Canacol Energy hits gas at Palmer 1

Canacol Energy said that the first well of its three well gas exploration program, Palmer 1, has tested 15.5 million standard cubic feet per day (2,730 barrels of oil equivalent) of dry gas.

Canacol holds a 100% operated interest in the Esperanza exploration and production contract via its 100% owned operating subsidiary Geoproduction Oil and Gas Company which it acquired in 2012. The corporation’s reserve auditor has been engaged to prepare a formal reserves report for the discovery.

As previously disclosed, the corporation has executed two new gas sales contracts for a combined 35 mmscfpd which will take Canacol’s current daily gas production of approximately 18 mmscfpd (3,170 boepd) to 53 mmscfpd (9,334 boepd) in late 2015. The new contracts each have a 5 year term, with pricing of US$ 5.40 / million British thermal units escalated at 2% per year. Canacol currently sells approximately 18 mmscfpd (3,170 barrels of oil equivalent per day) of gas from the Nelson Field to a local ferronickel producer under a 10 year contract that expires in 2021.

The Palmer 1 exploration well encountered 87 feet of gas pay within the primary target of the Cienaga de Oro sandstone reservoir. The Cienaga de Oro sandstone reservoir was perforated from 6,811 to 6,906 ft measured depth and flowed naturally at a rate of 15.5 mmscfpd (2,730 boepd) of dry gas with no water on a 36/64 inch choke during the course of a 36 hour isochronal flow test. The Corporation plans to continue the isochronal flow test over the next week to determine the ultimate deliverability of the reservoir zone, and then will tie the well into the Corporation’s operated gas processing and transportation facility at Jobo located approximately 5 kilometers east of the Palmer 1 well. The Corporation has identified up to 2 follow up locations to appraise and develop the Palmer discovery in early calendar 2015 once it has concluded its exploration drilling program at Esperanza, subject to the approval of the Agencia Nacional de Hidrocarburos (“ANH”).

Upon the completion of testing operations at Palmer 1, the Corporation plans to spud the second of three planned exploration wells on the Esperanza contract targeting the Cienaga de Oro reservoir, Corozo 1, in early October 2014 subject to approval by the ANH. The Corporation plans to commence drilling of the third exploration well, Canandonga 1, in December 2014, subject to approval by the ANH. The positive drilling result at Palmer 1 has validated the Corporation’s gas exploration model using advanced 3D seismic interpretation algorithms, meaning that the probability of encountering gas at both the Corozo and Canandonga prospects has increased significantly.

Press Release, August 27, 2014; Image: Canacol Energy