Canacol Energy - Ready to exploit Colombian tightening gas market
As we look across the E&P investment universe, few companies potentially offer greater asymmetric risk/reward upside compared with Canacol. The company is playing into a tightening Colombian gas market, which should continue to support favourable pricing and longer-term growth plans. However, even with existing pipeline infrastructure and a conservative outlook on exploration and appraisal success, our 2P + risked exploration base case valuation of C$5.87/share represents 59% upside to the current share price, while the downside is protected through existing take-or-pay contracts that suggest a low case based on 2021 take-or-pay contracted capacity (153mmscfd) of C$3.50/share. Under our current assumptions, which include Canacol’s dividend equivalent to a 5.7% yield, we anticipate planned capex and cash dividends to be covered by the company’s existing cash and cash generation.Canacol Energy is engaged in core petroleum and natural gas exploration and development activities in Colombia, Brazil and Guyana.
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