We are the future,
we are energy
The 2020 was a remarkable year that has transformed the way businesses are managing risks and opportunities related to environmental, social, and governance (ESG) matters. Being resilient has never been more critical, and companies must step up by offering innovative solutions for the world’s problems and responding efficiently to a more demanding context.
The COVID-19 pandemic has been an opportunity for us to demonstrate our ability to deal with critical junctures and quickly adapt. We rose to the challenge and never faltered in our ambition to produce the natural gas needed to improve the quality of life for millions of Colombians in a safe, efficient, and cost-effective way.
Despite the challenging circumstances, we continued to operate under the premise of taking care of the health and well-being of our employees and their families, our contractors, and the communities in which we operate. We generated strong cashflows, maintained a stable dividend, and created value for our multiple stakeholders, with a 16% return on capital invested and solid operating margins averaging 79%.
During 2020, we met several important milestones for gas production growth in Colombia. We increased 20% on realized natural gas sales, achieving 172 MMscfd in 2020 compared to 143 MMcfd in 2019. Despite a reduced drilling program which included only six of our planned twelve wells due to Covid-19 (and only two of those being exploration wells), the Corporation managed to achieve a 122% Reserve Replacement Ratio, totaling 637 Bcf of 2P reserves.
We executed several drilling and seismic activities, which aim to continue expanding our reserve base and de-risking our large resource portfolio, comprised of 188 prospects and leads with an aggregated un‐risked mean of 5.7 trillion standard cubic feet of natural gas. Also, we worked diligently to progress on different future growth projects such as a new gas pipeline from our Jobo gas facility to Medellin and developing a completely new gas sales channel, by participating in a near-field 200 MW power generation plant.
For 2021, we are focused on the following operational objectives: 1) drilling up to 12 exploration, appraisal, and development wells in a continuous program targeting a 2P reserves replacement ratio of more than 200%, 2) the acquisition of 655 square kilometres of 3D seismic on the VIM-5 and SSJN-7 blocks to expand our exploration prospect inventory, 3) the execution of a definitive agreement to build a new gas pipeline from Jobo to Medellin which will increase our gas sales by an additional 100 MMscfpd, and 4) continue our commitment to strengthen our ESG plan.
This report reflects the progress we have made creating a long-term vision ESG strategy, aligned with our business perspective, external stakeholders’ expectations, and industry trends. Our approach encompasses four priorities, and goals to reach over the next six years.
A cleaner energy future
A clean energy supply is crucial for successful economic and social development. At Canacol, we aim to thrive throughout the transition to a lower carbon economy, by adopting a gas business model and establishing a climate change corporate strategy. We have set short and medium-term commitments to understand and reduce our operational carbon emissions. We reduced our carbon emission intensity and our direct carbon emissions by 25% and 11%, respectively, against 2019 baseline. Furthermore, 88%of the energy generated for the Company’s operations comes from self-produced natural gas. We have increased the use of solar energy in our operations 140% compared to the previous year. As a reflection of our commitment to water resource management, in 2020 we treated 7.1 mega litres of water (19.3% of total usage) for subsequent recycling and reuse.
A transparent and ethical business
Strong corporate governance enables efficiency and transparency. We have adopted corporate governance best practices, and we are promoting respect for human rights while demonstrating ethics and integrity in everything we do.
Our commitment to shareholders and investors is to achieve business success while responsibly fostering sustainable development.
To meet these commitments, the Board of Directors is actively engaged in integrating the company’s strategy with the corresponding ESG opportunities and risks. In 2020, we created a Board of Directors’ Committee to oversee the ESG work composed of four independent members.
For the fifth year in a row, we received zero human rights violations and zero corruption reports.
A safe and committed team
Our team members drive our performance, and we are devoted to their well-being and safety. One of our main priorities is to create diverse and inclusive work-environments that foster creativity, growth, and productivity. We aim to be the employer of choice for Colombia’s hydrocarbon workforce, and a preferred partner for operators and regulators. We received 88% satisfaction score in our 2020 work-climate survey. This compares favorably with the regional and Colombian average scores of 72% and 74%, respectively.
Our recent efforts have been focused on increasing diversity and inclusiveness, and currently 34% of our workforce are women, including 13% of technical areas, 30% of executive roles, and 31% of the top management.
In 2020 our workforce’s (employees and contractors) Lost Time Injury Frequency Rate was 53% better than target (3.33). With the COVID-19 pandemic, we quickly adapted to prioritize employees’ health and safety without negatively affecting business operations.
A society guided by sustainable development
Working together with our neighbouring communities is essential to our success. We are committed to promoting and maintaining close and transparent relationships that facilitate community development and that improve quality of life in parallel with our growth. We work hand in hand with communities and authorities to identify and implement projects that catalyze growth of economic and social well-being. We are fully committed to leaving a positive legacy.
A leading example of this commitment is our local utility gas distribution project to replace firewood with a much cleaner, healthier, and more efficient cooking fuel. This initiative received an award from the Ministry of Mines and Energy and the National Hydrocarbons Agency for its contribution to SDG 13 – Climate Action.
In 2020, we created opportunities through local employment and development by going above and beyond regulatory requirements. Fifty-nine percent of our skilled labour and 100% of our unskilled labour were hired locally, and we purchased 93.3% of all goods and services locally, regionally, and nationally, representing an economic stimulus of $173 million dollars. We also joined humanitarian aid efforts to help communities during the pandemic, benefiting approximately 13,000 families.
For the year 2021, we are committed to continuing to create value for all our stakeholders using an approach that is sustainable, cooperative, respectful, and transparent. Our corporate best practices buttressed by our alignment with the 2030 Agenda for Sustainable Development and the 17 Sustainable Development Goals (SDG) as well as our commitment to the Ten Principles of United Nations Global Compact will guide our course for the years and decades to come. We are determined to succeed as a business and to be recognized as a leader in ESG implementation and results.
President, CEO and Director of Canacol Energy Ltd