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Research: Energy & Resources
On 10 October, Canacol Energy provided an update on gas sales and drilling results. Gas sales in Q3 were 178mmcf/day, which was down approximately 4% from the level seen in Q2 due to previously flagged problems at its Jobo gas processing plant. This is being resolved and management is confident about achieving its average 2023 production targets.
Written by
Peter Hitchens
Canacol Energy |
Q3 gas sales dip but netbacks improve |
Q3 update |
Oil and gas |
13 October 2023 |
Share price performance
Business description
Analyst
Canacol Energy is a research client of Edison Investment Research Limited |
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On 10 October, Canacol Energy provided an update on gas sales and drilling results. Gas sales in Q3 were 178mmcf/day, which was down approximately 4% from the level seen in Q2 due to previously flagged problems at its Jobo gas processing plant. This is being resolved and management is confident about achieving its average 2023 production targets.
Year end |
Revenue (US$m) |
EBITDAX* |
Cash flow |
Net debt |
Capex |
Yield |
12/22 |
336 |
198 |
185 |
438 |
(180) |
10.0 |
12/23e |
351 |
218 |
190 |
481 |
(150) |
10.0 |
12/24e |
364 |
217 |
197 |
503 |
(160) |
10.0 |
12/25e |
530 |
365 |
301 |
486 |
(180) |
10.0 |
Note: *Earnings before interest, tax, depreciation, amortisation and exploration write-off.
Canacol provided a gas sales update on 10 October. The group reported Q3 gas sales of 178mmcf/day, which compares to 185mmcf/day and 186mmcf/day in Q2 and Q1 respectively. This 4% decline is due to problems at the Jobo gas processing plant and some of its production wells. This had been flagged in its update on 5 September. Canacol is working on remediating these problems and expects to have production back to normal levels shortly. Management still expects to meet its average 2023 production target of 160–206mmcf/day, which would imply production in Q4 of approximately 183mmcf/day – slightly higher than current production of 180mmcf/day on 9 October.
The group also expected to see adjusted EBITDAX of US$61.0m in Q3, which compares to US$60.7m in Q2 and US$60.9m in Q1. Given the lower production, this would imply that the group is achieving a 4% higher netback as it maintains its higher-margin business. This should therefore not impact on our forecasts. The group is expected to report its Q3 results in early November.
Canacol is maintaining its active drilling programme, where the focus is on drilling wells that are close to its existing infrastructure and will help to build productive gas capacity to meet this anticipated increase in gas demand, which could come through on the back of the El Niño effect that is developing in the eastern Pacific Ocean. This may result in water shortages affecting hydroelectric power generation in Colombia, which could lead to increased demand for gas and allow the company to benefit from higher gas sales in Q423 and during 2024. In the quarter, the group drilled the Aguas Vivas-4 well, which was tied into permanent production towards the end of September. The Clarinete-9 development well was successfully drilled and is expected to start producing by 24 October. The group completed the Fresa-2 appraisal well, which encountered 10ft of net gas pay.
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Research: TMT
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