English: The old logo of Credit Suisse. (Photo credit: Wikipedia)
CNE : TSX : C$2.91
BUY
Target: C$6.50
COMPANY DESCRIPTION:
Canacol Energy is a Canadian-listed oil exploration and production company with properties focused in Colombia and Ecuador. The company recently acquired Shona Energy, a natural gas producer with long-life reserves and strategic blocks immediately offsetting the company’s heavy oil acreage in the Caguan basin of Colombia. With a new emerging unconventional shale opportunity, we believe the company is poised to renew shareholder interest.
Energy — Oil and Gas, Exploration and Production
$140 MILLION SECURED
New credit facility announced
Canacol announced a US$140 million senior secured term loan with a syndicate of banks including Credit Suisse, Citibank, EDC and Corpbanca. The five-year loan has an 18-month grace period on repayments and carries an interest rate of LIBOR + 4.5%. In our view, the new facility provides Canacol with vastly improved near-term liquidity, as payments will not be required until October 2014.
Investment highlights
The company will use the facility to repay a US$45 million loan associated with its Shona acquisition, a US$31.1 million credit facility with Scotiabank and US$17.5 million in Colombian debt. After repaying these facilities, we anticipate a US$46 million net increase in cash from financing in Q4/F13E.
We expect Canacol is currently drilling its light-oil Labrador-2 prospect, which is to be followed up with Labrador-3 and the high impact Leono exploration prospect on LLA-23.
By mid-year, we anticipate that the company will commence testing the shale oil sections of Mona Arana-1 with Exxon. Oso-Pardo-1 with partner ConocoPhillips should spud in Q2/13.
Valuation
We have aligned our 12-month target with our estimated base value of ~C$6.50 per share. With multiple near-term drilling catalysts, the potential return to our one-year target is currently ~125%.
Related articles
- Canacol Energy Ltd. and ConocoPhillips Sign Agreement for Shale Oil Exploration Project in Colombia (sys-con.com)
- Sights set on Columbian shale oil (upi.com)
