Canacol Energy Ltd. says that drilling and testing of the first horizontal well, Capella FH-10, and the Romero A1 well, has been completed, and that the steam injection pilot has commenced. The Corporation has also completed the acquisition and processing of 184 square kilometers of 3D seismic over the discovery, and has commenced the drilling of the Capella L-11 well. The Capella discovery is located on the Ombu E&P Contract in the Caguan - Putumayo basin of southern Colombia. The Corporation, through a farm in with Emerald Energy Plc., earned a 10% working interest in the Contract through the drilling of the Capella 1 discovery well in July 2008. The Ombu E&P Contract was awarded to the operator by the Agencia Nacional de Hidrocarburos in 2007. The Corporation has participated in the drilling of 8 wells into the discovery to date. Canacol also has a 100% operated working interest in 3 offsetting exploration contracts awarded directly to the Corporation in 2009 and 2010, and holds over 1.6 million net exploration acres in the area.

Charle Gamba, President and CEO of the Corporation, comments 'We are very pleased with the results of the Capella FH-10 horizontal well, which has tested at a gross rate up to 437 bopd, significantly higher than that of a vertical well in the field. We are confident that horizontal wells will play an important part in the future development of the field, having now demonstrated the capability of providing significantly more production than vertical wells. We are also anticipating the results of the steam injection pilot, which could have the potential to double the recoverable reserves associated with the discovery. The results from the horizontal well, the steam injection pilot, the 3D seismic, and the remaining 5 wells to be drilled in the field this year will be used to formulate the development plan for the field going forward into 2011 and beyond. Aside from continuing to develop the potential of the Capella discovery, the Corporation is also positioned to execute a significant exploration program on its three 100% working interest operated exploration blocks offsetting the Capella discovery in 2011.'

Capella F-10 Horizontal Well The Capella F-10 well was drilled in 2 phases, the first being a deviated pilot hole, and the second a horizontal well drilled from the existing deviated pilot wellbore. The deviated pilot well was drilled to a total depth of 4,180 feet measured depth ('ft MD') or 3,505 ft true vertical depth and encountered 75 ft of net oil pay within the Upper Mirador sandstone reservoir, the target of the horizontal well. The Upper Mirador reservoir has an average porosity of 28% and average oil saturation of 83%, with no free water encountered.

The lower part of the deviated pilot was subsequently plugged back and a horizontal well targeting the 80 ft thick Upper Mirador reservoir drilled to a depth of 5,067 ft MD. The length of the horizontal section within the Upper Mirador reservoir is 1,017 ft. The horizontal well encountered excellent oil saturated sandstone reservoir throughout the entire length of the section. The horizontal section of the well was completed with a slotted liner followed by installation of a progressive cavity pump ('PCP').

Testing of the Upper Mirador yielded gross flow rates of up to 437 bopd (44 bopd net) of 11o API oil with a water cut of approximately 1.3 % with the PCP set to 120 rotations per minute ('rpm'). The maximum potential flow rate of the well is 540 bopd gross (54 bopd net) with the PCP set to the maximum rate of 140 rpm. The rate achieved by the horizontal well greater than 2 times that of a vertical well, meaning that horizontal production wells will likely form a significant component of the future development drilling program for the field.

Tags: Canacol Energy Inc.