Tuesday, February 16, 2016

Canacol hits 158 feet of net gas pay in Colombia

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The Oboe 1 well encountered 158 feet of net gas pay with average porosity of 23% within multiple stacked sandstone reservoirs in the primary Tertiary-aged Cienaga de Oro target, representing the thickest gas pay encountered in the Cienaga de Oro in the Clarinete discovery thus far. The Corporation is currently casing the well and mobilizing testing equipment to the location to commence production testing of various gas bearing sandstone intervals within the Cienaga de Oro.

The expansion of gas pipeline and processing facilities continues apace and has led to monthly increases in gas delivered over the last few months. This is the thesis of my investment in Canacol; that being increased sales of gas leading to increases in cashflow that can recycled back into expanding the company's position in Colombia. 

Realized contractual gas sales for the months of November 2015, December 2015 and January 2016 were 18.4 MMscfpd, 25.5 MMscfpd and 30.0 MMscfpd respectively, reflecting the additional sales related to the Promigas pipeline expansion. Realized gas sales netbacks for the months of December 2015 and January 2016 were US$ 25.61 / barrel of oil equivalent (Dzboedz) and US$ 26.83/boe respectively. Based on the latest Promigas pipeline expansion schedule, Canacol estimates that gas sales will average approximately 80 MMscfpd (14,035 boepd) for calendar 2016 (including approximately 90 MMscfpd for the last three quarters of calendar 2016) at an anticipated average realized price of US$ 5.60 / thousand standard cubic feet (Dzmscfdz) (US$ 31.92/ boe), with an average netback of approximately US$ 4.56/mcf (US$ 26.00/boe), generating approximately US$ 163 million of gross revenues. 

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