LONDON, UK / ACCESSWIRE / January 14, 2021 / As we look across the E&P investment universe, few companies potentially offer greater asymmetric risk/reward upside compared with Canacol. The company is playing into a tightening Colombian gas market, which should continue to support favourable pricing and longer-term growth plans. However, even with existing pipeline infrastructure and a conservative outlook on exploration and appraisal success, our 2P + risked exploration base case valuation of C$5.87/share represents 59% upside to the current share price, while the downside is protected through existing take-or-pay contracts that suggest a low case based on 2021 take-or-pay contracted capacity (153mmscfd) of C$3.50/share. Under our current assumptions, which include Canacol's dividend equivalent to a 5.7% yield, we anticipate planned capex and cash dividends to be covered by the company's existing cash and cash generation.
Our base case valuation stands at C$5.87/share and assumes the world will return to normal in 2022, with gas sales resuming to pre-COVID-19 levels. With fixed gas prices for the medium term and 624bcf 2P reserves, the downside exposure to this valuation is limited to exploration success and decreased gas demand. In a scenario where exploration adds zero value, core NAV stands at C$3.62/share. Conversely, utilising existing infrastructure to the maximum suggests an unrisked upside valuation of C$7.78/share, while the expansion case currently being progressed could increase the upside valuation to C$9.17/share.
Click here to view the full report.
All reports published by Edison are available to download free of charge from its website
About Edison:Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise.At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting.
Edison is authorised and regulated by the Financial Conduct Authority.
Edison is not an adviser or broker-dealer and does not provide investment advice. Edison's reports are not solicitations to buy or sell any securities.
For more information please contact Edison:
Ian McLelland, +44 (0)20 3077 5756
Elaine Reynolds, +44 (0)20 3077 5713
oilandgas@edisongroup.com
Learn more atwww.edisongroup.com and connect with Edison on:
LinkedInhttps://www.linkedin.com/company/edison-investment-research
Twitterwww.twitter.com/Edison_Inv_Res
YouTubewww.youtube.com/edisonitv
SOURCE: Edison Investment Research Limited
View source version on accesswire.com:
https://www.accesswire.com/624284/Canacol-Energy-CNE-Ready-to-Exploit-Colombian-Tightening-Gas-Market
