Top Colombia Stock Canacol Energy Nears New Gas Sale Contracts

  • Contract prices to range from $4.50-$6.50 MMbtu: CEO
  • Canacol chief expects output this year to beat recent estimate

Canacol Energy Ltd. is doubling down on natural gas as strong domestic demand helps it outperform all other Colombian stocks in the nation’s benchmark index this year.

The driller has negotiated sales contracts for an additional 100 million cubic feet a day with electricity producers and other companies on Colombia’s Caribbean coast, with prices ranging from $4.50 to $6.50 per million British thermal units at the wellhead, according to Chief Executive Officer Charle Gamba.

Canacol expects to sign the contracts by year-end and ramp up gas production to 190 million cubic feet a day in the second half of 2017 from 90 million cubic feet at present. To achieve that goal, the company will drill six to seven development wells. Next month, it will choose between Promigas SA and a group of international companies for a contract to build pipeline infrastructure to transport the gas.

“The supply of gas in Colombia is actually diminishing as mature fields decline,” Gamba said in an interview Tuesday at his Bogota office. “And the demand on the coast has been increasing at an average 3 percent per year over the last 10 years. And it’s not going to slow.”

Speculation over a potential OPEC oil production freeze has contributed to price fluctuations in recent months. Canacol will drill one oil exploration well “with significant potential” later this year and will also increase exploration if oil prices stabilize above $50 a barrel for three months, Gamba said.

The Bogota and Toronto-listed driller will average output of 17,000 to 18,000 barrels of oil equivalent a day this year, he said. That compares with a target of 16,000 to 17,000 barrels in its August corporate presentation.

Canacol has gained 64 percent this year for the best performance on Colombia’s 25-member Colcap index.

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