1 - Canacol Energy Ltd.

June 2016
Solving Colombia’s Gas Supply Deficit
Focused Portfolio
• Dual‐listed Supply‐scarce Caribbean natural gas market •
•
•
•
Natural Gas
Enterprise value
Exploration success (‘08→)
Insider ownership
’16e guidance
• YE 2015 2P reserves Light Oil
S. Pacific Ocean
Shale Oil
Colombia
Pre‐tax NPV‐10
Value/share
Y/Y reserves replacement
2P F&D cost
Long reserves life
• Substantial exploration
resource potential(1)
Light Oil
Ecuador
Canacol
70
140
•
•
•
•
•
280
420
560
Km
(1) Management’s estimate of net unrisked
recoverable resource potential
• 13x 2P reserves
• Blocks / gross acres
TSX and BVC
US $800 MM
65%
~25%
16 – 17,000 boepd
79 MMboe
US $1.3 B
CDN $9.44
1,103%
$2.85/boe
~10 yrs.
1,045 MMboe
23 / 3.4 MM
2
Key Portfolio Components
Large gas reserves underpin production and cash flow for a decade
+52% CAGR in 2P reserves(1)
• Dry natural gas – [stable cash flow] 2P reserves in MMboe
79(2)
oil gas
•
•
•
•
14 Over the last 5‐yrs, Canacol has discovered more natural gas than every other Colombian explorer, combined
43
65 18
18
7
'09
8
11
82% gas
• 2P reserves
• LLA 23 exploration
resource potential(3)
14 MMbls
33 MMbls
20
17 '11
2 acquisitions
3 large discoveries
372 BCF (65 MMboe)
>3 TCF • Light oil optionality – [flexible approach]
35
23
‘12 and ‘14
‘13 → present
2P reserves
Exploration resource
potential(3)
'13
• Large shale oil opportunity – [call option]
'15
(1) Includes 21 MMboe of production since inception through 12/31/15
(2) Excludes 21 MMboe of production since inception through 12/31/15
(3) Management’s estimate of net unrisked recoverable resource potential (4) DeGolyer & MacNaugton unrisked mean prospective oil resources, effective June ‘14
• Exploration resource
potential(4)
458 MMbls
3
Strong Sales Growth
+45% projected CAGR in corporate sales ‘16 guidance and sales mix
Expressed in boepd
40,000+ Natural gas
80%
88% insensitive Tariff oil to oil volatility
8%
~20,000 16,500 Light oil
12%
10,933 1Q '16
'16e avg.
Current
Mid '18 ‐ after
pipeline
• Produced >20 MMboe since inception
• Operator of all production and facilities in Colombia
• Natural gas
100% avg. WI
• Light oil
91% avg. WI
•
Recent, large natural gas discoveries driving shift from oil to natural gas
4
Canacol Doesn’t Lose Sleep Over Oil Prices
Pursuit of dry natural gas that features stable pricing
Oil prices at zero? Canacol generates ~$100MM EBITDAX
Best gas pricing
EBITDAX in US$ MM
$153 MM
$12
$142
$130
Quarterly average MMbtu
$60
$118
$107 MM
$9
$45
LT gas contracts with price escalation
$6
$30
Canacol
US
$3
$15
Canada
$0/Bbl
1
$0
2
3
WTI oil price sensitivity
4
5
Mar
'14
Jun
'14
Sep
'14
Dec
'14
Mar
'15
Jun
'15
Sep
'15
Dec
'15
Mar
'16
2016e
5
Canacol‐Gas Ranks #1 Mid‐cycle break even costs ‐ $50/bbl WTI, $2.75/Mcf
$/bbl
$65 Mckenzie/Williams Three Forks oil
$63 Williams County Bakken oil
$59 Permian Delaware Basin Bone Spring oil
$58 Permian Midland Basin Wolfcamp (shallow) oil
invested from ‘09 to present $56 Tuscaloosa Marine Shale oil
$55 McKenzie County Bakken oil
$54 SCOOP Woodford oil
$52 Eagle Ford Black oil
$50 STACK Maramec / Woodford Oil
• N.A. shale oil and gas now largely uneconomic $47 Ft. Berthold Bakken / Three Forks oil
$44 Permian Delaware Basin Wolfcamp (tier 1) oil
$43 Permian Midland Basin Wolfcamp (deep) oil
$42 Ferguson Bakken/Exshaw oil
• Enter Canacol
 Breakeven < $5.00/boe
$41 Sanish and Parshall Bakken oil
$39 E. Pembina Cardium oil
$38 Gordondale Motney oil
Tower Motney oil
$36 SE SK Viewfield Bakken oil
$36 Karnes Trough Eagle Ford condensate
• Captured ~ 40% of all E&P capital $32 Source: Scotia Capital Playbook, October 2015
Barclays North American E&P research
Canacol‐gas < $5.00/boe
6
A Leader In E&P Capital Efficiency
Participate in our capex‐light growth
‘13 → ’15 cumulative capex
$MM
$807 Canacol‐gas
Peer avg.
Capex, x‐acquisitions ($ MM)
$97
$807
Production increase (boe/d)
10M
10M
8
73
$27
$12
Stable $26
Volatile $9 ‐ $28(1)
Wells drilled
1Q ‘16 netback ($/boe)
‘16 outlook ($/boe)
• Peers spent 8x more money to generate the same production increase
• Peers drilled 9x more wells
• Canacol is a leader in capital efficiency
$97 Canacol‐gas
Peer Avg.
(1) Range based on Brent oil price sensitivity: $35/Bbl to $55/Bbl
• One well / yr. to maintain current gas production
• $4.6 MM D&A cost per well
• ‘16e: spend $58 MM to generate $135 MM EBITDAX
7
Natural Gas Demand Greater Than Supply
Chuchupa 1
2
Ballena
Caribbean Sea
Barranquilla
2016
pipeline
2018
pipeline
• Supply decreasing 20% / yr. from coastal fields
• Three mature fields in blow‐down [‐100 MMcf/d per year decline](1)
1 Chuchupa 2 Ballena 3 La Creciente
• Demand increasing 3% / yr. for the past 10‐yrs. and projected to grow at 3‐4% through 2026
Cartagena
+100 MMcf/d
3
La Creciente
65 MMcf/d
Clarinete
• +65 MMcf/d from new 2016 pipeline 4 fields 100% WI
~785k acres
• Flows north / south
• Total production
• Gas EBITDAX/yr. 65 / 25 MMcf/d south
90 MMcf/d
$135 MM
Oboe
Jobo facility
Nelson
Palmer
25 MMcf/d
Cerro Matoso
mine
• +100 MMcf/d from planned 2018 pipeline
• Total production
190 MMcf/d
• Gas EBITDAX/yr. $310 MM
• By 2020e, Canacol will supply ~42% of the coast
15 30
60
90
120
Canacol Gas pipeline (1) Average annual decline for each of the trailing 2 years
Km
8
Epic Gas Deficit On Colombia’s Coast Plan to boost gas production to solve supply shortfall
Solving Colombia’s gas supply deficit • The Caribbean Coast had a balanced gas supply‐demand profile for decades
Gas supply‐demand forecast in MMcf/d
600
582
Supply shortfall
127 MMcf/d
25
477
• 3 mature fields in blow‐down
• 100 MMcf/d per year decline(1)
190
455
• Canacol began planning in 2012
Supply from Canacol
400
+165 MMcf/d
• ‘12 and ‘14
• ‘14 → present
• 2P reserves 2 acquisitions
3 large discoveries
372 BCF
265
200
Supply from three mature fields
‐212 MMcf/d
• Plan to 8x Canacol‐gas
• Solve 77% of the Caribbean’s lost supply
‐
'15
'16e
'17e
'18e
Source: Industry and Government Studies
(1) Average annual decline for each of the trailing 2 years
'19e
'20e
• Goal to backfill 165 MMcf/d of the 212 MMcf/d lost
• 127 MMcf/d of additional opportunity
9
Canacol’s Cluster Of Gas Discoveries
Robust reserves + the quest for exploration upside
4 blocks: 3 of 4 fields booked
• 2P reserves 372 BCF
La Creciente
• ~50 prospects / leads
• >3 TCF exploration
• Oboe to be booked at the end of June
3D seismic
VIM 19
100%
>3 TCF(1)
4 fields 3 new discoveries
100% WI
~785k acres
Oboe‐1
VIM 5
100%
Subcrop edge
Upper zone GWC
‐6,410 ft subsea
3D seismic
3
4
Clarinete
3km
Clarinete‐1
Oboe
Date
VIM 21
100%
Test (MMcf/d)
Jobo
facility
2
Clarinete‐2ST
10km
Esperanza
100%
Palmer
1
Cienaga de Oro time structure map
Nelson
Prospects / leads
Fields & discoveries
Canacol’s fields & discoveries
1 Dec ‘12 acquisition 2 Aug ’14 discovery 3 Dec ’14 discovery 4 Mar ’16 discovery
Pay (Ft.)
Porosity (%)
Clarinete‐1
Dec ‘14
44
149
26%
Clarinete‐2ST
Sep ‘15
30
127
23%
Oboe‐1
Mar ‘16
66
158
23%
47
145
24%
Average
(1) Management’s estimate of net unrisked recoverable resource potential 10
Gas Opportunities Continue To Multiply
Potential new pool at Nelson field – Porquero formation
Nelson‐5 Middle Porquero petrophysical interpretation
Gross Thickness 153 ft
Net Pay
62 ft
Porosity 31%
A
NELSON‐6
B
GWC‐5500’TVDSS
AVO Events
Nelson Field (Porquero Fm.)
Nelson‐5
Nelson‐4
Area 640 acres
Avg. Porosity 29%
GIIP
44 Bcf
A
Nelson‐2
Nelson‐3
• Potential for new gas pool at Nelson
• Up to 62 ft. reservoir net pay encountered in existing Nelson wells
• Nelson‐6 to spud in early 4Q ‘16
Nelson‐6
B
• Targeting shallow Porquero reservoir sandstones
• 31 Bcf EUR unrisked resource potential • $4.6MM D&A cost per well
Porquero net pay map (ft)
11
Large Resource Potential At Esperanza
Reduce exploration risk with the application of AVO technology
Top CDO depth structure map
AVO extraction: Top CDO (magenta marker) to Top CDO +25ms
ESPERANZA VIM‐5
N
S
3D seismic image
A
N
B
NISPERO‐1
Sucre‐2
PLIOCENE UNC
• Using 3D seismic data, Canacol is mitigating exploration risk by applying AVO seismic attribute analysis
• Nispero‐1 spud early 3Q ’16
Nispero‐1
• Targeting CDO sandstone reservoirs sealed by Porquero shale
• 40 Bcf EUR unrisked
resource potential $4.6MM cost (D&A)
AVO seismic attribute anomaly
BASEMENT
AVO Events
S
500 M
12
12
Successful Exploration on Block LLA‐23
With a lot more running room
Las Maracas
~12 MMbls LLA 23
Leono
91% WI
>110k acres
Pantro
Cravo S
~9 MMbls
Prospect/Leads
Wells
Gross Unrisked EUR (MMbbl)
3D prospects
13
20
Leads
5
16
Total
18
36
Tigro
Cravo E
~8 MMbls
• Five light oil discoveries made along Rancho Hermoso fault trend
Macarenas
~6 MMbls
1
Pumara Prospect
2
• Exceptional on‐block track record for exploration success (83%, 5/6 wells)
Maltes
Labrador
Labrad
or
• Three additional trends remain undrilled
• Multiple prospects are drill‐ready
Rancho Hermoso
Canacol’s fields & discoveries
Prospects
Leads
3
1
3 Opportunities trends to repeat
3D seismic
Competitor oil fields
Leono‐Pointer fluids flow line
Pointer CPF
• At $50/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
13
Pumara Prospect On Pumara‐1 well success case, targeting 5k bopd from 3 wells
Ubaque TVDSS map
Inline 197 over Pumara
C1
NW
C7
BARCO
SE
UBAQUE
PALEOZOIC
NW
Pumara‐1 (Exploration location) Pumara‐A (Appraisal well)
Pumara‐B (Appraisal well)
•
•
•
•
•
•
500 m
SE
Fault dependent anticlinal closure
Mapped on 3D seismic
Primary targets: Ubaque & Gacheta
Secondary targets: Mirador, Barco and C7
4 MMbls unrisked EUR resource potential
$3.8MM D&A well cost
14
Shale Oil Opportunity In Colombia
• World class shale oil
• Source rock to 2.3 trillion barrels discovered in Ecuador, Colombia and Venezuela(1)
• Comparable or superior characteristics to the Bakken and Eagle Ford (thickness, porosity, TOC pressure gradients)
Orinoco heavy oil belt
Venezuela
• Second largest shale oil land position behind Ecopetrol in Colombia
Colombia
Ecuador
0
Oil Fields sourced from La Luna
Middle Magdalena Valley Basin (MMV)
La Luna shale deposition limit
(1) James 2000, Journal of Petroleum Geology
(2) Only three of Canacol’s seven blocks
650 km
• 7 blocks
• Potential
• NPV‐10
749k net acres
458 MMbls of audited unrisked
prospective resource potential
$1.3 B(2)
• Early indications are positive
•
•
•
•
Farmed out acreage to Super Majors (‘11 – ‘12)
Two wells drilled de‐risked play (‘12 – ’15)
First frac planned this year by Conoco
Ideal location in producing hydrocarbon basin
15
Fractured Shale Potential To Be Tested On VMM 2
Top La Luna Structural Map
• 3D‐seismic defined naturally fractured La Luna Shale
Totumal Field (producing from fractured shale)
• Mono Araña‐1 well test
• IP 590 bbl/d
• Oil demonstrated to flow naturally (unstimulated) from 230 ft net pay
Mono Araña‐1
Guacari‐1
Mono Capuchino‐1
• Two wells planned for ’16 ‐ ’17
•
•
•
•
Mono Capuchino‐1 and Guacari‐1
66% WI
Each well has 2‐3 MMbls unrisked EUR potential $7.3MM D&A well cost
• Significant running room in a success case
16
Oil Exploration Upside
Light oil production upside forecast (unrisked)
30,000
• Large light oil prospects and leads inventory
25,000
• Dial up or down with oil price environment
20,000
• Light oil forecast
(bbl/d)
• 3x production from drill ready prospects
• >2x production from remaining prospects and leads
15,000
10,000
5,000
Years
0
1
2
3
4
Remaining Prospects (LLA‐23/VMM‐2)
Drill Ready Prospects (LLA‐23/VMM‐2)
Base Production (LLA‐23/Ecuador)
17
Projecting 60%+ Drop In Debt Multiple
Debt profile
Lower debt multiple to unlock Canacol’s equity?
Debt multiple to trailing 12‐month EBITDAX
Apollo
3.8x
3.4x
BNP
Start:
Eight equal installments
●
●
●
2.8x
2.6x
●
●
●
●
2.1x
●
1.4x
'16
Dec '17
'18
Sep '19
Dec '19
$MM
Loan
Drawn
Terms
Final Payment
BNP
$200
$180
L+4.75%
Sep ‘19
Apollo
$100
$75
L+8.50%
Dec ‘19
Dec '15
Mar '16
Jun '16e
• ’16e guidance
Sep '16e
Dec '16e
'17e
16 – 17,000 boepd
$58 MM capex
$135 MM ebitdax
18
A Rare Dislocation in Equity Value
You’re buying Canacol at a discount to the value of our existing gas contracts Advantage Canacol vs. five Colombian peers
Potential ~2x increase in share price (C$4.50)
BT NPV‐10, US $MM
CDN $/share 25
US $2,124 Stable production under LT contracts
US $193 20
US $1,102
2016e EV/DACF
US $800
US $800 15
~13x Industry avg.
CDN $5.23/share EV
10
2P gas
2p oil
Exploration
in MM, except /share amounts
TSX share price (6/23/16)
FD shares outstanding(1)
~6x CDN $4.50
5
CDN $4.50
Market capitalization(2)
Net debt(3)
0
Enterprise value
Source First Energy
3
5
7
9
11
13
15
Cash(3)
164
US $574
$226
US $800
$30
2P Reserve Life (years)
(1) Includes in‐the‐money options based on CDN 4.50/share price (2) Converted from CDN → USD exchange rate (0.78) as of 6/23/16
(3) As of 3/31/16
19
Investment Opportunity
Measuring 2015 – 2016e
Canacol
Peer avg.
North America Production growth
+63%
+17%
+11%
Capex $ growth
‐29%
+15%
+6%
$5.64 fixed
~$5.00 volatile
$1.58 volatile
Sensitivity to oil volatility
12%
>90%
88%
Gas netback ($/boe)
$26
$12
$9
EBITDAX growth 100%
< 15%
< 10%
G&A reduction
40%
Debt multiple
Decrease
Increase
Increase
Natural gas pricing ($/MMbtu)
F&D cost
$2.85
~$20
• Oil price trading at zero?
 Canacol generates over $100 MM in EBITDAX
• 2018 pipeline to boost EBITDAX: $135 → $310 MM / yr. TSX: CNE | BVC: CNE.C
Source: corporate filings and Barclays North American E&P research
20