Canacol Energy - Q2 results deliver strong operating cash flow

Canacol reported EBITDAX of US$55.2m for Q222, up 24% compared to Q221 due to a 29% increase in natural gas revenues as a result of both increased production and average sales prices. This resulted in strong operating cash flow, with funds from operations up 16% to US$39.1m (Q221: US$33.6m). A non-cash deferred tax expense led to a net loss of US$6.4m for the quarter due to the impact of the weakening Colombian peso on unused tax losses and cost pools. The 2022 drilling programme of up to 12 wells is progressing, with six wells successfully completed to date and the high-impact Pola-1 well to be spudded by year-end. Meanwhile, the new Colombian government is expected to change the country’s energy transition plans, having stood on a platform of ending new oil contracts. Finance Minister José Antonio Ocampo has, however, spoken of the importance of natural gas. In our view, the value of gas as a transition fuel increases with an accelerated shift away from oil and coal.