Canacol Energy Ltd. Reports a 26% Increase in Realized Contractual Gas Sales, a Net Income of $17.7 million and a 9% Increase in EBITDAX in Q2 2020
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 and six months ended June 30, 2020. Dollar amounts are expressed in United States dollars, except as otherwise noted.
Highlights for the three and six months ended June 30, 2020
(Production is stated as working-interest before royalties)
Financial and operational highlights of the Corporation include:
Despite the worldwide uncertainties and disruptions caused by the Covid-19 pandemic, Canacol's operations continued on relatively uninterrupted during Q2, including the drilling of Clarinete-5 and its 43 MMscfpd production test. Post June 30, 2020, the Corporation is currently completing the Pandereta-8 development well, which encountered 168 feet true vertical depth of net gas pay. Utilizing a second rig, the Corporation has also recently spud the Porro Norte-1 exploration well and anticipates well results to be released once the well has reached total depth and has been logged.
As at June 30, 2020, Canacol maintained its strong balance sheet and liquidity including approximately $58.6 million of cash, with our robust 2020 capital and dividend programs being funded through existing cash and operating cash flows. Adding to Canacol's existing financial flexibility, we have re-profiled the terms of the Credit Suisse Bank Debt and entered into two new credit facilities. Although these additional funds are not necessarily required at this time, the Corporation felt it prudent to secure additional financial flexibility at very favourable rates to potentially add additional wells in our drilling campaign and to advance the Medellin pipeline project.
Despite the slow recovery from the Covid-19 pandemic in Colombia, the Corporation expects its sales to be inside the previously released guidance range of 170 MMcfpd and 197 MMcfpd.
Financial Three months ended June 30, Six months ended June 30, 2020 2019 Change 2020 2019 Change Total natural gas, LNG and crude oil revenues, net of royalties and transportation expense $ 54,405 $ 47,689 14 % $ 125,399 $ 97,093 29 % Adjusted Funds from operations $ 31,181 $ 25,584 22 % $ 76,462 $ 55,491 38 % Per share - basic ($) 0.17 0.14 21 % 0.42 0.31 35 % Per share - diluted ($) 0.17 0.14 21 % 0.42 0.31 35 % Net income (loss) and comprehensive $ 17,715 $ 1,878 843 % $ (8,273 ) $ 8,152 n/a income (loss) Per share - basic ($) 0.10 0.01 900 % (0.05 ) 0.05 n/a Per share - diluted ($) 0.10 0.01 900 % (0.05 ) 0.05 n/a Cash flow provided by operating $ 37,814 $ 9,027 319 % $ 75,832 $ 34,282 121 % activities Per share - basic ($) 0.21 0.05 320 % 0.42 0.19 121 % Per share - diluted ($) 0.21 0.05 320 % 0.42 0.19 121 % EBITDAX $ 40,415 $ 37,008 9 % $ 99,285 $ 76,830 29 % Weighted average shares outstanding - basic 180,916 177,381 2 % 180,923 177,464 2 % Weighted average shares outstanding - 181,484 178,979 1 % 181,622 179,282 1 % diluted Capital expenditures, net dispositions $ 8,269 $ 13,442 (38 %) $ 28,161 $ 48,167 (42 %) Jun 30, 2020 Dec 31, 2019 Change Cash and cash equivalents $ 58,552 $ 41,239 42 % Restricted cash $ 4,027 $ 4,524 (11 %) Working capital surplus $ 72,141 $ 50,676 42 % Total debt $ 393,856 $ 392,946 -- Total assets $ 739,981 $ 754,062 (2 %) Common shares, end of period (000's) 181,005 180,075 1 % Operating Three months ended June 30, Six months ended June 30, 2020 2019 Change 2020 2019 Change Production, before royalties Natural gas and LNG (Mcfpd) 151,127 121,496 24 % 176,259 122,385 44 % Colombia oil (bopd) 245 342 (28 %) 280 387 (28 %) Total (boepd) 26,758 21,657 24 % 31,203 21,858 43 % Realized contractual sales, before royalties Natural gas and LNG (Mcfpd) 152,248 120,515 26 % 176,884 121,265 46 % Colombia oil (bopd) 197 356 (45 %) 247 398 (38 %) Total (boepd) 26,907 21,499 25 % 31,279 21,673 44 % Operating netbacks Natural gas and LNG ($/Mcf) 3.63 3.88 (6 %) 3.60 3.96 (9 %) Colombia oil ($/bopd) 12.16 29.20 (58 %) 17.00 26.13 (35 %) Corporate ($/boe) 20.61 22.27 (7 %) 20.55 22.63 (9 %)
-- Non-IFRS measures - see "Non-IFRS Measures" section within the MD&A.
-- The net loss realized during the six months ended June 30, 2020 is solely due to the non-cash deferred tax expense of $29.5 million, which is primarily due to the effect of the reduction in the Colombian Peso ("COP") exchange rate on the value of unused tax losses and cost pools. In the event that the COP strengthens in the future, as it did as at June 30, 2020, the Corporation would realize a deferred income tax recovery for the period.
This press release should be read in conjunction with the Corporation's interim condensed consolidated financial statements and related Management's Discussion and Analysis. The Corporation's has filed its interim condensed consolidated financial statements and related Management's Discussion and Analysis as at and for the three and six months ended June 30, 2020 with Canadian securities regulatory authorities. These filings are available for review on SEDAR at www.sedar.com.
Canacol is a natural gas exploration and production company with operations focused in Colombia. The Corporation's shares are traded on the Toronto Stock Exchange under the symbol CNE, the OTCQX in the United States of America under the symbol CNNEF and the Bolsa de Valores de Colombia under the symbol CNEC.
This press release contains certain forward-looking statements within the meaning of applicable securities law. Forward-looking statements are frequently characterized by words such as "plan", "expect", "project", "target", "intend", "believe", "anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will" occur, including without limitation statements relating to estimated production rates from the Corporation's properties and intended work programs and associated timelines. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. The Corporation cannot assure that actual results will be consistent with these forward looking statements. They are made as of the date hereof and are subject to change and the Corporation assumes no obligation to revise or update them to reflect new circumstances, except as required by law. Information and guidance provided herein supersedes and replaces any forward looking information provided in prior disclosures. Prospective investors should not place undue reliance on forward looking statements. These factors include the inherent risks involved in the exploration for and development of crude oil and natural gas properties, the uncertainties involved in interpreting drilling results and other geological and geophysical data, fluctuating energy prices, the possibility of cost overruns or unanticipated costs or delays and other uncertainties associated with the oil and gas industry. Other risk factors could include risks associated with negotiating with foreign governments as well as country risk associated with conducting international activities, and other factors, many of which are beyond the control of the Corporation. Other risks are more fully described in the Corporation's most recent Management Discussion and Analysis ("MD&A") and Annual Information Form, which are incorporated herein by reference and are filed on SEDAR at www.sedar.com. Average production figures for a given period are derived using arithmetic averaging of fluctuating historical production data for the entire period indicated and, accordingly, do not represent a constant rate of production for such period and are not an indicator of future production performance. Detailed information in respect of monthly production in the fields operated by the Corporation in Colombia is provided by the Corporation to the Ministry of Mines and Energy of Colombia and is published by the Ministry on its website; a direct link to this information is provided on the Corporation's website. References to "net" production refer to the Corporation's working-interest production before royalties. Use of Non-IFRS Financial Measures -Such supplemental measures should not be considered as an alternative to, or more meaningful than, the measures as determined in accordance with IFRS as an indicator of the Corporation's performance, and such measures may not be comparable to that reported by other companies. This press release also provides information on adjusted funds from operations. Adjusted funds from operations is a measure not defined in IFRS. It represents cash provided by operating activities before changes in non-cash working capital and decommissioning obligation expenditures. The Corporation considers funds from operations a key measure as it demonstrates the ability of the business to generate the cash flow necessary to fund future growth through capital investment and to repay debt. Funds from operations should not be considered as an alternative to, or more meaningful than, cash provided by operating activities as determined in accordance with IFRS as an indicator of the Corporation's performance. The Corporation's determination of adjusted funds from operations may not be comparable to that reported by other companies. For more details on how the Corporation reconciles its cash provided by operating activities to adjusted funds from operations, please refer to the "Non-IFRS Measures" section of the Corporation's MD&A. Additionally, this press release references working capital, EBITDAX and operating netback measures. Working capital is calculated as current assets less current liabilities, excluding the current portion of long-term obligations, and is used to evaluate the Corporation's financial leverage. EBITDAX is defined as consolidated net income adjusted for interest, income taxes, depreciation, depletion, amortization, exploration expenses and other similar non-recurring or non-cash charges. Operating netback is a benchmark common in the oil and gas industry and is calculated as total natural gas, LNG and petroleum sales, net transportation expenses, less royalties and operating expenses, calculated on a per barrel of oil equivalent basis of sales volumes using a conversion. Operating netback is an important measure in evaluating operational performance as it demonstrates field level profitability relative to current commodity prices. Working capital, EBITDAX and operating netback as presented do not have any standardized meaning prescribed by IFRS and therefore may not be comparable with the calculation of similar measures for other entities. Operating netback is defined as revenues, net transportation expenses less royalties and operating expenses. Realized contractual sales is defined as natural gas and LNG produced and sold plus income received from nominated take-or-pay contracts without the actual delivery of natural gas or LNG and the expiry of the customers' rights to take the deliveries. Boe Conversion - The term "boe" is used in this news release. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of cubic feet of natural gas to barrels oil equivalent is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In this news release, we have expressed boe using the Colombian conversion standard of 5.7 Mcf: 1 bbl required by the Ministry of Mines and Energy of Colombia. As the value ratio between natural gas and crude oil based on the current prices of natural gas and crude oil is significantly different from the energy equivalency of 5.7 Mcf:1, utilizing a conversion on a 5.7 Mcf:1 basis may be misleading as an indication of value.
For further information please contact: Investor Relations South America: +571.621.1747 IR-SA@canacolenergy.com Global: +403.561.1648 IR-GLOBAL@canacolenergy.com http://www.canacolenergy.com