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Parex Details Q4 2019 Results; Updates 2020 Plan

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   |    Tuesday,March 10,2020

Parex Resources Inc. reported its Q4 and full year 2019 results.

2019 Full Year Highlights

• Annual oil and natural gas production in 2019 averaged 52,687 barrels of oil equivalent per day ("boe/d") (98% crude oil), representing a production per share increase of 26% over the prior year comparative period;
  
  
• Earned net income of $328.0 million ($2.24 (CAD $2.97)⁽¹⁾ per share basic) for the year ended December 31, 2019 compared to net income of $402.9 million ($2.59 (CAD $3.36)⁽¹⁾ per share basic) for the year ended December 31, 2018;
  
  
• Generated an operating netback of $37.51/boe and a funds flow provided by operations ("FFO") netback of $29.61/boe from an average Brent price of $64.21/bbl;
  
  
• FFO of $570.5 million ($3.90 (CAD $5.17)¹ per share basic), a 42% increase from the year ended December 31, 2018 of $400.6 million ($2.58 (CAD $3.34)¹ per share basic) with a 10% decrease in Brent reference pricing year over year;
  
  
• For the year ended December 31, 2019 the Company recognized $362.3 million in free funds flow, compared to the previous year of $98.3 million;
  
  
• Utilized a portion of free funds flow, $223.9 million, to purchase 14,679,474 of the Company's common shares at an average price of CAD$20.41 pursuant to the Company's normal course issuer bid ("NCIB") referred to as share buy back;
  
  
• Capital expenditures ("Capex") were $208.2 million compared to $302.3 million for the year ended December 31, 2018. Capital expenditures were funded from FFO;
  
  
• Increased net working capital to $344.0 million at December 31, 2019 compared to a net working capital position of $218.5 million at December 31, 2018, and exited 2019 with no bank or term debt; and
  
  
• Participated in drilling 43 gross wells in Colombia resulting in 38 oil wells, 1 abandoned well, 2 suspended wells and 2 wells under test, for a success rate of 97%.

Q4 2019 Highlights

• Achieved a record quarterly oil and natural gas production of 54,221 boe/d (98% oil), representing a production per share increase of 3% over the previous quarter ended September 30, 2019 and an increase of 20% on a per basic share basis over the fourth quarter of 2018;
  
  
• Earned net income of $87.2 million($0.61 (CAD $0.81)⁽¹⁾ per share basic) compared to net income of $54.1 million ($0.35 (CAD $0.46)⁽¹⁾ per share basic) in Q4 2018;
  
  
• Fourth quarter sales volumes, excluding purchased oil, averaged 55,831 boe/d (98% oil);
  
  
• Realized an operating netback of $36.43/boe and an FFO netback of $27.89/boe from an average Brent price of $62.49/bbl;
  
  
• Generated FFO of $143.3 million, a 7% decrease compared to $154.2 million in Q4 2018. On a per share basic basis FFO was $1.00 (CAD $1.32)¹ compared to $0.99 (CAD $1.31)¹ per share basic compared to Q4 2018. The increase in FFO on a per share basis is a result of the Company's share buyback program;
  
  
• Capex was $58.3 million in the period compared to $76.8 million in the comparative period of 2018 and $208.2 million for the full year in 2019. The fourth quarter capital expenditure program included $52.7 million for drilling and completion;
  
  
• For the three months ended December 31, 2019, the Company recognized free funds flow of $84.9 million; and
  
  
• Participated in drilling 15 gross (9.25 net)⁽²⁾ wells in Colombia resulting in 11 oil wells, 1 abandoned well, 1 suspended well and 2 wells under test, for a success rate of 92% in Q4 2019 compared to 28 gross wells in the preceding nine months of 2019 and 8 gross wells in the fourth quarter of 2018.

In 2019, Parex strengthened its balance sheet and exited the year with a larger net working capital surplus and no long-term debt.

2020 Guidance

The table below is a summary of Parex’ original annual guidance for 2019 and 2020, and a review of 2019 actual results:

At current oil prices and Parex' current common share price, for 2020 the Company expects to maintain production at current levels and plans to reallocate capital from growth projects to accelerating its automatic share buy back program up to 100,000 common shares per day from the current program of 55,000 common shares per day. At the current valuation, Parex has the opportunity to repurchase its proven plus probable reserves (as per the press release dated February 6, 2020) at less than $6/boe and at a recycle ratio greater than 2 times.

Operational Update

Q1 2020 Production: Parex expects Q1 2020 average production to be approximately 54,500 boe/d.

Cabrestero (Operated, 100% WI): Parex is currently drilling a 7 well program, using 2 drilling rigs.  We expect to complete drilling in April 2020.

CPO-11 (WI 50%): The Montuno-1 exploration well was drilled and abandoned.  Parex expects to analyze and calibrate the well results to the existing 2D seismic data prior to future exploration activity.

Environmental, Social & Governance Update

Providing Stakeholders with greater ESG disclosure - Parex continued on its ESG journey by responding to the annual CDP (formerly Carbon Disclosure Project) climate change questionnaire and included disclosure on water security in 2019.  Parex is committed to progressively improving its disclosure and environmental performance efficiency metrics, which have been reported annually in our sustainability report since 2014.  The Company disclosed over 140 indicators in the 2018 annual sustainability report, prepared in 2019 in accordance with the Global Reporting Initiative (GRI) Standards; which represents a 86% disclosure increase year-over-year and greater transparency of corporate practices.

Sharing benefits of our success with the community - Parex marked its 10-year anniversary with gifts to the Faculty of Sciences at the University of Calgary and the Simón Bolívar Hospital in Bogota, Colombia. A $2.0 million gift to the University of Calgary launched six Parex Innovations Scholarships to support innovators and encourage research.  During the first half of 2020, the Company plans to spend $1.6 million to renovate infrastructure and provide specialized medical equipment to the Simón Bolívar Hospital, which serves the population within Bogota’s radius.  These gifts support two United Nations Sustainable Development Goals (SDG 4: Quality Education and SDG3: Good Health and Well-being). Additionally, these community gifts provide an opportunity for Parex to show appreciation to the communities where the Company's employees live.

Appointment of VP New Ventures, Jeff Meunier

Parex is pleased to announce that Jeff Meunier has joined the Company in the role of Vice President, New Ventures and as a member of the Executive team.  Jeff will be primarily responsible for reviewing business development opportunities where Parex can apply its conventional oil expertise and balance sheet strength.  Jeff joins us most recently from RBC Capital Markets where he was a Managing Director.  Jeff earned his Bachelor of Science in Mechanical Engineering from the University of Calgary and has over 22 years of experience working in the Investment Banking and oil & gas industry, including roles with a number of international companies including Marathon Oil Corporation, Woodside Petroleum Ltd., McDaniel & Associates Consultants Ltd. and Enerplus Corporation.