Canacol Energy is an E&P company with operations across 23 blocks and 2.5m net acres across Colombia and Ecuador. Management expects to increase Colombian, Caribbean Coast gas market share from 5% today to c 32% by the end of the decade. Production operations benefit from long-term gas contracts, and low operating costs at US$0.3/mcf drive peer-leading netbacks of a reported US$4.54/mcf. Management focus remains on growth and cash generation, with capital being directed towards a diverse mix of portfolio opportunities, including expanding the company’s contracted gas base, growing contingent gas inventory (organic and inorganic), monetisation of light oil reserves as oil prices rise, and early-stage exploration of prospective shale acreage. In September 2016, Canacol added a second drilling rig in the Lower Magdalena Basin targeting the addition of c 100bcf of recoverable resource to its 2P 390bcf (end 2015) gas reserve base. More gas resource is expected to underpin new sales contracts and a planned increase in productive capacity from 100mmcfd to 190mmcfd. Recent successes at Oboe-1 (28bcf), Nispero-1 and Trombon-1 (Nispero/Trombon combined 40bcf pre-drill) and a five-year rolling 64% exploration success rate gives us confidence in Canacol’s ability to meet its resource expansion target. Management estimates a 2P gas value under long-term contract of US$1.17bn and 2016 EBITDAX of c.US$135m rising to US$175m in 2017.
In this interview, VP exploration Mark Teare provides an overview of Canacol, how the company is well placed to meet growing gas demand along the Caribbean Coast and how the company’s gas bias and exploration success differentiate it from its E&P peers.