21
March 2017
March 2017
2 2
Forward Looking Statements
This presentation may include certain forward looking statements. All statements other thanstatements of historical fact, included herein, including, without limitation, statementsregarding 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 theCorporation. There can be no assurance that such statements will prove to be accurate, andactual results and future events could differ materially from those anticipated in suchstatements. All of the forward looking statements contained in this presentation are qualifiedby these cautionary statements and the risk factors described above. Furthermore, all suchstatements are made as of the date this presentation is given and Canacol assumes noobligation to update or revise these statements.
Barrels of Oil EquivalentBarrels of oil equivalent (boe) is calculated using the conversion factor of 5.7 Mcf (thousandcubic 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 anenergy equivalency conversion method primarily applicable at the burner tip and does notrepresent a value equivalency at the wellhead.
AcresAcres represents gross acres
Production and ReservesProduction represents net before royaltyReserves represent 2P reserves and before tax NPV‐10 as of December 31, 2015
USDAll dollar amounts are shown in US dollars, unless indicated otherwise
3
Ecuador
140 280 420 560
Km
Colombia
S. Pacific Ocean
Canacol
• Dual‐listed TSX and BVC• Enterprise value $696 MM• TSX share price CDN $3.84• Ownership by insiders ~21%
• Year end 2016 2P reserves 85 MMboe• Pre‐tax NPV‐10 $1.3 B
CDN $8.79/share • 1P/2P reserve replacement 166% / 194% y/y• Avg. gas F&D cost US $2.52/boe(1) or
US $0.44/mcf(1)• Reserve life 13 yrs.
• Substantial exploration 21 blocks /potential 3 MM acres
CanacologyA history of discovery
Shale Oil
Light Oil
Light Oil
Natural Gas
(1)Trailing 2‐yr average
(1)Measured from June 2008 to December 2016 or 2.0 MMbls of 2P reserves to 85 MMbls
85% gas
+52% CAGR in 2P reserves(1)
13‐yr. reserve life
35
43
0
3
2P reserves in MMboeoil gas
17 20
65 72
7 8 11 18
18
23
14
13
'09 '10 '11 '12 '13 '14 '15 '16
7985
4
3 key components• Dry natural gas – record cash flow• ‘13 → present 6 discoveries (86% success)
>315 BCF (>55 MMboe)
• Gas produced ~45 BCF
• Light oil • ‘08→ present 10 discoveries (71% success)• Oil produced ~18 MMbls• Matchless oil field 58 / 60 wells (97% success)
developer
• Shale oil option• ‘14 discovery• Partner ConocoPhillips• Prospective resources 185 MMbls(2)
CanacologyA portfolio approach
Strong Reserve Adds Stimulating Production Growth
Canacol’s gas production forecast
5
>40k
In boepd
16k
23k
Projected +60% CAGR
Fixed priced gas contracts offer stable cash flowsProduction mix
~90% insensitive
High netback natural gas
>80%
Tariff oil
Light oil
Current Exit '17 Exit '18
Canacol’s Competitive Advantage
Pursuing dry natural gas that features stable pricingQuarterly average MMbtu
1 2 3 4 5
$30
$15
WTI oil price sensitivity
$60
$45
Oil prices at zero? Canacol generates >$100MM EBITDAX EBITDAX in US$ MM
$106 MM
$117
$127$138
$149 MM
6
CANACOL$5+/MMbtu
~80% operating margin
EUROPE
USA
CANADA
Oil at zero
$‐
$2
$4
$6
$8
$10
$12
$14
$16
Mar'14
Jun'14
Sep'14
Dec'14
Mar'15
Jun'15
Sep'15
Dec'15
Mar'16
Jun'16
Sep'16
Dec'16
• Netbacks beat the top 8 most economic plays in the Marcellus and Montney
Kakw
a (N
est 2
)
Sunrise/Su
nset
SW PA Su
per R
ich Gas
Sept
imus
/Gro
undb
irch
SW PA Rich Gas
Daw
son
Susq
ueha
nna
NE PA
$10 $10 $10 $9$8
$16
$14$12
Top 8 most economic plays in the Marcellus and Montney(2017e pricing $3.25/MMbtu )
Cana
col(Nelso
n ga
s field)
Vs. North America Gas(1)Canacol avg. well 8‐mo. payoutAvg. Marcellus/Montney 23‐mo.
2017e operating netback(1)Pre‐tax $/boe
$24
Vs. Colombia OilConsistent cash flow13‐yr. RLI is higher than Colombian benchmark (~6‐yrs.)
Competitor
Source: CanaccordGenuity(1) Top 8 Marcellus and Montney plays only. Canacol data represents 2016e pre‐tax $/boe.
Gas onlycorporate
Historical operating netbackPre‐tax $/boe
Canacol‐Gas Is The Leader In Cash Generation
$5
$15
$25
$35
$45
$55
$65
$75
Mar'14
Jun'14
Sep'14
Dec'14
Mar'15
Jun'15
Sep'15
Dec'15
Mar'16
Jun'16
Sep'16
Dec'16
A B C7
8
Caribbean Sea
7 gas fields785k acres100% WI
La Creciente
ChuchupaBallena
Canacol gas blocksGas pipelineNew gas pipeline
CompressorGas field10 km
(1) Average annual decline for each of the trailing 3 years(2) UPME, December 2016
Canacol’s Sweet Spot
• Gas supply decline ‐20%/yr. or 100 MMcf/d from 3 mature gas fields(1)• Chuchupa, Ballena and La Creciente
• Gas demand +3% through 2025e(2)
• Thermoelectric, refining and industrial customers driving demand
• In 2015, the Caribbean region consumed 37% of Colombia’s gas(2)
Filadelfia
Caribbean Sea
Paiva
Caracoli
7 gas fields785k acres100% WI
La Creciente
ChuchupaBallena
Canacol gas blocksGas pipelineNew gas pipeline
CompressorGas field10 km
9
SPVPipeline Co.
Two New Gas Pipelines To Nearly Triple Canacol’s Gas Business To 230 MMcf/d
+40 MMcf/d= 130 MMcf/d
Dec ‘17
• Build 6‐in. pipeline Jobo→ Sincelejo• Add 2 compressor stations
• Twin Jobo→ Sincelejo pipeline
• Construct new pipeline Cartagena→Baranquilla
• ↑ power at Filadelfia and Paivacompressor stations
Pipeline Co.
+100 MMcf/d= 230 MMcf/d
Dec ‘18
90 MMcf/dJan → Nov ‘17
• 6 discoveries representing over 300 BCF in trailing 3‐yrs.
• 2P F&D of $2.52`/boe for 2 yr. period ended Dec 2016
• Large inventory of prospects / leads
• Balanced resource capture strategy
• …3 step opportunity to 2018 exit• 90→130 →230 MMcf/d
Expansive Inventory of Exploration Prospects & Leads
1010
3D
Nispero
Nelson CDO
Palmer3D
3D
Trombon
Clarinete
Oboe
Nelson Porquero
Jobo
VIM 5100% WI
Esperanza/ VIM 21100% WI
10 km
Top Cienaga de Oro time structure map (5 X 3D seismic merged (615km2), reprocessed and remapped in 2016)
Canacol’s fields & discoveriesprospects / leads
Cañahuate CDO
Cañahuate‐1 Exploration Target
Up to 70 ft. of CDO gas pay in offset Coral wells 3D seismic demonstrates stacked AVO events –potentially gas‐charged reservoir targets
• Spud March 24, 2017• Exploration target Cienaga de Oro reservoir sandstones • D&A / Depth $3.5 MM / ~9k ft. MD• Days to drill/test 6 weeks• Short tie back to Jobo processing plant (~5km)• Potential for up to 3 additional locations 11
A
B
CAÑAHUATE‐1
CAÑAHUATE‐B
CAÑAHUATE‐D
CAÑAFLECHA‐1
COR‐4
COR‐5
JOBO‐6
500 MHKW = Highest Known Water
CAÑAHUATE‐1 CAÑAHUATE‐B B
500 M
1,000
1,200
1,400
1,600
1,800
BASEMENT
INTRA CDO
TOP CDO
MID MIOCENE UNC
Fluid Factor (AVO) section across CAÑAHUATE‐1 and CAÑAHUATE‐C
CAÑAHUATE‐C
CDO depth structure map
A
Ecuador140 280 420 560
Km
Colombia
S. Pacific Ocean
Canacol
Ecuador
Llanos
Middle Magdalena
Canacol’s oil portfolio17 of 21 total blocks targeting oil (83% of total)2.2 MM oil‐focused acres
(1) For the 3 months ended 12/31/16(2) As of 12/31/2016(3) Represents Canacol’s gross working interest economic prospective oil resources 12
DeGolyer & MacNaugton prospective resource report , October 2014In MMbls Best, P50 High, P10 Mean3 blocks(3) 168 263 185
Three Oil LeversAble to dial up / dial‐down with oil price environment
• Oriente Basin, Ecuador +
• Llanos Basin, Colombia + • Production ~1,300 bopd(1)
• Matchless explorer 10/14 or 71% success• 2P reserves 3 MMbls(2)• Prospects and leads >20
• Middle Magdalena Basin, Colombia• Shallow ‐ Investigate potential in an established play
• Deep ‐ Blocks / net acres 7 / ~750kKey partner ConocoPhillips
560
1
2
3
12
Conventional Fractured ShaleVMM 2 Mono Capuchino‐1 (“MC‐1”) oil exploration well, 67% WI
BAMA‐1 MC‐1
1,000
1,500
2,000
2,500
MIOCENE
500 M
LISAMA
BASAL LISAMAUMIR
CRETACEOUS
SIMITRI
ROSABLANCA
GIRON
MC‐1
MA‐1• MC‐1 well update in late March 2017• Exploration target 2,000 ft. MD prospective interval• Drill cost / depth $7.1 MM (net) / ~12k ft. MD• Days to drill 75• Mean unrisked EUR 9 MMbls(1)
resource potential• Up to 10 additional well locations
1 KM
N
BMA‐1MC‐1
A
Offset to MA‐1, drilling MC‐1Depth structure map
(1) Management’s estimate of unrisked prospective resources 13
• Five light oil discoveries made along Rancho Hermoso fault trend
• Exceptional on‐block track record for exploration success (83%, 5/6 wells)
• Three additional trends remain undrilled
• Multiple prospects are drill‐ready
• At $55 ‐ $60/Bbl WTI• Target four drill ready prospects situated
along flow line for short and immediate tie‐in e.g. Pumara prospect
• Significant upside in success case
Successful Oil Exploration on Block LLA‐23With a lot more running room
14
Las Maracas~12 MMbls
Macarenas~6 MMbls
Cravo E~8 MMbls
Cravo S~9 MMbls
Labrador
3
2
1
91% WI>110k acres
LLA 23
Rancho Hermoso
Maltes
Tigro
Pantro
Leono
Labrador
Labrador
Spud Mar 31, ’17: Drill Pumara‐1
5 potential pay zones
Canacol’s fields & discoveries
Prospects
Leads
3 Opportunities trends to repeat
3D seismic
Competitor oil fields
Leono‐Pointer fluids flow line
Pointer CPF
1
LLA‐23: Pumara‐1 ExplorationTarget #1 Gacheta/Ubaque | Target #2 Mirador/Barco/C7
Fault dependent anticlinal closure mapped on 3D
NW
SE
Pumara‐Aappraisal
Pumara‐1
Pumara‐Bappraisal
Ubaque TVDSS map
1,500
1,750
2,000
2,250
2,500
2,750 NW SE500 M
INLINE 197 over PUMARA
Leon
C1
Mirador / Barco
C7
Gacheta / Ubaque
Paleozoic
• Exploration target Up to 5 stacked reservoirs • Drill cost / Depth $3.3 MM / ~11k ft. MD
• Days to drill 34• Potential for up to 2 additional locations• Short tie in to flow line (~250M) 15
A Rare Dislocation in Equity Value
in MM, except /share amounts
TSX share price (3/26/17) CDN $3.84
FD shares outstanding(1) 176
Market capitalization(2) US $506
Net debt(3) $190
Enterprise value US $696
Cash(3) $66
Buy Canacol at a discount to the value of our existing gas contracts BT NPV‐10, US $MM
(1) Includes in‐the‐money options based on CDN $3.84/share price (2) Converted from CDN → USD exchange rate (0.75) as of 3/26/17(3) As of 12/31/16
Stable production under LT contracts
$778
16
Despite superior economics, buy Canacol at adiscount to North America shale gas companies
$696
$1,167
$163
$263
EV 2P Gas 2p Oil Possible Gas + Oil
New US $265 Million Senior Secured Term Loan Financial house in order
17
• Refinanced 2 loans• BNP term loan $180 MM / L+4.75%• Apollo sub notes $75 MM / L+8.50%
• 1 senior secured term loan• Credit Suisse + syndicate $265 MM / L+5.50%• Green Shoe funds w/in 1‐yr. Up to $40 MM• Cost reduction +110 basis points
or 1.1%/yr.• Beginning Mar ’19 13 equal quarterly
installments
• Debt service AFTER Canacol starts generating >$300 MM EBITDAX/yr.
• Dedicate capital to high netback production instead of debt service
Canacol’s corporate debt profile
$‐
$50
$100
$150
$200
$250
'17 '18 '19 '20 '21 '22
Mar ‘1913 equal quarterly installments
Mar ‘22 maturity
US $265 MM
● ● ● ● ● ● ● ● ● ● ● ● ●
$ in MM
●
230 MMcf/d
130 MMcf/d
90 MMcf/d
Exit ‘18230 MMcf/d
$300 MM EBITDAX
Appendix – The Leader In Cash GenerationComparing payback periods by play
Septimus Montney GasDeep Basin Falher GasEast Lloyd Heavy Oil
Kakwa Falher/Wilrich GasPermian (MWC) ‐ Regan/Upton
Bilbo/Karr Montney Liquids‐Rich GasHaynesville Gas (Tier 1)
Permian (MWC) ‐ Midland/Martin/HowardKarr Dunvegan Oil
McMullen/LaSalle Eagle Ford OilFort Berthold Bakken/Three Forks Oil (2 Mi Hz.)
West Septimus Montney Liquids‐Rich GasBigstone Montney Liquids‐Rich Gas (ERH)
Karnes Trough Eagle Ford Rich Gas/CondensateKaybob Duvernay Rich Gas/Condensate (Tier 1)
Ferguson Bakken/Exshaw OilGordondale Montney Oil
Sunrise Montney GasNE PA (Susquehanna Core) Marcellus Lean Gas
SW SK Viking Oil (55 mboe)Parkland/Doe Montney Gas
Dawson Montney GasSE SK Viewfield Bakken Oil
Tower Montney OilKarnes Trough Eagle Ford OilSW SK Upper Shaunavon Oil
SE SK Frobisher/Alida OilKakwa (Nest 2) Montney Liquids‐Rich Gas
Woodenhouse Heavy Oil (Vt.)Canacol ‐ Clarinete / Oboe ‐ CdO Fm
Canacol ‐ Nelson ‐ CdO Fm
0 6 12 18 24 30 36 42 48 Payback period (in months)
Canacol – Nelson CdO FmCanacol – Clarinete / Oboe – CdO Fm
Natural gas
Oil
Liquids
10 months8 months
Source: Scotiabank estimatesPlay mid‐cycle break‐even costs – base case (P50) ‐ $60/Bbl WTI, $3.25/mcf Henry Hub, Colombia sales price $5/mcf
18
Appendix – Generating Top Tier ReturnsComparing IRRs by play
22
Woodenhouse Heavy Oil (Vt.)Canacol ‐ Nelson ‐ CdO Fm
Kakwa (Nest 2) Montney Liquids‐Rich GasCanacol ‐ Clarinete / Oboe ‐ CdO Fm
SE SK Frobisher/Alida OilDawson Montney Gas
Tower Montney OilSW SK Upper Shaunavon OilParkland/Doe Montney GasSW SK Viking Oil (55 mboe)SE SK Viewfield Bakken Oil
NE PA (Susquehanna Core) Marcellus Lean GasKarnes Trough Eagle Ford Oil
Sunrise Montney GasGordondale Montney Oil
Ferguson Bakken/Exshaw OilWest Septimus Montney Liquids‐Rich Gas
Kaybob Duvernay Rich Gas/Condensate (Tier 1)Bigstone Montney Liquids‐Rich Gas (ERH)
Septimus Montney GasBilbo/Karr Montney Liquids‐Rich Gas
Kakwa Falher/Wilrich GasSE SK Border Midale Oil
Karnes Trough Eagle Ford Rich Gas/CondensateKarr Dunvegan Oil
Bantry Glauconite OilGreater Ferrier Upper Mannville Gas
Inga/Fireweed Montney Rich Gas/Condensate
Canacol – Clarinete / Oboe – CdO Fm
Canacol – Nelson CdO Fm
93%
108%
Natural gas
Oil
Liquids
0 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%IRR%Source: Scotiabank estimatesPlay mid‐cycle break‐even costs – base case (P50) ‐ $60/Bbl WTI, $3.25/mcf Henry Hub, Colombia sales price $5/mcf
19
Higher Netback / Productivity = A Competitive EdgeComparing mid‐cycle breakeven costs by play
20
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
Break Even [Henry Hub ‐ US$/mcf]
Source: Scotiabank estimatesPlay mid‐cycle break‐even costs – base case (P50) ‐ $60/Bbl WTI, $3.25/mcf Henry Hub, Colombia sales price $5/mcf
Natural gas
Liquids
$1.05$1.28
Contact
Calle 113 No. 7‐45Torre B – Oficina 1501 Bogota, Colombia
+571.621.1747 IR‐[email protected]
8th Avenue Place4500, 525 – 8th Avenue South WestCalgary, Alberta T2P 1G1 Canada
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