Canacol's Crisis: A Test for Colombia's Energy Future and Global Law

NEW YORK, NY – November 24, 2025 – Canacol Energy, a key player in Colombia's natural gas market, has initiated a complex legal maneuver across two countries, signaling deep financial distress with implications that ripple far beyond its balance sheet. The company's filing for Chapter 15 bankruptcy protection in the U.S. is not an isolated event but the American front of a broader restructuring effort underway in Canada under the Companies' Creditors Arrangement Act (CCAA). This dual-pronged strategy reveals the intricate challenges of modern corporate insolvency and casts a harsh spotlight on the precarious state of Colombia's energy security.

For investors and analysts tracking the intersection of capital and industry, Canacol's situation is a compelling case study. It's a story of declining revenues, operational missteps, and a sovereign energy policy at a critical crossroads. The move to seek protection underscores a stark reality: even for a company supplying up to 20% of a nation's natural gas, market leadership is no shield against fundamental financial and operational pressures.

A Cross-Border Legal Shield

Canacol's decision to file for Chapter 15 in New York is a strategic, not a haphazard, one. This section of the U.S. Bankruptcy Code is designed specifically for cross-border insolvency cases. It allows a foreign company to ask a U.S. court to recognize and support a primary bankruptcy or restructuring proceeding happening elsewhere—in this case, the CCAA process in Alberta, Canada. The immediate goal is to obtain a stay against creditor actions in the United States, effectively building a legal firewall to protect its U.S.-based assets while it reorganizes its finances under the supervision of Canadian courts.

The U.S. Bankruptcy Court has already granted provisional relief, halting any creditor actions while the case proceeds. A full recognition hearing is scheduled for December 11, where Canacol's foreign representative, KPMG Inc., will argue for the Canadian CCAA case to be recognized as the "foreign main proceeding." If successful, this would give the Canadian court's decisions significant weight in the U.S., streamlining a potentially chaotic multi-jurisdictional process into a more orderly, centralized restructuring.

This legal architecture—using the CCAA's flexibility to negotiate with creditors and restructure operations while leveraging Chapter 15 to globalize that protection—is a sophisticated approach to corporate rescue. It allows management to maintain control and continue operations, aiming to create a viable plan of arrangement that satisfies creditors while preserving the company as a going concern. However, it also signals the severity of the financial crisis, necessitating the robust protection of international insolvency law to even begin the process of recovery.

The Path to Insolvency

The road to CCAA and Chapter 15 was paved with mounting financial strain and operational setbacks. A look at Canacol's recent performance reveals a company grappling with a significant downturn. While its third-quarter 2025 financials showed a net income of $18.7 million, this figure was misleadingly propped up by a non-cash deferred tax recovery. The underlying operational health told a different story: total revenues fell 21% year-over-year to $69.5 million, and Adjusted EBITDAX—a key metric of operational cash flow in the energy sector—plummeted by 43%.

This was not a sudden collapse but the culmination of a protracted decline. Throughout 2024 and 2025, the company faced a cascade of challenges. In March 2024, it suspended its quarterly dividend to preserve cash, a classic sign of liquidity pressure. By mid-2025, investor confidence had eroded to the point of a rout in its bond market, with the yield on its 2028 notes soaring as investors began pricing in the risk of default and focusing on potential recovery value.

These financial woes were rooted in real-world operational issues. A critical blow was the failure of a major gas supply contract with the city of Medellin in 2023, which created cash flow problems and production disruptions. Furthermore, reports emerged in late 2024 of over 40 contractors facing financial ruin due to unpaid work, with Canacol allegedly deflecting responsibility onto an intermediary firm. This combination of declining sales volumes, strategic missteps, and reputational damage created a perfect storm that made a comprehensive restructuring unavoidable.

A Microcosm of Colombia's Gas Dilemma

Canacol's corporate crisis cannot be viewed in a vacuum. It is deeply intertwined with Colombia's looming national energy crisis. The country is facing a concerning decline in its own natural gas reserves, which fell by 13% in 2024, leaving a reserve lifespan of less than six years. National production is also falling, down over 8% in the first half of 2024.

Compounding this supply-side weakness is a government policy that has added significant uncertainty to the sector. In a bid to advance its decarbonization goals, the Colombian government halted the issuance of new contracts for oil and gas exploration, placing its bets on existing discoveries to meet future demand. This policy now appears increasingly risky as domestic production wanes and demand continues to grow.

Against this backdrop, the financial instability of Colombia's largest independent gas producer is alarming. Canacol's distress is both a symptom of the sector's challenges and a potential accelerant of the nation's supply deficit. Projections already indicated Colombia would face a natural gas shortfall as early as 2025, forcing it to rely more heavily on expensive liquefied natural gas (LNG) imports. A significant, prolonged disruption at Canacol could worsen that deficit dramatically, threatening higher energy costs for consumers and industries across the country. The company's troubles serve as a stark warning about the fragility of Colombia's energy security and the consequences of disincentivizing domestic exploration and production.

Navigating the Fallout for Investors and Creditors

For those with capital at stake, the path forward is fraught with uncertainty. The market's verdict has been swift and brutal. Canacol's stock (TSX: CNE) has plummeted over 60% year-to-date, reflecting the market's assessment of the deep value destruction and the dilutive nature of most restructuring plans. Bondholders, who once held debt in a leading energy producer, are now engaged in a grim calculus of recovery, with their notes trading at levels that suggest a significant haircut is expected.

The CCAA and Chapter 15 proceedings impose an immediate and orderly halt to the chaos, but they also subordinate the interests of different stakeholders. Secured and unsecured creditors must now file their claims with the court-appointed monitor and await the company's Plan of Arrangement. This plan will detail how Canacol proposes to settle its debts, which could involve a mix of cash payments, debt-for-equity swaps, or extended repayment terms. While the process provides a forum for negotiation, creditors' ultimate recovery depends on the value that can be preserved or created in the reorganized company.

Shareholders, as is typical in such proceedings, are at the back of the line. The primary goal of the CCAA is to keep the business alive and satisfy creditors. Equity holders often see their stakes wiped out or severely diluted to accommodate the claims of debt holders. While Canacol continues to operate, the restructuring represents a fundamental reset of its capital structure, and the company that emerges will likely look very different for those who held its stock before the filing.