All amounts herein are in
Key Highlights
- Generated Q2 2023 funds flow provided by operations ("FFO")(1) of
$155 million and FFO per share(2)(3) of$1.45 . - Continued high performance from the first horizontal wells at Cabrestero (100% W.I.) and LLA-34 (55% W.I.); a second horizontal well at LLA-34 was recently completed and put on production; horizontal wells in the Southern Llanos represent new development opportunities for
Parex to efficiently maximize recovery and production rates. - Drilled a successful vertical near-field exploration well at LLA-81 (100% W.I.) that resulted in an oil discovery; a follow-up horizontal well has since been spud to maximize recovery and production.
- Safely resumed full operations at Capachos (50% W.I.) and Arauca (50% W.I.) in late
June 2023 . - Drilling the first well at Arauca (50% W.I.), which is currently at roughly 11,500 feet and expected to reach total depth in late Q3 2023.
- Moving second rig to Arauca (50% W.I.) to drill the Arauca-8 big 'E' exploration well and accelerate the multi-year development program on the block.
- Ramping up production at Capachos (50% W.I.), with the block expected to return to production rates of approximately 6,500 boe/d net in Q3 2023.
- Declared Q3 2023 regular dividend of
C$0.375 per share(7) orC$1.50 per share annualized. - Repurchased approximately 3.6 million shares year-to-date 2023 under the Company's current normal course issuer bid ("NCIB").
- Published ninth sustainability report, which integrates the
Task Force on Climate-Related Financial Disclosures ("TCFD") for the second year.
Q2 2023 Results
- Quarterly average oil and natural gas production was 54,120 boe/d(6), an increase of 6% from the second quarter of 2022, and a 5% increase from Q1 2023. The temporary suspension of operations at Capachos (50% W.I.) and Arauca (50% W.I.) had an estimated production impact of approximately 3,850 boe/d on the quarter.
- Increased production per share(3)(7) by 14% compared to the same quarter in the prior year, as a result of higher production and the reduction of outstanding shares through the NCIB.
- Realized net income of
$101 million or$0.95 per share basic(3). - Generated quarterly FFO(1) of
$155 million , a 32% decrease from Q2 2022, and FFO per share(2)(3) of$1.45 , a 27% decrease from Q2 2022, which was primarily driven by lower crude oil pricing. - Produced an operating netback(2) of
$43.46 /boe and an FFO netback(2) of$31.86 /boe from an average Brent price of$77.84 /bbl. - Incurred
$121 million of capital expenditures(5); participated in the drilling of 17 gross (12.50 net) wells. - Paid a
C$0.375 per share regular quarterly dividend and repurchased 1.3 million shares. - Cash position was
$133.4 million , a decrease of$239.0 million from Q1 2023 primarily due to the timing ofParex's Colombia tax payments.
(1) Capital management measure. See “Non-GAAP and Other Financial Measures Advisory.”
(2) Non-GAAP ratio. See “Non-GAAP and Other Financial Measures Advisory.”
(3) Based on weighted-average basic shares for the period.
(4) See "Operational and Financial Highlights" for a breakdown of production by product type.
(5) Non-GAAP financial measure. See “Non-GAAP and Other Financial Measures Advisory.”
(6) See "Operational and Financial Highlights" for a breakdown of production by product type.
(7) Supplementary financial measure. See "Non-GAAP and Other Financial Measures Advisory."
Operational and Financial Highlights | Three Months Ended | Six months ended | ||||||
2023 | 2022 | 2023 | 2023 | |||||
Operational | ||||||||
Average daily production | ||||||||
Light Crude Oil and Medium Crude Oil (bbl/d) | 7,982 | 6,734 | 7,115 | 7,551 | ||||
Heavy Crude Oil (bbl/d) | 45,644 | 42,373 | 43,435 | 44,545 | ||||
Crude Oil (bbl/d) | 53,626 | 49,107 | 50,550 | 52,096 | ||||
2,964 | 12,216 | 4,692 | 3,822 | |||||
Oil & Gas (boe/d)(1) | 54,120 | 51,143 | 51,332 | 52,733 | ||||
Operating netback ($/boe) | ||||||||
Reference price - Brent ($/bbl) | 77.84 | 111.98 | 82.16 | 80.00 | ||||
Oil & natural gas sales(4) | 67.26 | 98.22 | 69.41 | 68.32 | ||||
Royalties(4) | (11.15 | ) | (22.71 | ) | (12.21 | ) | (11.67 | ) |
Net revenue(4) | 56.11 | 75.51 | 57.20 | 56.65 | ||||
Production expense(4) | (9.14 | ) | (6.82 | ) | (8.85 | ) | (9.00 | ) |
Transportation expense(4) | (3.51 | ) | (3.03 | ) | (3.08 | ) | (3.30 | ) |
Operating netback ($/boe)(2) | 43.46 | 65.66 | 45.27 | 44.35 | ||||
Funds flow provided by operations ($/boe)(2) | 31.86 | 50.12 | 34.27 | 33.05 | ||||
Financial ($000s except per share amounts) | ||||||||
Net income | 101,415 | 143,128 | 104,375 | 205,790 | ||||
Per share - basic(6) | 0.95 | 1.24 | 0.96 | 1.91 | ||||
Funds flow provided by operations(5) | 154,842 | 227,796 | 161,724 | 316,566 | ||||
Per share - basic(2)(6) | 1.45 | 1.98 | 1.49 | 2.94 | ||||
Capital expenditures(3) | 121,309 | 126,240 | 113,868 | 235,177 | ||||
Free funds flow(3) | 33,533 | 101,556 | 47,856 | 81,389 | ||||
EBITDA(3) | 139,881 | 306,080 | 178,559 | 318,440 | ||||
Other long-term asset expenditures | 20,903 | 6,541 | 19,767 | 40,670 | ||||
Dividends paid | 30,101 | 22,226 | 29,831 | 59,932 | ||||
Per share - Cdn$(4) | 0.375 | 0.25 | 0.375 | 0.75 | ||||
Shares repurchased | 25,474 | 51,697 | 32,868 | 58,342 | ||||
Number of shares repurchased (000s) | 1,260 | 2,686 | 1,909 | 3,169 | ||||
Outstanding shares (end of period) (000s) | ||||||||
Basic | 106,194 | 113,810 | 107,419 | 106,194 | ||||
Weighted average basic | 106,830 | 115,134 | 108,192 | 107,507 | ||||
Diluted(8) | 106,962 | 114,648 | 108,221 | 106,962 | ||||
Working capital (deficit) surplus(5) | (2,957 | ) | 311,496 | 29,662 | (2,957 | ) | ||
Bank debt(7) | — | — | — | — | ||||
Cash | 133,375 | 392,786 | 372,419 | 133,375 |
(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 - Standards 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".
(4) Supplementary financial measure. See "Non-GAAP and Other Financial Measures Advisory".
(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. Dividends paid per share are based on the number of common shares outstanding at each dividend record date.
(7) Borrowing limit of
(8) Diluted shares as stated include the effects of common shares and stock options outstanding at the period-end;
Operational Update
- Southern Llanos – Cabrestero (100% W.I.): All injector wells on the block have been drilled, with four more producers expected to be drilled over the remainder of 2023. To date, waterflood response on the block has been strong, but minor delays are causing the Company to lag on total injected volume as some injector wells await stimulation and additional completion work. The first horizontal well on the block had an IP90 of approximately 1,500 bbl/d of heavy crude oil.
Parex continues to demonstrate how horizontal wells can be selectively placed to efficiently maximize recovery and production rates. - Southern Llanos – LLA-81 (100% W.I.): Successfully drilled a vertical near-field exploration well that had an oil discovery in the Carbonera 7 ("C7") reservoir. A follow-up horizontal well has been spud in order to maximize recovery and the vertical is expected to be converted to a water disposal well once the horizontal is complete. This discovery is an example of the short-cycle opportunistic production adds that
Parex has within its Southern Llanos portfolio. - Southern Llanos – LLA-26 (100% W.I.):
Parex has successfully brought three wells online that are short-cycle opportunistic production adds year-to-date 2023; as a result, Q2 2023 production from this block increased to approximately 3,300 bbl/d from a 2022 average of roughly 750 bbl/d (heavy crude oil); the block is expected to produce roughly 2,500 bbl/d of heavy crude oil for the remainder of the year. - Magdalena – VIM-1 (50% W.I.): In Q1 2023, the Company successfully started gas cycling, a process that maintains reservoir pressure and maximizes early liquids production by reinjecting gas. This is the first gas cycling project for
Parex , and allows the Company to access high-rate reservoirs in the portfolio. Following positive performance from VIM-1, the Company is currently planning to expand the facility capacity from 20 to 60 mmcf/d in 2024. - LLA-34 (55% W.I.): The first horizontal well at LLA-34 was drilled to a depth of roughly 14,000 feet and a horizontal lateral length of approximately 1,300 feet; the well had an IP90 of roughly 2,800 bbl/d (gross; heavy crude oil). A second horizontal well is now on production, which was drilled to a depth of approximately 14,000 feet and a horizontal lateral length of roughly 1,700 feet. LLA-34 currently has three drilling and four workover rigs in operation, with
Parex and its partner agreeing to drill up to four additional horizontal wells in H2 2023. - Current corporate production: Estimated average production in
July 2023 was 54,600 boe/d.
Northern Llanos - Arauca and Capachos Blocks (50% W.I.) Update
Following the resumption of operations at Capachos in mid-April and Arauca in late May, a social-related shut-in occurred in early June, which affected both blocks and further halting drilling and production. The shut-in has been resolved and the Company has been fully operational at both blocks since late June.
Arauca
Arauca-15, a development well with exploration upside, is at roughly 11,500 feet and is expected to reach total depth in late Q3 2023. Civil works for the Arauca-8 well, which is a multi-zone high-impact exploration prospect targeting light crude oil, are currently being completed in anticipation of a late Q3 2023 spud. While
Capachos
Since late
2023 Big 'E' Exploration Program
- Magdalena – VIM-43 (100% W.I.): As previously announced, the Chirimoya exploration well has been abandoned after all three prospective zones were evaluated, tested and confirmed that the potential reservoirs had no economic hydrocarbons. The total capital cost of drilling, casing, testing and abandoning the well was
$49 million . - Northern Llanos – Arauca (50% W.I.): The Arauca-8 well, which is a multi-zone, high-impact exploration prospect targeting light crude oil, is expected to spud in late Q3 2023.
Llanos Foothills – LLA-122 (50%. W.I.): The Arantes well is the first well within the Ecopetrol memorandum of understanding coverage area, targeting gas and condensate; this prospect is the first well to be drilled byParex within the high-potential Foothills trend and is expected to spud in Q4 2023.
2023 Corporate Guidance Update
On an annual basis, the temporary shut-ins at Capachos (50% W.I.) and delayed drilling operations at Arauca (50% W.I.) are estimated to have a combined impact on the Company's average production of roughly 3,100 boe/d (Capachos: 1,900 boe/d; Arauca: 1,200 boe/d). The Company was also affected by lower than expected production from its SOCA (Cabrestero (100% W.I.); LLA-34 (55% W.I.)) assets as a result of increased downtime.
Category | 2023 Guidance ( | 2023 Updated Guidance ( |
Brent Crude Average Price ($/bbl) | ||
Effective Tax Rate Estimate (%)(1) | 25% | 20% |
Funds Flow Provided by Operations Netback ($/boe)(2) | ||
FY Production Average (boe/d) | 57,000-63,000 | 54,000-57,000 |
Capital Expenditures ($ millions)(3) | ||
Funds Flow Provided by Operations ($ millions)(4) | ||
Free Funds Flow ($ millions; midpoint)(3) |
(1) Effective tax rate is the expected current tax effective rate on funds provided by operations.
(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".
(4) Capital management measure. See "Non-GAAP and Other Financial Measures Advisory".
Return of Capital Update
Q3 2023 Dividend
Parex’s Board of Directors has approved a Q3 2023 regular quarterly dividend of
This quarterly dividend payment to shareholders is designated as an “eligible dividend” for purposes of the Income Tax Act (
Active Share Buyback Program under Current Normal Course Issuer Bid
As at
ESG Update
The full report, including performance metric tables, can be found at www.parexresources.com under Sustainability.
Q2 2023 Results - Conference Call & Video Webcast
Conference ID: | 1 335 335 |
Participant Toll-Free Dial-In Number: | 1-888-550-5584 |
Participant Toll Dial-In Number: | 1-646-960-0157 |
Webcast: | https://events.q4inc.com/attendee/479709307 |
About
For more information, please contact:
Senior Vice President, Capital Markets & Corporate Planning
403-517-1733
investor.relations@parexresources.com
Investor Relations & Communications Advisor
587-293-3286
investor.relations@parexresources.com
NOT FOR DISTRIBUTION OR FOR DISSEMINATION IN
Non-GAAP and Other Financial Measures Advisory
This press release uses various “non-GAAP financial measures”, “non-GAAP ratios”, “supplementary financial measures” and “capital management measures” (as such terms are defined in NI 52-112), which are described in further detail below. Such measures are not standardized financial measures under IFRS and might not be comparable to similar financial measures disclosed by other issuers. Investors are cautioned that non-GAAP financial measures should not be construed as alternatives to or more meaningful than the most directly comparable GAAP measures as indicators of
These measures facilitate management’s comparisons to the Company’s historical operating results in assessing its results and strategic and operational decision-making and may be used by financial analysts and others in the oil and natural gas industry to evaluate the Company’s performance. Further, management believes that such financial measures are useful supplemental information to analyze operating performance and provide an indication of the results generated by the Company's principal business activities.
Set forth below is a description of the non-GAAP financial measures, non-GAAP ratios, supplementary financial measures and capital management measures used in this press release.
Non-GAAP Financial Measures
Capital expenditures, is a non-GAAP financial measure which the Company uses to describe its capital costs associated with oil and gas expenditures. The measure considers both property, plant and equipment expenditures and exploration and evaluation asset expenditures which are items in the Company’s statement of cash flows for the period. In Q3 2022, the Company changed how it presents exploration and evaluation expenditures. Amounts have been restated for prior periods to conform to the current year's presentation, refer to note 2 of the Company's interim consolidated financial statements for the period ended
For the three months ended | For the six months ended | ||||||||||
($000s) | 2023 | 2022 | 2023 | 2023 | |||||||
Property, plant and equipment expenditures | $ | 82,999 | $ | 93,346 | $ | 83,224 | $ | 166,223 | |||
Exploration and evaluation expenditures | 38,310 | 32,894 | 30,644 | 68,954 | |||||||
Capital expenditures | $ | 121,309 | $ | 126,240 | $ | 113,868 | $ | 235,177 |
Free funds flow, is a non-GAAP financial measure that is determined by funds flow provided by operations less capital expenditures. In Q3 2022, the Company changed how it presents exploration and evaluation expenditures included in total capital expenditures. Amounts have been restated for prior periods to conform to the current year's presentation refer to note 2 of the Company's interim consolidated financial statements for the period ended
For the three months ended | For the six months ended | ||||||||||||
($000s) | 2023 | 2022 | 2023 | 2023 | |||||||||
Cash provided by (used in) operating activities | $ | (36,612 | ) | $ | 244,783 | $ | 131,273 | $ | 94,661 | ||||
Net change in non-cash working capital | 191,454 | (16,987 | ) | 30,451 | 221,905 | ||||||||
Funds flow provided by operations | 154,842 | 227,796 | 161,724 | 316,566 | |||||||||
Capital expenditures | 121,309 | 126,240 | 113,868 | 235,177 | |||||||||
Free funds flow | $ | 33,533 | $ | 101,556 | $ | 47,856 | $ | 81,389 |
EBITDA, is a non-GAAP financial measure that is defined as net income adjusted for interest, taxes, depletion, depreciation and amortization. The Company considers EBITDA to be a key measure as it demonstrates Parex’ profitability before interest, taxes, depletion, depreciation and amortization. A reconciliation from net income to EBITDA is as follows:
For the three months ended | For the six months ended | ||||||||||||||
($000s) | 2023 | 2022 | 2023 | 2023 | |||||||||||
Net income | $ | 101,415 | $ | 143,128 | $ | 104,375 | $ | 205,790 | |||||||
Adjustments to reconcile net income to EBITDA: | |||||||||||||||
Finance income | (5,106 | ) | (1,432 | ) | (4,644 | ) | (9,750 | ) | |||||||
Finance expense | 4,253 | 3,419 | 3,704 | 7,957 | |||||||||||
Income tax expense (recovery) | (6,308 | ) | 126,219 | 33,172 | 26,864 | ||||||||||
Depletion, depreciation and amortization | 45,627 | 34,746 | 41,952 | 87,579 | |||||||||||
EBITDA | $ | 139,881 | $ | 306,080 | $ | 178,559 | $ | 318,440 |
Non-GAAP Ratios
Operating netback per boe, is a non-GAAP ratio that the Company considers to be a key measure as it demonstrates Parex’ profitability relative to current commodity prices.
Funds flow provided by operations per boe or FFO netback per boe, is a non-GAAP ratio 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. The Company considers funds flow provided by operations netback per boe to be a key measure as it demonstrates Parex’s profitability after all cash costs relative to current commodity prices.
Basic funds flow provided by operations per share is a non-GAAP ratio that is calculated by dividing funds flow provided by operations by the weighted average number of basic shares outstanding.
Capital Management Measures
Funds flow provided by operations, is a capital management measure that includes all cash generated from operating activities and is calculated before changes in non-cash working capital. The Company considers funds flow provided by operations to be a key measure as it demonstrates Parex’s profitability after all cash costs. A reconciliation from cash provided by (used in) operating activities to funds flow provided by operations is as follows:
For the three months ended | For the six months ended | ||||||||||||
($000s) | 2023 | 2022 | 2023 | 2023 | |||||||||
Cash provided by (used in) operating activities | $ | (36,612 | ) | $ | 244,783 | $ | 131,273 | $ | 94,661 | ||||
Net change in non-cash working capital | 191,454 | (16,987 | ) | 30,451 | 221,905 | ||||||||
Funds flow provided by operations | $ | 154,842 | $ | 227,796 | $ | 161,724 | $ | 316,566 |
Working capital (deficit) surplus, is a capital management measure which the Company uses to describe its liquidity position and ability to meet its short term liabilities. Working capital (deficit) surplus is defined as current assets less current liabilities.
For the three months ended | For the six months ended | ||||||||||||
($000s) | 2023 | 2022 | 2023 | 2023 | |||||||||
Current assets | $ | 322,146 | $ | 695,053 | $ | 528,744 | $ | 322,146 | |||||
Current liabilities | 325,103 | 383,557 | 499,082 | 325,103 | |||||||||
Working capital (deficit) surplus | $ | (2,957 | ) | $ | 311,496 | $ | 29,662 | $ | (2,957 | ) |
Supplementary Financial Measures
"Oil and natural gas sales per boe" is determined by sales revenue excluding risk management contracts, as determined in accordance with IFRS, divided by total equivalent sales volume including purchased oil volumes.
"Royalties per boe" is comprised of royalties, as determined in accordance with IFRS, divided by the total equivalent sales volume and excludes purchased oil volumes.
"Production expense per boe" is comprised of production expense, as determined in accordance with IFRS, divided by the total equivalent sales volume and excludes purchased oil volumes.
"Transportation expense per boe" is comprised of transportation expense, as determined in accordance with IFRS, divided by the total equivalent sales volumes including purchased oil volumes.
"Dividends paid per share" is comprised of dividends declared, as determined in accordance with IFRS, divided by the number of shares outstanding at the dividend record date.
"Production per share growth" is comprised of the Company's total oil and natural gas production volumes divided by the weighted average number of basic shares outstanding.
Oil & Gas Matters Advisory
The term "Boe" means a barrel of oil equivalent on the basis of 6 Mcf of natural gas to 1 barrel of oil ("bbl"). 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 and FFO netbacks. These oil and gas metrics have been 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 metrics 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.
References in this press release to short-term production rates, such as IP90, are useful in confirming the presence of hydrocarbons, however such rates are not determinative of the rates at which such wells will commence production and decline thereafter and are not indicative of long-term performance or of ultimate recovery. Additionally, such rates may also include recovered "load oil" fluids used in well completion stimulation. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production of
Distribution Advisory
The Company's future shareholder distributions, including but not limited to the payment of dividends and the acquisition by the Company of its shares pursuant to an NCIB, if any, and the level thereof is uncertain. Any decision to pay further dividends on the common shares (including the actual amount, the declaration date, the record date and the payment date in connection therewith and any special dividends) or acquire shares of the Company will be subject to the discretion of the Board of Directors of
Advisory on Forward Looking Statements
Certain information regarding
In particular, forward-looking statements contained in this document include, but are not limited to, statements with respect to: the Company’s focus, plans, priorities and strategies; that the horizontal well that has spud at Block LLA-81 will maximize recovery and production rates on the block; the anticipated timing of when the first well at the Arauca Block will reach its total depth;
These forward-looking statements are subject to numerous risks and uncertainties, including but not limited to, the impact of general economic conditions in
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,
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
This press release contains information that may be considered a financial outlook under applicable securities laws about the Company's potential financial position, including, but not limited to:
The following abbreviations used in this press release have the meanings set forth below:
bbl | one barrel |
bbls | barrels |
bbl/d | barrels per day |
boe | barrels of oil equivalent of natural gas; one barrel of oil or natural gas liquids for six thousand cubic feet of natural gas |
boe/d | barrels of oil equivalent of natural gas per day |
IP90 | average initial production rate over 90 consecutive days |
mcf | thousand cubic feet |
mcf/d | thousand cubic feet per day |
W.I. | working interest |
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