C&C Energia Ltd.

March 14, 2011 08:30 ET

C&C Energia Reports Record Fourth Quarter and Full-Year 2010 Operating and Financial Results

CALGARY, ALBERTA--(Marketwire - March 14, 2011) - C&C Energia Ltd. ("C&C Energia" or the "Corporation") (TSX:CZE) is pleased to report its operating and financial results for the three and twelve months ended December 31, 2010.

C&C Energia reported record results for the fourth quarter 2010 highlighted by a 46% increase in average daily production from the fourth quarter 2009 to 6,386 barrels of oil per day ("bopd"), exiting the year at approximately 7,300 bopd. Funds flow from operations for the fourth quarter was US$25 million and net income was US$6.6 million. The Corporation previously reported full-year average daily production for 2010 of 5,842 bopd, a 58% increase from 2009. C&C Energia has a strong balance sheet with a US$80.2 million adjusted working capital surplus (including $86.8 million in cash).

Financial & Operational Highlights
(All references to $ are to United States dollars unless otherwise noted.)
  Three months ended December 31   Twelve months ended December 31
(unaudited) 2010   2009   2010   2009
Financial (thousands of US$, except share and per share amounts)  
Oil revenues (net) 38,797   23,590   134,159   66,322
Funds flow from operations (1) 25,132   13,280   79,944   39,402
Net income 6,632   (561)   30,492   (4,994)
Capital expenditures 14,744   11,248   73,138   25,726
Adjusted working capital surplus (2) 80,209   12,624   80,209   12,624
Common shares outstanding

Weighted average common shares outstanding

Average production (3)              
        Crude oil (bbls/d) 6,386   4,376   5,842   3,708
Average reference price  
        WTI ($ per bbl) 83.79   75.97   79.01   60.48
Operating netback ($ per bbl) (4)
    Average realized price (5)
    Production expenses
    Transportation expenses

    Operating netback 49.22   41.57   41.61   31.91
(1) Funds flow from operations before changes in other non-cash items. Funds flow from operations is not a measure recognized by Canadian GAAP. See "GAAP and Non-GAAP Measures" below.
(2) Current assets less current liabilities excluding risk management and future taxes. Funds flow from operations is not a measure recognized by Canadian GAAP. See "GAAP and Non-GAAP Measures" below.
(3) Actual production sold for the three and twelve months ended December 31, 2010 was 5,945 bopd and 5,708 bopd, respectively (2009 – 4,151 bopd and 3,621 bopd).
(4) Excludes impact of risk management contracts. See "GAAP and Non-GAAP Measures" below.
(5)  Effective January 1, 2010, the Corporation began selling its Cravoviejo block oil production to HOCOL S.A. ("HOCOL"), a subsidiary of Ecopetrol. The sales agreement with HOCOL differs from previous sales agreements in that title transfer occurs when the oil is exported through the Covenas terminal, compared to previous agreements where title transfer occurred when the oil was delivered to the pipeline loading station. As a result, the Corporation will report higher revenue and higher transportation expenses compared to such amounts in periods prior to January 1, 2010. 


  • Increased average fourth quarter production rates to approximately 6,386 bopd, an increase 46% from the prior year and the annual average production increased 58% to 5,842 bopd with year-end exit rate of approximately 7,300 bopd.
  • Funds flow from operations nearly doubled compared to the fourth quarter 2009 to $25 million and for the year, funds flow from operations increased greater than 100% to $80.0 million.
  • 2010 net income increased $35.5 million to $30.4 million.
  • During the year, the Corporation drilled 15 gross wells (10.8 net), 5 exploration and 10 development, appraising existing discoveries on the Cravoviejo and Cachicamo blocks.
  • Total working interest proved oil reserves ("1P"), before royalties, increased 19% to 9.2 million barrels.
  • Total working interest proved plus probable oil reserves ("2P"), before royalties, increased 24% to 14.6 million barrels.
  • Total working interest proved plus probable plus possible oil reserves ("3P"), before royalties, increased 60% to 24.3 million barrels.
  • Production replacement of 170% on proved reserves and 230% on proved plus probable reserves. Production replacement is calculated as reserve additions divided by total year production in barrels.
  • Based upon 2010 capital investment in oil and gas exploration and development of $71.1 million (excluding corporate capital of approximately $2.0 million), finding and development costs ("F&D") for 2010 were $19.64 per barrel for proved and $14.42 per barrel for proved plus probable reserves. F&D cost, including future development costs, is $25.86 per barrel for proved and $23.73 per barrel for proved plus probable. F&D, including future development cost, is calculated in accordance with NI51-101 as exploration and development costs incurred in the year along with the change in estimated future development costs divided by the applicable reserve additions.
  • Operating netbacks of approximately $41.61 resulted in a recycle ratio of 2.1 times on proved reserves and 2.9 times on proved plus probable reserves.
  • Completed two major 3D seismic programs on the Pajaro Pinto and Llanos 19 blocks that have delineated several drilling targets for 2011.
  • Commenced construction of the Carrizales centralized production facilities on the Cravoviejo block.
  • Received formal approval from the ANH on the assignment of the Pajaro Pinto and Andaquies E&P contracts.

Operational Review

C&C Energia has 9 blocks (7 operated) in Colombia with a total of 766,514 acres (586,909 net acres). Two of these blocks were awarded to the Corporation at the June 22, 2010 bid round and are subject to finalization and execution of definitive agreements with the Agencia Nacional de Hidrocarburos ("ANH"). The Corporation's lands are located in the Llanos Basin (4 blocks), Middle Magdalena Valley (2 blocks), and Putumayo Basin (3 blocks).

During the fourth quarter of 2010, the Corporation invested approximately $14.7 million ($73.1 million for the year). Drilling and completion accounted for a significant portion of the capital with approximately $7.2 million ($45.8 million for the year). The Corporation also invested approximately $4.3 million ($16.1 million for the year) primarily in facilities on the Cravoviejo and Cachicamo blocks. Seismic programs accounted for $1.9 million ($7.4 million for the year) and related to Llanos 19, Andaquies and the Pajaro Pinto blocks while and $1.3 million ($3.8 million for the year) relates to capitalized general and administration expenses and general property.

Capital investment in 2010 was reduced, partially as a result of cost savings related to drilling and completion costs and also by a delay in facility procurement and construction at Carrizales 14 and a delay in the commencement of the Andaquies seismic program. Both of these activities were completed in the first quarter of 2011.

Llanos Basin

All of the Corporation's current production is on the Cravoviejo block and Cachicamo block with 95% of current production at the Corporation's operated Cravoviejo block. The Corporation drilled and completed 9 oil wells and 1 water injection well at Cravoviejo during the year and 6 (1.8 net) oil wells at Cachicamo. C&C Energia is currently constructing centralized production facilities at its Carrizales field with start-up by mid-year 2011.

The Corporation plans at least 11 wells at Cravoviejo and 7 wells (2.1 net) at Cachicamo in 2011. These are comprised of 1 water injection well, 8 development locations and 9 exploration tests. Primary oil targets are the C-5, C-7, Gacheta, Ubaque, Mirador and Guadalupe formations. Also, in the central Llanos, the Corporation has identified several structural prospects on 3D seismic on the Pajaro Pinto and Llanos 19 blocks. These prospects will begin to be evaluated in 2011 with up to three exploration tests are planned.

With increasing production levels in Colombia as a whole, and the Llanos basin in particular, production disruptions have been routinely encountered by many producers due to a lack of tanker trucks to transport product. The Corporation is currently engaged in a variety of activities to allow it to better manage delivery of its production. While the Corporation expects that these disruptions will not have a lasting impact on the Corporation's production, there can be no assurance that further trucking availability and union issues will not continue to affect the Corporation's production in 2011 and thereafter.

Middle Magdalena Valley

On the Morpho block (50% working interest), the Corporation re-entered the Morpho-1 well (originally drilled and tested in 2009) and completed three shallow oil bearing reservoirs in the Colorado formation at intervals of 4,940 feet to 4,950 feet, 5,560 feet to 5,570 feet and 6,520 feet to 6,530 feet. All three zones were recently fracture stimulated and placed on extended clean-up and testing. The fourth Colorado sand between 4,600 feet and 4,617 feet has also been re-opened and commingled with the other three zones. The Corporation has installed production facilities and placed the well on an extended test. Over the last 20 days, the well has produced an average of 75 barrels of fluid per day at a 20% water cut (60 bopd).

The Baco-1 well was drilled and cased to 12,664 feet during the third quarter 2010. The Corporation completed two sand intervals, one at 12,125 feet that is approximately 60 feet thick and another at 10,215 feet that is approximately 50 feet thick. Both zones were recently fracture stimulated and placed on clean-up and testing.

Management will evaluate the test results of both the Morpho-1 and Baco-1 wells to determine if they will produce at sustainable commercial levels before determining whether to pursue a development strategy.

Putumayo Basin

The Corporation plans at least 3 (2.5 net) wells and both 2D and 3D seismic programs in 2011 to initially evaluate several prospects identified on three blocks in the Putumayo Basin, Coati, Andaquies, and Putumayo 8. These blocks comprise 279,715 acres (216,728 net acres).

In January, the Corporation commenced a 220 kilometer 2D seismic program on the Andaquies block which was completed by early March. Preliminary results indicate the presence of two structures, approximately 1,500 and 2,750 acres in size, in the northern portion of the block with well-defined structural closure and potential drilling locations. The Corporation plans to drill its first exploration well on the Andaquies block in the fourth quarter of 2011.

Pipeline takeaway capacity in Colombia, and particularly in the Llanos Basin, has become constrained as the country's production continues to grow. The Corporation subscribed for a small participation of up to 0.5% in the new pipeline construction project, the Oleoducto Bicentenario de Colombia (the "OBC") operated by Ecopetrol, which will link the Llanos basin oil production to the Cano Limon oil pipeline system. Construction on this project at the Banadia oil terminal has been completed and construction on the OBC pipeline is expected to commence in 2011. The Corporation's capital commitment is approximately $5.2 million. In addition, the Corporation will fund its equity interest in the pipeline's ongoing operating costs and be eligible to receive any dividends declared by the Board of the project.


The Corporation has approved a capital investment budget for 2011 of between $130 and $145 million. The Corporation will invest funds on the following operations: seismic, approximately $5 million; development drilling and completions, approximately $25 million; facilities, workovers and equipping, approximately $40 million; exploratory drilling, approximately $50 to $65 million and; $10 million for various other projects. Production for 2011 is expected to range between 7,000 and 7,300 bopd from the Cravoviejo and Cachicamo blocks. First quarter production is expected to be impacted by ongoing transportation issues however, the Corporation confirms it production guidance for 2011. With a strong balance sheet and robust cash flow, the Corporation has sufficient resources to fund its ongoing programs.


The Corporation, through its subsidiary Grupo C&C Energia (Barbados) Ltd., is engaged in the exploration for, the development and production of, oil resources in Colombia. Its strategy is to develop producing oil assets by appraising and developing existing discoveries and exploring in areas assessed by management to be of low to moderate risk. Now with a total of twelve 9 blocks (7 operated) and over 586,000 net acres in Colombia, the Corporation has considerable upside for future production and reserve growth.


This press release contains forward-looking information within the meaning of applicable Canadian securities laws that involves known and unknown risks and uncertainties. Forward-looking information typically contains statements with words such as "anticipate", "estimate", "expect", "potential", "could", "will", "plans" or similar words suggesting future outcomes. The Corporation cautions readers and prospective investors in the Corporation's securities to not place undue reliance on forward-looking information as by its nature, it is based on current expectations regarding future events that involve a number of assumptions, inherent risks and uncertainties, which could cause actual results to differ materially from those anticipated by C&C Energia.

Forward-looking information in this press release includes, but is not limited to, information concerning the expectations of the Corporation with respect to the completion of definitive contracts with the ANH regarding the VMM 21 block and the Putumayo Block 8, expectations of the Corporation's future production growth, the Corporation's expectations for average annual production to the end of 2011, the Corporation's capital program for the remainder of 2011, plans for the construction of production facilities, the Corporation's drilling plans in each of its principal properties, plans for obtaining seismic data, the expectations of the Corporation regarding the potential resolution of oil transportation and delivery issues in the Llanos Basin and the other areas in which it operates and the planned development of the OBC pipeline project. These forward-looking statements are subject to assumptions regarding the Corporation's operations and the operating environment in Colombia. In particular, the expected timing of the finalization of definitive E&P Contracts for the VMM 21 block and the Putumayo Block 8 is based on assumptions regarding the conduct of negotiating such agreements being similar to those for prior similar agreements. Estimates of 2011 production and the Corporation's expected drilling plans and capital expenses are based on the assumptions that the Corporation's plans will be completed without any undue difficulty, that costs will not rise significantly and that events will not cause disruptions in the delivery of the Corporation's oil production to market. The Corporation's capital program and drilling and seismic plans are subject to change if circumstances change or if management of the Corporation determines that other business plans are more appropriate. The Corporation's expectations regarding the resolution of production issues in the Llanos Basin and elsewhere are subject to changes in circumstance or new developments that the Corporation cannot foresee.

Forward-looking information involves significant known and unknown risks and uncertainties. A number of factors could cause actual results to differ materially from those anticipated by C&C Energia including, but not limited to, general risks associated with the oil and gas industry (e.g. operational risks in exploration; inherent uncertainties in interpreting geological data; changes in plans with respect to exploration or capital expenditures; the uncertainty of estimates and projections in relation to costs and expenses and health, safety and environmental risks, potential risks arising from trucking and other delivery disruptions), the risk of commodity price and foreign exchange rate fluctuations, the uncertainty associated with the negotiating with the ANH or with other third parties in countries other than Canada and the risk associated with international activity. The forward-looking information included in this news release is expressly qualified in its entirety by this cautionary statement. The forward-looking information included herein is made as of the date hereof and C&C Energia assumes no obligation to update or revise any forward-looking information to reflect new events or circumstances, except as required by law.

GAAP and Non-GAAP Measures

The Corporation's financial statements have been prepared in accordance with Canadian generally accepted accounting principles, or Canadian GAAP, as applied to its financial statements.

This report makes reference to the terms "funds flow from operations", "operating netbacks", "netbacks" and "adjusted working capital", which are not recognized measures under Canadian GAAP and do not have a standardized meaning prescribed by Canadian GAAP. Accordingly, the Corporation's use of these terms may not be comparable to similarly defined measures presented by other companies. Funds flow from operations includes all cash flows from operating activities before changes in non-cash working capital. Operating netback is determined by dividing oil sales revenues less royalties, production expenses and transportation expenses by sales volumes. Management considers operating netback important as it is a measure of profitability per barrel sold and reflects the quality of production. Netbacks are calculated by subtracting royalties, production expenses, transportation expenses, administrative expense, interest and taxes paid by the Corporation from crude oil revenue and dividing by sales volume. Adjusted working capital surplus includes current assets less current liabilities excluding risk management and future taxes and is used to evaluate the Corporation's financial leverage. Management uses these non-GAAP measurements for its own performance measures and to provide its shareholders and potential investors with a measurement of the Corporation's efficiency and its ability to fund a portion of its future growth expenditures.

Contact Information

  • C&C Energia Ltd.
    Richard A. Walls
    President and Chief Executive Officer
    C&C Energia Ltd.
    Ken Hillier
    Chief Financial Officer