Canacol Energy Ltd. report that Canacol Energy Colombia S.A., a subsidiary of the Corporation, has been awarded a contract by Ecopetrol S.A. for a 100% working interest in the associated gas and gas liquids stream from the Rancho Hermoso Field, located in the Llanos Basin of Colombia. Under the terms of the contract, awarded to Canacol by Ecopetrol S.A. on August 31, 2011, the Corporation will purchase the produced gas from Ecopetrol S.A. at a price of US$ 6.50 per thousand British Thermal Units (US$ 15.48 per thousand standard cubic feet per day), which includes the associated liquids, those being naphtha, propane and butane. The gas is very liquids rich, with 1 million standard cubic feet per day (mmscfpd) yielding approximately 160 barrels of naphtha, 126 barrels of propane, and 118 barrels of butane per day. In Colombia naphtha, propane, and butane all sell at a premium to West Texas Intermediate. The contract will be effective on January 1, 2012, and the Corporation anticipates adding approximately 2,300 net barrels per day of naphtha, propane and butane to its existing oil production stream from the approximately 5.7 mmscfpd of gas production forecast for January 2012.

Charle Gamba, President and CEO of the Corporation, commented “We are very pleased to have been awarded this contract for the associated gas at Rancho Hermoso, which will add a very healthy amount of liquids production to our oil production stream in Colombia. The Corporation will also be able to book proven, probable and possible reserves associated with the associated gas and gas liquids under the terms of the contract. Meanwhile, the Corporation has spudded the first of four new development wells to be drilled in the field during the remainder of 2011.”

Tags: Canacol Energy Inc., Ecopetrol S.A.