Steppin’ On The High‐Priced Natural Gas
September 2016
Generating near record cash flows despite significant oil price volatility
gas
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 USD All dollar amounts are shown in US dollars, unless indicated otherwise
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Canacology A history of discovery
• Dual‐listed
Supply‐scarce Caribbean natural gas market
• Enterprise value • Ownership by insiders • ’16e guidance
Natural Gas
Light Oil S. Pacific Ocean
Shale Oil
Colombia
Light Oil
Ecuador Canacol 140
280
420
560
Km (1) 2016e average (2) Management’s estimate of net unrisked recoverable resource potential
• Year end 2015 2P reserves
TSX and BVC $732 MM ~25% 16 – 17,000 boepd $135 MM EBITDAX $90 MM capex
79 MMboe
• Pre‐tax NPV‐10 • Contracted gas sales price(1) • 2P F&D cost
$1.4 B $5.61 / MMbtu $2.85/Boe
• + Mid‐year 2016 2P reserves
+ 5 MMboe
• Substantial exploration resource potential(2)
~1,574 MMboe
• Blocks / gross acres
21 / 3.0 MM 3
Colombia’s Restless Gas Finder Canacol discovered more gas than all Colombia explorers, combined(1)
+47% CAGR in 2P reserves
• Dry natural gas – record cash flow
2P reserves in MMboe
79(2)
oil gas
• ‘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
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63% exploration success
43 35 23
65
18
18 7 '09
8
11
20 17
'11
'13
(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
'15
82% gas
• Oil – when the price is right • ‘08 → present • Oil produced • Matchless oil field developer • Portfolio
12 discoveries (57% success) ~18 MMbls 55 / 57 wells (96% success) 17 / 21 blocks (83% oil) ~2.2MM acres 1,057 MMbls(3) 4
A Passion To Explore, And A Drive To Produce
+31% projected CAGR in corporate sales
Fixed priced gas contracts erase oil volatility
Expressed in boepd
‘16e sales mix 40,000
High netback natural gas 78%
+31%
16,500
86% insensitive
17,817
Light oil 14%
11,746
1Q '16
Tariff oil 8%
'16e avg.
2Q '16 cash sales(1)
Late '18 ‐ post new pipeline
• ‘15 → ’16e: +101% increase to EBITDAX ($67 → $135 MM)(2) ~40% reduction to G&A • Fixed price gas contracts erase oil volatility (1) Includes deferred revenue cash receipts (2) Budgeted $40/Bbl WTI
•
>80% operating margins for natural gas • • •
$5.60/Mcf avg. sales price $.30/Mcf operating costs $4.56/Mcf netback 5
Sleep Deprived Over Oil Prices? Not Canacol…
Oil prices at zero? Canacol generates >$100MM EBITDAX
Pursuing dry natural gas that features stable pricing
EBITDAX in US$ MM
$153 MM
$12
$142 $130
Quarterly average MMbtu
$60
$118
$10
$107 MM $45
$8
CANACOL ‘16e avg. $5.60/mcf 81% operating margin LT gas contracts w/ 2‐3% price escalation
$6
$30
$4
EUROPE
$2
USA CANADA
$15
$0/Bbl 1
$‐ 2
3
WTI oil price sensitivity
4
5
6
Epic Gas Deficit On Colombia’s Coast Canacol’s plan to boost gas production to solve supply shortfall
Chuchupa 1
2 Ballena
Caribbean Sea Barranquilla
• Supply decreasing 20% / yr. from 3 mature fields • ‐100 MMcf/d per year decline(1) 1 Chuchupa 2 Ballena 3 La Creciente
Reficar
Cartagena
2018→ Pipeline +100 MMcf/d
• Demand increasing 3% / yr. for the past 10‐yrs. and projected to grow at 3‐4% through 2020e
2016 pipeline
3 La Creciente
65 MMcf/d
Canacol’s 5 gas fields
Jobo facility
• Canacol 2016e • Gas EBITDAX
90 MMcf/d $135 MM
Clarinete, Oboe, Nelson, Nispero, Palmer 25 MMcf/d
• Canacol 2018e→ • Gas EBITDAX/yr.
Cerro Matoso mine
190 MMcf/d ~$300 MM
• By 2020e, Canacol aims to supply ~42% of the coast • Solve 77% of the Caribbean's supply shortfall
30
60
90
120
Canacol Gas pipeline Km (1) Average annual decline for each of the trailing 2 years
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The Only Driller In Town Dominating the world’s most robust market for natural gas
Colombia’s gas pipeline network Chuchupa
Ballena
• X‐Canacol, only 3 producing gas fields supply the Caribbean
Barranquilla Cartagena
Caribbean Sea
La Creciente
Nelson Palmer Clarinete Oboe Nispero
Gas pipelines inaccessible to supply‐scarce 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
8 (1) ANH exploration wells drilled for Guajira onshore and offshore and Lower Magdalena Basins
↑ Reserves + ↑ Productive Capacity From 5 Gas Fields
VIM 5 100% WI
3D
3D
Oboe Clarinete Clarinete‐3
Esperanza/ VIM 21 100% WI
Nispero
Jobo
10 km
Trombon‐1 Nelson Nelson‐6 Porquero 3D
Palmer
Nelson‐8 CDO
Canacol’s fields & discoveries prospects / leads Top Cienaga de Oro time structure map (5 X 3D seismic merged (615km2), reprocessed and remapped in 2016)
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Opportunity To Book Reserves Against By‐passed Pay Nelson‐6 gas exploration well
Nelson Field’s shallow gas potential Porquero net pay map
B
N‐5 N‐4
Area Avg. porosity GIIP
Nelson‐6
A
640 acres 29% 44 Bcf
A
N‐2
1,000
1,300
TOP PORQUERO
Porquero opportunity
N‐3
UP PORQUERO
1,600
M PORQUERO
Nelson‐6 1,900
B
2,200
NELSON FAULT
TOP CDO BASEMENT
2,500
Nelson‐5 Porquero reservoir petrophysics Gross Thickness Net pay Porosity
153 ft 62 ft 31%
GWC‐5500’TVDSS
AVO event
• 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 (1) Management’s estimate of net unrisked resource potential
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Nelson Has More To Develop… Nelson‐8 gas development well
Nelson field’s 4 existing producers Gross sand Net pay Avg. porosity
383 ft. 167 ft. 23%
Nelson‐8
A
Cienaga de Oro depth structure map
B
1,000
N‐5 N‐4 1,300
1 km
N‐2
PORQUERO
N‐3
1,600
B
Nelson‐8
CIENAGA
1,900
NELSON FAULT
A 2,200
GWC ‐7,550 ft.
BASEMENT
• Nov 2016e spud of Nelson‐8 • Target • Est. IP • Est. reserve re‐class • DC&C / depth
Cienaga de Oro reservoir sandstones 8 ‐ 12 mmcf/d ~14 BCF from PUD to PDP $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 11
Well #3 Into 163 BCF Discovery(1) Clarinete‐3 gas development well
Opportunities at Clarinete continue to multiply Cienaga de Oro depth structure map
CLA‐3
CLA‐2ST
B
Oboe‐1 1,500
GWC ‐6,415 ft.
M MIOCENE 1,650
L. ATTIC 1,800
RED SAND
B A
1,950
CLA‐2ST
500 M
BLUE SAND
Sub‐crop edge
CLA‐3
CLA‐1
2,100
BASAL SAND
BASEMENT
AVO event
• 4Q ‘16 spud of Clarinete‐3 • • • •
Target Estimated IP Reserves re‐class DC&C / depth
Cienaga de Oro reservoir sandstones 10 ‐ 12 mmcf/d ~25 BCF from PUD to PDP $6.4 MM / ~10,000 ft.
(1) Represents 2P reserves as of December 31, 2015
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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
Trombon‐1 40 BCF unrisked resource potential(1) A
B
Sucre gas discoveries (‘77‐’80)
Trombon‐1
Nispero‐1
Sucre
B
MID MIOCENE
1,900
2,000
TOP CDO 2,100
Nispero‐1 Trombon‐1
INTRA CDO
2,200
2,300
2,400
BASEMENT
AVO event 500 M
• Sep 13, 2016 spud of Trombon‐1 • Exploration target
A
(1) AVO extraction: Top CDO to Top CDO +25ms 500 M
Cienaga de Oro reservoir sandstones • D&A / depth $4.8 MM / ~9,800 ft. TVD • Risk mitigation ‐ AVO seismic attribute analysis (1) Management’s estimate of net unrisked resources
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Investigate Potential For Established La Luna Play VMM 2 Mono Capuchino‐1 (“MC‐1”) oil exploration well
Offset to MA‐1’s La Luna, drill MC‐1 in Oct ‘16e
MA‐1 MC‐1
A
Top La Luna depth structure map
B
67% WI MC‐1 MA‐1
B
A N
MIOCENE 1,000
1 KM
LISAMA BASAL LISAMA UMIR 1,500
• Jan ‘13 MA‐1 discovery • 593 ft. MD La Luna • IP ~600 bopd from 335 ft. perforated interval
MA‐1 LA LUNA 2,000
SIMITRI
• MC‐1 spud Oct ’16e • Exploration target • Potential • D&A, net
MC‐1
1,630 ft. MD thick La Luna ~9 MMbls(1) $5.5 MM / ~11k ft. TVD
ROSABLANCA GIRON 2,500
500 M 500 M (1) Management’s estimate of net unrisked resources
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2016e Revised Capital Plan Doubling the search for high‐priced natural gas
New Plan
Original Plan
• CAPEX $58 MM 3 natural gas wells 5 light oil work‐overs
• CAPEX $90 MM 6 natural gas wells 5 light oil work‐overs 1 oil exploration well
• Gas production facilities
• Gas production facilities
• Gas exploration
• Gas exploration
Oboe‐1 well Nispero‐1 well Nelson‐6
Oboe‐1 well test Nispero‐1 well test
66 MMcf/d 28 MMcf/d
Sep 13 spud Oct estimated spud Nov estimated spud 4Q estimated spud
Trombon‐1 (exploration) Nelson‐6 (exploration) Nelson‐8 (development) Clarinete‐3 (development)
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Projecting 60%+ Drop In Debt Multiple
Record cash flows disintegrating Canacol’s debt multiple
Debt profile
●
Apollo
Debt to trailing actual 12‐month EBITDAX Debt to quarterly EBITDAX (annualized) 3.8x 3.4x
BNP
2.8x
Start: Eight equal installments ●
●
●
●
2.3x ●
●
●
●
1.9x ●
1.8x
'16
Dec '17e
• BNP (term loan) • Apollo (sub notes)
'18e
Sep '19e
Dec '19e
$180 MM / L+4.75% $75 MM / L+8.50%
Dec '15
Mar '16
• ’16e guidance
Jun '16
●
●
1.7x
1.7x
1.5x
Sep '16e
Dec '16e
2017e
●
16 – 17,000 boepd $135 MM ebitdax 16
A Rare Dislocation in Equity Value
Buy Canacol at a discount to the value of our existing gas contracts BT NPV‐10, US $MM
in MM, except /share amounts
TSX share price (9/20/16) FD shares outstanding(1) $2,170
Market capitalization(2) Net debt(3)
Stable production under LT contracts
Enterprise value Cash + restricted cash(3)
CDN $4.16 164 US $517 $215 US $732 $88
$166 $193 $778
(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
$1,165
$732
EV
2P Gas
2p Oil
Possible Exploration Gas + Oil
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Contact
Calle 113 No. 7‐45 Torre B – Oficina 1501 Bogota, Colombia +571.621.1747 IR‐
[email protected]
8th Avenue Place 4500, 525 – 8th Avenue South West Calgary, Alberta T2P 1G1 Canada 214.235.4798
[email protected]
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