Canacol Energy Ltd. is pleased to report its financial and operating results for the three months and year ended December 31, 2023. Dollar amounts are expressed in United States dollars, with the exception of Canadian dollar unit prices (“C$”) where indicated and otherwise noted.
Highlights for the three months and year ended December 31, 2023
Adjusted EBITDAX increased 2% and 11% to $53.1 million and $236.8 million for the three months and year ended December 31, 2023, respectively, compared to $52 million and $212.9 million for the same periods in 2022.
Conventional natural gas and crude oil proved plus probable reserves and deemed volumes (“2P”) before tax NPV-10 increased 10% to $2.1 billion at December 31, 2023, compared to $1.9 billion at December 31, 2022.
2P after tax NPV-10 increased 34% to $1.8 billion at December 31, 2023, compared to $1.3 billion at December 31, 2022. The significant increase in 2P after tax NPV-10 value is primarily impacted by the Corporation’s restructuring in the fourth quarter of 2022, the results of which are first incorporated into this year’s reserves report.
The Corporation’s natural gas and LNG operating netback increased 18% and 12% to $4.39 per Mcf and $4.11 per Mcf for the three months and year ended December 31, 2023, respectively, compared to $3.73 per Mcf and $3.68 per Mcf for the same periods in 2022. The increase is mainly due to an increase in average sales prices, net of transportation expenses, offset by an increase in operating expenses and royalties.
Total revenues, net of royalties and transportation expenses for the three months and year ended December 31, 2023 increased 17% and 11% to $79.7 million and $304.9 million, respectively, compared to $68 million and $274.2 million for the same periods in 2022, mainly due to higher average sales price, net of transportation expenses.
Adjusted funds from operations increased to $31 million for the three months ended December 31, 2023 compared to an outflow of $17 million for the same period in 2022. Adjusted funds from operations increased to $146.3 million for the year ended December 31, 2023, compared to $94.6 million for the same period in 2022. The increase is mainly due to an increase in EBITDAX combined with a decrease in current income tax expense.
Realized contractual natural gas sales volume decreased 6% and 2% to 164.8 MMcfpd and 178.3 MMcfpd for the three months and year ended December 31, 2023, respectively, compared to 175.6 MMcfpd and 182.4 MMcfpd for the same periods in 2022. The decrease is due to the unusual and unexpected decrease in the Corporation’s production capacity.
The Corporation realized a net income of $29.9 million and $86.2 million for the three months and year ended December 31, 2023, respectively, compared to a net income of $133.7 million and $147.3 million for the same periods in 2022.
Net cash capital expenditures for the three months and year ended December 31, 2023 were $72.2 million and $215.2 million, respectively, compared to $50.4 million and $166.3 million for the same periods in 2022.
As at December 31, 2023, the Corporation had $39.4 million in cash and cash equivalents and $10 million in working capital deficit.
Dividend
The Corporation has discontinued the quarterly dividend in order to strengthen its balance sheet.
Outlook
Charle Gamba, President and CEO of Canacol, stated: “As we previously stated, the Corporation’s long-term plan is focused on i) maintaining and growing our reserve base and production from our core assets in the Lower Magdalena Valley Basin (“LMV”), targeting the full use of existing transportation infrastructure; ii) exploring high impact exploration opportunities in the Middle Magdalena Valley Basin (“MMV”); iii) strategic entrance into the gas market in Bolivia, and iv) continue to develop and improve in the area of ESG.”
For 2024, the Corporation is focused on the following objectives:
1) In line with maintaining and growing Canacol’s reserves and production in its core gas assets in the LMV, the Corporation has planned comprehensive development and exploration programs. The Corporation aims to optimize its production and increase reserves by drilling up to five development wells, install new compression and processing facilities as required, and workover operations of producing wells in the Corporation’s key gas fields. The Corporation is expected to also drill four exploration wells, complete the acquisition of 85 square kilometers of 3D seismic to add new reserves and production and to identify new drilling prospects. These development and exploration activities are planned to support Canacol’s robust EBITDA generation and allow the Corporation to capitalize on strong market dynamics in 2024. Towards this end, the Corporation successfully drilled the Clarinete-10 development well, which entered production in February 2024, and has made a gas discovery at the Pomelo-1 exploration well, which encountered 96 feet of gas pay and is currently being tied into production.
2) Maintaining a low cost of capital, cash liquidity and balance sheet flexibility to invest for the long term. In a year of expected, highly supportive gas market dynamics, the Corporation is tactically prioritizing investments in the LMV and have therefore decided to postpone drilling of the Pola-1 exploration well located in the MMV to 2025.
3) Bolivia: achieve the government’s approval of a fourth E&P contract that covers an existing gas field reactivation, to begin development operations with a view to adding reserves and production and commencing gas sales in 2025.
4) Continue with the Corporation’s commitment to its environmental, social and governance strategy.