Quarterly / Earnings Reports | Second Quarter (2Q) Update | Drilling Activity

Parex Resources Reports Q2 2019 Results

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Parex Resources Inc. reported its Q2 2019 results.

Highlights:

• Funds flow provided by operations ("FFO") of $151.0 million ($1.03 (or CAD $1.38)⁽¹⁾ per share basic);
• Capital expenditures ("Capex") were $48.7 million in the period compared to $100.6 million in the comparative period of 2018. Capital expenditures were funded from FFO. Parex expects to invest approximately $200-230 million in capital projects in 2019;
• Utilized a portion of free cash flow of $102.2 million to purchase 4,725,000 of the Company's common shares for a total cost of $75.4 million (average price of CAD$21.51/share) pursuant to the Company's normal course issuer bid program ("NCIB");
• Quarterly production was 52,252 barrels of oil equivalent per day ("boe/d")(98% crude oil), representing a production per share increase of 6% over the previous quarter ended March 31, 2019 and an increase of 30% over the prior year comparative period;
• Earned net income of $101.5 million ($0.69 per share basic) compared to net income of $82.0 million ($0.54 per share basic) in Q1 2019;
• Generated an operating netback of $41.25 per boe and FFO netback of $31.92 per boe from an average Brent price of $68.52 per barrel ("bbl");
• Working capital was $240.1 million at June 30, 2019 compared to $207.4 million at March 31, 2019 and $66.1 million at June 30, 2018. The Company has an undrawn syndicated bank credit facility of $200.0 million; and
• Participated in drilling 11 gross (7.10 net) wells ⁽²⁾ in Colombia resulting in 10 oil wells and 1 suspended well, for a success rate of 90%.

Our current 2019 FFO forecast is $550-$600 million based on the following assumptions:

• Mid-point annual production average of 53,000 boe/d;
• H2 2019 Brent oil prices of $60/bbl-$65/bbl; and
• Brent/Vasconia crude differential less than $3/bbl.

Planned capital expenditures are expected to be fully funded by FFO, with working capital being retained for future opportunities and to buy back outstanding shares.

Operational Update

Production:  We expect Q3 2019 production average to exceed 53,000 boe/d.

Fortuna: (WI Parex 100%): The Habanero-1 well was spudded on June 3, 2019 to test a potential Lisama trap identified on 2D seismic data. The well was drilled to a total depth of 6,000 feet and encountered three prospective zones in the Lisama Formation, a prolific producing interval in the northern part of the Middle Magdalena Basin.

Using the drilling rig, two zones were perforated in the Upper Lisama sands. The first zone recovered 10.6 API gravity oil while swabbing and the second tested wet.  The drilling rig has been released and a service rig will be mobilized to test the Lower Lisama sands. Following this test, the Company will install a downhole pump, which is better suited for testing lower gravity oil in the Upper Lisama zone.

Parex is currently acquiring 178 km² of 3D seismic on the Fortuna Block to better image the Habanero structure and identify additional prospects on the block.

Capachos: (WI Parex 50%, Ecopetrol S.A. 50%): The Andina-3 appraisal well is currently drilling at a depth of 15,270 feet with a target depth of 17,965 feet.

Upcoming H2 2019 Exploration:

Share Repurchases: On December 21, 2018, Parex began a normal course issuer bid with the intent to repurchase for cancellation approximately 15.0 million shares (10% of public float).  As at August 1, 2019 the Company has repurchased 12.7 million shares at an average cost of C$20.13 per share for a total of C$255 million under this NCIB. Basic shares outstanding as at July 31, 2019 were 144.5 million compared to 155.0 million as at December 31, 2018.  Parex expects to complete the repurchase of 15 million shares in early Q4 2019.  The total cost of the NCIB program will be funded from existing working capital and/or free cash flow. Subject to the approval of the Toronto Stock Exchange, Parex expects to renew its NCIB in December 2019 with the intent to repurchase 10% of the public float.

Additionally, Parex will continue to evaluate other options for its surplus capital including exploration growth, business development and share repurchases.