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Parex Q1 2019 Results: C$119 Million Returned to Shareholders

CALGARY, Alberta, May 07, 2019 (GLOBE NEWSWIRE) -- Parex Resources Inc. (“Parex” or the “Company”) (TSX:PXT), a company focused on Colombian oil exploration and production, announces its unaudited financial and operating results for the three months ended March 31, 2019 (“First Quarter” or “Q1”). All amounts herein are in United States dollars (“USD”) unless otherwise stated.

Please note Parex will not hold a conference call to discuss First Quarter results.  In lieu, the Company invites stakeholders to attend its Annual General and Special Meeting of Shareholders (“AGM”) on Wednesday, May 8, 2019 beginning at 9:30 am Mountain Time.

2019 First Quarter Highlights: Brent Pricing Exposure Drives Funds Flow From Operations

  • Quarterly production was 51,208 barrels of oil equivalent per day ("boe/d”) (98% crude oil), representing an increase of 4% over the previous quarter ended December 31, 2018 and an increase of 26% over the prior year comparative period;
  • Earned net income of $82.0 million ($0.54 per share basic) compared to net income of $71.5 million ($0.46 per share basic) in the comparative quarter of 2018;
  • Generated an operating netback of $36.17 per boe and funds flow provided by operations ("FFO") netback of $27.65 per boe from an average Brent price of $63.83 per barrel ("bbl");
  • Funds flow provided by operations of $126.6 million ($0.84 (or CAD $1.12)(1) per share basic) a 25% increase as compared to $100.9 million ($0.65 (or CAD $0.82)(1) per share basic) for the prior year comparative period with a 5% decrease in Brent reference pricing year over year;
  • Utilized free cash flow of $74.0 million and cash on hand to purchase 6,207,510 of the Company's common shares for a total cost of $88.6 million (average price of CAD$19.21/share) pursuant to the Company's normal course issuer bid program ("NCIB");
  • Capital expenditures ("Capex") were $52.5 million in the period compared to $58.2 million in the comparative period of 2018. Capital expenditures were funded from FFO. Parex expects to invest approximately $200-230 million in capital projects in 2019;
  • Working capital was $207.4 million at March 31, 2019 compared to $218.5 million at December 31, 2018 and $205.8 million at March 31, 2018. The Company has an undrawn syndicated bank credit facility of $200.0 million; and
  • Participated in drilling 8 gross wells (5.30 net)(2) in Colombia resulting in 8 oil wells, for a success rate of 100%.

(1) Using USD-CAD Bank of Canada 2019 Q1 average rate of 1.3295 and 2018 Q1 average rate of 1.2600
(2) Oil wells: Block Cabrestero:  Akira-12 & Bacano Oeste-1; and Block LLA-34: Aruco-2, Jacana-23, Jacana-31, Tigana Suroeste-10, Tigui-2 & Tua-13.

   Three Months Ended
 March 31,Dec. 31, 
 2019 2018 2018 
Operational   
Average daily production   
Oil & Gas (boe/d)51,208 40,586 49,300 
    
Average daily sales of produced oil & natural gas   
Oil (bbl/d)50,042 39,378 51,420 
Gas (Mcf/d)4,992 3,138 4,446 
  Oil & Gas (boe/d)50,874 39,901 52,161 
    
Oil inventory - end of period (bbls)90,999 164,800 60,977 
    
Operating netback ($/boe)(1)   
Reference price - Brent ($/bbl)63.83 67.27 68.32 
Oil & natural gas revenue (excluding hedging)52.33 55.98 55.42 
Royalties(6.39)(7.29)(7.93)
Net revenue45.94 48.69 47.49 
Production expense(5.71)(5.35)(5.62)
Transportation expense(4.06)(4.24)(3.98)
Operating netback ($/boe)(1)36.17 39.10 37.89 
    
Funds flow provided by operations ($/boe)(1)27.65 28.10 31.39 
    
Financial (USD$000s except per share amounts)  
Oil and natural gas revenue246,594 202,450 270,599 
    
Net income82,014 71,512 54,060 
Per share - basic0.54 0.46 0.35 
    
Funds flow provided by operations(1)126,580 100,901 150,658 
Per share - basic0.84 0.65 0.97 
    
Capital expenditures52,533 58,210 76,758 
    
Total assets1,761,136 1,229,897 1,726,972 
Working capital surplus207,414 205,771 218,526 
Bank debt(2)   
    
Outstanding shares (end of period) (000s)   
Basic149,375 155,647 155,014 
Weighted average basic151,581 155,037 155,403 
Diluted(3)156,176 164,000 161,991 

(1) The table above contains Non-GAAP measures.  See “Non-GAAP Terms” for further discussion.
(2) Borrowing limit of $200.0 million as of March 31, 2019.
(3) Diluted shares as stated include the effects of common shares and in-the-money stock options outstanding at the period-end. The March 31, 2019 closing stock price was Cdn$20.92 per share.

2019 Corporate Guidance

Parex’ guidance for 2019, as previously press released on December 18, 2018, is as follows:

Production (average for period) 52,000-54,000 boe/d
Total Capital Expenditures $200-$230 million
Funds Flow provided by Operations (FFO)At $60/bbl Brent:  $450-$500 million
Free Funds Flow (FFO mid-point less Total Capex mid-point)$260 million

Our current 2019 FFO guidance is $575-$625 million based on the following assumptions:

  • Mid-point annual production average of 53,000 boe/d;
  • Brent oil prices of $65/bbl-$70/bbl; and
  • Brent/Vasconia crude differential less than $3/bbl.

Planned capital expenditures are expected to be fully funded by funds flow provided by operations, with working capital being retained for future opportunities and to buy back outstanding shares.

Operational Update

Production:  We expect Q2 2019 production to average 52,000 boe/d.

Share Repurchases: On December 21, 2018 Parex began a normal course issuer bid with the intent to repurchase for cancellation approximately 15.0 million shares (10% of public float).   As at May 7, 2019 the Company has repurchased 8.7 million shares at an average cost of C$19.61 per share for a total of C$169.7 million under this NCIB. Basic shares outstanding as at April 30, 2019 were 147.9 million compared to 155.0 million as at December 31, 2018. At present, Parex is repurchasing 75,000 shares daily under the Company's automatic share purchase plan.

Block LLA-34 Marketing & Transportation: A flowline from Block LLA-34 to the regional pipeline system has been completed and is expected to commence flowing oil in May 2019.

Parex continues to experience increased pricing for its oil blend.  The Brent/Vasconia crude differential has decreased from $5.26/bbl in Q4 2018, to $3.49/bbl for the first quarter of 2019, and to below $2.75/bbl in the second quarter to date. Vasconia crude is the reference price for a large majority of the Company’s oil sale contracts.

Capachos (WI Parex 50%):  On May 7, 2019 Parex commenced a multi-zone testing program in the Andina Norte-1 exploration well. The first two zones to be tested are in the deep Une Formation and are expected to be completed in 2-3 weeks. Subsequently, the uphole Guadalupe Formation will be tested in two zones after cement remediation work is concluded. The Mirador Formation appears non-hydrocarbon bearing and will not be tested.

The Company intends to provide an operational update following the completion of Une Formation testing program.

Annual General and Special Meeting - May 8, 2019

Parex invites stakeholders to attend its AGM on Wednesday, May 8, 2019 beginning at 9:30 am Mountain Time at the Conference Centre on the 4th floor of Eighth Avenue Place East Tower, 525 - 8th Avenue S.W., Calgary, Alberta T2P 1G1. A live audio webcast of the event will be available via the following link:
http://event.on24.com/wcc/r/1997149-1/9F5A689ED96EEDCD27FF9751A8A97C10

The recording of the AGM as well as the presentation will be made available at www.parexresources.com within hours of the event concluding.

This news release does not constitute an offer to sell securities, nor is it a solicitation of an offer to buy securities, in any jurisdiction.

For more information, please contact:

Mike Kruchten
Senior Vice President, Capital Markets & Corporate Planning
Parex Resources Inc.
Phone: (403) 517-1733
Investor.relations@parexresources.com

NOT FOR DISTRIBUTION OF FOR DISSEMINATION IN THE UNITED STATES

Non-GAAP Terms

The Company discloses several financial measures ("non-GAAP Measures") herein that do not have any standardized meaning prescribed under International Financial Reporting Standards ("IFRS"). These financial measures include operating netback per boe, funds flow from operations or funds flow provided by operations, funds flow from operations per boe, funds flow provided by operations netback, and free funds flow. Management uses these non-GAAP measures for its own performance measurement and to provide shareholders and investors with additional measurements of the Company’s efficiency and its ability to fund a portion of its future capital expenditures.

The Company considers operating netbacks per boe to be a key measure as it demonstrates Parex' profitability relative to current commodity prices. The following is a description of each component of the Company's operating netback per boe and how it is determined

  • Oil and natural gas sales per boe is determined by sales revenue excluding risk management contracts less non-cash oil revenue from overlifted Ocensa pipeline volumes divided by total equivalent sales volume including purchased oil volumes.
  • Royalties per boe is determined by dividing royalty expense by the total equivalent sales volume and excludes purchased oil volumes;
  • Production expense per boe is determined by dividing production expense by total equivalent sales volume and excludes purchased oil volumes; and
  • Transportation expense per boe is determined by dividing transportation expense by the total equivalent sales volumes including purchased oil volumes.

Funds flow provided by operations per boe is a non-GAAP measure that includes all cash generated from operating activities and is calculated before changes in non-cash working capital, divided by produced oil and natural gas sales volumes.

Free funds flow is determined by funds flow provided by operations less capital expenditures.

Shareholders and investors should be cautioned that these measures should not be construed as an alternative to net income or other measures of financial performance as determined in accordance with IFRS. Parex' method of calculating these measures may differ from other companies, and accordingly, they may not be comparable to similar measures used by other companies. Please see the Company's most recent Management’s Discussion and Analysis, which is available at www.sedar.com for additional information about these financial measures and for a reconciliation of the non-GAAP measures.

Oil & Gas Matters Advisory

The term "Boe" means a barrel of oil equivalent on the basis of 6 Mcf of natural gas to 1 bbl of oil. Boe’s may be misleading, particularly if used in isolation. A boe conversation ratio of 6 Mcf: 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. Given the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6 Mcf: 1Bbl, utilizing a conversion ratio at 6 Mcf: 1 Bbl may be misleading as an indication of value.

This press release contains a number of oil and gas metrics, including operating netbacks. These oil and gas metrics have prepared by management and do not have standardized meanings or standard methods of calculation and therefore such measures may not be comparable to similar measures used by other companies and should not be used to make comparisons. Such metrics have been included herein to provide readers with additional measures to evaluate the Company's performance; however, such measures are not reliable indicators of the future performance of the Company and future performance may not compare to the performance in previous periods and therefore such metric should not be unduly relied upon. Management uses these oil and gas metrics for its own performance measurements and to provide security holders with measures to compare the Company's operations over time. Readers are cautioned that the information provided by these metrics, or that can be derived from the metrics presented in this news release, should not be relied upon for investment or other purposes.

Advisory on Forward Looking Statements

Certain information regarding Parex set forth in this document contains forward-looking statements that involve substantial known and unknown risks and uncertainties. The use of any of the words "plan", "expect", “prospective”, "project", "intend", "believe", "should", "anticipate", "estimate", “forecast”, "guidance", “budget” or other similar words, or statements that certain events or conditions "may" or "will" occur are intended to identify forward-looking statements. Such statements represent Parex' internal projections, estimates or beliefs concerning, among other things, future growth, results of operations, production, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, plans for and results of drilling activity, environmental matters, business prospects and opportunities. These statements are only predictions and actual events or results may differ materially. Although the Company’s management believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievement since such expectations are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Many factors could cause Parex' actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, Parex.

In particular, forward-looking statements contained in this document include, but are not limited to, statements with respect to the 2019 capital expenditures, including the Company's plans to fund its 2019 capital program from funds flow from operations and its plans to retain working capital for future opportunities to buy back outstanding shares; the Company's forecasted 2019 funds flow provided by operations based on certain oil prices and the Company's anticipated free funds flow for 2019; the Company's estimated 2019 full year production rate and the expected average production for Q2 2019; and the expected timing of oil flowing from LLA-34 flowline to the regional pipeline system.

These forward-looking statements are subject to numerous risks and uncertainties, including but not limited to, the impact of general economic conditions in Canada and Colombia; volatility in commodity prices; industry conditions including changes in laws and regulations including adoption of new environmental laws and regulations, and changes in how they are interpreted and enforced, in Canada and Colombia; competition; lack of availability of qualified personnel; the results of exploration and development drilling and related activities; obtaining required approvals of regulatory authorities, in Canada and Colombia; risks associated with negotiating with foreign governments as well as country risk associated with conducting international activities; volatility in market prices for oil; fluctuations in foreign exchange or interest rates; environmental risks; changes in income tax laws or changes in tax laws and incentive programs relating to the oil industry; changes to pipeline capacity; ability to access sufficient capital from internal and external sources; risk that Parex' evaluation of its existing portfolio of development and exploration opportunities is not consistent with its expectations; that production test results may not necessarily be indicative of long term performance or of ultimate recovery; failure to reach production targets; and other factors, many of which are beyond the control of the Company. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect Parex' operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).

Although the forward-looking statements contained in this document are based upon assumptions which Management believes to be reasonable, the Company cannot assure investors that actual results will be consistent with these forward-looking statements. With respect to forward-looking statements contained in this document, Parex has made assumptions regarding, among other things: current and anticipated commodity prices and royalty regimes; availability of skilled labour; timing and amount of capital expenditures; future exchange rates; the price of oil, including anticipated Brent oil prices; the impact of increasing competition; conditions in general economic and financial markets; availability of drilling and related equipment; receipt of partner, regulatory and community approvals; royalty rates; future operating costs; effects of regulation by governmental agencies; uninterrupted access to areas of Parex’ operations and infrastructure; recoverability of reserves and future production rates; timing of drilling and completion of wells; on-stream timing of production from successful exploration wells; operational performance of non-operated producing fields; pipeline capacity; that Parex will have sufficient cash flow, debt or equity sources or other financial resources required to fund its capital and operating expenditures and requirements as needed; that Parex' conduct and results of operations will be consistent with its expectations; that Parex will have the ability to develop its oil and gas properties in the manner currently contemplated; current or, where applicable, proposed industry conditions, laws and regulations will continue in effect or as anticipated as described herein; that the estimates of Parex' reserves and production volumes and the assumptions related thereto (including commodity prices and development costs) are accurate in all material respects; that Parex will be able to obtain contract extensions or fulfil the contractual obligations required to retain its rights to explore, develop and exploit any of its undeveloped properties; and other matters.

Management has included the above summary of assumptions and risks related to forward-looking information provided in this document in order to provide shareholders with a more complete perspective on Parex' current and future operations and such information may not be appropriate for other purposes. Parex' actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do, what benefits Parex will derive. These forward-looking statements are made as of the date of this document and Parex disclaims any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.

This press release and, in particular the information in respect of the Company's expected capital expenditures for 2019, may contain future oriented financial information ("FOFI") within the meaning of applicable securities laws. The FOFI has been prepared by management to provide an outlook of the Company's financial results and activities and may not be appropriate for other purposes. The FOFI has been prepared based on a number of assumptions including the assumptions discussed in this press release. The actual results of operations of the Company and the resulting financial results may vary from the amounts set forth herein, and such variations may be material. The Company and management believe that the FOFI has been prepared on a reasonable basis, reflecting management’s best estimates and judgments. FOFI contained in this press release was made as of the date of this press release and Parex disclaims any intent or obligation to update publicly the press release, whether as a result of new information, future events or otherwise, unless required pursuant to applicable law.

Date/Time

Tue, 07 May 2019 21:26 GMT

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