10.08.2015, 14:25
Provides Production and Drilling Update and Announces Light Oil Discovery in Ecuador
OREANDA-NEWS. Canacol Energy Ltd. ("Canacol" or the "Corporation") (TSX:CNE;
OTCQX:CNNEF; BVC:CNEC) is pleased to provide the following update concerning its production and drilling
operations in Colombia and Ecuador.
Production Operations
Average net production before royalty for the month of July 2015 was 10,973 barrels of oil equivalent per day (“boepd”), which consisted of 7,175 barrels of oil per day (“bopd”) and 22 million cubic standard feet of gas per day (“mmscfpd”) (3,798 boepd) of natural gas. Average net production before royalty for the period August 1, 2015 to August 9, 2015 was 11,492 boepd, which consisted of 7,998 bopd and 20 mmscfpd (3,494 boepd) of natural gas. Production in July and August 2015 to date represent significant increases over June 2015 despite planned, scheduled maintenance at one of the Corporation’s gas off takers facilities which negatively impacted the amount of gas shipped, however, the scheduled maintenance is now completed. As previously reported, average net production before royalty for the period April 1, 2015 through June 30, 2015 averaged 9,970 boepd which consisted of 5,515 bopd and 25 mmscfpd (4,455 boepd) of natural gas.
Charle Gamba, President and CEO of Canacol, commented “Canacol remains focused on three objectives for calendar 2015: to ensure that the project to add 65 mmscfpd of new natural gas production remains on track to deliver for December 2015, to continue to invest in and increase tariff oil production in Ecuador where netbacks are not sensitive to global oil prices, and to lower operating cost and execute low cost well workovers to maintain light oil production on the LLA23 block with the highest possible margin. In this cycle of low global oil prices, the strategy that we embarked on three years ago to diversify our production base to include Colombian natural gas production and Ecuador fixed tariff production, both insensitive to global oil prices, is yielding very obvious benefits. In the meantime, we remain well capitalized with approximately US\\$ 45 million of current unrestricted cash, and an additional US\\$ 25 million of undrawn debt.”
The Corporation anticipates achieving the higher end of its calendar 2015 net before royalty production guidance of between 10,000 to 12,000 boepd. The Corporation is also on schedule to add an additional 65 mmscfpd (11,400 boepd) of new natural gas production in December 2015 to its existing production via its new, US dollar denominated, long term take or pay gas sales contracts not tied to global oil price. The Corporation anticipates exiting calendar 2015 with more than 20,000 boepd of net production before royalty. The Corporation anticipates that approximately 75% of calendar exit production will consist of natural gas from Colombia and tariff light oil from Ecuador, both not tied to global oil prices.
Approximately 55% of the Corporation’s current total net production before royalty is not tied to global oil price, this being natural gas production from Colombia and tariff light oil production from Ecuador. The Corporation receives an average blended netback of approximately US\\$ 23.00 / barrel of oil equivalent for its Colombia natural gas production (average 4,455 boepd for the period April 1, 2015 to June 30, 2015, and 3,798 boepd for the month of July), and a flat tariff netback of US\\$ 38.56 / barrel for its Ecuadorian production (average 1,757 bopd for the period April 1, 2015 to June 30, 2015, and average production of 2,174 bopd for the month of July 2015). All of the Corporation’s Colombian oil production is tied to global oil prices. The Corporation received an average sales price of approximately US\\$ 50.08 / barrel for its Colombian oil production for the period April 1, 2015 to June 30, 2015. The majority of its Colombian oil production came from its operated LLA23 block, which averaged 3,472 bopd net before royalty for the period April 1, 2015 to June 30, 2015, 4,262 bopd net before royalty for the month of July 2015, and 4,888 bopd net before royalty for the period August 1, 2015 to August 9, 2015. The increase in net oil production from the LLA23 block over the past 5 months reflect the positive results of the ongoing workover program in the Labrador and Pantro fields. The workover program, which has added approximately 1,400 bopd of net production before royalty over a 5 month period, has cost approximately US\\$ 5 million to execute, with additional workovers planned for the months of August and September 2015 in order to continue to maintain low cost production. As recently stated, the Corporation has reduced its operating costs in the LLA23 block via a series of infrastructure projects to approximately US\\$ 11 / barrel.
Colombian Gas Project
Canacol is involved in three construction projects that will allow the Corporation to increase gas production via the sale of gas to off takers located in Cartagena and Barranquilla under long term US dollar denominated take or pay contracts that are not tied to global oil prices. Upon completion of these projects, anticipated to be prior to December 1, 2015, the Corporation's net natural gas production before royalty will increase from current levels of 20 to 30 mmscfpd to approximately 83 mmscfpd (14,500 boepd). These projects consist of an expansion of the Promigas S.A. E.S.P. natural gas pipeline between Jobo and Cartagena, an expansion of the gas processing facilities at Jobo to increase treatment capacity from current capacity of 50 mmscfpd to 140 mmscfpd, and the completion of the tie-in of the Clarinete 1 gas well into the Jobo gas processing facility.
In July, Canacol announced that the Autoridad Nacional de Licencias Ambientales approved the environmental permit enabling Promigas to commence construction necessary to increase capacity of the existing Jobo to Cartagena natural gas pipeline, with actual construction having commenced the second week of July 2015. The Corporation has also commenced construction to expand the capacity of Canacol's existing gas processing facility located at Jobo from the current capacity of 50 mmscfpd to 140 mmscfpd. This expansion is anticipated to be completed in early November 2015. The Corporation is also completing the tie in of the Clarinete 1 well into the Jobo processing facility via a 12 kilometer flow line, which is scheduled to be completed in September 2015. The productive capacity of Canacol's existing gas wells, located in the Nelson, Palmer, and Clarinete fields, is approximately 120 mmscfpd (21,000 boepd), more than sufficient to deliver the total 83 mmscfpd (14,500 boepd) of gas required starting December 1, 2015.
Drilling Operations
The Corporation and its joint venture operating partners have completed the drilling and testing of the successful Secoya Oeste - A001 exploration well located adjacent to the producing Libertador and Atacapi light oil fields in the Oriente Basin of Ecuador. The Corporation holds a non-operated working interest of 25% in the Ecuadorian consortium which includes a risked service contract governing light oil production from the Libertador and Atacapi light oil fields. The Secoya Oeste – A001 exploration well was spud in early June 2015 targeting the T, U, and basal Tena sandstone reservoirs which produce in the adjacent Libertador and Atacapi oil fields. The well encountered 33 feet of net oil pay within these reservoirs. The Lower U sandstone reservoir tested at an average gross rate of 972 bopd (243 bopd net) of 27o API oil with a 10% water cut over the course of a 50 hour test using a jet pump. The Upper U sandstone tested at an average gross rate of 326 bopd (82 bopd net) of 29o API oil with 8% water cut over the course of a 53 hour test using a jet pump. The consortium plans to commingle the two intervals and bring the well on permanent production shortly, and is using the well results to plan the drilling of potential follow up appraisal and development wells. The consortium operates these two fields, and the new Secoya Oeste – A001 discovery well, under a risked service contract whereby the state oil company pays the consortium a flat tariff of US\\$ 38.56 / barrel of incremental production not tied to global oil prices. As the state oil company pays for all operating costs, the US\\$ 38.56 / barrel tariff is the netback the consortium receives for incremental production.
The Corporation commenced the drilling of the Clarinete 2 appraisal well at its Clarinete gas discovery located on the VIM5 block in the Lower Magdalena Valley on August 1, 2015. The Corporation has a 100% operated working interest in the VIM5 block. The well is located approximately 1.5 kilometers (“kms”) to the west of the Clarinete 1 discovery well, and is targeting the same two productive sandstone reservoirs that tested approximately 42 mmscfpd of natural gas from the Tertiary Cienaga de Oro Formation in the Clarinete 1 discovery well. The well is anticipated to take approximately five weeks to drill, complete, and production test. Upon the completion of testing operations at Clarinete 2 the drilling rig will be mobilized to drill Oboe 1. Oboe 1 is located approximately 3 kms to the north of the Clarinete 1 discovery well, and is targeting the same two productive sandstone reservoirs tested at the Clarinete 1 discovery. Oboe 1 is also anticipated to take approximately five weeks to drill, complete, and test. As per a third party reserves report effective February 2015, the Corporation has booked 150 billion cubic feet (“bcf”) of net recoverable 2P reserves to the Clarinete natural gas discovery based on the Clarinete 1 well.
The Corporation will provide updates when relevant information becomes available.
Canacol is an exploration and production company with operations focused in Colombia and Ecuador. The Corporation's common stock trades on the Toronto Stock Exchange, the OTCQX in the United States of America, and the Colombia Stock Exchange under ticker symbol CNE, CNNEF, and CNE.C, respectively.
Production Operations
Average net production before royalty for the month of July 2015 was 10,973 barrels of oil equivalent per day (“boepd”), which consisted of 7,175 barrels of oil per day (“bopd”) and 22 million cubic standard feet of gas per day (“mmscfpd”) (3,798 boepd) of natural gas. Average net production before royalty for the period August 1, 2015 to August 9, 2015 was 11,492 boepd, which consisted of 7,998 bopd and 20 mmscfpd (3,494 boepd) of natural gas. Production in July and August 2015 to date represent significant increases over June 2015 despite planned, scheduled maintenance at one of the Corporation’s gas off takers facilities which negatively impacted the amount of gas shipped, however, the scheduled maintenance is now completed. As previously reported, average net production before royalty for the period April 1, 2015 through June 30, 2015 averaged 9,970 boepd which consisted of 5,515 bopd and 25 mmscfpd (4,455 boepd) of natural gas.
Charle Gamba, President and CEO of Canacol, commented “Canacol remains focused on three objectives for calendar 2015: to ensure that the project to add 65 mmscfpd of new natural gas production remains on track to deliver for December 2015, to continue to invest in and increase tariff oil production in Ecuador where netbacks are not sensitive to global oil prices, and to lower operating cost and execute low cost well workovers to maintain light oil production on the LLA23 block with the highest possible margin. In this cycle of low global oil prices, the strategy that we embarked on three years ago to diversify our production base to include Colombian natural gas production and Ecuador fixed tariff production, both insensitive to global oil prices, is yielding very obvious benefits. In the meantime, we remain well capitalized with approximately US\\$ 45 million of current unrestricted cash, and an additional US\\$ 25 million of undrawn debt.”
The Corporation anticipates achieving the higher end of its calendar 2015 net before royalty production guidance of between 10,000 to 12,000 boepd. The Corporation is also on schedule to add an additional 65 mmscfpd (11,400 boepd) of new natural gas production in December 2015 to its existing production via its new, US dollar denominated, long term take or pay gas sales contracts not tied to global oil price. The Corporation anticipates exiting calendar 2015 with more than 20,000 boepd of net production before royalty. The Corporation anticipates that approximately 75% of calendar exit production will consist of natural gas from Colombia and tariff light oil from Ecuador, both not tied to global oil prices.
Approximately 55% of the Corporation’s current total net production before royalty is not tied to global oil price, this being natural gas production from Colombia and tariff light oil production from Ecuador. The Corporation receives an average blended netback of approximately US\\$ 23.00 / barrel of oil equivalent for its Colombia natural gas production (average 4,455 boepd for the period April 1, 2015 to June 30, 2015, and 3,798 boepd for the month of July), and a flat tariff netback of US\\$ 38.56 / barrel for its Ecuadorian production (average 1,757 bopd for the period April 1, 2015 to June 30, 2015, and average production of 2,174 bopd for the month of July 2015). All of the Corporation’s Colombian oil production is tied to global oil prices. The Corporation received an average sales price of approximately US\\$ 50.08 / barrel for its Colombian oil production for the period April 1, 2015 to June 30, 2015. The majority of its Colombian oil production came from its operated LLA23 block, which averaged 3,472 bopd net before royalty for the period April 1, 2015 to June 30, 2015, 4,262 bopd net before royalty for the month of July 2015, and 4,888 bopd net before royalty for the period August 1, 2015 to August 9, 2015. The increase in net oil production from the LLA23 block over the past 5 months reflect the positive results of the ongoing workover program in the Labrador and Pantro fields. The workover program, which has added approximately 1,400 bopd of net production before royalty over a 5 month period, has cost approximately US\\$ 5 million to execute, with additional workovers planned for the months of August and September 2015 in order to continue to maintain low cost production. As recently stated, the Corporation has reduced its operating costs in the LLA23 block via a series of infrastructure projects to approximately US\\$ 11 / barrel.
Colombian Gas Project
Canacol is involved in three construction projects that will allow the Corporation to increase gas production via the sale of gas to off takers located in Cartagena and Barranquilla under long term US dollar denominated take or pay contracts that are not tied to global oil prices. Upon completion of these projects, anticipated to be prior to December 1, 2015, the Corporation's net natural gas production before royalty will increase from current levels of 20 to 30 mmscfpd to approximately 83 mmscfpd (14,500 boepd). These projects consist of an expansion of the Promigas S.A. E.S.P. natural gas pipeline between Jobo and Cartagena, an expansion of the gas processing facilities at Jobo to increase treatment capacity from current capacity of 50 mmscfpd to 140 mmscfpd, and the completion of the tie-in of the Clarinete 1 gas well into the Jobo gas processing facility.
In July, Canacol announced that the Autoridad Nacional de Licencias Ambientales approved the environmental permit enabling Promigas to commence construction necessary to increase capacity of the existing Jobo to Cartagena natural gas pipeline, with actual construction having commenced the second week of July 2015. The Corporation has also commenced construction to expand the capacity of Canacol's existing gas processing facility located at Jobo from the current capacity of 50 mmscfpd to 140 mmscfpd. This expansion is anticipated to be completed in early November 2015. The Corporation is also completing the tie in of the Clarinete 1 well into the Jobo processing facility via a 12 kilometer flow line, which is scheduled to be completed in September 2015. The productive capacity of Canacol's existing gas wells, located in the Nelson, Palmer, and Clarinete fields, is approximately 120 mmscfpd (21,000 boepd), more than sufficient to deliver the total 83 mmscfpd (14,500 boepd) of gas required starting December 1, 2015.
Drilling Operations
The Corporation and its joint venture operating partners have completed the drilling and testing of the successful Secoya Oeste - A001 exploration well located adjacent to the producing Libertador and Atacapi light oil fields in the Oriente Basin of Ecuador. The Corporation holds a non-operated working interest of 25% in the Ecuadorian consortium which includes a risked service contract governing light oil production from the Libertador and Atacapi light oil fields. The Secoya Oeste – A001 exploration well was spud in early June 2015 targeting the T, U, and basal Tena sandstone reservoirs which produce in the adjacent Libertador and Atacapi oil fields. The well encountered 33 feet of net oil pay within these reservoirs. The Lower U sandstone reservoir tested at an average gross rate of 972 bopd (243 bopd net) of 27o API oil with a 10% water cut over the course of a 50 hour test using a jet pump. The Upper U sandstone tested at an average gross rate of 326 bopd (82 bopd net) of 29o API oil with 8% water cut over the course of a 53 hour test using a jet pump. The consortium plans to commingle the two intervals and bring the well on permanent production shortly, and is using the well results to plan the drilling of potential follow up appraisal and development wells. The consortium operates these two fields, and the new Secoya Oeste – A001 discovery well, under a risked service contract whereby the state oil company pays the consortium a flat tariff of US\\$ 38.56 / barrel of incremental production not tied to global oil prices. As the state oil company pays for all operating costs, the US\\$ 38.56 / barrel tariff is the netback the consortium receives for incremental production.
The Corporation commenced the drilling of the Clarinete 2 appraisal well at its Clarinete gas discovery located on the VIM5 block in the Lower Magdalena Valley on August 1, 2015. The Corporation has a 100% operated working interest in the VIM5 block. The well is located approximately 1.5 kilometers (“kms”) to the west of the Clarinete 1 discovery well, and is targeting the same two productive sandstone reservoirs that tested approximately 42 mmscfpd of natural gas from the Tertiary Cienaga de Oro Formation in the Clarinete 1 discovery well. The well is anticipated to take approximately five weeks to drill, complete, and production test. Upon the completion of testing operations at Clarinete 2 the drilling rig will be mobilized to drill Oboe 1. Oboe 1 is located approximately 3 kms to the north of the Clarinete 1 discovery well, and is targeting the same two productive sandstone reservoirs tested at the Clarinete 1 discovery. Oboe 1 is also anticipated to take approximately five weeks to drill, complete, and test. As per a third party reserves report effective February 2015, the Corporation has booked 150 billion cubic feet (“bcf”) of net recoverable 2P reserves to the Clarinete natural gas discovery based on the Clarinete 1 well.
The Corporation will provide updates when relevant information becomes available.
Canacol is an exploration and production company with operations focused in Colombia and Ecuador. The Corporation's common stock trades on the Toronto Stock Exchange, the OTCQX in the United States of America, and the Colombia Stock Exchange under ticker symbol CNE, CNNEF, and CNE.C, respectively.
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