Canacol Energy Ltd. Announces 2016 Year End Results Posting $135.5 Million of EBITDAX CALGARY, ALBERTA - (March 27, 2017) - Canacol Energy Ltd. ("Canacol" or the "Corporation") (TSX:CNE; OTCQX:CNNEF; BVC:CNEC; BMV:CNEN) is pleased to report its financial results for the year ended December 31, 2016. Dollar amounts are expressed in United States dollars, except as otherwise noted.

Charle Gamba, President and CEO of the Corporation, commented: "2016 saw the emergence of Canacol as a premier gas producer in Colombia. By April 2016, we had achieved our goal of 90 million standard cubic feet per day ("MMscfpd") of gas production. As a result of the increased gas sales, our adjusted petroleum and natural gas revenues after royalties increased 43% to $173.2 million for the year ended December 31, 2016 compared to $121.5 million in 2015; our adjusted funds from operations increased 122% to $113 million for the year ended December 31, 2016 compared to $51 million in 2015; our EBITDAX increased 101% to $135.5 million for the year ended December 31, 2016 compared to $67.4 million in 2015; and we posted comprehensive income of $23.6 million in 2016. After achieving the 90 MMscfpd milestone, several significant new 2016 gas discoveries drive our reserve and production base towards our December 1, 2017 target of 130 MMscfpd, and our December 1, 2018 target of 230 MMscfpd, which will place Canacol as the second largest gas producer in Colombia behind the state oil company.

Our industry leading 2015/2016 average gas F&D of $2.52/boe ($0.44/Mcf), combined with our very low operating expenses and robust long term gas contracts denominated in US dollars, ensure that our current and future gas production will yield consistently high netbacks and margins for our shareholders. This operating base in conjunction with the financial flexibility achieved by the closing of the February, 2017 $265 million senior secured term loan, led by Credit Suisse, provides a solid platform for our targeted growth. For 2017, management's primary goals are to 1) achieve a gas production rate of 130 MMscfpd by December 1, 2017 via the construction of a new private gas pipeline,

2) drill three gas exploration wells to continue to build the Corporation's gas reserves base at industry leading F&D costs, and 3) drill two oil exploration wells to increase oil production and satisfy exploration commitments to the ANH.

With respect to the new private gas pipeline, a Special Purpose Vehicle ("SPV") has been formed to build and operate a six inch pipeline that will transport 40 MMscfpd of gas from the Corporation's Jobo gas processing facility to Sincelejo / Bremen approximately 80 kilometers ("kms") to the north, where the private pipeline will connect to the Promigas operated pipeline that ships gas to Cartagena. Canacol has executed a ten year take-or-pay contract for 40 MMscfpd of gas at contractual terms comparable to the Corporation's current US dollar denominated gas sale contracts. A bank has been retained to raise the $60 million that the SPV will require to complete the pipeline outside of Canacol. In the meantime, the SPV is acquiring all of the right of ways required for the pipeline, and is tendering all of the major contracts which would include tubulars and compression. The Corporation anticipates that the pipeline will be in operation on December 1, 2017. The productive capacity of the Corporation's currently producing wells is approximately 195 MMscfpd, and that of the Corporation's gas processing facilities approximately 200 MMscfpd.

Canacol has also spud the Canahuate-1 gas exploration well and the Pumara-1 oil exploration well. The Canahuate-1 exploration well, located on the Esperanza E&P Contract (100% operated working interest), was spud on March 24, 2017. The Canahuate-1 well is located approximately three kms north of the Corporation's Jobo gas processing facility and is targeting gas bearing sandstones within the proven producing Cienaga de Oro reservoir. Over the past three years, six of the seven exploration wells drilled by the Corporation on its gas blocks, including the Esperanza E&P contract, have resulted in commercial gas discoveries. The Canahuate-1 well is expected to take approximately six weeks to drill and test.

Canacol also maintains a large inventory of light oil drill ready production and exploration opportunities. The Corporation will spud the Pumara-1 exploration well on the LLA-23 E&P Contract (100% operated working interest) on March 31, 2017. The Pumara-1 exploration well is located three kms north of the Labrador field and is targeting light oil bearing reservoirs within the proven producing C7, Mirador, Gacheta and Ubaque reservoirs. Over the past four years, five of the six exploration wells drilled by the Corporation on the LLA-23 contract have resulted in commercial light oil discoveries. The Pumara-1 well is expected to take approximately five weeks to drill and test, and if

successful, it will be placed immediately on permanent production via the Corporation's oil processing facilities located at Pointer.

With the 2017 capital program to be funded by a combination of existing working capital and cash flows, Canacol is well positioned to continue to build production and revenues despite the uncertainty and volatility associated with global oil prices, especially with a near to mid term global outlook of "low oil prices for longer". It is important to point out that approximately 90% of our current production revenues are not impacted by global oil prices, and that the Corporation's debt facility is not subject to redetermination should oil prices fall. Our financial strength, coupled with Canacol's outstanding exploration drilling and commercialization track record, provides a solid platform which will allow us to reach our target of 230 MMscfpd of gas production exiting 2018.

The Corporation anticipates releasing an update on its Mono Capuchino-1 exploration well on March 28, 2017 and its 2017 guidance during the week of April 3, 2017."

During 2016, the Corporation had many operational and financial accomplishments:

  • The drilling and completion of the Oboe-1 exploration well and its combined test results of 66 MMscfpd in March 2016.

  • The completion of the Promigas pipeline and the Promisol Jobo gas plant upgrade in April 2016, which allowed Canacol to increase gas production to 90 MMscfpd. Canacol's total current gas processing capability is 200 MMscfpd.

  • The drilling and completion of the Nispero-1 exploration well and its test result of 28 MMscfpd in August 2016.

  • The completion of the first and second tranche of private placement offerings of 9,687,670 and 1,800,000 common shares of the Corporation, respectively, issued at C$4.08 per common share for a total of C$46.9 million in August 2016.

  • The drilling and completion of the Trombon-1 exploration well and its test result of 26 MMscfpd in October 2016.

  • The drilling and completion of the Nelson-6 exploration well and its test result of 23 MMscfpd in November 2016.

  • The initiation of a private pipeline venture in November, 2016 that will deliver 40 MMscfpd of new gas production to new and existing customers located on the Caribbean coast in December 2017, thereby increasing the Corporation's transportation capacity from its current 90 MMscfpd to 130 MMscfpd upon completion.

  • The execution of the agreement with Promigas in November 2016 to expand the existing gas distribution network currently used by the Corporation to accommodate an additional 100 MMscfpd of new gas transportation and sales, thereby increasing the Corporation's transportation capacity to 230 MMscfpd in December 2018.

  • The drilling and completion of the Clarinete-3 development well and its test result of 18 MMscfpd in December 2016.

  • The Nelson-5 Porquero recompletion and its test result of 13 MMscfpd in December 2016.

    Highlights for the Three Months Ended December 31, 2016

    (in thousands of United States dollars, except as otherwise noted; production is stated as working-interest before royalties)

    Financial and operating highlights of the Corporation include:

  • Realized contractual sales volumes increased 96% to 18,310 boepd for the three months ended December 31, 2016 compared to 9,359 boepd for the same period in 2015. The increase is primarily due to an increase in gas production in the Esperanza and VIM-5 blocks as a result of the additional sales related to the Promigas pipeline expansion.

  • Average daily production volumes increased 96% to 17,728 boepd for the three months ended December 31, 2016 compared to 9,064 boepd for the same period in 2015. The increase is primarily due to an increase in gas production in the Esperanza and VIM-5 blocks as a result of the additional sales related to the Promigas pipeline expansion.

  • Adjusted funds from operations for the three months ended December 31, 2016 increased 395% to $42 million compared to $8.5 million for the same period in 2015. Adjusted funds from operations are inclusive of results from the Ecuador Incremental Production Contract (the "Ecuador IPC") (see full discussion in MD&A). The increase in adjusted funds from operations is primarily the result of additional sales related to the Promigas pipeline expansion and an increase in benchmark crude oil prices.

  • Petroleum and natural gas revenues for the three months ended December 31, 2016 increased 141% to $42 million compared to $17.4 million for the same period in 2015. Adjusted petroleum and natural gas revenues, inclusive of revenues related to the Ecuador IPC, for the three months ended December 31, 2016 increased 93% to $47.9 million compared to $24.9 million for the same period in 2015. The increase is primarily the result of additional sales related to the Promigas pipeline expansion.

  • Average corporate operating netback for the three months ended December 31, 2016 increased 9% to $24/boe compared to $21.96/boe for the same period in 2015. Operating corporate netback is inclusive of results from the Ecuador IPC.

  • The Corporation recorded a comprehensive income of $20.3 million for the three months ended December 31, 2016 despite the non-cash impairment charge of $37.3 million, mainly due to the execution of its tax planning strategies which significantly reduced income tax expense. The Corporation recognized a current income tax recovery of $6.3 million and a deferred income tax recovery of $42.3 million during the three months ended December 31, 2016 despite its $42 million adjusted funds from operations.

  • Capital expenditures for the three months and year ended December 31, 2016 were $58.6 million and $107.9 million, respectively, while adjusted capital expenditures, inclusive of amounts related to the Ecuador IPC, were $59.7 million and $110.2 million, respectively.

  • At December 31, 2016, the Corporation had $66.3 million in cash and $62.1 million in restricted cash.

Financial

Three months ended December 31,

Three months ended December 31,

Twelve Months ended December 31,

Six months ended December 31,

Twelve months ended June 30,

2016

2015

Change

2016

2015

Change

2015

Change

Petroleum and natural gas revenues, net of royalties

41,967

17,402

141%

147,985

39,360

276%

149,047

(1%)

Adjusted petroleum and natural gas revenues, net of royalties(2)

47,943

24,883

93%

173,184

54,782

216%

177,937

(3%)

Cash provided by operating activities

30,289

4,974

509%

73,577

19,276

282%

64,445

14%

Per share - basic ($)

0.17

0.03

467%

0.44

0.14

214%

0.58

(24%)

Per share - diluted ($)

0.17

0.03

467%

0.44

0.13

238%

0.58

(24%)

Adjusted funds from operations (1)(2)

41,979

8,473

395%

113,019

23,690

377%

87,395

29%

Per share - basic ($)

0.24

0.05

380%

0.68

0.17

300%

0.79

(14%)

Per share -diluted ($)

0.24

0.05

380%

0.67

0.16

319%

0.78

(14%)

Comprehensive income (loss)

20,331

(84,466)

n/a

23,638

(103,495)

n/a

(106,022)

n/a

Per share - basic ($)

0.12

(0.54)

n/a

0.14

(0.72)

n/a

(0.96)

n/a

Per share - diluted ($)

0.12

(0.54)

n/a

0.14

(0.72)

n/a

(0.96)

n/a

Capital expenditures, net, including acquisitions

58,638

22,394

162%

107,930

44,693

141%

217,342

(50%)

Adjusted capital expenditures, net,

including acquisitions (1)(2)

59,691

22,867

161%

110,224

48,947

125%

243,108

(55%)

December 31,

2016

December 31,

2015

Cash

66,283

43,257

53%

Restricted cash

62,073

61,721

1%

Working capital surplus, excluding

non-cash items and current portion of bank debt(1)

64,899

46,310

40%

Current and long-term bank debt

250,638

248,228

1%

Total assets

787,508

668,349

18%

Common shares, end of period (000s)

174,359

159,266

9%

Operating

Three months ended December 31,

Three months ended December 31,

Twelve months ended December 31,

Six months ended December 31,

Twelve months ended June 30,

2016

2015

Change

2016

2015

Change

2015

Change

Petroleum and natural gas production, before royalties (boepd)

3,616

4,012

Petroleum (2)

5,523

(35%)

6,253

(36%)

7,999

(50%)

Natural gas

14,112

3,541

299%

11,930

3,507

240%

3,505

240%

Total (2)

17,728

9,064

96%

15,942

9,760

63%

11,504

39%

Petroleum and natural gas sales, before royalties (boepd)

3,657

4,019

Petroleum (2)

5,468

(33%)

6,370

(37%)

8,010

(50%)

Natural gas

13,986

3,542

295%

11,830

3,499

238%

3,512

237%

Total (2)

17,643

9,010

96%

15,849

9,869

61%

11,522

38%

Realized contractual sales, before royalties (boepd)

14,653

12,357

Natural gas

3,891

277%

3,674

236%

3,512

252%

Crude oil

2,026

3,390

(40%)

2,315

4,253

(46%)

6,083

(62%)

Ecuador (tariff oil) (2)

1,631

2,078

(22%)

1,704

2,117

(20%)

1,927

(12%)

Total (2)

18,310

9,359

96%

16,376

10,044

63%

11,522

42%

Operating netbacks ($/boe) (1)

26.35

27.15

Esperanza (natural gas)

24.03

10%

23.27

17%

20.62

32%

VIM-5 (natural gas)

21.99

20.78

6%

23.68

20.78

14%

-

n/a

LLA-23 (oil)

14.80

12.02

23%

12.05

16.74

(28%)

34.91

(65%)

Ecuador (tariff oil) (2)

38.54

38.54

-

38.54

38.54

-

38.54

-

Total (2)

24.00

21.96

9%

24.92

22.38

11%

28.05

(11%)

  1. Non-IFRS measure - see "Non-IFRS Measures" section within MD&A.

  2. Inclusive of amounts related to the Ecuador IPC - see "Non-IFRS Measures" section within MD&A.

Canacol Energy Ltd. published this content on 27 March 2017 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 27 March 2017 22:19:07 UTC.

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