Steppin On The September 2016 High Priced Natural Gas Generating - - PowerPoint PPT Presentation

gas

September 2016

Steppin’ On The High‐Priced Natural Gas

Generating near record cash flows despite significant oil price volatility

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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

• bligation 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 USD All dollar amounts are shown in US dollars, unless indicated otherwise

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Ecuador 140 280 420 560 Km Colombia

• S. Pacific Ocean

Canacol

Supply‐scarce Caribbean natural gas market

• Dual‐listed

TSX and BVC

• Enterprise value

$732 MM

• Ownership by insiders

~25%

• ’16e guidance

16 – 17,000 boepd $135 MM EBITDAX $90 MM capex

• Year end 2015 2P reserves

79 MMboe

• Pre‐tax NPV‐10

$1.4 B

• Contracted gas sales price(1)

$5.61 / MMbtu

• 2P F&D cost

$2.85/Boe

• + Mid‐year 2016 2P reserves

+ 5 MMboe

• Substantial exploration

~1,574 MMboe resource potential(2)

• Blocks / gross acres

21 / 3.0 MM

(1) 2016e average (2) Management’s estimate of net unrisked recoverable resource potential

Canacology

A history of discovery

Shale Oil Light Oil Light Oil Natural Gas

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(1) Source: ANH, over the trailing 5‐yrs. (2) Excludes mid‐year 2016 2P reserves for Oboe 1 gas discovery (3) Management’s estimate of net unrisked resource potential

17 65 14 '09 '11 '13 '15

82% gas

+47% CAGR in 2P reserves 63% exploration success

• Dry natural gas – record cash flow
• ‘13 → present

4 discoveries (83% success) +302 BCF (+53 MMboe)

• Gas produced

~31 BCF

• Large gas reserves underpin gas sales contracts

to 2020 and beyond

• Exploration resource

2.4 – 2.8 TCF(3) potential

• Oil – when the price is right
• ‘08 → present

12 discoveries (57% success)

• Oil produced

~18 MMbls

• Matchless oil field

55 / 57 wells (96% success) developer

• Portfolio

17 / 21 blocks (83% oil) ~2.2MM acres 1,057 MMbls(3)

79(2)

7 8 11 18 35 43

18 20 23

2P reserves in MMboe

• il gas

Colombia’s Restless Gas Finder

Canacol discovered more gas than all Colombia explorers, combined(1)

A Passion To Explore, And A Drive To Produce

+31% projected CAGR in corporate sales

• ‘15 → ’16e: +101% increase to EBITDAX ($67 → $135 MM)(2)

~40% reduction to G&A

• Fixed price gas contracts erase oil volatility

Expressed in boepd

(1) Includes deferred revenue cash receipts (2) Budgeted $40/Bbl WTI

11,746 16,500 17,817 40,000

1Q '16 '16e avg. 2Q '16 Late '18 ‐ post new pipeline

cash sales(1)

+31%

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High netback natural gas 78% Tariff oil 8% Light oil 14%

• >80% operating margins for natural gas
• $5.60/Mcf avg. sales price
• $.30/Mcf operating costs
• $4.56/Mcf netback

86% insensitive Fixed priced gas contracts erase oil volatility

‘16e sales mix

Sleep Deprived Over Oil Prices? Not Canacol…

Pursuing dry natural gas that features stable pricing

Quarterly average MMbtu

1 2 3 4 5

$30 $15

WTI oil price sensitivity

$60 $45

$0/Bbl Oil prices at zero? Canacol generates >$100MM EBITDAX

EBITDAX in US$ MM

$107 MM

$118 $130 $142 $153 MM

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$‐ $2 $4 $6 $8 $10 $12

CANACOL ‘16e avg. $5.60/mcf 81% operating margin LT gas contracts w/ 2‐3% price escalation EUROPE USA CANADA

Canacol Gas pipeline

La Creciente

Cartagena

Ballena Chuchupa

Caribbean Sea

Cerro Matoso mine

1 2

Barranquilla

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30 60 90 120 Km

• Supply decreasing 20% / yr. from 3 mature fields
• ‐100 MMcf/d per year decline(1)
• Demand increasing 3% / yr. for the past 10‐yrs.

and projected to grow at 3‐4% through 2020e

• Canacol 2016e

90 MMcf/d

• Gas EBITDAX

$135 MM

• Canacol 2018e→

190 MMcf/d

• Gas EBITDAX/yr.

~$300 MM

• By 2020e, Canacol aims to supply ~42% of the coast
• Solve 77% of the Caribbean's supply shortfall

1 2 3 Chuchupa Ballena La Creciente

2016 pipeline

65 MMcf/d

(1) Average annual decline for each of the trailing 2 years

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Epic Gas Deficit On Colombia’s Coast

Canacol’s plan to boost gas production to solve supply shortfall

2018→ Pipeline +100 MMcf/d

Reficar

Jobo facility

Canacol’s 5 gas fields

Clarinete, Oboe, Nelson, Nispero, Palmer

25 MMcf/d

• X‐Canacol, only 3 producing gas fields supply

the Caribbean

• Less than 5 exploration wells per year were

drilled in the area over the trailing 8‐yrs.(1)

• 39 total exploration wells
• 42% success (vs. Canacol 83%)
• X‐Canacol, ~340 MMCF/d supply shortfall by

2020e

The Only Driller In Town

Dominating the world’s most robust market for natural gas

Barranquilla Cartagena La Creciente Caribbean Sea 8

Colombia’s gas pipeline network

Chuchupa Ballena

(1) ANH exploration wells drilled for Guajira onshore and offshore and Lower Magdalena Basins

Nelson Palmer Clarinete Oboe Nispero

Gas pipelines inaccessible to supply‐scarce Caribbean

Oboe Trombon‐1 Jobo Clarinete‐3 Nelson‐8 CDO Nelson‐6 Porquero Nispero

3D

Nelson Palmer

3D 10 km 3D

Clarinete

Top Cienaga de Oro time structure map (5 X 3D seismic merged (615km2), reprocessed and remapped in 2016)

↑ Reserves + ↑ Productive Capacity From 5 Gas Fields

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Canacol’s fields & discoveries prospects / leads

VIM 5

100% WI

Esperanza/ VIM 21

100% WI

3D

Nelson‐5 Porquero reservoir petrophysics

GWC‐5500’TVDSS

N‐3

Gross Thickness 153 ft Net pay 62 ft Porosity 31%

AVO event

1,000 1,300 1,600 1,900 2,200 2,500

N‐2 N‐4 N‐5

A

Opportunity To Book Reserves Against By‐passed Pay

Nelson‐6 gas exploration well

NELSON FAULT

Porquero

• pportunity

(1) Management’s estimate of net unrisked resource potential

B A B Nelson‐6 Nelson‐6

TOP PORQUERO UP PORQUERO M PORQUERO TOP CDO BASEMENT

Nelson Field’s shallow gas potential

Porquero net pay map

Area 640 acres

• Avg. porosity

29% GIIP 44 Bcf

• Up to 62 ft. reservoir net pay encountered in

existing Nelson wells

• Oct 2016e spud of Nelson‐6
• Exploration target Shallow Porquero

sandstone reservoirs

• Potential

31 Bcf EUR(1)

• D&A / depth

$4.1 MM / ~6,200 ft.

• Objective

Test net pay to establish reservoir productivity

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Nelson field’s 4 existing producers

Cienaga de Oro depth structure map

Gross sand 383 ft. Net pay 167 ft.

• Avg. porosity

23% 1 km

1,000 1,300 1,600 1,900 2,200

• Nov 2016e spud of Nelson‐8
• Target

Cienaga de Oro reservoir sandstones

• Est. IP

8 ‐ 12 mmcf/d

• Est. reserve re‐class

~14 BCF from PUD to PDP

• DC&C / depth

$6.3 MM / ~9,900 ft.

• $3.2 MM work‐over 4 wells starting in Sep ‘16
• Tubing upgrade (2 7/8” → 3 ½”) to extend well

productive life and optimize reserve recovery

• $4 MM upgrade Jobo facility and Nispero‐

Jobo flow line

N‐3 N‐2 N‐4 N‐5

NELSON FAULT

A B A B

Nelson Has More To Develop…

Nelson‐8 gas development well

Nelson‐8 Nelson‐8

PORQUERO CIENAGA BASEMENT

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GWC ‐7,550 ft.

500 M

Well #3 Into 163 BCF Discovery(1)

Clarinete‐3 gas development well

• 4Q ‘16 spud of Clarinete‐3
• Target

Cienaga de Oro reservoir sandstones

• Estimated IP

10 ‐ 12 mmcf/d

• Reserves re‐class

~25 BCF from PUD to PDP

• DC&C / depth

$6.4 MM / ~10,000 ft.

M MIOCENE

• L. ATTIC

BLUE SAND RED SAND BASAL SAND BASEMENT

B CLA‐2ST

1,500 1,650 1,800 1,950 2,100

AVO event

CLA‐1 CLA‐2ST CLA‐3 A B

Opportunities at Clarinete continue to multiply

Cienaga de Oro depth structure map CLA‐3 Oboe‐1

(1) Represents 2P reserves as of December 31, 2015 GWC ‐6,415 ft. Sub‐crop edge

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AVO Technology Is Helping Extend The Trend

Trombon‐1 gas exploration well

Canacol’s Nispero‐1 tested 28 MMcf/d in Aug ’16

500 M

B A

• Sep 13, 2016 spud of Trombon‐1
• Exploration target

Cienaga de Oro reservoir sandstones

• D&A / depth

$4.8 MM / ~9,800 ft. TVD

• Risk mitigation ‐ AVO seismic attribute analysis

(1) AVO extraction: Top CDO to Top CDO +25ms

Nispero‐1 Trombon‐1

Sucre gas discoveries (‘77‐’80)

(1) Management’s estimate of net unrisked resources

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Trombon‐1 40 BCF unrisked resource potential(1)

1,900 2,000 2,100 2,200 2,300 2,400

B

Sucre

500 M AVO event

A Trombon‐1 Nispero‐1

BASEMENT INTRA CDO TOP CDO MID MIOCENE

(1) Management’s estimate of net unrisked resources 500 M

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Investigate Potential For Established La Luna Play

VMM 2 Mono Capuchino‐1 (“MC‐1”) oil exploration well

B A MA‐1 MC‐1

1,000 1,500 2,000 2,500

MIOCENE 500 M LISAMA BASAL LISAMA UMIR LA LUNA SIMITRI ROSABLANCA GIRON

MC‐1 MA‐1

Offset to MA‐1’s La Luna, drill MC‐1 in Oct ‘16e

Top La Luna depth structure map

67% WI

• Jan ‘13 MA‐1 discovery
• 593 ft. MD La Luna
• IP ~600 bopd from 335 ft. perforated interval
• MC‐1 spud Oct ’16e
• Exploration target

1,630 ft. MD thick La Luna

• Potential

~9 MMbls(1)

• D&A, net

$5.5 MM / ~11k ft. TVD

1 KM N

B MA‐1 MC‐1 A

Original Plan

• CAPEX $58 MM
• 3 natural gas wells
• 5 light oil work‐overs
• Gas production facilities
• Gas exploration
• Oboe‐1 well
• Nispero‐1 well
• Nelson‐6

New Plan

• CAPEX $90 MM
• 6 natural gas wells
• 5 light oil work‐overs
• 1 oil exploration well
• Gas production facilities
• Gas exploration
• Oboe‐1 well test

66 MMcf/d

• Nispero‐1 well test

28 MMcf/d

• Trombon‐1 (exploration)

Sep 13 spud

• Nelson‐6 (exploration)

Oct estimated spud

• Nelson‐8 (development)

Nov estimated spud

• Clarinete‐3 (development) 4Q estimated spud

2016e Revised Capital Plan

Doubling the search for high‐priced natural gas

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Projecting 60%+ Drop In Debt Multiple

'16 Dec '17 '18 Sep '19 Dec '19 BNP Apollo

Start: Eight equal installments

• Debt profile

Record cash flows disintegrating Canacol’s debt multiple

• ’16e guidance

16 – 17,000 boepd $135 MM ebitdax

3.4x 2.8x 2.3x 1.9x 1.5x Dec '15 Mar '16 Jun '16 Sep '16e Dec '16e 2017e

• 1.8x

1.7x 1.7x 3.8x

• BNP (term loan)

$180 MM / L+4.75%

• Apollo (sub notes)

$75 MM / L+8.50%

e e e e

• Debt to trailing actual 12‐month EBITDAX

Debt to quarterly EBITDAX (annualized)

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A Rare Dislocation in Equity Value

in MM, except /share amounts

TSX share price (9/20/16) CDN $4.16 FD shares outstanding(1) 164 Market capitalization(2) US $517 Net debt(3) $215 Enterprise value US $732 Cash + restricted cash(3) $88

Buy Canacol at a discount to the value of our existing gas contracts

BT NPV‐10, US $MM

(1) Includes in‐the‐money options based on CDN 4.16/share price (2) Converted from CDN → USD exchange rate (0.76) as of 9/20/16 (3) As of 6/30/16 and prior to the recently closed CDN $46.9 million private placement, the Corporation had $25.3 million in cash and $62.5 million in restricted cash

Stable production under LT contracts

$778

$732 $1,165 $193 $166 $2,170 EV 2P Gas 2p Oil Possible Gas + Oil Exploration

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Contact

Calle 113 No. 7‐45 Torre B – Oficina 1501 Bogota, Colombia +571.621.1747 IR‐LA@canacolenergy.com 8th Avenue Place 4500, 525 – 8th Avenue South West Calgary, Alberta T2P 1G1 Canada 214.235.4798 IR@canacolenergy.com

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