May 2019 Forward Looking Statements This presentation may include - - PowerPoint PPT Presentation

May 2019

Forward Looking Statements

This presentation may include certain forward looking statements. All statements

• ther 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. Realized contractual sales Represents net before royalty USD All dollar amounts are shown in US dollars, unless indicated otherwise

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Why Natural Gas In Colombia?

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Bogota

Colombia

Conventional gas

Colombia

• South America’s oldest/most stable democracy
• 3rd largest South American economy
• Regulatory stability (1)

Natural gas in Colombia(2)

• Country´s gas demand

~ 1 BCF

• Caribbean Coast

~ 40%

• Demand

growing 2-3% / yr.

• Limited competition
• Gas supply x-Canacol

declining ~12% / yr.

Canacol´s gas production in Colombia

• Current

~122 MMcf/d

• Jun ‘19e

~215 MMcf/d

• 1Q ‘19 wellhead price

$4.97/ Mcf

70km Canacol’s E&P blocks (1) Accenture “Strategy Energy”, March 2016: Accenture Consulting ranks Colombia’s oil & gas regulatory reform In the top 3

Unconventional

• il

Cartagena Barranquilla Cerro Matos0

Colombia’s Natural Gas Supply Deficit

Strong gas demand on Colombia’s Caribbean Coast

• Demand

~450 MMcf/d increasing 3% / yr.(2)

Terminal decline in Caribbean gas supply

• For 30+ yrs., Chevron provided ~50% of gas supply
• Times have changed since Canacol’s entry into the

Colombian gas market in 2012

Canacol is replacing Chevron as the largest supplier of gas to the Caribbean coast

• The only active explorer over the trailing 6-yrs.

Hocol 30 MMcf/d Frontera 25 MMcf/d Guajira Chevron fields ~225 MMcf/d

Canacol

179 MMcf/d(1)

10 km Canacol gas blocks Promigas pipeline expansion Existing gas pipelines

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(1) 2019e corporate guidance (2) Source: UPME Colombia

Caribbean Sea

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Discovered 481 BCF Since Inception

78 114 365 409 505 559

'13 '14 '15 '16 '17 '18

In BCF 2P reserves in BCF

+11%

History of Canacol’s 2P reserves +232% 2P reserves replacement ratio

• 2P reserves increased 11% to 559 BCF
• Delivering BT NPV-10 value of $1.5 B(1), net of CNE debt

Industry-leading F&D cost

2P F&D Recycle Ratio

• 1-yr.

$0.32/Mcf 11.8x(2)

• 3-yr.

$0.57/Mcf 7.1x(3)

• ~13-yr reserve life, ranked #1 amongst Colombia peers

A history of discovery

• Success rate

83%

• 2P reserves adds / CAGR

481 BCF / 55%

2.6 TCF upside(4)

• Prospects & leads

140

• Net acres

1.1 MM

(1) Before tax NPV-10 for Canacol’s 2P gas reserves as of 12/31/18 (2) The 1-yr. recycle ratio is based on a natural gas netback of $3.80/Mcf for the 1 year ended 12/31/18 (3) The 3-yr. recycle ratio is based on a natural gas netback of $4.03/Mcf for the 3 years ended 12/31/18 (4) Mean unrisked prospective gas resource

Canacol’s Consistent Growth

Solid gas portfolio

• E&P contracts / net acres

5 / 1.1 MM

• Take/pay fixed wellhead gas pricing $4.97/Mcf(1)
• Operating netback

$4.03/Mcf(2)

• Robust operating margins

>81%(2)

Continuous production and reserves growth

• Est. ‘18 → ‘19e production growth

+58%

• 2P reserves adds over the trailing 6-yrs.

481 BCF

• Outstanding gas exploration success

83%

(1) As of 1Q 2019. Represents realized gas contracts, net of transportation costs (2) As of 1Q 2019

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40,300

Natural gas production growth profile

In MMcf/d

6 consecutive quarters of gas sales growth

76.0 85.2 106.3 111.9 115.3 119.3 122.0 179.0 3Q '17 4Q '17 1Q '18 2Q '18 3Q '18 4Q '18 1Q '19 2019 guidance

Cartagena Barranquilla Cerro Matos0

10 km Canacol gas blocks Pipeline expansion Existing gas pipelines

Infrastructure To Support Superior Gas Sales Growth

Jobo Station Bremen Sincelejo To Medellin

Caribbean Sea

16 70 81 113 179 315 '12 '16 '17 '18 '19e '22e 215

Average annualized natural gas sales

Jun ‘19e

‘12 Acquired Shona Energy

• 80 km pipeline → Cerromatoso nickel mine

‘16 Promigas-funded 190 km pipeline ‘17 Private-funded 82km line Jobo → Bremen Jun ‘19e Promigas-funded expansion

• 70 km Jobo → Sincelejo / 100 km Cartagena → Barranquilla

’22e Potential 100 MMcf/d pipeline to Barranquilla or Medellin

In MMcf/d

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2019 Capital Plan

2019 focus $119 MM

(1) Pre-operative seismic, workover, trailing, social, and other costs

3D seismic

$16

Other $23 Facilities expansion & equipment

$30

6 exploration & appraisal + 2 development wells $50

(1)

• Lifted gas treatment capacity from 200 →

330 MMcf/d

• Increase gas sales from ~130 → ~215 MMcf/d
• Drill 8 (6 remaining) exploration, appraisal

and development wells

• Execute definitive agreement to increase

gas sales via new Medellin pipeline

• Increase gas sales by +100 MMcf/d in 2022

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$ in MM

La Creciente

Pandereta Oboe Nispero Trombon Palmer Toronja Canahũate

SSJN 7 CNE operator + 50% WI VIM 5 100% WI Bremen Sincelejo Guepaje Mamay VIM 19 100% WI Esperanza 100% WI VIM 21 100% WI

Sabanas 2017 Breva Clarinete Cañandonga Nelson Chirimia Jobo Station

El Deseo Chimu

Canacol gas field Gas field Prospect Lead 3D seismic Existing flow line Future flow line Facilities 5 10 15 km

Promigas 2019 2016

Canacol-gas '12 - '13 '14 - '16 '17 - '18 CAGR Blocks 2 4 5 14% Net acres (in 000s) 85 725 1,100 44% Gross resources (in TCF)(1) 0.1 2.0 2.6 59% Prospects & leads 7 44 115 49%

Expanding Canacol’s Gas Resource Runway

(1) Represents gross mean unrisked resources from a resource report prepared by Boury Global Energy Consultants, effective 7/31/18

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Recent 30% increase in prospective resources

(Source: Gaffney Cline & Associates resource report, effective 12.31.17)

2.6 TCF of resource upside(1)

• Blocks/net acres

5 / 1.1 MM

• Prospects & leads

140

Forward plan

• ‘19

8 well program (6 remaining)

• ‘19 – ‘21

Acquire 3D seismic (VIM5, VIM19,

SSJN7)

• ‘20+

Exploratory drilling on new 3D seismic (VIM5, VIM19, SSJN7)

Nelson-13 Development Well Flowtests 33 MMcf/d

Dec ‘18: encountered the thickest gas reservoirs in corporate history

Nelson Field

A B

Top CDO depth structure 500 M Penetration point

B A

Nelson-13 Nelson-13

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266 ft TVD of net gas pay from 2 zones

SSJN 7 VIM 5 VIM 19 VIM 21 Esperanza Nelson-13

Geoseismic section along Nelson-13 wellbore trajectory

Nelson 4 & 5 (“N-4, N-5”)

• Drilled

2011 & 2014

• Current production

8 & 14 MMcf/d

• Cumulative production 13 & 6 BCF

Reservoir Porquero CDO Total N-4 Net pay (ft. TVD) 52 162 214

• Avg. porosity (%)

23% 22% N-5 Net pay (ft. TVD) 107 117 224

• Avg. porosity (%)

27% 22% N-13 Net pay (ft. TVD) 104 162 266

• Avg. porosity (%)

26% 20%

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Palmer-2 targeting CDO + Porquero upside

SSJN 7 VIM 5 VIM 19 VIM 21 Esperanza Palmer-2

Palmer-2 Appraisal Well Encounters 81 Feet of Pay

A B

Palmer-2

Penetration point Surface pad location

Palmer Field

Palmer-1

Drilled Jul ’14 Current production 10 MMcf/d Cumulative production 9 BCF

Geoseismic section along Palmer-2 wellbore trajectory AVO attribute event 1 KM Depth structure with Fluid Factor extraction (AVO) at top CDO level

B A

Palmer-1 Palmer-2

Palmer-1 Palmer-2 Reservoir CDO CDO Net pay (in ft. TVD) 64 81 Porosity (%) 16-22% 23% Test rate (in MMcf/d) 64 29

Nelson Field

Top CDO depth structure 500 M Penetration point

B A

Nelson-7

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Nelson-7 encounters gas in Porquero and CDO

SSJN 7 VIM 5 VIM 19 VIM 21 Esperanza Nelson-7

Geoseismic section along Nelson-7 wellbore trajectory

A B

Nelson-7

Nelson-7 Development Well Encounters 221 Feet of Pay

Nelson 7 success Reservoir Porquero CDO TOTAL Net pay (ft TVD) 56 165 221 Porosity (%) 23% 18%

Acordeon 1 Exploration Well

Spud May ‘19: Multiple follow-up locations in success case

B Fluid factor section along Acordeon-1 and -3 13 B A

SSJN 7 VIM 5 VIM 19 VIM 21 Esperanza Acordeon-1

Acordeon-1 Acordeon-3

A B

Chirimia ‘18 Clarinete ‘14

A-2 A-3 Acordeon-A, -B,-C

Depth structure with fluid factor extraction (AVO) at Mid CDO level 1 KM Surface pad location

Well objective: Investigate presence of gas charged reservoir sandstones supported by AVO methodology

Acordeon-1

AVO attribute event

• Drill cost

$3.7 MM

• 3 km from Clarinete
• < 1km tie-in to proposed Pandereta-Jobo flow-line

CDO target

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US $ in MM, except CDN $/share

TSX $/share (5/8/19) CDN $4.10 Fully diluted shares outstanding(1) 179 Market capitalization(2) $ 544 Net debt(3) $ 343 Enterprise value $ 887 Insider ownership 22%

Capital structure

As of 3/31/2019

• Senior notes (7.25%, 2025)

$320 MM

• Bank debt (Libor + 5.5%, 2020)

$30 MM

• Working capital surplus

$51 MM

• Cash

$39 MM

Financial Summary

Strong projected growth in EBITDAX

US$ in MM

(1) Includes in-the-money options based on CDN $4.10/share price (2) Converted from CDN → USD exchange rate (0.74) as of 5/8/19 (3) As of 3/31/19

TSX: CNE | BVC: CNE.C

+23% $126 $139 $220 $270 '17 '18 '19e '20e ~ ~ +59%

TSX-Approved Normal Course Issuer Bid

TSX: CNE | BVC: CNE.C BB- B1

• The Corporation believes its market price does not reflect

its underlying value

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Shares authorized to repurchase up to 14.1 MM % of public float 10% Max share purchase per day ~31k 1-yr. approval ending 11/19/19 Canacol shares purchased in Nov-Mar ‘19 785,890 Cost $2.4 MM

Outlook

June Promigas pipeline expansion

• +80 MMcf/d of new transportation capacity
• ↑ gas sales to ~215 MMcf/d

Execute drilling program throughout 2019

• Acordeon-1 next
• Potential significant reserve add

Solid progress on new Medellin pipeline to increase gas sales by +100 MMcf/d in 2022

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