Canacol Energy Ltd. Provides Rancho Hermoso Drilling Update

CALGARY, ALBERTA--(Marketwire - March 8, 2012) - Canacol Energy Ltd. ("Canacol" or the "Corporation") CNE CNEC is pleased to provide an update of its development drilling program at its operated Rancho Hermoso Field located in the Llanos Basin of Colombia. The Corporation has completed the drilling, casing, completion, and tie-in of the Rancho Hermoso 15 and 17 ("RH 15" and "RH 17") wells.

The RH 15 well was drilled approximately 1.6 kilometers to the west of the nearest producing well to test the western limit of the oil-bearing reservoirs within the field. The well is currently injecting water at a stable rate of approximately 20,000 barrels per day.

The RH 17 well has been placed on permanent production from the Mirador reservoir at a stabilized gross rate of approximately 5,800 barrels of oil per day. The RH 17 well encountered 158 feet ("ft") of net oil pay within 6 different reservoir intervals, which include from top to bottom, the C7, Mirador, Los Cuervos-Barco, Guadalupe, Gacheta, and Ubaque.

The Corporation spud the Rancho Hermoso 16 well on March 03, 2012 and is targeting production from the Ubaque reservoir.

The Corporation maintains its average 2012 production guidance of between 14,000 and 16,000 bopd net after royalty revenue production. This guidance excludes any production from potential future exploration success.

Rancho Hermoso 15 Well Results

The RH 15 well was planned as an appraisal well along the western margin of the field with the principal objective to probe the down-flank extension of all the productive reservoirs within the field. The distance between the RH 15 and the Rancho Hermoso 1 well is approximately 1,630 meters and between the RH 15 and the Rancho Hermoso 3st well is approximately 2,660 meters. Petrophysical analysis of the open-hole logs indicates a total of 30 ft of net oil pay in 3 reservoirs: 4 ft of net oil pay within the C7 reservoir with an average porosity of 16%, 18 ft of net oil pay within the Mirador reservoir with an average porosity of 22%, and 8 ft of net oil pay in the Los Cuervos-Barco reservoir with an average porosity of 18%.

The RH 15 well has demonstrated the western limit of the field in the C7, Mirador, and Los Cuervos-Barco reservoirs. The Corporation is currently injecting approximately 20,000 barrels of water per day into the well.

Rancho Hermoso 17 Well Results

The RH 17 well was spud on February 12, 2012, and reached a total depth of 10,746 ft md on February 22, 2012 in the Ubaque reservoir. The well was drilled in a record time of 10 days. Good oil and gas shows were encountered in the C7, Mirador, Los Cuervos-Barco, Guadalupe, Gachet,a and Ubaque reservoirs while drilling. Petrophysical analysis of the open-hole logs indicates a total of 158 ft of net oil pay within the well: 4 ft of net oil pay within the C7 reservoir with average porosity of 16%, 20 ft of oil pay in the Mirador reservoir with average porosity of 23%, 20 ft of net oil pay within the Los Cuervos-Barco reservoir with average porosity of 18%, 22 ft of net oil pay within the Guadalupe reservoir with average porosity of 25%, 32 ft of net oil pay within the Gacheta reservoir with an average porosity of 17%, and 60 ft of net oil pay within the Ubaque reservoir with average porosity of 24%.

Rancho Hermoso 17 Production Results

The Corporation completed the RH 17 well in the Mirador reservoir between 9,723 - 40 ft md and equipped the well with an electro-submersible pump. The well has been placed on permanent production at a stable gross rate of approximately 5,800 bopd of 34 degree API oil with 1% water cut at a pump frequency of 63 Hz.

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

Canacol is a Canadian-based international oil and gas corporation with operations focused onshore in Colombia and Ecuador. Canacol is publicly traded on Toronto Stock Exchange CNE and the Bolsa de Valores Colombia CNEC. The Corporation's public filings are available at www.sedar.com.

This press release contains certain forward-looking statements within the meaning of applicable securities law. Forward-looking statements are frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will" occur, including without limitation statements relating to estimated production rates from the Corporation's properties and intended work programs and associated timelines. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. The Corporation cannot assure that actual results will be consistent with these forward-looking statements. They are made as of the date hereof and are subject to change and the Corporation assumes no obligation to revise or update them to reflect new circumstances, except as required by law. Prospective investors should not place undue reliance on forward-looking statements. These factors include the inherent risks involved in the exploration for and development of crude oil and natural gas properties, the uncertainties involved in interpreting drilling results and other geological and geophysical data, fluctuating energy prices, the possibility of cost overruns or unanticipated costs or delays and other uncertainties associated with the oil and gas industry. Other risk factors could include risks associated with negotiating with foreign governments as well as country risk associated with conducting international activities, and other factors, many of which are beyond the control of the Corporation.