June 2018
The Leader In Natural Gas Production Growth Forward Looking - - PowerPoint PPT Presentation
The Leader In Natural Gas Production Growth Forward Looking - - PowerPoint PPT Presentation
June 2018 The Leader In Natural Gas Production Growth Forward Looking Statements This presentation may include certain forward looking statements. All statements other than statements of historical fact, included herein, including, without
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Forward Looking Statements
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This presentation may include certain forward looking statements. All statements other than statements of historical fact, included herein, including, without limitation, statements regarding future plans and objectives of Canacol Energy Ltd. (“Canacol” or the “Corporation”), are forward-looking statements that involve various risks, assumptions, estimates, and uncertainties. These statements reflect the current internal projections, expectations or beliefs of Canacol and are based on information currently available to the Corporation. There can be no assurance that such statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements. All of the forward looking statements contained in this presentation are qualified by these cautionary statements and the risk factors described above. Furthermore, all such statements are made as of the date this presentation is given and Canacol assumes no obligation to update or revise these statements. Barrels of Oil Equivalent Barrels of oil equivalent (boe) is calculated using the conversion factor of 5.7 Mcf (thousand cubic feet) of natural gas being equivalent to one barrel of oil. Boes may be misleading, particularly if used in isolation. A boe conversion ratio of 5.7 Mcf:1 bbl (barrel) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Production and Reserves Production represents net before royalty. Reserves represent 2P reserves and before tax NPV-10 as of December 31, 2017 USD All dollar amounts are shown in US dollars, unless indicated otherwise
NASA at night, 2018
gas
Why Natural Gas In Colombia?
3 Bogota Colombia Caribbean Sea
70km Canacol’s gas E&P blocks
- il E&P blocks
gas
- South America’s oldest/most stable democracy
- 3rd largest South American economy
- 2016 peace treaty = security
- OECD newest member
- Accenture Consulting ranks Colombia’s oil & gas
regulatory reform In the top 3(1)
- Regulatory stability
- Natural gas in Colombia
- Demand growth
+3% growth/y(2)
- Supply decline
- 15%/y(2)
- Avg Natural Gas residential penetration 65%(3)
- Low NGV penetration(3)
- % of total energy consumption 26%(3)
(1) Accenture “Strategy Energy”, March 2016 (2) For Colombia’s Caribbean Coast market (3) Promigas Annual Market Report
Cartagena Barranquilla Cerro Matos0
Colombia’s Natural Gas Supply Deficit
X-Canacol, Caribbean natural gas supply -15%/yr. demand +3%/yr. No Domestic Competition Chevron ~282 MMcf/d Hocol ~ 30 MMcf/d Frontera ~25 MMcf/d Transportation infrastructure capacity is key challenge to growth Ituango hydroelectric project delayed 2 years / 2700 Mw.
Hocol 30 MMcf/d Frontera 25 MMcf/d Mature Chevron fields ~282 MMcf/d
Canacol
114-129MMcf/d(1)
10 km Canacol gas blocks Promigas pipeline expansion Existing gas pipelines
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- 200
400 600 800 1,000 1,200 '17 '18e '19e '20e '21e '22e '23e '24e '25e '26e Guajira Canacol Cusiana-Cupiagua
(1) 2018 guidance estimate (2) Source: Wood Mackenzie Total Colombia demand represents low case (3) Represents the mid point of 2018e guidance
122 MMcf/d(3) → 230 MMcf/d
Colombia gas supply (2)
In MMcf/d
Related to Ituango coming online. Now delayed 2-yrs Anticipated new start date for Ituango
Canacol’s Consistent Growth
- Solid gas portfolio
- E&P contracts / net acres
5 / 1.1 MM
- Take/pay fixed wellhead gas pricing $4.75/mcf(1)
- Robust operating margins
>70%
- Access to key transportation infrastructure
- Continuous production and reserves growth
- Est.‘18→‘19 production growth
+89%
- Outperforms industry peers in expected production
growth rate
- 2P reserves adds over the trailing 4-yrs.
409 BCF
- Outstanding nat. gas explorat success
86%
- Team created $1B+ of value from 3 gas
acquisitions
40,300
Natural gas production growth profile
(1) Based on current gas contracts, net of transportation costs
70 81 114-129 230 '16a '17a '18e '19e
In MMcf/d In boe/d
20,000- 22,600
+89% +44% +16%
12,400 14,200 40,400
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Reserve reports as of 12.31.17 Includes Canacol’s oil assets in Ecuador (1) Pre-tax NPV-10 for Canacol’s 2P gas reserves as of 12.31.2017 (2) Represents gross mean unrisked resources from Gaffney, Cline & Associates resource report, 12.31.16 (3) Expected monetary value discounted at 10%, Gaffney, Cline & Associates resource report, 12.31.16 (4) As of 12.31.2017
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- Natural gas success
- Acquisitions
$170 MM
- Capital invested
$244 MM $414 MM
- Value created
$1.4 B(1)
- Exploration drilling success
86%
- ‘17 2P reserve replacement
399%
- Solid reserve base underpins value
- Blocks/net acres
5 / 1.1 MM
- 2P gas reserves
505 BCF
- Resource upside
>2 TCF(2)
- Resource value
$789 MM(3)
- Delivering sustainable cash flow from a
16-yr. reserve life
- 2P reserves F&D
$0.63/Mcf(4)
17 20 65 72 89 7 8 11 18 18 23 14 13 14 '09 '10 '11 '12 '13 '14 '15 '16 '17 35 43 79 85
103
+35% CAGR
Continuous Reserves Growth
Discovered 409 BCF in 2P reserves over the trailing 4-years
2P reserves in MMboe
- il gas
Natural gas
$1.4 B in value(1) 16-yr. reserve life
Cartagena Barranquilla Cerro Matos0
Dec ’12 +20 MMcfd
- Corporate acquisition of Shona Energy
- 80 km pipeline to Cerromatoso ferro
nickel mine
Apr ‘16 +65 MMcfd -Corp Gas Sales 85 MMcfd(1)
- Promigas-funded 190 km pipeline
Dec ‘17 +40 MMcfd -Corp Gas Sales 120 MMcfd (2)
- Private-funded 6-in. 82km line Jobo →
Bremen (“Sabanas”)
Dec ‘18 +100 MMcfd -Corp gas sales 230 MMcfd(3)
- Promigas-funded expansion 20-in. line
70 km Jobo → Sincelejo 100 km Cartagena → Barranquilla
2021 +100 MMcf/d -Corp gas sales 330MMcfd(3)
- Future pipeline project to Barranquilla
- r Medellin
10 km Canacol gas blocks Pipeline expansion Existing gas pipelines
Expanding Infrastructure To Achieve 230 MMcf/d in 2019
Jobo Station
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Bremen Sincelejo To Medellin
(1) Avg Gas Sales 2H´16 (2) 2018 mid-point Guidance Estimate (3) Gas Sales Estimates
2018 Guidance & Key Objectives
Preoperative Seismic, workovers &
- ther
$30MM Exploration & Development $33MM
$80 MM capital budget for 2018
US $ in MM Preoperative seismic, workovers & other $30MM
- Key objectives
- 1. Achieve 230 MMcf/d exit rate
- 2. Target >100% conventional reserves replacement
- 3. Divest oil assets
- 4. Retain non-conventional shale oil assets operated by
ConocoPhillips for upside potential
- 5. Become pure-play, Colombian gas E&P company
Drilling Schedule 2018 Block 1Q 2Q 3Q 4Q Exploration Gaiteros-1 VIM-5 Breva-1 VIM-21 Borojo-1 Esperanza Appraisal/development Pandereta-3 VIM-5 Chirmia-1 VIM-5 Canahuate-3(East) VIM-21 Canahuate-2(West) VIM-21
- 2018 guidance
- Gas
114 – 129 MMcf/d
- Oil
1,700 boepd
- 7 wells
4 exploration & appraisal 3 development workovers
- Expand gas processing
From 200 → 330 MMcf/d facilities
Facilities & Equipment $17MM
Fully funded from existing cash and cash flows
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VIM 21 Esperanza
Chirmia Clarinete Field 143 BCF Cañandonga Toronja
VIM 5
Oboe Trombon Nispero Nelson Field 193 BCF Canahuate Pandereta
5 km
Canacol gas 3D seismic Flow line Lead Prospect ‘18 prospect “E” Exploration “A” Appraisal (1) Gaffney Cline report, effective 12/31/16 Please see page 2 for cautionary statements
- 12 out of 14 successful exploration wells
- 86% success
- 2 reservoirs
- Ciénaga de Oro (“CDO”) (deep)
- Porquero (shallow)
- Key stats
- 44 prospects / 2 TCF upside(1)
A Conventional Natural Gas Success Story
Breva
Jobo Station
Palmer
Cañahuate 3(E) Cañahuate 2(W)
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Avg. Net pay Test rate Well cost
- Ft. TVD
MMcf/d $ MM CDO 85 42 $4.5 Porquero 59 30 $3.9 Avg. 72 38 $4.2
3rd Consecutive Shallow Porquero Gas Discovery
Breva-1 – knowing that red means gas
- 3-for-3
- Emerging and important new Porquero play type
- Canacol investigating future Porquero upside
across 1.1 MM net acres
1 KM AVO extraction over Mid Porquero SST marker
Nuez-1 Datil-1 Cachuate-1
VIM-21
Toronja-1 14 ft. BREVA-1 29 ft.
Arandala-1 Carambolo-1
Breva-1 success yields at least 5 more locations
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Porquero exploration Breva-1 Toronja-1 Nelson-6 May '18 Jun '17 Nov '16 Test rate (MMscfpd) in process 24 23 Pay (ft. TVD) 29 14 39 Porosity 27% 20% 19% Days to drill 13 6 9 Total depth (ft. MD) 7,560 7,200 6,400
Replaying CDO success with AVO in the Porquero
Nelson-5 79 ft. Nelson-6 39 ft.
3D
Includes net pay in ft. TVD
Ecuador 140 280 420 560 Km
- S. Pacific Ocean
Colombia
Middle Magdalena Basin Shale oil
Feb ‘18 Ecuador sold
- $36.4 MM in cash proceeds
Jun ‘18 Sale of Conventional Oil, Colombia(1)
- $20 MM in cash proceeds +
- $20 MM in Arrow common stock immediately
distributed to shareholders (free trading shares)
- Anticipated Close
mid-July 2018
- 8 Blocks
Llanos, Caguán-Putumayo & Middle Mag Convent
- Liabilities & commit
Explorat Commit $54 MM Financ Guarant $21.1MM OBC Liability $9.0MM ARO Liability $3.9MM
Divest Oil Assets
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(1) Subject to fullfillment of certain conditions
La Luna Shale Oil
Middle Magdalena Basin
- Source rock >2.3 trillion barrels in S.A.
- Canacol’s unconventional portfolio
- Operating partner
ConocoPhillips
- Non–operated WI 20%
- 2 Blocks
VMM2 & VMM3
- VMM2
Carried in 1st Explorat Phase
- D&M prospective
Best P50 – 168 MMbls
resources report(1) High P10 – 263 MMbls
- 2019 – 2020 Conoco Phillips Activity
- Late ´17 Applied for drill & frack license
6 horiz wells / VMM2 & VMM3
- Early ´19 Anticipated date to receive permit
- ´19 Plan VMM3 –drill & frack 1 horiz well
- ´20 Plan VMM2 –drill & frack 1 horiz well
(CNE fully carried)
140 280 420 Km 560
Ecuador Colombia
La Luna Shale depositional limit Middle Magdalena 12
VMM2 & VMM3 Blocks
(1) Degoyler & McNaughton Unconventional Prospective Resource Report, Oct 2014. Pro forma for Blocks VMM2 & VMM3
MMcf/d
Realized contractual gas sales growth
76 85 106 114-129 230
3Q '17 4Q '17 1Q '18 '18e '19e +12% +25% $6.5 $6.1 1Q '17 1Q '18
US $ in MM, except BOE data
Lower corporate G&A costs
$4.28/boe $3.27/boe
- 24%
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Solid Results 1Q’ 18
Growing a highly profitable business
Funds from operations
US $ MM X-Ecuador
$15.9 $21.5 1Q ´17 1Q ´18
High operating margins
35%
US $/Mcf
Nat gas revs $5.14
Transp ($0.41) Royalties ($0.62) Opex ($0.40) Gas operating Netback $3.71 72% margin US $/Boe
$29.30
$21.15
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(1) Assumes similar netbacks & G&A to current figures (2) Includes in-the-money options based on CDN $4.22/share price (3) Converted from CDN → USD exchange rate (0.77) as of 6.8.18 (4) As of 3/31/18 (5) Fluctuating three month Libor +5.5% as of 4/26/18
US $ in MM, except CDN $/share
TSX $/share (6/8/18) CDN $4.22 Fully diluted shares outstanding(2) 181 Market capitalization(3) $ 585 Net debt(4) $ 259 Enterprise value $ 844 Insider ownership 22%
Capital structure May ‘18: Closed $320 MM of sr. unsecured notes
- Replaced former credit facility
- Reduced annual interest rate by ~75 basis points
- Exchanged floating ~8%(5) for fixed 7.25%
- Deferred amortization payments
- Re-pay principal at maturity or 2025
As of 03.31.2018
- Cash $61 MM
- Restricted Cash $13 MM
- Working Capital Surplus $95 MM
TSX: CNE | BVC: CNE.C
Financial Summary
81
MMcf/d
114-129
MMcf/d
230
MMcf/d
+60% +96%
$88 $130-$150 $275 (1)
Increasing Ebitda Generation
US$ in MM ‘17 ’18E
With new Pipeline planned for 2019