Mr. Charle Gamba reports

CANACOL ENERGY LTD. REPORTS A 41% INCREASE IN FUNDS FROM OPERATIONS AND A 27% INCREASE IN REALIZED GAS SALES IN Q3 2019 AND DECLARES A RECURRING QUARTERLY DIVIDEND

Canacol Energy Ltd. has released its financial and operating results for the three and nine months ended Sept. 30, 2019. Dollar amounts are expressed in U.S. dollars, except as otherwise noted.

Charle Gamba, president and chief executive officer of the corporation, commented: "The third quarter saw an increase in natural gas production of 28 per cent for the three months ended and 18 per cent for the nine months ended, compared to the same periods in 2018, maintaining stable netbacks at the wellhead of $3.86 per thousand cubic feet, after opex and royalties. Looking forward to the remainder of 2019, the corporation anticipates signing during the week of Nov. 18, 2019, a 12-year take-or-pay gas sales contract for approximately half of the volume of the planned 100-million-cubic-foot-per-day gas pipeline from Jobo to Medellin. Given the stability of our future cash flow streams, and the forecast of free cash flows, Canacol's board of directors has decided to declare a recurring dividend paid quarterly. A dividend of $7-million will be paid in cash on Dec. 31, 2019, to shareholders of record at the close of business on Dec. 16, 2019, subject to regulatory approvals."

Highlights for the three and nine months ended Sept. 30, 2019 (production is stated as working interest before royalties)

Financial and operational highlights of the corporation include:

• Realized contractual natural gas sales increased 27 per cent and 17 per cent to 146.4 million standard cubic feet per day and 129.7 million standard cubic feet per day for the three and nine months ended Sept. 30, 2019, compared with 115.3 million standard cubic feet per day and 111.2 million standard cubic feet per day for the same periods in 2018, respectively. Average natural gas production volumes increased 28 per cent and 18 per cent to 147.6 million standard cubic feet per day and 130.9 million standard cubic feet per day for the three and nine months ended Sept. 30, 2019, compared with 114.9 million standard cubic feet per day and 110.6 million standard cubic feet per day for the same periods in 2018, respectively.
• Total natural gas revenue, net of royalties and transportation expenses, for the three and nine months ended Sept. 30, 2019, increased 25 per cent and 19 per cent to $55.1-million and $148.2-million, compared with $43.9-million and $125-million for same periods in 2018, respectively, mainly attributable to the increase of natural gas production.
• The corporation realized EBITDAX (earnings before interest, taxes, depreciation, amortization and exploration expense) of $46-million and $122.9-million for the three and nine months ended Sept. 30, 2019, compared with $36-million and $105.2-million for the same periods in 2018, respectively.
• Funds from operations increased 41 per cent and 22 per cent to $36.4-million and $91.9-million for the three and nine months ended Sept. 30, 2019, compared with $25.8-million and $75.6-million for the same periods in 2018, respectively. Funds from operations per share increased 33 per cent and 21 per cent from 15 cents per share and 43 cents per share to 20 cents per share and 52 cents per share, respectively.
• The corporation recorded net income of $700,000 and $8.8-million for the three and nine months ended Sept. 30, 2019, compared with net income of $12.1-million and a net loss of $5.6-million for the same periods in 2018, respectively. The net income realized during three months ended Sept. 30, 2019, is net of certain non-cash expenses, including a deferred income tax expense of $14.2-million (almost entirely due to the effect of the reduction in the Colombian peso exchange rate on the value of unused tax losses and cost pools) and a depletion and depreciation expense of $13-million.
• The corporation's natural gas operating netback increased 2 per cent and 4 per cent to $3.86 per thousand cubic feet and $3.92 per thousand cubic feet in the three and nine months ended Sept. 30, 2019, compared with $3.80 per thousand cubic feet and $3.77 per thousand cubic feet for the same periods in 2018, respectively. The increases are mainly attributable to a 40-per-cent and 32-per-cent reduction of operating expenses to 24 cents per thousand cubic feet and 28 cents per thousand cubic feet for the three and nine months ended Sept. 30, 2019, compared with 40 cents per thousand cubic feet and 41 cents per thousand cubic feet for the same periods in 2018, respectively.
• Net capital expenditures for the three and nine months ended Sept. 30, 2019, were $30.8-million and $79-million, respectively. Net capital expenditures were net of the $14.5-million disposition of working interest of the Sabanas flowline during the nine months ended Sept. 30, 2019.
• As at Sept. 30, 2019, the corporation had $33.4-million in cash and cash equivalents, $4.6-million in restricted cash, and $49.1-million in working capital surplus.
• The corporation drilled three development wells, Clarinete-4, Palmer-2 and Nelson-7, and three exploration wells, Pandereta-5, Acordeon-1 and Ocarina-1, during the nine months ended Sept. 30, 2019.
• The expansion of the Promigas 100-million-cubic-foot-per-day pipeline expansion was completed and the Jobo 3 natural gas processing facility commenced operation during the three months ended Sept. 30, 2019, lifting Canacol's natural gas treatment capacity from previous levels of 200 million cubic feet per day to 330 million cubic feet per day.

Outlook

For the remainder of 2019, the corporation is focused on executing its exploration drilling program and executing the necessary agreements related to the construction of a new gas pipeline to Medellin, which will transport 100 million cubic feet per day of new gas sales in 2023.

The 2019 drilling program has been successful to date, with two discoveries, Acordeon-1 and Ocarina-1, and three successful development wells, Palmer-2, Nelson-7 and Clarinete-4. The success at Acordeon-1 and Ocarina-1 lifts Canacol's commercial chance of exploration success to 85 per cent, an industry-leading metric for a conventional onshore gas play. The remainder of the drilling program for 2019 includes the Arandala-1 exploration well, which the corporation has recently cased and completed.

With respect to the Medellin pipeline project, the corporation anticipates executing a take-or-pay sales contract with a major Colombian utility during the current month of November, 2019, whereby half of the capacity of the new pipeline will be contracted for a period of 12 years. The next step, to be completed by the end of 2019, will be to form the consortium which will build and operate the pipeline.

Commencing in the fourth quarter of 2019, the corporation is pleased to announce a regular recurring quarterly dividend. The board of directors has approved a $7-million quarterly dividend to be paid on Dec. 31, 2019, with a record date anticipated to be Dec. 16, 2019, subject to regulatory approvals. This amount represents approximately 5.2 Canadian cents per share, or a yield of approximately 4.4 per cent annually at current share prices.

Financial                                        Three months ended Sept. 30,         Nine months ended Sept. 30,
                                                        2019            2018               2019             2018
Total natural gas and crude oil
revenues, net of royalties and
transportation expense                           $    56,634     $    53,398      $     153,727    $     153,424
Funds from operations (1)                        $    36,420     $    25,810      $      91,911    $      75,643
Per share  -- basic ($) (1)                             0.20            0.15               0.52             0.43
Per share  -- diluted ($) (1)                           0.20            0.15               0.51             0.43
Net income (loss) and comprehensive
income (loss)                                    $       663     $    12,138      $       8,815    $     (5,563)
Per share -- basic ($)                                     -            0.07               0.05           (0.03)
Per share -- diluted ($)                                   -            0.07               0.05           (0.03)
EBITDAX (1)                                      $    46,037     $    36,006      $     122,867    $     105,190
Capital expenditures, net dispositions           $    30,806     $    18,585      $      78,973    $      89,890


                                                                                Sept. 30,  2019   Dec. 31,  2018

Cash and cash equivalents                                                         $      33,414    $      51,632
Restricted cash                                                                   $       4,618    $       4,196
Working capital surplus                                                           $      49,112    $      60,782
Total debt                                                                        $     389,484    $     388,222
Total assets                                                                      $     733,472    $     705,003


Operating                                        Three months ended Sept. 30,         Nine months ended Sept. 30,
                                                        2019            2018               2019             2018
Natural gas and crude oil production,
before royalties (1)
Natural gas (mcfpd)                                  147,630         114,923            130,901          110,580
Colombia oil (bopd)                                      322           1,816                365            1,902
Total (boepd) (2)                                     26,222          21,978             23,330           21,302
Realized contractual sales, before
royalties (1)
Natural gas (mcfpd)                                  146,439         115,317            129,747          111,230
Colombia oil (bopd)                                      329           1,945                375            1,915
Total (boepd) (2)                                     26,020          22,176             23,138           21,429
Operating netbacks (1)
Natural gas ($/mcf)                                     3.86            3.80               3.92             3.77
Colombia oil ($/bopd)                                  24.34           26.27              25.59            31.52
Corporate ($/boe) (2)                                  22.06           22.04              22.41            22.39

1. Non-IFRS (international financial reporting standards).
2. The corporation has excluded results relating to the Ecuador IPC in the prior period for comparative purposes.

This press release should be read in conjunction with the corporation's unaudited interim condensed consolidated financial statements and related management's discussion and analysis (MD&A). The corporation has filed its unaudited interim condensed consolidated financial statements and MD&A as of and for the three and nine months ended Sept. 30, 2019, with Canadian securities regulatory authorities. These filings are available for review on SEDAR.

About Canacol Energy Ltd.

Canacol is an exploration and production company with operations focused in Colombia.

We seek Safe Harbor.