Canacol Energy Ltd. Provides Rancho Hermoso Operations Update

Mon Apr 23, 2012 6:30am EDT

* Reuters is not responsible for the content in this press release.

  CALGARY, ALBERTA, Apr 23 (MARKET WIRE) --
Canacol Energy Ltd. ("Canacol" or the "Corporation") (TSX:CNE) (BVC:CNEC)
is pleased to provide an update of its recently drilled Rancho Hermoso 16
("RH 16") development well at its operated Rancho Hermoso field located
in the Llanos basin of Colombia. The RH 16 well was tested at a stable
gross rate of 5,160 barrels of oil per day ("bopd") from the Mirador
reservoir, and is currently on permanent production. The Gacheta
reservoir in the RH 16 well was also tested at a stable gross rate of 398
bopd. The Gacheta reservoir is a new oil-producing reservoir identified
in the field for which no reserves are currently assigned. The Rancho
Hermoso 6 ("RH 6") well has been recompleted in the Mirador reservoir and
was tested at a stable gross rate of 5,397 bopd, and is currently on
permanent production.

    Rancho 16 development well results

    The RH 16 well was spud on March 3, 2012 and reached a total depth of
10,480 feet measured depth ("ft md") on March 13, 2012 in the Ubaque
reservoir. Good oil and gas shows were encountered in the C7, Mirador,
Los Cuervos-Barco, Guadalupe, Gacheta, and Ubaque reservoirs while
drilling. Petrophysical analysis of the open-hole logs indicates a total
of 137 ft of net oil pay within the well: 10 ft of net oil pay within the
C7 reservoir with average porosity of 24%, 10 ft of oil pay in the
Mirador reservoir with average porosity of 23%, 14 ft of net oil pay
within the Los Cuervos-Barco reservoir with average porosity of 22%, 28
ft of net oil pay within the Guadalupe reservoir with average porosity of
26%, 41 ft of net oil pay within the Gacheta reservoir with an average
porosity of 20%, and 34 ft of net oil pay within the Ubaque reservoir
with average porosity of 21%.

    Rancho Hermoso 16 production results

    The Corporation first production tested the Gacheta reservoir within the
RH 16 well. This reservoir has been observed to be oil-bearing in the
majority of the wells drilled in the field, but has not been production
tested until now. The Gacheta reservoir has been completed between 10,146
and 10,160, 10,164 and 10,177, and 10,186 and 10,200 ft md and equipped
with an electro-submersible pump ("ESP"). Over the course of a 24-hour
test, the Gacheta flowed at a stable gross rate of approximately 398 bopd
of 15-degree API oil with 22% water cut at a pump frequency of 60 Hz. The
Corporation will use the results of the production test to book new
reserves to the field for year-end 2012, and will complete the Gacheta in
the remainder of the existing wells at a future date.

    Upon completion of the production test of the Gacheta, the Mirador
reservoir within the RH 16 well was completed between 9,438 and 9,456 ft
md and equipped with an ESP. The Mirador was tested at a stable gross
rate of 5,160 bopd with 36% water cut at a pump frequency of 57 Hz. The
water cut has decreased throughout the duration of the test and
management considers the water to be associated with the drilling process
of the well. The Mirador shall remain on permanent production through the
main production facilities.

    Rancho Hermoso 6 workover

    The RH 6 well, drilled in 2010, has been recompleted in the Mirador
reservoir. The well was previously producing oil from the Los
Cuervos-Barco reservoir, which has produced at total of 1.1 million
barrels of gross reserves to date. Due to high water cut, the decision
was made to recomplete the well in the Mirador reservoir.

    The Mirador reservoir was completed between 9,604 and 9,623 ft md and
equipped with an ESP. The Mirador was production tested at a stable rate
of 5,343 bopd with a water cut of 1% at a pump frequency of 57 Hz. The
well remains on permanent production through the main production
facilities.

    Forward plans

    The Corporation anticipates completing a 3D seismic survey over the
Rancho Hermoso field by early May 2012, and anticipates using the new
seismic to define new locations to drill in Q3 2012. In addition, the
Corporation has identified more than 25 other workover candidates within
the existing wells for recompletion over the next 18 months to increase
production from the field.

    The Corporation maintains its average calendar 2012 production guidance
of between 14,000 and 16,000 bopd net revenue production, which does not
include potential production from any of the exploration wells planned
for 2012. Canacol's balance sheet remains strong with $90.7 million in
cash, cash equivalents and restricted cash as of December 31, 2011. The
Corporation remains fully funded to execute its calendar 2012 production
and exploration programs.

    The Corporation, through its 100% owned Colombian subsidiary Canacol
Energy Colombia S.A., operates the Rancho Hermoso field under two
contracts with Ecopetrol S.A., those being 1) a participation contract in
the Casanare area whereby the Corporation receives approximately 25%
(after royalty) of gross production from the C7, Los Cuervos-Barco,
Guadalupe, Gacheta, and Ubaque reservoirs, and the remainder
(approximately 75%) to Ecopetrol S.A., and 2) a risked service production
contract for the Mirador reservoir, whereby the Corporation is paid a
tariff for each barrel of oil produced and Ecopetrol S.A. receives the
oil.

    Canacol is a Canadian-based international oil and gas corporation with
operations focused onshore in Colombia and Ecuador. Canacol is publicly
traded on Toronto Stock Exchange (TSX:CNE) and the Bolsa de Valores
Colombia (BVC:CNEC). The Corporation's public filings are available at
www.sedar.com.

    This press release contains certain forward-looking statements within the
meaning of applicable securities law. Forward-looking statements are
frequently characterized by words such as "plan", "expect", "project",
"intend", "believe", "anticipate", "estimate" and other similar words, or
statements that certain events or conditions "may" or "will" occur,
including without limitation statements relating to estimated production
rates from the Corporation's properties and intended work programs and
associated timelines. Forward-looking statements are based on the
opinions and estimates of management at the date the statements are made
and are subject to a variety of risks and uncertainties and other factors
that could cause actual events or results to differ materially from those
projected in the forward-looking statements. The Corporation cannot
assure that actual results will be consistent with these forward-looking
statements. They are made as of the date hereof and are subject to change
and the Corporation assumes no obligation to revise or update them to
reflect new circumstances, except as required by law. Prospective
investors should not place undue reliance on forward-looking statements.
These factors include the inherent risks involved in the exploration for
and development of crude oil and natural gas properties, the
uncertainties involved in interpreting drilling results and other
geological and geophysical data, fluctuating energy prices, the
possibility of cost overruns or unanticipated costs or delays and other
uncertainties associated with the oil and gas industry. Other risk
factors could include risks associated with negotiating with foreign
governments as well as country risk associated with conducting
international activities, and other factors, many of which are beyond the
control of the Corporation.

Contacts:
Canacol Energy Ltd.
Investor Relations
800-554-3590, extension 101
IR@canacolenergy.com
www.canacolenergy.com

Copyright 2012, Market Wire, All rights reserved.

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