Q1 2025 Canacol Energy LTD Earnings Call
Operator: Good day, and welcome to the Canacol Energy First Quarter 2025 Financial Results Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Good day and welcome to the chemical energy first quarter 2025 financial results Conference call.
All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.
Operator: If you would like to ask a question, you may submit one on the webcast portal.
You would like to ask a question you may submit one on the webcast portal.
Carolina Orozco: At this time, I would like to turn the conference over to Carolina Orozco, Vice President of Investor Relations. Please go ahead, ma'am.
At this time I would like to turn the conference over to Carolyn Roscoe Vice President of Investor Relations. Please go ahead ma'am.
Carolina Orozco: Good morning and welcome to Canacol's first quarter financial results conference call. This is Carolina Orozco, Vice President of Investor Relations.
Speaker Change: Good morning, and welcome to chemicals first quarter financial results Conference call do you just kind of Leonardo School, Vice President of Investor Relations and with Mr. Child, Gamba, President and Chief Executive Officer, and Mr. Jason Bednar, Chief Financial Officer before we begin it is important to mention that the comments on this call. They can Nicholls senior management.
Carolina Orozco: I am with Mr. Charle Gamba, President and Chief Executive Officer, and Mr. Jason Bednar, Chief Financial Officer.
Operator: Before we begin, it is important to mention that the comments on this call by Canacol's 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: Can include projections of the corporation's future performance. These projections new year constitute any commitment as to future results, nor taking into account risks or uncertainties that could materialize.
Speaker Change: We sold clinical assumes no responsibility India event that future results are different from the projections on these conference calls.
Operator: Please note that all finance figures on this call are denominated in U.S. dollars.
Speaker Change: Note that all financial figures on this call are denominated in U S dollars will begin the presentation with our president and CEO, Mr. Charles Gamba well then.
Charle Gamba: We will begin the presentation with our President and CEO, Mr. Charle Gamba, who will summarize highlights for the corporation for the first quarter of 2025.
Speaker Change: Summarize highlights for the corporation for the first quarter of 2025, Mr. Jason Bednar, Our CFO will then discuss financial hi, Mr down that 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 I will now turn over the call to Mr. Charles Lambert, President and CEO of kind of cool.
Jason Bednar: Mr. Jason Bednar, our CFO, will then discuss financial highlights.
Charle Gamba: Mr. Gamba will close with a discussion of the corporation's outlook for the remainder of 2025.
Operator: At the end, we will have a Q&A session.
Charle Gamba: I will now turn over the call to Mr. Charle Gamba, President and CEO of Canacol Energy. Thanks, Caroline, and welcome everyone to Canacol's first quarter 2025 conference. Pleased to report a strong and profitable first quarter supported by a favourable commodity price environment, a solid commercial strategy and our continued focus on cost control and financial stability. These factors enable us to maintain robust and stable operating margins, demonstrating the strength and efficiency of our systems. In the first quarter of 2025, we achieved an average natural gas price of $7.23 per million cubic feet per day net of transportation.
Speaker Change: Eric.
Speaker Change: Thanks, Kathleen and welcome everyone to chemicals first quarter 2025 conference call.
Speaker Change: Pleased to report a strong and profitable first quarter supported by favorable commodity price environment solid commercial strategy and our continued focus on cost control and financial discipline. These factors enabled us to maintain robust and stable operating margins demonstrate the strength and efficiency of our business.
Speaker Change: The first quarter of 'twenty five we achieved an average realized natural gas price of $7 23 per million cubic feet per day net of transportation costs operating net backs for natural gas rose, 12% year over year to $5 48.
Charle Gamba: Operating netbacks for natural gas rose 12% year-over-year to $5.48 per million. While average realized sales of $135.5 million can be super good for natural gas and oil, we kept operating expenses low at $0.50, allowing us to maintain a strong operational margin of 76% and supporting our continued strong financial Importantly, natural gas sales volumes remain in line to meet our full year guidance range of between 140 and 153 million cubic feet per day. Net income grew to $31.8 million compared to $3.7 million in the same quarter last year. This increase was primarily driven by stronger operating netbacks and a $19.5 million deferred tax credit.
Speaker Change: Pete.
Speaker Change: While average realized sales of $135 5 million cubic feet per day for natural gas and oil we kept operating expenses low at 50 cents.
Speaker Change: All of us to maintain a strong operational margin of 76% and supporting our continued strong financial performance importantly, natural gas sales volumes remain in line to meet our full year guidance range of between 140, and 153 million cubic feet per day.
Speaker Change: Net income grew to $31 $8 million compared to $3 7 million in the same quarter last year. This increase was primarily driven by stronger operating net backs and a $19 5 million deferred tax recovery.
Charle Gamba: Our financial position remains strong with quarter-end cash of $79M, unchanged from our year-end 2024 balance. Additionally, our leverage ratio stood at 2.3, a notable improvement from 2.91 in the same period last year, and remains well within our 3.5 maintenance covenant threshold.
Speaker Change: Our financial position remains strong with quarter end cash of $79 million.
Speaker Change: Unchanged from our year end 2024 balance. Additionally, our leverage ratio stood at 2.3, a notable improvement from 291 in the same period last year and remains well within our $3 five maintenance covenant threshold operationally during the first quarter, we drilled a total of four wells three.
Charle Gamba: Operationally, during the first quarter, we drilled a total of four wells. three successful development and evaluation wells, which all encountered gas and have all been tied into production. We also drilled the Chibigi 1 exploration well, which encountered non-commercial volume. At Natia 2, we found approximately 550 feet of gas-charged sandstones within the Porquero formations with pressures of up to 13,500 PSI. The well subsequently encountered difficulties while running casing and had to be temporarily suspended. Operations resumed last week to continue to drill the primary Cienaga de Oro target to a total planned depth of 16,500 PSI. Upon completion of drilling, open hole and encased hole logs will be run across the CDO and porquero and production tests will subsequently be conducted across any potential gas producing environment.
Speaker Change: Three successful developments any valuation loss, which all encountered gas and have all been put into production. We also drilled the <unk>, one exploration, well, which encountered noncommercial volumes with gas at in the tier two we signed approximately 550 feet of gas to our SaaS deals within the port Carol formations with pressures up to 13500 <unk> the well.
Speaker Change: All subsequent encountered difficulties, while running casing that had to be temporarily suspended operations resumed last week to continue to drill the primary scenography oral target to a total planned depth of 16500 feet. Upon completion of drilling open hole and cased hole logs will be right across the CDO on for Garo and production tests will subsequently be conducted across it.
Speaker Change: Any potential gas producing intervals.
Charle Gamba: I'm also pleased to share that Canacol has recently received the highest ESG performance rating from ISS, a leading provider of sustainability assessments for the global oil and gas industry. This recognition places us significantly ahead of the sector average in areas such as climate protection and energy transition. Our commitment to clean natural gas production, the ongoing reduction of venting and fugitive emissions and our rigorous monitoring of water resources were key factors in this achievement. In addition to the ISS rating, we've earned top ESG scores across several recognized international agencies. S&P Global awarded us 75 points in its Corporate Sustainability Assessment, CSA, ranking Canacol in the top 10% of global oil and gas.
Speaker Change: I'm also pleased to share. The Kennecott has recently received the highest ESG performance ranging from ISS, a leading provider of sustainably assessments for the global oil and gas industry. This recognition places are significantly ahead of the sector average scenarios, such as climate protection and energy transition our commitment to clean natural gas production the ongoing reduction of benzene.
Speaker Change: With emissions and a rigorous modern water resources were key factors in this achievement.
Speaker Change: In addition to the ISS rating, we've earned top ESG scores across several recognized international agencies S&P global awarded US 75 points since corporate sustainability assessments, CSA ranking Cana Collins top 10% of global oil and gas peers.
Charle Gamba: and Secure, and our second consecutive inclusion in its Sustainability Yearbook. The Stainalytics rated us 24.4 placing us in the top 4% of 301 global oil and gas producers. MSCI reaffirmed our A rating for the second consecutive year and CDP awarded us a B for both climate change and our first year of assessment for water security. Additionally IS's governance scored us three for governance, one for environment and one for social, all of which are better than the industry average.
Speaker Change: And securing a second consecutive inclusion and its sustainability yearbook.
Speaker Change: Mr Analytics rated at $24 four placing us in the top 4% of 301 global oil and gas producers MSCI reaffirmed our a rating for the second consecutive year and CDP awarded Us a b for both climate change and our first year of assessment for water security. Additionally, ISS governance scored us three for governance one for <unk>.
Speaker Change: <unk> and one for social all of which are better than the industry average. These outstanding results are a direct reflection of our more than a decade of hard work and dedication to embed in the highest ESG standards into our corporate strategy.
Charle Gamba: These outstanding results are a direct reflection of our more than a decade of hard work and dedication to embedding the highest ESG standards into our corporate strategy. They demonstrate our commitment to advancing a cleaner, more sustainable and responsible energy future.
Speaker Change: <unk> commitment to advance a cleaner more sustainable and responsible energy future I'll now turn the presentation over to Jason Bednar, Our CFO, who will discuss our 2005 first quarter financial results.
Jason Bednar: I'll now turn the presentation over to Jason Bednar, our CFO, who will discuss our 2005 first quarter financial. The first quarter of 2025 marked another strong period of performance for Canacol with solid EBITDAX generation, strong netbacks and continued capital discipline. We realized average natural gas prices of $7.23 per MCF net of transportation, benefiting from a strong pricing environment. With operating expenses held steady at $0.50 per MCF, our natural gas operating net back rose to $5.48 per MCF, up 12% from the first quarter of last year. These efficient unit economics translated into healthy financial performance. Revenue, net of royalties and transportation totaled $72.7 million, while adjusted EBITDAX came in at $56.3 million.
Speaker Change: Yeah.
Karl: Thanks, Karl the first quarter of 2025 marked another strong period of.
Karl: Performance for Kenneth Cole with solid EBITDAX generation strong net backs and continued capital discipline.
Karl: We realized average natural gas prices of $7 23 per Mcf net of transportation.
Karl: From a strong pricing environment.
Karl: With operating with operating expenses held steady at 50 cents per Mcf for natural gas operating netback rose to $5.48 per Mcf.
Karl: 12% from the first quarter of last year.
Karl: These efficient unit economics translated into healthy financial performance revenues net of royalties and transportation totaled $72 7 million, while adjusted EBITDAX came in at $56 3 million.
Jason Bednar: We also generated $39.3 million in adjusted funds from operations. Cash provided by operating activities reached $62.6 million, a 14% increase over the same quarter in 2024, demonstrating the continued resilience of our cash-generating capacity. Net income for the quarter was $31.8M, supported by a stronger net back and a $19.5M deferred tax recovery as the Colombian peso appreciated against the U.S. dollar.
Karl: We also generated $39 3 million and adjusted funds from operations.
Cash provided by operating activities reached $62 6, million% to 14% increase over the same quarter in 2020 for demonstrating the continued resilience of our cash generating capacity.
Karl: Net income for the quarter was $31 8 million supported by a stronger netback and a 19 million deferred tax recovery as the Colombian peso appreciated against the U S dollar.
Jason Bednar: On the operational front, we invested $50.5M during the quarter, fully funded by operating cash flow. We drilled a total of 4 wells, including 3 successful development wells, being Sikoo 2, Lulu 3 and Fraser 3. We also continued progressing the drilling of Natia 2-0 and continued with the expansion of our compression capacity and ongoing work over program. We ended the quarter with $79 million in cash, unchanged from year-end 2024, reflecting our disciplined approach to prioritizing high-return projects and optimizing capital allocation. This cash position remains unchanged since our February guidance update and provides us with ample headroom to fund near-term operations.
On the operational front, we invested 55 million during the quarter fully funded by operating cash flow, we drilled a total of four wells, including three successful wells being seat due to lead free and Fraser threes.
Karl: We also continued progressing the drilling up in that tier two well, we continued with the expansion of our compression capacity and ongoing Workover program.
Karl: We ended the quarter with 79 million in cash unchanged from year end 2024, reflecting our disciplined approach to prioritizing high return projects and optimizing capital allocation.
Karl: <unk> cash position remains unchanged since our February guidance update and provides us with ample headroom to fund the near term operations.
Jason Bednar: Thanks to the combination of strong margins, disciplined spending and a resilient balance sheet, we remain well positioned to deliver on our 2025 program. We continue to meet all financial covenants with ample room. At the quarter end, our leverage ratio was 2.32x, well below the 3.25x and 3.5x covenant thresholds. Our interest coverage ratio stood at 4.95x, well above the 2.5x minimum. And our current ratio was at 1.4x, exceeding the required 1x. This strong covenant buffer coupled with a strong cash position reinforces our ability to meet operational needs and execute on our capital priorities with prudent financial flexibility.
Karl: Thanks to the combination of strong margins disciplined spending and a resilient balance sheet, we remain well positioned to deliver on our 2025 program.
We continue to meet all financial covenants with ample room at the quarter end, our leverage ratio was 2.32 times well below the 3.25 times at three five times Covenant thresholds, our interest coverage ratio stood at 495 times well above the two two.
Karl: Five times at a minimum.
Karl: And our current ratio was at 1.4 times exceeding the required one time.
Karl: This strong covenant buffer coupled with a strong cash position reinforces our ability to meet operational needs and execute on our capital priorities with prudent financial flexibility.
Karl: [laughter].
Jason Bednar: One of the Corporation's long-term key objectives is debt reduction. Our $50M Macquarie term loan is scheduled to begin amortizing in four equal quarterly installments of $12.5M starting in December of this year. Additionally, we are actively monitoring free cash flow availability throughout the year and may pursue additional discretionary debt repayments or bond buybacks without compromising our ability to fully fund the capital program and advance key exploration activities.
Karl: One of the Corporation's long term key objectives is debt reduction or 50 million Macquarie term loan is scheduled to begin amortizing in four equal quarterly installments of $12 5 million starting in December of this year. Additionally, we are actively monitoring free cash flow availability throughout the year and may pursue.
Karl: Through additional discretionary debt repayments or bond buybacks without compromising our ability to fully fund the capital program and advanced key exploration activities.
Jason Bednar: Therefore, as part of our ongoing balance sheet optimization, at the end of the quarter, we carried out a targeted open market buyback of our 2028 senior notes. Acquiring $5 million in principal for $2.7 million in cash, roughly half the par value. The repurchase senior notes were subsequently cancelled in early April 2025.
Karl: Therefore, as part of our ongoing balance sheet optimization at the end of the quarter, we carried out a targeted open market buyback cover 2028 senior notes.
Karl: Acquiring 5 million in principal for $2 7 million in cash roughly half the par value the repurchase senior notes were subsequently canceled in early April 2025.
Jason Bednar: Lastly, I want to address a topic we've received several inquiries about in recent weeks. To be absolutely clear, Canacol has not hired or even engaged in discussions with any restructuring advisor at any point during 2024 or 2025. Our full focus remains on executing our capital plan, advancing exploration and reducing debt through internally generated cash flow.
Karl: Lastly, I want to address the topic, we've received several inquiries about my.
Karl: In recent weeks two we absolutely clear chemical has not hired or even engaged in discussions with any restructuring advisor at any point during 2024 or 2025, our full focus remains on executing our capital plan advancing exploration and reducing debt through internally.
Karl: We generated cash flow.
Jason Bednar: This concludes my comments.
Karl: Yes.
Charle Gamba: I will now hand it back to Charles. Thank you. Our 2025 focus continues to be centred on five items. Firstly, maintaining and growing our EBITDA generation and reserves through the investment in drilling, work over and new facilities project. Secondly, drilling high-impact gas exploration opportunities in the lower and middle Magdalena Valley, like Matija, giving positive results. Thirdly, deleveraging of debt, as Jason just indicated, opportunistic buyback of debt at significantly reduced capital requirements. Fourthly, laying the groundwork to be able to commence operations in Bolivia in 2026. And finally, to continue the corporation's commitment to its ESG strategy.
Charlotte: Includes my comments I will now hand, it back to Charlotte. Thank you.
Charlotte: Thanks, Jason.
Charlotte: Our two tiny 2025 focus continues to be.
Charlotte: Centered on five items, firstly, maintaining and growing our EBITDA generation of reserves through the investment in drilling Workover and facility projects.
Charlotte: Secondly, drilling high impact gas exploration opportunities in the lower and Middle Magdalena Valley like meta you give.
Charlotte: Given positive results thirdly deleveraging of debts as Jason just indicated opportunistic buyback of debt at significantly reduced.
Charlotte: Capital requirements fourthly laying the groundwork to be able to commence operations in Bolivia in 2026, and finally to continue the corporation's claim into its ESG strategy.
Charle Gamba: Our 2025 work program is focused on our core assets in the Lower and Middle Magdalena basins. In the Lower Mag Valley, we plan to drill up to 10 natural gas exploration wells, while in the Middle Mag, we intend to drill one exploration well targeting both natural gas and condensate. These activities are designed to maintain and grow our production base and reserves. Additionally, we will continue installing additional compression and processing infrastructure where needed, and execute targeted workovers across key producing areas. Corporation is currently sidetracking in the TIA-2 exploration well. Current operations include the installation of a whipstock within the 7-inch casing prior to milling a window and initiating the drilling of the sidetrack.
Charlotte: Our 2020 flat work program is focused on our core assets in the lower and middle Magdalena basins, lower Mag Valley, we plan to drill up to 10 natural gas exploration well, while in the middle Mag, we intend to drill one exploration well targeting both natural gas and condensate. These activities are designed to maintain and grow our production base reserves. Additionally, we will have <unk>.
Charlotte: Installing additional compression and processing infrastructure, where needed and execute targeted workovers across key producing fields Corporation is currently sidetrack, even the tier two exploration well current operations include the installation of a which started in the seventies casein prior 10 million in window and initiating the drilling of a sidetrack.
Charle Gamba: The objective of the sidetrack is to re-drill the gas-burying port-claro interval where we encountered 550 feet of gross gas pay, and to continue on to drill the deeper primary Ciena de Oro sandstone target. In the Middlemeg Basin, we are preparing to drill the Valiente gas condensate prospect starting in the third quarter of this year. This large material prospect is located approximately 5 kilometres uptip of the Opan gas field. which had produced large volumes of gas and condensate in the past. We're also assessing the strategic options for drilling of the deeper, high-risk, high-reward polar prospect located in the Middle Magdalena.
Charlotte: The sidetrack is to re drill the gas dairy and pork narrow interval, where we encountered 550 feet of gross gas paint and to continue on to drill the deeper prime are you seeing either the oral sandstone target reservoir in the Midland Basin, we are preparing to drill the valeant they gas condensate prospects starting in the third quarter of this year. This law.
Charlotte: <unk> material prospect is located approximately five kilometers update Oh PON gasfield.
Charlotte: Which had produce large volumes of gas and condensate in the past. We're also assessing the strategic options for drilling of the deeper high risk high reward polar prospect located in the Middle Magdalena Valley, given the scale and complexity of polo.
Charle Gamba: Given the scale and complexity of Pola, we are carefully evaluating our options before committing to the drilling phase at this time. Lastly, we are progressing with our regional expansion to Bolivia, currently awaiting Congressional ratification of three exploration contracts, Arenales, Olay and Florideste, as well as for the redevelopment of the Tita gas field. In the meantime, our team is advancing the environmental permitting process and preparing detailed development plans with the objective of initiating the TETA field reactivation in 2021.
Charlotte: Were carefully evaluating our options before committing to the drilling phase of this project lastly, we are progressing with our regional expansion to Bolivia currently awaiting.
Charlotte: Congressional ratification of three exploration contracts during the holidays.
Charlotte: And Florida as well as for the redevelopment of the cheap gas.
Charlotte: In the meantime, our team is advancing the environmental permitting process and preparing detailed development plan with the objective of initiating the teeth of field reactivation in 2026.
Charle Gamba: Thank you for your attention and we look forward to updating you on our progress in the coming months.
Charlotte: 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 are now ready to take questions. Thank you. Once again, if you would like to ask a question, you may do so by submitting one on the webcast portal.
Charlotte: Thank you.
Charlotte: Once again, if you would like to ask a question you may do so by submitting one on the webcast portal.
Operator: We will now pause for a few moments to gather our questions. Please stand by. Thank you.
Charlotte: We will now pause for a few moments to gather our questions. Please standby. Thank you.
Charlotte: Hum.
Charlotte: Yeah.
Charlotte: Yeah.
Charlotte: [music].
Operator: © BF-WATCH TV 2021 Ladies and gentlemen, thank you for standing by.
Charlotte: Yeah.
Speaker Change: Ladies and gentlemen, thank you for standing by I will now hand, the call off to Carolyn Roscoe, who will take us through webcast questions. Thank you.
Carolina Orozco: I will now hand the call off to Carolina Orozco, who will take us through webcast questions. Thank you.
Speaker Change: Okay.
Speaker Change: Okay.
Alejandro DeMichelis: The first question comes from Alejandro Demichelis from Jefferies. How do you see the new reclassification projects in Colombia impacting the market and your price realizations? I will take that. There are currently no fewer than 11 proposed projects. The Colombia gas consumption is about 1 BCF, so it's a relatively small market. Currently this year there's about a 40M cubic foot a day shortfall, but that shortfall is projected to expand in the next coming years. With respect to the impact on Canacol's business, we expect to see significantly better pricing for our domestic gas sales. Current imported, landed and commercialized re-gasified gas prices are in the $16 to $18 range, which are 4 times or 400% higher than local domestic pricing historically.
Speaker Change: Our first question comes from Alejandro than the Chinese.
Speaker Change: Jefferies.
Speaker Change: How do you see then you ever Densification projects in Colombia impacting the market and your price realizations.
Speaker Change: Yeah I'll take that.
Speaker Change: There are currently no fewer than 11 proposed projects.
Speaker Change: For Regasification and Columbia important to keep in mind that the Columbia gas consumption is about one bcf relatively small market.
Speaker Change: Currently this year, there's about a 40 million cubic foot a day shortfall.
Speaker Change: Minor shortfall at that shortfall is projected to expand in the next coming years.
Speaker Change: With respect to the impact on <unk> business, we expect to see significantly better pricing for our domestic gas sales current imported landed and commercialized by gas prices are in the 16% to $18 range, which are four times or 400% higher than local domestic.
Speaker Change: Pricing historically.
Charle Gamba: While 11 re-gasification projects is clearly a bit of overkill, there may be 1 or 2 that actually reach some form of commercial viability, but nevertheless the impact will be very, very positive with respect to domestic gas pricing as it will approach parity of imported gas.
Speaker Change: So while 11 Regasification projects is clearly a bit of overkill there.
Speaker Change: There may be one or two that that actually reach some form of commercial viability, but nevertheless, the impact will be very very positive with respect to the domestic gas pricing as it will approach parity of imported gas pricing.
Charle Gamba: Thank you, Charles.
Stefan Kenny: Thank you. The next question is from Stefan Kenny.
Charle Gamba: The next question is from Stéphane Chalin regarding Natilla 2. As we speak, has the whipstock been installed and has drilling the CDO started?
Regarding that do you get to as we speak have the weak stuff being stopped and has drilling the cdos target.
Charle Gamba: Thanks, Stephan. As I mentioned in the presentation, we are currently re-entering the wellbore. in order to set a whip stock in the 7-inch casing shoe, at which point we will mill a window out of the 7-inch casing and commence drilling operations, the objective being to re-drill the Porcaro and then to continue drilling onto the CDO primary target.
Speaker Change: Thanks, Stefan as I mentioned in the presentation. We are currently.
Stefan Kenny: Reentry in the Wellbore.
Speaker Change: In order to.
Set a whipstock into seven inch casing shoe at which point, we will Miller window out of the seven inch casing and commenced drilling operations.
Speaker Change: Our objective being to rebuild the poor Carol and then to continue drilling onto the CDO primary targets.
Charle Gamba: We have another question from Estefan, can you give us an indication of the contribution of successful drilling in Q1? Q1 of the year to date, we have drilled a total of 6 wells, LULO 3, FRESA 3, SECO 2 and 3, CLARENETE 11 and CHIVIKI 1. 5 of those wells were successful and are currently on production and the CHIVIKI 1 well encountered non-commercial volumes of gas.
Speaker Change: We have another question from Mr. Han can you give us any indication of the contribution of successful drilling in Q1.
Speaker Change: Our Q1, all year to date, we have drilled a total of six wells.
Speaker Change: <unk> three <unk> three sequel, two and three clarinet, 11, and GBP one five of those wells were successful and are currently on production and the <unk>, one well encountered non commercial volumes of gas. So very successful drilling program. We're looking forward for the remainder of this year to drill an additional nine wells in there.
Charle Gamba: A very successful drilling program. We're looking forward for the remainder of this year to drill an additional 9 wells in the Lower Magdalena Valley, the majority of those being exploration wells, as well as the Valiente exploration well in the Middle Magdalena.
Speaker Change: The lower Magdalena Valley, the majority of those being exploration wells as well as the Valeant the exploration well in the Middle Magdalena Basin.
Speaker Change: Thank you. The next question is from May have me go has to come back to it but why what are you thinking on Valeant. They are you looking to farm out.
Charle Gamba: The next question is from Benjamin Rojas from BTG Pactual. What are you thinking on Valiente? Are you looking to farm out? No, we are not farming out. It is a fairly shallow prospect. We won't be drilling much deeper than 6,000 feet, so the well is not going to be particularly expensive. It is a very large target, much larger than the targets we drill for in the lower Magdalena Valley. The target at Valiente is well in excess of 100bcf of gas and condensate. Fortunately, the prospect is located very close to the TGI gas pipeline, so the connection into the interior market to Bogotá and Medellín will be very quick and efficient if we encounter gas at Valiente.
Speaker Change: Valeant. They know we are not far me nuts.
Speaker Change: It is a fairly shallow prone prospects that we won't be drilling much deeper than 6000 feet. So the world is not going to be particularly expensive.
Speaker Change: It is a very large targets a very large target much larger than the targets. We drill four in the lower Magdalena valley in the targeted value is well in excess of 100 Bcf of gas and condensates and Fortunately the prospect is located very close to the TGI gas pipeline. So the connection into the into your <unk>.
Speaker Change: Markets with high unmet <unk> will be very quick and efficient if we encountered gas.
Charle Gamba: The plan is, and we are currently executing Preparations necessary to access the location and build the platform. The plan is to drill the Valiente prospect at 100% working depth.
Speaker Change: So no. The plan is and we are currently executing.
Speaker Change: Preparations necessary to access location and build the platform.
Speaker Change: One is to drill the valeant the prospect that 100% working interest.
Speaker Change: Yeah.
Operator: Once again, everyone, if you would like to ask a question, you may do so by submitting one on the webcast portal. Please stand by as we poll for more questions. Thank you. Thank you for standing by.
Speaker Change: Once again, everyone. If you would like to ask a question you may do so by some anyone on the webcast portal. Please standby as we poll for more questions. Thank you.
Speaker Change: [music].
Carolina: Thank you for standing by I will now hand, it back to Carolina, who will take us through more questions.
Carolina Orozco: I will now hand it back to Carolina who will take us through more questions.
Miguel Ospina: Our next question comes from Miguel Ospina from Compass Group. Could you please give us some color about CAPEX size and execution going forward? Q1, as reported, was $50M of CapEx. Our budget, as reported on our boat February 24th, was $143M for the year, which leaves roughly $90M to go. The schedule is relatively smooth for the final three quarters, although slightly still weighted towards Q2 as we continue to roll in the TIA.
Speaker Change: Our next question San Miguel Ospina Compass Group could you. Please give us some color about capex size and execution going forward.
Carolina: Yeah.
Speaker Change: Q1, as reported was $50 million of Capex. Our budget is reported on or about February 24th was $143 million for the year.
Speaker Change: Which leaves roughly $90 million to go.
Speaker Change: Schedule is relatively smooth.
Speaker Change: For the final three quarters, although slightly still weighted towards Q2, as we continue to drill in that tier.
Jason Bednar: Thanks, Jason.
Speaker Change: Thanks, Jason we now have a question from Cornell have gone public or theirs.
Charle Gamba: We now have a question from Juan Alarcon. The public orders... The public order problems being reported in the news, with an estimated $8 million in losses due to the loss of the machinery, are affecting the company's financial situation. How much will this affect the company's financial situation, along with the lost time to conduct the exploration? Is the company responsible for the cost of the machinery?
Speaker Change: The public are there problems being reported in the news with an estimated 8 million in losses due to the loss of the machinery are affecting the company's financial situation.
Speaker Change: March will be affected the company's financial situation along with the lost time to conduct exploration is the company responsible for the cost of that machinery, how would they solve the problem.
Charle Gamba: How will they solve the problem? We did have an incident at one of our drilling platforms in Sucre Norte on Monday where some Terrorists entered the platform and burnt 5 yellow equipments, tow trucks, earth movers, All of the damage standards to third-party contractors, obviously Canacol and no oil and gas company owns their own yellow equipment of course. So, with respect to the losses, those are all incurred by the third party contractors who of course have insurance policies in place with local service insurance providers to recover any loss that the third party. The $8M, I have no idea where that number comes from.
Speaker Change: Yes.
Speaker Change: We did have an incident at one of our drilling platforms and secret northeast on Monday, where some.
Speaker Change: Terrorists entered the platform and burnt.
Speaker Change: Five yellow equipment.
Speaker Change: Trucks earthmoving et cetera.
Speaker Change: All of the damage sustained theirs to third party contractors, obviously cannot call and no oil and gas company owns their own yellow equipment of course.
Speaker Change: So so with.
Speaker Change: Respect to the losses those are all incurred by the third party contractors will of course have insurance policies in place with local service insurance providers to recover the any lost at the third party the $8 million I have no idea where that number comes from.
Charle Gamba: I'm not aware of the magnitude of the cost of the equipment to third parties that was burnt. I'm not sure where that $8M number comes from. That's some misinformation that's been circulated by interested parties.
Speaker Change: I'm not aware of the magnitude of the cost of the equipment to third parties that was burnt so I'm not I'm not sure that $8 million number comes from that says misinformation, obviously, that's been circulated by interested parties perhaps.
Charle Gamba: Thank you, Charles.
Speaker Change: Thank you Charles we have a question from Paul Don.
Jason Bednar: We have a question from Paul Dunn. Can you please give details of the contracted volumes you have for 2025, including volumes, price, and duration? Yes, so the total take or pay contracts that we have in 2025 is $111 million cubic feet a day at a price of $6.30. The weighted average life of that 111 million cubic feet a day is three years.
Paul: Can you. Please give details of the contracted volumes you have for 2025, including volumes price and duration.
Paul: Yes, so the total take or pay contracts that we have in 2025.
Paul: 111 million cubic feet, a day at a price of $6.30.
Paul: The weighted average life of that 138 am 111 million cubic feet. A day is three years.
Jason Bednar: Typically, volumes would roll off on December 1st of every year as that balance goes down.
Paul: And typically volumes would roll off on December 1st of every year is that balance goes down.
Jason Bednar: Thanks, Jason.
Jason Bednar: Thanks, Jason we have a question from <unk> <unk>.
Juan Alarcon: We have a question from Juan Sebastian Ayala. The question came in Spanish. ¿Tienen pensado aumentar o dar dividendos para 2025? Which is basically if you are considering paying any dividend in 2025.
Jason Bednar: <unk> came in Spanish in infantile all meant that all out and put out with me. Thank you. Thank all which is basically you've got considering paying any dividend in 2025.
Charle Gamba: Our focus, as mentioned previously, is on debt reduction with excess cash, not paying dividends. That would be A.
Speaker Change: Our focus as mentioned previously is on debt reduction with excess cash not paying dividends that would be a and b.
Charle Gamba: And B, the banking covenants no longer allow us to pay dividends until at least the Macquarie loan is paid out.
Jason Bednar: Banking covenants no longer allow us to pay dividends.
Speaker Change: Until at least the Macquarie loan is paid outs.
Speaker Change: Thank you. The next question is from Keystone Fader from K G. Could you. Please comment on the Capex jumping during once during the first quarter of 2025.
Christian Feda: The next question is from Christian Feda from KNG.
Jason Bednar: Could you please comment on the CAPEX jumping during the first quarter of 2025? I think that one's relatively easy. As Cheryl said, we drilled a handful of wells with the bulk of those being successful, while at the same time we continued to drill Natia. Once the Natia project is completed, the CapEx would smooth out for the remainder of the quarters, as I alluded to earlier.
Speaker Change: Yes, I think that one is relatively easy as Charles said, we drilled a handful of wells with the bulk of it was being successful while at the same time, we continue to drill.
Speaker Change: So once the project is completed the Capex would smooth out for the remainder of the quarters as I alluded to earlier.
Charle Gamba: Next question is from Oriana Cobalt from Balance on the delays and challenges encountered in Latija 2. Are you expecting these to materially impact the ability to add volumes during the year? No, we're not, as we did not include any production from Natia in our 2025 guidance. Typically, we do not include production from exploration.
Speaker Change: Our next question is from Adina cobalt some balance on the delays and challenges encountered in the tier two are you expecting these to materially impact the ability to add volumes during the year.
No we're not as we did not include any production from the Tms.
Speaker Change: In our 2025 guidance. So typically we do not include production from exploration wells in.
Speaker Change: In production guidance.
Charle Gamba: The next question is from Joshua Nemser from Nine Left Capital. Regarding Natija, is the gas in the Porquero formation commercially viable? How do conditions encountered so far influence your expectations about the deeper CDO formation, given high pressures in Natija to how might production economics differ from your older pre-owned?
Speaker Change: The next question is from Joshua <unk> from nine less capital regarding that the that is asking that poor care formation.
Speaker Change: Any viable how the conditions encountered so far influence your expectations about the deeper see deal formation, keeping high pressure seeing that do you get to how much production economics differ from your older fields.
Charle Gamba: Firstly, we encountered 550 feet of gas within many sandstones in the Porcaro at Natia 2. We do produce from the Porcaro in our producing operations around Hobo. The Porcaro is a proven reservoir that has and is producing gas from the Porcaro. So, it's a proven reservoir. We did encounter the gas at very high pressure as we're drilling much deeper depths here at Netilla. That will obviously have a very positive impact on productivity, whereas a typical Porcaro well that we produce from in our producing assets to the south might come on at 5M to 8M cubic feet per day.
Speaker Change: So firstly, we encountered 550 feet of gas within many sandstones in the porcaro Aetna to you too.
Speaker Change: We do produce from the poor Carol and are producing operations around cobalt. So the poor Carol is a proven reservoir that has that has and is producing gas for us. So it's a proven reservoir.
Speaker Change: We did encounter the gas it at very high pressure as we're drilling much deeper depths here next year.
Speaker Change: It will obviously have a very positive impact on productivity, whereas a typical for Carol well.
Speaker Change: We produced from our producing assets to the south might come on at five to 8 million cubic feet per day at these pressures of 16500 Psi, we would expect.
Charle Gamba: At these pressures of 16,500psi, we would expect initial rates to be well in excess of 15M to 20M cubic feet per day. from the Porcaro. Finding gas in the Porcaro is indeed very positive with respect to the potential to find gas in the underlying CDO. The two occur together in all of our producing fields in the South. Wherever there's Porcaro gas, there's always underlying CDO gas because essentially if the structure that's trapped Porchero Gas is valid, then undoubtedly the same structure is trapping Cienega de Oro Gas in the deep horizon. The encountering of large volumes of Porchero Gas at Matia 2 bodes very well for the presence of gas within the underlying CDP.
Speaker Change: Initial rates to be well in excess of 15% to 20 million cubic feet per day from the <unk> and.
Speaker Change: And finding gas and the poor Carol is indeed, very positive with respect to the potential to find gas and the underlying CDO.
Speaker Change: To occur together and all of our producing fields in the south wherever theres four carrier gas theres always underlying so yogesh because essentially if the structure that's trapped.
Speaker Change: For Carole gas is valid then undoubtedly the same strategies trapping sinagra, the Oro gas in the deeper horizons.
Speaker Change: The accounting of of large volumes of poor carrier gas admit to you tube bodes very well for the presence of gas within the underlying CDO reservoir.
Charle Gamba: Thank you.
Speaker Change: Thank you once again, if you would like to ask a question you may do so by clicking submit a question on the webcast portal. Please standby as we poll for some more questions. Thank you.
Operator: Once again, if you would like to ask a question, you may do so by clicking Submit a Question on the webcast portal. Please stand by as we poll for some more questions.
Operator: Thank you. Ladies and gentlemen, thank you for standing by.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: No.
Speaker Change: [music].
Speaker Change:
Speaker Change: Yeah.
Carolina: Ladies and gentlemen, thank you for standing by I'll now hand, it back to Carolina to take us through some more questions.
Carolina Orozco: I'll now hand it back to Carolina to take us through some more questions.
Speaker Change: Okay.
Oliana Cobalt: The next question comes from Oliana Cobalt from Balance.
Speaker Change: The next question comes from.
Speaker Change: Yeah, Nicole Bob from buttons can you comment on factors that led to the sequential jump in lifting cost during the quarter and what are your expectations for the remainder of the year.
Jason Bednar: Can you comment on factors that led to the sequential jump in lifting costs during the quarter, and what are your expectations for the remainder of the year? First of all, the cost in absolute dollars was actually down 6% compared to last year's quarter. On a per unit basis, it was increased slightly and sat at $0.50. Essentially, the lifting costs are largely fixed, the bulk of which attributable to the Hobo gas plant. Very simply, as a function of how much you produce on a per unit basis, that would go up or down. Having said that, we did have efficiencies with respect to the dollar amount going down, and we don't expect on a per unit basis that it will increase past this level.
Speaker Change: Yeah.
Speaker Change: Yes, so first of all the cost in absolute dollars was actually down 6% compared to the last year's quarter on.
Speaker Change: On a per unit basis it was <unk>.
Speaker Change: Very slightly.
Speaker Change: Sat at 50.
Speaker Change: Essentially the lifting costs are largely fixed the bulk of which are attributable to the hobo gas plant so very simply.
Speaker Change: Yeah.
Speaker Change: Function of how much you produce on a per unit basis that would go up or down.
Speaker Change: So having said that we did have efficiencies with respect to the dollar amount going down and we don't expect on a per unit basis.
Speaker Change: Kris pads at this level.
Speaker Change: Okay.
Jason Bednar: Thank you, Jason.
Speaker Change: Thank you Jason we have another question from Joshua <unk> from <unk> capital what are your thoughts on additional bond buybacks at these levels.
Joshua Nemser: We have another question from Joshua Nemcher from Nine Left Capital. What are your thoughts on additional bond buybacks at this level? As I alluded to earlier, we remain attentive to our working capital balance, our capital program and from time to time when we feel comfortable, we would have the ability to buy back more bonds.
Speaker Change: As I alluded to earlier.
Speaker Change: We remain attentive to our working capital balance.
Speaker Change: Our capital program.
And from time to time when we.
Speaker Change: We feel comfortable.
Speaker Change: <unk> would have the ability to buy back more box.
Speaker Change: Okay.
Charle Gamba: Thank you.
Speaker Change: Thank you.
Miguel Ospina: We have a question from Miguel Ospina from Compass. Could you give us some more about working capital dynamics? It was big in the first quarter.
Speaker Change: Have a question from Miguel Ospina from campus could you give us some color about working capital dynamics. It was big in the first quarter should we expect some reversal.
Jason Bednar: Should we expect some reversal? The receivable balance went down. In a nutshell, some of our off-takers pay us the month before as they don't have letters of credit in place, which typically all our contracts do. It's really just timing of when we receive that cash. Having said that, we receive everyone's cash within 30 days, so it's more of a timing issue as opposed to something structural.
Speaker Change: Yeah. So the.
Speaker Change: The receivable balance.
Speaker Change: <unk> down.
Speaker Change:
Speaker Change: Essentially.
Speaker Change: In nutshell, some of our off takers pay us the month before.
Speaker Change: As they don't have letters of credit in place, which typically all our contracts do.
Speaker Change: So it's really just timing of when they received when we receive that cash having said that we received everyone's cash within 30 days. So it's more of a timing issue as opposed to something structural.
Charle Gamba: Next question is from Aswini Krishnan from Alliance Bernstein. Can you share any color on how you see production evolving over the rest of the year given that first Q2025 was below the low end of guidance? Yes, our guidance for 2025 is between $140,000 and $153,000 and that guidance remains unchanged.
Speaker Change: The next question is from ethylene accretion from Alliance Bernstein can you share any color on how you see production evolving over the rest of the year given that the first Q2 thousand 25 was below the low end of guidance.
Speaker Change: Yes, our guidance for 2021, 40, and $1 53 and that guidance remains unchanged.
Operator: Thank you, Charles. Once again, if you would like to ask a question, you may do so by submitting one on the webcast portal. Please stand by as we poll for more questions.
Charles: Thank you Charles.
Speaker Change: Once again, if you would like to ask a question you may do so by submitting one on the webcast portal. Please standby as we poll for more questions.
Charles: Yeah.
Charles: [music].
Operator: Ladies and gentlemen, this will conclude today's conference call. Thank you for attending today's presentation. You may now disconnect your lines.
Speaker Change: Ladies and gentlemen, this will conclude today's conference call. Thank you for attending today's presentation. You may now disconnect your lines.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: [music].
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