Canacol Energy Ltd.
It’s difficult for a firm to become a strong force in its industry, but after only half a decade, Canacol Energy Ltd. has done so, President Charle Gamba says. Based in Calgary, Alberta, the oil and gas exploration and production company has onshore operations in Colombia and Ecuador.
A longtime veteran of the oil industry, Gamba founded Canacol in 2008. Previously, he held technical and management roles with numerous international oil companies, including serving as the vice president of exploration for Occidental Oil & Gas Co. in Bogota, Colombia.
Under his leadership, Canacol has developed a diverse portfolio. It has interests in seven producing oil and gas fields with 33 million barrels of proven and probable oil and gas reserves with a value of more than $700 million, and 26 exploration contracts with more than 200 million net risked barrels of prospective oil and gas resources.
“We hold 250,000 net acres in a very promising nonconventional shale oil play in the Magdalena Valley, where we are partnered with ExxonMobil, Shell and ConocoPhillips, who will be sharing their technical experience with us and carrying us by paying much of the exploration capital to prove up this important resource in Colombia,” he says.
Ahead of the Game
Gamba is proud of what Canacol has achieved. “In the space of five years,” he says, “we have assembled one of the most diverse production and exploration portfolios in Colombia, mainly by having the foresight and vision to take large positions in both new and old basins well before the plays became popular and competitive.
“We picked up our exploration positions in both conventional heavy oil and non-conventional shale oil long before the majors started to take an interest,” he says. In addition to its Magdalena project, Canacol also is working with Pacific Rubiales Energy Corp. and Sinochem Group in the search for and development of conventional heavy oil in Colombia’s Caguan basin.
Canacol’s success, Gamba notes, is due to its staff and its working environment, which promotes teamwork. “We’ve assembled a team of professionals that works very well together and I’m confident that we will continue to be successful together as a team,” he says.
An important factor in nurturing this environment is its stock option plan, which includes everyone “from the CEO to the mail clerk,” he says. “Each realizes that they play an important part in achieving the company’s goals.”
Acquisition Opportunities
Canacol’s industry is not without its challenges, Gamba admits. Currently, he says, all of the equity markets are closed to junior international oil exploration and production companies, particularly in South America.
This has resulted in many small public and private exploration and production companies running out of funds to develop their portfolios. “While this presents a challenge to companies with no production and cash flow, it presents opportunities for those companies that can leverage their cash flow and reserves to raise debt,” Gamba says.
“The debt can be used to buy distressed companies that have good production and exploration portfolios that can be acquired at very attractive metrics,” he says. For example, in December of 2012, Canacol acquired Shona Energy, which held interests in four blocks in Colombia, one of them a producing gas block in the Lower Magdalena valley that has long term gas sales contracts with BHP.
Canacol acquired approximately 16 million barrels of oil equivalent for less than $9 per barrel, an outstanding deal. In normal market conditions, these types of acquisitions cost up to $25 per barrel.
Strong Potential
Canacol has a bright future ahead, Gamba forecasts. This year, it has a production base that should deliver an average of 8,000 barrels of oil equivalent a day. “For 2014, we are targeting 12,000 barrels of oil equivalent a day,” he says.
“We’re also executing our largest exploration drilling program ever [in] Colombia, with plans to drill nine conventional and shale oil exploration wells this year,” he says, noting that its Magdalena Valley project has the strongest potential of the plays it is drilling this year.
“Proving this play up in Colombia will have a major impact on our valuation and the value we deliver to our shareholders,” he says. “The first well we drilled into the play last year with ExxonMobil was a shale oil discovery which we shall be production-testing later this summer, the first of its kind in Colombia.”