Canacol Oil Output May Surpass Forecast on Leono Find

Canacol Energy Ltd., the crude explorer whose shares doubled in Bogota and Toronto this year, expects output may surpass a previous estimate of 15,000 daily barrels in 2014 following its Leono discovery in Colombia.

The Leono find in central Colombia’s onshore Llanos Basin could add as much as 10,000 barrels a day to the Calgary-based company’s production next year, from “just over” 12,000 barrels of oil equivalent currently, Chief Executive Officer Charle Gamba said yesterday in an interview in Bogota. Total output of 15,000 barrels is “a low-side type of guidance” for next year, he said.

Canacol is leading gains on Colombia’s benchmark Colcap index this year as crude output surges. The shares have more than doubled as crude production jumped from an average of 5,354 barrels a day in the last three months of 2012.

“It’s a pretty dramatic increase in production,” Gamba said. “We’ve just made a discovery that’s going to allow us once again to expand our production and reserves in a very meaningful way.”

Canacol’s shares tumbled 57 percent in 2012, when production at its biggest field declined. Canacol rose 0.9 percent to C$6.53 at 1:45 p.m. in Toronto. It gained 0.7 percent to 11,880 pesos in Bogota.

Aggressive Bidding

The company plans to drill four more wells in Leono in the first quarter after reporting Dec. 16 that the first well tested at a net 1,490 barrels a day, Gamba said. It plans to publish results from a second zone at Leono next week, he said.

“We still have just a little bit of uncertainty with respect to what the field will ultimately be capable of,” Gamba said. “We’re going to drill four more wells in the first quarter and that will really solidify the development plan and the meaningfulness of this discovery.”

Canacol plans to be “quite aggressive” in bidding during the Colombian government’s auction next year of oil blocks available for exploration, Gamba said.

“A lot of the juniors have fallen off, so we think we’ll have a very good competitive advantage in this bid round,” Gamba said. “The playing field in Colombia has narrowed significantly.”

Pacific Rubiales Energy Corp., which operates Colombia’s largest field, completed the acquisition of Petrominerales Ltd. this year, following the purchase of C&C Energia Ltd and PetroMagdalena Energy Corp. in 2012.

Consolidation in Colombia’s oil industry is “almost inevitable” as larger companies look to build reserves and production, he said. Canacol has been involved in discussions but hasn’t landed a formal offer, Gamba said.

“There’s always a fairly low level of interest,” he said. “If we happen to continue building production and reserves as we plan to next year, on the back of Leono primarily, and our 10 exploration wells, and if our portfolio of shale oil has even the possibility of looking commercial, we’ll very quickly go to the top of several radar screens in terms of an acquirer.”

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