August 2016 Growth From A Focused Portfolio
Forward Looking Statements This presentation may include certain forward looking statements. All statements other than statements of historical fact, included herein, including, without limitation, statements regarding future plans and objectives of Canacol Energy Ltd. (“Canacol” or the “Corporation”), are forward ‐ looking statements that involve various risks, assumptions, estimates, and uncertainties. These statements reflect the current internal projections, expectations or beliefs of Canacol and are based on information currently available to the Corporation. There can be no assurance that such statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements. All of the forward looking statements contained in this presentation are qualified by these cautionary statements and the risk factors described above. Furthermore, all such statements are made as of the date this presentation is given and Canacol assumes no obligation to update or revise these statements. Barrels of Oil Equivalent Barrels of oil equivalent (boe) is calculated using the conversion factor of 5.7 Mcf (thousand cubic feet) of natural gas being equivalent to one barrel of oil. Boes may be misleading, particularly if used in isolation. A boe conversion ratio of 5.7 Mcf:1 bbl (barrel) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Acres Acres represents gross acres Production and Reserves Production represents net before royalty Reserves represent 2P reserves and before tax NPV ‐ 10 as of December 31, 2015 Exploration Resource Potential Exploration resource potential represent management’s estimate of net unrisked recoverable resource potential, unless indicated otherwise 2 2 USD All dollar amounts are shown in US dollars, unless indicated otherwise
Focused Portfolio • Dual ‐ listed TSX and BVC Supply ‐ scarce Caribbean natural gas market • Enterprise value US $717 MM • Exploration success (‘08 → ) 65% • Insider ownership ~25% • ’16e guidance 16 – 17,000 boepd Natural Gas $135 MM EBITDAX • YE 2015 2P reserves 79 MMboe • Pre ‐ tax NPV ‐ 10 US $1.3 B Light Oil • 2P pre ‐ tax value/share CDN $6.51 S. Pacific Ocean Shale Oil • Y/Y reserves replacement 1,103% Colombia • 2P F&D cost $2.85/boe • Long reserves life ~10 yrs. • + Mid ‐ year 2016 2P reserves 5 MMboe Light Oil Ecuador • Substantial exploration 1,045 MMboe Canacol resource potential (1) 70 140 280 420 560 • Blocks / gross acres 23 / 3.4 MM Km (1) Management’s estimate of net unrisked 3 recoverable resource potential
3 Key Portfolio Components Large gas reserves underpin production and cash flow for a decade +52% CAGR in 2P reserves • Dry natural gas – [stable cash flow] 2P reserves in MMboe 79 (1) • ‘12 and ‘14 oil gas 2 acquisitions • ‘13 → present 3 large discoveries 14 • YE ‘15 2P reserves 372 BCF (65 MMboe) Over the last 5 ‐ yrs, Canacol has discovered more natural gas than every other • + Mid ‐ year ‘16 reserves 28 BCF (5 MMboe) Colombian explorer, combined • Exploration resource >3 TCF potential (2) 43 35 82% • Light oil optionality – [flexible approach] 65 gas 23 • 2P reserves 14 MMbls 18 • LLA 23 exploration 33 MMbls 18 resource potential (1) 11 20 8 7 17 • Large shale oil opportunity – [call option] '09 '11 '13 '15 • Exploration resource 458 MMbls (1) Excludes mid ‐ year 2016 reserves update for Oboe 1 (2) Management’s estimate of net unrisked recoverable resource potential potential (3) (3) DeGolyer & MacNaugton unrisked mean prospective oil resources, effective June ‘14 4
Strong Sales Growth +27% projected CAGR in corporate sales ‘16 guidance and sales mix Expressed in boepd 40,000+ Natural gas 80% +27% 88% insensitive Tariff oil to oil volatility 8% 19,521 16,500 Light oil 12% 10,933 1Q '16 '16e avg. May ‐ Jun ’16 Current Mid '18 ‐ after cash sales (1) pipeline • Produced >20 MMboe since inception • Recent, large natural gas discoveries driving shift from oil to natural gas • Operator of all production and facilities in Colombia • Budgeted $40/ Bbl WTI, $135 MM EBITDAX • Natural gas 100% avg. WI • +$10/ BBL in WTI results in +$4MM EBITDAX • Light oil 91% avg. WI 5 (1) Includes deferred revenue cash receipts
Canacol Doesn’t Lose Sleep Over Oil Prices Pursuit of dry natural gas that features stable pricing Oil prices at zero? Canacol generates ~$100MM EBITDAX Best gas pricing EBITDAX in US$ MM Quarterly average MMbtu $153 MM $12 $142 $130 $60 $118 $107 MM $9 $45 LT gas contracts with price escalation $6 $30 Canacol US $3 $15 Canada $0/Bbl $0 Mar Jun Sep Dec Mar Jun Sep Dec Mar 2016e 1 2 3 4 5 WTI oil price sensitivity '14 '14 '14 '14 '15 '15 '15 '15 '16 6
Canacol ‐ Gas Ranks #1 Mid ‐ cycle break even costs ‐ $50/bbl WTI, $2.75/Mcf $/bbl $65 Mckenzie/Williams Three Forks oil $63 Williams County Bakken oil • Captured ~ 40% of all E&P capital $59 Permian Delaware Basin Bone Spring oil invested from ‘09 to present $58 Permian Midland Basin Wolfcamp (shallow) oil $56 Tuscaloosa Marine Shale oil $55 McKenzie County Bakken oil • N.A. shale oil and gas now $54 SCOOP Woodford oil $52 Eagle Ford Black oil largely uneconomic $50 STACK Maramec / Woodford Oil $47 Ft. Berthold Bakken / Three Forks oil $44 Permian Delaware Basin Wolfcamp (tier 1) oil • Enter Canacol $43 Permian Midland Basin Wolfcamp (deep) oil $42 Breakeven < $5.00/boe Ferguson Bakken/Exshaw oil $41 Sanish and Parshall Bakken oil $39 E. Pembina Cardium oil $38 Gordondale Motney oil $36 Tower Motney oil $36 SE SK Viewfield Bakken oil Canacol ‐ gas $32 Karnes Trough Eagle Ford condensate < $5.00/boe Source: Scotia Capital Playbook, October 2015 Barclays North American E&P research 7
A Leader In E&P Capital Efficiency Participate in our capex ‐ light growth ‘13 → ’15 cumulative capex $MM Canacol ‐ gas Peer avg. Capex, x ‐ acquisitions $97 $807 ($ MM) $807 Production increase 10M 10M (boe/d) Wells drilled 8 73 1Q ‘16 netback $27 $12 ($/boe) ‘16 outlook ($/boe) Stable $26 Volatile $9 ‐ $28 (1) • Peers spent 8x more money to generate the same production increase • Peers drilled 9x more wells • Canacol is a leader in capital efficiency $97 • One well / yr. to maintain current gas production • $4.6 MM D&A cost per well • ‘16e: spend $58 MM to generate $135 MM EBITDAX Canacol ‐ gas Peer Avg. (1) Range based on Brent oil price sensitivity: $35/Bbl to $55/Bbl 8
Natural Gas Demand Greater Than Supply Chuchupa 1 • Supply decreasing 20% / yr. from coastal fields 2 Ballena • Three mature fields in blow ‐ down Caribbean Sea [ ‐ 100 MMcf/d per year decline] (1) Barranquilla 1 2 3 Chuchupa Ballena La Creciente 2016 2018 • Demand increasing 3% / yr. for the past 10 ‐ yrs. pipeline pipeline Cartagena and projected to grow at 3 ‐ 4% through 2026 +100 MMcf/d • +65 MMcf/d from new 2016 pipeline 3 La Creciente 4 fields • Flows north / south 65 / 25 MMcf/d south 100% WI • Total production 65 MMcf/d 90 MMcf/d ~785k acres • Gas EBITDAX/yr. $135 MM Clarinete Oboe Jobo facility • +100 MMcf/d from planned 2018 pipeline Nelson Palmer • Total production 25 MMcf/d 190 MMcf/d • Gas EBITDAX/yr. $310 MM Cerro Matoso mine • By 2020e, Canacol will supply ~42% of the coast 15 30 60 90 120 Canacol Gas pipeline Km 9 (1) Average annual decline for each of the trailing 2 years
Epic Gas Deficit On Colombia’s Coast Plan to boost gas production to solve supply shortfall Solving Colombia’s gas supply deficit • The Caribbean Coast had a balanced gas Gas supply ‐ demand forecast in MMcf/d supply ‐ demand profile for decades 600 582 • 3 mature fields in blow ‐ down Supply shortfall • 100 MMcf/d per year decline (1) 127 MMcf/d 25 477 455 190 • Canacol began planning in 2012 Supply from Canacol • ‘12 and ‘14 2 acquisitions 400 +165 MMcf/d • ‘14 → present 3 large discoveries • ‘15 2P reserves 372 BCF • ‘16 mid ‐ year reserves +28 BCF 265 • Plan to 8x Canacol ‐ gas 200 Supply from three mature fields ‐ 212 MMcf/d • Solve 77% of the Caribbean’s lost supply • Goal to backfill 165 MMcf/d of the 212 MMcf/d lost ‐ • 127 MMcf/d of additional opportunity '15 '16e '17e '18e '19e '20e Source: Industry and Government Studies (1) Average annual decline for each of the trailing 2 years 10
Canacol’s Cluster Of Gas Discoveries Robust reserves + the quest for exploration upside > 3 TCF of exploration upside (1) • 100% WI • ‘15 2P reserves 372 BCF Date Test Pay Porosity (%) • ~785k acres • ‘16 Oboe add (MMcf/d) (Ft.) 28 BCF • 4 gas fields • ~50 prospects / leads Clarinete ‐ 1 Dec ‘14 44 149 26% • 3 of 4 fields booked Clarinete ‐ 2ST Sep ‘15 30 127 23% Oboe ‐ 1 Mar ‘16 66 158 23% VIM 5 100% Average 47 145 24% 3D seismic Clarinete Oboe VIM 21 Oboe ‐ 1 100% Jobo Nispero ‐ 1 Subcrop edge Clarinete ‐ 2ST Palmer 10km 3km Nelson ‐ 6 Esperanza Clarinete ‐ 1 Cienaga de Oro time Upper zone GWC 100% Nelson ‐ 6,410 ft subsea structure map Prospects / leads Fields & discoveries Canacol’s fields & discoveries (1)Management’s estimate of net unrisked recoverable resource potential 11
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