Following court approvals in the US and Canada, Canacol has gained access to USD 45m in additional debtor-in-possession (DIP) funds. The Canadian E&P company operating in Colombia had requested the additional money to meet post-filing obligations and now has access to a total of USD 112m.

The approval comes after Canacol had already drawn USD 45m in DIP financing (initially USD 15m, then USD 15m the week of 14 March, and USD 15m between 15 March and 4 April).

Unfortunately for Canacol and its creditors, our premonition that the initial USD 45m wouldn’t be enough has ended up materializing.

Initially, Canacol was authorized to obtain a DIP facility of up to USD 67m. However, creditors later signed a commitment letter increasing the aggregate amount to USD 112m by adding a new draw term loan tranche of up to USD 45m.

The tranche was to be funded as many as three draws: up to USD 15m no later than 28 April, an additional USD 15m by 4 May, and the remaining to be advanced no later than 15 June.

The new capital structure further relegates the recovery of the unsecured bondholders (Table 1).

The report from the monitor, KPMG, provides some visibility into Canacol’s financial position. We see that collections, which can serve well as a proxy for revenues, are very low, and what we call “cash EBITDA” (collection – operating disbursement + capex + DIP fee and interest) is negative. According to the 16 April report, the expectation for the period 5 April-27 June is not going to be any better and would also require the company to keep drawing from the now increased DIP facility (Table 2).

The first thing to note is that Canacol’s revenue per quarter was USD ~120m in the two previous quarters before it defaulted in November 2025 and stopped publishing financial statements. It has essentially dropped to a quarter of that so far during 2026.

Production during those two quarters prior to default was ~120 million cubic feet per day (mmcfpd). Also, capex between October 2023 and September 2024 was in the order of USD 175m per year (USD 88m per half). Considering the actual figures from 1Q26 and those forecasted for 2Q26, USD 34m sounds very little for a company that wants to maintain/increase production to get out of the mess it is in.

One clearly important aspect is that production has plummeted. During the month Canacol defaulted, natural gas dispatches were 100.9 mmcfpd. As soon as next month, that amount declined 16.5%, and has continued to decrease every month since then (Table 3).

Production in what were Canacol’s three largest fields (Clarinete, Arandala and Fresa) dropped by ~60% between October 2025 and March 2026. This was offset by production in other fields, but clearly wasn’t enough.

In March 2026, Canacol had a gross natural gas production of 75 mmcfpd, equivalent to 6.5% of Colombia’s total. This figure was 128.7 mmcfpd or 10.4% in September 2025.

Canacol is experiencing a negative vicious cycle. It doesn’t have capital to invest in capex, so production drops, which lowers revenue, which means the company needs more funds to cover the shortfall.

It could be argued that the best way to break this cycle is to sell the company. That’s probably why Canacol requested, and the US judge conceded, the appointment of Moelis to try to find a buyer as soon as possible.

A second important aspect is Canacol trying to break its offtake contracts. The last publicly known information was a commitment of 111 mmcfpd at USD 6.3 per mmcf. When the company produced more than that, it could sell the excess in the spot market, which was more than USD 12 per mmcf. A quick shortcut to increase revenues would be to suspend the agreements, so Canacol can sell all its production on the spot market and essentially double revenues overnight.

Of course, all their counterparties (industries, commercial and residential users) will suffer. The termination would need to be approved by the Colombian Superintendency of Companies.

In our previous report, we calculated recoveries using two different methods. Fast forward to today, EBITDA is much lower and reserves are probably lower too, given that capex to replenish them has been subdued. The 2028 bonds trade in the high 30s, up ~10 cents since our previous report.

Asset sales in progress

Canacol is undergoing a market process to determine investor interest in its assets.

The “phase 1” bid deadline ended on 16 March, while the “phase 2” deadline was 4 May.

During the first phase, the sale advisor and the court-appointed monitor KPMG “received robust interest,” reflected in non-binding letters of intent.

The bid process letter, then, was delivered to all qualified bidders, which are conducting due diligence.

According to the company, a successful bid under the sale and investment solicitation process must “include sufficient consideration to repay in full all DIP obligations, secured charges under the Canadian court proceeding, and certain Colombian tax and social security claims.

If the purchase price does not allow full cash repayment of Canacol’s unsecured notes due 2028, any consideration to noteholders must be acceptable to the ad hoc bondholders providing the DIP financing.

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