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Canacol Energy Ltd. provides Nispero gas discovery update

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Oilfield Technology,

Canacol Energy Ltd. has provided the following update concerning the Nispero 1 gas discovery, the doubling of its gas drilling programme for the remainder of 2016, and an increase of 9% in corporate cash sales to 19440 boe/d for the month of July 2016 compared to the average cash sales of 17 817 boe/d for the quarter of 1 April to 30 June, 2016.

Nispero 1 exploration discovery (100% operated working interest)

The Nispero 1 exploration well was spudded on the Esperanza Exploration and Exploitation Contract on July 17, 2016. The well reached total depth of 9906 ft measured depth (ft md) on 7 August, 2016, encountering 79 ft md (55 ft true vertical depth) of net gas pay with average porosity of 17% within the primary Cienage de Oro (CDO) reservoir target. The CDO reservoir interval was perforated in seven different intervals between 8792 to 9630 ft md and flowed at a final stabilised rate of 28 million ft3/d. of dry gas with no water at a flowing tubing head pressure of 2045 lb/in.2 over a test period of 53 hours. The Corporation is currently completing the Nispero 1 well for permanent production via a flow line that will tie the well into the Corporation's operated Jobo production facility.Given the success at Nispero, the Corporation plans to immediately drill the offsetting Trombon gas prospect from the same drilling platform the Nispero 1 well was drilled from. The Trombon 1 exploration well will target the same CDO reservoir interval tested in the offsetting Nispero 1 well, but in a distinct and isolated fault block located approximately 2 km south of the Nispero discovery. The corporation anticipates spudding the Trombon 1 well late in the week of August 29, 2016, and anticipates that the well will take five to six weeks to drill and flow test.

Expansion of the 2016 Gas Drilling Programme

The corporation is currently contracting a second rig to drill the Nelson 6 and Nelson 8 wells while the existing rig will be left to drill the Trombon 1 exploration well and then be mobilised to drill appraisal wells in the Clarinete and Oboe fields. The Nelson 6 exploration well will target gas pay within the shallow Porquero sandstone reservoir in the Nelson field. The Nelson 8 well is a development well targeting productive reservoirs within the CDO reservoir that are not being drained by the existing producing wells in the Nelson field. The corporation anticipates that both new Nelson wells will be drilled and tested prior to the end of 2016. Following the drilling and testing of the Trombon 1 exploration well, the existing rig will be mobilised to the Clarinete field to drill the Clarinete 3 appraisal well prior to the end of 2016. The Corporation intends to keep one drilling rig active for all of 2017 drilling gas exploration and appraisal wells on its operated VIM 5, Esperanza, VIM 19 and VIM 21 Exploration and Production contracts.

The objectives of the expanded gas drilling programme are to 1) target management's estimate of more than 100 billion ft3 of potential recoverable resource in order to secure new gas sales contracts, and 2) increase the productive capacity of the corporations' gas assets to more than 190 million ft3/d. in 2017 to supply the new contracts.

The corporation also plans to spud the Mono Cappuccino oil exploration well on its operated VMM2 E&P contract in the last quarter of 2016.

Corporate production

Gas and oil cash sales before royalties for the month of July 2016 averaged approximately 19 440 boe/d, which consisted of 88.0 million ft3/d. (15 431 boe/d) of gas, and 4009 bpd which included production from Ecuador. Of the 88 million ft3/d. of gas cash sales, approximately 85.0 million ft3/d. were realised contractual gas sales as the Corporation saw its customers accept physical delivery of nearly all of their nominated gas volumes. The average cash netback of the gas cash sales was approximately US$26.60 /boe during this period, while the average cash netback of the oil sales was US$25.16/bbl.The corporation will provide updates when relevant information becomes available.

Adapted from a press release by Louise Mulhall

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