Oilman Jim's Letter - 10 May 2024

Canacol Energy (CNE.TO CNNEF) reported financial and operating results for the three months ended March 31, 2024. Adjusted funds from operations increased 29% to $42.2 million, compared to $32.7 million for the same period in 2023, mainly due to an increase in EBITDAX combined with a decrease in current income tax expense. Adjusted EBITDAX increased to $61.0 million for the three months ended March 31, 2024, compared to $60.9 million for the same period in 2023. The corporation realized a net income of $3.7 million for the three months ended March 31, 2024, compared to a net income of $16.9 million for the same period in 2023, the decrease in net income driven by a non-cash deferred income tax expense of $0.5 million as compared to a deferred income tax recovery of $17.4 million in 2023. Net cash capital expenditures were $35.9 million compared to $47.1 million for the same period in 2023 and as at March 31, 2024, the corporation had $25.1 million in cash and cash equivalents and $11.2 million in working capital deficit. For 2024, Canacol remains focused on: maintaining and growing reserves and production in its core gas assets in the LMV; executing comprehensive development and exploration programs; optimising production and increasing reserves by drilling up to five development wells; installing new compression and processing facilities; and workover operations of producing wells in the key gas fields. The corporation expects to drill the higher impact Cardomomo-1 exploration well in mid-summer of 2024.

GeoPark (GPRK) announced the execution of an offtake and prepayment agreement with Vitol, one of the world’s leading energy and commodity companies. The offtake agreement provides for GeoPark to sell and deliver to Vitol a minimum of 20,000 barrels of oil per day of production from the Llanos 34 Block, which is GeoPark operated with a 45% working interest. The offtake agreement will start on July 1, 2024, for a minimum of 20 months and up to 36 months. As part of this transaction, GeoPark will obtain immediate access to committed funding from Vitol for up to $300 million, with an option to increase by another $200 million for a total of $500 million, in prepaid future oil sales over the period of the offtake contract. Funds committed by Vitol will be made available until June 30, 2025. Amounts drawn on this prepayment facility can be repaid through future oil deliveries or prepaid at any time without penalty. The improved commercial performance and access to competitive and flexible financing secured by this transaction is said to provide GeoPark with immediate value and optionality for future growth.

88 Energy (88E.AX EEENF 88E.L) announced that the 2D seismic acquisition program for Petroleum Exploration Licence 93, Namibia, has been awarded to Polaris Natural Resources Development. The seismic program has already paid for by 88 Energy as part of the farm-in agreement with Monitor Exploration (Namibia) to earn its initial 20% working interest in PEL 93. The program is to acquire a minimum of ~200-line km of 2D seismic, with data acquisition to commence mid-2024. Data will be used to validate 10 independent structural closures identified from airborne geophysical methods (and part existing 2D seismic), in pursuit of a maiden prospective resource declaration. PEL 93 is a 18,500km2 onshore acreage position comprising blocks 1717 and 1817 in the Owambo Basin, Namibia and 88 Energy can earn up to a 45% non-operated interest via the farm-in. There is considerable potential for more leads to be identified as the dataset is expanded. Fast-tracking of drilling with the first potential exploration well as early as 2H 2025 is targeted. A nearby operator is drilling 3 to 4 wells in the Owambo basin and is expected to spud the first well in mid-2024. This is said to represent a significant catalyst for understanding of the onshore resource potential in Namibia, which already holds a ready path to market.

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