Parex Resources Announces Operational Update, Oil Discoveries and Completion of Normal Course Issuer Bid

Parex Resources release

CALGARY, Alberta, Oct. 13, 2022 (GLOBE NEWSWIRE) -- Parex Resources Inc. (“Parex” or the “Company”) (TSX: PXT) announced an operational update inclusive of crude oil discoveries. Also announced is the completion of purchases under its current normal course issuer bid (“NCIB”) and an update on its balance sheet. All amounts herein are in United States Dollars unless otherwise stated.

Key Highlights

• Q3 2022 average production is estimated to be 51,100 boe/d⁽¹⁾, up approximately 8% from Q3 2021.
• Current production is approximately 55,000 boe/d⁽²⁾, demonstrating strong production growth to start Q4 2022.
• Expect FY 2022 production to average 52,000 to 53,000 boe/d⁽³⁾, with a 2022 exit rate in excess of 60,000 boe/d.
• Successful drilling efforts in the Llanos Basin year to date have resulted in crude oil discoveries on the Cabrestero, Capachos and LLA-40 blocks.
• Encouraging well results in the Magdalena Basin at the VIM-1 Block where Parex plans to begin reinjecting gas for enhanced oil recovery (“EOR”) starting in Q4 2022.
• Completed the current NCIB at the end of Q3 2022, marking the fourth consecutive year where Parex has purchased the maximum allowable shares under its NCIB programs, and equates to over C$1.1 billion returned to shareholders through share repurchases since 2017.

Operational Update

Production – Q3 2022

• Q3 2022 average production is estimated to be 51,100 boe/d⁽¹⁾, up approximately 8% from Q3 2021 and consistent with Q2 2022.
• Q3 2022 average production varied from Management’s guidance of 53,000 to 55,000 boe/d⁽⁴⁾ due to delays from the unplanned testing of new zones, operational and weather-related setbacks, as well as temporary localized blockades.
• Temporary localized blockades following the election are estimated to have lowered total average production for Q3 2022 by approximately 1,500 boe/d, with potential future impacts anticipated to be lower and incorporated into the Company’s long-term planning.

Production – Current & Guidance

• Current production is approximately 55,000 boe/d⁽²⁾, demonstrating strong production growth to start Q4 2022.
• Q4 2022 production is expected to average 54,000 to 58,000 boe/d, with incremental volume to come from already drilled wells at Capachos, continued drilling at Block LLA-40 for short-cycle opportunistic adds, and the VIM-1 Block gas reinjection project once online.
• FY 2022 revised production guidance to average 52,000 to 53,000 boe/d, with the exit rate to still exceed 60,000 boe/d⁽³⁾; FY 2021 average production was 46,998 boe/d⁽⁵⁾.

(1)	Estimated production volume for the three months ended September 30, 2022 (light and medium crude oil: 6,906 bbl/d, heavy crude oil: 43,066 bbl/d, and conventional natural gas: 6,766 mcf/d).
(2)	Estimated total average production for the 12-day period of October 1, 2022 to October 12, 2022.
(3)	FY 2022 average production guidance, as originally announced May 11, 2022, was 54,000 to 56,000 boe/d.
(4)	As originally announced August 3, 2022.
(5)	Production volume for the year ended December 31, 2021 (light and medium crude oil: 6,831 bbl/d, heavy crude oil: 38,449 bbl/d, and conventional natural gas: 10,308 mcf/d).

Llanos Basin – Capachos and Arauca Blocks (50% W.I.) – Positive Drilling Results with Multi-Zone Wells Coming Online at Capachos and Progressing Arauca for 2023

• Parex drilled the first new well at the Capachos Block since 2019, which encountered a new deeper zone resulting in a crude oil discovery. Work is currently being completed on the well to commingle production across the different zones and expected to be online in Q4 2022.
• Also at the Capachos Block, successfully recompleted an existing well that is now producing out of a new shallower zone with comingled production.
• As a result of these successes at Capachos, Parex and its partner are continuing development with a follow-up well that is currently being drilled. Longer-term, Parex sees three proven zones on the block, resulting in multiple recomplete and commingling opportunities for both existing and planned new wells.
• At the Arauca Block, civil works is completed for the first well and the rig is expected to arrive in Q1 2023 as a result of delays from testing at the Capachos Block. Further, Parex has added marketing optionality through offloading a portion of Capachos Block production to facilities at the Arauca Block.

Llanos Basin – Cabrestero Block (100% W.I.) – Near-Field Exploration Success and Effective Waterflood Expansion

• Executing near-field exploration with a discovery in a new play that is now producing approximately 1,800 bbl/d⁽¹⁾ of heavy oil. Building on this success, the Company is evaluating potential follow-up locations, including a horizontal development well, and is planning to construct a new well pad in Q4 2022 to further delineate the potential.
• The acceleration of infill drilling as well as waterflood optimization is proceeding as planned and has resulted in production gains. Production has increased over 45% year-over-year from the block, with Q3 2022 production of approximately 11,000 bbl/d of heavy crude oil and current production of over 12,100 bbl/d⁽¹⁾ of heavy crude oil.

Llanos Basin – Block LLA-40 and LLA-26 (100% W.I.) – Short-Cycle Opportunistic Production Adds

• Performed a successful recompletion in a new zone on Block LLA-40 that resulted in a follow-up drilling campaign. The first follow-up well was drilled near the end of Q3 2022, which has produced crude oil and is expected to be on full production in early Q4 2022 following facility upgrades. A second appraisal well is planned for Q4 2022 to further define the zone size as well as increase short-term production.
• The Block LLA-26 and LLA-40 drilling campaigns have experienced weather-related setbacks, specifically a land slide that destroyed the main road to the blocks, affected rig moves and delayed spud timing. In response, the rig for the Block LLA-26 campaign was diverted to drill an exploration well on Block LLA-94. The Block LLA-26 drilling campaign will now begin in late Q4 2022 and is expected to add production beginning in Q1 2023.

Magdalena Basin – VIM-1 Block (50% W.I.) – Liquids-Rich Gas Developments

• A horizontal development well has been drilled to its total depth with encouraging results and the well is expected to be completed in early Q4 2022. The existing vertical well on the block produced approximately 1,400 bbl/d (light and medium crude oil) and 5,900 mcf/d (conventional natural gas) gross during Q3 2022. Once the horizontal well is completed, the two wells will be used for gas reinjection.
• Parex’s strategy is to grow long-term liquids recovery by reinjecting gas for EOR and the Company has identified several other opportunities within its portfolio for this application. In this instance at VIM-1, Parex estimates the potential to double the liquids recovery factor.

(1)	Estimated total average production for the 12-day period of October 1, 2022 to October 12, 2022.

Magdalena Basin – Boranda (50% W.I.) and Fortuna (100% W.I.) Blocks – Exploitation Potential

• Completed the assessment of four prospective formations at the Fortuna Block, which indicated non-economic results and ended the campaign. Experience applying proven technologies on this block, such as horizontal drilling, advanced stimulations, and synthetic drilling fluid, is being utilized on other blocks across the Company’s inventory
• Parex drilled the first ever horizontal well on the Boranda Block, which is currently producing roughly 500 bbl/d⁽¹⁾ of heavy oil on jet pump. Based on this success, the Company is evaluating using similar horizontal drilling techniques in the field and estimates there are 10 to 15 potential follow-up locations on the block.

Return of Capital Update

Dividend

With the payment of the Q3 2022 regular dividend of C$0.25 per share on September 30, 2022, Parex has paid over C$130 million in dividends since Q3 2021.

Share Buybacks

As at September 30, 2022, Parex has completed the maximum allowable share purchases under its current NCIB through the purchase of 11.8 million shares, representing 10% of the public float as at December 22, 2021. The share purchases under the 2022 NCIB returned approximately C$285 million to shareholders.

The completion of this year’s NCIB marks the fourth consecutive year where Parex has purchased the maximum allowable shares under its NCIB programs, reducing the fully diluted share count by one third from approximately 164 million in 2017 to 110 million in 2022. Since 2017, Parex has returned over C$1.1 billion to shareholders through share repurchases.

As at September 30, 2022, Parex had 109.3 million basic shares outstanding. In due course, the Company expects that it will submit a notice of intention to make an NCIB to the Toronto Stock Exchange for calendar 2023.

Capital Allocation Framework

Parex targets at least one third of annual funds flow from operations (“FFO”)⁽²⁾ and 100% of free funds flow (“FFF”)⁽³⁾ to be returned to shareholders through dividends and share buybacks. Based on current Management estimates, Parex expects to be able to meet this goal in 2022.

Balance Sheet Update

Parex estimates its working capital surplus⁽²⁾ to be approximately $225 million as at Q3 2022, a decrease of roughly $85 million from Q2 2022. Cash on the balance sheet has been reduced by the acceleration of share buybacks as noted above and the purchase of long-lead items such as well casing to support the 2023 capital expenditure program.

As at September 30, 2022, Parex continues to be debt free and has an undrawn $200 million credit facility.

(1)	Estimated total average production for the 12-day period of October 1, 2022 to October 12, 2022.
(2)	Capital management measure. See “Non-GAAP and Other Financial Measures Advisory.”
(3)	Non-GAAP financial measure. See “Non-GAAP and Other Financial Measures Advisory.”

Q3 2022 Results – Conference Call & Webcast

We are holding a conference call and webcast for investors, analysts and other interested parties on Friday, November 4, 2022, at 9:30 am MT (11:30 am ET). To participate in the conference call or webcast, please see access information below:

Toll-free dial number (Canada/US):	1-800-806-5484
International dial-in numbers:	https://www.confsolutions.ca/ILT?oss=7P1R8008065484
Passcode:	8312227#
Webcast:	https://edge.media-server.com/mmc/p/babjejdv