Creating A Latin America Oil & Gas LeaderJune 2016
Forward Looking Statements
This presentation may include certain forward looking statements. All statements other thanstatements of historical fact, included herein, including, without limitation, statementsregarding future plans and objectives of Canacol Energy Ltd. (“Canacol” or the“Corporation”), are forward‐looking statements that involve various risks, assumptions,estimates, and uncertainties. These statements reflect the current internal projections,expectations or beliefs of Canacol and are based on information currently available to theCorporation. There can be no assurance that such statements will prove to be accurate, andactual results and future events could differ materially from those anticipated in suchstatements. All of the forward looking statements contained in this presentation are qualifiedby these cautionary statements and the risk factors described above. Furthermore, all suchstatements are made as of the date this presentation is given and Canacol assumes noobligation to update or revise these statements.
Barrels of Oil EquivalentBarrels of oil equivalent (boe) is calculated using the conversion factor of 5.7 Mcf (thousandcubic feet) of natural gas being equivalent to one barrel of oil. Boes may be misleading,particularly if used in isolation. A boe conversion ratio of 5.7 Mcf:1 bbl (barrel) is based on anenergy equivalency conversion method primarily applicable at the burner tip and does notrepresent a value equivalency at the wellhead.
AcresAcres represents gross acres
Production and ReservesProduction represents net before royaltyReserves represent 2P reserves and before tax NPV‐10 as of December 31, 2015
Exploration Resource PotentialExploration resource potential represent management’s estimate of net unrisked recoverableresource potential, unless indicated otherwise
USDAll dollar amounts are shown in US dollars, unless indicated otherwise
Magdalena Valley, Colombia 2
GROWTH FORMULADemocratic security
+ Investor confidence+ Capital= Sustainable growth
In The Late 90’s, Colombia LaunchedA New Growth Formula
Bogota, 2016
‐0.7%
2.2%
3.2%
3.7%
3.7%
4.3%
4.5%
5.2%
‘00 → ‘15 average growth rateSource: ‘15 World Bank
Peru
Colombia
Chile
Argentina
LATAM
Mexico
Brazil
Venezuela
Colombia treats capital with respect’15 World Bank Investor Protection Index
2
4
10
30
35
40
56
62 Colombia
Brazil
Peru
Chile
LATAM
Mexico
Argentina
Venezuela3
Colombia’s Growth Formula Is Driving A Boom In Capital Flows
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15
Cumulative FDI in Colombia (1)US $ in MM E&P All other industries
Colombia is capital friendly‘15 OECD foreign direct investment (“FDI”)restrictiveness index
• ‘03 →’15: Canada, U.S. and U.K. invested over US $45 billion, or ~35% of FDI
• ‘03 →’15: Oil and gas‐related FDI increased from 16% → 30% of total capital inflows
• Cumulative US $39 billion invested in E&P
Canada‐U.S. 22% of totalU.K. 13%
US $130b
US $2b
(1) Balance of payments – Banco de la Republica
E&P30%
4
launch
Change Agent #1: Colombia’s National SecurityThursday, June 23, 2016 – a historic day in Colombia’s history
• ‘99 Plan Colombia / National Security Policy• Extraordinary plan to counter the war on drugs
• Vastly improved security environment is unlocking decades of pent‐up growth
• June 23, 2016 signed agreement – bilateral and final ceasefire• End to all hostilities, decommission weapons,
offer security guarantees and install criminal prosecutions
Colombian President Santos and FARC Rebel Leader Londono sign agreement
5
Change Agent #2: Colombia’s Oil & Gas Regulation
• ‘03 Pro‐business restructuring of Colombia’s oil & gas regulatory model • Unleashed one of the most attractive E&P
regimes in the world
• Latin America’s oldest and most stable democracy (1886)
• Solid legal system
• Strong pursuit of the country’s richly endowed hydrocarbons
6
Source: ANH and Barclays Capital E&P Research based WTI $50/Bbl, effective June ‘16
Colombia’s old vs. new oil gas regulatory model
After 2003
Before 2003
‘03 ‘09 Today‘05
Exploration Exploitation ANH TEA Available
Evolution of Colombia’s E&P land base
• Pre ANH launch, early ‘03• 31 MM prospective E&P acres• 8% contracted
• Today• 253 MM prospective E&P acres• 53% contracted• 80+ oil & gas companies
(super‐majors to startups)
Capital Is Finding Many E&P Opportunities8x increase in exploration area
7
launch
A New Era In Colombia E&P
528 527
588
786
944 990
951
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Oil production doubledANHAvg. bopd in 000s
• Yet only 25% of Colombia’s ~50b barrels of resource potential have been discovered(1)
• Prolific geology • Richly endowed hydrocarbon base• Freedom to market to any continent
(1) Source ANH, Ecopetrol
launch
Cumulative ANH investment & executionANHAvg. bopd in 000s
US $4b
'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
8
• Colombia is in the early innings• 8 bid rounds to date• 640 E&P licenses offered• Growth delayed due to country issues
• Growth delay theme is crystallized by Canacol’s 79 MMboe of conventional 2P reserves • Vs. the rest of the world is forced to find and
produce unconventional hydrocarbons
• Accenture considers Colombia’s oil & gas regulatory reform 1 of 3 finest in history• Develop and manage geological information• Assess/promote opportunity• Foster industry partnerships• Frequency of bid rounds• Rule of law
Accenture Ranks Colombia’s Oil & Gas Regulatory Reform In The Top 3(1)
Top 3 country reformations
Years elapsed
Bid rounds
UK1970
44
42
Norway1972
46
34
Colombia2003
13
8
(1) Accenture Global Consulting “Strategy Energy”, March 20169
10
Ecuador
70 140 280 420 560
Km
Colombia
S. Pacific Ocean
Canacol
Supply‐scarce Caribbean natural gas market • Board/management team with 60+ years
cumulative experience operating in Colombia E&P• Headquartered in Calgary, Alberta• ‘08 launch• Dual listed on TSX and BVC• Enterprise value US $800 MM• Exploration success (‘08→) 65%• Insider ownership ~25%• ’16e guidance 16 – 17,000 boepd
• YE 2015 2P reserves 79 MMboe• Y/Y reserves replacement 1,103%• 2P F&D cost $2.85/boe• Long reserves life ~10 yrs.
• Substantial exploration 1,045 MMboeresource potential(1)• Blocks / gross acres 23 / 3.4 MM
Canacol Today
(1) Management’s estimate of net unriskedrecoverable resource potential
Shale Oil
Light Oil
Light Oil
Natural Gas
• Sourcing of opportunities• Jump‐start with land acquisition and/or M&A• Evaluated
• Over 75 mm net prospective acres• 150 potential transactions • Over 20 farm‐ins• Participated in 5 bid rounds
• Building a portfolio to weather any setting• Four acquisitions since ‘08• Total purchase price US $228MM• Current NPV‐10 US $1.3 b• Four‐fold increase in 2P reserves
• De‐risk through exploration and expand through development
Rigorous Approach To E&P Portfolio Management
‘08 ‘11 ‘12 ‘14
OIL GAS
4 acquisitions since launch
Scorecard
(1) Management’s estimate of net unrisked recoverable resource potential 11
12
Key Portfolio ComponentsLarge gas reserves underpin production and cash flow for a decade
(1) Includes 21 MMboe of production since inception through 12/31/15(2) Excludes 21 MMboe of production since inception through 12/31/15(3) Management’s estimate of net unrisked recoverable resource potential (4) DeGolyer & MacNaugton unrisked mean prospective oil resources, effective June ‘14
17
65
14
'09 '11 '13 '15
82% gas
+52% CAGR in 2P reserves(1) • Dry natural gas – [stable cash flow] • ‘12 and ‘14 2 acquisitions• ‘13 → present 3 large discoveries• 2P reserves 372 BCF (65 MMboe)• Exploration resource >3 TCF
potential(3)
• Light oil optionality – [flexible approach]• 2P reserves 14 MMbls• LLA 23 exploration 33 MMbls
resource potential(3)
• Large shale oil opportunity – [call option]• Exploration resource 458 MMbls
potential(4)
79(2)
7 811
18
35
43
18
20
23
2P reserves in MMboeoil gas
Over the last 5‐yrs, Canacol has discovered more natural gas than every other Colombian explorer, combined
Canacol Doesn’t Lose Sleep Over Oil PricesPursuit of dry natural gas that features stable pricing
Best gas pricingQuarterly average MMbtu
$0
$3
$6
$9
$12
Mar'14
Jun'14
Sep'14
Dec'14
Mar'15
Jun'15
Sep'15
Dec'15
Mar'16
2016e
Canacol
US
Canada
LT gas contracts with price escalation
1 2 3 4 5
$30 /Bbl
$15
WTI oil price sensitivity
$60/Bbl
$45
$0/Bbl
Oil prices at zero? Canacol generates ~$100MM EBITDAX
EBITDAX in US$ MM
$107 MM
$118
$130 MM$142
$153 MM
13
Canacol breakeven < $5.00/boe
88% of Canacol’s production is insensitive to low oil prices
Canacol Gas pipeline
La Creciente
Cartagena
Ballena
Chuchupa
Caribbean Sea
Cerro Matosomine
12
Barranquilla
3
15 30 60 90 120
Km
• Supply decreasing 20% / yr. from coastal fields[‐100 MMcf/d per year decline](1)
• Demand increased 3% / yr. for the past 10‐yrs. and projected to grow at 3‐4% through 2026
• +65 MMcf/d from new 2016 pipeline • Flows north / south 65 / 25 MMcf/d south• Total production 90 MMcf/d• Gas EBITDAX/yr. $135 MM
• +100 MMcf/d from planned 2018 pipeline• Total production 190 MMcf/d• Gas EBITDAX/yr. $310 MM• By 2020e, Canacol will supply ~42% of the coast
1 2 3Chuchupa Ballena La Creciente
2016pipeline
65 MMcf/d
(1) Average annual decline for each of the trailing 2 years
2018pipeline
25 MMcf/d
14
4 fields 100% WI
~785k acres
+100 MMcf/d
Epic Gas Deficit On Colombia’s Coast Plan to boost gas production and solve over 75% of the Caribbean’s lost supply
A Leader In Capital EfficiencyThe lowest cost producer typically wins
• ’16e plan Spend $58 MM to generate $135 MM EBITDAX 3 natural wells and 5 light‐oil workovers One well / yr. ($4.6 MM D&A) to maintain current gas
production
• 3 natural gas exploration wells targeting 100 Bcf(1) Mar ‘16 Oboe‐1 well test 66 MMcf/d Nispero‐1 well spud early 3Q ’16 Nelson‐6 well spud early 4Q ’16 New gas sales contracts
• Reactivate oil exploration when pricing cooperates
(1) Management’s estimate of net unrisked recoverable resource potential
Natural Gas4 blocks2P reserves 372 BCF
Light oil5 discoveries3 prospective trends to repeat
15
• Five light oil discoveries made along Rancho Hermoso fault trend
• Exceptional on‐block track record for exploration success (83%, 5/6 wells)
• Three additional trends remain undrilled
• Multiple prospects are drill‐ready
• At $50/Bbl+ WTI• Target four drill ready prospects situated
along flow line for short and immediate tie‐in e.g. Pumara prospect
• Significant upside in success case
Successful Exploration on Block LLA‐23With a lot more running room
16
Prospect/Leads Wells Gross Unrisked EUR (MMbbl)
3D prospects 13 20
Leads 5 16
Total 18 36
Las Maracas~12 MMbls
Macarenas~6 MMbls
Cravo E~8 MMbls
Cravo S~9 MMbls
Labrador
3
2
1
91% WI>110k acres
LLA 23
Rancho Hermoso
Maltes
Tigro
Pantro
Leono
Labrador
Labrador
Pumara Prospect
Canacol’s fields & discoveries
Prospects
Leads
3 Opportunities trends to repeat
3D seismic
Competitor oil fields
Leono‐Pointer fluids flow line
Pointer CPF
1
• World class shale oil• Source rock to 2.3 trillion barrels discovered in Ecuador, Colombia and Venezuela(1)
• Comparable or superior characteristics to the Bakken and Eagle Ford
• Second largest shale oil land position behind Ecopetrol
• 7 blocks 749k net acres
• Potential 458 MMbls of audited unriskedprospective resource potential
• NPV‐10 $1.3 B(2)
• Early indications are positive• Farmed out acreage to Super Majors (‘11 – ‘12)• Two wells drilled de‐risked play (‘12 – ’15)• First frac planned this year by Conoco
Long Term Shale Oil Opportunity In Colombia
0 650 km
Oil Fields sourced from La LunaMiddle Magdalena Valley Basin (MMV)La Luna shale deposition limit
Orinoco heavy oil belt
Venezuela
Colombia
Ecuador
(1) James 2000, Journal of Petroleum Geology(2) Only three of Canacol’s seven blocks
17
True Investment Opportunity In A Rudderless E&P World
• Colombia’s vastly improved security and E&P regulatory environment is unlocking decades of pent‐up growth potential
• Canacol was an early‐mover in securing prime acreage
• Years of rigorous execution and discipline provide an E&P portfolio that can weather any environment
• Our balanced resource‐capture strategy and strong track record are the ingredients for continued success
• Canacol doesn’t lose sleep over oil prices• Pursuit of dry natural gas that generates > $100 MM
in EBITDAX/yr. when oil is priceless18