Canacol Energy Ltd. Reports a 15% Increase in Realized Gas Sales and 42% Increase in Funds from Operations Per Share for Q1 2019

Source Press Release
Company Canacol Energy Ltd. 
Tags Strategy - Corporate, Financial & Operating Data
Date May 08, 2019

Canacol Energy Ltd. (“Canacol” or the “Corporation”) (TSX:CNE; OTCQX:CNNEF; BVC:CNEC) is pleased to report its financial and operating results for the three months ended March 31, 2019.  Dollar amounts are expressed in United States dollars, except as otherwise noted.

Charle Gamba, President and CEO of the Corporation, commented: “The first quarter marked a strong start to 2019, with a 42% increase in funds from operations per share to $0.17 per share, compared to the first quarter of 2018, driven by a 15% increase in realized contractual gas sales. This was achieved via the delivery of the first 20 MMscfpd of the 100 MMscfpd of new transportation capacity to Cartagena via the Promigas expansion in December 2018.  We also hit on the first two of our eight well drilling program for 2019, with Palmer-2 encountering 81 feet of net gas pay and recently testing 29 MMscfpd and Nelson-7 encountering 221 feet of net gas pay.  Most importantly, our ongoing focus on lowering operating expenses is being reflected this quarter with a 29% reduction compared to fourth quarter 2018.  Looking forward to the remainder of 2019, we are about to spud Acordeon-1, our first exploration well of the year.  Acordeon-1 is located approximately three kilometers to the southeast of the Clarinete field, and has the potential for a significant increase in reserves.  The Promigas expansion between Jobo and Cartagena is on target to deliver an additional 80 MMscfpd of new transportation capacity in June 2019, which will lift gas sales to approximately 215 MMscfpd for the remainder of 2019.  Finally, progress is being made towards signing sales and shipping agreements for a new pipeline that will transport 100 MMscfpd of new gas sales to Medellin in 2022.  We anticipate being in a position to execute the relevant agreements needed to start the project in the third quarter of this year.

Highlights for the three months ended March 31, 2019

(Production is stated as working-interest before royalties)

Financial and operational highlights of the Corporation include:

  • Realized contractual natural gas sales increased 15% to 122 MMscfpd for the three months ended March 31, 2019, compared to 106.3 MMscfpd for the same period in 2018.  Average natural gas production volumes increased 17% to 123.3 MMscfpd for the three months ended March 31, 2019, compared to 105.3 MMscfpd for the same period in 2018. The increases are primarily due to the increase in natural gas sales as a result of the additional sales relating to the completion of the Sabanas pipeline;
  • Total natural gas and crude oil revenues, net of royalties and transportation expenses for the three months ended March 31, 2019 increased 4% to $49.4 million, compared to $47.6 million for same period in 2018.  The increase is mainly attributable to the increase of natural gas production, offset by the decrease of crude oil production due to the sale of the Corporation’s oil assets;
  • Funds from operations increased 39% to $29.9 million for the three months ended March 31, 2019, compared to $21.6 million for the same period in 2018;
  • Funds from operations per share increased 42% to $0.17 per share for the three months ended March 31, 2019, compared to $0.12 per share for the same period in 2018;
  • The Corporation realized an EBITDAX of $39.8 million for the three months ended March 31, 2019, compared to $33.6 million for the same period in 2018;
  • The Corporation recorded a net income of $6.3 million for the three months ended March 31, 2019, compared to a net income of $8.3 million for the same period in 2018;
  • The Corporation’s natural gas operating netback increased 9% to $4.03 per Mcf in the three months ended March 31, 2019, compared to $3.71 per Mcf for the same period in 2018. The increase is mainly attributable to: i) a 5% increase in realized natural gas sales prices, net of transportation expense to $4.97 per Mcf, compared to $4.73 per Mcf for the same period in 2018 and ii) a 25% reduction of operating expenses to $0.30 per Mcf for the three months ended March 31, 2019, compared to $0.40 per Mcf for the same period in 2018;
  • Net capital expenditures for the three months ended March 31, 2019 was $34.7 million. Net capital expenditures included non-cash additions relating to decommissioning obligations of $1.2 million and a non-cash addition of $5.9 million relating to right-of-use leased assets recognized during the three months ended March 31, 2019;
  • Since the Corporation obtained necessary approval to conduct a normal course issuer bid (“NCIB”) to purchase outstanding common shares of the Corporation (“Common Shares”) on the open market, in accordance with the rules of the Toronto Stock Exchange in November 2018, the Corporation has purchased 785,890 Common Shares for $2.4 million; and
  • At March 31, 2019, the Corporation had $39 million in cash and $4.3 million in restricted cash.

Palmer-2 Tests 28.7 MMscfpd

The Palmer-2 well drilled in the first quarter of 2019 was recently tested at a final rate of 28.7 MMscfpd at a flowing tubing head pressure of 846 psi with no water from the Cienega de Oro sandstone reservoir.  The step rate drill stem test was conducted over 38 hours during four flow periods.

Financial  Three months ended March 31,   
2019  2018  Change   
       
Total natural gas and crude oil revenues, net of royalties and transportation expense  49,404  47,629 
       
Funds from operations(1)  29,907  21,581  39 
Per share  – basic ($)(1)  0.17  0.12  42 
Per share  – diluted ($)(1)  0.17  0.12  42 
       
Net income and comprehensive income  6,274  8,278  (24  %) 
Per share – basic ($)  0.03  0.05  (40  %) 
Per share – diluted ($)  0.03  0.05  (40  %) 
       
EBITDAX(1)  39,822  33,611  18 
       
Weighted average shares outstanding – basic  177,547  176,572 
Weighted average shares outstanding – diluted  179,637  178,759  —   
       
Capital expenditures, net, including acquisitions  34,725  40,194  (14  %) 
       
  Mar 31,
2019 
Dec 31,
2018 
Change   
       
Cash and cash equivalents  38,998  51,632  (24  %) 
Restricted cash  4,308  4,196 
Working capital surplus  51,173  60,782  (16  %) 
Total debt  394,318  388,222 
Total assets  720,095  705,003 
       
Common shares, end of period (000’s)  177,403  177,462  —   
       
Operating  Three months ended March 31,   
2019  2018  Change   
       
Natural gas and crude oil production, before royalties(1)       
Natural gas (Mcfpd)  123,291  105,262  17 
Colombia oil (bopd)(2)  433  1,924  (77  %) 
Total (boepd)(3)  22,063  20,391 
       
Realized contractual sales, before royalties(1)       
Natural gas (Mcfpd)  122,025  106,334  15 
Colombia oil (bopd)(2)  440  1,896  (77  %) 
Total (boepd)(3)  21,848  20,551 
       
Operating netbacks(1)       
Natural gas ($/Mcf)  4.03  3.71 
Colombia oil (bopd)(2)  23.64  33.21  (29  %) 
Corporate ($/boe)(3)  23.00  22.25 
         
  1. Non-IFRS measures – see “Non-IFRS Measures” section within MD&A.
  2. Decreased in the three months ended March 31, 2019, due to the sale of the Corporation’s petroleum assets in 2018.
  3. The Corporation has excluded results relating to the Ecuador IPC in the prior period for comparative purposes.

This press release should be read in conjunction with the Corporation’s unaudited interim condensed consolidated financial statements and related Management’s Discussion and Analysis.  The Corporation’s has filed its unaudited interim condensed consolidated financial statements and related Management's Discussion and Analysis as of and for the three months ended March 31, 2019 with Canadian securities regulatory authorities.  These filings are available for review on SEDAR at .

Source: EvaluateEnergy® ©2019 EvaluateEnergy Ltd