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Canacol Energy

CN: CNE

Market CapC$560m

Last Close C$3.17

Canacol Energy is a natural gas exploration and production company primarily focused on Colombia.

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Investment summary

Canacol offers investors a pure play on the Colombian natural gas market where it holds a c 20% market share of national demand. A newly secured gas sales contract will connect the company to interior markets via a new pipeline to be completed by 2024. It is focusing on converting its 5.7tcf of net unrisked prospective resource into reserves, with its 2021 exploration capex the largest in its history. In 2020, Canacol replaced 61.9bcf of production with 75bcf of reserves (a reserves replacement ratio (RRR) of 122%). It has targeted a RRR of 200% in 2021 by drilling up to 12 wells at an estimated cost of c $66m. 11 wells will now be drilled in 2021, with the Aguas Vivas 1 discovery encountering the thickest net pay yet of 412ft. The historical success rate of over 80% underpinned by AVO analysis of 3D seismic keeps risks low, while the planned capex and cash dividends are covered by Canacol’s existing cash and cash generation.

Y/E Dec
Revenue (US$m)
EBITDA (US$m)
PBT (US$m)
EPS (fd) (c)
P/E (x)
P/CF (x)
2019A 219.5 162.8 64.7 19.21 12.8 4.1
2020A 246.8 184.6 79.8 (1.27) N/A 2.9
2021E 237.0 193.1 88.9 31.68 7.8 2.7
2022E 287.9 240.4 125.9 48.05 5.1 2.2
Industry outlook

The Colombian, Caribbean Coast gas market is expected to move into gas deficit in the absence of LNG imports, incremental piped gas or the development of recent deepwater discoveries. Canacol sells gas under long-term, fixed-price gas contracts, typically of five to 10 years’ duration with inflation clauses to protect cash flows.

Last updated on 12/01/2022
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Share price graph
Balance sheet
Forecast net debt (US$m) 348
Forecast gearing ratio (%) 145
Price performance
%
1m
3m
12m
Actual (1.9) (21.4) (14.6)
Relative* (3.6) (24.6) (28.0)
52-week high/low C$4.1/C$3.0
*% relative to local index
Key management
Charle Gamba CEO
Jason Bednar CFO