Mr. Ravi Sharma reports
CANACOL ENERGY LTD. ACHIEVES 224% 2P GAS RESERVE REPLACEMENT RATIO INCREASING 2P RESERVES TO 624 BCF WITH A BTAX VALUE OF US$2.1 BILLION
Canacol Energy Ltd. has released its conventional natural gas reserves for the fiscal year ended Dec. 31, 2019. The corporation's conventional natural gas reserves are located in the Lower Magdalena Valley basin, Colombia.
GROSS RESERVES SUMMARY
Gross reserves
Proven developed Total Total proven Total proven + probable
producing proven + probable + possible
Product type (PDP) (1P) (2P) (3P)
Conventional natural gas Bcf 251.9 394.1 623.8 884.8
-------- ------ -------- -------- --------
Total oil equivalent (1) MMboe 44.2 69.1 109.4 155.2
-------- ------ -------- -------- --------
Before-tax NPV-10 (2) MM U.S.$ $877.2 $1,345.0 $2,145.0 $2,879.3
After-tax NPV-10 (2) MM U.S.$ 703.3 1,033.4 1,583.2 2,087.2
-------- ------ -------- -------- --------
The numbers in this table may not add exactly due to rounding.
All reserves are represented at Canacol's working interest share before royalties.
(1) The term boe means a barrel of oil equivalent on the basis of 5,700 cubic feet of natural gas to
one barrel of oil as per Colombian regulatory practice.
(2) Net present value (NPV) is stated in millions of U.S. dollars and is discounted at 10 per cent.
Highlights
Conventional natural gas proven plus probable reserves (2P):
-
Increased by 12 per cent since Dec. 31, 2018, totalling 624 billion cubic feet at Dec. 31, 2019, with a before-tax value discounted at 10 per cent of $2.1-billion (U.S.), representing both $15.47 (Canadian) per share of reserve value, and $13.41 (Canadian) per share of 2P net asset value (net of $285.6-million (U.S.) of net debt);
-
Reserve replacement of 224 per cent based on calendar 2019 gross conventional natural gas reserve additions of 117 billion cubic feet;
-
2P F&D of 67 U.S. cents per thousand cubic feet for the three-year period ended Dec. 31, 2019;
-
Recycle ratio of 4.4 times for the year ended Dec. 31, 2019;
-
Recycle ratio of 5.7 times for the three-year period ended Dec. 31, 2019 (calculated based on the weighted-average natural gas netback for the years ended Dec. 31, 2019, 2018 and 2017);
-
Reserves life index (RLI) of nine years based on annualized fourth quarter 2019 conventional natural gas production of 180,986,000 cubic feet per day or 31,752 barrels of oil equivalent per day;
-
RLI of 8.3 years based on conventional natural gas production guidance of 205 million cubic feet per day for calendar 2020.
Conventional natural gas proven developed producing reserves (PDP):
-
Increased by 31 per cent since Dec. 31, 2018, totalling 252 billion cubic feet at Dec. 31, 2019;
-
Reserve replacement of 213 per cent based on calendar 2019 gross conventional natural gas reserve additions of 112 bcf.
Conventional natural gas total proven reserves (1P):
-
Increased by 4 per cent since Dec. 31, 2018, totalling 394 bcf at Dec. 31, 2019;
-
Reserve replacement of 127 per cent based on calendar 2019 gross conventional natural gas reserve additions of 66 bcf;
-
1P F&D of 98 U.S. cents per Mcf for the three-year period ended Dec. 31, 2019;
-
Recycle ratio of 2.7 times for the year ended Dec. 31, 2019;
-
Recycle ratio of 3.9 times for the three-year period ended Dec. 31, 2019 (calculated based on the weighted-average natural gas netback for the years ended Dec. 31, 2019, 2018 and 2017).
Conventional natural gas total proven plus probable plus possible reserves (3P):
- Increased by 20 per cent since Dec. 31, 2018, totalling 885 bcf at Dec. 31, 2019, with a before-tax value discounted at 10 per cent of $2.9-billion
(U.S.).
Ravi Sharma, chief operating officer of Canacol, commented: "The corporation has historically achieved significant conventional natural gas exploration and development drilling success from our assets located in the Lower Magdalena Valley, and this success continued into 2019. Since 2013, we have added 696 bcf of 2P conventional natural gas reserves from commercial success in 27 out of 31 drilled wells, representing a 37-per-cent CAGR at an industry-leading three-year 2P F&D cost of 67 U.S. cents per Mcf. With a portfolio of 140 identified prospects and leads containing mean unrisked prospective gas resource of 2.6 trillion cubic feet according to our 2018 third party resource report, we anticipate many more years of successful exploration drilling resulting in the movement of gas resources into proven and probable reserves."
Discussion of year ended Dec. 31, 2019, reserves report
During the year ended Dec. 31, 2019, the corporation recorded increases in certain reserve categories as a result of the drilling and completion of locations at Nelson-13 and Palmer-2 on the Esperanza natural gas block, Acordeon-1, Ocarina-1 and Clarinete-4 on the VIM-5 natural gas block, and Arandala-1 on the VIM-21 natural gas block, all in the Lower Magdalena Valley basin, Colombia.
The attached tables summarize information from the independent reserves report prepared by Boury Global Energy Consultants Ltd. (BGEC), effective Dec. 31, 2019. The BGEC 2019 report covers 100 per cent of the corporation's conventional natural gas reserves.
The BGEC 2019 report was prepared in accordance with definitions, standards and procedures contained in the Canadian oil and gas evaluation handbook (COGE handbook) and National Instrument NI 51-101 (Standards of Disclosure for Oil and Gas Activities). Additional reserve information as required under NI 51-101 is included in the corporation's annual information form, which will be filed on SEDAR by March 31, 2020.
GROSS RESERVES FOR THE YEAR ENDED DEC. 31, 2019
Reserve category (1) Dec. 31, Dec. 31,
2018 2019
(bcf) (bcf)
Proven developed producing (PDP) 192,563 251,865
Total proven (1P) 380,155 394,148
Total proven + probable (2P) 558,886 623,758
Total proven + probable + possible (3P) 739,384 884,838
------- -------
(1) All reserves are Canacol working interest
before royalties.
FIVE-YEAR GAS PRICE FORECAST -- BGEC REPORT DATED DEC. 31, 2019
Reserve Report date 2020 2021 2022 2023 2024
Volume-weighted average gas price U.S.$/MMBtu Dec. 31, 2019 $5.38 $5.56 $5.84 $6.16 $7.59
------------- ----- ----- ----- ----- -----
1. Gas price forecast is based on existing long-term contracts net of
transportation (if applicable) and adjusted for inflation, along with
interruptible gas sales pricing based on forecasts from La Unidad de
Planeacion Minero Energetica (UPME), a special administrative unit
of the Colombian Ministry of Mines and Energy.
RESERVES NET PRESENT VALUE BEFORE- AND AFTER-TAX SUMMARY (1)
Before tax After tax
Net asset Net asset
value value
Reserve category Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2019 2019 2019 2019
(M U.S.$) (2) (Cdn$/share) (2) (M U.S.$) (2) (Cdn$/share) (2)
Proven developed producing (PDP) $877,181 $4.27 $703,268 $3.01
Total proven (1P) $1,345,033 $7.64 $1,033,446 $5.39
Total proven + probable (2P) $2,144,958 $13.41 $1,583,167 $9.36
Total proven + probable + possible (3P) $2,879,324 $18.71 $2,087,158 $12.99
---------- ------ ---------- ------
(1) Net present value is stated in thousands of U.S. dollars and is discounted
at 10 per cent. The forecast prices used in the calculation of the present value
of future net revenue are based on the price deck described herein. The BGEC
forecast for gas prices at Dec. 31, 2019, is included in the corporation's annual
information form.
(2) Net asset value is calculated at Dec. 31, 2019, NPV10 less estimated net debt
of $285.6-million (U.S.) (being $350 million of bank debt less estimated cash of
$64.4-million) divided by 180.1 million basic shares outstanding as at Dec. 31,
2019. NAV calculations are converted to Canadian dollars at the Dec. 31, 2019,
effective rate of U.S. dollar to Canadian dollar of 1.30.
RESERVE LIFE INDEX (RLI)
Reserve category Dec. 31, Dec. 31,
2018 2019
(yr) (1) (yr) (2)
Proven developed producing (PDP) 5 4
Total proven (1P) 9 6
Total proven + probable (2P) 13 9
--- ---
(1) Calculated using average three months ended Dec. 31,
2018, natural gas production of 116,618,000 cubic feet per
day or 20,459 boepd annualized.
(2) Calculated using average three months ended Dec. 31,
2019, natural gas production of 180,986,000 cubic feet per
day or 31,752 boepd annualized.
RLI (reserve life index) is calculated by dividing the
applicable reserves category by the annualized fourth
quarter production.
YEAR ENDED DEC. 31, 2019, CANACOL GROSS RESERVES RECONCILIATION (1)
Total Light/medium Heavy crude Conventional NGL Total
oil crude oil oil natural gas
(Mbbl) (Mbbl) (Mbbl) (MMcf) (Mbbl) Mboe (4)
Proven developed producing
Opening balance (Dec. 31, 2018) - - - 192,563 - 33,783
------- ------- ------- ------- ------- -------
Extensions - - - - - -
Improved recovery - - - - - -
Technical revisions (2) - - - 84,840 - 14,884
Discoveries (3) - - - 26,869 - 4,714
Acquisitions - - - - - -
Dispositions - - - - - -
Economic factors - - - - - -
Production - - - (52,407) - (9,194)
Closing balance (Dec. 31, 2019) - - - 251,865 - 44,187
------- ------- ------- ------- ------- -------
Total Light/medium Heavy crude Conventional NGL Total
oil crude oil oil natural gas
(Mbbl) (Mbbl) (Mbbl) (MMcf) (Mbbl) Mboe (4)
Total proven
Opening balance (Dec. 31, 2018) - - - 380,155 - 66,694
------- ------- ------- ------- ------- -------
Extensions - - - - - -
Improved recovery - - - - - -
Technical revisions (2) - - - 31,892 - 5,595
Discoveries (3) - - - 34,508 - 6,054
Acquisitions - - - - - -
Dispositions - - - - - -
Economic factors - - - - - -
Production - - - (52,407) - (9,194)
------- ------- ------- ------- ------- -------
Closing balance (Dec. 31, 2019) - - - 394,148 - 69,149
------- ------- ------- ------- ------- -------
Total Light/medium Heavy crude Conventional NGL Total
oil crude oil oil natural gas
(Mbbl) (Mbbl) (Mbbl) (MMcf) (Mbbl) Mboe (4)
Total proven + probable
Opening balance (Dec. 31, 2018) - - - 558,886 - 98,050
------- ------- ------- ------- ------- -------
Extensions - - - - - -
Improved recovery - - - - - -
Technical revisions (2) - - - 47,965 - 8,415
Discoveries (3) - - - 69,314 - 12,160
Acquisitions - - - - - -
Dispositions - - - - - -
Economic factors - - - - - -
Production - - - (52,407) - (9,194)
------- ------- ------- ------- ------- -------
Closing balance (Dec. 31, 2019) - - - 623,758 - 109,431
------- ------- ------- ------- ------- -------
(1) The numbers in this table may not add due to rounding.
(2) Conventional natural gas technical revisions are associated with the Palmer, Nelson, Canahuate
and Clarinete gas fields.
(3) Conventional natural gas discoveries are associated with Nelson-13 and Palmer-2 on the Esperanza
block, Acordeon-1, Ocarina-1 and Clarinete-4 on the VIM-5 block, and Arandala-1 on the VIM-21 block,
all in the Lower Magdalena Valley basin, Colombia.
(4) The term boe means a barrel of oil equivalent on the basis of 5.7 Mcf of natural gas to one
barrel of oil as per Colombian regulatory practice.
1P RESERVE METRICS RECONCILIATION -- CANACOL WORKING INTEREST BEFORE ROYALTY (1) (2) (3)
Calendar 2019 Three years ended Dec. 31, 2019,
conventional natural gas conventional natural gas
Net capital expenditures (M$ U.S.) (2) (8) $70,359 $225,814
Capital expenditures -- change in FDC (M$ U.S.) (4) 24,982 1,849
--------- ---------
Total F&D (M$ U.S.) 95,341 227,663
Net acquisitions (M$ U.S.) - -
--------- ---------
Total FD&A (M$ U.S.) (6) (7) 95,341 227,663
--------- ---------
Reserve additions (MMcf) 66,400 233,471
Reserve additions -- net acquisitions - -
--------- ---------
Reserve additions including net acquisitions (MMcf) 66,400 233,471
--------- ---------
1P F&D per Mcf (U.S.$/Mcf) (5) 1.44 0.98
1P FD&A per Mcf (U.S.$/Mcf) (6) (7) 1.44 0.98
--------- ---------
(1) The numbers in this table may not add due to rounding.
(2) The company excludes mid-stream investments from the F&D calculations, as these capital
investments represent long-life mid-stream assets that have multidecade operating life potential,
coupled with residual value. Two thousand seventeen capital expenditures exclude $10.2-million
(U.S.) related to the corporation's investment in the Sabanas flowline, $8.9-million (U.S.) related
to a compression finance lease on the Sabanas flowline and $18.3-million (U.S.) related to other
mid-stream initiatives. Two thousand eighteen capital expenditures exclude $8.9-million (U.S.)
related to the second compression finance lease on the Sabanas flowline, $18.4-million (U.S.)
related to the third Jobo Station expansion and $4.9-million (U.S.) related to other mid-stream
initiatives. Two thousand nineteen capital expenditures exclude $14.5-million (U.S.) related to the
third Jobo Station expansion, which was completed in 2019.
(3) All values in this table are stated on a 1P (total proven) basis.
(4) Capital expenditures -- change in FDC -- are rounded. FDC is the 1P (total proven) future
development capital.
(5) 1P F&D (finding and development) costs on a 1P (total proven) basis.
(6) 1P FD&A (finding, development and acquisition) costs on a 1P (total proven) basis.
(7) With the finding and development costs, the aggregate of the exploration and development costs
incurred in the most recent financial year and the change during that year in estimated future
development costs generally will not reflect total finding and development costs related to reserve
additions for that year.
(8) Two thousand nineteen capital expenditures include $11.9-million (U.S.) of seismic acquisition
costs, which encompass prospects that will be drilled in 2020 forward. This seismic cost increased
Canacol's 1P F&D by 18 U.S. cents per Mcf and five U.S. cents per Mcf for calendar 2019, and the
three-year period ended Dec. 31, 2019, respectively. Two thousand nineteen capital expenditures
were reduced by $14.9-million (U.S.) of proceeds from the divestiture of Canacol's working interest
in the Sabanas flowline, which decreased Canacol's 1P F&D by 22 U.S. cents per Mcf and nil per Mcf
for calendar 2019, and the three-year period ended Dec. 31, 2019, respectively.
2P RESERVE METRICS RECONCILIATION -- CANACOL WORKING INTEREST BEFORE ROYALTY (1) (2) (3)
Calendar 2019 Three years ended Dec. 31, 2019,
conventional natural gas conventional natural gas
Net capital expenditures (M$ U.S.) (2) (8) $70,359 $225,814
Capital expenditures -- change in FDC (M$ U.S.) (4) 31,183 (1,831)
--------- ---------
Total F&D (M$ U.S.) 101,542 223,983
Net acquisitions (M$ U.S.) - -
--------- ---------
Total FD&A (M$ U.S.) (6) (7) 101,542 223,983
--------- ---------
Reserve additions (MMcf) 117,279 334,334
Reserve additions -- net acquisitions - -
--------- ---------
Reserve additions including net acquisitions (MMcf) 117,279 334,334
--------- ---------
2P F&D per Mcf (U.S.$/Mcf) (5) 0.87 0.67
2P FD&A per Mcf (U.S.$/Mcf) (6) (7) 0.87 0.67
--------- ---------
(1) The numbers in this table may not add due to rounding.
(2) The company excludes mid-stream investments from the F&D calculations, as these capital
investments represent long-life mid-stream assets that have multidecade operating life potential,
coupled with residual value. Two thousand seventeen capital expenditures exclude $10.2-million
(U.S.) related to the corporation's investment in the Sabanas flowline, $8.9-million (U.S.) related
to a compression finance lease on the Sabanas flowline and $18.3-million (U.S.) related to other
mid-stream initiatives. Two thousand eighteen capital expenditures exclude $8.9-million (U.S.)
related to the second compression finance lease on the Sabanas flowline, $18.4-million (U.S.)
related to the third Jobo Station expansion and $4.9-million (U.S.) related to other mid-stream
initiatives. Two thousand nineteen capital expenditures exclude $14.5-million (U.S.) related to the
third Jobo Station expansion, which was completed in 2019.
(3) All values in this table are stated on a 2P (total proven plus probable) basis.
(4) Capital expenditures -- change in FDC -- are rounded. FDC is the 2P (proven plus probable)
future development capital.
(5) 2P F&D (finding and development) costs on a 2P (total proven plus probable) basis.
(6) 2P FD&A (finding, development and acquisition) costs on a 2P (total proven plus probable)
basis.
(7) With the finding and development costs, the aggregate of the exploration and development costs
incurred in the most recent financial year and the change during that year in estimated future
development costs generally will not reflect total finding and development costs related to
reserve additions for that year.
(8) Two thousand nineteen capital expenditures include $11.9-million (U.S.) of seismic acquisition
costs, which encompass prospects that will be drilled in 2020 forward. This seismic cost increased
Canacol's 2P F&D by 10 U.S. cents per Mcf and four U.S. cents per Mcf for calendar 2019, and the
three-year period ended Dec. 31, 2019, respectively. Two thousand nineteen capital expenditures
were reduced by $14.9-million (U.S.) of proceeds from the divestiture of Canacol's working interest
in the Sabanas flowline, which decreased Canacol's 2P F&D by 13 U.S. cents per Mcf and nil per Mcf
for calendar 2019, and the three-year period ended Dec. 31, 2019, respectively.
The recovery and reserve estimates of conventional natural gas are estimates only. There is no guarantee that the estimated reserves will be recovered, and actual reserves of conventional natural gas may prove to be greater than, or less than, the estimates provided.
Reserves of conventional natural gas as at Dec. 31, 2019, are evaluated using natural gas pricing based on existing long-term contracts net of transportation (if applicable) and adjusted for inflation, along with interruptible gas sales pricing based on forecasts from La Unidad de Planeacion Minero Energetica, a special administrative unit of the Colombian Ministry of Mines and Energy. Comparative volumes of conventional natural gas as at Dec. 31, 2018, evaluated using natural gas pricing based on existing long-term contracts net of transportation (if applicable) and adjusted for inflation. Forecast prices used in the reserves reports are included in the corporation's annual information form, which will be filed on SEDAR by March 31, 2020, under the sections "Forecast Prices Used in Estimates" and "Forward Contracts" in the "Statement of Reserves Data and Other Oil and Gas Information."
Canacol is an exploration and production company with operations focused in Colombia.
We seek Safe Harbor.
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