Parex Plans to Increase Production and Re-start Capex Programs

Source: 6/24/2020, Location: South America

Parex Resources Inc., a company headquartered in Calgary, Alberta and focused on Colombian oil exploration and production, provides an operational update. All currency amounts are in United States dollars, unless otherwise stated.

Business Update: Strong Realized Pricing Drives Increased Activity

With greater visibility to stabilizing netbacks and community safety, Parex is developing action plans to return shut-in production, resume capital activity and generate free cash flow. However, the Company’s priority remains the health and safety of its employees, partners and the communities where we operate.

: As part of its response to the COVID-19 pandemic and in order to minimize the social interactions in its operating communities and maximize shareholder value during periods of low oil pricing, Parex voluntarily curtailed Q2 production volumes. The Company’s Q2 2020 average sales volumes are estimated at 42,700 barrels of oil equivalent per day (“boe/d”).

Parex expects to gradually increase production into Q4 2020 with a targeted range of 44,000-48,000 boe/d. Production is currently above 40,000 boe/d and Parex estimates Q3 2020 production to average 42,000-44,000 boe/d. To date the June 2020 Vasconia differential to Brent oil price has averaged approximately $3.50/bbl.

2020 Capital Expenditures:

The Company is preparing to re-activate its development and exploration program. We estimated H1 2020 invested capital to be $80-$85 million and a potential H2 2020 capital program of $65-$70 million for a total full-year 2020 capital of $145-$155 million.

Depending on market conditions and community safety, over the next quarter Parex is preparing to approve investment in the following development projects:

- LLA-34 and Cabrestero: Completions and work-overs (4-6 wells) plus development drilling (4-6 wells)

- Capachos: Andina field flowline completion

- Aguas Blancas: Completion of 2 drilled exploration wells

The Company will be building contingent plans to add a diverse exploration program for Q4 2020. A further capital update will be provided as part of the Q2 2020 financial results for the following projects:

- La Belleza (VIM-1 Block): Advance initial works for 2021 drilling

- Boranda: 1 appraisal well

- Fortuna: Drill exploration well

Parex’ proposed capital program to increase near-term production and evaluate exploration prospects for long-term sustainability.

Share Buy-Back: To date, the Company has repurchased for cancellation 4.7 million common shares under the normal course issuer bid that commenced on December 23, 2019. As of June 19, 2020, Parex has 138.9 million basic shares outstanding compared to 149.4 million basic shares outstanding as at March 31, 2019.

Financial Strength:

Parex is well-positioned for the challenges of the current business environment. The Company is debt-free, has an approximate June 1, 2020 cash position of $360 million and an undrawn credit facility of $200 million. As at March 31, 2020, the Company’s working capital was $330 million.

Q2 Results and Conference Call

We anticipate releasing our Second Quarter 2020 unaudited financial results on Wednesday, August 5, 2020 after the close of markets. We will hold the quarterly conference call and webcast for investors, analysts and other interested parties on Thursday, August 6, 2020 at 9:30 am MT (11:30 am ET), conditional on the Q2 results being released the previous day.

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