Canacol Energy Ltd. provides the results of its year-end reserves update for its operated Rancho Hermoso and Entrerrios oil fields in Colombia, its non-operated Capella heavy oil discovery in Colombia, and its non-operated oil fields in Brazil. The Corporation has increased net 2P reserves by 347%, from 1.247 million barrels of oil (mmbo) in 2008 to 4.334 mmbo in 2009, with a corresponding increase in NPV10 of 72% from US$55.817 million in 2008 to US$96.171 million in 2009.
Charle Gamba, President and CEO of Canacol, commented:
“I am pleased to report that in 2009 we have significantly increased our reserves base and the value of those reserves, mainly through exploration success in Colombia. The Corporation anticipates adding additional reserves to its base with continued appraisal and development drilling activity at its Capella heavy oil discovery in Colombia throughout 2010. The Corporation has also established a significant conventional oil exploration position with interests in 15 exploration contracts covering over 2.4 million net acres. The execution of our exploration programs in 2010 and 2011 has the potential to add significantly to our existing production and reserves base.”
The Corporation operates two producing oil fields, Rancho Hermoso (100% working interest) and Entrerrios (60% working interest), located in the Llanos Basin of Colombia. Each field has two contracts governing the production. One contract, a Risk Service Contract, provides a tariff revenue for each barrel produced from the Mirador interval in the Rancho Hermoso field, and the remaining three contracts are production sharing type arrangements whereby the company is entitled to an equity share of the volumes produced net of a royalty payment to the government. The Corporation has a 10% working interest in the Capella heavy oil discovery in Colombia, located on the Ombu Exploration and Production Contract in the Putumayo - Caguan Basin. The contract was awarded to the operator under the new terms defined by the Agencia Nacional de Hidrcarburos, whereby production is subject to a sliding scale royalty payable to the government. Royalty is determined by various production and reserves thresholds, and varies from a low of 8% to a high of 23%. The royalty level for Capella production is discounted by 25% due to the heavy nature of the crude.
In Brazil the corporation has a non-operated 47.5% working interest in 4 producing oil fields located on the Reconcavo Basin.
The evaluations, effective June 30, 2009, were conducted internally with the assistance of the company’s independent reserve evaluator Ryder Scott (Colombia - Rancho Hermoso and Entrerrios Fields), Netherland Sewell (Colombia - Capella oil discovery), and Degolyer and MacNaughton (“D&M”) (Brazil), and are in accordance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities. The reserves are provided on a net after royalty basis in units of barrels of oil (bbl) using a forecast price deck in US dollars. The estimated values may or may not represent the fair market value of the reserve estimates.