Canacol Energy Ltd.'s (CNE:TSX; CNNEF:OTCQX) Lulo 1 exploration well in Colombia's Cienaga de Oro reservoir encountered natural gas, reported Research Capital Corp. analyst Bill Newman in a May 4 update.
"Given the thickness and porosity of the sandstone reservoir, the discovery could be significant," Newman wrote.
Notable Return on Investment
The analyst also pointed out that this largest independent producer of natural gas in Colombia offers investors an attractive potential return of about 218% and is a Buy.
This is derived from the gap between where Canacol is currently trading, at CA$10.24 per share, and Research Capital's target price on it, CA$32.50.
Standout Exploration Well
Lulo 1 hit 207 feet of natural gas pay having an average porosity of 21%, Newman reported and pointed out this discovery is noteworthy.
"The Lulo 1 well has the potential to add significant reserves and production within Canacol's main producing area in the Lower Magdalena Valley basin," commented Newman. "We look forward to the production test results."
Once testing of Lulo 1 is completed, Canacol will tie the well into its nearby Jobo production facility. Also, to better delineate the discovery with Lulo 1, the energy company will immediately spud the Lolo 2 appraisal well.
Successful Well Tests
Along with Lulo 1, two other exploration wells in the area around it, tested positive, and Newman reported their results.
The Saxofon 1, also being tied into Jobo, is one. It recently showed on testing an average rate of 6.1 million cubic feet per day (6.1 MMcf/d) from a 22-foot interval in the Cienaga de Oro reservoir and an average rate of 5.9 MMcf/d from a 57-foot interval in the Porquero reservoir.
The other was the Dividivi 1. From a 12-foot interval in the Cicuco limestone reservoirs, it tested at an average rate of 3.84 MMcf/d.
"Flow rates could be a near-term catalyst," Newman wrote.
Also coming up, in the interim, are Canacol's Q1/23 financial and operational results, due out on May 11.
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Disclosures for Research Capital Corp., Canacol Energy Ltd., May 4, 2023
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