Canacol Energy : Reports Filing of December 31, 2015 Financial Results and Annual Information Form

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Canacol Energy Ltd. Reports Filing of December 31, 2015 Financial Results and Annual Information Form

CALGARY, ALBERTA - (March 28, 2016) - Canacol Energy Ltd. ("Canacol" or the "Corporation") (TSX:CNE; OTCQX:CNNEF; BVC:CNEC) is pleased to report its reserves and financial results for the six months ended December 31, 2015. Dollar amounts are expressed in United States dollars, except as otherwise noted.

Charle Gamba, President and CEO of the Corporation, commented: "In July 2015 we announced the changing our fiscal year end to December 31 with the intention of aligning our year end with that of our peer group, and more importantly to reflect the 2016 evolution of Canacol as we become a significant natural gas producer in Colombia. Today we are pleased to report the results of our first December 31 year end.

During the prolonged downturn in global commodity prices, particularly the relentless drop in oil price during 2015 which continues to this day, Canacol's management team has focused on growing our high net back gas business in Colombia. Canacol's realized gas netback for the last quarter of 2015 was US$ 24.03 / boe, reflecting the strength of this commodity in Colombia. Our growth in the Colombian gas market during 2015 and the first quarter of 2016 to date is reflected by both the increase in gas production, which will reach 90 MMscfpd near the end of March, generating approximately $163 million in gross revenues this year, and the increase in value of the Corporation's 2P reserves which now stand at 79 MMboe, 80% of which are gas with a before tax undiscounted value of $1.3 billion or C$9.44 per share. These reserves do not include the recent Oboe-1 well, which tested at a combined rate of 66 MMscfpd.

For the remainder of 2016, and during the current low price oil environment, the management team will focus on executing its US$ 52 million capital program which will primarily target exploration for additional gas reserves from its large portfolio of drill ready gas opportunities. The Corporation has also embarked upon the planning of a new gas pipeline project with the objective of increasing Canacol's gas sales to Colombia's Caribbean coast by an additional 100 MMscfpd in 2018. Meanwhile, the company continues to maintain a large inventory of light oil drill ready production and exploration opportunities which could be rapidly executed should global oil prices recover to a reasonable level to justify capital investment."

During this timeframe the Corporation has had many operational and financial accomplishments:

• The drilling of the recent Clarinete-2ST well and its combined test results of over 30 MMscf/d in October, 2015.

• The drilling of Oboe-1 and its combined test results of over 66 MMscf/d (11,579 boe/d), with the associated reserves not currently booked,

• The completion of the upgrade, on schedule, of the Canacol owned Jobo gas processing plant to now process 80 MMscf/d of gas.

• The current commissioning and testing of the completed Promisol Jobo gas plant to process an additional

  100 mmcf/d of gas, bringing Canacol's total gas processing capability to 180 MMscf/d.

• The tying-in of both Clarinete-1 and Clarinete-2ST to the Jobo plant via a 12 km 6" flow-line, such that both are now capable of delivering gas.

• The strategic investment with Cavengas for C$79 million in September, 2015, which allowed for both a partial repayment of debt and the ability to maintain a flexible capital expenditure program as the corporation continues to focus on developing its substantial natural gas portfolio.

Additionally, Canacol has been actively reducing its costs in 2016:

• A planned 2016 Capex budget of $52 million, down 37% from the $82 million spent in calendar 2015.

• Continued reductions on LLA-23 costs, to post six months ended December 31, 2015, operating costs of

  $8.74/boe, almost half of the $15.90/boe for the twelve months ended June, 2015.

• Aggressive G&A reductions, including staff reductions.

  The Corporation's recently released December 31, 2015 NI 51-101 compliant reserves reports showed marked increases during 2015 as a result of gas drilling, and allowed the Corporation to post some of the best metrics in the industry. Highlights included:

• Proven developed producing ("PDP") reserves increased by 110% since June 30, 2015, to total 28.4 MMboe at December 31, 2015.

• Proved plus probable ("2P") reserves totaled 79.2 MMboe at December 31, 2015, with a before tax value discounted at 10% of $1.3 billion, being C$9.44 per share.

• Achieved a 2P reserve replacement of 1,013%, based on calendar 2015 gross reserve additions of 30.3 MMboe, being more than 10 times of those produced in the same period.

• Achieved a 1P reserve replacement of 656% based on calendar 2015 gross proven reserve additions of 19.7 MMboe.

• Achieved 2P finding and development costs ("F&D") of $1.81/boe for its gas assets and $2.85/boe as a corporate total for calendar 2015.

• Recorded 2P finding, development and acquisition costs ("FD&A") of $2.44/boe for its gas assets and

  $3.38/boe as a corporate total for calendar 2015.

• Recorded a 2P reserves life index ("RLI") of 24 years based on 2015 production, and a 10 year RLI based on expected future gas production of 90 MMscfpd upon the completion of the Promigas pipeline expansion (1P RLI being 16 years and 7 years, respectively).

Looking forward to the remainder of 2016, management shall remain focused on:

1) Disciplined capital spending with anticipated capex of $52 million predicated on a WTI price of $30/bbl for the first half of 2016, and $35/bbl for the second half of 2016,

2) Continuing to grow Canacol's Colombian gas reserves and production base through its exploration program targeting 100 BCF (18 MMboe) of unrisked reserve potential, which has commenced with the recently announced success at Oboe-1 which tested at a combined rate of 66 MMscfpd,

3) Initiating the planning and construction of a new gas pipeline which will send 100 MMscpfd of new Canacol gas production to the Caribbean coast of Colombia in 2018, and

1. Maintaining Canacol's large inventory of light oil drill ready production and exploration opportunities which could be rapidly executed should global oil prices recover to a reasonable level and justify capital investment.

   
   

   Highlights for the Three and Six Months Ended December 31, 2015

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

   Financial, operating and reserves highlights of the Corporation include:

   • Proven developed producing ("PDP") reserves and deemed volumes increased 110% to 28.4 million boe at December 31, 2015 compared to 13.5 million boe at June 30, 2015. Total proved ("1P") reserves and deemed volumes increased 3% to 53 million boe at December 31, 2015 compared to 51.5 million boe at June 30, 2015.

   • Total pre-tax NPV-10 PDP reserve and deemed volume value increased 99% to $570.5 million at December 31, 2015 compared to $286.7 million at June 30, 2015, and total pre-tax NPV-10 1P reserve and deemed volume value increased 16% to $936.4 million at December 31, 2015 compared to $810.2 million at June 30, 2015.

   • Average sales volumes decreased 21% to 9,010 boepd for the three months ended December 31, 2015 compared to 11,403 boepd for the same period in 2014. Average sales volume decreased 14% to 9,869 boepd for the six months ended December 31, 2015 compared to 11,522 boepd for the twelve months ended June 30, 2015.

• Average daily production volumes decreased 23% to 9,064 boepd for the three months ended December 31, 2015 compared to 11,822 boepd for the same period in 2014. Average daily production volumes decreased 15% to 9,760 boepd for six months ended December 31, 2015 compared to 11,504 boepd for the twelve months ended June 30, 2015. The overall decrease in production volumes in the three months ended December 31, 2015 compared to the same period in 2014 is primarily due to production declines from LLA-23 and Rancho Hermoso and other, as well as decreased gas production due to pipeline capacity being down for further construction, offset by increases in tariff oil production from Ecuador. LLA-23 oil production decreased in the three months ended December 31, 2015 compared to the three months ended September 30, 2015 as the prior quarter included flush production associated with the workovers performed during the quarter.

• Petroleum and natural gas revenues for the three months ended December 31, 2015 decreased 55% to $16.5 million compared to $36.4 million for the same period in 2014. Petroleum and natural gas revenues for the six months ended December 31, 2015 decreased 74% to $38.4 million compared to $149 million for the twelve months ended June 30, 2015. Adjusted petroleum and natural gas revenues, inclusive of revenues related to the Ecuador Incremental Production Contract (the "Ecuador IPC") (see full discussion in MD&A), for the three months ended December 31, 2015 decreased 45% to $24 million compared to $43.9 million for the same period in 2014. Adjusted petroleum and natural gas revenues for the six months ended December 31, 2015 decreased 70% to $53.9 million compared to $177.9 million for the twelve months ended June 30, 2015.

• Average corporate operating netback for the three months ended December 31, 2015 decreased 13% to

  $21.96/boe compared to $25.14/boe for the same period in 2014. Average corporate operating netback for the six months ended December 31, 2015 decreased 20% to $22.38/boe compared to $28.05/boe for the twelve months ended June 30, 2015. Operating corporate netback is inclusive of results from the Ecuador IPC.

• Adjusted funds from operations for the three months ended December 31, 2015 decreased 62% to $8.5 million compared to $23 million for the same period in 2014. Adjusted funds from operations for the six months ended December 31, 2015 decreased 73% to $23.7 million compared to $87.4 million for the twelve months ended June 30, 2015.

• The Corporation recorded a comprehensive loss of $84.5 million for the three months ended December 31, 2015 compared to a comprehensive loss of $46 million for the same period in 2014. The comprehensive loss for the three months ended December 31, 2015 was mainly driven by non-cash items that did not affect the core business of the Corporation. Most significantly, the non-cash impairment expense on development and production assets of $44.6 million, the non-cash depletion and depreciation expense of $13.9 million, the non- cash deferred income tax expense of $8.8 million, and the non-cash exploration expense of $8.7 million. The Corporation recorded a comprehensive loss of $103.5 million for the six months ended December 31, 2015 compared to a comprehensive loss of $106 million for the twelve months ended June 30, 2015. The comprehensive loss for the six months ended December 31, 2015 was mainly driven by non-cash items that did not affect the core business of the Corporation. Most significantly, the non-cash impairment expense on development and production assets of $44.6 million, the non-cash depletion and depreciation expense of

  $26.5 million, the non-cash deferred income tax expense of $12.3 million, and the non-cash exploration expense of $8.7 million.

• Capital expenditures for the three and six months ended December 31, 2015 were $22.4 million and $44.7 million, respectively, while adjusted capital expenditures, inclusive of amounts related to the Ecuador IPC, were $22.9 million and $48.9 million, respectively. Capital expenditures for the three and six months ended December 31, 2015 included non-cash decommissioning costs of $7.9 million and $10.7 million, respectively, and non-cash capitalized stock-based compensation of $0.5 million and $0.9 million, respectively.

• At December 31, 2015, the Corporation had $43.3 million in cash and $61.7 million in restricted cash.

Financial	Three months ended December 31, 2015	Three months ended December 31, 2014	Change	Six months ended December 31, 2015	Twelve months ended June 30, 2015	Change
Petroleum and natural gas revenues, net of royalties Adjusted petroleum and natural gas revenues, net of royalties (2) Cash provided by operating activities Per share - basic ($) Per share - diluted ($) Adjusted funds from operations (1) (2) Per share - basic ($) Per share -diluted ($) Comprehensive loss Per share - basic ($) Per share - diluted ($) Capital expenditures, net, including acquisitions Adjusted capital expenditures, net, including acquisitions (1)(2) Cash Restricted cash Working capital surplus, excluding non-cash items (1) Long-term bank debt Total assets Common shares, end of period (000s)	16,472	36,404	(55%)	38,430	149,047	(74%)
	23,953	43,878	(45%)	53,852	177,937	(70%)
	4,974	31,743	(84%)	19,276	64,445	(70%)
	0.03	0.29	(90%)	0.14	0.58	(76%)
	0.03	0.29	(90%)	0.13	0.58	(78%)
	8,473	22,952	(62%)	23,690	87,395	(73%)
	0.05	0.21	(76%)	0.17	0.79	(78%)
	0.05	0.21	(76%)	0.16	0.78	(79%)
	(84,466)	(45,970)	84%	(103,495)	(106,022)	(2%)
	(0.54)	(0.43)	26%	(0.72)	(0.96)	(25%)
	(0.54)	(0.43)	26%	(0.72)	(0.96)	(25%)
	22,394	78,403	(71%)	44,693	217,342	(79%)
	22,867	87,228	(74%)	48,947	243,108	(80%)
				December 31,	June 30,
				2015	2015	Change
	43,257			45,765	(5%)
	61,721			61,772	-
	46,310			62,883	(26%)
	248,228			267,023	(7%)
	668,349			669,742	-
	159,266			126,434	26%
Operating	Three months ended December 31, 2015	Three months ended December 31, 2014	Change	Six months ended December 31, 2015	Twelve months ended June 30, 2015	Change
Petroleum and natural gas production, before royalties (boepd) Petroleum (3) Natural gas Total (2) Petroleum and natural gas sales, before royalties (boepd) Petroleum (3) Natural gas Total (2) Realized sales prices ($/boe) LLA-23 (oil) Esperanza (natural gas) Clarinete (natural gas) Ecuador (tariff oil) (2) Total (2) Operating netbacks ($/boe) (1) LLA-23 (oil) Esperanza (natural gas) Clarinete (natural gas) Ecuador (tariff oil) (2) Total (2)	5,523	8,586 (36%)		6,253	7,999 (22%)
	3,541	3,236 9%		3,507	3,505 -
	9,064	11,822 (23%)		9,760	11,504 (15%)
	5,468	8,187 (33%)		6,370	8,010 (20%)
	3,542	3,216 10%		3,499	3,512 -
	9,010	11,403 (21%)		9,869	11,522 (14%)
	28.56	58.62 (51%)		31.89	59.91 (47%)
	28.77	25.12 15%		27.67	25.04 11%
	31.37	- n/a		31.37	- n/a
	38.54	38.54 -		38.54	38.54 -
	31.20	45.55 (32%)		32.18	45.76 (30%)
	12.02	30.78 (61%)		16.74	34.91 (52%)
	24.03	20.04 20%		23.27	20.62 13%
	20.78	- n/a		20.78	- n/a
	38.54	38.54 -		38.54	38.54 -
	21.96	25.14 (13%)		22.38	28.05 (20%)

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.

3. Includes tariff oil production and sales related to the Ecuador IPC.