An anonymous director reports
CANACOL ENERGY LTD. REPORTS REALIZED CONTRACTUAL NATURAL GAS SALES VOLUMES OF 188 MMSCFPD AND A 24% INCREASE IN ADJUSTED EBITDAX TO $55.2 MILLION IN Q2 2022
Canacol Energy Ltd. has released its financial and operating results for the three and six months ended June 30, 2022. Dollar amounts are expressed in United States dollars, with the exception of Canadian-dollar-unit prices where indicated and otherwise noted.
Highlights for the three and six months ended June 30, 2022
Realized contractual natural gas sales volumes increased 10 per cent and 6 per cent to 188 MMscfpd (million standard cubic feet of gas per day) and 184.9 MMscfpd for the three and six months ended June 30, 2022, compared with 171.5 MMscfpd and 174.5 MMscfpd for the same periods in 2021, respectively. Average natural gas production volumes increased 10 per cent and 6 per cent to 190.6 MMscfpd and 186.9 MMscfpd for the three and six months ended June 30, 2022, compared with 173.1 MMscfpd and 176.3 MMscfpd for the same periods in 2021, respectively. The increase is mainly due to an increase of natural gas sales volumes contracted under firm contracts in 2022.
- Total natural gas revenues, net of royalties and transportation expenses increased 29 per cent and 19 per cent to $67.9-million and $132.2-million for the three and six months ended June 30, 2022, compared with $52.6-million and $110.9-million for the same periods in 2021, respectively, mainly attributable to higher sales volumes and higher natural gas realized sales prices, net of transportation expense.
- Adjusted EBITDAX (earnings before interest, taxes, depreciation, amortization and exploration expense) increased 24 per cent and 15 per cent to $55.2-million and $104.8-million for the three and six months ended June 30, 2022, compared with $44.6-million and $91.4-million for the same periods in 2021, respectively.
- Adjusted funds from operations increased 16 per cent and 1 per cent to $39.1-million and $72.9-million for the three and six months ended June 30, 2022, compared with $33.6-million and $71.9-million for the same periods in 2021, respectively.
- The corporation realized a net income of $18-million for the six months ended June 30, 2022, compared with a net loss of $600,000 for the same period in 2021. The corporation recognized a deferred tax recovery of $200,000 during the six months ended June 30, 2022, compared with a deferred tax expense of $9.7-million. The fluctuation of deferred taxes was primarily due to the effect of the Colombian peso (COP) foreign exchange rate on the value of unused tax losses and cost pools.
- The corporation realized a net loss of $6.4-million for the three months ended June 30, 2022, compared with a net income of $2.4-million for the same period in 2021. The non-cash deferred tax expense recognized of $12-million mainly contributed to the net loss during the three months ended June 30, 2022, compared with a deferred tax recovery of $1.6-million for the same period in 2021 due to the fluctuation of the COP foreign exchange rate, as described herein.
- The corporation's natural gas operating netback increased 17 per cent and 12 per cent to $3.66 per Mcf and $3.63 per Mcf for the three and six months ended June 30, 2022, compared with $3.14 per Mcf and $3.25 per Mcf for the same periods in 2021, respectively. The increase is mainly due to a 16-per-cent and 11-per-cent increase in average sales prices, net of transportation expenses to $4.73 per Mcf and $4.70 per Mcf during the three and six months ended June 30, 2022, compared with $4.09 per Mcf and $4.22 per Mcf in the same periods in 2021, respectively. The increase in operating netback was offset by higher operating expenses per Mcf mainly due to higher maintenance costs.
- Net capital expenditures for the three and six months ended June 30, 2022, were $46.5-million and $73.1-million, respectively. Net capital expenditures included non-cash adjustments related mainly to decommissioning obligations and right-of-use leased assets of $3.9-million and $4.5-million, respectively, for the three and six months ended June 30, 2022.
- As at June 30, 2022, the corporation had $90.8-million in cash and cash equivalents and $100.8-million in working capital surplus.
As indicated in the corporation's 2021 environmental, social and governance (ESG) integrated report released on June 28, 2022, Canacol currently leads the industry as one of the cleanest oil and gas producers in both Colombia and North America with scope 1 and 2 greenhouse gas (GHG) emissions that are 80 per cent lower than the company's oil-focused peers and 50 per cent lower than its gas-focused peers, on average. Canacol's ambition is to continue to lead the oil and gas industry in Colombia in terms of supplying the increasing energy demands of Colombians while reducing carbon emissions, exploring avenues for renewable energy generation, fostering national energy self-sufficiency, and catalyzing the growth and development of Colombia's economy and its people. Canacol enthusiastically supports global goals to meet the Paris Agreement targets as well as Colombia's commitment to a 51-per-cent reduction in emissions by 2030, of which natural gas will play a crucial role in a fair and equitable energy transition. The corporation's objective on ESG matters is to improve the quality of life of millions of people through the exploration, production and supply of conventional natural gas in Colombia. Alongside this, the corporation is focused on generating value for its stakeholders in a sustainable, collaborative, co-responsible, respectful and transparent way. With the corporation's transition to natural gas, it now has an environmentally friendly value proposition that contributes to the reduction of CO2 (carbon dioxide) emissions in Colombia and provides for a more efficient use of resources.
The corporation continues to support its communities in essential social projects such as access to water and utilities, local economic projects, construction, and improvement of public and community infrastructure, technical and university scholarships amongst others.
The corporation has strong corporate governance standards and procedures, which are aligned with best global practices and trends, and uses control mechanisms that protect shareholder's interests, respect and promote human rights, guarantee ethical behaviour, integrity and transparency, ensure regulatory compliance, and minimize risk.
For 2022 and beyond, the corporation is committed to continue developing and maintaining a robust ESG strategy and, as such, is implementing a six-year plan with the following four priorities:
A cleaner energy future -- deliver natural gas under the highest environmental and operational efficiency standards;
- A safe and committed team -- maintain best-in-class health and safety practices and promote a diverse and inclusive culture;
- Transparent and ethical business -- adopt best practices, incorporate governance, encourage respect for human rights, and ensure ethics and integrity in everything Canacol does;
- Sustainable development -- promote and maintain close and transparent relationships that guarantee communities' growth and quality of life.
For the remainder of 2022, the corporation is focused on the following objectives: 1) drilling of up to a total of 12 exploration and development wells in a continuous program, of which six wells were drilled in the first half of 2022, with two exploration wells and two development wells planned for Q3 2022; 2) the acquisition of 470 square kilometres of 3-D seismic on the corporation's VIM-5 block to expand its exploration prospect inventory; 3) the purchase of rental facilities equipment and the installation of gas compression to lower operating expenses and increase recovery factors, respectively; 4) the selection of a contractor for the new gas pipeline from Jobo to Medellin, which will add 100 MMscfpd (with expansion potential up to 200 MMscfpd) of new gas sales to the interior in late 2024, resulting in Canacol being responsible for 30 per cent (up to 40 per cent) of Colombia's domestic gas supply; 5) continuing the return of capital to shareholders in the form of dividends and common share buybacks; and 6) continuing with the corporation's commitment to its ESG strategy and its achievement of scope 1 and 2 GHG emissions intensities that are at least 50 per cent lower on average than its gas-focused peers (and 80 per cent lower on average than oil-focused peers) in North and South America.
Canacol is a natural gas exploration and production company with operations focused in Colombia. The corporation's shares are traded on the Toronto Stock Exchange under the symbol CNE, the OTCQX in the United States under the symbol CNNEF and the Bolsa de Valores de Colombia under the symbol CNEC.
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