Canacol Energy Ltd

Canacol reported Q2 2025 revenue net of transportation of $76.2 million, adjusted EBITDAX of $47.4 million, adjusted funds from operations of $36.9 million, operating cash flow of $33.4 million, and net income of $13.9 million. Realized natural gas prices net of transportation were $6.77 per Mcf, royalties were $1.12 per Mcf, field operating costs were $0.54 per Mcf, and operating netbacks were $5.11 per Mcf, with operating margins of roughly 75%. Total natural gas and oil sales were 127 MMcfe/d, including 119 MMcfd of realized natural gas sales and 1,382 bbl/d of oil. Q2 capital expenditures were $57 million, cash tax payments were $11.8 million, and cash and cash equivalents were $37 million at June 30. For full-year 2025, management reiterated CapEx guidance of $143 million to $160 million and said it now expects to be near the upper end at about $160 million, with the remaining roughly $53 million weighted more to Q3 than Q4. Management also said current cash tax expense was $9.3 million for Q2 and $23.9 million for the first half, and that cash withholding taxes in the second half should be around $2 million per month. The company said the $50 million Macquarie term loan will amortize in 6 equal monthly installments starting September 15, 2025 unless a waiver is secured.

Charle Gamba said the quarter demonstrated Canacol’s ability to generate strong profits and cash flow despite softer volumes, helped by favorable gas pricing and disciplined operating costs. He emphasized operational execution, noting 4 successful wells in the quarter and saying recent tie-ins have lifted current gas sales to about 137 MMcf/d. Strategically, he highlighted continued focus on high-return drilling, near-field commercialization, and maintaining a strong capital structure while also advancing Bolivia and ESG initiatives.

Jason Bednar highlighted the quarter’s resilience in EBITDAX and margins, pointing to $76.2 million of revenue net of transportation, $47.4 million of adjusted EBITDAX, $36.9 million of adjusted funds from operations, and $13.9 million of net income. He said the quarter was capital intensive at $57 million of CapEx, plus $11.8 million of cash taxes and a scheduled $14 million bond coupon payment, leaving $37 million of cash at June 30, but that CapEx was funded from operating cash flow and cash on hand. He also flagged covenant compliance with leverage of 2.7x, interest coverage of 4.49x, and current ratio of 1.14x, while noting the Macquarie loan’s accelerated amortization trigger and ongoing discussions with banks to amend non-bond debt, with an expected agreement in September.

Analysts focused on the 2025 drilling calendar, CapEx, Natilla-3, Bolivia timing, tax cash outflows, and liquidity in a stress case. Management said Valiente-1 should spud in October with results by year-end, while Fresa-5, Mariner-1, and Clarinete-12 are also slated for the second half; Natilla-3 is being redesigned to address the wellbore instability seen at Natilla-2 and is expected to be drilled early in 2026. On Bolivia, management expects congressional ratification late Q3 or early Q4, environmental permits for Tita in early to mid-2026, and first commercialization in early 2027. On liquidity, Bednar pointed to the new wells as the most obvious incremental source, estimating roughly $9 million per month of additional cash flow and EBITDA from about 30 MMcf/d of incremental sales at a $10/Mcf netback.