Mr. Kevin Flick reports

CANACOL ENERGY LTD. PROVIDES DRILLING AND PRODUCTION UPDATE FROM ITS RANCHO HERMOSO FIELD IN COLOMBIA

Canacol Energy Ltd. has provided an update of its development drilling program at its operated Rancho Hermoso field, located in the Llanos basin of Colombia. The company has completed the drilling and casing of the second of four new development wells it plans to drill through the remainder of calendar 2011. The Rancho Hermoso 12 (RH 12) well has been placed on permanent production from the Los Cuervos-Barco reservoir, which is producing at a stabilized gross rate of approximately 14,790 barrels of oil per day (3,697 barrels of oil per day net to Canacol). The RH 12 well encountered 130 feet of net oil pay within five different reservoir intervals, which include, from top to bottom, the C7, Mirador, Los Cuervos-Barco, Guadalupe and Ubaque intervals.

Charle Gamba, president and chief executive officer of the company, commented: "We encountered a new Los Cuervos-Barco channel sandstone reservoir within the northern part of the field at apparently virgin reservoir conditions, an outcome that was not anticipated in this part of the field. The production results from the well are significantly better than we had forecast, and will ensure that Canacol has a strong finish to calendar 2011 in terms of net revenue production, with an anticipated exit rate in excess of 14,000 barrels of oil per day. Meanwhile, operations are under way to spud the Rancho Hermoso 13 development well, the third of four new wells planned in the field for the remainder of calendar 2011. With $115-million (U.S.) in cash as of our last reporting period and strong production revenues, the corporation is fully financed to execute its development and exploration drilling programs throughout 2012."

Rancho Hermoso 12 well results

The RH 12 well was spudded on Sept. 30, 2011, and reached a total depth of 10,160 feet measured depth on Oct. 15, 2011, in the Ubaque reservoir. Good oil and gas shows were encountered in the C7, Mirador, Los Cuervos-Barco, Guadalupe and Ubaque reservoirs while drilling. Petrophysical analysis of the open-hole logs indicates a total of 130 feet of oil pay within the well: 13 feet of oil pay within the C7 reservoir with average porosity of 22 per cent, 11 feet of oil pay in the Mirador reservoir with average porosity of 29 per cent, 21 feet of pay within the Los Cuervos-Barco reservoir with average porosity of 20 per cent, 40 feet of oil pay within the Guadalupe reservoir with average porosity of 23 per cent and 45 feet of oil pay within the Ubaque reservoir with average porosity of 25 per cent.

Production results

The company completed the Los Cuervos-Barco reservoir between 9,089 to 9,099 feet measured depth and 9,072 to 9,077 feet measured depth, and equipped the well with an electrosubmersible pump. The well has been placed on permanent production at a stable gross rate of approximately 14,790 barrels of oil per day (3,697 barrels of oil per day net to Canacol) of 34-degree API light oil with no water at a pump frequency of 60 hertz.

The company, through its 100-per-cent-owned Colombian subsidiary, Rancho Hermoso SA, operates the Rancho Hermoso field under two contracts with Ecopetrol SA, those being: (i) a participation contract in the Casanare area, whereby the company receives approximately 25 per cent (after royalty) of gross production from the C7, Los Cuervos-Barco, Guadalupe, Gacheta and Ubaque reservoirs, and the remainder (approximately 75 per cent) goes to Ecopetrol SA; and (ii) a risked service production contract for the Mirador reservoir, whereby the company is paid a tariff for each barrel of oil produced and Ecopetrol SA receives the oil.

Annual general shareholders meeting

The company plans to hold its annual general shareholders meeting on Jan. 27, 2012, at 2:30 p.m. MST, in Calgary, Alta. Additional details of the meeting, including its specific location in Calgary, will be provided at a later date.

We seek Safe Harbor.