Canacol Charges Ahead at Rancho Hermoso Field

Canacol updated its development drilling program at its operated Rancho Hermoso Field located in the Llanos Basin of Colombia. The Corporation has completed production testing of the Los Cuervos - Barco reservoir in the recently drilled Rancho Hermoso 8 ("RH 8") well. The RH 8 well encountered 93 feet ("ft") of net oil pay within 4 different reservoir intervals, which include, from top to bottom, the Mirador, Los Cuervos–Barco, Guadalupe, and Ubaque.

Charle Gamba, President and CEO of Canacol, stated, "Drilling results from the Rancho Hermoso field continue to deliver as expected, and with 5 more new development wells planned for the field in 2011, we are on track to deliver on our target of between 10,000 and 11,000 bopd of net production for 2011. With a drilling program dominated by exploration wells in Colombia and Guyana, five of which each target 100 million barrel plus recoverable conventional oil prospects, 2011 should be a very exciting year for the Corporation, and for our shareholders."

Rancho Hermoso 8 Well Results

The Rancho Hermoso 8 well was spud on December 6, 2010 and reached a total depth of 10,191 ft measured depth ("md") on December 25, 2010, with good oil and gas shows encountered in the Mirador, Los Cuervos–Barco, Guadalupe, and Ubaque reservoirs. Petrophysical analysis of the open-hole logs indicates a total of 93 ft of oil pay within the well: 15 ft of oil pay within the Mirador reservoir with average porosity of 27%, 15 ft of pay within the Los Cuervos–Barco reservoir with average porosity of 21%, 11 ft of oil pay within the Guadalupe reservoir with average porosity of 25%, and 52 ft of oil pay within the Ubaque reservoir with average porosity of 26%.

Production Test Results

The Los Cuervos –Barco reservoir at RH 8 contains 15 ft of net oil pay, and was perforated between 9,349 and 9,364 ft md. The well flowed at a final stable gross rate of 3,927 bopd (982 bopd net) of 35° API light gravity oil with 1.5% water cut using an electrical submersible pump ("ESP") set to a frequency of 75 Hz during a 24 hour flow period. Water cut decreased steadily throughout the course of the production test, and based upon the salinity of the water, management has concluded that the water is completion fluid related to the drilling of the well, and not formation water.

The well was tested with a relatively small ESP that has a total pumping capacity of only 4,000 barrels of total fluid per day ("bfpd"), and as such the true productive potential of the zone was not realized during the course of the test. The productivity of the zone indicates that higher rates are achievable, and the Corporation is currently installing a larger ESP with a pumping capacity of 10,000 bfpd to increase the producing rate of the well. It is anticipated that the well will be placed on permanent production with the larger ESP within one week.