CALGARY, Alberta, Feb. 29, 2024 (GLOBE NEWSWIRE) — Parex Resources Inc. (“Parex” or the “Company”) (TSX:PXT) is pleased to announce its financial and operating results for the three- and twelve-month periods ended December 31, 2023, as well as the results of its independent reserves assessment as at December 31, 2023. Additionally, the Company announces that it has resumed full operations at its Capachos and Arauca Blocks in the Northern Llanos, as well as the declaration of its Q1 2024 regular dividend of C$0.375 per share.
All amounts herein are in United States dollars (“USD”) unless otherwise stated.
“In 2023, we achieved record production, successfully replaced 100% of PDP reserves, and delivered excellent safety performance – thanks to the collective efforts of the Parex team,” commented Imad Mohsen, President & Chief Executive Officer.
“While we encountered some headwinds during the year, we approach 2024 with confidence in base production from our core SOCA assets, optimism about near-term growth and upside potential in Arauca, and continue to be focused on high grading our portfolio and delivering meaningful exploitation and exploration volumes.”
Key Highlights
Generated annual funds flow provided by operations (“FFO”) of $668 million(1) and free funds flow (“FFF”) of $184 million(2) in 2023.
Achieved record production per share, up 12% compared to 2022(6).
Replaced approximately 100% of proved developed producing (“PDP”) reserves and grew PDP reserves per share (on a boe basis) by 5% over 2022(3).
Resumed full operations at Capachos(4) and Arauca(5) on February 25, 2024; FY 2024 average production guidance midpoint of 57,000 boe/d is unchanged.
Returned $224 million to shareholders in 2023; cumulatively, returned over C$1.5 billion to shareholders over the past five years through dividends and share repurchases.
Declared a Q1 2024 regular dividend of C$0.375 per share(6) or C$1.50 per share annualized; current dividend yield is roughly 6.8%(6).
Commenced a current normal course issuer bid (“NCIB”) on January 22, 2024; in 2023, the Company repurchased roughly 5% of its outstanding shares.
2023 Fourth Quarter Results
Record average production of 57,329 boe/d(7), an increase of 6% over Q4 2022 and 5% over Q3 2023.
Realized net income of $134 million or $1.28 per share basic(8).
Generated FFO of $193 million(1) and FFO per share of $1.85(8)(9).
Produced an operating netback of $41.79/boe(9) and an FFO netback of $36.81/boe(9) from an average Brent price of $82.90/bbl.
Incurred $91 million(2) of capital expenditures, participating in the drilling of 11 gross (8.30 net) wells.
As at December 31, 2023, cash was $140 million and working capital surplus $79 million(1); working capital was supplemented by the Company’s secured credit facility that had $90 million drawn as at year-end due to the timing of vendor payments and oil sale collections at the end of the quarter.
2023 Full-Year Results
Record average production of 54,356(7) boe/d, up 4% over 2022.
Realized net income of $459 million or $4.32 per share basic(8).
Generated FFO of $668 million(1) and FFO per share of $6.29(8)(9).
Produced an operating netback of $44.84/boe(9) and an FFO netback of $33.59/boe(9) from an average Brent price of $82.18/bbl.
Incurred $483 million(2) of capital expenditures, participating in the drilling of 59 gross (43.6 net) wells.
Paid $119 million or C$1.50 per share(6)(8) in regular dividends and repurchased $105 million worth of shares.
2023 Year-End Corporate Reserves Report: Highlights(3)
For the year ended December 31, 2023, the Company:
Generated a PDP reserves replacement ratio of approximately 100%, with 2023 production of approximately 19.8 mmboe and reserve additions of 19.7 mmboe.
Grew PDP reserves per share (on a boe basis) by 5% compared to 2022.
Attained growth in PDP after-tax net asset value (“NAV”) per share to C$22.40(9)(10), which was 5% higher than 2022.
Increased Q4 2023 average production by approximately 6% over the comparative quarter and maintained a year-over-year PDP reserve life index of approximately four years.
Proved (“1P”) and proved plus probable (“2P”) reserve volumes were down 14% and 16%, respectively, compared to 2022.
Reserves were lower primarily due to technical revisions, which were focused on asset impairment on non-core blocks in the middle Magdalena, as well as LLA-34(11) on delineation underperformance.
Added approximately four million of 2P reserves from the Arauca-8 well(5); in 2024, Parex plans to test the remaining zones of the well and conduct appraisal drilling on the block to better understand the extent of the reservoir.
Grew PDP, 1P and 2P after-tax NAV per boe by 2%(9)(10), 8%(9)(10) and 6%(9)(10), respectively, when compared to 2022.
(1) Capital management measure. See “Non-GAAP and Other Financial Measures Advisory.”
(2) Non-GAAP financial measure. See “Non-GAAP and Other Financial Measures Advisory.”
(3) See “2023 Year-End Corporate Reserves Report: Discussion of Reserves” for additional information.
(4) Capachos: 50% W.I.
(5) Arauca: Business Collaboration Agreement with Ecopetrol S.A. (Parex 50% Participating Share); Ecopetrol S.A. currently holds 100% of the working interest in the Convenio Arauca while the assignment procedure is pending.
(6) Supplementary financial measure. See “Non-GAAP and Other Financial Measures Advisory.”
(7) See “Operational and Financial Highlights” for a breakdown of production by product type.
(8) Based on weighted-average basic shares for the period.
(9) Non-GAAP financial ratio. See “Non-GAAP and Other Financial Measures Advisory.”
(10) Discounted at 15% and using the GLJ Brent forecast.
(11) LLA-34: 55% W.I.
Operational and Financial Highlights
Three Months Ended
Year Ended
Dec. 31,
Dec. 31,
Sep. 30,
December 31,
2023
2022
2023
2023
2022
2021
Operational
Average daily production
Light Crude and Medium Crude Oil (bbl/d)
9,700
10,511
8,837
8,417
7,471
6,831
Heavy Crude Oil (bbl/d)
46,760
42,746
44,779
45,163
43,008
38,449
Crude oil (bbl/d)
56,460
53,257
53,616
53,580
50,479
45,280
Conventional Natural Gas (mcf/d)
5,214
6,000
5,742
4,656
9,420
10,308
Oil & Gas (boe/d)(1)
57,329
54,257
54,573
54,356
52,049
46,998
Operating netback ($/boe)
Reference price – Brent ($/bbl)
82.90
88.63
85.92
82.18
99.04
70.95
Oil and gas sales(4)
71.12
74.81
75.98
71.00
86.88
60.97
Royalties(4)
(12.12
)
(12.88
)
(13.72
)
(12.31
)
(17.68
)
(9.12
)
Net revenue
59.00
61.93
62.26
58.69
69.20
51.85
Production expense(4)
(13.67
)
(7.14
)
(9.73
)
(10.42
)
(6.90
)
(6.29
)
Transportation expense(4)
(3.54
)
(3.50
)
(3.56
)
(3.43
)
(3.24
)
(3.03
)
Operating netback ($/boe)(2)
41.79
51.29
48.97
44.84
59.06
42.53
Funds flow provided by operations netback ($/boe)(2)
36.81
17.02
31.28
33.59
38.50
33.56
Financial ($000s except per share amounts)
Net income
133,783
249,958
119,736
459,309
611,368
303,105
Per share – basic(6)
1.28
2.29
1.13
4.32
5.38
2.42
Funds flow provided by operations(5)
193,377
85,194
157,839
667,782
724,890
577,545
Per share – basic(2)(6)
1.85
0.78
1.49
6.29
6.38
4.61
Capital expenditures(3)
91,419
147,746
156,747
483,343
512,252
272,234
Free funds flow(3)
101,958
(62,552
)
1,092
184,439
212,638
305,311
EBITDA(2)
110,653
213,604
221,271
650,364
953,210
633,280
Adjusted EBITDA(2)
201,345
244,637
225,784
816,815
1,066,040
689,177
Long-term inventory expenditures
(866
)
56,415
(374
)
39,430
140,266
5,001
Dividends paid
29,505
20,108
29,239
118,676
75,491
47,631
Per share – Cdn$(4)(6)
0.375
0.25
0.375
1.50
0.89
0.50
Shares repurchased
22,453
3,206
24,273
105,068
221,464
218,491
Number of shares repurchased (000s)
1,220
220
1,240
5,628
11,821
12,869
Outstanding shares (end of period) (000s)
Basic
103,812
109,112
105,014
103,812
109,112
120,266
Weighted average basic
104,394
109,107
105,621
106,247
113,572
125,210
Diluted(8)
104,502
109,939
105,722
104,502
109,939
121,600
Working capital surplus(5)
79,027
84,988
(57,511
)
79,027
84,988
325,780
Bank debt(7)
90,000
—
—
90,000
—
—
Cash
140,352
419,002
34,548
140,352
419,002
378,338
(1) Reference to crude oil or natural gas in the above table and elsewhere in this press release refer to the light and medium crude oil and heavy crude oil and conventional natural gas, respectively, product types as defined in National Instrument 51-101 – Standard of Disclosure for Oil and Gas Activities.
(2) Non-GAAP ratio. See “Non-GAAP and Other Financial Measures Advisory”.
(3) Non-GAAP financial measure. See “Non-GAAP and Other Financial Measures Advisory” for the composition of such measure.
(4) Supplementary financial measure. See “Non-GAAP and Other Financial Measures Advisory” for the composition of such measure.
(5) Capital management measure. See “Non-GAAP and Other Financial Measures Advisory”.
(6) Per share amounts (with the exception of dividends) are based on weighted average common shares.
(7) Borrowing limit of $200.0 million as of December 31, 2023.
(8) Diluted shares as stated include the effects of common shares and stock options outstanding at the period-end. The December 31, 2023 closing stock price was C$24.95 per share.
Guidance Update
Parex’s FY 2024 average production guidance of 54,000 to 60,000 boe/d (57,000 boe/d midpoint) and capital expenditures of $390 to $430 million ($410 million midpoint) remain unchanged.
Operational Update
Northern Llanos – Capachos and Arauca Update(1)(2)
Parex has resumed activity in the Northern Llanos following social protests that required the Company to shut in its Capachos Block and halt drilling and testing operations at the Arauca Block. Full operations are proceeding with:
Arauca-8 well currently testing the remaining zones in the Guadalupe formation;
Drilling the Arauca-15 sidetrack; and
Capachos average production is roughly 3,800 boe/d (net) and is expected to further increase throughout the remainder of the current quarter.
Corporately, the shut-ins were limited to the Capachos and Arauca Blocks and are expected to affect Parex’s Q1 2024 results. The net production of Capachos was approximately 5,000 boe/d before the suspension of operations. Additionally, there is an Arauca impact from the delayed pace of drilling and testing operations.
(1) Capachos: 50% W.I.
(2) Arauca: Business Collaboration Agreement with Ecopetrol S.A. (Parex 50% Participating Share); Ecopetrol S.A. currently holds 100% of the working interest in the Convenio Arauca while the assignment procedure is pending.
Cabrestero and LLA-34 – Waterflood Injection Performance and Polymer Pilot Update(1)(2)
The waterflood injection programs are advancing successfully at both Cabrestero and LLA-34, affirming their effectiveness in improving reservoir recovery. So far in 2024, the blocks are demonstrating strong base production and outperforming Management’s expectations.
In late 2023, polymer injection began at Cabrestero. The polymer injection process has been successfully completed and the Company has implemented a comprehensive monitoring program for two well patterns. This program is designed to capture the reservoir response and validate the technology’s efficacy in accelerating oil production and enhancing sweep efficiency. The Company expects preliminary results in H2 2024.
(1) Cabrestero: 100% W.I.
(2) LLA-34: 55% W.I.
Big ‘E’ Exploration – High-Impact Targets with Transformational Potential
The Arantes well at LLA-122(1) is targeting gas and condensate in the high-potential Foothills trend of Colombia, where historical pool sizes have been significant. This prospect was spud in early January 2024 and is expected to reach a total depth of approximately 18,000 feet in Q2 2024.
Parex continues to progress the pre-drill work for the Hydra well at VIM-1(2), which is expected to spud mid-year 2024.
(1) LLA-122: 50% W.I.
(2) VIM-1: 50% W.I.
Sustainability Update
Parex continues to be recognized as a top-tier ESG performer:
ESG industry top-rated company by Sustainalytics;
In the Jantzi Social Index;
One of three Canadian-listed exploration and production companies included in the 2024 Bloomberg Gender-Equality Index; and
Maintained a rating of “AA” through Morgan Stanley Capital International (“MSCI”).
Notably in 2023, the Company made significant social investments through both direct community investment and the Colombian national government’s Work for Taxes program. The Work for Taxes program enables corporations to undertake infrastructure projects for a direct reduction in their tax liabilities to support local communities and to date, Parex has been granted approximately $70 million of projects under this program. In 2023, over $15 million was invested through the Work for Taxes initiative, with an additional approximately $5 million invested directly in communities.
Parex plans to issue its tenth annual sustainability report, alongside its third integrated Task Force on Climate-Related Financial Disclosures (“TCFD”), in early Q3 2024.
Tax Update
Starting with the 2023 tax year, Colombia introduced an income surtax that is linked to the historical Brent oil price over 10 years. Following December 31, 2023, the income surtax to be used for the 2023 tax year was confirmed. For Parex’s 2023 current tax expense, the Company’s forecast and tax provisions were completed at 15%, and came in lower than expected at 10%, which positively benefited 2023 current tax expense.
For 2024, the Company is currently assuming a 10% income surtax based on current commodity prices.
Return of Capital
Q1 2024 Dividend
Parex’s Board of Directors has approved a Q1 2024 regular dividend of C$0.375 per share to be paid on March 28, 2024, to shareholders of record on March 15, 2024.
This quarterly dividend payment to shareholders is designated as an “eligible dividend” for purposes of the Income Tax Act (Canada).
Normal Course Issuer Bid Update
As at February 28, 2024, Parex has repurchased approximately 0.5 million shares under its current NCIB at an average price of C$21.88 per share, for a total consideration of roughly C$12 million.
In 2023, Parex repurchased 5.6 million shares, representing approximately 5% of the public float and a return of C$142 million to shareholders.
2023 Year-End Corporate Reserves Report: Discussion of Reserves
The following tables summarize information contained in the independent reserves report prepared by GLJ Ltd. (“GLJ”) dated February 29, 2024 with an effective date of December 31, 2023 (the “GLJ 2023 Report”). All December 31, 2023 reserves presented are based on GLJ’s forecast pricing effective January 1, 2024; all December 31, 2022 reserves presented are based on GLJ’s forecast pricing effective January 1, 2023 and all December 31, 2021 reserves presented are based on GLJ’s forecast pricing effective January 1, 2022. GLJ pricing is available on their website at www.gljpc.com.
All reserves are presented as Parex working interest before royalties and in certain tables set forth below, the columns may not add due to rounding. Additional reserve information as required under NI 51-101 will be included in the Company’s Annual Information Form for the 2023 fiscal year, which will be filed on SEDAR+ by March 1, 2024.
Gross Reserves Volumes
Dec. 31
2021
2022
2023
Change over Dec. 31,
Reserve Category
Mboe
Mboe
Mboe(1)
2022
Proved Developed Producing (PDP)
80,559
82,788
82,628
—
%
Proved Developed Non-Producing
9,685
11,767
7,252
(38
%)
Proved Undeveloped
35,022
36,100
22,647
(37
%)
Proved (1P)
125,266
130,655
112,528
(14
%)
Proved + Probable (2P)
198,825
200,704
168,625
(16
%)
Proved + Probable + Possible (3P)
286,927
281,595
231,299
(18