<p> <strong><span style="color: rgb(0, 100, 0);"><span style="font-size: 20px;"><font color="#222222">CNE @$3.79  per share only TD Sec says $9 in 2013, so Canacol Energy</font></span></span><span style="color: rgb(255, 0, 0);"><span style="font-size: 20px;"> Buyout of Shona Energy FOR CANACOL ENERGY TD SEC. UPGRADES Canacol energy is now the 5th Largest Reserves in Colombia</span></span><span style="color: rgb(0, 100, 0);"><span style="font-size: 20px;"> </span></span><font face="Times New Roman"><span style="color: rgb(0, 100, 0);">WHEN  I  FIRST  BLOGGED  THESE  CANACOL  ENERGY  STORIES  IT  WAS  $2.62 NOW  $3.79 TODAY </span>TD says Canacol Energy Research report on Canacol Energy (CNE) Canacol announced that its Agueda-1-ST <font size="3"><font size="3">exploration well on the Labrador prospect on the LLA23 block in Colombia's </font></font><font size="3"><font size="3">Llanos Basin has made a light oil discovery that tested 1,832 bbl/d of 28</font></font><font size="3"><font size="3">degree API oil from the Gacheta Formation (with additional potential in the </font></font><font size="3"><font size="3">Ubaque and C7 formations still to be tested). IMPACT IS POSITIVE FOR CANACOL ENERGY (CNE.TO) </font></font><font size="3"><font size="3">Canacol has larger resource potential on other blocks in Latin </font></font><font size="3"><font size="3">America, but we view this well result as likely the most important in its </font></font><font size="3"><font size="3">exploration campaign this year, as it should almost instantly start contributing </font></font><font size="3"><font size="3">high net back production and offset declines from Canacol’s core (and </font></font><font size="3"><font size="3">adjacent) Rancho Hermoso producing field, while supporting follow-up </font></font><font size="3"><font size="3">development drilling locations.</font></font><font size="3"><font size="3">We believe the market had sold off Canacol's shares for multiple reasons,</font></font><font size="3"><font size="3">including technical trading related to Canacol's proposed merger with Shona </font></font><font size="3"><font size="3">Energy (SHO-V, Not Rated). However, we assume that concern around the </font></font><font size="3"><font size="3">company's financial health (if Rancho Hermoso significantly under performs </font></font><font size="3"><font size="3">expectations) was a factor that also contributed to share price weakness. We </font></font><font size="3"><font size="3">believe this discovery should significantly reduce such concerns, as it should </font></font><font size="3"><font size="3">a) contribute near-term revenues, and b) support potential reserve additions </font></font><font size="3"><font size="3">that will help to maintain or grow reserve based lending capacity.</font></font><font size="3"><font size="3">We had already assumed that Canacol's proposed merger with Shona Energy </font></font><font size="3"><font size="3">(SHO-V) would be approved </font></font><font size="3"><font size="3">but our </font></font><font size="3"><font size="3">conviction in that assumption is supported by this news, since we assume this </font></font><font size="3"><font size="3">discovery will make the deal significantly more appealing to Shona </font></font><font size="3"><font size="3">shareholders, from which a 2/3 approval is required in a vote scheduled for </font></font><font size="3"><font size="3">mid-December.</font></font><font size="3"><font size="3">The discovery also supports our view that Canacol management has a track </font></font><font size="3"><font size="3">record of value-creating acquisitions. Recall that the LLA 23 block was </font></font><font size="3"><font size="3">acquired through the acquisition of Carrao Energy (private) in late 2011. We </font></font><font size="3"><font size="3">have long viewed that acquisition as a value-creating deal (albeit dependent </font></font><font size="3"><font size="3">on exploration success going forward). This now makes the third recent </font></font><font size="3"><font size="3">indication that the exploration lands acquired in that deal warranted investment, following positive indications from the Mono Arana-1 well on the VMM 2 block (partnered with Exxon Mobil<font size="3"><font size="3">) announced in late October and encouraging indications from the Achote-1 well on the Portofino </font></font><font size="3"><font size="3">block (partnered with Pacific Rubiales) announced in late September.</font></font><font size="3"><font size="3">Agueda-1-ST was drilled as a sidetrack to the original Agueda-1 well (drilled in 2007) by re-entering and </font></font><font size="3"><font size="3">sidetracking to drill the Labrador prospect. The Labrador prospect was identified on recently acquired 3D </font></font><font size="3"><font size="3">seismic, with potential identified in the C7, Gacheta, and Ubaque formation structurall up dip of the original </font></font><font size="3"><font size="3">Agueda 1 well.</font></font><font size="3"><font size="3">The well encountered 70 feet of potential net oil pay:</font></font><font size="3"><font size="3">10 ft in the C7 Formation with average porosity of 23%;</font></font><font size="3"><font size="3">42 ft in the Lower Gacheta Formation with average porosity of 30%;</font></font><font size="3"><font size="3">18 ft in the Ubaque Formation with average porosity of 26%.</font></font><font size="3"><font size="3">The Lower Gacheta was perforated in 3 separate intervals, and produced at a gross rate of 1,832 bbl/d (1,466</font></font><font size="3"><font size="3">bbl/d net to Canacol) of 28 degree API light oil with 0.6 % water cut, 43 mcf/d of gas and a GOR of 24 scf/bbl </font></font><font size="3"><font size="3">during a 48 hour production test.C</font></font><font size="3"><font size="3">anacol holds an 80% operated working interest in the LLA23 block, immediately adjacent to the Rancho </font></font><font size="3"><font size="3">Hermoso field area (where it operates under a risk service contract with Ecopetrol). As a result of the more </font></font><font size="3"><font size="3">favourable royalty terms on the LLA 23 block, netbacks for any potential developments on LLA23 should be </font></font><font size="3"><font size="3">substantially higher than at Rancho Hermoso. We assume there could be substantial synergies from operating a </font></font><font size="3"><font size="3">development at Agueda-1-ST immediately adjacent to the existing Rancho Hermoso field.Outlook is </font></font><font size="3"><font size="3">Canacol plans to continue production testing of the Lower Gacheta in the short term, with produced oil being </font></font><font size="3"><font size="3">transported to the nearest point of sale. Upon completion of the production test of the Lower Gacheta, Canacol </font></font><font size="3"><font size="3">plans to test the deeper Ubaque reservoir, and the well placed on permanent production from either zone </font></font><font size="3"><font size="3">thereafter. Canacol is formulating plans to drill several development wells into the Labrador discovery. In </font></font><font size="3"><font size="3">addition, five other exploration prospects identified on seismic are being licensed for drilling in 2013.</font></font><font size="3"><font size="3">We have tentatively added an assumption of 1.3 mmbbl of 2P reserves at Agueda-1-ST to our Base NAVPS </font></font><font size="3"><font size="3">estimate. In addition, we have de-risked our total resource assumptions for the LLA 23 block slightly. These </font></font><font size="3"><font size="3">changes have increased our near-term production and cash flow expectations, as well as our NAVPS estimates.</font></font><font size="3"><font size="3">Note, however, that our risked assumption of 7 mmbbl net to Canacol’s 80% working interest in LLA23 </font></font><font size="3"><font size="3">remains below management’s pre-drill estimate for the block of 11 mmbbl..<font face="Times New Roman">Canacol Energy is Partnered in Colombia, with the Best Oil Majors in The World, EXXON MOBIL, SHELL, SINOCHEM (CHINESE OIL ) ECOPETROL, and Pacific Rubiales all Partnered with little .32 cent Canacol. Facts! <span style="font-size: 20px;">TD SEC. SAYS CANACOL GOING TO  $9  in 2013 UPGRADED CNE. SHONA ENERGY BUYOUT GREAT DEAL imo</span></font></font></font></font></font></font></strong><br /> <br />  </p>