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ANNUAL INFORMATION FORM FOR THE YEAR ENDED JUNE 30, 2009 NOVEMBER 25, 2009 Statements in

ANNUAL INFORMATION FORM FOR THE YEAR ENDED JUNE 30, 2009

NOVEMBER 25, 2009

Statements in this Annual Information Form may be viewed as forward-looking statements. Such statements involve risks and uncertainties that could cause actual results to differ materially from those projected. There are no assurances the Corporation can fulfill such forward-looking statements and the Corporation undertakes no obligation to update such statements. Such forward-looking statements are only predictions; actual events or results may differ materially as a result of risks facing the Corporation, some of which are beyond the Corporation’s control. The forward-looking statements or information contained in this Annual Information Form are made as of the date hereof and the Corporation undertakes no obligation to update or revise any forward looking statements, whether as a result of new information, future events or otherwise, unless required by applicable securities laws.

TABLE OF CONTENTS

GLOSSARY

1

ABBREVIATIONS AND CONVERSION

5

METRIC CONVERSION TABLE

6

INFORMATION

6

FORWARD LOOKING STATEMENTS

6

NAME AND INCORPORATION

8

INTERCORPORATE RELATIONSHIPS

8

GENERAL DEVELOPMENT OF THE BUSINESS

9

DESCRIPTION OF THE BUSINESS AND OPERATIONS

16

STATEMENT OF RESERVES DATA AND OTHER OIL AND GAS INFORMATION

22

UNDEVELOPED RESERVES FORECAST PRICES AND COSTS

29

DESCRIPTION OF CAPITAL STRUCTURE

35

DIVIDEND RECORD AND POLICY

36

MARKET FOR SECURITIES

36

PRIOR SALES

37

ESCROWED SECURITIES

37

DIRECTORS AND OFFICERS

37

LEGAL PROCEEDINGS AND REGULATORY ACTIONS

42

TRANSFER AGENT AND REGISTRARS

43

MATERIAL CONTRACTS

43

INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

43

INTEREST OF EXPERTS

44

RISK FACTORS

44

ADDITIONAL FINANCIAL AND OTHER INFORMATION

57

SCHEDULE A REPORT ON RESERVES DATA BY INDEPENDENT QUALIFIED RESERVES EVALUATOR (FORM 51-101F2)

SCHEDULE B REPORT OF MANAGEMENT AND DIRECTORS ON OIL AND GAS DISCLOSURE (FORM 51-101F3)

GLOSSARY

In this Annual Information Form, the following abbreviations and terms shall have the meanings set forth below, unless otherwise indicated:

ABCA” means the Business Corporations Act (Alberta), R.S.A. 2000, c. B-9, as amended, including the regulations promulgated thereunder;

ANH” means Agencia Nacional de Hidrocarburos, or National Hydrocarbon Agency, an agency of the Colombian government;

ANP” means Agência Nacional do Petróleo, Gás Natural e Biocombustíveis, Brazil’s National Petroleum Agency;

BCH” means BCH Ltd., a former wholly owned subsidiary of the Corporation incorporated under the ABCA;

bitumen” means a highly viscous oil which is too thick to flow in its natural state, and which cannot be produced without altering its viscosity;

Board of Directors” means the board of directors of the Corporation, as constituted from time to time;

Common Shares” means common voting shares in the capital of Canacol as presently constituted;

Corporation” or “Canacol” means Canacol Energy Ltd., and, when used in the context of describing the Corporation’s assets and business, may include its subsidiaries and predecessors;

crude oil” or “oil” means a mixture that consists mainly of pentanes and heavier hydrocarbons, which may contain sulphur and other non-hydrocarbon compounds, that is recoverable at a well from an underground reservoir and that is liquid at the conditions under which its volume is measured or estimated. It does not include solution gas or natural gas liquids;

DeGolyer” means DeGolyer and MacNaughton Canada Limited, independent oil and gas reservoir engineers for the Corporation’s Brazil properties;

DeGolyer Report” means the report dated July 31, 2009 entitled “Appraisal Report as of June 30, 2009 on certain properties owned by Canacol Energy Ltd.” prepared by DeGolyer;

development costs” means costs incurred to obtain access to reserves and to provide facilities for extracting, treating, gathering and storing the oil and gas from the reserves. More specifically, development costs, including applicable operating costs or support equipment and facilities and other costs of development activities, are costs incurred to:

(a) gain access to and prepare well locations for drilling, including surveying well locations for the purpose of determining specific development drilling sites, clearing ground, draining, road building, and relocating public roads, gas lines and power lines, to the extent necessary in developing the reserves;

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(b)

drill and equip development wells, development type stratigraphic test wells and service wells, including the costs of platforms and of well equipment such as casing, tubing, pumping equipment and the wellhead assembly;

(c)

acquire, construct and install production facilities such as flow lines, separators, treaters, heaters, manifolds, measuring devices and production storage tanks, natural gas cycling and processing plants, and central utility and waste disposal systems; and

(d)

provide improved recovery systems;

development well” means a well drilled inside the established limits of an oil or gas reservoir, or in close proximity to the edge of the reservoir, to the depth of a stratigraphic horizon known to be productive;

Ecopetrol” means Empresa Colombiana de Petróleos, the Colombia national oil company;

Emerald Energy” means Emerald Energy Plc, operator under the Ombu E&P Contract;

exploration costs” means costs incurred in identifying areas that may warrant examination and in examining specific areas that are considered to have prospects that may contain oil and gas reserves, including costs of drilling exploratory wells and exploratory type stratigraphic test wells. Exploration costs may be incurred both before acquiring the related property (sometimes referred to in part as “prospecting costs”) and after acquiring the property. Exploration costs, which include applicable operating costs of support equipment and facilities and other costs of exploration activities, are:

(a)

costs of topographical, geochemical, geological and geophysical studies, rights of access to properties to conduct those studies, and salaries and other expenses of geologists, geophysical crews and others conducting those studies (collectively sometimes referred to as “geological and geophysical costs”);

(b)

costs of carrying and retiring unproved properties, such as delay rentals, taxes (other than income and capital taxes) on properties, legal costs for title defence and the maintenance of land and lease records;

(c)

dry hole contributions and bottom hole contributions;

(d)

costs of drilling and equipping exploratory wells; and

(e)

costs of drilling exploratory type stratigraphic test wells;

forecast prices and costs” means future prices and costs that are:

(a)

generally accepted as being a reasonable outlook of the future; and

(b)

if, and only to the extent that, there are fixed or presently determinable future prices or costs to which the reporting issuer is legally bound by a contractual or other obligation to supply a physical product, including those for an extension period of a contract that is likely to be extended, those prices or costs rather than the prices and costs referred to in paragraph (a);

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future net revenue” means the estimated net amount to be received with respect to the development and production of reserves (including synthetic oil, coal bed methane and other non-conventional reserves) estimated using constant prices and costs or forecast prices and costs;

gross” means:

(a)

in relation to the Corporation’s interest in production or reserves, its “company gross reserves”, which are its working interest (operating or non-operating) share before deduction of royalties and without including any royalty interests of the Corporation;

(b)

in relation to wells, the total number of wells in which the Corporation has an interest; and

(c)

in relation to properties, the total area of properties in which the Corporation has an interest;

heavy oil” means a dense, viscous oil with a high proportion of bitumen, which is difficult to extract with conventional techniques and is more costly to refine;

La Sierra E&P Contract” means the exploration and production contract located in the Middle Magdalena Basin in Colombia, awarded by the ANH in 2007 and operated by Canacol;

net” means:

(a)

in relation to the Corporation’s interest in production or reserves its working interest (operating or non-operating) share after deduction of royalty obligations, plus its royalty interest in production or reserves;

(b)

in relation to the Corporation’s interest in wells, the number of wells obtained by aggregating the Corporation’s working interest in each of its gross wells; and

(c)

in relation to the Corporation’s interest in a property, the total area in which the Corporation has an interest multiplied by the working interest owned by the Corporation;

Netherland Sewell” means Netherland Sewell & Associates, Inc., independent oil and gas reservoir engineers for the Capella Colombia properties;

Netherland Sewell Report” means the report dated July 31, 2009 entitled “Appraisal Report as of June 30, 2009 on certain properties owned by Canacol Energy Ltd.” prepared by Netherland Sewell;

NI 51-101” means the National Instrument 51-101 — Standard of Disclosure for Oil and Gas Activities of the Canadian Securities Administrators;

Ombu E&P Contract” means the exploration and production contract located in the Caguan Basin, to the south-west of the Llanos Basin, in Colombia (Capella conventional heavy oil discovery), awarded by the ANH in December 2006 and operated by Emerald Energy;

Ombu Farmout Agreement” means a farmout agreement entered into in July 2008, whereby the Corporation earned a 10% Working Interest, subject to approval by the ANH, in the Ombu E&P Contract;

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operating costs” or “production costs” means costs incurred to operate and maintain wells and related equipment and facilities, including applicable operating costs of support equipment and facilities and other costs of operating and maintaining those wells and related equipment and facilities;

Option Plan” means the stock option plan of Canacol;

possible reserves” means those additional reserves that are less certain to be recovered than probable reserves. It is unlikely that the actual remaining quantities recovered will exceed the sum of the estimated proved plus probable plus possible reserves;

probable reserves” are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves;

production” means recovering, gathering, treating, field or plant processing (for example, processing gas to extract natural gas liquids) and field storage of oil and gas;

proved reserves” are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves;

reserves” are estimated remaining quantities of oil and natural gas and related substances anticipated to be recoverable from known accumulations, from a given date forward, based on (a) analysis of drilling, geological, geophysical, and engineering data; (b) the use of established technology; and (c) specified economic conditions, which are generally accepted as being reasonable and shall be disclosed. Reserves are classified according to the degree of certainty associated with the estimates being “proved reserves”, “probable reserves” and “possible reserves”;

Ryder Scott” means Ryder Scott Company Petroleum Consultants, independent oil and gas reservoir engineers for the Rancho Hermoso and Entrerrios Colombia properties;

Ryder Scott Report” means the report dated July 31, 2009 entitled “Appraisal Report as of June 30, 2009 on certain properties owned by Canacol Energy Ltd.” prepared by Ryder Scott;

Shareholder” means a holder of record of one or more Common Shares;

Tax Act” means the Income Tax Act (Canada) and the regulations promulgated thereunder, as amended;

TSXV” means the TSX Venture Exchange Inc.;

undeveloped reserves” are those reserves expected to be recovered from known accumulations where a significant expenditure (e.g., when compared to the cost of drilling a well) is required to render them capable of production. They must fully meet the requirements of the reserves classification (proved, probable, possible) to which they are assigned. In multi-well pools, it may be appropriate to allocate total pool reserves between the developed and undeveloped categories or to sub-divide the developed reserves for the pool between developed producing and developed non-producing. This allocation should be based on the estimator’s assessment as to the reserves that will be recovered from specific wells, facilities and completion intervals in the pool and their respective development and production status;

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unproved property” means a property or part of a property to which no reserves have been specifically attributed; and

well abandonment costs” means costs of abandoning a well (net of salvage value) and of disconnecting the well from the surface gathering system. They do not include costs of abandoning the gathering system or reclaiming the wellsite;

W. Washington” means W. Washington Empreendimentos E. Participações Ltda., the Corporation’s Brazilian joint venture partner in certain lands; and

Working Interest” means the net interest held in an oil and natural gas property which normally bears its proportionate share of the costs of exploration, development and operations as well as any royalties or other production burdens.

ABBREVIATIONS AND CONVERSION

In this Annual Information Form, the following abbreviations and terms have the meanings set forth below:

Oil and Natural Gas Liquids

Natural Gas

BBL

barrel

MCF

thousand cubic feet

BBLS

barrels

MMCF

million cubic feet

MBBLS

thousand barrels

MCF/D

thousand cubic feet per day

MMBBLS

million barrels

MMCF/D

million cubic feet per day

MSTB

1,000 stock tank barrels

MMBTU

million British Thermal Units

BBLS/D

barrels per day

BCF

billion cubic feet

BOPD

barrels of oil per day

GJ

gigajoule

NGLs

natural gas liquids

STB

standard tank barrels

Other

API

American Petroleum Institute

°API

an indication of the specific gravity of crude oil measured on the API gravity scale. Liquid

BOE

petroleum with a specified gravity of 28° API or higher is generally referred to as light crude oil. barrel of oil equivalent on the basis of 1 BOE to 6 Mcf of natural gas. BOEs may be misleading,

BOE/D

particularly if used in isolation. A BOE conversion ratio of 1 BOE for 6 Mcf is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. barrels of oil equivalent per day

m 3

cubic metres

MBOE

1,000 barrels of oil equivalent

McfGE 1,000 cubic feet of gas equivalent on the basis of 6 McfGEs to 1 bbl of crude oil. McfGEs may be misleading, particularly if used in isolation. A McfGE conversion ratio of 6 McfGEs to 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

1,000 cubic feet equivalent per day 1,000 McfGE Probable reserves Possible reserves thousands of dollars West Texas Intermediate, the reference price paid in U.S. dollars at Cushing, Oklahoma for crude oil of standard grade

McfGE/D MmcfGE Prob Poss $000s or M$ WTI

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METRIC CONVERSION TABLE

The following table sets forth certain factors for converting metric measurements into imperial equivalents.

To convert from

To imperial units

Multiply by

Boe

Mcf

6

Mcf

Cubic metres (“m 3 ”)

28.174

Cubic metres

Cubic feet

35.494

Bbls

Cubic metres (“m 3 ”)

0.159

Cubic metres (“m 3 ”)

Bbls

6.290

Feet

Metres

0.305

Metres

Feet

3.281

Miles

Kilometres (“km”)

1.609

Kilometres (“km”)

Miles

0.621

Acres

Hectares

0.405

INFORMATION

The information in this Annual Information Form is stated as at June 30, 2009, unless otherwise indicated. For an explanation of the capitalized terms and expression and certain defined terms, please refer to the “Glossary” and “Abbreviation and Conversion” sections at the beginning of this Annual Information Form. Except as otherwise indicated, all dollar amounts in this Annual Information Form are expressed in Canadian dollars and references to $ are to Canadian dollars.

Colombian (Rancho Hermoso and Entrerrios) estimated future net revenue based on the Ryder Scott Report is presented in U.S. dollars effective June 30, 2009. Colombian (Capella) estimated future net revenue based on the Netherland Sewell Report is presented in U.S. dollars effective date June 30, 2009. Brazil estimated future net revenue based on the DeGolyer Report is presented in U.S. dollars effective June 30, 2009.

FORWARD LOOKING STATEMENTS

Certain statements contained in this Annual Information Form may constitute forward-looking statements. These statements relate to future events or the Corporation’s future performance. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as “seek”, “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe” and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Corporation believes that the expectations reflected in those forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this Annual Information Form should not be unduly relied upon by investors. These statements speak only as of the date of this Annual Information Form and are expressly qualified, in their entirety, by this cautionary statement.

In particular, this Annual Information Form contains forward-looking statements, pertaining to the following:

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projections of market prices and costs;

supply and demand for oil and natural gas;

the quantity of reserves;

oil and natural gas production levels;

capital expenditure programs;

treatment under governmental regulatory and taxation regimes; and

expectations regarding the Corporation’s ability to raise capital and to continually add to reserves through acquisitions and development.

With respect to forward-looking statements contained in this Annual Information Form, the Corporation has made assumptions regarding, among other things:

the Colombian, Brazilian and Guyanese legislative and regulatory environment;

the impact of increasing competition; and

the Corporation’s ability to obtain additional financing on satisfactory terms.

The Corporation’s actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk factors set forth below and elsewhere in this Annual Information Form:

volatility in the market prices for oil and natural gas;

uncertainties associated with estimating reserves;

geological, technical, drilling and processing problems;

liabilities and risks, including environmental liabilities and risks, inherent in oil and natural gas operations;

incorrect assessments of the value of acquisitions;

competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel; and

the other factors referred to under “Risk Factors”.

The forward-looking statements or information contained in this Annual Information Form are made as of the date hereof and the Corporation undertakes no obligation to update or revise any forward looking statements, whether as a result of new information, future events or otherwise, unless required by applicable securities laws.

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NAME AND INCORPORATION

Canacol and its subsidiaries are primarily engaged in petroleum and natural gas exploration and development activities in Colombia, Brazil and Guyana. Canacol, through its predecessor companies, was originally incorporated on July 20, 1970 under the British Columbia Company Act, under the name “New Claymore Resources Ltd.”. On November 18, 2004, New Claymore Resources Ltd. changed its name to “BrazAlta Resources Corp.” and continued under the ABCA on November 24, 2004. On February 12, 2009, the Corporation changed its name to “Canacol Energy Ltd.”

The Corporation’s head office is located at Suite 620, 304 - 8th Avenue S.W., Calgary, Alberta T2P 1C2. The Corporation has material branch offices in Bogota, Colombia at Calle 100 No. 8ª-55 Torre C Oficina 309 (W.T.C) and in Rio de Janeiro Brazil at Rua da Assembleia 66 - 17 Andar. The registered office of the Corporation is located at 1000, 250 - 2nd Street S.W., Calgary, Alberta T2P 0C1.

The Corporation is a reporting issuer in the Provinces of Alberta and British Columbia. The Common Shares are listed and posted for trading on the TSXV under the trading symbol “CNE”.

INTERCORPORATE RELATIONSHIPS

The following chart sets forth the Corporation’s relationship with each wholly-owned and controlled subsidiary and their respective jurisdictions of incorporation.

CANACOL ENERGY LTD. (Alberta) Canacol Energy Brazalta Brasil Canacol Energy Canacol Energy (USA) Ltd. Sul
CANACOL ENERGY LTD.
(Alberta)
Canacol Energy
Brazalta Brasil
Canacol Energy
Canacol Energy
(USA) Ltd.
Sul
Inc.
(Guyana) Inc.
(Texas)
Brazalta Brasil Norte
Commercialiazcao
De Petroleo Ltda.
(Brazil)
(Brazil)
(Alberta)
(Guyana)
(inactive)
100% owned by
Canacol
100% owned by
Canacol
100% owned by
Canacol
100% owned by
Canacol
100% owned by
Canacol
Hemotron
Canacol Andina
Canacol Energy
Investements S.A.
Inc.
(Panama) Inc.
International
(Panama)
(Panama)
(BVI)
(inactive)
100% owned by
Canacol
100% owned by
Canacol
100% owned by
Canacol
Rancho Hermoso
S.A.
(Colombia)
94.95% owned by
Hemotron
5.05% owned by
Canacol Energy Inc.

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Canacol Energy Inc. (“Canacol Energy”) was incorporated on January 25, 2008 and amalgamated with 1415386 Alberta Ltd. on October 30, 2008 under the ABCA to continue as Canacol Energy Inc. The registered office of Canacol Energy is located at 1000, 250 - 2 nd Street S.W., Calgary, Alberta T2P 0C1.

The Corporation performs oil and gas exploration and development activities in Brazil primarily through BrazAlta Brasil Norte Commercializacao do Petroleo Ltda. (“BrazAlta Norte”). BrazAlta Norte was incorporated on October 24, 2005 in Brazil with its registered office at Praca Prof. Jose Lannes nº40 CJ 61 – Edificio Berrini 500, Sao Paulo, SP, Brazil 04571-100.

BrazAlta Brasil Sul Ltda. is an inactive corporation which was incorporated on October 24, 2005 in Brazil with its registered office at Praca Prof. Jose Lannes nº40 CJ 61 – Edificio Berrini 500, Sao Paulo, SP, Brazil 04571-100.

The Corporation also performs oil and gas exploration and development activities in Colombia primarily through Rancho Hermoso S.A (“RHSA”), Hemotron Investments S.A. International (“Hemotron”) and Canacol Energy (Panama) Inc. (“Canacol Panama”).

RHSA was incorporated on December 7, 2001 in Colombia with its registered office at Calle 100, nº 8A-55 - Torre C, suite 601, Bogota D.C., Colombia.

Hemotron was incorporated on June 14, 2006 in the British Virgin Islands with its registered office at P.O. Box 3152, Road Town, Tortola, British Virgin Islands.

Canacol Panama was incorporated on September 4, 2007 in Republica de Panama, Panama with a registered office at Edificio Plaza Obarrio, Oficina 308, Panama City, Panama.

Canacol Andina Inc. is an inactive corporation which was incorporated on May 21, 2008 in Republica de Panama, Panama with a registered office at Edificio Plaza Obarrio, Oficina 308, Panama City, Panama.

The Corporation also performs oil and gas exploration and development activities in Guyana primarily through Canacol Energy (Guyana) Inc. (“Canacol Guyana”). Canacol Guyana was incorporated as a limited-liability company on January 24, 2005 under the Companies Act, 1991 (Guyana), under the name “Groundstar Resources Inc.” Canacol Guyana changed it name from Groundstar Resources Inc. to “Canacol Energy (Guyana) Inc.” on October 23, 2009 and has a registered office at 62 Hadfield & Cross Sts., Werk-en-rust, Georgetown, Guyana, South America.

GENERAL DEVELOPMENT OF THE BUSINESS

Three Year History

Canacol is a resource corporation engaged in the acquisition, exploration and development of oil and natural gas in Colombia, Brazil and Guyana. The Corporation is headquartered in Calgary, Alberta, Canada. The following describes the development of Canacol’s business and major transactions and events of the last three completed financial years, and activities that have or are expected to occur in the current financial year.

Period From July 1, 2006 to June 30, 2007

During this period the Corporation’s focus was on activities in Brazil.

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On May 16, 2006, the Corporation completed the acquisition of a drilling rig with a 2,000 metre plus depth capability for use in Brazil.

In November 2006, as part of the Round 8 land auctions, the ANP awarded the Corporation two onshore blocks, W.Washington, the Corporation’s Brazilian joint venture partner, one onshore block and Brownstone Ventures Inc. (“Brownstone”) two onshore blocks. Each block represents approximately 180 km 2 and are known as Blocks 131, 132, 161, 172 and 177 in the Tucano Basin area of Central Eastern Brazil. The Corporation, W.Washington and Brownstone entered into an agreement pursuant to which each party will co-operate on the ownership and development of the combined five blocks awarded in the Round 8 land auctions.

On January 9, 2007, the Corporation repaid a promissory note to W.Washington for $3,209,883 which represented principal plus interest of $29,883. The promissory note was part of the consideration for certain of the Corporation’s assets in Brazil.

On January 9, 2007, the Corporation also completed a private placement of 3,010,000 units for total gross proceeds of $3,160,500 to Oyan Services Corp., a corporation controlled by the shareholders of W.Washington. Each unit issued consists of one Common Share and one-half of one warrant, with each whole warrant entitling the holder thereof to acquire one Common Share at $1.20 per share until January 9, 2009.

On January 10, 2007, the Corporation completed an underwritten private placement of 8,334,000 units, at a price of $1.20 per unit for total gross proceeds of $10,000,800. Each unit issued was comprised of one Common Share and one half of one warrant, with each whole warrant entitling the holder thereof to acquire one Common Share at $2.00 per share until July 10, 2008. The private placement was completed by a syndicate of underwriters led by Westwind Partners Inc. and including FirstEnergy Capital Corp. The Corporation used $7,500,000 of proceeds to purchase a second drilling rig and ancillary equipment with the balance for further development of Brazilian oil and gas assets and general corporate purposes.

On February 23, 2007, the Corporation’s former wholly owned service company, BCH, entered into drilling services contracts with Petróleo Brasileiro S.A. (“Petrobras”) to provide onshore drilling services.

On April 27, 2007, the Corporation entered into four multi-year contracts with Petrobras for the provision of drilling rigs and related services.

Period From July 1, 2007 to June 30, 2008

During the period ended June 30, 2008, BCH secured two additional drilling service contracts with Petrobras bringing the total number of rigs contracted with Petrobras to six and established three new field bases throughout Brazil during 2008 in (i) Mossoró, Rio Grande de Norte, (ii) Aracaju, in Sergipe and (iii) São Mateus, Espirito Santo, complementing its main field office in Catu, Bahia and in-country head office in Rio de Janeiro.

In August 2007, BCH, the former subsidiary of the Corporation, closed a senior secured medium term loan credit facility of US$30,000,000 and completed two draws on the facility totalling US$28,200,000 to fund expanding operations in the Brazilian oilfield services market.

In August 2007, the Corporation as guarantor and W. Washington, its Brazilian joint venture partner, as borrower, jointly closed a reserves based US$50,000,000 revolving line of credit facility (the “Brazil

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Credit Facility”) with a syndicate of lenders led by Standard Bank Plc. (“Standard Bank”). The Corporation issued Standard Bank 3,500,000 warrants to purchase Common Shares at a price of $2.00 per share for a period of five years as part of the Brazil Credit Facility.

On November 28, 2007, the ANP awarded the Corporation three blocks in the on-shore Espírito Santo basin located in Central Eastern Brazil as part of the Round 9 auction. The Espírito Santo blocks acquired in Round 9 are known as Blocks ES-T-318, ES-T-362, and ES-T-380. These exploration blocks cover approximately 30 km 2 each.

In addition, as part of the Round 9 auction, the ANP awarded a consortium led by W. Washington and including the Corporation, Brownstone, and Petro Latina do Brasil Exploração e Produção de Petróleo e Gás Natural Ltda. (“Petro Latina”) two onshore blocks known as REC-T-170 and REC-T-169, covering approximately 28 km 2 each in the Recôncavo area of North Eastern Brazil. The first exploration phase on these blocks is for a three year term.

In December 2007, the Corporation completed a brokered private placement of 9,917,364 Common Shares at a price of $0.55 per share for gross proceeds of $5,454,550. An additional 82,636 Common Shares for gross proceeds of $45,450 were issued on a non-brokered basis to Brazilian based employees of the Corporation, for aggregate gross proceeds of $5,500,000.

On January 31, 2008, BCH issued a US$40,000,000 convertible secured subordinated debenture (the “Allis-Chalmers Debenture”) to Allis-Chalmers Energy Inc. (“Allis-Chalmers”). The Allis-Chalmers Debenture was convertible at any time prior to maturity, at Allis-Chalmers’ option, into common shares of BCH at a conversion price of US$4.163 per BCH common share, equating to approximately 49% of the post-conversion outstanding common shares of BCH.

On January 31, 2008, the Corporation also entered into an agreement with Allis-Chalmers whereby Allis- Chalmers was granted the option to acquire the remaining outstanding shares of BCH from the Corporation on or about maturity of the Allis-Chalmers Debenture, at fair market value, such value to be determined by a mutually agreed upon third party valuator.

In June 2008, the Corporation and W. Washington entered into a participation agreement with Brownstone to earn interests in Test Well Blocks 24, 31, 52, 39, 91, 102 & 113, each in the Reconcavo Basin, Brazil. Brownstone earns a 25% interest in each of the Test Well Blocks by paying 25% of the costs associated with the drilling of each test well.

Operational highlights for the year ended June 30, 2008 included:

The Corporation drilled six (2.5 net) exploration wells in Brazil of which five (2 net) were unsuccessful and abandoned and one (0.5 net) was cased for production and produced under a long-term test and was shut-in.

The Corporation also drilled two successful (1 net) new development wells in Brazil.

Period From July 1, 2008 to June 30, 2009

On August 25, 2008, Canacol entered into a definitive amalgamation agreement for the arm’s length acquisition of all of the issued and outstanding common shares and warrants of a private oil and gas exploration company, Canacol Energy Inc. (the “Canacol Energy Acquisition”). The final agreed aggregate consideration for all of the Canacol Energy common shares and warrants was a total of

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39,999,994 Common Shares. On October 31, 2008, the Canacol Energy Acquisition was successfully completed. Pursuant to the Canacol Energy Acquisition, the Corporation acquired oil exploration, development, and production operations in the countries of Colombia and Guyana. The assets in Colombia included the Rancho Hermoso and Entrerrios oil fields, the Ombu E&P Contract and the La Sierra E&P Contract. In addition to Colombia, the Corporation acquired a 55% non-operated working interest in Guyana under a farmin agreement covering a large onshore exploration contract through participation in the drilling of two exploration wells.

On August 29, 2008, the Corporation, in conjunction with Canacol Energy, closed the acquisition of a private Colombian exploration and production company, RHSA, for gross proceeds of US$28,600,000.

A

debt facility was jointly put in place by Canacol and Canacol Energy in order to finance the acquisition

of

RHSA. Canacol (through a subsidiary) and Canacol Energy jointly borrowed from Standard Bank the

sum of US$25,600,000 as co-borrowers (the “Standard Bank Loan”). The Standard Bank Loan comprised two credit facilities:

(1) a US$50,000,000 three year senior secured borrowing base revolving credit facility with an initial availability of US$14,000,000; and

(2) a US$11,600,000 mezzanine facility.

The security package and terms for the Standard Bank Loan included a lien on the shares of RHSA; a guarantee from each of the Corporation and Canacol Energy; and a hedge of a percentage of RHSA production. In addition, the Corporation issued to Standard Bank warrants to acquire 10,000,000 Common Shares at a price of $0.80 per share for a period of five years (the “Series I Warrants”), and cancelled the 3,500,000 warrants previously issued to Standard Bank as part of a Brazil Credit Facility.

On October 27, 2008, the Corporation’s former wholly owned subsidiary, BCH, completed a non- brokered private placement of 4,474,999 common shares, at a price of US$4.163 per BCH common share for aggregate gross proceeds of US$18,629,421. The Corporation acquired 2,282,249 BCH common shares and Allis-Chalmers acquired 2,192,750 BCH common shares pursuant to the private placement. BCH use the proceeds from the private placement to pay down intercompany debt to the Corporation (US$7,400,000), interest to Allis-Chalmers with respect to the Allis-Chalmers Debenture (US$3,500,000), acquire additional drilling rig equipment, and for general BCH corporate purposes.

On November 10, 2008, the Corporation and Emerald Energy executed an amendment of the Ombu Farmout Agreement. Under the terms of the amendment, Canacol would not enter the second and third phases of the Ombu Farmout Agreement, whereby Canacol would have funded 100% of the cost of the continued appraisal and development program which was to have included 14 additional wells, 61 km of 2D seismic, and 70 km 2 of 3D seismic in consideration for up to 30% Working Interest on the Ombu E&P Contract. As a result, Canacol’s Working Interest in the Ombu E&P Contract is 10%, the interest earned in phase 1 of the Ombu Farmout Agreement, and Canacol will pay its Working Interest share of all future appraisal and development activity on the block.

On December 11, 2008, Canacol closed a transaction with Standard Bank and sold its initial hedge agreement associated with its net oil production in Colombia for net consideration of US$5,000,000. The proceeds from the sale of the initial hedge was used to repay a portion of the US$11,600,000 mezzanine loan due to Standard Bank. A new hedge agreement was simultaneously entered into which involved the same production volumes as the initial hedge, however, the oil collar floor was reduced to US$55.00 per bbl and the cap was reduced to US$80.25 per bbl, which continued through the year end.

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On January 2, 2009, the Corporation completed the sale of BCH to Allis-Chalmers. Under the terms of the transaction, Allis-Chalmers assumed the Corporation’s US$23,500,000 portion of BCH’s outstanding term debt facility with Standard Bank and the Allis-Chalmers Debenture. In addition, Allis-Chalmers paid cash consideration of US$5,000,000 to the Corporation which was applied to the Corporation’s outstanding mezzanine loan facility under the Standard Bank Loan.

On April 17, 2009, Canacol executed a series of agreements with Gemini Oil and Gas Fund II, L.P. (“Gemini”), the Jersey, Channel Island based oil and gas investment fund, whereby Gemini agreed, subject to certain preconditions, to invest up to US$9,000,000 to be used to fund a portion of the Corporation’s development and appraisal programs on its producing assets in Colombia in 2009.

Under the terms the agreements, Gemini agreed to invest:

Up to US$3,000,000 towards the drilling of a development well and the workover of two existing wells in Entrerrios field;

Up to US$3,000,000 towards the drilling of two development wells and the workover of one existing well in Rancho Hermoso field; and

Up to US$3,000,000 towards the drilling of additional delineation wells in the Capella field (Ombu E&P Contract).

In return for the investment, Gemini is entitled to receive payment equivalent to a percentage of Canacol’s gross revenue from production on the fields. Gemini has indicated that at its discretion the total investment may be increased up to maximum of US$12,000,000.

On April 17, 2009, Canacol and W. Washington paid the full amount owing of US$7,100,000 under the Brazil Credit Facility, resulting in the elimination of the Corporation’s debt facility in Brazil. Following this transaction, the Corporation no longer cross guaranteed the debt of W. Washington on the Brazil Credit Facility.

In connection with the repayment of the Brazil Credit Facility, the Corporation increased its debt on the Standard Bank Loan by $3,500,000. As part of this process the Colombia mezzanine facility was repaid in full. The increase in the Standard Bank Loan was accomplished as a result of increased proven reserves in Colombia.

In May 2009, the Corporation completed a brokered private placement of 48,000,000 units, at a price of $0.125 per unit for aggregate gross proceeds of $6,000,000 in two closings. Each unit issued was comprised of one Common Share and one half of one warrant, with each whole warrant entitling the holder thereof to acquire one Common Share at $0.20 per share until May 14, 2011 with respect to the warrants issued pursuant to the first closing of the private placement (the “2009 Series II Warrants”) and May 28, 2011 with respect to the warrants issued pursuant to the second closing of the private placement (the “2009 Series III Warrants”).

On May 15, 2009, Canacol entered into a conditional share purchase agreement to acquire from Groundstar Resources Limited (the “Groundstar Vendor”) all of the shares of Groundstar Resources Inc. (“Groundstar”), a Guyana company which holds entitlement to a 7,800 km 2 Petroleum Prospecting Licence (the “Takutu Block PPL”) in the Takutu Basin, onshore Guyana (the “Groundstar Acquisition”).

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Operational highlights for the year ended June 30, 2009 included six wells being drilled on the Corporation’s Capella field exploration and appraisal drilling program on the Ombu E&P Contract:

Five wells (Capella No. 1, 2, 3, 4, and 5) were tested and flowed heavy oil in the range of 9 to 11° API gravity at individual well rates of up to 345 boe/d under cold flow conditions. Extended production testing of the Capella No. 1, 2, and 3 wells in February yielded stable production rates of 400 bbls/d, with the water cut for the field steadily reducing to a level of approximately six percent.

The Capella No. 6 well was drilled to a total depth of 3,645 feet on March 30, 2009 and penetrated both Mirador formations. The upper Mirador showed 80 feet of thick continuous sandstone reservoir exhibiting up to 37% porosity, while the lower Mirador conglomerate showed 175 feet with production tested at approximately 300 bbls/d.

Subsequent to June 30, 2009

On July 2, 2009, Canacol announced that it had been awarded the Pacarana Technical Evaluation Area in Colombia, immediately adjacent and to the south of the Ombu E&P Contract. Canacol has 100% Working Interest in this block, which is approximately 470,000 hectares in size and is located in the Caguan-Putumayo Basin. The work obligations associated with this block include acquiring 2,240 km of aeromagnetic and gravity data and conducting geotechnical studies over a period of 24 months for an anticipated cost of approximately US$465,000.

On July 7, 2009, Canacol completed the sale of a US$1,000,000 receivable for proceeds of US$910,000 to an arm’s length purchaser. Canacol issued to the purchaser 1,500,000 warrants to acquire one Common Share at $0.30 per share until January 7, 2011.

On July 23, 2009, the Corporation completed a non-brokered private placement of 2,219,048 units, at a price of $0.17 per unit for total gross proceeds of $377,238. Each unit issued was comprised of one Common Share and one half of one warrant, with each whole warrant entitling the holder thereof to acquire one Common Share at $0.30 per share until January 23, 2011.

On August 31, 2009, Canacol announced that it was awarded the Tamarin E&P contract (the “Tamarin E&P Contract”) in Colombia. The Tamarin E&P Contract is located 25 km directly southwest of the Ombu E&P Contract and covers approximately 27,000 hectares and is located in the Putumayo-Caguan Basin. The Tamarin E&P Contract has a six year term and includes the requirement to acquire and interpret 60 km of 2D seismic.

In September 2009, Canacol completed a brokered private placement of convertible unsecured subordinated debentures (the “2009 Debentures”) in the aggregate principal amount of $4,000,000 in two closings. Each 2009 Debenture issued pursuant to the private placement is subject to a coupon interest rate of 12% per annum, payable quarterly in arrears through the issuance of Common Shares at a price equal to a 10% discount to the volume weighted average trading price of the Common Shares for the 10 trading days immediately preceding the quarterly interest payment date or such higher price as any regulatory body shall require. The 2009 Debentures mature on September 4, 2011, and are convertible into Common Shares at the holder's option at a conversion price equal to $0.36 per share. At maturity, Canacol has the option to repay the 2009 Debentures through the issuance of Common Shares at the price equal to 95% of the weighted average price of the Common Shares for the 20 consecutive trading days ending five days before the maturity date.

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On October 15, 2009, the Corporation completed an underwritten private placement of 142,858,000 Common Shares, at a price of $0.28 per share for total gross proceeds of $40,000,240. The private placement was completed by a syndicate of underwriters led by Canaccord Capital Corporation and including FirstEnergy Capital Corp.

On October 23, 2009, the Corporation completed the Groundstar Acquisition in consideration for a cash payment of US$3,450,000. The Groundstar Acquisition provides the Corporation a 90% Working Interest in the Takutu Block PPL in Guyana. The Corporation will carry the Groundstar Vendor’s 10% Working Interest. The Groundstar Vendor will remain operator of the Takutu Block PPL until commercial production. The first exploratory well expected to be spud prior to May 2010. The Corporation was previously committed to spend approximately US$12,000,000 (paying 100% of the costs through this expenditure amount) on the Takutu Block PPL to earn a 55% interest through a farmin agreement with Groundstar Vendor dated May 18, 2008. The farmin agreement was terminated by the completion of the Groundstar Acquisition.

On November 5, 2009, the Corporation completed a farmout agreement with Sagres Energy Inc. (“Sagres”), whereby Sagres acquired a 25% interest in the Takutu Block PPL. On closing, Sagres paid US$1,250,000 to be applied first to 30% of prior direct costs incurred by Canacol, then to 30% of future cash calls to a maximum of US$1,750,000, and 27.5% of cash calls thereafter. Sagres is entitled to 30% of revenues until recovery of its first US$3,000,000 paid to Canacol, 27.5% of revenues until its full cost recovery, and 25% thereafter. Under the terms of the agreement, the Corporation and Sagres will carry the Groundstar Vendor’s 10% remaining Working Interest until first commercial oil production. The Corporation also entered into an agreement with Roraima Energy Ltd. (“Roraima”) to eliminate Roraima’s prior interest in the Takutu Block PPL in exchange for payment by the Corporation of funds equal to the amount previously paid by Roraima. Following the completion of the above transactions, the Corporation’s net Working Interest in the Takutu Block PPL is 65%.

Operational updates subsequent to the year ended June 30, 2009 include:

The Corporation commenced drilling operations on the Rancho Hermoso 3A well. The well encountered 24 feet of net interpreted oil pay within the Mirador reservoir, which was perforated from 9,118 to 9,133 feet. Early production testing was completed, yielding production rates of up to 799 bbls of 35° API oil per day from the Mirador reservoir at initial total fluid rates of up to 3,994 bbls of fluid per day.

The Corporation participated in the drilling of two slim-hole test wells in the area around the Capella No. 6 well, the drilling of the first horizontal well in the field, and the commencement of a cyclic steam injection pilot on one of the existing vertical producing wells. Both slim hole test wells were abandoned due to mechanical problems experienced at shallow depths prior to penetrating the producing reservoir intervals. Emerald Energy and the Corporation have decided not to attempt another slim hole until the contractor has prepared a revised drilling program for the wells that will ensure mechanical and operational success. As the contract was awarded to the vendor on a turnkey success basis, no costs were incurred related to this program.

Significant Acquisitions and Dispositions

During the fiscal year ended June 30, 2009, the Corporation did not complete any significant acquisitions as defined in National Instrument 51-102 — Continuous Disclosure Obligations (“NI 51-102”). The Corporation did, however, sell its remaining interest in BCH and complete the Canacol Energy

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Acquisition. See “General Development of the Business - Three Year History”. The Corporation did not file a Form 51-102F4 in relation to the Canacol Energy Acquisition.

DESCRIPTION OF THE BUSINESS AND OPERATIONS

General

Canacol is an international oil and gas company involved in the production, development, appraisal and exploration of hydrocarbons. The Corporation’s key interests are in Colombia and Brazil, with further interests in Guyana. The Corporation’s asset portfolio encompasses production, development, appraisal and exploration properties.

Exploration and Development Strategy

The near-term business plan of the Corporation is to continue growing its production and reserves base through a combination of exploration, property development and acquisitions. To accomplish this, Canacol continues to pursue an integrated growth strategy including exploration and development drilling focused in Colombia, Brazil and Guyana, acquisitions, farmin opportunities, farmout opportunities, further land acquisitions and trades.

Additionally, potential asset and/or corporate acquisitions will be considered to further supplement the growth strategy of the Corporation. It is anticipated that any future acquisitions would be financed through a combination of cash flow and additional equity and/or debt. The Corporation will seek out, analyze and complete asset and/or corporate acquisitions where value creation opportunities have been identified that have the potential to increase Shareholder value and returns, taking into account the Corporation’s financial position, taxability and access to debt and equity financing.

Management of the Corporation has industry experience in several producing areas in addition to the Corporation’s geographic areas of interest and has the capability to expand the scope of the Corporation’s activities as opportunities arise.

The Corporation is largely opportunity driven and will focus its expenditures in areas that provide the greatest economic return to the Corporation, recognizing that all drilling involves substantial risk and that a high degree of competition exists for prospects. No assurance can be given that drilling will prove successful in establishing commercially recoverable reserves. See “Risk Factors”.

Competitive Conditions

Companies involved in the petroleum industry must manage many risks which are beyond their direct control. Among these risks are risks associated with exploration, environment, commodity prices, foreign exchange and interest rates.

The oil and natural gas industry is intensely competitive and the Corporation competes with a substantial number of other companies, many of whom have greater financial resources. Many of such companies not only explore for and produce oil and natural gas, but also carry on refining operations and market petroleum and other products on a world-wide basis. There is also competition between the petroleum industry and other industries supplying energy and fuel to industrial, commercial and individual customers. There is no assurance that the Corporation will be able to successfully compete against its competitors. See also “Risk Factors”.

Cyclical Nature of Business

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The Corporation’s business is generally not cyclical. The exploration and development of oil and natural gas reserves is dependent on access to areas where production is to be conducted. Seasonal weather variation, including rainy seasons, affects access in certain circumstances. See also “Risk Factors”.

Specialized Skill and Knowledge

Operations in the oil and natural gas industry mean that Canacol requires professionals with skills and knowledge in diverse fields of expertise. In the course of its exploration, development and production, the Corporation utilizes the expertise of geophysicists, geologists, petroleum engineers and landmen. The Corporation faces the challenge of attracting and retaining sufficient employees to meet its needs. See also “Risk Factors”.

Employees

As at June 30, 2009, the Corporation had approximately 40 full-time equivalent employees worldwide, of which 22 full-time employees are working in the exploration and production segment. In addition, the Corporation utilizes, as required from time to time, the services of professionals on contract or consulting basis.

Environmental Protection and Policies

The Corporation and others in the oil and gas industry are subject to various federal, provincial and local environmental laws and regulations enacted in most jurisdictions in which it operates, which primarily govern the manufacture, processing, importation, transportation, handling and disposal of certain materials used in its operations. The Corporation adheres to all such laws and regulations. While regulatory developments that may follow in subsequent years could have the effect of reducing industry activity, we cannot predict the nature of the restrictions that will be imposed. The Corporation may be required to increase operating expenses or capital expenditures in order to comply with any new restrictions or regulations. See also “Risk Factors”.

Historically, environmental protection requirements have not had a significant financial or operational effect on the Corporation’s capital expenditures, earnings or competitive position. Environmental requirements have not had a significant effect on such matters in fiscal 2009 nor are they currently anticipated to in the future.

The Corporation has incorporated certain health, safety and environmental policies and procedures aimed at protecting the safety of the personnel and reducing the environmental impact of its operations.

Foreign Operations

The Corporation’s oil and gas operations and assets are located in foreign jurisdictions. As a result, the Corporation is subject to political, economic and other uncertainties, including but not limited to changes, sometimes frequent, in energy policies or the personnel administering them, nationalization, expropriation of property without fair compensation, cancellation or modification of contract rights, foreign exchange restrictions, currency fluctuations, royalty and tax increases, and other risks arising out of foreign governmental sovereignty over the areas in which the Corporation’s operations are conducted, as well as risks of loss due to civil strife, acts of war, guerrilla activities and insurrections. Changes in legislation may affect the Corporation’s oil and natural gas exploration and production activities. The

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Corporation’s international operations may also be adversely affected by laws and policies of Canada as they pertain to foreign trade, taxation and investment. See also “Risk Factors”.

Principal Properties and Operations

The following is a description of the Corporation’s principal oil and gas properties and operations as at June 30, 2009.

Colombia

Rancho Hermoso and Entrerrios Fields

The Corporation’s operations are primarily engaged in exploration, development and production of oil in Colombia though its two operated producing fields, Rancho Hermoso (100% Working Interest) and Entrerrios (60% Working Interest), located on the Llanos Basin.

The Corporation operates the Rancho Hermoso and Entrerrios fields. Rancho Hermoso is operated under a risk service contract with Ecopetrol whereby the Corporation, through RHS, receives an operating tariff per gross produced bbl of oil from Ecopetrol. The Corporation also receives reimbursement for transportation costs. The Entrerrios field is operated under a participation contract.

Gross production from the Rancho Hermoso and Entrerrios fields is approximately 2,800 bbls/d. The Corporation’s net production is 1,700 bbls/d, comprised of 350 bbls/d net of government royalties and 1,350 bbls/d of tariff production. The majority of the net oil production is currently hedged at a floor of US$55.00 per bbl and a ceiling of US$80.25 per bbl until late 2011. The average tariff price for 2009 is approximately US$9.63 per gross bbl, and is insensitive to WTI oil price fluctuation. Under the existing agreement with Ecopetrol the tariff will increase through a series of steps each year to approximately US$17.36 per gross bbl in 2012 for the duration of life of the field. The average tariff price for 2010 will be approximately US$12.04 per bbl.

Subsequent to the year ended June 30, 2009, the Corporation commenced a three well development program on the Rancho Hermoso and Entrerrios fields and intends to workover three existing oil producing wells in the fields by the end of December 2009.

Ombu E&P Contract – Capella Conventional Heavy Oil Discovery

Pursuant to the Ombu Farmout Agreement, Canacol earned a 10% Working Interest in the Ombu E&P Contract by paying 100% of all activities associated with the drilling, completion, and testing of the Capella No. 1 well. The Capella conventional heavy oil discovery is operated by Emerald Energy on the Ombu E&P Contract in the Caguan Putumayo Basin in Colombia.

The Caguan Basin comprises more than 100,000 km 2 and is located in South East Colombia where it shares the border with Ecuador and Peru. The Caguan Basin is considered to be the northern extension of and contiguous with the Putamayo Basin. The Capella field, which is currently being delineated, is a large seismically defined field and is equivalent to the Mirador Formation common in the Llanos Basin to the north.

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Six wells have been drilled to date on the Capella field:

The Capella No.1 exploration well was drilled to a total depth of 3,802 feet, discovered oil of approximately 10° API gravity in two intervals in the target Eocene aged Mirador formation, and was flow tested at a combined oil rate of 240 bbls/d.

The Capella No.2 well, located approximately 1.3 km southwest of Capella No.1, was drilled to a total depth of 3,550 feet, also encountered oil in two intervals in the Mirador reservoir, and was flow tested at a combined oil rate of 345 bbls/d.

The Capella No.3, the first deviated well drilled in the block, was drilled from a surface location adjacent to the Capella No.1 and penetrated the reservoir approximately 340 metres away. The lower Mirador reservoir was flow tested at a rate of approximately 135 bbls/d with a water cut of approximately 8%. The upper Mirador reservoir was encountered with similar thickness and petrophysical properties as in the previous wells but was not flow tested.

The Capella No.4 vertical well was drilled approximately 1.6 km to the southwest of the Capella No.1 location and both of the Mirador reservoir intervals were encountered with the upper interval in this well being thinner than in previous wells. However, poor cementing within the well bore, resulted in neither of the Mirador intervals being effectively flow tested.

The Capella No.5 well, located some 3.4 km to the northeast of Capella No.1, also encountered both Mirador reservoirs. The lower Mirador reservoir was flow tested at an average rate of approximately 82 bbls/d with a water cut of approximately 52% and the upper Mirador reservoir was flow tested at an average rate of approximately 26 bbls/d with a water cut of approximately

4%.

The Capella No.6 well, located 4.2 km to the southwest of Capella No.1, was drilled to a total depth of 3,645 feet and penetrated both Mirador formations.

Emerald Energy plans to drill one additional horizontal well, Capella No. 7, in 2009 and to complete extended production testing of all the wells as part of the appraisal of the southern part of the Capella structure.

The intervals flow tested to date in the first five wells drilled have flowed heavy oil in the range of approximately 9° to 11° API gravity. Extended production testing of Capella wells commenced in February 2009 with an average daily production rate of approximately 400 bbls/d, comprising of contributions from the Capella No.1 and Capella No.2 wells, and with the water cut for the field steadily reducing to a level of approximately 6%.

The Capella oil has, to date, been sold directly to industrial end users within Colombia but it is expected that, during commercial development, the Capella oil will be delivered to existing pipelines following blending or upgrading.

Subsequent to the year ended June 30, 2009, the Corporation was awarded the Pacarana Technical Evaluation Area (100% Working Interest), which is approximately 470,000 hectares in size and is located immediately adjacent and to the south of the Ombu E&P Contract. The Corporation was also awarded the Tamarin E&P Contract, which is approximately 27,000 hectares is size and is located 25 km directly southwest of the Ombu E&P Contract. See “General Development of the Business — Three Year History”.

La Sierra E&P Contract

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The Corporation also operates the La Sierra E&P Contract (51% Working Interest) located in the Middle Magdalena Basin, awarded by the ANH in 2007. The Upper Magdalena Basin is classified as a Neocene- aged, intermontagne basin located on the upper reach of the Magdalena River between the Central and Eastern Cordillera of central Colombia. The contract contains the La Sierra 1 oil discovery, which was drilled in 1992 and recovered 23 bbls of 17° API oil from 10 feet of net pay in the Tertiary Honda Formation at 1,400 feet measured depth.

The Corporation acquired 33 km of 2D seismic on the La Sierra E&P Contract in Q3, 2008 and completed the acquisition of a 46 km 2 3D seismic program subsequent to the year ended June 30, 2009 at a net cost of US$1,100,000. It is intended that the results of this program will be used to drill an offset to the La Sierra 1 discovery well in early 2010. The exploration well will target the Tertiary Honda reservoir in close proximity to the existing La Sierra 1 well. The well may be production tested with a progressive cavity pump to improve deliverability from the reservoir, with possible follow up using cyclic steam injection to increase recovery.

Brazil

In addition to the operations in Colombia, the Corporation is also engaged in the exploration, development and production of oil and gas in the prolific Reconcavo, Espírito Santo and Tucano Basins of Brazil. The Corporation has interests in four producing fields in Reconcavo Basin, Brazil, operated by its joint venture partner W. Washington.

During 2007, the ANP approved the assignment to Canacol of a 47.5% Working Interest in all W. Washington’s concession contracts including the development blocks (four blocks) acquired by W. Washington in Round 0; and its exploration blocks (14 blocks) acquired in Round 6 and Round 7. The ANP also approved the assignment to W. Washington of a 52.5% Working Interest in all Canacol’s Round 7 concession contracts (17 blocks), thus formalizing the completion of the Corporation’s joint venture with W. Washington to hold, explore, develop and produce hydrocarbons in Brazil.

Recôncavo Basin, Brazil

As part of the Round 9 auction in 2007, the ANP awarded a consortium led by W. Washington and including the Corporation, Brownstone, and Petro Latina two onshore blocks known as REC-T-170 and REC-T-169, covering approximately 28 km 2 each in the Recôncavo area of North Eastern Brazil. The Recôncavo Basin is located in northeastern Brazil, in the state of Bahia, and occupies an area of 11,500 km 2 . The first exploration phase on these blocks is for a three year term.

Espirito Santo Basin, Brazil

As part of the Round 9 auction, the ANP awarded the Corporation three blocks in the on-shore Espírito Santo Basin located in Central Eastern Brazil. The Espírito Santo blocks acquired by the Corporation are known as Blocks ES-T-318, ES-T-362, and ES-T-380. These exploration blocks cover approximately 30 km 2 each.

The Espirito Santo Basin is a Cretaceous rift basin located in Bahia east-central Brazil. The basin extends into the near offshore Atlantic where it is contiguous with the offshore part of the Campos Basin. It comprises more than 100,000 km 2 ; roughly 20% of that is represented onshore. Oil production for the

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Espirito Santo Basin in 2008 averaged 67,000 bbls/d and 253 MMcf/d. Petrobras holds all rights to this production.

Tucano Basin, Brazil

As part of the Round 8 land auctions, the ANP awarded the Corporation two onshore blocks, W. Washington, the Corporation’s Brazilian joint venture partner, one onshore block and Brownstone two onshore blocks. Each block represents approximately 180 km 2 and the blocks are known as Blocks 131, 132, 161, 172 and 177 in the Tucano Basin area of Central Eastern Brazil. The Corporation, W. Washington and Brownstone entered into an agreement pursuant to which each party will co-operate on the ownership and development of the combined five blocks awarded in the Round 8 land auctions.

On November 28, 2006, a federal judge in Brasilia issued an injunction suspending the auction after a congresswoman of the governing Workers Party challenged an auction rule that limits the number of bids each company is allowed to place at the auction. During previous Rounds, Brazil’s oil block auctions have been challenged in the courts, with ANP successfully overturning any judicial actions against them. As at November 25, 2009, the court injunction with respect to the Round 8 land auctions has been lifted in the superior court from one of two jurisdictions. Canacol and its partners have no information indicating that they will not retain their successful Round 8 Bid Lands.

The Tucano Basin, also in the state of Bahia, extends north and west of the Recôncavo Basin, and shares the same depositional history and stratigraphy, but to date has proven more gas prone. It is separated from the Recôncavo basin by the Aporá high, where the sedimentary cover thins significantly or disappears entirely.

Guyana

Takutu Basin, Guyana

Subsequent to the year ended June 30, 2009, Canacol acquired a 90% Working Interest in the 7,800 km 2 Takutu Block PPL pursuant to the Groundstar Acquisition. The Takutu Block PPL is located in the Takutu Basin, onshore Guyana adjacent to the border with Brazil and was awarded to the Groundstar Vendor in July 2005. The Takutu Block PPL was recently extend to July 2012 with a commitment to drill one well on the property by May, 2010 and a second well must be drilled by May, 2011.

On November 5, 2009, the Corporation completed a farmout agreement with Sagres, whereby Sagres acquired a 25% interest in the Takutu Block PPL. On closing, Sagres paid US$1,250,000 to be applied first to 30% of prior direct costs incurred by Canacol, then to 30% of future cash calls to a maximum of US$1,750,000, and 27.5% of cash calls thereafter. Sagres is entitled to 30% of revenues until recovery of its first US$3,000,000 paid to Canacol, 27.5% of revenues until its full cost recovery, and 25% thereafter. Under the terms of the farmout agreement, the Corporation and Sagres will carry the Groundstar Vendor’s 10% remaining Working Interest until first commercial oil production. The Corporation also entered into an agreement with Roraima to eliminate Roraima’s prior interest in the Takutu Block PPL in exchange for payment by the Corporation of funds equal to the amount previously paid by Roraima.

Following the completion of the above transactions, the Corporation’s net Working Interest in the Takutu Block PPL is 65%.

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The Takutu block contains the Karanambo discovery made by Home Oil in 1982. The Karanambo 1 well tested 411 bbls/d (42° API) from a sub-salt reservoir during a five-hour drill stem test proving the existence of a light oil hydrocarbon system within this frontier basin. Two other large seismically defined prospects have been identified on the block.

Other

Canada

Operations in Canada are considered to be non-core. Canadian properties at December 31, 2008 were non operated and included five natural gas wells (1.70 net) located in Sylvan Lake, Alberta, and royalty income from six wells in the Lochend area of Alberta. On January 1, 2009, the Corporation completed a sale of the majority of its Canadian petroleum properties for proceeds of $122,000. Following the sale, the Corporation continues to hold interests in some non producing properties and is seeking to dispose of its interest in these remaining properties. The Corporation does not expect to receive any material proceeds from such a future sale.

Ireland

Exploration in Ireland is considered to be non-core and high risk and includes oil and natural gas exploration and the potential for development of salt cavern gas storage. The Corporation is currently reviewing and will likely discontinue future activity in Ireland.

STATEMENT OF RESERVES DATA AND OTHER OIL AND GAS INFORMATION

Date of Statement

This Statement of Reserves Data and Other Oil and Gas Information is dated June 30, 2009 unless indicated otherwise.

Disclosure of Reserves Data

The reserves data set forth herein is based upon evaluations completed by Ryder Scott (Colombia – Rancho Hermoso and Entrerrios), Netherland Sewell (Colombia - Capella), and DeGolyer (Brazil) (collectively, the “Evaluators”). Each of the Ryder Scott Report, the Netherland Sewell Report and the DeGolyer Report (collectively referred to herein as the “Reports”) is dated effective June 30, 2009.

The reserves data contained herein summarizes the oil and heavy oil reserves of the Corporation and the net present values of future net revenue for these reserves using forecast prices and costs. The reserves data complies with the requirements of NI 51-101. Certain additional information not required by NI 51- 101 has been included herein to provide readers with further information regarding our properties.

The Corporation engaged the Evaluators to provide evaluations of proved, probable, and possible reserves. All of the Corporation’s reserves are in Colombia and Brazil. In preparing the Reports, basic information was provided to the Evaluators by the Corporation, which included land data, well information, geological information, reservoir studies, estimates of on-stream dates, contract information, current hydrocarbon product prices, operating cost data, capital budget forecasts, financial data and future operating plans. Other engineering, geological or economic data required to conduct the evaluations and upon which the Reports are based, was obtained from public records, other operators and

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from the Evaluators non-confidential files. The extent and character of ownership and the accuracy of all factual data supplied for the Reports, from all sources, was accepted by the Evaluators as represented.

The tables and information contained herein, show the estimated share of the Corporation’s crude oil and the present value of estimated future net revenue for these reserves, using forecast prices and costs as indicated.

Colombian (Rancho Hermoso and Entrerrios) estimated future net revenue based on the Ryder Scott Report is presented in U.S. dollars effective June 30, 2009.

Colombian (Capella) estimated future net revenue based on the Netherland Sewell Report is presented in U.S. dollars effective date June 30, 2009.

Brazil estimated future net revenue based on the DeGolyer Report is presented in U.S. dollars effective June 30, 2009.

All evaluations and reviews of future net cash flow are stated prior to any provision for interest costs or general and administrative costs and after the deduction of estimated future capital expenditures for wells to which reserves have been assigned and future site restoration and reclamation costs for wells in Brazil and Colombia to which reserves have been assigned. It should not be assumed that the estimated future net cash flow shown below is representative of the fair market value of the Corporation’s properties. There is no assurance that such price and cost assumptions will be attained and variances could be material. The recovery and reserve estimates of crude oil reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil reserves may be greater than or less than the estimates provided herein.

The Report of Management and Directors on Oil and Gas Disclosure (on Form 51-101F3) and the Reports on Reserves Data by Ryder Scott, Netherland Sewell and DeGolyer are included in this Annual Information Form. See attached hereto as Schedules A and B, respectively.

The reserves data contained herein is based on the Evaluators’ respective price forecasts, in each case as of June 30, 2009.

Undeveloped Reserves

The Corporation attributes proved, probable, and possible undeveloped reserves based on accepted engineering and geological practices as defined under NI 51-101. These practices include the determination of reserves based on the presence of commercial test rates from either production tests or drill stem tests, extensions of known accumulations based upon either geological or geophysical information and the optimization of existing fields.

Subject to the success of operations, within the next two years, the Corporation has the following plans regarding the development of proved, probable and possible undeveloped reserves:

The Corporation’s proved undeveloped reserves will be developed through further drilling and completion of wells within these areas. In Q4 2009 and 2010, the Corporation’s planned drilling program consists of two locations at Rancho Hermoso, three locations at Entrerrios and 15 at Capella along with workovers in all areas. The 2010 drilling and completions schedule will focus on these three areas and on any other opportunities arising from the Corporation’s exploration programs.

- 24 -

Probable undeveloped reserves in Brazil and in the Colombian properties are generally assigned adjacent to proved well locations.

Drilling plans are affected by economic considerations including commodity prices and the Corporation’s drilling plan for 2010 is expected to range from 15 to 24 wells in Colombia, Brazil and Guyana depending on the commodity prices.

Undeveloped reserves, like all projects, are subject to competition for capital and consequently may be delayed or accelerated from time to time.

Significant Factors or Uncertainties Affecting Reserves Data

There are numerous uncertainties inherent in estimating quantities of proved reserves, including many factors beyond the control of the Corporation. The reserve data included herein represents estimates only. In general, estimates of economically recoverable oil and natural gas reserves and the associated future net cash flows are based upon a number of variable factors and assumptions, such as historical production from the properties, the assumed effects of regulation by governmental agencies and future operating costs, all of which may vary considerably from actual results. All such estimates are to some degree speculative, and classifications of reserves are only attempts to define the degree of speculation involved. For those reasons, estimates of the economically recoverable oil and natural gas reserves attributable to any particular group of properties, classification of such reserves based on risk of recovery and associated estimates of future net revenues expected, prepared by different engineers or by the same engineers at different times, may vary substantially. The actual production, revenues, taxes and development and operating expenditures of the Corporation with respect to these reserves will vary from such estimates, and such variances could be material.

Estimates with respect to proved reserves that may be developed and produced in the future are often based upon volumetric calculations and upon analogy to similar types of reserves rather than actual production history. Estimates based on these methods are generally less reliable than those based on actual production history. Subsequent evaluation of the same reserves based upon production history will result in variations, which may be substantial, in the estimated reserves.

Consistent with the securities disclosure legislation and policies of Canada, the Corporation has used forecast prices and costs in calculating reserve quantities included herein. Actual future net cash flows also will be affected by other factors such as actual production levels, supply and demand for oil and natural gas, curtailments or increases in consumption by oil and natural gas purchasers, changes in governmental regulation or taxation and the impact of inflation on costs.

All three Evaluators have used the same uninflated and forecasted oil prices and inflation rates in their evaluations.

Unescalated

Escalated

Oil Field

WTI

WTI

Inflation

 

Year

US$/BBL

US$/BBL

%

2009

(6 months)

51.56

1.80

2009

(6 months)

66.00

66.00

-

2010

69.00

70.38

2.00

2011

72.00

74.91

2.00

2012

75.00

79.59

2.00

2013

78.00

84.43

2.00

2014

80.00

88.33

2.00

2015

80.00

90.09

2.00

2016

80.00

91.89

2.00

2017

80.00

93.73

2.00

2018

80.00

95.61

2.00

2019

80.00

97.52

2.00

2020

80.00

99.47

2.00

2020 +

Escalate oil prices at 2.0% per year therafter

- 25 -

The following table sets forth the reconciliation of Canacol’s gross reserves by principal product type using forecast prices and cost estimates at June 30, 2009.

RECONCILIATION OF COMPANY GROSS RESERVES BY PRINCIPAL PRODUCTION TYPE FORECAST PRICES AND COSTS AS OF JUNE 30, 2009

 

Light and Medium Oil

 

Heavy Oil

Gross Proved

Gross Proved

Gross Proved

Gross Proved

Gross Proved

Gross Proved

(mbbl)

plus

plus

(mbbl)

plus

plus

Probable

Probable

Probable

Probable

(mbbl)

plus Possible

(mbbl)

plus Possible

Factors

(mbbl)

(mbbl)

Colombia

Rancho Hermoso and Entrerrios

 

Capella

June 30, 2008 Extensions Technical Revisions Discoveries Acquisitions Dispositions Economic Factors Production

-

-

-

-

-

-

-

-

-

-

-

-

(2)

(287)

(287)

-

-

-

-

-

-

-

-

-

1,584

3,635

3,635

934

2,258

3,781

-

-

-

-

-

-

-

-

-

-

-

-

(76)

 

(76)

(76)

-

-

-

June 30, 2009

1,506

3,272

3,272

934

2,258

3,781

Brazil

June 30, 2008 Extensions Technical Revisions Discoveries Acquisitions Dispositions Economic Factors Production

348

1,335

1,404

-

-

-

-

-

-

-

-

-

(58)

 

(36)

424

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

12

 

(7)

(34)

-

-

-

(89)

(89)

(89)

-

-

-

June 30, 2009

213

1,202

1,705

-

-

-

Corporate Total

June 30, 2008 Extensions Technical Revisions Discoveries Acquisitions Dispositions Economic Factors Production

348

1,335

1,404

-

-

-

-

-

-

-

-

-

(60)

(323)

136

-

-

-

-

-

-

-

-

-

1,584

3,635

3,635

934

2,258

3,781

-

-

-

-

-

-

12

 

(7)

(34)

-

-

-

(165)

(165)

(165)

-

-

-

June 30, 2009

1,719

4,474

4,977

934

2,258

3,781

Notes:

All reserves presented herein represent the Corporation’s and the Corporation’s subsidiaries interest, where applicable. The reserves of the subsidiaries of the Corporation have been consolidated into the Corporation’s accounts.

Table may not add due to rounding.

- 26 -

The following table provide a summary of the Canacol’s net present value of future net revenue at June 30, 2009 using forecast prices and costs.

Table 2.2.2 Total Corporation NI 51-101

SUMMARY OF NET PRESENT VALUE OF FUTURE NET REVENUE FORECAST PRICES AND COSTS AS OF JUNE 30, 2009

   

Net Present Value (NPV) of Future Net Revenue (FNR)

 

Unit Value BFIT Disc.

 

Before Income Taxes - Discounted at (% /yr)

 

After Income Taxes - Discounted at (% /yr)

 

0

5

10

15

20

0

5

10

15

20

@ 10% /Yr (US$/BOE)

RESERVES CATEGORY

(US$ 000's)

(US$ 000's)

(US$ 000's)

(US$ 000's)

(US$ 000's)

(US$ 000's)

(US$ 000's)

(US$ 000's)

(US$ 000's)

(US$ 000's)

Colombia (Capella)

Proved

                     

Developed Producing

(9,738)

(6,962)

(5,189)

(4,010)

(3,196)

(9,738)

(6,962)

(5,189)

(4,010)

(3,196)

(900.87)

Developed Non-Producing

5,524

4,604

3,933

3,425

3,032

5,095

4,201

3,553

3,066

2,691

23.65

Undeveloped

18,871

13,368

9,692

7,164

5,383

13,752

9,346

6,472

4,543

3,217

12.72

Total Proved

14,657

11,010

8,435

6,580

5,219

9,109

6,585

4,835

3,599

2,712

9.03

Probable

26,673

17,099

11,327

7,723

5,401

17,456

10,714

6,743

4,328

2,815

8.55

Total Proved Plus Probable

41,330

28,109

19,762

14,303

10,620

26,565

17,298

11,578

7,927

5,527

8.75

Possible

31,767

15,666

8,028

4,257

2,324

20,788

9,755

4,708

2,320

1,155

5.30

Total Proved + Probable + Possible

73,097

43,775

27,790

18,560

12,944

47,352

27,053

16,286

10,246

6,682

7.36

Colombia (Rancho Hermoso and Entrerrios)

 

Proved

                     

Developed Producing

13,778

12,623

11,573

10,630

9,789

8,956

8,321

7,725

7,178

6,682

9.38

Developed Non-Producing

3,677

3,433

3,203

2,988

2,787

2,391

2,263

2,137

2,017

1,903

11.77

Undeveloped

15,542

12,931

10,807

9,069

7,638

10,432

8,745

7,362

6,220

5,271

-

Total Proved

32,997

28,987

25,583

22,686

20,214

21,779

19,329

17,224

15,415

13,856

16.98

Probable

40,182

32,804

26,892

22,127

18,262

27,473

22,606

18,680

15,496

12,894

20.04

Total Proved Plus Probable

73,179

61,791

52,474

44,813

38,476

49,253

41,934

35,904

30,910

26,750

18.43

Possible

-

-

-

-

-

-

-

-

-

-

-

Total Proved + Probable + Possible

73,179

61,791

52,474

44,813

38,476

49,253

41,934

35,904

30,910

26,750

18.43

Brazil

Proved

                     

Developed Producing

2,572

1,911

1,489

1,205

1,004

2,245

1,655

1,280

1,028

851

9.50

Developed Non-Producing

1,690

1,391

1,159

977

832

1,609

1,324

1,103

929

790

5.91

Undeveloped

-

-

-

-

-

-

-

-

-

-

-

Total Proved

4,262

3,302

2,648

2,182

1,836

3,854

2,979

2,383

1,957

1,641

7.51

Probable

38,957

28,456

21,287

16,202

12,487

36,956

26,933

20,091

15,241

11,700

21.52

Total Proved Plus Probable

43,219

31,758

23,935

18,384

14,323

40,810

29,912

22,474

17,198

13,341

19.91

Possible

23,693

16,474

11,876

8,808

6,676

22,631

15,718

11,314

8,375

6,332

23.61

Total Proved + Probable + Possible

66,912

48,232

35,811

27,192

20,999

63,441

45,630

33,788

25,573

19,673

21.00

Corporate Total

Proved

                     

Developed Producing

6,612

7,572

7,873

7,826

7,597

1,463

3,014

3,816

4,197

4,337

5.64

Developed Non-Producing

10,891

9,428

8,294

7,390

6,652

9,095

7,788

6,793

6,012

5,384

13.07

Undeveloped

34,413

26,299

20,498

16,233

13,021

24,184

18,091

13,833

10,763

8,488

26.90

Total Proved

51,916

43,299

36,666

31,448

27,269

34,742

28,892

24,442

20,971

18,208

13.13

Probable

105,812

78,359

59,506

46,052

36,150

81,885

60,252

45,514

35,064

27,410

16.93

Total Proved Plus Probable

157,727

121,658

96,171

77,500

63,419

116,627

89,145

69,956

56,035

45,618

15.24

Possible

55,460

32,140

19,904

13,065

9,000

43,419

25,473

16,022

10,695

7,487

10.45

Total Proved + Probable + Possible

213,188

153,798

116,075

90,565

72,419

160,046

114,617

85,979

66,730

53,105

14.13

Reference Item 2.1(1) and (2) of Form 51-101F1.

NPV of FNR includes all resource income: Sale of oil reserves; Processing of third party reserves; Other income.

Income Taxes includes all resource income, appropriate income tax calculations and prior tax pools. Note: The numbers in this table may not add exactly due to rounding.

The following table sets forth Canacol’s total future net revenue at June 30, 2009 using forecast prices and costs.

TOTAL FUTURE NET REVENUE (UNDISCOUNTED) FORECAST PRICES AND COSTS AS OF JUNE 30, 2009

           

BT Future

 

AT Future

Operating

Development

Well Aband.

Net Revenue

Net Revenue

Revenue

Royalties

Cost

Costs

Costs

(1)

Income Taxes

(1)

RESERVES CATEGORY

(US$ 000's)

(US$ 000's)

(US$ 000's)

(US$ 000's)

(US$ 000's)

(US$ 000's)

(US$ 000's)

(US$ 000's)

Colombia (Capella)

TOTAL PROVED

54,204

 

- 27,029

7,542

795

18,838

9,729

9,109

TOTAL PROVED + PROBABLE

138,099

 

- 58,444

20,580

2,013

57,062

30,497

26,565

TOTAL PROVED + PROB + POSS

245,438

 

- 98,531

36,953

3,545

106,409

59,056

47,353

Colombia (Rancho Hermoso and Entrerrios)

 

TOTAL PROVED

98,186

69,011

(8,659)

2,640

2,197

32,997

11,218

21,779

TOTAL PROVED + PROBABLE

222,642

149,718

(16,700)

14,594

1,851

73,179

23,926

49,252

TOTAL PROVED + PROB + POSS

222,642

149,718

(16,700)

14,594

1,851

73,179

23,926

49,252

Brazil

 

TOTAL PROVED

14,364

1,014

8,576

170

343

4,261

408

3,853

TOTAL PROVED + PROBABLE

84,825

5,677

25,891

9,513

524

43,220

2,409

40,811

TOTAL PROVED + PROB + POSS

122,219

8,008

34,491

12,234

574

66,912

3,471

63,441

Corporate Total

 

TOTAL PROVED

166,754

70,025

26,946

10,352

3,335

56,096

21,355

34,741

TOTAL PROVED + PROBABLE

445,566

155,395

67,636

44,687

4,388

173,460

56,832

116,628

TOTAL PROVED + PROB + POSS

590,299

157,726

116,322

63,781

5,970

246,500

86,453

160,047

Note: The numbers in this table may not add exactly due to rounding.

The following table sets forth Canacol’s total future net revenue by production group as of June 30, 2009 using forecast prices and costs.

TOTAL FUTURE NET REVENUE BY PRODUCTION GROUP FORECAST PRICES AND COSTS AS OF JUNE 30, 2009

   

BFIT Future Net Revenue Discounted (10% /Yr)(1)

UNIT VALUE

RESERVES CATEGORY

PRODUCTION GROUP

(US$ 000's)

(US$/BBL)

Colombia (Capella)

PROVED

Heavy Oil

8,435

9.03

PROVED + PROBABLE

Heavy Oil

19,762

8.75

PROVED+PROB+POSSIBLE

Heavy Oil

27,790

7.36

Colombia (Rancho Hermoso and Entrerrios)

 

PROVED

Light & Medium Crude Oil

25,583

16.98

PROVED + PROBABLE

Light & Medium Crude Oil

52,474

18.43

PROVED+PROB+POSSIBLE

Light & Medium Crude Oil

52,474

18.43

Brazil

PROVED

Light & Medium Crude Oil

2,648

7.51

PROVED + PROBABLE

Light & Medium Crude Oil

23,935

19.91

PROVED+PROB+POSSIBLE

Light & Medium Crude Oil

35,811

21.00

Corporate Total

PROVED

Light & Medium Crude Oil

28,231

15.19

Heavy Oil

8,435

9.03

PROVED + PROBABLE

Light & Medium Crude Oil

76,409

18.87

Heavy Oil

19,762

8.75

PROVED+PROB+POSSIBLE

Light & Medium Crude Oil

88,285

19.39

Heavy Oil

27,790

7.36

(1)

The unit values are based on net reserve volumes before income tax (BFIT). Reference Item 2.2(3)(c) of Form 51-101F1. Note: The numbers in this table may not add exactly due to rounding.

The following table provides a summary of Canacol’s oil reserves at June 30, 2009 using forecast prices and costs.

Table 2.2.1 - Total Corporation NI 51-101

SUMMARY OF OIL RESERVES FORECAST PRICES AND COSTS AS OF JUNE 30, 2009

   

RESERVES

 

Light & Medium Oil

Heavy Oil

 

Total Oil

Gross (2)

Net (3)

Gross (2)

Net (3)

Gross (2)

Net (3)

RESERVES CATEGORY

(Mbbl)

(Mbbl)

(Mbbl)

(Mbbl)

(bbl)

(bbl)

Colombia

Rancho Hermoso and Entrerrios

Capella

 

Proved Developed Producing Developed Non-Producing Undeveloped

1,234

352

6

5

 

1,240

358

272

102

166

156

438

259

-

-

762

716

762

716

Total Proved

1,506

454

934

878

2,440

1,332

Probable

1,766

635

1,325

1,245

3,090

1,880

Total Proved Plus Probable

3,272

1,090

2,258

2,123

5,530

3,213

Possible

-

-

1,523

1,432

1,523

1,432

Total Proved + Probable + Possible

3,272

1,090

3,781

3,555

7,053

4,645

Brazil

   

Proved Developed Producing Developed Non-Producing Undeveloped

170

158

-

-

 

170

158

43

39

-

-

43

39

-

-

-

-

-

-

Total Proved

213

198

-

-

213

198

Probable

989

924

-

-

989

924

Total Proved Plus Probable

1,202

1,121

-

-

1,202

1,121

Possible

502

471

-

-

502

471

Total Proved + Probable + Possible

1,705

1,592

-

-

1,705

1,592

Corporate Total

   

Proved Developed Producing Developed Non-Producing Undeveloped

1,404

510

6

5

 

1,409

516

315

142

166

156

481

298

-

-

762

716

762

716

Total Proved

1,719

652

934

878

2,653

1,530

Probable

2,755

1,559

1,325

1,245

4,080

2,804

Total Proved Plus Probable

4,474

2,211

2,258

2,123

6,732

4,334

Possible

502

471

1,523

1,432

2,025

1,903

Total Proved + Probable + Possible

4,976

2,682

3,781

3,555

8,758

6,237

(1)

Estimates of Reserves of natural gas include associated and non-associated gas.

 

(2)

"Gross Reserves" are Company's working interest reserves before the deduction of royalties.

 

(3)

"Net Reserves" are Company's working interest reserves after deductions of royalty obligations plus the Company's royalty interests. Note: The numbers in this table may not add exactly due to rounding.

-29-

The following table sets out the volume of the Corporation’s proved undeveloped and probable undeveloped reserves over the most recent three financial years and the amount of reserves first attributed in each of those years.

UNDEVELOPED RESERVES FORECAST PRICES AND COSTS

 

Light and Medium Oil

Heavy Oil

Gross (mbbl)

Gross (mbbl)

First

Cumulative at year end

First

Cumulative at year end

Reserves Category

Attributed

Attributed

Colombia

Rancho Hermoso and Entrerrios

Capella

Proved Undeveloped Prior to 2007

-

-

-

-

2007

-

-

-

-

2008

-

-

-

-

2009

-

-

762

762

Probable Undeveloped Prior to 2007

-

-

-

-

2007

-

-

-

-

2008

-

-

-

-

2009

1,204

1,204

1,325

1,325

Brazil

-

-

-

-

Proved Undeveloped Prior to 2007

90

90

-

-

2007

-

90

-

-

2008

-

-

-

-

2009

-

-

-

-

Probable Undeveloped Prior to 2007

890

890

-

-

2007

-

890

-

-

2008

55

776

-

-

2009

152

544

-

-

Colombia and Brazil

-

-

-

-

Proved Undeveloped Prior to 2007

90

90

-

-

2007

-

90

-

-

2008

-

-

-

-

2009

-

-

762

762

Probable Undeveloped Prior to 2007

890

890

-

-

2007

-

890

-

-

2008

55

776

-

-

2009

1,356

1,748

1,325

1,325

-30-

The following table outlines the forecast for future development costs associated with the Corporation’s assets and properties for the reserves categories noted below, calculated on an undiscounted and a discounted (10%) basis.

TABLE 5.3 - Total Corporation NI 51-101