energy ltd. ESG Report 2020 E N V I R O N M E N T A L • S O C I A L • G O V E R N A N C E CANACOL ENERGY LTD ESG report 2020 2 BOARD OF DIRECTORS IN 20201 ESG report 2020 GRI 102-18 / 102-22 / 102-23 CSA-DJSI 1.1 Corporate governance / DJSI 1.1.2 Non-executive Chairman / Lead Director GRI 102-1 / 102-5 / 102-12 / 102-45 / 102-46 / 102-50 / 102-54 / 103-1 MICHAEL HIBBERD, Chairman, Independent Director • presents information for Canacol Energy Ltd2, summarizing economic, social, environmental, and governance outcomes and milestones. ARIEL MERENSTEIN, • covers the period from January 1, 2020 to December 31, 2020, unless otherwise stated. Independent Director • includes information on Canacol Energy´s operations in Canada and Colombia (clarification is CHARLE GAMBA, made when information is presented separately for the different countries). President, CEO & Director • is our Communication on Progress (CoP) for the United Nations Global Compact. • has been prepared in accordance with the GRI standards: Comprehensive option. DAVID WINTER, Independent Director • is aligned with the following standards: GRI’s Oil & Gas G4 Sector Disclosures, Sustainability Accounting Standards Board (SASB), Carbon Disclosure Project (CDP), Task Force on FRANCISCO DÍAZ, Climate-Related Financial Disclosures (TCFD), Corporate Sustainability Assessment-S&P Independent Director Global, standards suggested by Bloomberg, the United Nations Sustainable Development Goals (SDG) and the World Economic Forum Guide: Measuring Stakeholder Capitalism. GONZALO FERNÁNDEZ-TINOCO, • all monetary amounts are reported in United States dollars unless otherwise stated. The Independent Director average exchange rate used for 2020 was 3,380 COP/USD, for 2019 was 3,280 COP/USD, for 2018 was 3,000 COP/USD, and for 2017 was 2,950 COP/USD. GREGORY D. ELLIOT, Independent Director • Canacol’s largest shareholders are Cavengas Holdings S.R.L with 18.2% of outstanding common shares and Fourth Sail Capital, LP with 16.7%. JUAN ARGENTO, Director Consulting DESARROLLO VISIBLE POINT OF CONTACT FOR Design and Layout FURTHER INFORMATION TYPO DISEÑO GRÁFICO LTDA Canacol Energy Ltd. GRI 102-53 Corporate Headquarters: Suite 2650, 585 – For further information about this 8th Avenue SW, Calgary, Alberta T2P 1G1 Branch in Colombia: Calle 113 No. 7-45, Bogotá, report, please send an e-mail to Torre B, Oficina 1501 [email protected] May 2021 1. The information for the Board of Directors is as of March 2021. Mr. Juan Argento replaced Mr. Oswaldo Cisneros, who passed away at the end of 2020. 2. Canacol Energy Ltd., hereinafter: “Canacol Energy”, “Canacol”, or the “Company” and includes, where the context dictates, its subsidiaries. CANACOL ENERGY LTD ESG report 2020 3 Contents 4 WE ARE THE FUTURE, WE ARE ENERGY 6 CANACOL ENERGY 21 A CLEANER ENERGY FUTURE 43 A TRANSPARENT AND ETHICAL BUSINESS 53 A SAFE AND COMMITTED TEAM 68 A SOCIETY GUIDED BY SUSTAINABLE DEVELOPMENT 84 REPORTING INDEXES 122 INDEPENDENT ASSURANCE STATEMENT BY DELOITTE CANACOL ENERGY LTD ESG report 2020 4 GRI 102-12 / 102-14 / 102-15 During 2020, we met several important milestones for gas production growth in We are The 2020 was a remarkable year that Colombia. We increased 20% on realized has transformed the way businesses are natural gas sales, achieving 172 MMscfd in managing risks and opportunities related to 2020 compared to 143 MMcfd in 2019. Despite the future environmental, social, and governance (ESG) a reduced drilling program which included only matters. Being resilient has never been more sixf o our planned twelve wells due to Covid-19 critical, and companies must step up by offering (and only two of those being exploration wells), we are innovative solutions for the world’s problems the Corporation managed to achieve a 122% and responding efficiently to a more demanding Reserve Replacement Ratio, totaling 637 Bcf of energy context. 2P reserves. The COVID-19 pandemic has been an opportu- We executed several drilling and seismic nity for us to demonstrate our ability to deal with activities, which aim to continue expanding our critical junctures and quickly adapt. We rose to reserve base and de-risking our large resource the challenge and never faltered in our ambition portfolio, comprised of 188 prospects and leads to produce the natural gas needed to improve with an aggregated un-risked mean of 5.7 trillion the quality of life for millions of Colombians in a standard cubic feet of natural gas. safe, efficient, and cost-effective way. Also,e w worked diligently to progress on Despite the challenging circumstances, we different future growth projects such as a continued to operate under the premise of new gas pipeline from our Jobo gas facility to taking care of the health and well-being of our Medellin and developing a completely new gas employees and their families, our contractors, sales channel, by participating in a near-field and the communities in which we operate. 200 MW power generation plant. We generated strong cashflows, maintained a stable dividend, and created value for our For 2021, we are focused on the following oper- multiple stakeholders, with a 16% return on ational objectives: 1) drilling up to 12 explo- capital invested and solid operating margins ration, appraisal, and development wells in a averaging 79%. continuous program targeting a 2P reserves replacement ratio of more than 200%, 2) the acquisition of 655 square kilometres of 3D seis- mic on the VIM-5 and SSJN-7 blocks to expand our CANACOL ENERGY LTD ESG report 2020 5 exploration prospect inventory, 3) the execu- A TRANSPARENT We received 88% satisfaction score in our 2020 A leading example of this commitment is our tion of a definitive agreement to build a new AND ETHICAL BUSINESS work-climate survey. This compares favorably local utility gas distribution project to replace gas pipeline from Jobo to Medellin which will with the regional and Colombian average firewood with a much cleaner, healthier, and increase our gas sales by an additional 100 Strong corporate governance enables scoresf o 72% and 74%, respectively. Our more efficient cooking fuel. This initiative MMscfpd, and 4) continue our commitment to efficiency and transparency. We have adopted recent efforts have been focused on increasing received an award from the Ministry of Mines strengthen our ESG plan. corporate governance best practices, and we diversity and inclusiveness, and currently 34% and Energy and the National Hydrocarbons are promoting respect for human rights while of our workforce are women, including 13% of Agency for its contribution to SDG 13 - This report reflects the progress we have demonstrating ethics and integrity in everything technical areas, 30% of leadership roles, and Climate Action. made creating a long-term vision ESG strategy, we do. 31% of the top management. aligned with our business perspective, external In 2020, we created opportunities through local stakeholders’ expectations, and industry trends. Our commitment to shareholders and investors In 2020 our workforce’s (employees and employment and development by going above Our approach encompasses four priorities, and is to achieve business success while responsi- contractors) Lost Time Injury Frequency Rate and beyond regulatory requirements. Fifty- goals to reach over the next six years. bly fostering sustainable development. was 53% better than target (3.33). With the nine percent of our skilled labour and 100% of COVID-19 pandemic, we quickly adapted to our unskilled labour were hired locally, and we To meet these commitments, the Board of prioritize employees’ health and safety without purchased 93.3% of all goods and services A CLEANER ENERGY FUTURE Directors is actively engaged in integrating the negatively affecting business operations. locally, regionally, and nationally, representing company’s strategy with the corresponding an economic stimulus of $173 million dollars. A clean energy supply is crucial for successful ESG opportunities and risks. In 2020, we We also joined humanitarian aid efforts to help economic and social development. At Canacol, created a Board of Directors’ Committee to A SOCIETY GUIDED BY communities during the pandemic, benefiting we aim to thrive throughout the transition to a oversee the ESG work composed of four SUSTAINABLE DEVELOPMENT approximately 13,000 families. lower carbon economy, by adopting a gas busi- independent members. ness model and establishing a climate change Working together with our neighbouring For the year 2021, we are committed to continu- corporate strategy. We have set short and For the fifth year in a row, we received zero communities is essential to our success. We are ing to create value for all our stakeholders using medium-term commitments to understand and human rights violations and zero corruption committed to promoting and maintaining close an approach that is sustainable, cooperative, reduce our operational carbon emissions. reports. and transparent relationships that facilitate respectful, and transparent. Our corporate best community development and that improve practices buttressed by our alignment with the We reduced our carbon emission intensity and qualityfe o lif in parallel with our growth. We work 2030 Agenda for Sustainable Development and our direct carbon emissions by 25% and 11%, A SAFE AND COMMITTED TEAM hand in hand with communities and authorities the 17 Sustainable Development Goals (SDG) respectively, against 2019 baseline. Further- to identify and implement projects that catalyze as well as our commitment to the Ten Principles more, 88% of the energy generated for the Our team members drive our performance, and growthf o economic and social well-being. We of United Nations Global Compact will guide our Company’s operations comes from self-pro- we are devoted to their well-being and safety. are fully committed to leaving a positive legacy. course for the years and decades to come. We duced natural gas. We have increased the use One of our main priorities is to create diverse are determined to succeed as a business and to of solar energy in our operations 140% com- and inclusive work-environments that foster be recognized as a leader in ESG implementa- pared to the previous year.