Canacol Energy Ltd T.CNE

CNE results

[tigris72poo]

Impressive F&D costs and Recycle Ratios.  Doesn't get much better than this IMO.


Canacol Energy Ltd. Reports a 6% Increase in EBITDAX and an 11% Increase in Adjusted Funds from Operations per Share in Q4 2020
CALGARY, ALBERTA - (March 18, 2021) - 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 and year ended December 31, 2020.  Dollar amounts are expressed in United States dollars (“USD”), except as otherwise noted.
Charle Gamba, President and CEO of the Corporation, commented: "Canacol’s success continued into 2020 despite the COVID-19 global pandemic.  2020 EBITDAX of $187.5 million increased 12% over 2019 levels, and fourth quarter 2020 EBITDAX continued to strengthen, posting an increase of 9% over the third quarter 2020 levels. Despite a 2020 reduced drilling program which included only six of our planned twelve wells due to COVID-19 (and only two of those being exploration wells), the Corporation managed to more than replace its produced reserves, which is a direct indication of the high quality of our exploration drilling portfolio. The Corporation has historically achieved significant conventional natural gas exploration and development drilling success from our assets located in the Lower Magdalena Valley. Since 2013, we have added 771 billion cubic feet of proved plus probable conventional natural gas reserves (“2P”) from commercial success in thirty-three out of thirty-seven drilled wells, representing a 31% compound annual growth rate (“CAGR”) at an industry-leading three-year 2P finding and development cost of 84 USD cents per thousand cubic feet. With a portfolio of 162 identified prospects and leads containing mean unrisked prospective gas resource of 4.7 trillion cubic feet, according to the Corporation’s 2019 third party resource report, we anticipate many more years of successful exploration drilling resulting in the movement of gas resources into proven and probable reserves."
Highlights for the three months and year ended December 31, 2020
(Production is stated as working-interest before royalties)
Financial and operational highlights of the Corporation include:

• The Corporation’s conventional natural gas proved developed producing reserves (“PDP”) increased 10% since December 31, 2019, totalling 277 billion cubic feet (“Bcf”) at December 31, 2020 (140% PDP reserves replacement ratio). The Corporation’s conventional natural gas total proved plus probable reserves (“2P”) increased 2% since December 31, 2019, totalling 637 Bcf at December 31, 2020 (122% 2P reserves replacement ratio). The Corporation’s conventional natural gas proved reserves (“1P”) increased 0.2% since December 31, 2019, totalling 395 Bcf at December 31, 2020 (101% 1P reserves replacement ratio).
• 1P and 2P finding and development cost (“F&D cost”) were $1.18 per Mcf and $0.84 per Mcf for the three year period ending December 31, 2020, respectively.
• The Corporation achieved a 2.7x and 4.4x 2P recycle ratio for the one and three year period ending December 31, 2020, respectively.  The one-year recycle ratio was calculated based on natural gas netback for the year ended December 31, 2020 of $3.57 per Mcf, and the three-year recycle ratio was calculated based on weighted average natural gas netback for the three year ended December 31, 2020 of $3.71 per Mcf.

• The Corporation achieved a 2.1x and 3.2x 1P recycle ratio for the one and three year period ending December 31, 2020, respectively.  The one-year recycle ratio was calculated based on natural gas netback for the year ended December 31, 2020 of $3.57 per Mcf, and the three-year recycle ratio was calculated based on weighted average natural gas netback for the three year ended December 31, 2020 of $3.71 per Mcf.
• The Corporation achieved a 1P and 2P Reserves life index (“RLI”) of 6.4 years and 10.3 years, respectively, based on annualized fourth quarter 2020 conventional natural gas production of 170,087 Mcfpd or 29,840 Boepd.

• Realized contractual natural gas and liquefied natural gas (“LNG”) sales decreased 6% to 169.8 MMscfpd for the three months ended December 31, 2020, compared to 180.8 MMscfpd for the same period in 2019. Natural gas and LNG production volumes decreased 6% to 170.1 MMscfpd from 181 MMscfpd during the three months ended December 31, 2020, compared to the same period in 2019. The decrease is primarily due to the decrease in spot market sales as a result of the COVID-19 pandemic. 
• Realized contractual natural gas and LNG sales increased 20% to 171.6 MMscfpd for the year ended December 31, 2020, compared to 142.6 MMscfpd for the same period in 2019. Natural gas and LNG production volumes increased 19% to 171.1 MMscfpd from 143.5 MMscfpd during the year ended December 31, 2020, compared to the same period in 2019. The increase is due to the completion of the pipeline connecting the Corporation’s natural gas processing facility to Cartagena, Colombia in late Q3 2019 (the “2019 pipeline expansion”), offset by lower than anticipated spot market sales due to the COVID-19 pandemic.
• Total natural gas revenues, net of royalties and transportation expenses decreased 5% to $60.9 million for the three months ended December 31, 2020, compared to $64.2 million for same period in 2019, primarily due a reduction in spot market sales as a result of the COVID-19 pandemic. Total natural gas revenues, net of royalties and transportation expenses increased 13% to $240.3 million for the year ended December 31, 2020, compared to $212.4 million for same period in 2019, mainly attributable to the increase of natural gas production due to the 2019 pipeline expansion.  

• Adjusted funds from operations increased 7% and 16% to $35.3 million and $145.1 million for the three months and year ended December 31, 2020, respectively, compared to $33 million and $124.9 million for the same periods in 2019, respectively.  Adjusted funds from operations per basic share increased 11% and 14% to $0.20 per basic share and $0.80 per basic share for the three months and year ended December 31, 2020, respectively, compared to $0.18 per basic share and $0.70 per basic share for the same periods in 2019, respectively. 
• EBITDAX increased 6% and 12% to $45.9 million and $187.5 million for the three months and year ended December 31, 2020, respectively, compared to $43.1 million and $167.5 million for the same periods in 2019, respectively.
• The Corporation realized a net income of $0.9 million and a net loss of $4.7 million for the three months and year ended December 31, 2020, respectively, compared to a net income of $25.4 million and $34.2 million for the same periods in 2019, respectively.  The net loss realized during the year ended December 31, 2020 is solely due to the non-cash deferred tax expense of $51.4 million mainly due to an increase in the valuation allowance (refer to the “Income Tax Expense” section of the MD&A for further details).

• The Corporation’s natural gas and LNG operating netback was $3.58 per Mcf in the three months ended December 31, 2020 and 2019.  The average sales price, net of transportation increased due to higher spot market gas sales prices during the three months ended December 31, 2020, however the increase was offset by an increase in royalties and operating expenses per Mcf. The Corporation’s natural gas and LNG operating netback decreased 7% to $3.57 per Mcf for the year ended December 31, 2020, as compared to $3.82 per Mcf in the same period in 2019. The decrease is mainly due to lower spot sales prices due the COVID-19 pandemic and higher royalties mainly due to increased production at the Corporation’s VIM-5 block, which is subject to a higher royalty rate.
• Net capital expenditures for the three months and year ended December 31, 2020 were $29.4 million and $84 million, respectively. Net capital expenditures included non-cash adjustments related to decommissioning obligations and right-of-use leased assets of $3.1 million and $1.4 million for the three months and year ended December 31, 2020, respectively.
• As at December 31, 2020, the Corporation had $68.3 million in cash and cash equivalents and $73.4 million in working capital surplus.

Outlook
For the remainder of 2021, the Corporation is focused on the following operational objectives: 1) the drilling of twelve exploration, appraisal, and development wells in a continuous program with the objective of targeting a 2P reserves replacement ratio of more than 200 percent, 2) the acquisition of the 655 square kilometers of 3D seismic on the Corporation’s VIM-5 and SSJN-7 blocks to expand its exploration prospect inventory, 3) the execution of a definitive agreement to construct a new gas pipeline from the Jobo natural gas processing facility to Medellin, Colombia which will increase the Corporation’s natural gas sales by an additional 100 MMscfpd in 2024, and 4) the continued strengthening of our environmental, social and governance strategy and reporting.
 

FINANCIAL & OPERATING HIGHLIGHTS
(in United States dollars (tabular amounts in thousands) except as otherwise noted)

Financial	Three months ended December 31,									Year ended December 31,
		2020			2019		Change				2020			2019		Change
Total natural gas, LNG and crude oil revenues, net of royalties and transportation expense		63,976			65,795		(3	%)			246,804			219,522		12	%
Adjusted Funds from operations(1)		35,251			32,999		7	%			145,122			124,915		16	%
Per share  – basic ($)(1)		0.20			0.18		11	%			0.80			0.70		14	%
Per share  – diluted ($)(1)		0.20			0.18		11	%			0.80			0.69		16	%
Net income (loss) and comprehensive income (loss)(2)		921			25,432		(96	%)			(4,743)			34,247		n/a
Per share – basic ($)		0.01			0.14		(93	%)			(0.03)			0.19		n/a
Per share – diluted ($)		0.01			0.14		(93	%)			(0.03)			0.19		n/a
Cash flow provided by operating activities		26,477			35,388		(25	%)			152,325			106,470		43	%
Per share – basic ($)		0.15			0.20		(25	%)			0.84			0.60		40	%
Per share – diluted ($)		0.15			0.20		(25	%)			0.84			0.59		42	%
EBITDAX(1)		45,941			43,144		6	%			187,528			167,515		12	%
Weighted average shares outstanding – basic		179,764			179,238		—				180,646			178,266		1	%
Weighted average shares outstanding – diluted		179,764			181,412		(1	%)			180,646			180,395		—
Capital expenditures, net dispositions		29,366			21,514		36	%			83,964			100,487		(16	%)
											Dec 31, 2020			Dec 31, 2019		Change
Cash and cash equivalents											68,280			41,239		66	%
Restricted cash											—			4,524		(100	%)
Working capital surplus											73,404			50,676		45	%
Total debt											415,209			392,946		6	%
Total assets											749,792			754,062		(1	%)
Common shares, end of period (000’s)											179,515			180,075		—
Operating	Three months ended December 31,									Year ended December 31,
		2020			2019		Change				2020			2019		Change
Production, before royalties(1)
Natural gas and LNG (MMscfpd)		170,087			180,986		(6	%)			171,126			143,524		19	%
Colombia oil (bopd)		287			309		(7	%)			291			351		(17	%)
Total (boepd)		30,127			32,061		(6	%)			30,313			25,531		19	%
Realized contractual sales, before royalties(1)
Natural gas and LNG (MMscfpd)		169,763			180,753		(6	%)			171,600			142,603		20	%
Colombia oil (bopd)		300			301		—				286			356		(20	%)
Total (boepd)		30,083			32,012		(6	%)			30,392			25,374		20	%
Operating netbacks(1)
Natural gas and LNG ($/Mcf)		3.58			3.58		—				3.57			3.82		(7	%)
Colombia oil ($/bopd)		23.04			27.08		(15	%)			18.57			25.92		(28	%)
Corporate ($/boe)		20.44			20.49		—				20.34			21.80		(7	%)

1.  Non-IFRS measures – see “Non-IFRS Measures” section within the MD&A.
2. During the year ended December 31, 2020, the Corporation realized a net loss of $4.6 million solely as a result of a non-cash deferred tax expense of $51.2 million related mainly to an increase in the valuation allowance (refer to the “Income Tax Expense” section within the MD&A for further details).

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This press release should be read in conjunction with the Corporation’s audited consolidated financial statements and related Management’s Discussion and Analysis (“MD&A”).  The Corporation’s has filed its audited consolidated financial statements, related MD&A and Annual Information Form as at and for the year ended December 31, 2020 with Canadian securities regulatory authorities.  These filings are available for review on SEDAR at www.sedar.com.