Mr. Charle Gamba reports

CANACOL ENERGY LTD. PROVIDES 2020 GUIDANCE

Canacol Energy Ltd. has provided its capital and gas sales guidance for 2020.

The corporation announces that its 2020 capital budget is $114-million (U.S.) which will be fully financed from existing cash and 2020 cash flow. Forecast realized contractual gas sales for 2020, which include downtime, are anticipated to average approximately 205 million standard cubic feet per day (MMscfpd), representing a 37-per-cent increase over 2019 anticipated average gas sales of approximately 150 MMscfpd. The average wellhead sales price, net of transportation costs where applicable, is expected to be approximately $4.80 (U.S.) per thousand cubic feet.

The corporation's forecast production, EBITDA (earnings before interest, taxes, depreciation and amortization) and cash flow for 2020 will be substantially higher than previous years, with EBITDA forecast to be approximately $265-million (U.S.). The budget also allows for a minimum of $7-million (U.S.) in quarterly dividends, as recently announced, as well as approximately $15-million (U.S.) in debt reduction in 2020. Despite the increases in dividends and debt reduction, the corporation expects a material cash build in 2020 which will allow for further flexibility in the recently renewed share buyback, dividend size and an expanded exploration program. Also notable is a dramatic decrease in the corporation's net debt to EBITDA ratio, which stood at 2.3 times at Sept. 30, 2019, and is anticipated to be approximately 1.1 times on Dec. 31, 2020.

Charle Gamba, president and chief executive officer of Canacol, stated: "For 2020 the corporation is focused on the following objectives: 1) the drilling of 12 exploration, appraisal and development wells in a continuous program representing the largest exploration drilling program ever executed by Canacol; 2) the execution of a definitive agreement to construct a new gas pipeline from Jobo to Medellin which will increase the corporation's gas sales by an additional 100 MMscfpd in 2023 to a total sales level greater than 300 MMscfpd; 3) continuing our program of quarterly dividend payments and scheduled debt repayment; and 4) continue with our commitment of strengthening our environmental, social and governance strategy and reporting to ensure successful results for our stakeholders."

2020 gas sales

Forecast gas sales, which include downtime, are anticipated to average 205 MMscfpd for 2020 at an average wellhead price of $4.80 per thousand cubic feet. Wellhead netback, after operating expenditures and royalties, is anticipated to average approximately $3.80/Mcf. Approximately 80 per cent of gas sales will be take-or-pay, with the remaining 20 per cent being interruptible spot sales. The corporation foresees robust pricing on the interruptible spot market for 2020 based on 1) the continuing decline of approximately 20 per cent per year from the mature gas fields located in the Guajira, which will result in an approximately 40 MMscfpd deficit in the coastal market compared with 2019, 2) the continuing rise in gas demand in Colombia, which averaged approximately 5 per cent in 2019, and 3) the lack of competitor activity in Colombia, which saw no commercially successful gas wells being drilled in 2019 with the exception of those drilled by Canacol.

                    2020 CAPITAL DETAILS
 
2020 capital expenditure program                              

Maintenance and development drilling             US$19-million 
Exploration activities (wells and seismic)       US$72-million 
Facilities and infrastructure                    US$11-million 
Administrative, social, environmental and other  US$12-million 
Total capital expenditures                      US$114-million

The bulk of the 2020 capital program targets the corporation's large exploration portfolio with the drilling of a total of 12 wells, five more wells than were drilled in 2019. Of the 12 wells planned, nine are exploration wells, one is an appraisal well, and two are infill development wells, marking the largest exploration drilling program ever executed by the corporation. Total anticipated cost of the drilling program is approximately $70-million (U.S.).

Block         Well ID    Well classification

Esperanza   Nelson-14            Development    
             Milano-1            Exploration    
             Faisan-1            Exploration    
           Laguneta-1            Exploration    
VIM 21        Fresa-1            Exploration    
          Cornamusa-1            Exploration    
VIM 5          Oboe-2            Development    
             Flauta-1            Exploration    
        Porro Norte-1            Exploration    
            Ocarina-2              Appraisal     
            Saxofon-1            Exploration    
       Piccolo Este-1            Exploration    

The first well in the program will be the Nelson-14 development well, which is anticipated to be spudded on Jan. 7, 2020. The corporation plans to use its existing rig contract for the Pioneer 53 rig to drill eight wells in succession during the course of 2020, and will contract a second rig in April, 2020, to drill four wells in a continuous program, leaving time available to drill additional wells before year-end as required.

The 2020 drilling program emphasizes exploration as the corporation continues to build out its reserve base while ensuring sufficient production redundancy to meet the company's forecast gas sales. With the exception of the Ocarina-2 appraisal well (offset to the 2019 discovery Ocarina-1 well), the remaining nine exploration wells will target prospects defined on seismic and supported by AVO analysis. The application of AVO methodology is the technical means by which the corporation mitigates risks associated with the presence of gas-charged sandstones in its exploration prospects, and in large part accounts for the corporation's remarkable 83-per-cent success rate with its exploration program over the past six years.

Canacol takes its responsibility to the environment, communities and governance seriously. During 2020, the company will continue to strengthen its ESG strategy and reporting, ensuring successful results for its stakeholders. It executes its activities to the highest technical standards to ensure minimum impact on the environment, and maximum investment in the local communities. During 2020 the company will continue to build the greenhouse effect gas (GHG) inventory of its activities and deepen its commitment to the reduction of its carbon footprint, contributing to compliance with global objectives and commitments made by the Colombian government to counteract climate change. The company is conscious of the importance of clean and abundant water for the future of the planet and its children, and it will continue to adopt and promote initiatives to ensure the protection and preservation of water sources in its areas of operation.

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

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