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Canacol Energy

CN: CNE

C$665.5m market cap

C$3.7 last close

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

Investment summary

As we look across the E&P investment universe, few companies potentially offer greater asymmetric risk/reward upside compared with Canacol. The company is playing into a tightening Colombian gas market, which should continue to support favourable pricing and longer-term growth plans. However, even with existing pipeline infrastructure and a conservative outlook on exploration and appraisal success, our 2P + risked exploration base case valuation of C$5.87/share represents 59% upside to the current share price, while the downside is protected through existing take-or-pay contracts that suggest a low case based on 2021 take-or-pay contracted capacity (153mmscfd) of C$3.50/share. Under our current assumptions, which include Canacol’s dividend equivalent to a 5.7% yield, we anticipate planned capex and cash dividends to be covered by the company’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)
2018A 204.5 138.6 7.3 (12.32) N/A 5.4
2019A 219.5 162.8 64.7 19.21 14.8 4.7
2020E 234.3 195.1 92.7 42.95 6.6 2.9
2021E 228.4 187.2 85.7 29.92 9.5 3.3
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 one to 10 years’ duration with inflation clauses to protect cash flows.

Last updated on 14/01/2021
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Sector
Oil & gas
Share price graph
Balance sheet
Forecast net debt (US$m) 286.2
Forecast gearing ratio (%) 95
Price performance
%
1m
3m
12m
Actual (7.3) 8.5 (16.7)
Relative* (10.2) (0.6) (19.5)
52-week high/low C$4.6/C$2.8
*% relative to local index
Key management
Charle Gamba CEO
Jason Bednar CFO

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