(MENAFN- Investor Ideas) The success of this one well in Colombia has the Canadian operator testing additional nearby locations that may boost production, noted a Research Capital Corp. report.
Canacol Energy Ltd. (CNE:TSX; CNNEF:OTCQX) successful recent testing of the Lulo 1 well suggests this exploration play in Colombia's Cienaga de Oro sandstone reservoir "could quickly build production capacity" close to the company's Jobo gas processing facilities, reported Research Capital Corp. analyst Bill Newman in a May 24 update note.
"The Lulo discovery has the potential to add significant reserves and production capacity within Canacol's main producing area in the Lower Magdalena Valley basin," Newman wrote.
Compelling Return on Investment
Newman also pointed out that the potential gain for investors in Canacol is significant. The difference between the Canadian natural gas company's current share price of CA$11.19 and Research Capital's target price on Canacol of CA$32.50 implies a possible 190% return.
Canacol is a Buy.
Possible Production Increases
Newman discussed the latest events surrounding the Lulo natural gas discovery.
Canacol tested Lulo 1 over seven days at various rates, up to 22,200,000 cubic feet per day (22.2 MMcf/d), the average being 17 MMcf/d. Tubing head pressure was 2,042 pounds per square inch.
Today, Lulo 1 is producing at a controlled rate of 17 MMcf/d.
As for the Lulo 2 appraisal well, relayed Newman, Canacol spud it on May 17 and is now drilling it. The company expects it to be producing by the end of May.
If Lulo 2 is successful, combined production from it and Lulo 1 would be in the 30-40 MMcf/d range.
"This is significant when compared to the estimated corporate production capacity before the Lulo discovery of about 240 MMcf/d," Newman highlighted.
New Prospective Area
The Lulo discovery led to Canacol exploring another prospective area, close to its main production location, in the middle to lower Cienaga de Oro, Newman wrote. In this 5 square kilometer expanse, Canacol identified five projects to pursue, one of which is Piña Norte, about 300 meters from the company's Jobo facilities.
Canacol intends to spud the Piña Norte exploration well next month, June 2023, and release its first results in July.
If Pina Norte is successful, plans call for next spudding the Cereza 1 exploration well, which is further out from Jobo, about 1 kilometer away.