Colombia-focused Canacol Energy Ltd. (CNE) edged down four cents to $4.17 on 226,100 shares. It did its best to boast of pipeline progress and a new gas discovery, but could not overcome the results of a frustrating third quarter. Sales volumes for the quarter averaged about 16,600 barrels of oil equivalent a day (80 per cent gas), down from over 18,900 barrels a day in the same period last year, reflecting infrastructure maintenance done by three of Canacol's gas customers. As a result, Canacol's third quarter cash flow of 11 U.S. cents a share fell below analysts' predictions of 13 U.S. cents a share.
Canacol is also facing a slight delay at one of its own infrastructure projects, the 40-million-cubic-foot-a-day Sabanas gas pipeline. This line is intended to allow Canacol to boost its gas production to 130 million cubic feet a day (equal to about 22,800 barrels of oil equivalent a day) once construction is finished, which was supposed to occur this Dec. 1. Canacol declared as recently as August that construction was on schedule. Now, however, it has tweaked the timeline. Even though it still says that construction will be done on Dec. 1, only half of the capacity will actually be ready as of that date; the rest must wait until mid-January. This delay is disappointing but perhaps not surprising. Long-time investors will recall that Canacol ran into delays with a previous pipeline project (an expansion of the line from Jobo to Cartagena), which was supposed to be finished on Dec. 1, 2015, but was not actually finished until mid-April, 2016. Naturally, this weighed on Canacol's average production for full-year 2016. The fresh delays at Sabanas, combined with the lower-than-hoped-for production in the latest quarter, could create similar problems for full-year 2017. Canacol said last April that it expected its full-year 2017 sales to average 18,000 to 19,000 barrels a day, with December's production averaging 25,000 barrels a day as a result of the completion of the Sabanas line. As things currently stand, year-to-date sales (up to Sept. 30) sit below 17,300 barrels a day, and Sabanas will not be fully ready in December after all.
Canacol's third quarter report did contain some encouragement. Its latest exploration well, Panderata-1, has encountered gas in its primary reservoir target and is now being prepared for testing. Although this discovery is still at a very early stage, the presence of gas is nonetheless encouraging, particularly as maps show that this is one of the largest gas prospects that Canacol has targeted so far. The company is now drilling another gas exploration well, Canadonga-1, targeting the same reservoir. With luck, good test results from both wells will be in by year-end.
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