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Canacol operates two producing fields, Rancho Hermoso and Entrerrios, which lie in the northern portion of the Llanos Basin, Colombia's most prolific hydrocarbon basin.

Located 240 kilometers north east of Bogota, the Rancho Hermoso Field is an elongated north south trending structure with three way structural closure on the north, west and south sides of the structure and is truncated on the east by a major normal fault.

History
In December 2009, Canacol announced that the Rancho Hermoso 5 well tested at a rate of 3,994 gross barrels of oil per day (“bopd”), or approximately 1,000 bopd net to Canacol, of 33 degree API light oil from the Guadalupe reservoir. In mid December 2009, Canacol further announced that it tested a combined flow rate of 8,428 gross bopd, or approximately 2,100 bopd net to Canacol, from the Guadalupe and Los Cuervos reservoirs. The Los Cuervos reservoir was placed on production in late February 2010. The underlying Guadalupe reservoir was tested at a final stable rate of 1,037 gross bopd, approximately 234 bopd net to Canacol, and was isolated to test the overlying Los Cuervos reservoir.

In late July 2010, the Corporation announced that Rancho Hermoso 6 encountered total of 115 feet true vertical depth ("TVD") of net oil pay in five different reservoirs, which is significantly greater than the 40 ft of net oil pay encountered at the Rancho Hermoso 5 well located down dip on the structure.

In late October 2010, the Corporation completed the drilling and testing of the Rancho Hermoso 7 well, which tested a flow rate of 5,019 gross barrels of oil per day from the Los Cuervos reservoir. The Los Cuervos – Barco reservoir at RH 7ST contained 34 ft of net oil pay.

In mid December 2010, the Corporation completed the drilling and testing of the Rancho Hermoso 9 well, which tested a flow rate of 6,750 gross barrels of oil per day from the Mirador reservoir. The RH 9 well encountered 109 feet of net oil pay within 5 different reservoir intervals, which include, from top to bottom, the Mirador, Los Cuervos–Barco, Guadalupe, Gacheta, and Ubaque. The Corporation drilled the RH 9 well before the RH 8 well for scheduling purposes.

In January 2011, the Corporation completed the drilling and testing of the Rancho Hermoso 8 well, which tested a flow rate of 3,927 gross barrels of oil per day from the Los Cuervos-Barco reservoir. The RH 8 well encountered 93 feet of net oil pay within 4 different reservoir intervals, which include, from top to bottom, the Mirador, Los Cuervos-Barco, Guadalupe, and Ubaque.

In February 2011, the Corporation completed the drilling of the Rancho Hermoso 10 well, which tested 26,286 gross barrels of oil per day. The RH 10 well encountered 110 feet of net oil pay within 5 different reservoir intervals, which include, from top to bottom, the C7, Mirador, Los Cuervos-Barco, Guadalupe, and Ubaque.

In June 2011, the Corporation completed production testing of the C7 sandstone reservoir in the Rancho Hermoso 4 well, which after 1 week of testing flowed at an average rate of 1,786 gross bopd (447 bopd net) of 34 degrees API light oil. 

Rancho Hermoso Gas

In late August 2011, the Corporation was awarded a contract by Ecopetrol S.A. for a 100% working interest in the associated gas and gas liquids stream from the Rancho Hermoso field. The contract will be effective on January 1, 2012, and the Corporation anticipates adding approximately 2,300 net barrels per day of naphtha, propane, and butane to its existing oil production stream from the approximately 5.7 mmscfpd of gas production forecast for January 2012.    

In late September 2011, Canacol completed the drilling and casing of the first of four new development wells it plans to drill through the remainder of calendar 2011. The Rancho Hermoso 11 well encountered 130 feet of net oil pay within 6 different reservoir intervals, which include, from top to bottom, the C7, Mirador, Los Cuervos–Barco, Guadalupe, Gacheta, and Ubaque.

In mid October 2011, Canacol completed the drilling and case of the second of four new development wells it plans to drill through the remainder of calendar 2011. The RH 12 well encountered 130 feet (“ft”) of net oil pay within 5 different reservoir intervals, which include, from top to bottom, the C7, Mirador, Los Cuervos-Barco, Guadalupe, and Ubaque.

Rancho Hermoso and Entrerrios oil fields are each subject to different contracts governing production. At Rancho Hermoso, production from the Mirador formation is subject to a Risk Service Contract with Ecopetrol. Under the contract, Canacol receives a fixed price tariff for each barrel produced, which is insensitive to oil price fluctuations. Under an existing agreement with Ecopetrol, the tariff escalates each year to approximately US $17.56 per gross barrel in 2012 plus transportation reimbursement and will remain at that level for the duration of the field's life.

The Corporation, through its 100% owned Colombian subsidiary Rancho Hermoso S.A., operates the Rancho Hermoso field under two Contracts with Ecopetrol S.A., those being 1) a Participation Contract in the Casanare Area whereby the Corporation receives 25% (after royalty) of  gross production from the C7, Los Cuervos–Barco, Guadalupe, Gacheta, and Ubaque reservoirs, and the remainder (approximately 75%) to Ecopetrol S.A., and 2) a Risked Service Production Contract for the Mirador reservoir, whereby the Corporation is paid a tariff for each barrel of oil produced and Ecopetrol S.A. receives the oil. 

Regional Geological Setting
The Llanos Basin is situated on the east side of the Andes Mountains and covers an area of approximately 200,000 square kilometers (77,000 square miles). The basin is Colombia’s most prolific hydrocarbon basin and contains the majority of Colombia’s oil fields and proved oil reserves. The formation of the basin was initiated by Jurassic rifting and subsidence and ended with the late Miocene Andean Orogeny. The Andean Orogeny created the major north-south Andes Mountain Range extending from Colombia to the southern tip of South America. The rifting followed by the thrusting and uplift resulted in a structural style that is characterized by deep rooted, high angle thrust and normal faults associated with low amplitude closures oriented NNE-SSW.

The basin is a northwest dipping monocline that includes a thick Paleozoic-Cretaceous marine depositional sequence that can reach a maximum thickness of 3,000 meters (9,850 ft). The marine sequence is overlain by the late Tertiary continental sediments of the Guayabo Formation, which is associated with the Cordillera Oriental uplift in late Miocene through Pleistocene.