Oboe 1 tests at 26 MMscf gas per day
CANACOL ENERGY LTD. TESTS 26 MMSCFPD (4,561 BOEPD) FROM FIRST OF THREE PLANNED FLOW TESTS AT OBOE 1 AND CURRENT GAS SALES OF 51 MMSCFPD IN COLOMBIA Canacol Energy Ltd.'s Oboe 1, an appraisal well drilled in the company's Clarinete gas field on the Vim 5 exploration and production (E&P) contract, has tested at a maximum rate of 26 million standard cubic feet per day (4,561 barrels of oil equivalent (boepd)) of dry gas with no water from the Cienaga de Oro (CDO) reservoir. This flow test is the first of three separate tests planned on three separate gas bearing reservoir intervals within the CDO reservoir encountered in the Oboe 1 well. Canacol, through its wholly owned subsidiary CNE Oil & Gas S.A.S., holds a 100% operated interest in the VIM 5 E&P contract. Gas Sales Realized contractual gas sales currently total approximately 51 MMscfpd with the Promigas S.A. ("Promigas") pipeline expansion on schedule to ramp Canacol's gas sales and production up to 90 MMscfpd by March 31, 2016. Realized contractual gas sales for the months of November 2015, December 2015 and January 2016 were 18.4 MMscfpd, 25.5 MMscfpd and 30.0 MMscfpd respectively, reflecting the additional sales related to the Promigas pipeline expansion. Realized gas sales netbacks for the months of December 2015 and January 2016 were US$ 25.61 / barrel of oil equivalent ("boe") and US$ 26.83/boe respectively. Based on the latest Promigas pipeline expansion schedule, Canacol estimates that gas sales will average approximately 80 MMscfpd (14,035 boepd) for calendar 2016 (including approximately 90 MMscfpd for the last three quarters of calendar 2016) at an anticipated average realized price of US$ 5.60 / thousand standard cubic feet ("mscf") (US$ 31.92/ boe), with an average netback of approximately US$ 4.56/mcf (US$ 26.00/boe), generating approximately US$ 163 million of gross revenues. The Corporation's capital expenditure budget for calendar 2016 is anticipated to be approximately US$ 52 million excluding capital lease payments relating to the Jobo-gas processing plant, which a subsidiary of Promigas will operate. Oboe 1 Test Results The Oboe 1 well was spud on January 19, 2016 and reached a total depth of 9,750 feet measured depth ("ft md") on February 7, 2016. Oboe 1 encountered 158 feet of net gas pay with average porosity of 23% within multiple stacked sandstone reservoirs in the primary Tertiary-aged Cienaga de Oro target, representing the thickest gas pay encountered in the Cienaga de Oro in the Clarinete discovery thus far. The CDO sandstone reservoir was perforated between 8,170 and 8,212 ft md within the first interval to be tested. Flow testing of this interval achieved a final rate of 26 MMscfpd (4,561 boepd) of dry gas using a 46 / 64 inch choke with a tubing head pressure of 2,135 pounds per square inch with no water at the end of a 60 hour flow test period. The final flow rate was registered at the absolute measurement limit of the testing equipment. The first test interval is currently shut in for a pressure build up that is expected to conclude in 3 days. Three separate reservoir intervals are planned to be tested: the interval between 8,116 and 8,683 ft md (the subject of this reported flow test), the interval between 7,309 and 8,106 ft md (the subject of the second planned flow test), and the interval between 6,556 and 7,270 ft md, (the subject of the third planned flow test). Upon the conclusion of the pressure build up of the first test interval, a removable plug will be placed above the tested interval, and Canacol will execute flow testing of the second interval. The Corporation anticipates providing the flow test results of the second interval within one week.