Canada-based oil and gas company Canacol Energy has begun drilling the Oso Pardo 1 exploration well on the Santa Isabel Exploration and Production (E&P) contract located in the Middle Magdalena Valley of Colombia.

The Oso Pardo 1 well located about 12km west of the earlier drilled Mono Arana 1 discovery encountered oil in both the Tertiary Lisama sandstone and naturally fractured shales of the Cretaceous La LunaFormation.

Canacol is drilling the well to test the oil potential of both the shallow conventional Tertiary Lisama sandstone reservoir and deeper naturally fractured shale and carbonate reservoirs within the La Luna and Simiti oil shales.

Canacol Energy president and CEO Charle Gamba said, "Based upon the recent success of the Mono Arana 1 exploration well drilled late last year with our partners on the adjacent VMM2 contract, we are optimistic of the outcome at Oso Pardo 1 well with respect to the continued de-risking of our approximately 253,000 net acres of prospective shale oil located in the Magdalena Valley of Colombia."

The company has signed an agreement with ConocoPhillips Colombia Ventures, a wholly-owned subsidiary of ConocoPhillips Company for the well.

As per the agreement, Canacol will hold a 30% operated working interest in the deep Cretaceous section of the contract, whileConocoPhillips will own the remaining 70% interest.

Under the agreement, Canacol will retain a 100% contractual interest in the shallow Tertiary section of the Concession Contract.

Subject to approval of the Agencia Nacional de Hidrocarburos the working interests will be formalized.