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Canacol Energy announces 73% hike in proved reserves in Colombia, shares spike

Published: 13:44 27 Sep 2011 EDT

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Canacol Energy (TSE:CNE) announced Tuesday it increased its proved reserves for the full year fiscal 2011 at its operations in Colombia by 73% through development drilling, sending its shares up over 15%.

The Calgary, Alberta-based company acts as operator at its two producing properties in western Colombia: the Rancho Hermoso oil field, in which it owns a 100% interest, and the Entrerrios oil field, in which it owns a 60% interest. It also carries a 10% non-working interest in the Capella property, located in the Caguan-Putumayo Basin in Colombia.

Canacol said its total corporate proved (1P) reserves for the year ending June 30 increased 73% to 4.5 million barrels (mmbbls), from 2.6 mmbbls last year.

As a result, Canacol shares in Toronto hiked 18.64% as of 12:26 pm EDT, to trade at $0.70 per share.

The company also announced a 1P reserve-replacement ratio, a metric used by investors to judge the operating performance of an oil and gas exploration and production company, of 209%. The reserve-replacement ratio measures the amount of proved reserves added to the company's reserve base during the year, relative to the amount of oil and gas produced.

During stable demand conditions, a company's reserve replacement ratio must be at least 100% for the company to stay in business long-term.

For the year, the company's 1P pre-tax net present value (NPV) also more than tripled to USD $199.2 million, from $64.9 million last year.

Meanwhile, Canacol's total proved plus probable (2P) reserves rose 16% year-over year to 7.9 mmbbls, for an NPV of $229.7 million, while its total proved plus probable plus possible (3P) reserves increased little more than 3% to 13.1 mmbbls, for an NPV of $372.6 million.

President and CEO, Charle Gamba, commented: "I am pleased to report that the [company] has significantly increased reserves and the corresponding value of those reserves, mainly through continued exploitation success in Colombia.

"[Canacol] sees the potential to increase reserves further in Rancho Hermoso and Capella through more development drilling.

"The execution of our exploration programs for fiscal year 2012 has the potential to add significantly to our existing production and reserve base."

As at June 30, the Rancho Hermoso property, located in the Llano Basin of Colombia, reported that its 2P reserves increased 88% to 2.5 mmbbls for an NPV of $214.5 million.

Though it did not disclose detailed reserves for its Entrerrios property, also located in the Llano Basin, Canacol noted that 2P reserves at Capella increased 28% to 5.4 mmbbls for an NPV of $96.2 million.

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