgemenl, as srethe inlernsl prolectlons 01costs and future infiation and discount rste5. We ccnsider that sbsndonmentand dismsntllng costs are reJsonable, based on the experience snd msrl<:etcondilions; however,signlflcsnt vanatiors 'n externa' lactors used lor lhe cslculslion 01the estimste could sign>ltcsnlly impsctthe lirsnclal 5tatements

4.2.2. Impairmenl

At lhe end 01 each period reeorted, the Company evsluste5 csrrying vslues 01 its tangible snd intsngibleassels to determine il an Indicst.cn that these amounts hsve suffered any imparrment loss, In such csse,the recoverable amount 01 lhe ssset is calculsted to determine the scope 01the impairment 105S(il sny),When il is nOI possible to estirrste the recoversble smount 01Sn individusl asset the Compsnycalculales the recoverable amount 01the cssh genersting unil which such assel belongs lo, When areasonable and con5istenl bssls 01d'stnbution i5 identilied, cOmmon s5sets are also assigned lo theindividual cssh genersting units, or disl"buted to Ihe smallesl group 01cssh generating unils lar which areasonable snd consistent d Istribution basis may be identitied

The recoversble smount ISthe h'9her between Ihe fair value less disposition costs and lhe value in use,Upon estomsting the vslue in use, future estimated cash fiows are discounled lrom the current v81ue byusing a discount rate belore taxes which rellects lhe currenl markel valuations in respect lo the temporaryvalue 01money and the specific risks 01the asset lor which lhe estimsles 01future cash Ilows hsve no!been sdjusted

25



4.2.2. Impairment (conlinued)II the calculated recoverab~e arrount 01an asset (or cash generaling unit) islower than ,ts carry'ng valueIhe carrying value 01the asset (or cash generating unit) is reduced to ils recoverable amount Impairmentloses are recognlzed Immed,alely In lhe statemenl 01 income, except il Ihe asset is recorded at a revaluedamount, In which case. the impairment loss should be considered as a decrease in the revaluation.

When a loss Irom Impairment is subsequenlly reversed, the carrying value (or cash generabng unot)increases to II-,e reviewed estimated value 01 its recoverable amount, so thal lhe increased carrying valuedoes not exceed lhe carrylng value that had been calculated il lhe impairmenl value had nol beenrecognized lor such assel (or cash generating unil) in prior years The reversal of a loss lrom impairmentis recognized automatloally In the statemenl 01 income

4.2.3 Liligalion

The Company is subject to c1aims lhrough regulalory and arb,tration procedures tax liquidabons andother claims that arise dunng the ordinary course 01 businesses. The managemenl and legal counselevaluale these situations based on Ihe" nature, the probability Ihat Ihey materialize and Ihe amountsinvolved lo decide on the amounts recognized in Ihe linancial slatemenls. This analysis, which couldrequire considerable judg ments, includes legal processes filed egainsl the Company and claims nol yetinitiated

In accordanoe w,th managements evaluation and guidelines established in lAS 37, Provisions,Conlingenl Liabllilies ano Contirgent Assets, provisions have been sel up lo comply with lhese costswhen il is considered Ihal tre contlngency is probable and reasonable estimates 01such asset may bemade

The Campany cons ders that cayments required to resolve Ihe amaunls relating lo cla,ms, in the evenl 01loss, will not vary s'9 nl/icant y lrom est,mated casts and, accordingly, they will nol have a materialadverse elfecl on Company' s I,nanc'al statements

4.2.4. Income Tax

Uncertainties exis! in respeet 01the inlerprelation 01 camplex tax regulations, changas in lax regulations,and amounts and opporlunities in which the future tax resull is ganeraled. Given the wide range 01international commerc,al relations and the long-term nature and complexily 01 exisling conlr¡¡clualagreements, differences arising between lhe actual results and lhe assumptions made, or upon lhe futurechanges 01 ouch aooull'ptions, they could requlre future adjustmenls lo income and expenses alreadyrecorded,

The Company calculates pravisions based on reasonable eslimates, lar the possible consequencesderiving Irom the insped'ons ",ade by the Colombian lax aulhorities The amounl 01 lhese provisions isbased an several lactors, such as experience in prior lax inspeclions, and on Ihe various inlerpretalionsal tax regulalions, maoe by the enlily subject lo tax and by lhe responsible tax aulhorily. Theseinterpretalion d,lferences could arise in e greal variety 01matters, depending on circumstances andcondilions existing in the Company's domicile. Since the Company considers remole the probability 01liligalion of a tax nature and subsequenl disbursements a. a resull thereol, no conlingent liability relatedla taxes has been recegnlzed

26



4.2.4, Income Tax (conlinued)

As established in lAS 12, Income Ta;<, the current ta;<payable is based on la;< prolils recorded during theyear, The ta;<able income differs Imm lhe prolil reported in the stalement 01 income and othercomprehensive income due to revenue items or taxable or deductible expenses in other years and itemsthat are never taxable or deduclible. The current tax liability is calculated by using tax rales appmved bythe tax entity at the end 01the periad reported.

Delened tax assets and Ilabilities are recognized for future tax consequences attribulable to differencesbetween carrying values 01 assets and liabilities existing in lhe linancial statements and their respectivetax basis. Delerred taxes on assets and liabilities are calculated based on statutory tax rates we believewill be applied to Qur taxable income during the years in which temporary differences between carryingvalues are expected to te recovered.

The carrying value 01 an asset for delerred taxes should be subjecl lo linal review in each reporting periodand should be reduced insolar as it is probable Ihal il will not have enough tax gain, in the Mure, topermit to recover all or a part of the asset

The measurement 01 delerrad tax liabililies and delerred tax assets will rellect tax consequences thatwould derive from the way lhe Company expects at the end of the pe¡iod being reported lo recover orliquidate the carrying value 01 Its assets and I;abilities

4.2.5. Uselul Lile 01 Property, Plan! and Equipmenl

The Company determires estimated uselul iives and depreciation charges corresponding to property,plant and equipment This estlmate considers the economic life of the pipeline and Ihe limitations 01 ilsoperation over time. This estimate could change. among othe¡ reasons, due to new oil discoverieschanges in lhe environ",entallegislat'on or in the contracts signed with the Company's shippersManagement periodicatly reviews usefullives and depreciation charges

4.2.6 Hedging Accounling

The identilication 01 hedging relations between protected objects and hedging instruments (derivativefinancjal inslruments andlor not denvative) involva crilical judgments on Ihe eflective existence 01 thehedging relalionship and the effectiveness thereof. In addition, Ihe Company conhnuously evaluates thealignment between the hedging relations identified and the objectives and strategy 01 its policy 01 riskmanagement

5. Inlormation on Operalion Segments

AiI Company's assets are lacated in Colombia and are focused on a single segment which is crude oiltransportation, For administration purposes, Management supervises operating results based on Ihecrude transportation operation, whera its main assets are represented by the pipeline, this being the basislor decision making conceming lhe assignment 01 resources and evaluates it, financial yields. There areno operating segments lha! should be aggregated to form part of that previously reported

27



6, New and Amellded Slandards and Inlerprelalíons

New and amended slandards and inlerprelalions incorporaled lo Ihe accountíng lrameworkaccepled in Colombia which applicalion should be asseased as 01 January 1, 2016 or Ihal may beearlyapplled

Decrees 2615 01 December 17, 2014. 2420 01December 13, 2015 ~nd 2496 01 December 24, 2015inlroduced lo the regul~tory technic~1 lramework 01lin~nci~1 inlorm~lion new sl~nd~rds, cll~nges or~mendmenls i5sued or carned cut by lhe Intemational Accounling St~nd~rd Board "IASB" lo theInlemational Financial Reporting Standards during 2013, to evaluale their application in financial periodsslarting as ot J~n u~ry 1 2016, ~Ilhoug h Iheir application could be early ~pplied

IFRS 9 "Fin~nci~lln5trumerts"

It addresses lhe cl~ssilicatlon. v~'uation and recognition 01 flnancial ~ssets ~nd financ'~lli~bilille5 Thecomplete verl,;ion 01th,s IFRS was publislled in July 2014. 11subslilules tlle guideline gathered in lAS 39on lr.e cl~ss.l,c~tlon and va' uatlon 01Imaneial instrumenls. IFRS 9 mainlains, allhough simplifie5 thevaried valuation model ane estab! Ishes three main v~luation c~legorie5 lor financial assel5

Amorti¡:ed cost. lair value with ehanges in olher comprehensive income ~nd f~ir v~lue wlth ehange5 inresulls. The classilication b~se depends on lhe entity's bus'ness model and the characterislics 01conlractual cash ftows 01the Im~ne;~1 ~sset It i5 requ;red lhat investmenls in nel equity inslruments arevalued at fair v~'ue with changes in resul15 with Ihe revocable oplion at lhe inilialion 01 presenling thechanges in lhe I~ir value in other global non-reeyelable result Now lhere is a n!!w model 01 expectedcredit losse5 which substllutes the imp~irment losses model 01 lAS 39. There were no changes Iorfin~ncialliab'lities In elassilicatlon and valuation, excepllor the ,ecognition 01 changes in the own cred;tri5k in other global result, lar liabililies designated at fair v~lue wilh changes in resulls. IFRS 9 relaxes lherequirements lor lhe efi'eeliveness 01the hedge. Under lAS 39, a hedge should be highly efi'eclive, bOlhprospeelively and retrospeclively. IFRS 9 subslilutes thi51ine demanding an economic relation belweenthe ilem hedged ~nd the hedgirg instrument ~nd Ih~llhe ",Iio covered te the same one actu~lly u5ed bylhe entily tor its risk management. lhe contemporaneous document~lion contlnues being necessary bulis differenl lrom lhe one bemg prep~red under lAS 39. The st~ndard i5 in lorce for accounting periodsstarting ~s 01 J~nuary 1, 2018. Its early adoption;s permilted, lhe Company i5 evalualing lhe imp~clsth~l the 5lated slandard could generale,

IFRS 1S "Revenues Irom eontracts w,th elients'

IFRS 15 Revenue5 lrom conlr~ct5 witll c1ienI5, issued in M~y 2014, i5 a new st~ndard applic~ble to ~IIcontr~ct5 wilh ctlents, except leases. lin~neial inslruments and insurance conlracts. Th,s is a joinl projectwilh lhe Fin~ncial Accounting St~nd~rd Board FASB to eliminate differences in Ihe ,ecognilion 01revenues between IFRS and US GAAP. Th;s new standard intends to improve the inconsislencies ~ndwe~knesses 01 lAS 18 ~nd pmvide a model that will faeililate lhe comparabHily 01companies of differentinduslrres and regions It prov des a ne.••.modellor the recognition 01 revenues and more detailed,equiremenls for cortraet wlth mu,tiple elements. In !!ddition, It requires more detailed disclosures. lisapplication is effective as 01 January 1, 2018 and its earty application is permitled lile Comp~ny isevaluating the impacts that the stated st~ndard could generale

28



6. New and Amended Standards and Interpretalion", (conlinued)

New standards, amendmenlS and interpretations issued by Inlernational Accounting Slandards Board(IASB lor its Engllsh acronym) wlch haoe not yet been incorporaled to lhe accounl'ng frameworkaccepted in Colombia

The improvements ard arrendmenlslo the IFRS, as well as the interpretalion that have been publisheddunng 2015 coulo te II1corporated to lhe Colombian regulalory Iramework

7. eash and Cash Equivalents

September 30,2016

June 30,2016

Cash O" " "" "Banks 124,641 94,591Flxed time deposlt certillcates 20,000Trusts 5,815 4,600National tax refund securlf.es (TIOIS) 1,3_8~____O" 151,855 USS 99,203

The fair value of cash ano ifs equivalenfs is approximated lo jts carrying value oue to its short-term nature(Iess fhan fhree monfhs) and ,ts high liquid,ty. Cash and cash equivalents have no reslricfions or lienslimiling their disposition

6. Trade Oeblol'5 and Other Accounts Receivable

September 30,2016

June 30,2016

Trade accounls receivableRelated parties (Note 26)Sundry deblor. (1)

O"O"

72,29475,7629,624

157,880

38,40977,70223,820139,931

In conneclion with lerms and conditions regarding accounls receivable Irom relaled parties, reler lo Note

"Accounls receivable are al a fair value Trade accounts receivable do nol bear jnteresl and lheir averagepayment lerm is 01 30 days

(1) The principal balar",", 111 ,u,,(lry deblo~ thoy are composod by tho loIlowmg concept

29



8. Trade Deblors and Olher Aceounls Receivable (continued)

Septemb.r 30,2016

Spedfic destlnolion lund (a:Reimbursable - Manda:" ooclraols ol.cb.,di"ri", andolh"rs (b)Legal embarg""'sIndustry and commerce la,EmployeesIncome ta' bol"n"es in lavor (N"lo 15)

US$

""

June 30,2016

6,272 US$ 6,5153,025 2,4()4

371 36789 3967 116

__ ~"o,3.?_"__"g~82,j--USS 23,820

a) Under this heading are d Sbu,sementsma~e to Alianza Fidu.,;ana SA corr.sponding to free-inveslmenllo"nsto .mployee, 01US$2,190 and mcrtgage credits 01USS3,940. lhere is also e mortgage eredit to Cevipetrol 01USS141 "rld lor leo.,ng of veh,cles 01US$O.894,their decrease is due to lhe net ellee! bemeen Ioans grantedduring lhe quarter less collectiors

b) Reimbursables inelude operalio~. with third p"rtles Ior r.cov.ries associated with mandale contracts end olhersw,th the follcwing lh"d pan.es

Seplembar 30,2016

June 3D,2016

Oleoducto de CoIcmb'a S AOleoducto Bicenlenario de Co'cmb" S A.SCenit T,anspMe y Logislic" de Hldroc.rburos SASAecount receivable Irom Ihird p"rt'esOlros

9. Olhar Financial Assels, Net

US$

U85

1.436 USS

'"'"226'"3,025 USS

"";"'"""'852.404

Septembar 30,2016

June 30,2016

Hedge conlract. U85 18,180 US$ 9.580

Other f'nancla! assets II,abilllies correspond lo the valuation 01financial instruments deriving IromOleoducto Central S A. wr.ose purpose is lo miligale the volalility 01lhe exchange rale on Ine cash flowrequired for Company's operations. The balances correspond lo lheir fair value classified in lhe seC<lndlevel 01 hierarchy, ca!culated basad on observable enlrias by using lhe methodology 01 forward poi ni.

Taking ¡nto account thal the Company's tunctional currency is Ihe US dallar, sny lransaction in a currencyolher lhan the US dollar represent. en exposure lo lhe exehange rale risk for Company's pertormance. Inorder lo m'tlgale tne ¡mpaol on eash flows lha! could be generaled as a resull 01 variatlons in rates 01Colombian peso uersus the US dollar, lhe managemenl evaluales the exposure to Ihis risk for the twelue(12) monlns moved lorward subsequently and makes the decision lo contrae! hedge ¡nslrurnents for the

30

Oleoducto Central S, A.


9. Olher Flnancial Assels, nel (conlinued)

cash ftow in pesos within the frarnework established by the financial risk management policy The use oflhree derlvatlve 'nstruments 's established in such policy: Forwards, collars and options

At present, the Company has only ente red inlo hedge operations by means 01lorward inslruments underIhe non-delivery basis

The Company covers ma,nly the loilowing risks

• from 50% to 71% Operating Expenses. The main headings 01 operatlng expenses the Company ishedging are those re:ated to personnel, leases, fees and services, Insurance, maintenance andrepairs, variable costs whlch are denominated in Colombian pesos

• One hundred per cent (100%) of lhe lax payment Tax headings being covered correspond to incometax, Income tax far equalify (CREE), surtax lor income fax lar equahty (CREE) and Ihe weallh tax

forward hedge instrumenls being used allow selting the sales price in US dollars, which will offset theeffect 01devaluation ar revaluation arising up to the time lhe Company monelizes resources necessary locaver ils monlhly ar spec,f,c obligations on operating expenses and lax payments, which are payable inColombian pesos

The lair value ollorward operatlons is US$178,445 (al June 30, 2016 lhe loss recorded was 01USS167,625) Tak'ng i"to account that lhe Company seeks lo minimize the exchange exposure far Ihe\Welve (12) future months, cash fiaws are expected lo be made and payments of monlhs Irom October2016 and September 2017 are expected to be covered.

The dollar-oflsel method is ~sed to calculale effectiveness, It consists 01comparing changes in valuesobserved 01the item Cavered w,th the corresponding changes in the hedge instrumenl according toprojections 01the lorward curve at the cul-off dale, This valuation model is made both retrospeclively andprospectively to measure the effecliveness 01the sel al instruments over the Ilows hedged

The resull of the amounl recorded in 'Olher Comprehensive Income- - OCI at lhe reporting period cut-offamounts lo USS18. 152 (nel 01tax $10,573) (al June 30, 2016 il amounts to US$10,361 and nel 01 taxesat Ihat date 01US$6,C58) He proM recorded in lhe slatement of camprehensive income during lheperiod Irom July to Seplember 2016 was 01USS16,989 (al June 30, 2016 the loss recorded was 01USSa,695)

10. Olher AsselsSeplember 30,

2016June 30,2016

Prepaid expenses (1)Other advances (2)

""'"6,492

6,637'"6,918

7.338

l') rncludes compliance a'l..risk sabolage and terronsm insurance pelicies. material damages, infidelity and~nanClalnsk, el",i Ilal)<Iit~,and insurance tor employees

(2) Includes ad"ances drawn lo suppliers as a pe" 01the acqu;silion 01goods and services lor each Orle01theprOi"cls, ma:nly lo<Project P-135,

31



10. OtharAssets(continuad)

The main advances were crawr to the following supplLers:

September 3D,2016

Juna 3D,2016

Siemens S.ASurtidora de Gas del Caribe S.AWorlay Parsons Group Inc SucursalSulzar Pumps (US) IncOther 5maller ones

us.

uss

2,6871,319

39039

2,0626,492

uss

uss

3,0051,303'"S302,1946,918

32



". Property, Plant and Equipment, nel

Plantand Duch. nC\wOfl<sand Consl,uctions inEquipment Line. Progress Building. Land Olhc, 11) Total

Aoquisition ooslAl Maroh 31, 2016 US$ ~5,4¡ US$ 1,6,5.578 e" 415,754 USS 7R,34R US$ 21,3R2 USS 68,3GB US$ 2.302,836Addítions {39) (144) 52,477 12.570 64,864Capitalizcd financial imeresl 4,209 4,209Consumption 01non-capitalizable (8,496) (8,49'6)materials and spare pad.Sale. and di.posals (223) (223)Al Juno 30, 2016 e" 95.4< US$1.62~,434 e" 472,440 e" 76,J46 e" 21,362 e" 72,159 US$2,36J.190Addilions m 27,041 6,825 34,021Capilalizalion ••• (948)Capilalized financial inlefosl 4,591 4,591Consumptian 01non-<:apitalizable

" (10,960) (10,938)materials and spare partsSales and disposal. 1'1 '"Al Septembe, 30, 2016 e" 95,6{ US$1,626,377 "" 503.146 "" 76,346 e" 21,362 e" 68,024 US$2,390,859

Deprecialion and valueImpairmenl provisionAIMa,ch31,2016 e" (29.21 US$ (664,779) e" e" (5,854) e" e" (14,382) e" (714,229)C~arge lor penod deprecialion (1,296) (16,041) (568) (563) (18,468)Sale. and dispo'als '" ""Al June 30, 2016 e" (30,5' e" (680,820) e" e" (6,4221 e" e" (14.786) e" (732,538)C~arge for period deprcciation (1,296) (16,0721 (568) (590) (18,526)Sales and dispo.als , ,Al September 30,2016 e" (31.81 e" 1696,888) e" e" (6,990) e" e" (15,376) e" (751,060)

Nol carrying valueAl June 30,2016 e" 64.9: USS 944,61. e" 472,440 e" 69,924 e" 21,362 e" 57.373 US$ 1$lQ.652Al Seplember 30, 2016 e" 63.7! US$ 929,489 e" 503,146 e" 69,356 e" 21,362 e" 52.648 US$l,6J9,799

D



11, Property, Plant and Equipment, Nat (continued)

(1) Ineludes malerials inventol)', cost 01abandonmenl 01the pipeline syslem. office equipmenl, compuler. "ndlelecommuniCOIon equ'pment tr~"'POr1.tion equipment and fiuvial equipmen\

TIlere are no commitments a~dlor restriclions 01 acquisitions 01 property, plsnl snd equipmenl.

Cosl!> lor Capítaliled Loans

The Company is in constructon upon lhe expansion 01 lhe pipeline eapacity by mesns 01 Project 'P-135', The carrying value 01 these assels at September 30, 2016 amounls to USS453,419 (June 30, 2016- US$432529) The project is being financed by means 01 resources Iram lhe debt in bonds The Bank 01New York Mellon Bets as lrustee

The smount 01costs cspitslized during the periad ended September 30, 2016 was 01US$4,591 (June 30,2016 Ior USS4,209) The rate used lo determine the amount 01 loan costs feasible 01capitalization was42%. which is the el/ectlve interest rale 01 Ihe debt I,naneed by this project

Construction in Progress

Constructicns in pro9,ess irclude projects such ss replacemenl 01El Porvenir equipment, unloadingoptimization, 600 eSt, resl recovery, El Porvenir soundprooling and other smailer prcjects: PrcjeetPotency 135 is hig hlighted due lo its investmenl and development

Financlal Leasíng

The carrying vslue 01 property, planl and equipment under financialleasing and lease contracts withpurchase option al September 30, 2016 is 01US$l 7 (June 30. 2016 al US$35). Assets under lessing andlease contrscts wilh purc~ase aplion are laxed as guaranlee 01 lhe respective financialleasing and theobligst,ons assu med In lre lease contraets wilh purchase aplion

Assels under this mode irelude Ihe Iollowing balsnces

September 30,2016

Juna 30,2016

Vehicles "SS 17 US$

34



12. Inlangibles, Nol

SarvleeLleanses and Coneasslonsoftwara Agraamonl Tolal

Aequisilion eoslAl Mareh 31, 2016 USS 14,165 USS 43,620 USS 57,785Disposals (146) (146)Al Juno 30, 2016 14,019 43,620 57,639Additions " "Al Seplomber 30, 2016 '" 14,058 USS 43,620 US, 57,878

AmortizalionAt March 31, 2016 (11,743) (41,577) (53,320)Charge lor period amort'zation (281) 16811 (~.1~Al June 3D, 2016 USS (12,004) USS (42,258) USS (54,262)Charge 1m pariod amortzation (317) (681) (998)Al Soptomber30, 2016 US$ (12,321) USS (42,939) USS (55,260)

Nal carrying valuoAl June 30, 2016 USS 2,015 USS 1,362 USS 3,371Al Seplember 30, 2016 "SS 1,736 "SS .., "SS 2,416

Servica Coneession Agreomonl

Port Concession Agreement No, 016 01Oecember 6, 1996, wriose pUlpose is lo grant a port eoncessionlar trie construction and operation 01 off.shore lacilities ot a new oil terminal 01Cove~as inlended to loadexportation crude, was initially 'ntended lo render a private serviee

Addendum No, 02 was sub.cribed on Octobar 24, 2011 to change Ihe Iype 01service lrom a private por!to a public port. intended to handle crude exportalion. Trie payment lar this eoncession as a publie por!amounting to US$2,885,3:34 tack place in 2011 and;s payable over 5 years; the flrst payment 01US$781 ,735 was made in November 2, 2011 and the remaining ones amounted lo US$732,232, Al theSeptember 2016 eutoff, ;ts carrying value amounts to US~681 (June, 2016 US51 ,361 l, with a remalningamortization periad 01 three monlhs

35



13. Debla and Loans Bearing Interes!

Composillon of Icans

Loens are recorded al tre:r amcrt zed cost, which corresponds lo lhe presen! value 01cash fiows,discounted al effectlve 'ntereSl rate

l

5aptembor 3D,2016

June 3D,2016

Short.term loansInteres! payable for external public credí!Financialleasing

Long.term loansExternal Public Credi! BondsFinancialleasing

Long-Term External Public Credí! Bonds

"'$ 20,000 USS 20,00051 "USI ' ._-----

20,051 US$ 20,075

USI 484,269 US¡ 479,089

" ".484,2.90__ 479,112USI 504,341 USl 499,187

L

By meana 01 Reso:utlor. ',355 or April 29, 2014, jhe Ministry 01 F;nance and Public Credi! authorized lheCompany lo subscribe, iss~e Cledplace External Public Oebt Bonds, under Rule 144 A / S Registralion 01the United States 01America Secuntles Act, in inlernalional capital marl<ets lor up lo live hundred milliondollars 01Ihe United Sta tes 01Amenca (USS500,000,000) in arder lo linance the needs 01 investment 01luture expansion pro¡ects (Potency 135 and Warming)

The charactenstics. lerm and conditions are as foIlows

• Redemption term 17 years wlth a maturity date until May 7, 2021• Issue price: 99.367%• Amortizalion: Upon maturity• Yield at malurity: 4 105%• Oenominatkm currency. Oenorninated in dollars 01 the United Slates 01America (USO)• Interest rate: Fixed. in accord~rlce with market conditions plevailing on the bonds placement date,

Ihus complying with Ihe maximum limilo for the external indebledness inlerest rates delined by theCentral Bank

• Oenominations US$200,OOOand integral multiples 01 USS1,OOO• Listed in: Luxemt:ourg Stoc~ Excnange

The variance 01 this obligation 01the periad Irom June 2016 to September 2016 corresponds to therecognition 0' bond issue costs in the statemenl 01 income, also includes the exchange differencegenerated by the debt converSlon Irom funclional currency to currency presenlation.

36

Oleoducto Central S. A_


13. Debts and Loana Bearing Intereal (continued)

Long-Term Exlernal Public Credit Bonde (continued)

Below la lhe lair value 01 bonds

September 30,___ 2016

June 30,2016

Fair value USI 511,660 US$ 488,200

Article 28 01External Resolution No 801200001 the Board 01Oirectors 01the Central Bank establishesthat interest rates 01lorei. n currency credits, including secunties placad in internalional markels, shouldrellect market cond t'ons and may not exceed the maximum rate applicab!e generally indicated by theCentral Bank

Payment dales 01 inlerest will be May 7 and November 7 01 each year, start'ng on November 7. 2014

Computation date: May 7, 20,4 T+5, gross value USS496,835,000; rate 4.000%, determined on a30/360 day basis

Leaeing contracta

a 11corresponds to t~e Financial Leasing Master Agreemenl subscribed w'th "Banco de Occidente- oncompuler leasingComputation lorm Vanable monthly rentVariat'on lactor: OTF +3 poinlsTerm: 36 months

b It corresponds lo the rent olvehicles taken by Cavipetrol with "Banco de Bogol~" -the long-lermportion exceeding 12 months- with the following conditions agreed

Interest rate. DTF + 3 pointsTerm: 36 montha

Loans Maturity Profile

Tlle loans maturity prolile is described below:

Up to 1 year 1 - 5years TotalSeptember 30, 2016E><IernalPublic eredil Bords USI 20,000 USI 484,269 USI 504,269Lease obllgations " " "USS 20,051 USI 484,290 USI 504,341

37



13. Debls and Loana Bearlng Inlerest{conlinued)

Loana Malurity Profile (conlinued)

June JO, 2016External Public eredil BondsLease obligalions

Guaranlaes

Up lo 1 year

uss 20,0007S

20,075uss

1_5years

US$ 479,089 US$

"US$ 479,112 US$

Total

499,08996

499,187

Assets under leasing ofveh'c:es and compulers. taken wilh "Cavipelrol" and "Banco de Occidente",respectively, are under pledge without tenancy

14. Tralla Accounts and Olher Accounls Payable

Seplember 30,2016

June 302016

Dividends payableSuppliers and accounts payable (1)Transportation tax (2)Related parties (Nole 26)W,thhording taxErnployees fringe benefitsWithholdings and payroll contributionsSales tax payableIndustry and comlTerce tax wltnholdingsWealth tax

us,

us,

122,79665,34511,7805,5222,7791,028

'"'""S210,010

US$ 155.45070.9945,9285,7332,966j ,032

'"'00,,,1,662

USS 244, 730

(1) Al Sept.mber 30, 2016, Ir.el"a.s ",ainly lhe balanceWlthassooated supplie", Project Patency 135. The mainsuppliers and accounts payab'e ale detailad below:

Seplembllr 30,2016

June 302016

S;em~ns SAConsorcio Generación P-135Mckinsey & Company Colombia INCI.maco! S,A,Massy Energy Colombia SASWo~eyparsQnsGroup Inc. SucursalDelrio S.ASoenergy Inlernalional Colomb;a

"" e,390 USS8,0204,7353,9213,4873,0923,0392,674

5,45711,3481,0022,6473.506

'"'"

38

,---~--------------~----


Notes to Financial Statemen1s

14. Trade Account5 and Olher Accounts Payable (continued)

September 30,2016

June 302018

Parex Resource, C6Qmb a UdaHel,,!., S A SCon.orcio Tierra. Boya,,"Tecnilanques Ingenie,os S.A.SOlhers

1,5961,167"16~

'"23,05465,~4~ USS

2,832

'"1 ,0632,586

3a'8370,993

(2) Th! transportation tax carrespond' lo actual "00 e,timated crude valumes [ha! hao. been lransported in thestated pe~od plu, the .a:ue pcr.olng 01cancel.tion lo municipal jurisdictians which due to di'posiliO" 01 theNa!i"nal Plann-ng Department ",der u$ the payment as followo;

5eptember 30,2016

June JO,2016

Estimat.d tr"nsport taxAceounl$ payable ""USa

11,295 US$..,11,780 US$

5,449

'"5,928

The accounting value 01 Irade accounts and other accounts payable approximates to its fair value,

15. Income TaK and Curren! lax Liabili!ies

Septomber 30,2016

June 30,2016

Income tax, CREE and CREE surtax "" 84,496 US$

159,35965.729

7,2625,451

223,422331,204 USS

161,36266,55510,6708,069

"a-'¡;-496--USS--(1 (3791

"SS

US$

lhe ourrent tax balance is the fcllo\'"ng

Income fa" CREE ~nd CREE surta,Le ••Income ta, advanceSurtax advanceIncome ta. withhoicings In favorCREE ta, withholding.Credifable VAlLiabilily pay.tl. (balance in favor) Ior income la,

39


Notes to Financial Sta1emen1s

15. Income Tax and Current Tax Liabilities (continued)

Below is lhe deta;1 ot lhe balance ot deferred tax assets and liabililies:

September 30,2016

June 30,2016

Assel - Deferred inceme tax "" 11,942 "S$ "Assel- Deferred CREE surtax ". "'Assel- CREE deferred lax 4,298 4,48918,348 17,070

Liability - De/erred income lax (107,772) (103,508)Liability - Delerred CREE surtax (4,983) (4,551)Liab,lity - CREE deferred tax (38,580) (37,0271

(151,315} (145,0861

"" (134,987) US$ (121

The net movement 01Mferred taxes during the period is lhe lollowing:

Initia! balanceOebil lo stalemenl of income(Cred,t) debit lo olher comprehensive income (1)Transla/ion adjustment

Ending bal~nce

""

""

(128,018) US$(9,392)3,277(838)

(13419871 USS

(11 :(10,009)

'"(3,502)!12E

(1) Varialions in deferred tax balances were recorded in result accounts 01the period except lor thefollowing ;tems wh1ch were recorded in other comprehensive incoma, as lollows:

September 30,2016

Jun••30,2016

HeadlngDeferred (Iiability) as,et - Financ al aso"t. (Iiabilitie.) "" 3,277 USS

The Company had recogntzed in l~e financi~1 stalements lhe effect 01 ~pplying paragraph 41 01lAS 12 - Incorne tax since accordlng to the le!ter CGN No 201600000781 01January 18, 2016,estabhshed that il was not Oceesa ~pplicatton

The differences between tlle carry:ng value 01assets and liabilities ~nd the tax bases tllereol resultin tlle lollowing tirning diHerences thal generate deferred laxes, calculated and recorded in tlleperiods ended June 30 ane Sep~emtar 30, 2016, based on the current tax rates as relerral Ior lheyears such temporary d,ffere1ces reverSe

40



15. Income Tax and Currenl Tax Liabililies (conlinuad)

Below is lhe detail 01 delened tax assels and liabililies is lhe lollowing:

Seplember 30.2016

June 302016

liabilities Irom provisions USI 15,842 USS 16,541Other liabilities S06 S28Delarred lax assal USI 16,348 USS 17,069

Property, plant and equipment (1) USI (151,315) USS (139,987)Deterred lax liability USI (151,315) ",S (139,987)

(1) Far tax purposes, tt,e property, p'ant "nd equipment account has a speafic uselul .Ie, Under accounting andfinanciol in/ormolion standards "ocepl.d in Colombia, lhe us.fullife is d.lermined by a lechnical an"lys,s, Thisdiff.rence results in a differenl depreeiation basis lor accounting and la. purposes

Assets Irom delerred tax assets pending offsetting are recognized lo the extent that the realization 01 therespective tax benelit is probable through future tax benefits

Income Tax

Currenl tax prov'slons appllcable to Oleoducto Central S,A establish thal:

a, As 01January 1 2013, taxable income in Colombia is subject lo 25% On income lax, except lortaxpayers who, upon an express disposilion, manage special rates, The basis to determine theincome tax may nol be lower lhan 3% 01 ils net equity in Ihe lasl day 01 the previous taxable year(presumplive income), except lar Ihose which, under Law, have different dispositions

b. As oflaxable year 2007, and only for lax purposes, taxpayers may readjust annually Ihe cost 01tangible assets and •.••al estate having lhe nature 01 f,xed assets. The percenlage 01 adjuslment willbe set by DIAN (National Tax Department in Colombia) upon resolution

As 01January 1, 2013, by means 01Act 1607 01December 2012, the income tax lor equality (CREE)was crealed in Colombia as a contribution 01companies and assimilaled legal enlities to benelilemployees, generate employment and invest in social-related malters. Non-Ior-prolil organizations,individuals and companies decla •.••d as free trade zones at a 15% rate are not subject to Ihe incomelax Ior equality (CREE).

e, The basis to determine the income tax Ior equality (CREE) may not be lower than 3% of ils netequity On the last cay 01the prior taxable year

d, As indicated in the alorementioned Act. as 01July 1,2013, legal entities and assimilated companiesare exonerated Irem the payment 01 payroll contribulions in lavar of Servicio Nacional deAprendizaje SENA and Institute Colombiano de Bienestar Familiar ICaF, and in accordance witharticle 31 01 the same Act, as 01 January 1, 2014, legal entities and assimilated laxpayers declarers

41



15 Income Ta~ and Currenl Tax Líabililies (continued)01 income ta~ correspor,ding to employees wMo eam, individually considered up to ten (lO) minimummontrily salaries in torce are exonerated Irom paying contributions to the heallh eare system. Thisexoneralion does nol apply lo laxpayers nol subject lo Ihe CREE lax

Tax Reform

On Oecember 23, 2014, Aet 1739 broughl a lax relorm with lhe following provisions'

a TMe income tax ler equality (CREE) is applicable at a 9% rate on a permanent basis as 01 2015,

b It eslablishes a surtax 01Ihe income lax for equality (CREE) for taxpayers eslablished in Article 20 01Act 1607 of 2012 The surtax will increase Ihe ineome tax rate for equily (CREE) as follows 5% in2015,6% in 2016, 8% in 2017. and 9% in 2018

e, Trie weallri tax, payable by inoome taxpayers, was established and its generat'ng lael is lhepossession lriereol al January 1 of years 2015, 2016 and 2017, The wealtM lax is generated by thepossession lriereol al January 1, 2015, when its value is equallo or higMer Ihan $1,000 minionpesos, For purposes of this ta~, tMe coneept 01weallh is equivalenllo tMe tOlal gross equity at lhesame dale Iess Ihe debts in lorce al 5ucMdate

d As 01 2015, tax losse" and excesses 01minimum basis oould be offsel wilh luture inoome originatedin income lax lor equality (CREE), considering the same rules slipulaled lor Irie income tax.

e It establisries tMe complementary ta~ or la~ normalization Ior years 2015, 2016 and 2017, whicM willbe payable by laxpayers 01wealth lax and volunlary declarers 01 such lax Maving assets omiltedandlor non.exlstent liabililies at January 1, 2015, 2016 and 2017, respectively, The tax rate will beIhe lollowing 10% in 2015, 11,5% in 2016 and 13% in 2017

Income Tax E~pense

Below is a detail 01 income tax and tnCOmetax lor equahty (CREE) and CREE surtax, recognized inpenod resulls

Period !romSeptembo, 30, June 30,

2016 2016

64,113 "" 61,nO23,090 22,03915,393 14,693.__l~) '"102,S9~ 98,364

6,~19 7.2612,272 2,606." '"9,392 10,009

111,985 "" 108.373""

Curren! tuProvision lar income tax 01Ihe pericd US$Provision lor CREE la<Provi.ion for CREE .una,Adjuslment to currenl income la, expense .nd CREE prior yea,s

Tol.llncome l.x expense

Delemod la<Deferred income la~Delened ¡ncome la< CREEDele,red income tax 01CREE surtax

42



15, Income Tu and Current Tu Liabllitles (continued)

Reconciliation 01 the effeclive tax rate

The Cornpany's inccrne tax ditfers trom the theoretical arnounl !ha! would have been obtained by usingthe fax rate applicable to prolit belore tax, Below is a detail 01the reconciliation between ¡he account'ngprolit belore taxes end nel taxeble income, which wa. the basis to determine the expense on concept 01income tax, income tax lor equelity (CREE) and CREE surtax:

Period fromJuly 1 to April1 to

September30, June 30,2016 2016

Values Rales Values Re18a

Accounling profil before tax , 26~,2S0 1 231,169Income tax applying lhe Company's localtsx rate 106,112 4000% 92,458 40.00%Non.ta,able revenues (147) -0,05% (745) .032%NQn-dedue!ibleexpenses n 000% , 0,00%

O,fference betwoon ta<able base el incom. and

" 0,01'/,CREE taxesConvers'on adJu.tments - Collarfune!onal 6,166 2,34% '5,372 6,67%Currer.cyConversion aClu.lrrenl - 'rcome expense S", 030% 2,20' 095%Differentlalin rale - deferred ta, (967) -036% (1,336) -0,58%Prioryea,-,;' income la. e<pense (3) 0.00% m 0,17%

Tax profil befo,," tax 1 111,985 42,22% , 108,373 4US%

16. Delerred Revenues

Revenues received In advance, short termRevenue. received ir. advance long term (1)

September 30,2016

US$ 2,405 US$14,260

_ U5-$~-16,665 ------US$

June 30,2016

73114,26014,991

(1) Long-te"" ad'anc<:. r.",,,i'ed corre.pond to Ihe paymenl 01the reSeN" oflhe cap.oity 01ll1ePipelineacquired by the oompanies described in lhe note, whic/1already slMed the amortizalionas 012016, once thecapacity e.pa~.ion .tart.

Seplember 30,2016

Juna 30,2016

BP ProduCls North AméricaGunvor Colombia CI SAS ""

:""13,051 USS1,209

14,260 US$

13,0511,209

14.260

43



H. ProvisionsAbandonment

costa Contlngencles (1) Total

Al March 31,2016 USS 43,167 USS 2.571 US, 45,738Deployments , ,Additions 4,910 4,910Financial cost '" '"Translation adjustment (341) " (247)Al June 30, 2016 USS 48,651 USS 2,668 USS 51,319Addilions {1,249} (1,249)Financialoost (1,425) (1,425)Translation ad¡ ustment '" ss '"Al SeptembeT 30, 2016 _1,J5$ 46,596 USS 2,701 USS 49,297

Al September 30, 2016 and June 30, 2016, Oleoducto Central S,A, is involved in severai low materialitylegal procedures which arise in the normal courss of operations. and that inelude: 1) lawsuifs for theguaranlee; 2) lawsuits lor environmental damages; 3) lawsui15 lor acquisilions' indemnities; 4) procedureslor revocation 01 licenses andior eoncessions. and; 5) various eivillawsuils, Oleoducto Central S,Abel:eves lhat the apprepriate provisions have been set.up in those cases where it is considered that anobligalion has been incurred lor the necessary amount to lace the related risks. Oleoducto Central S.Aoons,ders that these malters will be resolved withoul al/eeting the business sig nificanlly, its financ;alpes't,on or ils operating resulls. In addition, in connection wilh certain legal procedures in progress. incertain occas'cns Olecd~cto Central SA may determine and disclose reasonable eSlimates 01 theexpected toss or the pesslble Ioss rank, as well as a provision created for such loss; however, lor a limitednumber 01 legal prccedures in progress, Oleoducto Central could not be in the possibility 01making abelter estimate 01the expected loss or olthe rank 01 possible, or could be in the possibihty, but ,tconsiders thal d iscloslng such inlorrnation on a case.by-case basis, would seriou51y damage Ihe p05ilion01Oleoducto Central S.A In tna legal procedures 'n progress or in any related Ilquidation negotiat'on,Consequenlly. in these cases, Oleoducto Central S,A, discloses qualitabve inlormation in respect to thenature and characlerlsl<cs 01the contingency, wilhout Including the Ioss esbmate or the pessible 1055me,

The lollowing chart detalls the main litigation cases reoognized in the stalement 01linancial poslt;on,which loss expeelations are highly probable

Claims

September 30,2016

June 30,2016

The payment 01 presumed damages 's claimed, resulting Iromthe attack agalnsllhe Cupiagua-Cusiana-Covenas pipeline bythe Ejército de LiberacIÓn Nacional (ELN) in lhe jurisdiclion 01Fraguas, Machuca, Municipality of Segovia (Anlioquia)

USS 1,263 USS 1,263

44



17. Provísions (conlinucd)

Seplembcr 30,_ .2016

Oeclaring the annulment 01writs 2064 and 3082 012008 lorwhich the M'nislry 01Environmenl Housing and TerritorialOevelopmenl MAVOT rejecled Ihe investmenls of 1% execufedin compliance wilh Ih.e environmenlal license of lhe pipeline 012013

Oeclaring the annulment 01 Resolulion 431 012009 whereby lheMAVOr amended Ihe Resolution 952 01 1995 (pipelineenvironmentallicense) including Ihe obhgalion 01 1% senlencewhich was admitted by tre Ccuncil 01State on OGtober 15.2014

Junc 30,2016

Declaring Ihe annulment 01wrils 155 and 1981 012010 wherebyIhe MAVOT rejected Ihe additional investment plan executedbenef'tting 01 the hydrograph,c bas'ns

On Augusl 21, 2013. the Civil Municipal Court 52 of Bogot~issued a pa~menl manoale writ and a writ setling a bail. OnAugusl 26. 2013. Ocensa liled an appeal agalnst the paymentmandate, nullily incident cue lo 'ack 01jurisdicfion and a¡¡peal 01reversal aga,nst the writ lnat set the caulion. By means 01 a writnotil'ed on March 4, 2014, fhe Court rejected lhe lawsuifdue lolack 01jurisdiction and ordered ils remission lo Ihe off,ce 01assignmenl {olici~a de reparto) 01 adminislralive courts

uS! 1,402 uss 1,402

The prGGesswas awarded te the Administrative Oral Ceurt 31 01Bogot~, which by means ola wnt notof,ed on May 15, 2014proposed negative conllict 01 com petence, ordering lheremission 01lr.e file lo the "Ccnsejo Superior de la Judicatura"The .Consejo Superior de 'a Judicafura" decided in June 2014thal the matter shculc ccnlirue to be taken care 01 by fhe CivilMunicipal Court 52. On April 18. 2015, Iha Civil Municipal Court US$52 issued a wril Ihal considered Ihe nullit~ incidenf as resolvedin respeef lo which Ocensa liled an appeal which was finallyresolved on July 1 2015, cQnlirming Ihe payment mandale Thapayment mandate is pand,ng response b~ Ocensa

3 US$

45



17. Provlslons (contlnuedl

Contingenl Li"bilities nol Accrued

The Company has contlngent liabilities not recorded in Ihe Slatements 01Financiai Position uponconsidering that the prcbab¡ilty 01occurrence is possible. Such contingencies mainly derive Irom legalprocesses related wit,'1labor lawsuils to the Company's contractors, lawsuits 01 repair lor damagescaused during the eonstr~etlOn 01 lhe pipeline, However, these processes are not material as a whole anddo not affeet signllleantly the Company's linancial statements

Contingent Assets Nct Aeeruec'

The Company does not have assets lrom contongencies which probability 01occurrence is determined aspossib!e

18. Equity

Subscribed end P~id-in Capital

Authorized capital is 01 5,350.000 shares at a par value 01$30, 104.543412483 each; subscribed andpaid-in 5,159,000, and s~bscribed and paid-in capital being US$81,714

A delail 01 the shareho'ders is shown below

Subscribed shares %

Cenit Transporte y log istica de Hidrocarburos SAS,Alianza Fiduciaria S.A - Fide'comiso Acciones OcensaBanco de Bogotá (Panamá), S.A. - Fideicomiso AccionesOcensa

Al Candelaria (Spa'n), SL UTransporte Reg;stfadc Servicios S A

Equily Reserves

3,747,9101,153,138

257,949,,5,159,000

Septembllr 30,2016

72.64799%2235197%

499998%

000004%000002%

100%

June 30,2016

Legal reserveLegal reServe 10% non-taxed u"'

U5$7,736 USS33,12240,858 USS

7.73633,12240,858

Th" Colombian Coae 01Commeree establlshes that it is mandatory to appropriate 10% 01 its net annualprolits as a legal reserve until the balance thereol is equivalent to 50% 01subscribed capital. This reservemay be used to offset losses or distnbute them in the event 01Company's liquidation,

46

Oleoduc10 Cen1ral S. A.

Notes to Financial S1atements

18. Equlty (continuad)

Paymen/ o,DividandsBelow is the datail 01d,stributeo dlvidends

August 24, 2016 - profits Irom January 1 lo March 31, 2016

Unpeid dividends declared

uss 155,449

September 20, 201e - prollts Irom April1 to June 30, 2016 (1) US$ 122,796

(1) By means of Minufe No. 95 of September 20, 2016, lhe General Sharehold.rs' Meeting approved the distributi""01dividends lrom prof,t. at June 30. 2016

O/her Comprehonsive Income

This headir.g includes effects or the effeetive portion 01 cash fiow hedge instruments, thus recognizing theeffective portlon in other Ccmprehensive Income. The change in lair valua 01 the hedge instrument,which has been recognized in Other Comprehensive Income. will ba reclassilied to income when thehedged item affel;ts income The Compa~y, wilh this hedge policy, seeks lo stebilize cash Ilows andmitigata economlC effacts that could arise Irom fiuctuations in market variables, namely, the peso/dollarexchange rate and the i~ternational relerence price 01Brent oiL 8eing belween 80% and 125% 01 the leirvelue established lar the hedge is a poliey eslablished by Ihe Company for recognition purposes in OlherComprehenslve Income

The Value at Risk (VaR) methodo!ogy is used to measure lhe effectiveness olthe hedge, which uses asindicatcr tha EBITOA al Rlsk

This meaSUfeme~t is made by means 01 simulalions 01Monte Carla: however, other commonly acceptedmethodologies could be co~templa!ed, which should allow to:

(1) Presenl pota~tial vanances In the pesosldollars (COP/USO) excha~ge rale and/or pnces 01 rawmaterials {Brent),

(2) Measure the impact 01these movements in the Company's cash ftow

(3) Measure the impact 01these movements in the EBITOA (andlor net prolit il prude~t) 01theCompany

The speciflc model to measure risks and lhelr critical variables, as well as lhelr amounts, wiil be evalualedmonthly at the Aucit and Financial Commihee When fhe hedge is no lo~ger effective. Ihe hedgeaccounting will Ceese

47

,------~~~~~~~~~~~~~~~-----



18. Equily lconlinued)

O/he, Comprehensive ¡"come (continued)

Additionally. Olre' Corrprehers;ve Ireame ¡neludes the effect 01 translating tl1e financial statements ¡nlolhe presentation currency. Upon preparing lhe financial statemenls. the presentation currency differs fromIhe funclional curreney and the results and linarn;ial position are translated ¡nto lhe seleeted presentallancurrency -in this case Ihe peso. Assels and liabililles are lranslated al Ihe c105;n9 rateo revenues andexpenses are translated al lhe a~erage rale, and equily is translated al the rate prevailing allhetren5action date

Seplember 30,2016

Juno 30,2016

""Cash hedgesDe/erred laxDelerred lax translat,cn adjustmenl

19. Revenues From Ordlnary Acl;vllies

(18,152) US$7,579

:~L=75,081US$ e4,50a US$

(10,361)4.303

75,91669,858

Perlod lromSeplember JO, Aprlll lo June JO,

~~,20,,16 2016~_

Hydrocarbons lransporlation serviceUnloading servieeOther revenues

Hydrocarbons IranspQrt~tion service

US$ J05,2521,7aO4,417

US$ Jll,449

US$ 271,5441,5624,601

US$ 217,707

This eorresponds lo the transportation 01 oillrom Cupiagua, up lo the exportation by the TLU-2 in theCove~a5 terminal. the transportation service is billed by the barreis transported in eaeh section 01thepipeline at the rate set by the Ministry 01Mines and Energy for eaeh cne and for Ihe Co~e~as terminal lherate authorized by the Superintendence 01Ports and Transportation The average 01 crude barreislransported lor the period tmm July 1 to September JO, 2016 were 594,708 KBPD and Imm Aprill toJune 30, 2016 were 544,062 KBPD During 30 2016 Ocensa received more barreis lor transportalion duelo the non-operatlon cf the Oleoducto Bicentenario as a resull 01the altacks lo the Oleodudo Ca~oLimOn, wh'ch was regularly operaling in the 20, a reason why the increase 01 volurnes lransported;sevidenced Addilionally, In the 30 no discounts to the rale were applied in accordance with lhecommefclal strategy cond,t,cns; the rate applied was the MM&E, with lhe appljcalion oflhe update annualfador since July 1, 2016



19. Revenues From Ordlnary Activities (continued)

Un/oading service

This corresponds lo the unlcadlng 01 oil or d,luent in the unloading facilities located in the Cusiana .tationThi •• ervice is bll'ed lor lhe barre:s nominated by clients at the contractual rate. The bi-annual adjustmen01the .Ship or Pa( contracls was made during the 3Q corresponding to the lirst hall 01 2016 so Ocen.aobtained greater revenues vs the 2Q The adjustment made was 01approximately US$ 706k

O/her revenues

TMese correspond to por! services, dilut,on serviee. administrat,ve and maintenanee servlees

Informa/ion on Main C/ien/s

Revenues generated as a result 01crude transporlation activities are obla'ned by the lollowing cllents

Period lromJuly 1 to April1 to

September 30, June 302016 2016

Eeopetrol S.AMela Pelroleum Corp Colomblan BranchOther smaller enes

20. Cost 01 Sales

USS 223,15315,599

____ 7~,6!17USS 311,449

US$ 196.47430.11751,116

US$ 277. 707

Frjetion reducer (1)Fuels and lubricants (2)Gas (3)Electric power (3)

Fixed eestsOperabon and mainterance (4)DepreciationAmortizalionLabor eosts(5)Materials (6)

"" 5,193 "" 3,8183,531 4,4931,834 2,9613,466 1,61714,024 13,089

16,586 16,01818,069 17,993

'" '"1,234 69'1,7BO 978

__ .__ 38,350 36,366US$ 52,374 "" 49.455

(1) An increase is rellecled as a resull 01higher volumes lransported mainly upon the reversal olthe Araguaneyline beCllu5e {JIils nOrl_operatiQndue to lhe altacks to the Oleoducto Cano Limón,

(2) The decreaoe " ove to the lac11hatlhe pri"" 01the C",d~ fuel purch••• d dun.ngthe firsl hall was higher lhanIhe ce.1 DI 'ueh "rude during Ihe third quarter 012016

(3) The variat,on in gas ~na energy lOduo to lhe higher volumes lransported due to the reversal olthe Araguaneyline

49

20. Cosl 01 Sales (Continued)

21. Operalion and Projeets Expenses

No1es 10 Financial Statements

4,366

''"1,6296.731eS$

US$ 1,16455;"5'"m

USS 2,902

4,803no..,

6,039

Periad fmmJuly 1 lo Aprll1 to

Seplember 30 June 30,2016 2016

""""

Fees and ser,/iCeS (1) "" 1,675Maintenance '"Miscellaneous (2) 78'Insurance .,.Leases '""" 3,520

Labor expenses (1)Deprecialion ano amorf;zat'on (2)Taxes (3)

Periad fmmJuly 1 to April1 lo

Seplember 3D, June 3D,2016 2016 __

(4) Thoro is an incroaoe becau,e of Ihe higher lo"el al o,ecution olworks, mainlenance and other ac!i"ilies. Inadd,lion, inlegrity se""ce, lo 1hepipeline are ,"ciuded,

(5) The increase is ger.eraled by the recagnilion al the performance bonus(6) Thore 15an increase due lo tre cansumpllOnof lools and maleMaisbecause 01mainlenance and exeoution of

works


(') The expense of fees and seNices increases mainly duo la consul11ngservice. and implemen1ation01be1terpraclice, reMe red by Mck'~sey Ior 5378

(2) The "ariation of the miscellaneou, head,"~ is becau.e 011herego.tra1oonof Ihe Ta, Con1rolinstallmen1in chargeOfIhe Comp1roller'. General Offloe (Contralorla General de la República) Ior 5497 and the con1Mbulionlo lheSuperintenaence 01Fons aoa Transporta1ionIor 53B

22. Adminislralion Expenses

(') ~o"a",ent C(lrre'pondin9 10Ihe increa,e in the payment 01iJ<Jnu.eslor reconcili.1ion. ufH'n final retirementamounting lo US$6' 0, 'ncrease in lhe paymenl 01iJ<JnusesIor orders and projec! for USS69, lho reducto"" byUSS' 7B 01Ihe perlorrrance oonu. (es1im.tes), and 1hedecrease in v'C.lions expense lor US$63

(2) Below osa detall of aepmclal oc and amortizalion;

50



23. Olhar Operating Income (Expansas), Nsl

Penod fromJ~ly 1 to April1 lo

Seplember 3D, J~ne 30.2016 2016

Depreciation 01cDmpute" and cDmmunicationequipmentDeprecialion 01olfice equipmenlDeprecialion cf vehicies and transpori"1 on eQuipmenlDeprecialion 01vehicles leds,ngDeprecialion 01"Dmpute" leasingAmorirzation 01computer softwareAmcrtizatlon 01SAP 6 Oproject

""

"SS

."","

""

""

'"",'",'""no

(3) There,." docre""o 'n tr,l. head,nQdue to the paymenl ofthe tax on financial mo.ements Ior USS452,

Perlod fromJuly1lo April1lo

Saplembar 30, Juna 3D,2016 2016

MonelizationOther

24. Financia! Result, Nel

F,"sncial ¡ncomeGsin5 Irom red.e dervati~e5 (1)Yields and ,"lerestLsle-paymenl interest

Financial costaLoases Iram he~ge derivatlve5 (1)Olher financral expensesFinancial C05tsInlerest

Exchange difference 9sin (Iass), nelFlnancial rasult, nal

""

"SS

"SS

m

"""

26,733

"",26,936

(9,744)1,425(61),

(8,378){3,032)15,526

U"U"uss

uss

(610).(ª-1L(641)

33,8601,457

S35,322

(25,165)(915)(164)(72)

(26,316)4.16513,191

(1) Below 's a detall 01hedge" recognized in re"ults durinQthe peliod 012016, whioh were sub.cribed during 2015;

51


Notes to Financial Sta1emen1s

24. Flnanclal Result, Net (contlnued)

Perlad lromJuly 1 lO

SeplomberJO,2016

Aprill toJuno 30,2016

Gain. lrom hecge operatlcn.Unrealized gainsRealized gains

Expenses lrom hedge op"rationsUnrealized lossesReallzed losses

c., 26,240 e" 29,026." 4,834e" 26,733 e" 33,860

e" (9,e32) e" (17,950)

uss (12) (7.21~)(9,744) e" (25,165)

The effectiveness 01the results of lhe hedged items was impacted by the effects 01 lhe exchange rEte,WhlCh show be:ow

PerladJanuary2016February 2016Mareh 2016April2016May 2016June 2016July2016August 2016September2016

(0) Representative Markel Rale - Amelican dellar I Colombian pe.o.

TRM lO)

3.287313,300,003,022.3~2.885,723,054602,916,153,055,1~2,882.692,879.95

TRM Varlallon.._----1371).41869

(283,65)(13663)168,88(13845)139,00(17246)(2,74)

Transact,ons 01 derivahes are agreea to in dollars lor the coverage 01cash Ilows in pesos, whichexp"ation do nol go beyond September 2017 The lotal 01 hedges open at September 2016 IS 01

Sale Exchange__ ~O,peralicn,,__ rateag~

(In Ihousands 01 US dollars)PerladOclober 20 16Ncvember 2016December 2016Janua¡y 2017Februa¡y 201 7March 2017Apn12017May 2017June 2017July 2017Augusl2017September 2017Tolal

,

,

5,8466,2295,5632,69451,7863,68057,7313,93861,7283,4452,6682,794

208,302

3,107.143,222243,479.603,462,323,217,173.211.013,107.453,239.793,138,313.293.003,051.713,063.15

52



25. Risk Managemenl

Because 01 its Imaneial strueture, lhe Company is direetly exposed lo exehange, inleresl rale credil andliquidity risks as shcwn below

25.1 Exchange Rale Risk

The exehange risk management is lramed-up On the principie that lhe peso/dollar exehange rate issubject 10 h'ghly-volatile and unpredictable changes. In this sense, the objective 01 hedge slrategiesdefmed by the Company is lo miligale movemenls in Ihose variables upon lhe use 01 derivaliveinstruments ac<.;""ed in ¡irancial rralilets

The exchange rate risk refers lo economic elleets resulting Irom Iluctuatlons 01Ihe exchange rale whichthe Company is exposed lo. In lhe case 01Oleoducto Central SA, most revenues Irom se",icesrendered are computed and oolleolOO in United States dOllars; however, sorne expenses and all taxobligalions are paid in Colomblan pesos as the Company operates in Colombia. For this reason,Company's cash Ilows are ex~osed to peso/US dollar fluctualions in the exchange rale

For thal purpose, Oleoduclo Central SA uses hedge operations upon contracting derivative instrumenlS,mainly Forwards, aiming lo mitigate the efleclS thal. upon peso/dollar movements, are originated inrespect 01Ihe budgel 01 expenses ,n pesas and tax obligations not exceeding one year.

Al the Septemeer JO, 2016 cutoll. the notional 01 the current hedge portfolio al exchange rale was ofUS$208,302 ,500 (al June 30. 2016 USS 141,689,083).

This represents an increase al 47% ,n respect lo Ihe figure reporled at June 30, 2016. This change isexplained by Ihe performance 01lorward contracts, primarily Ior tax operalians were due in April and June2017,

The United Slates dollar/peso Exchange rate has fiucluated during the lasl lew years At September 30,2016, the Colombian pesa has reflected a revaluation 01 1.24%, presenting an exchange rale 01$2,879.95 per USSl in respect lo the rate recorded alJune 30, 2016 01$2,916.15 per USSl

Below is the efleCl lhal a 1% and 5% variation would have in the exchange rate al Colambian pesos vs.US dollars, related ta the expasure af linancial ass"ts and liabililies in lor"ign currency al September 30,2016

ScenarialVariation in Ihe

ORM

Effect an resultsBefore

laxes (+/-)

'%ó%

,S

(4,472)(21.507)

For Ih" calculation 01the ellect on results belore taxes, lhe average rale ollhe 3 monlhs was laxen farIhe periad Irom July 1 te September 30, 2016, equivalenlto $2,99307 per US$1,

The sensltlvity analysis only includes monetary assels and liabililies in Ioreign eurrency al Ihe close date,as shawn below

53



25.1 Exchanga Rata Risk (continuad)

September 30, Juna 30,2016 2016

Cas~ and cash equivalents COP$ 68,295 COPS 98.933Trade accounts receivable and other accounts 48,315 91.442reC€ivableOther linancial assels 52,358 27.936Other assets 18,599 20.072Acttve pos Ilion 187,567 238,383

Debt and loans bearing interest (209) (2B7)Trade accounts and other aeeounts payable (242,920) {251 ,576)Current tax i'ab,lit.es (243,494Provisions (141,974) (149,653)Oeterred revenues 11,393) (1,394)Passive pos ilion (629,990) (402,910)Nat passive positlon COP$ (442,423) COP$ (164,527)

25.2 Credit Risk

The eredit risk is the ,isk acquired by the Company as a result 01 non-complianee wlt~ obligations 01clients, 01 Imancial instllutlons which Inveslments are made w,t~ or 01 counlerparties which derivatlvefLnancial instruments are contracted with,

Pe,manent monitoring al credit ratings is;ued by nsk ,aling companies on financial snlllles whichinve;tmenls are made wilh or derivative instruments are negotiated wilh Is earried oul at OleoducloCentral SA in arder to gua,anlee !hat sueh companies meet the mlnimum raling defined by theCompany

An individual ana',YSISis made lo, accounts receivable considered impaired wIlich pe,mits identilying thesilual,en 01 each elient and trus dellning the neeessary provisions. sueh as age 01aeeounts ,eC€ivabte lobe accrued; at Se¡:temter 30, 2016 there are no indiealo,s 01 impairment lor accounls reeeivablebalances

The Company carries out admlnistrative and legal acbons neC€ssary to recove, past due aecountsreceivable, as well as Interest recognition 01clients not complying wilh paymenl polieies

25.3 Líquidity Risk

The Natranal Plannmg Department, as evidenced in its officialletter number SC-201 34380757471 01Octoba, 15, 2013, Issued a lavo rabie apinion lo' lhe Company to enter inlo public credil operatlons uponthe international iss~e 01a bond in United Stales dalla'. lo, up to USD1 ,000,000,000, with 100% 01possibllity to reopen the rest 01the amount in order lo finance Capex need. 01 new projects. Based onlhi; favorable opinion, by means 01Re;olution number 4254 01December 12, 2013, the Mini.try 01Finance and Public Credi! au!horized the Company to negotiate Ihe ¡ssue and plaC€menl of bond. in the

54



25,2 Liquidity Risk (continuad)

internatioMI capital market lar up to one thousand million United States dollars (US01.000,OOO,OOO) inorder to linanee investment needs 01luture expansion projects,

By means 01Resolution 1369 01April 29, 2014, Ihe Minislry 01Finance and Public Credit authorized theCompany to subscribe, issue and place External Public Oebt Bonds, under Rule 144 A I S Regislrabon 01Ihe Uniled Slates 01Atrerica Securities Act, in international capilal markels lar up to USD500,OOO,OOOinorder to linanee the needs 01 ,nvestment 01 luture expansion projeels (Poteney 135 and Warmingl. Thisprevides the Company with tee possrbillty to reopen the resl oflhe amounl, given lhal Company'slinaneing needs require lhem and thal capilal markel condilions are lavo rabie

ne liquidlty risk is managed based on the applicalion 01 the Merton Miller and Daniel Orr model. which '5a random generation induction model lor daily changes in Ihe cash balance. in order lo establishminimum cash levels required lo take care 01liquidity requiremenls 01lhe organizalion, including its debtservice eommllmenls

The main purpose 01the internal proeedures is to guaranlee enough liquidity levels lo comply with lheCompany's I,nancial commitments within ils timetable 01maturilies, as well as the main instrumenls lortheir measurement and lollow-up. Such ;nSlr1Jments are: Weekly report 01 Ihe treasury command bullelinboard, monthly cash flow. and analysis 01the annual mobile average 01the cash ~ow loresighl

The Company has a policy to manage liquidity surpluses. Such policy prevides criteria, guidehnes anddirectives lor the elllclent and sale adm;nislralion olliquidity surpluses, and establishes hmits 01exposureper counterparty Al present, the counterparty limit 01 risk exposure is limited to Ihe higher 01 the lollowingparameters: A maximum amount 01US$150 million by the eounlerparty, or il the cash balance laUs belowsuch amount, it should be divided at least into lhree counlerparties that meet lhe minimum ralingpermitted. In the evenl issuer and issue limits established herein are exceeded, Ihe portlollo adminislratorwill have 45 calendar days to take tee measures necessary lo adjust lo such limits

The cred,t quallty 01 issoers, assets and counterparties 01operations are as follows

Minimum permitted ratlng.

Foreign Financial Entitles____ R_'_tlngEntlty

Slandard & Poor'SMoody's Investors Servlee

Filch Ratings

Local Financial Entjties

_____ Rating entity

Flteh RatingsBRC Inveslor Services

Short-Ierm raling

A-'p-,p.,

Short-term ra\ing

F>.BRC1+

Long-term raling

Long-term raling

AAAAAA

55

,------------ -

Oleoducto Centra! S. A.

Notes lo Financia! Statements

25.2 Llquldlly Rlsk (continued)

Furtnermore, c1ients who wish lo psrtlc'pale in procesee. 01Firm Transportalion Offers OPS (from theSpanish Oferta de Transporte en Firme OPS) wilh Ihe Company have a number 01 requirements Ihalclass'fy them under 3 ralng ~roups. This classification is meda based on elements 5ueh as credi! ri$kretings for Iheir long-Ierm dallar debl issued by ene 01¡he following risk rating entilies Standard andPoor's Raling Group, a divis;'on ef McGraw.Hill Campanies: Moody's Investor Services, Ine" o' FilenRehngs. Inc., as well as ¡nti i<;ators 01war1ling capital, nel equily, compliance guarantors and bank pre-approvsl 01stand-l;y latters 01 credi! with AAA eredil raling are also included in Ihe classificalion process01 each group lo evaluale clienl ris~s

25,3 Interesl Rate Risk

Oleoduclo Cenlral SA issued a hond in lhe inlemalional markel al a nollonal amount 01 USDSOO millionin 2014 A delined lixed inleresl rate 014% was used in such issue; therelore, there is no risk 01 intereslrate.

25,4 Capital Management

The main objeclive 01 Ire Companis capital managemenl is lo ensure a financia' structure thal oplimizeslhe cosl 01capilal. maximizes Ihe yield 01 ils sharehorders, and allow access lo financlal markels at acompetitiva casI In arder to cover ils financing needs,

Below is Ihe indebtedness ratio 01 periods reported:

September 30, June 30,2016 2016

"" 151,B55 "" 99,203(504,341) (499,187)

"" (352,486) "SI (399,984)

"" 976,987 "SI 951,638

56,45% 72,48%Leverage (1)(1) Net financial debt I (Net tinancial debt + Equity)

Cash and cash equivale~ts (Note 7)Loans (Note 13)Net financial debt

Equity

56



26. Re\ated Parties

The main transaclions ~etween related partles during the periods indicated are detailed below'

Hydrocarbontran~crta.!i.,,-n

____ 'c.c".od fro~ull'. l.!>, S~ptember 30, 2016 __Operatton and

Unloading Dilulion Administrative main!enancese""ice se""ice so""iccs so""iccs

Pur<;haseofproduclS andse",,;ces

US$ 4,519

""""".00

732 US$

"____ ."' ._.!!.64_US$ 228,133 US$ 746 US$ 608 US$ US$ 347 US$ 5,715

Ecof>l!lrolSA US$ 222,421 US$Cenit Transporte y Logistica de HidrocarburosS.A.SHoce! S.A 5,656Olooducto de Colombia SA 56Olooductode Los Llar>osOrienlales S.AOlooducto Bicentenariode ColombiaSAS

Administrativose""icos

Dilutionse""ico

Unloadingse""ice

Hydrccarbon¿.ra nspo rtalion

____________ '..•_"•.od 'rom A~il 1 te J~ 30,_'_._,_. _Opera~on and-Púi-chase ofmain!enance producls andse""ices se"";cos

Ecopetrol SAHocol S.AOleoducto de Colombia S.AOlooducto de Les Llanos OrienlalesS,AOloodUCIoBieentenanode ColombiaSAS.

U1>$ 201,292 US$5,712

~"---USS 207,453 US$

3500 US$

"362 US$

oo'

'"979 US$

"12 US$

"""'"

oo'

oo'



26. Relaled Partias (continuad)

The mosl representative balances with related entlties at Septembar 30 and June 30, 2016, are includedin accounts receivable and accounts payable, as fOllows.

September 30, June 30,2016 2016

Accounls receivab'eEcopetrol S AHocol S,AOleoducto de Colombia SAOleoducto de Los llanos Onentales S,AOleoducto Bicentenario oe Colombia SASCenit Transporte y Loglst'ca de Hidrocarburos SAS

Acccunts payableEcopetrol S,AOleoducto de Colombia SAOleoducto BICentenario de Colomb,a SAS.Cenit Transporte y loglstlca de Hidrocarburos SAS

""

""""09$

73,5751,540

82

'"'"75,762

4,487

'".""5,522

"SS

"SS09$

"99

66.8297,9082,549

'"'"2977,702

4,661m

'"295,733

Oulstand,ng arr,ounts are MI guaranteed and will be settled in cash. No guarantees have been grantedor received, No expense has been recognized in the eurrent period or in prior periods eoncerninguncolledab'e cr bad debts related to amounls due by related parties

Trade purehases ano sales transactions 01 goods and services, concerning lhe development of IheCompany's corperate purpose, wilh related parties are made under general market prices and conditions

27. Compensallon lo Direclors

Djrectors' lees lor attendance to the meelings olthe Board of Direelors and/or the Commitlee amount loapproximately US$40 lor lhe period from July lo Seplember 01 2016 and lo US$53 for lhe period IromApril to June 2016

The total compensalion paid lo the diredors, execulive oflicers and top direetors lar salary and othercompensal'ons dUfing the quarter 110mJuly to September 2016 amounted lo US$336 and lor the penodfrom April lo June 2016 to US$367, Furthermore, for benefLls. the amounts paid lar lile insurance,vehicles leas¡ng, prepsid heslth eare. Mutual Fund, amounted to US$43 snd USS42, respeetively lor eaehquarter

28. Subsequenl Evenls

At lhe date 01the issL.'snee 01 lhese linsncial slatements there were no subsequenl events whieh couldhave s ~olent'sl effeet o~ the 'nlormation contained in the finaneial slatements

Documents

Oleoducto Central S.A....EY Buildinqabetter working world Statutory Audítor's Report Tothe Srareholders of Olecducto Central S,A, Ihave audited lre accorrpanying financial statements