On The Horizon Doubling Production To 230 MMcf/d September 2018 - - PowerPoint PPT Presentation

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On The Horizon Doubling Production To 230 MMcf/d September 2018 - - PowerPoint PPT Presentation

On The Horizon Doubling Production To 230 MMcf/d September 2018 Forward Looking Statements This presentation may include certain forward looking statements. All statements other than statements of historical fact, included herein, including,


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SLIDE 1

On The Horizon Doubling Production To 230 MMcf/d

September 2018

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SLIDE 2

2

Forward Looking Statements

2

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. Production and Reserves Production represents net before royalty. Reserves represent 2P reserves and before tax NPV-10 as of December 31, 2017 USD All dollar amounts are shown in US dollars, unless indicated otherwise

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SLIDE 3

Why Natural Gas In Colombia?

3 Bogota Colombia Caribbean Sea gas

Colombia

  • South America’s oldest/most stable democracy
  • 3rd largest South American economy
  • 2016 peace treaty = security
  • OECD newest member
  • Regulatory Stability (1)
  • Natural gas in Colombia(2)
  • Country´s gas demand ~ 1000 MMcfd
  • Caribbean Coast ~ 40%
  • Demand increasing 2-3% per annum
  • Main gas historical suppliers declining
  • Limited Competition
  • Canacol´s gas production
  • Current ~ 120 MMcfd

230 MMsfd in March´19

  • 90% sold at wellhead in US$ escalated 2% per year
  • 2018 avg. wellhead price $4.80/ MMcfd (2)

70km Canacol’s conventional

  • il E&P blocks

(1) Accenture “Strategy Energy”, March 2016: Accenture Consulting ranks Colombia’s oil & gas regulatory reform In the top 3 (2) Average for 2 quarters ended 6.30.2018

unconventional

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SLIDE 4

Cartagena Barranquilla Cerro Matos0

Colombia’s Natural Gas Supply Deficit

  • Caribbean Coast gas demand

450 MMcf/d

  • Demand increasing 3% per annum(1)
  • For 30+ yrs., Chevron supplied ~50% of all gas

supply to Colombia

  • Supply declining 12% per annum(1)
  • Transportation Infrastructure capacity is key

challenge to grow

  • Over the trailing 6 yrs., Canacol is the only active

explorer in the Caribbean

  • Canacol is filling the gas supply gap

Hocol 30 MMcf/d Frontera 25 MMcf/d Mature Chevron fields ~282 MMcf/d

Canacol

114-129MMcf/d(1)

10 km Canacol gas blocks Promigas pipeline expansion Existing gas pipelines

4

(1) Source: Wood Mackenzie Total Colombia demand represents low case

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SLIDE 5

5

  • Natural gas success
  • Acquisitions

$170 MM

  • Capital invested

$244 MM $414 MM

  • Value created

$1.4 B(2)

  • ‘17 2P reserve replacement

399%

  • Solid reserve base underpins value
  • Blocks/net acres

5 / 1.1 MM

  • Dec ‘17 2P gas reserves

505 BCF

  • Jul ‘18 2P reserve additions

+ 59 BCF

  • Resource upside

2.6 TCF(3)

35 43 79 85

103

+32% CAGR in natural gas 2P reserves

Discovered 468 BCF In 5-years

In MMboe

  • il gas

7 8 11 18 18 23 14 13 14 17 20 65 72 89 89 +10

' 0 9 ' 1 0 ' 1 1 ' 1 2 ' 1 3 ' 1 4 ' 1 5 ' 1 6 ' 1 7 ' 1 8 Reserve reports as of 12/31/17 and 7/31/18 (1) As of 12/31/17 (2) Pre-tax NPV-10 for Canacol’s 2P gas reserves as of 12/31/17 (3) Represents gross mean unrisked resources from a resource report prepared by Boury Global Energy Consultants, effective 7/31/18.

  • 16-yr. gas reserve life
  • 2P reserves F&D $0.63/Mcf(1)

YTD reserve adds from 3 wells

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SLIDE 6

Canacol’s Consistent Growth

  • Solid gas portfolio
  • E&P contracts / net acres

5 / 1.1 MM

  • Take/pay fixed wellhead gas pricing $4.85/mcf(1)
  • Robust operating margins

>75%

  • Continuous production and reserves growth
  • Est.‘18→‘19 production growth

+90%

  • 2P reserves adds over the trailing 5-yrs. 468 BCF
  • Outstanding gas exploration success

80%

40,300

Natural gas production growth profile

(1) Based on current gas contracts, net of transportation costs

70 81 114-129 230 '16a '17a '18e '19e

In MMcf/d

+90% +44% +16%

6

  • Team created $1B+ of value

from 3 gas acquisitions

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SLIDE 7

Cartagena Barranquilla Cerro Matos0

Dec ’12 +20 MMcfd

  • Acquired Shona Energy
  • 80 km pipeline → Cerromatoso nickel mine

Apr ‘16 +65 MMcfd → 85 MMcfd

  • Promigas-funded 190 km pipeline

Dec ‘17 +40 MMcfd → 120 MMcfd

  • Private-funded 82km line Jobo → Bremen

Mar ‘19 +100 MMcfd → 230 MMcfd

  • Promigas-funded expansion
  • 70 km Jobo → Sincelejo

100 km Cartagena → Barranquilla

2021 +100 MMcf/d → 330MMcfd

  • Future pipeline to Barranquilla/Medellin

10 km Canacol gas blocks Pipeline expansion Existing gas pipelines

August 3rd Environmental Permit Enables Canacol To Add +100 MMcf/d in ‘19

Jobo Station

7

Bremen Sincelejo To Medellin

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SLIDE 8

VIM 21 Esperanza

Chirmia Clarinete Field 143 BCF Cañandonga Toronja

VIM 5

Oboe Trombon Nispero Nelson Field 193 BCF Canahuate Pandereta

5 km

Canacol gas 3D seismic Flow line Lead Prospect “E” Exploration “A” Appraisal (1) Boury & Associates resource report, effective 7/31/2018

  • Applying AVO to investigate the presence of

gas-charged sandstones

  • 12-for-15 successful exploration wells
  • 80% success
  • 8-for-8 successful appraisal/development wells
  • 100% success
  • 2 reservoirs
  • Ciénaga de Oro (“CDO”) (deep)
  • Porquero (shallow)
  • Key stats

A Conventional Natural Gas Success Story

Breva

Jobo Station

Palmer 8

Avg. Net pay Test rate Well cost

  • Ft. TVD

MMcf/d $ MM CDO 85 42 $4.5 Porquero 59 30 $3.9 Avg. 72 38 $4.2

Acordeon

115 prospects / 2.6 TCF upside(1)

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SLIDE 9

La Creciente

Pandereta Oboe Nispero Trombon Palmer Toronja Canahũate

SSJN 7 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 Esperanza 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 2018 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 prospective resources

9 Acordeon

  • July ‘18 resource report increased prospective

resources by 30%

  • Forward plan
  • ‘18 - ‘20 Ongoing exploratory drilling covered by

existing 3D seismic

  • ‘19 -’21

Acquire 3D seismic (VIM5, VIM19, SSJN7)

  • ‘20+

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

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SLIDE 10

3rd Consecutive Shallow Porquero Gas Discovery

Breva-1

  • 3-for-3 exploration discoveries
  • Up to 5 additional locations
  • Emerging and important new Porquero play type
  • Canacol investigating future Porquero upside

across 1.1 MM net acres

1 KM AVO extraction over Mid Porquero SST marker

Nuez-1 Datil-1 Cachuate-1

VIM-21

Toronja-1 14 ft. BREVA-1 29 ft.

Arandala-1 Carambolo-1

Breva-1 success yields at least 5 more locations

10

Porquero exploration Breva-1 Toronja-1 Nelson-6 May '18 Jun '17 Nov '16 Test rate (MMscfpd) 25 24 23 Pay (ft. TVD) 29 14 39 Porosity 27% 20% 19% Days to drill 13 6 9 Total depth (ft. MD) 7,560 7,200 6,400

Replaying CDO success with AVO in the Porquero

Nelson-5 79 ft. Nelson-6 39 ft.

3D

Includes net pay in ft. TVD

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SLIDE 11

Acordeon Running Room?

November ’18: Acordeon-1 exploration well on VIM 5

B Fluid factor section along Acordeon-1 and -3 Acordeon-1 Acordeon-3 11 A

Chirimia ‘18 Clarinete ‘14

A-3 Acordeon-A, -B,-C Acordeon-1 A-2 Depth Structure with Fluid Factor extraction (AVO) at Mid CDO level B B A

1KM Surface pad location

  • Cienaga de Oro Formation target
  • 8,700 ft. TVD
  • Drill cost (D&A) $3.65 MM
  • Multiple follow up locations in success case
  • 3 km from Clarinete and Chirimia discoveries
  • <1km tie-in to proposed Pandereta-Jobo flow-line

Well objective: Investigate presence of gas charged reservoir sandstones supported by AVO methodology VIM 5

SSJN 7 VIM 5 VIM 19 VIM 21

Acordeon-1

Esperanza

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SLIDE 12

Ecuador 140 280 420 560 Km

  • S. Pacific Ocean

Colombia

Caguan Putumayo Basin Heavy oil Llanos Basin Light oil Middle Magdalena Basin Unconventional oil Upper Magdalena Shale oil

Ecuador

  • Closed the sale of Ecuador assets in Feb ‘18
  • $36.4 MM in cash proceeds

Colombia conventional oil

  • $40 MM pending sale to Arrow Exploration Ltd.
  • 8 blocks and associated commitments
  • Arrow common shares $25 MM
  • Cash

$10 MM

  • Promissory note

$5 MM

Divesting Canacol Conventional Colombia Oil

By late September anticipated transaction close

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SLIDE 13

La Luna Unconventional Oil

  • Source rock >2.3 trillion barrels in S.A.
  • Canacol’s unconventional portfolio
  • Operating partner

ConocoPhillips

  • Non–operated WI

20%

  • 2 Blocks

VMM2 & VMM3

  • VMM2

Carried in 1st Explorat Phase

  • D&M prospective

Best P50 – 168 MMbls resources report(1) High P10 – 263 MMbls

  • ConocoPhillips activity
  • Late ´17 Applied for drill & frack license

6 horiz wells / VMM2 & VMM3

  • Early ´19 Anticipated date to receive permit
  • ´19 Plan VMM3 –drill & frack 1 horiz well

140 280 420 Km 560

Ecuador Colombia

La Luna Shale depositional limit Middle Magdalena 13

VMM2 & VMM3 Blocks

(1) Degoyler & McNaughton Unconventional Prospective Resource Report, Oct 2014. Pro forma for Blocks VMM2 & VMM3

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SLIDE 14

MMcf/d

Realized contractual gas sales growth

Solid Results 2Q ‘18

3 consecutive quarters of production growth

Strong gas pricing & netbacks

US $ / MMCF/d

76 85 106 112 114-129 230 3Q '17 4Q '17 1Q '18 2Q '18 '18e '19e $4.69 $4.65 $4.72 $4.85 $3.83 $3.55 $3.71 $3.80 3Q '17 4Q '17 1Q '18 2Q '18 Gas price, net of transportation Gas netback

14

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SLIDE 15

15

(1) Includes in-the-money options based on CDN $4.03/share price (2) Converted from CDN → USD exchange rate (0.76) as of 9/7/18 (3) As of 6/30/18 (4) Fluctuating three month Libor +5.5% as of 4/26/18

US $ in MM, except CDN $/share

TSX $/share (9/7/18) CDN $4.03 Fully diluted shares outstanding(1) 179 Market capitalization(2) $ 549 Net debt(3) $ 282 Enterprise value $ 831 Insider ownership 22%

Capital structure

As of 06/30/2018

  • Cash $55 MM
  • Restricted cash $6 MM
  • Working capital surplus $84 MM

TSX: CNE | BVC: CNE.C

Financial Summary

EBITDA ramping

US$ in MM

'17 '18 '19 81 MMcf/d 114-129 MMcf/d 230 MMcf/d $88 MM $130 - $150 MM $275 MM +60% +96%