Sunday, July 9, 2017

Canacol Energy (CNE.T) hits another monster gas well in Colombia

Canacol Energy:


Mr. Mark Teare, Senior Vice President of Exploration at Canacol, commented “Toronja 1 marks another success in the new, high impact, shallow Porquero sandstone gas play that we tested last year with the Nelson 6 exploration well, with Toronja 1 successfully testing at a combined rate of 46 MMscfpd.

46 MMscfpd is equivalent to 8100 barrels of oil per day.  This is huge and is the 8 successful well of the nine recently drilled.

The issue with Canacol currently is the ability to take the gas to market. However the management has updated its ongoing plans regarding this issue.

...the SPV has acquired approximately 60% of the right of way for the flowline, and has purchased two parcels of  land for the compression stations.  Fabrication and sailing of the tubulars and compression stations is on schedule, with all  equipment  anticipated  to  arrive  in  Colombia  prior to mid  August  2017.    Construction  of  the  flowline  is  anticipated  to  commence in the last week of August 2017.  Pressure testing of the  flowline and compression stations is anticipated to commence in  mid  November  2017,  with  the  flowline  anticipated  to  commence  deliveries  of gas  to Cartagena  via  a connection to the Promigas S.A. pipeline in Bremen on December 1, 2017. 

The company keeps finding more gas and has plans to get it to lucrative markets on the coast. They are receiving premium pricing because the Chevron field that used to supply the majority of the gas is in terminal decline. If the the management can execute and get the pipeline done on time we will see a huge jump in cashflows.

Exploration success is leading to reserve growth

Chevron had a monopoly now it will shift to Canacol 

The upside is the oil properties that Canacol still holds. The under-investment into finding oil reserves will lead to an eventual price spike in oil at some point.

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