Canacol Energy Ltd. (Canacol) (CNE) is pleased to report its light, medium and heavy crude oil and conventional natural gas reserves and deemed volumes for the fiscal year end December 31, 2016. The Corporation engaged DeGolyer and MacNaughton Canada Limited (DMCL) to prepare independent reserves evaluations for its two primary conventional natural gas fields in Colombia and forits oilreserves in Colombia and deemed volumes in Ecuador. The DMCL evaluated reserves and deemed volumes represent 92% of the Corporation’s total reserves and deemed volumes on a Total Proved “1P” basis.
The Corporation’s conventional natural gas reserves are located in the Lower Magdalena Valley basin, Colombia.
Canacol’s light and medium crude oil reserves are located in the Llanos and Middle Magdalena Valley basins, Colombia. Additional deemed volumes of light and medium crude oil are developed in the Oriente basin, Ecuador. Heavy crude oil reserves are located in the Caguan basin, Colombia.
- Proved Developed Producing “PDP” reserves and deemed volumes increased by 49% since December 31, 2015,
to total 42.4 million barrels of oil equivalent (MMBOE) at December 31, 2016
- Total Proved + Probable “2P” reserves and deemed volumes totaled 84.6 MMBOE at December 31, 2016, with a
before tax value discounted at 10% of US$ 1.3 billion, representing CAD $ 8.79 per share
- Achieved 1P reserve replacement of 166% and 2P reserve replacement of 194% based on calendar 2016 gross
reserve and deemed volume additions of 9.3 MMBOE (1P) and 11 MMBOE (2P)
- Achieved 2P finding and development costs (F&D) of US$ 4.71/BOE for its gas assets and US$ 5.31/BOE as a
corporate total for calendar 2016
- Achieved 2P F&D of US$ 2.52/BOE for its gas assets and US$ 3.48/BOE as a corporate total for the 2 year period
ending December 31, 2016
- Recorded 2P finding, development and acquisition costs (FD&A) of US$ 5.04/BOE for its gas assets and US$
5.66/BOE as a corporate total for calendar 2016 Recorded a 2P reserves life index (RLI) of 13 years based on annualized fourth quarter 2016 production of 17,778 BOEpd
Ravi Sharma, Chief Operating Officer of Canacol Energy, commented “The Corporation has achieved significant
conventional natural gas exploration and development drilling success over the past 3.5 years. During this time, we have added over 315 BCF of 2P conventional natural gas reserves from commercial success on 11 out of 12 wells, representing a 52% compound annual growth rate (CAGR). As of December 31, 2016, Canacol’s total 1P reserves and corresponding before tax NPV - 10 are 57 MMBOE and US$ 900 million, respectively, or CAD $5.47 per share. The Corporation’s 2P reserves and corresponding before tax NPV?10 are 85 MMBOE and US$ 1.3 billion, respectively, or CAD $8.79 per share.
Canacol’s management team continues to execute its growth strategy with respect to high value Colombian gas. The
Corporation forecasts 130 million cubic feet of gas per day (“MMcfd”) of natural gas production for exit rate 2017 and 230 MMcf/d of natural gas production for exit rate 2018. These targets represent production growth of 44% from current production of 90 MMcf/d and sequential production growth of 77% from 130 to 230 MMcf/d to exit 2018.
Discussion of Year Ended December 31, 2016 Reserves Report
During the six month period from June 30th 2016 to December 31st 2016, the Corporation recorded increases in certain reserve categories as a result ofthe drilling and completion of exploration locations at Nelson - 6, Nispero -1 and Trombon-1 on the Esperanza natural gas block in the Lower Magdalena valley Basin, Colombia.
The following tables summarize information from the independent reserves report prepared by DeGolyer and
MacNaughton Canada Limited, effective December 31, 2016 (the DMCL 2016 report) and the independent reserves report prepared by Petrotech Engineering Ltd., effective December 31, 2016 (the Petrotech 2016 report). The DMCL 2016 report covers 100% of the Corporation’s oil reserves and deemed volumes and 90% of Canacol’s natural gas reserves on a 1P basis, including Nelson and Clarinete fields.
Each independent reserves report was prepared in accordance with definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook (COGE Handbook) and National Instrument NI 51-101, Standards of Disclosure for Oil and Gas Activities (NI 51-101). Additional reserve information as required under NI 51-101 is included in the Corporation’s Annual Information Form which will be filed on SEDAR by March 31, 2017.
The recovery and reserve estimates of light and medium crude oil, heavy crude oil and conventional natural gas are
estimates only. There is no guarantee that the estimated reserves will be recovered and actual reserves of light and
medium crude oil, heavy crude oil and conventional natural gas may prove to be greater than, or less than, the estimates provided.
Reserves of light and medium crude oil and heavy crude oil as at December 31, 2016 are evaluated against the DMCL forecast pricing effective at that date. Comparative volumes of light and medium crude oil and heavy crude oil as at December 31, 2015 are evaluated against the DMCL forecast pricing effective at that date. Deemed volumes of light crude oil are determined by dividing cash flow by the tariff price of USD$38.54/ barrel which remains constant for the life of the incremental production contract. Reserves of conventional natural gas as at December 31, 2016 are evaluated against contract pricing forecast for each gas contract. Comparative volumes of conventional natural gas as at December 31, 2015 are evaluated against contract pricing for each gas contract atthe effective date. Forecast prices used in the reserves reports are included in the Corporation’s Annual Information Form which will be filed on SEDAR by March 31, 2017 under the sections “Forecast Prices Used in Estimates” and “Forward Contracts” in the “Statement of Reserves Data and Other Oil and Gas Information”.