Parex Resources Inc., a company headquartered in Calgary, Alberta that focuses on sustainable, conventional oil and gas production, is pleased to announce its unaudited financial and operating results for the three months ended June 30, 2021 (“Second Quarter” or “Q2”). All amounts herein are in United States Dollars (“USD”) unless otherwise stated.
2021 Second Quarter Highlights
- Quarterly average production was 43,900 barrels of oil equivalent per day ("boe/d") (consisting of 5,881 barrels per day ("bbls/d") of light crude oil and medium crude oil, 36,308 bbls/d of heavy crude oil and 10,266 thousand cubic feet per day ("mcf/d") of conventional natural gas), an increase of approximately 18% on a per basic share basis over the previous period ended June 30, 2020. Parex' oil production in Q2 was temporarily restricted due to transportation blockades across Colombia that restricted movement of crude oil, and supplies to drilling and completion activities.
- Current production is approximately 48,000 boe/d (consisting of approximately 6,240 bbls/d of light crude oil and medium crude oil, 39,840 bbls/d of heavy crude oil and 11,520 mcf/d of conventional natural gas).
- Recognized net income of $91.7 million ($0.72 (or CAD $0.88)(1) per share basic) compared to net income of $47.5 million ($0.37 (or CAD $0.47)(1) per share basic) in the previous quarter ended March 31, 2021 and net income of $19.3 million ($0.14 (or CAD $0.19)(1) per share basic) in Q2 2020;
- Generated an operating netback(3) of $41.29 per barrel of oil equivalent ("boe") and funds flow provided by operations ("FFO")(3) per boe of $32.02 from an average Brent price of $69.08 per barrel ("bbl");
- FFO of $131.6 million ($1.03 (or CAD $1.27)(1) per share basic) as compared to $38.8 million ($0.28 (or CAD $0.39)(1) per share basic) for Q2 2020. FFO increased in the current quarter due to higher global oil prices;
- Capital expenditures were $44.8 million in the period resulting in free funds flow(3) for the three months ended June 30, 2021 of $86.8 million;
- Utilized a portion of free funds flow to purchase 4,212,315 of the Company's common shares for a total cost of $75.9 million (average price of CAD$21.67/share) pursuant to the Company's normal course issuer bid program ("NCIB");
- Reduced basic outstanding shares as a result of the active NCIB from 155.6 million shares as at June 30, 2018 to 124.9 million shares at June 30, 2021 or a decrease of approximately 20%;
- Working capital was $352.2 million at June 30, 2021 compared to $341.7 million at March 31, 2021 and $339.3 million at June 30, 2020. The working capital in addition to an undrawn syndicated bank credit facility of $200.0 million results in immediate liquidity of $552.2 million; and
- Participated in drilling 10 gross (6.55 net) wells(2) in Colombia resulting in 7 oil wells, 1 disposal well, 1 well under test and 1 abandoned well, for a success rate of 88%.
(1) Using USD-CAD Bank of Canada 2021 Q2 average rate of 1.2282, 2021 Q1 average rate of 1.2660 and 2020 Q2 average rate of 1.3853.
(2) Oil wells: Block LLA-34: Tigana Sur-17, Tigui-13 & ST, Tigana Norte-54, Tigana Sur-18, Tigui-22; Cabrestero: Bacano-9, Bacano Oeste-7. Disposal well: LLA-34: Batara-1. Well under test: Boranda: Boranda Centro-1. Abandoned: LLA-32: Groot-1.
(3) See "Non-GAAP Terms" for further discussion.
H2 2021 Operational Update - Upcoming Activity Highlights
Parex provides the below update on our ongoing exploration and growth activities:
- Arauca & LLA-38 :Entered into an initial work plan agreement with Ecopetrol, consisting of drilling 2 development wells, 1 exploration well and a further capital program of $75.8 million. Drilling of the first well of the four well program is planned to begin in Q1 2022.
- Cabrestero : 4-6 well program - drilling commenced June 2021.
- Capachos : Permitting of a 6 well drilling program consisting of 3 appraisal wells and 3 exploration wells has commenced, along with obtaining partner and regulatory approvals.
- Fortuna : Currently drilling Perla Negra horizontal well testing the Olini carbonate Formation.
- VIM-1 : The Planadas-1 exploration well was spud on July 30, 2021 and is targeting Cienaga de Oro limestones. The Company is continuing to accelerate development for the production of oil and compressed natural gas for the La Belleza discovery.
- VMM-46: Acquisition of 215 square km of 3D seismic expected in October 2021.
Share Buy-Back & Dividend Initiation
As of July 31, 2021, the Company has repurchased for cancellation 8,912,355 common shares, under its NCIB which commenced on December 23, 2020, at an average cost of CAD$21.35 per share. As of July 31, 2021, Parex had 123,762,107 basic shares outstanding. From October 15, 2017 to July 31, 2021, Parex has repurchased approximately 40.8 million shares at an average cost of CAD$19.24 per share returning CAD$784 million to shareholders. Parex expects to purchase the maximum allowable 12.9 million shares under the NCIB, prior to its expiry on December 22, 2021.
In its press release dated July 7, 2021, the Company announced the implementation of a quarterly dividend program with respect to its common shares and the approval of the board of directors (the "Board") of the payment of a dividend of CAD$0.125 per common share, which will be payable on September 30, 2021 to shareholders of record as of September 15, 2021.
The decision to declare any quarterly dividend and the amount of such dividend, if any, will be subject to the discretion and determined by the Board taking into account, among other things, business performance, financial condition, growth plans and expected capital requirements, as well as any contractual restrictions and compliance with applicable law. There can be no assurance that dividends will be paid at the intended rate or at any rate in the future.
Parex is committed to returning capital to shareholders and believes the decision to initiate a dividend program, as well as continuing to fully utilize its NCIB, demonstrates such commitment.