GlobeNewswire Inc | Aug 13, 2020 07:30PM EDT

August 13, 2020

CALGARY, Alberta, Aug. 13, 2020 (GLOBE NEWSWIRE) -- 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 June30, 2020

(Production is stated as working-interest before royalties)

Financial and operational highlights of the Corporation include:

-- Realized contractual natural gas and liquefied natural gas (LNG) sales increased 26% and 46% to 152.2 MMscfpd and 176.9 MMscfpd for the three and six months ended June 30, 2020, respectively, compared to 120.5 MMscfpd and 121.3 MMscfpd for the same periods in 2019, respectively. Average natural gas and LNG production volumes increased 24% and 44% to 151.1 MMscfpd and 176.3 MMscfpd for the three and six months ended June 30, 2020, respectively, compared to 121.5 MMscfpd and 122.4 for the same periods in 2019, respectively. The increase is primarily due to the completion of the 100 MMscfpd pipeline expansion in late Q3 2019, offset by the decrease in sales as a result of the Covid-19 pandemic. -- Total natural gas and LNG revenue, net of royalties and transportation expenses for the three and six months ended June 30, 2020 increased 17% and 28% to $53.3 million and $123.2 million, respectively, compared to $45.7 million and $93.1 million for same periods in 2019, respectively, mainly attributable to the increase of natural gas production and the 100 MMscfpd pipeline expansion. -- Adjusted funds from operations increased 22% and 38% to $31.2 million and $76.5 million, respectively, for the three and six months ended June 30, 2020, respectively, compared to $25.6 million and $55.5 million for the same periods in 2019, respectively. Adjusted funds from operations per basic share increased 21% and 35% to $0.17 per basic share and $0.42 per basic share for the three and six months ended June 30, 2020, respectively, compared to $0.14 per basic share and $0.31 per basic share for the same periods in 2019, respectively. -- EBITDAX increased 9% and 29% to $40.4 million and $99.3 million for the three and six months ended June 30, 2020, respectively, compared to $37 million and $76.8 million for the same periods in 2019, respectively. -- The Corporation realized a net income of $17.7 million and a net loss of $8.3 million for the three and six months ended June 30, 2020, respectively, compared to a net income of $1.9 million and $8.2 million for the same periods in 2019, respectively. 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 exchange rate on the value of unused tax losses and cost pool. -- The Corporations natural gas and LNG operating netback decreased 6% and 9% to $3.63 per Mcf and $3.60 per Mcf in the three and six months ended June 30, 2020, respectively, compared to $3.88 per Mcf and $3.96 per Mcf for the same periods in 2019, respectively. The decrease is due to lower spot market gas sales prices, net transportation costs. The decrease is offset by a 19% and 20% reduction of operating expenses per Mcf to $0.25 per Mcf and $0.24 per Mcf for the three and six months ended June 30, 2020, respectively, compared to $0.31 per Mcf and $0.30 for the same periods in 2019, respectively. -- Net capital expenditures for the three and six months ended June 30, 2020 were $8.3 million and $28.2 million, respectively. Net capital expenditures included non-cash adjustments related to decommissioning obligations of $3.7 million and $5 million three and six months ended June 30, 2020, respectively. -- On April 21, 2020, the Corporation entered into a credit agreement with Banco de Occidente (Operating loan) and withdrew $5 million in COP for additional COP liquidity purposes. -- On June 30, 2020, the Corporation entered into an agreement to amend the terms of the bank debt held with Credit Suisse (Credit Suisse Bank Debt). The original fixed interest rate of 6.875% was revised to a floating interest rate of LIBOR + 4.25% (LIBOR rate was 0.3% at the amendment date) and the original eleven equal quarterly principal payments, which were to commence on June 11, 2020, were revised to seven equal quarterly principal payments to commence on December 11, 2021. -- As at June 30, 2020, the Corporation had $58.6 million in cash and cash equivalents, $4 million in restricted cash and $72.1 million in working capital surplus.

Outlook

Despite the worldwide uncertainties and disruptions caused by the Covid-19 pandemic, Canacols 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 Canacols 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 naturalgas, LNG andcrude oilrevenues, net $ 54,405 $ 47,689 14 % $ 125,399 $ 97,093 29 %of royaltiesandtransportationexpense Adjusted Fundsfrom $ 31,181 $ 25,584 22 % $ 76,462 $ 55,491 38 %operations^(1)Per share ? 0.17 0.14 21 % 0.42 0.31 35 %basic ($)^(1)Per share ?diluted ($)^ 0.17 0.14 21 % 0.42 0.31 35 %(1) Net income(loss) andcomprehensive $ 17,715 $ 1,878 843 % $ (8,273 ) $ 8,152 n/a income(loss)^(2)Per share ? 0.10 0.01 900 % (0.05 ) 0.05 n/a basic ($)Per share ? 0.10 0.01 900 % (0.05 ) 0.05 n/a diluted ($) Cash flowprovided by $ 37,814 $ 9,027 319 % $ 75,832 $ 34,282 121 %operating activitiesPer share ? 0.21 0.05 320 % 0.42 0.19 121 %basic ($)Per share ? 0.21 0.05 320 % 0.42 0.19 121 %diluted ($) EBITDAX^(1) $ 40,415 $ 37,008 9 % $ 99,285 $ 76,830 29 % Weightedaverage shares 180,916 177,381 2 % 180,923 177,464 2 %outstanding ?basicWeightedaverage shares 181,484 178,979 1 % 181,622 179,282 1 %outstanding ? diluted Capitalexpenditures, $ 8,269 $ 13,442 (38 %) $ 28,161 $ 48,167 (42 %)netdispositions Jun 30, 2020 Dec 31, 2019 Change Cash and cash $ 58,552 $ 41,239 42 %equivalentsRestricted $ 4,027 $ 4,524 (11 %)cashWorkingcapital $ 72,141 $ 50,676 42 %surplusTotal debt $ 393,856 $ 392,946 ? Total assets $ 739,981 $ 754,062 (2 %) Common shares,end of period 181,005 180,075 1 %(000?s) Operating Three months ended June 30, Six months ended June 30, 2020 2019 Change 2020 2019 Change Production,before royalties^(1)Natural gasand LNG 151,127 121,496 24 % 176,259 122,385 44 %(Mcfpd)Colombia oil 245 342 (28 %) 280 387 (28 %)(bopd)Total (boepd) 26,758 21,657 24 % 31,203 21,858 43 % Realizedcontractual sales, beforeroyalties^(1)Natural gasand LNG 152,248 120,515 26 % 176,884 121,265 46 %(Mcfpd)Colombia oil 197 356 (45 %) 247 398 (38 %)(bopd)Total (boepd) 26,907 21,499 25 % 31,279 21,673 44 % Operating netbacks^(1)Natural gasand LNG ($/ 3.63 3.88 (6 %) 3.60 3.96 (9 %)Mcf)Colombia oil 12.16 29.20 (58 %) 17.00 26.13 (35 %)($/bopd)Corporate ($/ 20.61 22.27 (7 %) 20.55 22.63 (9 %)boe)

-- 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 Corporations interim condensed consolidated financial statements and related Managements Discussion and Analysis. The Corporations 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 Corporations 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 themeaning of applicable securities law. Forward-looking statements arefrequently characterized by words such as ?plan?, ?expect?, ?project?,?target?, ?intend?, ?believe?, ?anticipate?, ?estimate? and other similarwords, or statements that certain events or conditions ?may? or ?will? occur,including without limitation statements relating to estimated production ratesfrom the Corporation?s properties and intended work programs and associatedtimelines. Forward-looking statements are based on the opinions and estimatesof management at the date the statements are made and are subject to a varietyof risks and uncertainties and other factors that could cause actual events orresults to differ materially from those projected in the forward-lookingstatements. The Corporation cannot assure that actual results will beconsistent with these forward looking statements. They are made as of the datehereof and are subject to change and the Corporation assumes no obligation torevise or update them to reflect new circumstances, except as required by law.Information and guidance provided herein supersedes and replaces any forwardlooking information provided in prior disclosures. Prospective investorsshould not place undue reliance on forward looking statements. These factorsinclude the inherent risks involved in the exploration for and development ofcrude oil and natural gas properties, the uncertainties involved ininterpreting drilling results and other geological and geophysical data,fluctuating energy prices, the possibility of cost overruns or unanticipatedcosts or delays and other uncertainties associated with the oil and gasindustry. Other risk factors could include risks associated with negotiatingwith foreign governments as well as country risk associated with conductinginternational activities, and other factors, many of which are beyond thecontrol of the Corporation. Other risks are more fully described in theCorporation?s most recent Management Discussion and Analysis (?MD&A?) andAnnual Information Form, which are incorporated herein by reference and arefiled on SEDAR at www.sedar.com. Average production figures for a given periodare derived using arithmetic averaging of fluctuating historical productiondata for the entire period indicated and, accordingly, do not represent aconstant rate of production for such period and are not an indicator of futureproduction performance. Detailed information in respect of monthly productionin the fields operated by the Corporation in Colombia is provided by theCorporation to the Ministry of Mines and Energy of Colombia and is published bythe Ministry on its website; a direct link to this information is provided onthe Corporation?s website. References to ?net? production refer to theCorporation?s working-interest production before royalties.

Use of Non-IFRS Financial Measures -Such supplemental measures should not beconsidered as an alternative to, or more meaningful than, the measures asdetermined in accordance with IFRS as an indicator of the Corporation?sperformance, and such measures may not be comparable to that reported by othercompanies. This press release also provides information on adjusted funds fromoperations. Adjusted funds from operations is a measure not defined in IFRS.It represents cash provided by operating activities before changes in non-cashworking capital and decommissioning obligation expenditures. The Corporationconsiders funds from operations a key measure as it demonstrates the ability ofthe business to generate the cash flow necessary to fund future growth throughcapital investment and to repay debt. Funds from operations should not beconsidered as an alternative to, or more meaningful than, cash provided byoperating activities as determined in accordance with IFRS as an indicator ofthe Corporation?s performance. The Corporation?s determination of adjustedfunds from operations may not be comparable to that reported by othercompanies. For more details on how the Corporation reconciles its cashprovided by operating activities to adjusted funds from operations, pleaserefer to the ?Non-IFRS Measures? section of the Corporation?s MD&A.Additionally, this press release references working capital, EBITDAX andoperating netback measures. Working capital is calculated as current assetsless current liabilities, excluding the current portion of long-termobligations, and is used to evaluate the Corporation?s financial leverage.EBITDAX is defined as consolidated net income adjusted for interest, incometaxes, depreciation, depletion, amortization, exploration expenses and othersimilar non-recurring or non-cash charges. Operating netback is a benchmarkcommon in the oil and gas industry and is calculated as total natural gas, LNGand petroleum sales, net transportation expenses, less royalties and operatingexpenses, calculated on a per barrel of oil equivalent basis of sales volumesusing a conversion. Operating netback is an important measure in evaluatingoperational performance as it demonstrates field level profitability relativeto current commodity prices. Working capital, EBITDAX and operating netback aspresented do not have any standardized meaning prescribed by IFRS and thereforemay not be comparable with the calculation of similar measures for otherentities.

Operating netback is defined as revenues, net transportation expenses lessroyalties and operating expenses.

Realized contractual sales is defined as natural gas and LNG produced and soldplus income received from nominated take-or-pay contracts without the actualdelivery of natural gas or LNG and the expiry of the customers? rights to takethe deliveries.

Boe Conversion - The term ?boe? is used in this news release. Boe may bemisleading, particularly if used in isolation. A boe conversion ratio of cubicfeet of natural gas to barrels oil equivalent is based on an energy equivalencyconversion method primarily applicable at the burner tip and does not representa value equivalency at the wellhead. In this news release, we have expressedboe using the Colombian conversion standard of 5.7 Mcf: 1 bbl required by theMinistry of Mines and Energy of Colombia. As the value ratio between naturalgas and crude oil based on the current prices of natural gas and crude oil issignificantly different from the energy equivalency of 5.7 Mcf:1, utilizing aconversion on a 5.7 Mcf:1 basis may be misleading as an indication of value.

For further information please contact: Investor RelationsSouth America: +571.621.1747 IR-SA@canacolenergy.com Global: +403.561.1648 IR-GLOBAL@canacolenergy.com http://www.canacolenergy.com