Q4 2024 Canacol Energy LTD Earnings Call
Operator: Good day and welcome to the Canacol Energy Year-End 2024 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by a zero.
Good day and welcome to the chemical energy year end 'twenty 'twenty four financial results conference call all participants will be in listen only mode.
Should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
Operator: After today's presentation, there will be an opportunity to ask questions. We will only be taking questions from the webcast side today. Please note this event is being recorded.
After todays presentation, there will be an opportunity to ask questions. We will only be taking questions from the webcast side today.
Note. This event is being recorded.
Carolina Orozco: I would now like to turn the conference over to Carolina Orozco, Vice President of Investor Relations. Please go ahead.
Speaker Change: I would now like to turn the conference over to Carolina Orozco, Vice President of Investor Relations. Please go ahead.
Carolina Orozco: Good morning and welcome to Canacol's 4th Quarter and Fiscal Year 2024 Financial Results Conference Call. This is Carolina Orozco, Vice President of Investor Relations.
Speaker Change: Good morning, and welcome to chemicals fourth quarter and fiscal year 'twenty 'twenty four financial results Conference call. You just kind of any might also vice president of Investor Relations, Mr. Charles Dauber, President and Chief Executive Officer, and Mr. Jason Bednar, Chief Financial Officer.
Carolina Orozco: I am with Mr. Charles Gamba, President and Chief Executive Officer, and Mr. Jason Bednard, Chief Financial Officer. Before we begin, it is important to mention that the comments on this call by Canacol Senior Management can include projections of the corporation's future performance. These projections neither constitute any commitment as to future results nor take into account risks or uncertainties that could materialize. As a result, Canacol assumes no responsibility in the event that future results are different from the projections shared on this conference call.
Speaker Change: Before we begin it is important to mention that the comments on this call mechanical senior management can include projections of the corporation's future performance. These projections mean constitute any commitment as to future results nor take into account risks or uncertainties that could materialize as a result clinical assumes no responsibility in the event that future results are different from the.
Speaker Change: <unk> shared on this conference call.
Carolina Orozco: Please note that all finance figures on this call are denominated in U.S. dollars.
Charles Dauber: Please note that all final figures on this call are denominated in U as daughters, who will begin the presentation with our president and CEO, Mr. Charles <unk>, who will summarize highlights for the corporations fiscal year 'twenty 'twenty four result, Mr. Jason Bednar, our CFO will then discuss financial highlights for the fourth quarter of 2024, Mr. Dumbo will close with a discussion of.
Carolina Orozco: We will begin the presentation with our President and CEO, Mr. Charles Gamba, who will summarize highlights for the corporation's Fiscal Year 2024 results.
Carolina Orozco: Mr. Jason Bednard, our CFO, will then discuss financial highlights for the 4th Quarter of 2024.
Carolina Orozco: Mr. Gamba will close with a discussion of the corporation's outlook for the remainder of 2025. At the end, we will have a Q&A session.
Charles Dauber: The corporation's outlook for the remainder of 2025 at the end, we will have a Q&A session and we will now turn over the call to Mr child down about president and CEO of clinical labs.
Charles Gamba: We will now turn over the call to Mr. Charles Gamba, President and CEO of Canacol M. Thanks Carolina, and welcome everyone to Canacol's fourth quarter and fiscal year-end 2024 conference call. We're pleased to report that this past year was a record-breaking one for Canacol Energy, with EVDX reaching a new high of $296 million, 25% higher than the EVDX recorded in 2023. Our realized natural gas prices for the year were $6.99 per 1,000 standard cubic feet, which generated net backs of between $5.41 per 1,000 standard cubic feet. 32% higher compared to last year, all the while maintaining a strong operational margin of 77%.
Charles Dauber: Thanks, Karen and welcome everyone to <unk> fourth quarter and fiscal year end 2024 conference call.
Speaker Change: Pleased to report that this past year was a record breaking once mechanical energy with EBITDAX, reaching a new high of $296 million, 25% higher than the record in 2023.
Speaker Change: Our realized natural gas prices for the year was $6.99 per thousand standard cubic feet, which generated net backs of <unk>.
Speaker Change: Between $5 41 per thousand cubic feet.
Speaker Change: 32% higher compared to last year, all the while maintaining a strong operational margin was 77% in 2024, we averaged 165 million standard cubic feet per day equivalent of gas and oil sales, which included an average of 157 million standard cubic feet per day of natural gas.
Charles Gamba: In 2024, we averaged 165 million standard cubic feet per day equivalent of gas and oil sales, which included an average of 157 million standard cubic feet per day of natural gas. Through our disciplined approach to capital management, we will continue investing in key projects focusing on increasing our EBITDAs generation and reserves base, as well as reducing our debt. During 2024, we invested $122M in capital, 43% lower compared to the previous year and lower than our 2024 guidance of $138M. This reduction is attributed to drilling and cost efficiency efforts during the course of the year. These capital efficiencies, combined with our strong financial performance, enable us to close the year with a cash position of $79 million.
Speaker Change: Through our disciplined approach to capital management, we will continue investing in key projects focused on increasing our EBITDAX generation and reserve base as well as reducing our debt.
Speaker Change: During 2024, we invested $122 million in capital, 43% lower compared to the previous year and lower than our 2024 guidance of $138 million. This reduction is attributed to drilling and cost efficiency efforts. During the course of the year. These capital efficiencies combined with our strong.
Speaker Change: <unk> financial performance enabled us to close the year with a cash position of $79 million.
Charles Gamba: Strong commodity pricing combined with our focus on cost reduction and production optimization have been essential to maximize our response to market dynamics. and achieve these strong results.
Speaker Change: Commodity pricing combined with our focus on cost reduction and production optimization have been essential to maximize a response to market dynamics.
Speaker Change: And achieved these strong results from drilling perspective, we drilled a total of five exploration wells in five development wells with four out of the five exploration wells in all of the development wells being successful. We're also releasing our oil and gas reserves and deemed volumes for the fiscal year ending December 31, 2024 through our exploration.
Charles Gamba: From a drilling perspective, we drilled a total of five exploration wells and five development wells, with four out of the five exploration wells and all of the development wells being We are also releasing our oil and gas reserves and deemed volumes for the fiscal year ending December 31, 2024. Through our exploration and development drilling efforts, we achieved a 2P reserve replacement ratio of 85%, with 53B cubic feet in new discovery. This brings our total 2P reserves to 599 billion cubic feet of gas equivalent. The net present value of the future net revenues from our 2P reserves, discounted at 10%, is now estimated at US$2.6 billion before tax and US$2 billion after tax.
Speaker Change: On development drilling efforts, we achieved a two P reserve replacement ratio of 85% with 53 billion cubic feet in new discoveries.
Speaker Change: It brings our total <unk> reserves to 599 billion cubic feet of gas equivalent the net present value of the future net revenues from our two P reserves discounted at 10% is now estimated at USD, two $6 billion before tax and U S $2 billion. After tax. These figures represented an increase of 20.
Charles Gamba: These figures represent an increase of 21% and 13% respectively compared to 2023 year-end. The before-tax value translates to CAD$109 per share of reserve value and CAD$79 per share of 2P net asset value, highlighting the strong intrinsic value of our reserve portfolio. Furthermore, with a reserve index of 10.2 years, our 2P reserves will sustain long-term production, supporting our ongoing development and future exploration.
Speaker Change: One and 13% respectively compared to 2023 year end.
Speaker Change: The before tax value translates to Canadian dollars $109 per share of reserve value at 79.
Speaker Change: Canadian dollars per share of <unk> net asset value highlighting the strong intrinsic value of our reserve portfolio. Furthermore, with readers are index of 10.2 years or two P reserves will sustain long term production supporting our ongoing development and future exploration projects.
Charles Gamba: Finally, we are pleased to share the results of the Corporate Sustainability Assessment conducted by S&P Global. In this rigorous evaluation, we achieved a total score of 75 points, ranking us as the 4th best company out of 165 participants in the Global Oil & Gas upstream integrated sector in the entire world. We achieved an eighth place in the environmental dimension, improving three positions from last year, fourth place in social dimension, improving eight positions from last year, and for the second consecutive year we ranked first in governance.
Speaker Change: Finally, we're pleased to share the results of the corporate sustainability assessment conducted by S&P Global and this rigorous evaluation, we try to achieve a total score of 75 points ranking us as the fourth best company out of 165 participants in the global oil and gas business.
Speaker Change: Upstream and integrated sector in the entire world, we achieved an eighth place in environmental dimension, improving three positions from last year fourth place and social dimensions, improving eight positions from last year and for the second consecutive year. We ranked first in governance I'll now turn the presentation over to Jason Bednar, our CFO, who will discuss 2020.
Jason Bednard: I'll now turn the presentation over to Jason Bednar, our CFO, who will discuss 2024 fourth quarter results. The fourth quarter of 2024 was another very strong quarter for us with record EBITDAX generation and net back. Our realized natural gas price net of transportation reached $7.81 per MCF during the three months ended December 31, 2024, with operating expenses averaging $0.45 per MCF, 26% lower compared to the same period in 2023. Building on this cost efficiency and supported by our strong realized pricing, we achieved record natural gas operating netbacks of $6.12 per MCF, which is 39% higher year-over-year and being the highest quarterly netback in the corporation's history.
Jason Bednar: For fourth quarter results.
Jason Bednar: Thanks, Charles the fourth quarter of 2024 was another very strong quarter for us with record EBITDAX generation and net backs.
Jason Bednar: Our realized natural gas price net of transportation reached $7 81 per Mcf. During the three months ended December 31, 2024, with operating expenses, averaging 45 cents per mcf, 26% lower compared to the same period in 2023.
Jason Bednar: Building on this cost efficiency and supported by our strong realized pricing, we achieved record natural gas operating net backs of $6 12 per Mcf, which is 39% higher year over year and being the highest quarterly net back in the corporation's history.
Jason Bednard: Our emphasis on operational efficiency continues to strengthen our financial results, enabling us to keep costs and capital expenditures in check while preserving strong operational and financial metrics. At the same time, as Cheryl noted, Colombia's tight natural gas supply reinforces our solid commercial approach which balances stable long-term take-or-pay contracts with healthy interruptible sales exposure. During the fourth quarter of 2024, we generated total revenues, net of royalties and transportation expenses of $98.3 million, which were 23% higher compared to $79.7 million for the same period in 2023. Adjusted funds from operations for the quarter totaled $52.1 million, a 68% increase from the $31 million in the same period of 2023, largely driven by higher EBITDA.
Jason Bednar: Our emphasis on operational efficiency continues to strengthen our financial results, enabling us to keep costs and capital expenditures in check while preserving strong operator operational and financial metrics at the same time as Cheryl noted Columbia has tightened natural gas supply reinforces our solid commercial.
Jason Bednar: Which balances stable long term take or pay contracts with healthy interruptible sales exposure.
Jason Bednar: During the fourth quarter of 2024, we generated total revenues net of royalties and transportation expenses of $98 3 million, which were 23% higher compared to $79 7 million for the same period in 2023 adjusted funds from operations for the quarter totaled $52 1 million.
Jason Bednar: 68% increase from the $31 million in the same period in 2023, largely driven by higher EBITDAX adjusted EBITDAX Rose.
Jason Bednard: Adjusted EBITDAX Rows significantly by 43 percent, reaching 76.1 million for the three months ended December 31st, 2024, compared to 53.1 million for the same period in 2023. This increase was driven primarily by higher operating netbacks for natural gas.
Jason Bednar: Significantly by 43%, reaching $76 1 million for the three months ended December 31, 2024, compared to $53 1 million for the same period. In 2023. This increase was driven primarily by higher operating net backs for natural gas.
Jason Bednard: The corporation realized the net loss of 25.4 million for the three months ended December 31st, 2024, compared to a net income of 29.9 million in the same period in 2023. The net loss for the three months and year ended December 31st, 2024 is a result of a non-cash deferred income tax expense of 28.9 million, as compared to a non-cash deferred income tax recovery of 31.7 million in 2023, offset by an increase in EBITDA. Q4 2024 Deferred Tax Expense is mainly driven by the foreign exchange impact on the corporation's unused tax pools and capital pools. Our recruit capital expenditures for the three months ended December 31st, 2024 was $28.6 million, 60% down from $72.2 million in Q4 2023.
Jason Bednar: <unk> realized the net loss of $25 4 million for the three months ended December 31, 2024 compared to a net into about $29 9 million in the same period of 2023, the net loss for the three months.
Jason Bednar: And year ended December 31, 2024, as a result of a noncash deferred income tax expense of $28 9 million as compared to a noncash deferred income tax recovery of $31 7 million in 2023 offset by an increase in EBIT tax Q4 2020 for deferred.
Jason Bednar: Tax expense is mainly driven by the foreign exchange impact on the corporations unused tax pools in capital pools.
Jason Bednar: Ah recruit capital expenditures for the three months ended December 31, 2024 was $28 6 million, 60% down from $72 2 million in Q4 2023.
Jason Bednard: This reduction reflects lower spending on warehouse inventory, drilling, completion, workovers and related costs, and land and seismic acquisition aligning with the corporation's commitment to capital efficiency. Our strategic investments and operational efficiencies have allowed us to achieve a return of capital employed of 18% for the fourth quarter, a significant improvement compared to 11% reported in the same period of 2023. This reflects our disciplined approach to prioritizing high return projects and optimizing capital allocation, ensuring that each investment contributes meaningfully to our financial performance. As of December 31, 2024, the Corporation had $79.2M in cash and cash equivalents, marking its strongest cash position since Q3 of 2022, along with a working capital surplus of $45.5M.
Jason Bednar: This reduction reflects lower spending on warehouse inventory drilling completion, workovers and related costs and land and seismic acquisition aligning with the corporation's commitment to capital efficiency.
Jason Bednar: Our strategic investments in operational efficiencies have allowed us to achieve our return on capital employed of 18% for the fourth quarter, a significant improvement compared to the 11% reported in the same period of 2023. This reflects our disciplined approach to prioritizing high return projects and optimizing capital.
Jason Bednar: Allocation, ensuring that each investment contributes meaningfully to our financial performance.
Jason Bednar: As of December 31, 2020 for the Corporation had $79 2 million of cash and cash equivalents marketing extraordinary cash position since Q3 of 2022.
Jason Bednar: Along with working capital surplus of $45 5 million.
Jason Bednard: Further, as announced on February 24 alongside our guidance, the cash position at that date still remained at $79M, and I'm pleased to provide an update that as of today the cash position remains at approximately $80M. With this strong liquidity, the corporation is well suited to address both current and future operational requirements, while preserving the financial flexibility needed to seize strategic opportunities and sustain long-term growth.
Jason Bednar: Further as announced on February 24th alongside our guidance the cash position at that date still remains at 79 million and I'm pleased to provide an update that as of today of the cash position remains at approximately $80 million with this strong liquidity. The corporation is well suited to address both current and future operation.
Jason Bednar: Requirements, while preserving the financial flexibility needed to seize strategic opportunities and sustain long term growth.
Jason Bednar: <unk>.
Jason Bednard: I'd also like to highlight our declining leverage ratio, which was approximately 2.9 times at both year-end 2023 and March 31st, 2024. That leverage ratio fell consistently throughout 2024, and at December 31st, 2024, stood at 2.31 times, as a result of both record EBITDA and a very strong cash position, and indeed lower than the 2024 guidance we issued at the start of the year of between 2.4 to 2.8 times.
Jason Bednar: I'd also like to highlight our declining leverage ratio, which was approximately two nine times at both year end 2023 at March 31, 2024 that leverage ratio fell consistently throughout 2024 and at December 31, 2024 stood at 2.31 times as of <unk>.
Jason Bednar: Both record EBITDA, and a very strong cash position and indeed lower than the 2024 guidance. We issued at the start of the year of between two four to two eight times.
Jason Bednard: One of the corporation's 2025 objectives is to reduce our debt levels. The Macquarie two-year term loan remains drawn at $50 million and begins terming out in four equal quarterly installments of $12.5 million, with the first of such payments scheduled for December 2025. In addition to that, the corporation will continue to monitor its prospective free cash flow throughout the year, with the goal of potential further debt repayments or bond buybacks while balancing its capital programs and successful exploration development.
Jason Bednar: One of the Corporation's 2025 objective is to reduce our debt levels.
Jason Bednar: Okay.
Jason Bednar: The Macquarie two year term loan remains drawn at $50 million and begins terming out in four equal quarterly installments of $12 5 million with the first of such payments scheduled for December 2025.
Jason Bednar: In addition to that the corporation will continue to monitor perspective free cash flow throughout the year with the goal of potential further debt repayments or bond buybacks, while balancing as capital programs at successful exploration developments.
Jason Bednard: As of the end of the fourth quarter, we are fully compliant with all financial covenants, which include the following. First, the consolidated leverage ratio of 3.2 times incurrence and 3.5 times maintenance based. Our current leverage ratio of 2.31 is well inside this covenant. Second Covenant is a minimum consolidated interest coverage ratio of 2.5 times. Our current coverage ratio is at 5.1, which is well above the minimum required. And finally, a consolidated current ratio requirement of minimum 1 times, and we currently stand at 1.7 times. As such, we're well inside all of our financial restrictions.
Jason Bednar: As of the end of the fourth quarter, we are fully compliant with all financial covenants, which include the following.
Jason Bednar: First the consolidated lever leverage ratio of three two times and current saying three five times maintenance based.
Jason Bednar: Current leverage ratio of 231 is well inside this covenant.
Jason Bednar: The second Covenant is a minimum consolidated interest coverage ratio of two five times. Our current coverage ratio is at 5.1, which is well above the minimum required.
Jason Bednar: And finally consolidated current ratio requirement of a minimum one times and we currently stand at one seven times as such we're well inside all of our financial restrictions.
Jason Bednard: This concludes my comments.
Charlotte: This concludes my comments I'll hand, it back to Charlotte now.
Charles Gamba: I'll hand it back to Charl now. Firstly, maintaining and growing Canacol's EBITDA generation and reserves through higher commodity pricing and investment in drilling, work over and new facilities projects. Secondly, drilling high-impact gas exploration opportunities in both the Lower and Middle Magdalena Valleys. Third, reducing our debt.
Jason Bednar: Yeah.
Jason Bednar: Yeah.
Jason Bednar: Thanks, Jason.
Charles Dauber: 2025, our focus is fivefold, firstly, maintaining and growing Canada goes EBITDA generation and reserves through higher commodity pricing and investment in drilling workover and new facilities projects.
Charles Dauber: Lead drilling high impact gas exploration opportunities in both the lower and middle Magdalena valleys third reducing our debt fourth laying the groundwork to be able to commence operations in Bolivia in 2026, and fifth and finally continue the corporation's commitment towards ESG strategy.
Charles Gamba: 4th laying the groundwork to be able to commence operations in Bolivia in 2026 and 5th and finally continue the corporation's commitment to its ESG strategy.
Charles Gamba: We published our 2025 guidance in February, announcing a capital program ranging from $143 to $160 million. Throughout the year, we expect to average natural gas and oil sales between 146 and 159 million standard cubic feet per day of gas equivalent, with natural gas sales projected to be between 140 and 153 million standard cubic feet per day. We expect commodity prices to remain strong throughout the rest of this year and into next year and hence lowered our take or pay volumes to $111 million standard cubic feet per day in order to maximize our exposure to the higher price spot zone.
Charles Dauber: We published our 2025 guidance in February announcing the capital program, ranging from $143 million to $160 million throughout the year, we expect the average natural gas and oil sales between 146, and 159 million standard cubic feet per day of gas equivalents with natural gas sales projected to be between 140 and.
Charles Dauber: 153 million standard cubic feet per day.
Charles Dauber: We expect commodity prices to remain strong throughout the rest of this year and into next year, and hence lowered our take or pay volumes to 111 million standard cubic feet per day in order to maximize our exposure to the higher priced spot sales market.
Charles Gamba: We anticipate well-head natural gas prices, including both take or pay and interrupted volumes, net of transportation to range between $7.33 and $7.65 per thousand standard cubic feet. By maintaining disciplined capital allocation and operational efficiencies, we expect to sustain net backs between $5.81 and $6.19 per thousand standard cubic feet, resulting in an EBITDA forecast of $264 million to $312 million for 2020. It's important to note that a $1 change in the cost of interruptible gas pricing impacts EBITDA by $9-$14 million, highlighting our ability to capture opportunities in the market under higher prices.
Charles Dauber: We anticipate wellhead natural gas prices, including both take or pay and interruptible volumes net of transportation to range between $7 33, and $7 65 per thousand cubic feet.
Charles Dauber: By maintaining disciplined capital allocation and operational efficiencies, we expect to sustain net backs between $5 81.
Charles Dauber: And $6 19 per 1000 standard cubic feet, resulting in an EBITDA forecast of $264 million to $312 million for 2025.
Charles Dauber: It's important to note that a $1 change in the cost of interruptible gas pricing impacts EBITDA by 9% to $14 million Highland highlighting our ability to capture opportunities in the market under higher pricing.
Charles Gamba: In 2025, we also plan to increase our exploration activities in both the Lower and Middle Magdalena Valley basins as part of our long-term commitment to maintain and growing the Corporation's reserves and production. We intend to drill up to 11 exploration wells, including 10 new wells in the lower Magdalena Valley and one in the middle Magdalena Valley. High-impact wells include the Natia II well, where we plan to penetrate the primary CDO target shortly, having found significant reserves already in the overlying Porcaro Formation. Second high-impact well would include the Valiente well located in the middle Magdalena Valley.
Charles Dauber: In 2025, we also plan to increase our exploration activities in both the lower and Middle Magdalena Valley basins as part of our long term commitment to maintaining and growing the corporation's reserves and production base, we intend to drill up to 11 exploration wells, including 10, new wells in the lower Magdalena Valley and one in the Middle Magdalena Valley.
High impact wells included in the tier two well with our plan to penetrate the primary CDO target shortly having found significant reserves already in the overlying poor Carol formation.
Charles Dauber: Second high impact well would include the Valeant.
Well located in the Middle Magdalena Valley. Additionally, we will continue to optimize output by installing more compression processing facilities and executing workovers in key producing areas.
Charles Gamba: Additionally, we will continue to optimize output by installing more compression, processing facilities and executing workovers in key producing areas. Through this multi-tiered drilling approach, which includes high-impact exploration, near-field tie-ins and ongoing development work, we expect to continue positioning ourselves as the largest independent supplier to Colombia's natural gas market for the long-term.
Charles Dauber: This multi tiered drilling approach.
Charles Dauber: Which includes high impact exploration near field tie ins and ongoing development work we.
Charles Dauber: We expect to continue positioning ourselves as the largest independent supplier to Colombia's natural gas market for the long term looking ahead, we see significant exploration potential with over seven five trillion cubic feet of risk prospective resource on our current exploration portfolio spread across the lower middle Magdalena values of Colombia through our.
Charles Gamba: Looking ahead, we see significant exploration potential with over 7.5 trillion cubic feet of risk-prospective resource on our current exploration portfolio spread across the Lower and Middle Magdalena Valleys of Colombia. For a disciplined capital approach to capital management, we will continue investing in key projects focusing on increasing our EBITDA's generation and reserve base, as well as reducing our debt.
Charles Dauber: Disciplined capital approach to capital management, we will continue investing in key projects focusing on increasing our EBITDAX generation and reserve base as well as reducing our debt.
Charles Gamba: Outside of Colombia, we are progressing with our strategic entry into Bolivia. We have signed three expiration contracts, the Arenales, Ovalle and Florida Estes, and one field redevelopment contract, Tita, all located in the prolific gas-producing sub-Andean basin of Bolivia. These contracts are pending congressional ratification and formalization to establish the effective dates which we anticipate to achieve in September of this year.
Charles Dauber: Outside of Colombia, we are progressing with our strategic entry into oblivion.
Charles Dauber: Signed three exploration contracts the <unk> buy in Florida.
Charles Dauber: And one field redevelopment contract Teeter all located in the prolific gas producing some Indian basin. Olivia. These contracts are pending congressional ratification and formalization to establish the effective dates which we anticipate to achieve in September of this year.
Charles Gamba: We are currently preparing to apply for the environmental permit for Tita and developing our plans for the field's redevelopment with the intention to begin investments and field reactivation activities in 2020. Although the Sub-Indian Basin is underdeveloped in terms of resource, it benefits from an existing export pipeline network into Brazil, creating a very favourable environment for commercialisation of any gas we can bring back onto production or find. By leveraging our technical expertise and proven ability to commercialise gas, we aim to expand our regional footprint and diversify our resources.
Charles Dauber: We're currently preparing to apply for the environmental permit for pizza and developing our plans for the field redevelopment with the intention to begin investments in field reactivation activities in 2026.
Charles Dauber: Although the southern Indian Basin is underdeveloped in terms of resource it benefits from an existing export pipeline network into Brazil, creating a very favorable environment for commercialization of any cash we can bring back onto production or find by leveraging our technical expertise and proven ability to commercialize gas, we aim to expand our regional footprint and diversify our resource.
Charles Gamba: Thank you for your attention and we look forward to updating you on our progress in the coming months.
Charles Dauber: Thank you for your attention and we look forward to updating you on our progress in the coming months, we're now ready to take questions.
Operator: We're now ready to take questions. We will now begin the question and answer session. Once again, we will only be taking questions from the webcast. At this time, we will pause momentarily to assemble our roster. Please stand by.
Charles Dauber: We will now begin the question and answer session. Once again, we will only be taking questions from the webcast. At this time, we will pause momentarily to assemble our roster. Please standby.
Charles Dauber: Okay.
Charles Dauber: [music].
Operator: Thank you.
Charles Dauber: Thank you.
Omar Ceolla: The first question we have today is from Omar Ceolla from Oppenheimer.
Speaker Change: The first question, we have today from all myself, Jeff Oppenheimer, how will the company replenish its PDP reserves and how easy or how fast can you currently not producing one P reserves turning to production.
Charles Gamba: How will the company replenish its PDP reserves and how easy or how fast can you currently not producing 1P reserves turn into production? Thanks Omar. The way we typically increase our PDP reserves generally through in-field work such as workovers of existing wells which open new producing zones in the well, the installation of compression in the field which lowers the dry-down pressure on the reservoir so we can suck more gas and push more gas out of the well. These two activities are always ongoing in our operations and always result in increases of PDP reserves from existing wells.
Omar: Thanks Omar.
Omar: We typically increase our PDP reserves generally we threw in field work such as Workovers at existing wells, which open new producing zones in the well.
Omar: Bruce you months.
Omar: The installation of compression in the field, which lowers the dry down pressure on the reservoir. So we can set more gas and push more gas out of the well. These two activities are always ongoing in our operations and always.
Omar: Our results in increases of PDP reserves from existing wells.
Charles Gamba: The second way to increase PDP is to bring on new production from new wells and new discoveries, which we have done so far this year in the example of Siku-2, for example, LULO-3, and hopefully bringing Natia-2 on by year end. Through those two activities, infield work related to working over existing wells and the installation of compression, as well as bringing on new wells, we managed to increase and replace our PDP. on a yearly basis.
Omar: The second way to increase PDP of course is to bring on new production from new wells.
Omar: New discoveries, which we have done so far this year and the example of <unk> for example, Google III.
Omar: And hopefully, bringing the tier two on by year end, so through those two activities.
Omar: Infield work related to work over existing wells and the installation of compression as well as bringing on new wells, we managed to increase and replace our PDP reserves on a yearly basis.
Speaker Change: Thank you count. The next question is from Peter <unk> from Jefferies.
Peter Bowley: The next question is from Peter Bowley from Jeffries. You have $12.5 million in short-term debt under the Senior Term Loan with Macquarie. Can you remind us the amortization profile of this loan? And can you confirm production levels have been sufficient to not trigger an accelerated amortization event under the TL-accredited agreement?
Speaker Change: You have $12 $5 million in short term debt under the senior term loan with Macquarie.
Peter <unk>: Does that amortization profile of these known Anthony confirmed production levels have been sufficient to not trigger an accelerated amortization event under the credit agreement.
Anthony: Sure. Thanks Carolina.
Charles Gamba: The Macquarie Loeb $50M was taken out in September of 2024. There are no debt repayments for the first 12-months. As such, the first quarterly installment, as I mentioned earlier, is in December of 2025 and it's four equal quarterly installments of the $12.5M, with the last one being in September 2026. The production levels have not dipped below any form of accelerated amortization for any month since inception to date. And for those that aren't aware, should it trigger, which once again we do not expect that to happen, it would simply pay out in six payments beginning in October 2025.
Anthony: So the Macquarie low $50 million was taken out in September of 'twenty 'twenty four.
Anthony: There is no debt repayments for the first 12 months.
As such the first quarterly installment as I had mentioned earlier.
Anthony: In December of 2025, and its four equal quarterly installments of up to 12 5 million with the last one being in September 2026.
Anthony: Our production levels sufficient yes, there is the production levels have not dip below any form of accelerated amortization for any month since inception to date.
Anthony: And for those that aren't aware should trigger which once again, we do not expect that to happen it would simply payout in six.
Anthony: Payments beginning in October 2025.
Charles Gamba: So essentially it'd pay out over the final six months instead of the final 12 months, but we're not anticipating.
Anthony: We had paid over the final six months instead of the final 12 months, but we're not anticipating that.
Peter Bowley: There's another question from Peter, can you share an update on Natija to when you target knowing results? Yes, Peter, we're currently running casing in the well to isolate the gas that we have already discovered within the shallow or porcaro formation. Once we've completed that casing operation, we will commence drilling again to deepen the well through the primary target, which is the Cienaga de Oro.
Peter <unk>: There's another question from Peter.
Peter <unk>: Can you share an update on that do you get to when you target knowing results, yes Peter.
We're currently running.
Speaker Change: Casing in the well to isolate the gas that we have already discovered within the Shadow report Carol formation.
Speaker Change: And once we've completed that case in operation, we will commence drilling again to deepen the well through the primary target which in this world.
Charles Gamba: These operations should take between four to five weeks.
Speaker Change: These operations should take between four to five weeks.
Speaker Change: The chalk.
Alexander Emery: The next question is from Alexander Emery from S&P Global Plats. Can you provide more color on your plans for your Bolivian blocks this year? We understand Canacol signed the four contracts with Bolivia's Energy Ministry in January. Yes, in Bolivia we are waiting for the ratification of the four contracts by Congress. We anticipate that to occur in September of this year.
Speaker Change: The next question is from Alexander <unk> from S&P Global Platts can you provide more color on your plans for your body to unblock, Steve here, we understand clinical song before contracts with Bolivia and argue Ministry in January.
Speaker Change: Yes in Bolivia, we are waiting for the ratification of the four contracts by Congress, we anticipate that to occur in September of this year in the meantime.
Charles Gamba: In the meantime, we are preparing the environmental, all the paperwork to submit for environmental permitting of the TITA block so that we can start operations in TITA next year. Those operations would include workovers of existing construction of early production gas treatment facilities and the construction of a short flow line to tie those wells into the export line to Brazil. That is the status of Bolivia.
Speaker Change: We are.
Speaker Change: Preparing the environmental all of the paperwork to submit for environmental permitting of the Tico block. So that we can start operations in the next year and those operations would include workovers of existing wells.
Speaker Change: <unk> of existing wells the construction of early production gas treatment facilities and the construction of a short flow line to tie those wells into the export line to Brazil. So thats the status of Bolivia, we're aiming to have production from Bolivia, hopefully exiting 2026.
Charles Gamba: We are aiming to have production from Bolivia hopefully exiting 2020.
Alejandra Andrade: Next question is from Alejandra Andrade from JP Morgan. On the tax side, can you remind us the expected cash payment for 2025? To clarify, you do not need to get rebates from the government but simply will make a lower payment, correct? As our guidance press release roughly a month ago stated, the tax installment that we will pay in Q2 total $18 million, of which $12 million is a prepayment related to 2025 tax. And of course, we have roughly a million dollars a month comes off our revenue checks, you know, being like two or two and a half percent.
Speaker Change: Next question is from Alejandro <unk> from J P. Morgan.
Speaker Change: The tax side can you remind us the expected cash payments from 'twenty to 'twenty five to clarify you did not need to get rebates from the government that we will make another payment correct.
Speaker Change: Yes, our guidance press release, roughly a month ago stated.
Speaker Change: The tax installment that we will pay in Q2.
Speaker Change: Total $18 million of which 12.
Speaker Change: <unk> is.
Speaker Change: As a prepayment related to 2025 tax.
Speaker Change: And of course, we have roughly a million dollars a month comes off our revenue checks being.
Speaker Change: Being like two or two 5% so it's not a big number.
Charles Gamba: So it's not a big number. And no, we don't expect any rebates. Anything we have overpaid essentially just rolls into a credit for the next year and thus lowers that year's tax.
Speaker Change: We don't expect any rebates.
Speaker Change: Anything we have.
Speaker Change: Overpaid, essentially just rolls into a credit for the next year and that's lowers that year is taxes.
Speaker Change: Yeah.
Speaker Change: Thank you Jason next question is somewhat anecdotal thoughts on balance.
Oriana Kovalt: The next question is from Oriana Kovalt from Balance. In your reserve reports, we see your price forecast for the next five years with revisions to close to 40% versus 2024 report. Can you shed additional colour on what are you seeing behind your expectations and if you are using any benchmark reports for forecasts? Yes, this reflects not only the current market dynamics in Colombia where there is a shortfall of gas supply, but also the cost of imported and regasified LNG into Colombia. Essentially, The benchmark that applies to Columbia, specifically the The landing point of the SPAC terminal located in Cartagena parallels that of Brazilian imported LNG pricing at a...
Speaker Change: Reserve reports, we see your price forecast for the next five years with mutations to close to 40% versus 2024 report can you shed additional color on what are you seeing behind our expectations and they are using any benchmark reports for forecast.
Speaker Change: Yes.
Speaker Change: It reflects the.
Speaker Change: Not only the current market dynamics in Colombia, where there is a shortfall of gas supply.
Speaker Change: But also the cost of imported and re gasify LNG into Colombia, so essentially.
Speaker Change: The benchmark that applies to Colombia, specifically.
Speaker Change: The landing point of the terminal located in card the Hainan parallels that of Brazilian imported LNG pricing.
Speaker Change: Adam.
Charles Gamba: at a premium of about 10% to 15% given the relatively small votes that Colombia can accept. That forecast going forward reflects current market conditions which are being driven by the shortage of gas and the relatively high cost of imported LNG into Colombia tied to Brazilian imports.
Speaker Change: Yeah.
Speaker Change: Hi.
Speaker Change: Premium of about 10% to 15% given the relatively small boats.
Speaker Change: Colombia can accept.
Speaker Change: That forecast going forward reflects current market conditions, which are being driven by the sort of shortage of gas and the relatively high cost of imported LNG, the Columbia tied to Brazilian important benchmark.
Speaker Change: Thank you Carol we have a question from Arlinda Alexandre from scenarios investment management when it comes to reducing debt what is your priority buying back bonds or reducing Dr. Seth.
Alexander: We have a question from Alexander from Sonarius Investment and Management.
Charles Gamba: When it comes to reducing debt, what is your priority, buying back bonds or reducing the RCS? First of all, as I mentioned, we do have some scheduled Macquarie payments, which is not dissimilar from the RCF, perhaps. Obviously, the quickest way to de-lever post that would be to buy back bonds at a discounted rate, so that's certainly on the radar.
Speaker Change: Well first of all as I mentioned, we do have some scheduled Macquarie payments right, which is not dissimilar from the Rcs perhaps.
Speaker Change: Obviously, the quickest way to Delever post that would be to buy back bonds at discounted rates. So that certainly on the radar.
Speaker Change: And any excess cash flow.
Speaker Change: Suspect will be allocated to a mix of both whether it's the rcs or the bond buyback.
Charles Gamba: Any excess or the bond buyback, it's entirely possible and perhaps likely that we will be extending the term of the RCF also.
Speaker Change: It's entirely possible and perhaps likely that we will be extending the term of the Rcs also.
Speaker Change: Okay.
Bernardo Carvajal: We have a question from Bernardo Carvajal from Parellones Capital. Thank you for the webinar.
Speaker Change: We have a question from but not of a kind of a hot summer Friday Janus capital.
Charles Gamba: Are you considering any sale of assets to help the leverage? No, we are not.
Speaker Change: Thank you for delighting, our are you considering any sale of assets to help deleverage.
Speaker Change: No we are not.
Andres Castillo: The next question is from Andres Castillo from Kratos Capital Partners.
Speaker Change: The next question is from.
Speaker Change: Andres prestige up from Roth capital partners.
Charles Gamba: Please talk us about how you see pricing of natural gas evolving vis-a-vis the price of imported LNG via Cartagena or Buenaventura. Yeah, I mean, the only practical in the mid to near term, and that's the next. 5-6 years. The only potential source of new imported volumes of LNG would be through the expansion of the SPEC terminal in Cartagena. That's a fairly limited capacity terminal at the moment, so there's not a lot of potential in the near to mid-term to significantly increase imports of LNG into Colombia. We expect, as I mentioned in an earlier question, that imported LNG pricing in Colombia will certainly be at a premium to Brazilian benchmarks and international benchmarks in general, given the relatively small volumes that are involved and the smaller ships that are used at higher cost.
Speaker Change: Can you talk us about how you see pricing now towards basketball team.
Speaker Change: Vis vis the price of imported LNG by a quite the Hainan or went out in total.
Speaker Change: Yes.
Speaker Change: The only practical in the mid to near term and that's the next five to six years.
Speaker Change: The only potential source of.
Speaker Change: New imported volumes of LNG would be through the expansion of the spec terminal in Cartagena.
Speaker Change: That's a fairly limited.
Speaker Change: Passenger terminal at the moment, so so theres not a lot of potential in the near to midterm to significantly increased imports.
Speaker Change: LNG into Colombia.
Speaker Change: So we expect again as I mentioned in an earlier question.
Speaker Change: That imported LNG pricing in Colombia will certainly be at a premium to Brazilian.
Speaker Change: Benchmarks and international benchmarks in general given the relatively small volumes that are involved in the smaller ships that are used at higher cost per guest into Colombia with respect to the winner the insured a terminal on the Pacific Coast Net project has now been.
Charles Gamba: With respect to the Buenaventura Terminal on the Pacific Coast, that project has now been on the books for at least 15 years, technically extremely difficult to achieve given having to cross the Western Andes with a gas pipeline. So that project remains very distant in any terms of potential outlook, certainly well beyond 10 years.
Speaker Change: On the books for at least 15 years technically extremely difficult to achieve given given having to cross the the western and these with a with a gas pipeline. So that project remains very distinctive in terms of potential outlook, certainly well beyond 10 years.
Operator: Once again, we are going to pause momentarily while we gather more questions from our webcast side. Please stand by.
Speaker Change: Once again, we're going to pause momentarily, while we gather more questions from our webcast side. Please standby.
Speaker Change: Oh.
[music].
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].
Ezequiel Fernandez: We have one last question from Ezequiel Fernandez from Balance. How will Canacol fund the expansion into Bolivia? Would this require an equity injection or does Canacol plan to raise more debt, possibly non-recourse?
Speaker Change: We have one last question from as I can take this one.
Speaker Change: Hello, Chemical fund the expansion into Bolivia with these require an equity injection or does clinical plan to raise more debt, possibly nonrecourse.
Charles Gamba: As I mentioned in response to the earlier question, the only activity we have planned Some reactivation activities associated with the Tita gas field and that would involve essentially the work over of up to five existing wells, the installation of some production treatment facilities and a relatively short flow line to tie the facilities into the export line. We anticipate that that will cost approximately $12.5M in total and the result of that investment would be commercializing gas production.
Speaker Change: Yes, so as I mentioned in response to the earlier question. The only activity. We have planned next year is the sum.
Speaker Change: Some reactivation activities associated with the <unk>.
Speaker Change: Gas field.
Speaker Change: And that would involve essentially the workover of up to five existing wells the installation of some production treatment facilities and our relatively short flow lines tie the facilities into the export line, we anticipate that that will cost approximately $12 $5 million in total.
Speaker Change: And the results of that.
Speaker Change: <unk> would be commercializing gas production. So certainly in the near term 2026 relatively small investments into.
Charles Gamba: Certainly in the near-term 2026 relatively small investment into Bolivia simply to re-establish production from that existing gas field. Going forward, 2027 and beyond, we would start drilling new wells in both that existing gas field as well as start exploring some of the three other blocks over the next five years. We expect cash flow from TITA as a result of next year's activities and essentially relatively minimal amounts of new cash into Bolivia once TITA is up and cashed.
Speaker Change: Bolivia simply to reestablish production from that existing gas field going forward 2027, and beyond we would start drilling new wells.
Speaker Change: In both that existing gas yield as well as start exploring some of the three other blocks over the next five years.
Speaker Change: We expect cash flow.
Speaker Change: From Peter as a result of next year's activities and essentially.
Speaker Change: Relatively minimal amounts of new cash into Bolivia, once <unk> is up and cash flowing.
Speaker Change: Okay.
Charles Gamba: Thank you, Charles.
Operator: This was the last question. Thanks everyone for joining us today. We appreciate your time and interest and we look forward to connecting with you again on our next call.
Tal: Thank you Tal.
Speaker Change: Was the last question and thanks, everyone for joining us today.
Speaker Change: We appreciate your time and interest and we look forward to connecting with you again on our next call.
Operator: Have a great day.
Speaker Change: Okay.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Operator: Thank you for attending today's presentation.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: [music].