Canacol's Gas Audit: A Pillar of Stability in a Turbulent Colombian Market

CALGARY, Alberta – November 25, 2025 – In a move that sends a clear signal of stability to the market, Canacol Energy Ltd. has released the results of an independent audit of its proved natural gas reserves, confirming the substantial value of its core Colombian assets. While a routine press release on the surface, the audit, conducted by the globally respected firm DeGolyer and MacNaughton (D&M), provides a critical anchor of certainty for a company operating at the epicenter of Colombia’s escalating energy crisis.

For investors and analysts parsing the complexities of Latin American energy markets, the D&M report is more than just a validation of cubic feet; it’s a story about asset credibility, strategic national importance, and the financial bedrock upon which Canacol’s future exploration ambitions are built. The audit affirms the company’s internal estimates with what D&M termed no “significant” aggregate differences, a crucial endorsement as Canacol navigates a challenging environment of low reserve replacement and intense market scrutiny.

The Gold Standard of Validation

In the oil and gas sector, where a company’s value is fundamentally tied to the resources buried beneath the ground, third-party verification is the gold standard of corporate transparency. DeGolyer and MacNaughton, a firm with a reputation for independence and technical rigor since 1936, provides precisely this level of assurance. Their involvement in auditing the world’s most significant energy assets, including those of Saudi Aramco, lends immense weight to their findings.

The audit focused on Canacol's key producing properties in the Esperanza, VIM-5, and VIM-21 Blocks. It compared D&M’s findings against Canacol’s internal estimates, which were prepared by BGEC. The results showed a modest variance: D&M estimated total proved marketable gas reserves at 232,389 million cubic feet (MMcf), approximately 7.7% lower than BGEC's estimate of 251,700 MMcf. The most sensitive category, proved developed producing reserves, saw a minimal negative difference of just 2.2%.

While any downward revision draws attention, D&M’s official opinion that the estimates “do not differ significantly” is the key takeaway for the market. It effectively de-risks a major component of Canacol’s valuation, assuring investors that the company's foundational assets are solid. This external validation provides a firm data point that cuts through the noise of fluctuating commodity prices and regional policy shifts.

A Strategic Asset in a Nation Under Pressure

The significance of Canacol’s confirmed reserves extends far beyond its balance sheet; it is a matter of national importance for Colombia. The country is staring down a severe natural gas deficit. With proven reserves falling to their lowest levels in over a decade—enough for only about six years at current consumption rates—and domestic production declining, Colombia’s reliance on expensive liquefied natural gas (LNG) imports is surging.

This predicament has been intensified by the current administration's policy of halting new oil and gas exploration contracts, a move intended to accelerate a green transition but one that has alarmed industry experts. Projections now indicate that without new domestic discoveries, Colombia could be forced to import over half of its gas by 2029, threatening industrial competitiveness and increasing energy costs for millions of households.

In this context, Canacol is not just another producer; it is a linchpin of Colombia’s energy security. The company currently supplies approximately 17% of the nation's total gas demand and over 50% of the needs for the heavily industrialized Caribbean Coast. The confirmed reserves in the D&M audit represent a vital, reliable source of domestic energy that helps mitigate the country’s growing import dependency. For policymakers in Bogotá, Canacol’s operational stability is a critical component of the national energy equation, creating a powerful, symbiotic relationship between the company and the state.

Balancing the Books and the Drill Bits

The positive audit results arrive at a crucial time for Canacol. The company has faced headwinds, including a recent credit downgrade from S&P Global Ratings to 'CCC+' in April 2025, which cited concerns over a low reserve replacement ratio. For 2024, the company’s replacement of proved reserves stood at just 30%, a figure that, if sustained, would imply a shrinking asset base. This has put management under immense pressure to demonstrate a path to long-term growth.

Canacol's strategy appears to be a two-pronged approach: solidify the value of existing assets while aggressively exploring for new ones. The D&M audit masterfully accomplishes the first objective. For the second, the company has laid out a substantial 2025 capital budget between $143 million and $160 million. This program is heavily weighted towards exploration, with plans to drill up to 11 exploration wells alongside three development wells.

This strategy is a direct response to market concerns. By securing third-party validation of its current reserves, Canacol shores up its financial foundation. This, in turn, provides the stability needed to pursue a high-impact drilling campaign aimed at replenishing and growing its reserve base. Success in this exploration program is paramount to reversing the negative sentiment around its reserve replacement and proving its long-term viability.

Valuing the Future

Financially, the audit’s impact on the company’s valuation is tangible. D&M’s after-tax Net Present Value (NPV-10), a key metric for valuing future cash flows from reserves, came in at $948.9 million for total proved reserves. This is about 10.9% below Canacol's internal estimate of $1.06 billion. While a reduction, this audited figure provides a more defensible floor for the company's valuation, which many analysts believe is undervalued given its strategic position and strong gas pricing environment.

With Colombian natural gas demand projected to grow and domestic supply constrained, Canacol is well-positioned to benefit from robust prices, which are expected to remain in the $7-$8 per Mcf range. The audit confirms the company has the reserves to capitalize on this dynamic. However, the market’s gaze is now fixed firmly on the future. The confirmed reserves provide a backstop, but sustained investor confidence and a re-rating of the company’s stock will ultimately depend on the drill bit. The success of the 2025 exploration campaign will be the next major catalyst, determining whether Canacol can convert its stable foundation into a compelling growth story.