All amounts herein are in
Key Highlights
- Generated Q1 2023 funds flow provided by operations ("FFO")(1) of
$162 million and FFO per share(2)(3) of$1.49 . - The first well of the 2023 big 'E' exploration program, Chirimoya at VIM-43 (100% W.I.), successfully reached its target depth of roughly 17,500 feet; open hole evaluation is currently underway.
- Successfully drilled highly productive horizontal wells at both Cabrestero (100% W.I.) and LLA-34 (55% W.I.).
- Resumed full operations at Capachos (50% W.I.) on
April 17, 2023 , as previously announced, and anticipating the resumption of drilling activity at Arauca (50% W.I.) in Q2 2023. - Quarter-to-date(8) estimated average production is approximately 55,000 boe/d and the Company is on track to meet the lower end of FY 2023 production guidance of 57,000 to 63,000 boe/d, excluding potential production from big 'E' exploration drilling.
- Declared Q2 2023 regular dividend of
C$0.375 per share orC$1.50 per share annualized. - Repurchased approximately 2.5 million shares year-to-date 2023 under the current normal course issuer bid ("NCIB").
“In the Northern Llanos, I am proud of our team and community partners who have been instrumental in returning Capachos to full operations. Building off of that work, we are optimistic that we will be able to resume drilling at Arauca in the short term. Arauca has proven, multi-zone reservoirs, and is expected to be a long-term, high capital efficiency growth area for us. Our ability to work collaboratively with communities continues to be a key differentiator for
“We have spent the last two years building a strategic foundation for sustainable growth. Our emphasis on using proven technology is demonstrating its real value with drilling successes, such as the profitable horizontal wells drilled at both Cabrestero and LLA-34, as well as reaching target depth at our first well in this year’s big 'E' program. Technology is enabling access to new locations, improving drilling efficiency, and increasing recovery factors. This combined with our people and portfolio, makes
Q1 2023 Results
- Quarterly average oil and natural gas production was 51,332(6) boe/d, which was in-line with Q1 2022 and a 5% decrease from Q4 2022; the primary driver of the decrease was the production impact of approximately 6,500 boe/d net during the suspension of operations at Capachos, which has since been brought back online.
- Production per share(3)(7) increased by 9% compared to the same quarter in the prior year, driven primarily by development drilling and the reduction of outstanding shares via the NCIB.
- Realized net income of
$104 million or$0.96 per share basic(3). - Generated quarterly FFO(1) of
$162 million , a 21% decrease from Q1 2022, and FFO per share(2)(3) of$1.49 , a 14% decrease from Q1 2022. - Produced an operating netback(2) of
$45.27 /boe and an FFO netback(2) of$34.27 /boe from an average Brent price of$82.16 /bbl. - Incurred
$114 million of capital expenditures(5); participated in the drilling of 14 gross (10.85 net) wells. - Paid a
C$0.375 per share regular quarterly dividend and repurchased 1.9 million shares through the NCIB. - Working capital surplus(1) was
$30 million , which decreased by$55 million from Q4 2022, primarily from inventory build due to the suspension of operations in the Northern Llanos.
(1) Capital management measure. See “Non-GAAP and Other Financial Measures Advisory.”
(2) Non-GAAP ratio. See “Non-GAAP and Other Financial Measures Advisory.”
(3) Based on weighted-average basic shares for the period.
(4) See "Operational and Financial Highlights" for a breakdown of production by product type.
(5) Non-GAAP financial measure. See “Non-GAAP and Other Financial Measures Advisory.”
(6) See "Operational and Financial Highlights" for a breakdown of production by product type.
(7) Supplementary financial measure. See "Non-GAAP and Other Financial Measures Advisory."
(8) For the period of
Operational and Financial Highlights | Three Months Ended | |||||
2023 | 2022 | 2022 | ||||
Operational | ||||||
Average daily production | ||||||
Light Crude Oil and Medium Crude Oil (bbl/d) | 7,115 | 5,687 | 10,511 | |||
Heavy Crude Oil (bbl/d) | 43,435 | 43,865 | 42,746 | |||
Crude oil (bbl/d) | 50,550 | 49,552 | 53,257 | |||
4,692 | 12,816 | 6,000 | ||||
Oil & Gas (boe/d)(1) | 51,332 | 51,688 | 54,257 | |||
Operating netback ($/boe) | ||||||
Reference price - Brent ($/bbl) | 82.16 | 97.90 | 88.63 | |||
Oil & natural gas sales(4) | 69.41 | 86.24 | 74.81 | |||
Royalties(4) | (12.21 | ) | (17.70 | ) | (12.88 | ) |
Net revenue(4) | 57.20 | 68.54 | 61.93 | |||
Production expense(4) | (8.85 | ) | (6.24 | ) | (7.14 | ) |
Transportation expense(4) | (3.08 | ) | (2.99 | ) | (3.50 | ) |
Operating netback ($/boe)(2) | 45.27 | 59.31 | 51.29 | |||
Funds flow provided by operations ($/boe)(2) | 34.27 | 43.73 | 17.02 | |||
Financial ($000s except per share amounts) | ||||||
Net income | 104,375 | 152,650 | 249,958 | |||
Per share - basic(6) | 0.96 | 1.29 | 2.29 | |||
Funds flow provided by operations(5) | 161,724 | 205,488 | 85,194 | |||
Per share - basic(2)(6) | 1.49 | 1.73 | 0.78 | |||
Capital expenditures(3) | 113,868 | 110,913 | 147,746 | |||
Free funds flow(3) | 47,856 | 94,575 | (62,552 | ) | ||
EBITDA(3) | 178,559 | 247,615 | 213,604 | |||
Other long-term asset expenditures | 19,767 | 11,585 | 56,415 | |||
Dividends paid | 29,831 | 13,115 | 20,108 | |||
Per share - Cdn$(4) | 0.375 | 0.14 | 0.25 | |||
Shares repurchased | 32,868 | 97,404 | 3,206 | |||
Number of shares repurchased (000s) | 1,909 | 4,425 | 220 | |||
Outstanding shares (end of period) (000s) | ||||||
Basic | 107,419 | 116,413 | 109,112 | |||
Weighted average basic | 108,192 | 118,541 | 109,107 | |||
Diluted(8) | 108,221 | 117,331 | 109,939 | |||
Working capital surplus(5) | 29,662 | 286,684 | 84,988 | |||
Bank debt(7) | — | — | — | |||
Cash | 372,419 | 362,103 | 419,002 |
(1) Reference to crude oil or natural gas in the above table and elsewhere in this press release refer to the light and medium crude oil and heavy crude oil and conventional natural gas, respectively, product types as defined in National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities.
(2) Non-GAAP ratio. See “Non-GAAP and Other Financial Measures Advisory”.
(3) Non-GAAP financial measure. See "Non-GAAP and Other Financial Measures Advisory".
(4) Supplementary financial measure. See "Non-GAAP and Other Financial Measures Advisory".
(5) Capital management measure. See "Non-GAAP and Other Financial Measures Advisory".
(6) Per share amounts (with the exception of dividends) are based on weighted average common shares.
(7) Borrowing limit of
(8) Diluted shares as stated include the effects of common shares and stock options outstanding at the period-end;
Pending Retirement of Chief Financial Officer and Transition Plan
Following a successful 35-year career,
“As one of the co-founders of the company,
“Since joining the company in 2021, I have seen the valuable contributions that Ken has made in positioning the Company for lasting, sustainable growth. Ken’s leadership and institutional knowledge has been instrumental in driving an industry-leading return of capital program that has delivered long-term value for shareholders. We want to thank Ken for his commitment and contribution to
Operational Update
- Southern Llanos – Cabrestero (100% W.I.): Spud in Q1 2023, the first ever horizontal well at Cabrestero was drilled to a vertical depth of approximately 12,000 feet and a horizontal lateral of roughly 1,600 feet. Currently the well is producing approximately 2,000 bbl/d of heavy crude oil. After successfully substituting traditional vertical wells for horizontal wells at both Cabrestero and LLA-34 (55% W.I.),
Parex has identified a multi-year inventory of horizontal drilling locations across the Llanos basin to increase recovery factors. - Southern Llanos – LLA-26 (100% W.I.): In 2023,
Parex brought two wells online that are short-cycle opportunistic production adds, with a third well actively being drilled; this block had average production of approximately 750 bbl/d of heavy crude oil in 2022 and the block is expected to have peak average production of roughly 3,000 to 4,000 bbl/d in Q3 2023. - Magdalena – VIM-1 (50% W.I.): In Q1 2023, the Company successfully started gas cycling on the block, which by reinjecting gas maintains reservoir pressure and maximizes early liquids production. Since Q4 2022, liquids production has increased from roughly 1,500 bbl/d to 3,500-4,000 bbl/d gross (light & medium crude oil). VIM-1 is
Parex's first installation of a gas cycling project, which enables access to high-rate reservoirs and results in the maximization of net present value through the monetization of high netback liquids earlier in the project's life. This proven technology is expected to be used as a template for future expansions in the VIM basin and can also be applied in the Northern Llanos as well asLlanos Foothills . - Northern Llanos – Capachos (50% W.I.): As announced on
April 17, 2023 , operations at the Capachos Block were restarted, where there has been a gradual ramp-up of production. - Northern Llanos – Arauca (50% W.I.): The Company continues to engage with stakeholders at all levels and expects that drilling operations will resume in Q2 2023.
- LLA-34 (55% W.I.): In Q1 2023, the first ever horizontal well was drilled at LLA-34 to a vertical depth of roughly 14,000 feet and a horizontal lateral of approximately 1,300 feet. Currently the well is producing approximately 3,000 boe/d gross of heavy crude oil, with
Parex and the operator evaluating drilling additional horizontal wells on the block in 2023. LLA-34 currently has four drilling and four rig workover rigs in operation.
2023 Big 'E' Exploration Program – Timing Updates
- Magdalena – VIM-43 (100% W.I.): The Chirimoya well is a deep and complex prospect that other operators have tried to drill and failed to get to target. By applying proven technology and replacing traditional water-based drilling fluids with synthetics, combined with the Company's drilling experience at an adjacent block (VIM-1),
Parex successfully reached the wells' target depth of approximately 17,500 feet. Open hole evaluation, including logging operations, are underway. Based on initial assessment, the Company is likely to case and test the well in the coming weeks. - Northern Llanos – Arauca (50% W.I.): Following the completion of the first development well that also has exploration upside (Arauca-15), the Arauca-8 well, which is a multi-zone, high-impact exploration prospect targeting light crude oil, is expected to spud in Q3 2023.
Llanos Foothills – LLA-122 (50%. W.I.): The Arantes well is the first well within the Ecopetrol memorandum of understanding coverage area, targeting gas and condensate; this prospect is the first one to be drilled byParex within the high-potential Foothills trend and is expected to spud in late Q4 2023.
2023 Corporate Guidance Update
Parex’s Q1 2023 average production of 51,332(1) boe/d was below the Company’s guidance primarily due to the suspension of operations at Capachos (50% W.I.). Quarter-to-date(2) estimated average production is approximately 55,000 boe/d.
On an annual basis, the shut-in at Capachos (50% W.I.) and the delayed drilling operations at Arauca (50% W.I.), are expected to have a combined impact on the Company's average production of roughly 2,625 boe/d (Capachos: 1,625 boe/d; Arauca: 1,000 boe/d). Incorporating the aforementioned social disruptions to date,
(1) See "Operational and Financial Highlights" for a breakdown of production by product.
(2) For the period of
Return of Capital Update
Q2 2023 Dividend
Parex’s Board of Directors has approved a Q2 2023 regular quarterly dividend of
This quarterly dividend payment to shareholders is designated as an “eligible dividend” for purposes of the Income Tax Act (
Active Share Buyback Program under Current Normal Course Issuer Bid
As at
ESG Update
2023 Annual General & Special Meeting of Shareholders
Further information regarding the Annual General and Special Meeting, including meeting materials, can be found at www.parexresources.com under Investors.
About
For more information, please contact:
Senior Vice President, Capital Markets & Corporate Planning
403-517-1733
investor.relations@parexresources.com
Investor Relations & Communications Advisor
587-293-3286
investor.relations@parexresources.com
NOT FOR DISTRIBUTION FOR DISSEMINATION IN
Non-GAAP and Other Financial Measures Advisory
This press release uses various “non-GAAP financial measures”, “non-GAAP ratios”, “supplementary financial measures” and “capital management measures” (as such terms are defined in NI 52-112 - Non-GAAP and Other Financial Measures Disclosure), which are described in further detail below. Such measures are not standardized financial measures under IFRS and might not be comparable to similar financial measures disclosed by other issuers. Investors are cautioned that non-GAAP financial measures should not be construed as alternatives to or more meaningful than the most directly comparable GAAP measures as indicators of
These measures facilitate management’s comparisons to the Company’s historical operating results in assessing its results and strategic and operational decision-making and may be used by financial analysts and others in the oil and natural gas industry to evaluate the Company’s performance. Further, management believes that such financial measures are useful supplemental information to analyze operating performance and provide an indication of the results generated by the Company's principal business activities.
Set forth below is a description of the non-GAAP financial measures, non-GAAP ratios, supplementary financial measures and capital management measures used in this press release.
Non-GAAP Financial Measures
Capital expenditures, is a non-GAAP financial measure which the Company uses to describe its capital costs associated with oil and gas expenditures. The measure considers both property, plant and equipment expenditures and exploration and evaluation asset expenditures which are items in the Company’s statement of cash flows for the period. In Q3 2022, the Company changed how it presents exploration and evaluation expenditures. Amounts have been restated for prior periods to conform to the current year's presentation, refer to note 2 of the Company's interim consolidated financial statements for the period ended
For the three months ended | ||||||||
($000s) | 2023 | 2022 | 2022 | |||||
Property, plant and equipment expenditures | $ | 83,224 | $ | 83,868 | $ | 111,512 | ||
Exploration and evaluation expenditures | 30,644 | 27,045 | 36,234 | |||||
Capital expenditures | $ | 113,868 | $ | 110,913 | $ | 147,746 |
Free funds flow, is a non-GAAP financial measure that is determined by funds flow provided by operations less capital expenditures. In Q3 2022, the Company changed how it presents exploration and evaluation expenditures included in total capital expenditures. Amounts have been restated for prior periods to conform to the current year's presentation refer to note 2 of the Company's interim consolidated financial statements for the period ended
For the three months ended | |||||||||
($000s) | 2023 | 2022 | 2022 | ||||||
Cash provided by operating activities | $ | 131,273 | $ | 190,607 | $ | 297,569 | |||
Net change in non-cash working capital | 30,451 | 14,881 | (212,375 | ) | |||||
Funds flow provided by operations | 161,724 | 205,488 | 85,194 | ||||||
Capital expenditures | 113,868 | 110,913 | 147,746 | ||||||
Free funds flow | $ | 47,856 | $ | 94,575 | $ | (62,552 | ) |
EBITDA, is a non-GAAP financial measure that is defined as net income adjusted for interest, taxes, depletion, depreciation and amortization. The Company considers EBITDA to be a key measure as it demonstrates Parex’ profitability before interest, taxes, depletion, depreciation and amortization. A reconciliation from net income to EBITDA is as follows:
For the three months ended | |||||||||||
($000s) | 2023 | 2022 | 2022 | ||||||||
Net income | $ | 104,375 | $ | 152,650 | $ | 249,958 | |||||
Adjustments to reconcile net income to EBITDA: | |||||||||||
Finance income | (4,644 | ) | (624 | ) | (4,724 | ) | |||||
Finance expense | 3,704 | 3,816 | 1,542 | ||||||||
Income tax expense (recovery) | 33,172 | 57,505 | (77,339 | ) | |||||||
Depletion, depreciation and amortization | 41,952 | 34,268 | 44,167 | ||||||||
EBITDA | $ | 178,559 | $ | 247,615 | $ | 213,604 |
Operating netback, is a non-GAAP financial measure that the Company considers to be a key measure as it demonstrates Parex’ profitability relative to current commodity prices.
Non-GAAP Ratios
Operating netback per boe, is a non-GAAP financial ratio that the Company considers to be a key measure as it demonstrates Parex’ profitability relative to current commodity prices.
Funds flow provided by operations per boe or FFO netback per boe, is a non-GAAP ratio that includes all cash generated from operating activities and is calculated before changes in non-cash working capital, divided by produced oil and natural gas sales volumes. The Company considers funds flow provided by operations netback per boe to be a key measure as it demonstrates Parex’ profitability after all cash costs relative to current commodity prices.
Basic funds flow provided by operations per share is calculated by dividing funds flow provided by operations by the weighted average number of basic shares outstanding.
Capital Management Measures
Funds flow provided by operations, is a capital management measure that includes all cash generated from operating activities and is calculated before changes in non-cash working capital. The Company considers funds flow provided by operations to be a key measure as it demonstrates Parex’ profitability after all cash costs. A reconciliation from cash provided by operating activities to funds flow provided by operations is as follows:
For the three months ended | |||||||||
($000s) | 2023 | 2022 | 2022 | ||||||
Cash provided by operating activities | $ | 131,273 | $ | 190,607 | $ | 297,569 | |||
Net change in non-cash working capital | 30,451 | 14,881 | (212,375 | ) | |||||
Funds flow provided by operations | $ | 161,724 | $ | 205,488 | $ | 85,194 |
Working capital surplus, is a non-GAAP capital management measure which the Company uses to describe its liquidity position and ability to meet its short term liabilities. Working Capital Surplus is defined as current assets less current liabilities.
For the three months ended | ||||||||
($000s) | 2023 | 2022 | 2022 | |||||
Current assets | $ | 528,744 | $ | 626,916 | $ | 593,602 | ||
Current liabilities | 499,082 | 340,232 | 508,614 | |||||
Working capital surplus | $ | 29,662 | $ | 286,684 | $ | 84,988 |
Supplementary Financial Measures
"Oil and natural gas sales per boe" is determined by sales revenue excluding risk management contracts, as determined in accordance with IFRS, divided by total equivalent sales volume including purchased oil volumes.
"Royalties per boe" is comprised of royalties, as determined in accordance with IFRS, divided by the total equivalent sales volume and excludes purchased oil volumes.
"Production expense per boe" is comprised of production expense, as determined in accordance with IFRS, divided by the total equivalent sales volume and excludes purchased oil volumes.
"Transportation expense per boe" is comprised of transportation expense, as determined in accordance with IFRS, divided by the total equivalent sales volumes including purchased oil volumes.
"Dividends paid per share" is comprised of dividends declared, as determined in accordance with IFRS, divided by the number of shares outstanding at the dividend record date.
"Production per share growth" is comprised of the Company's total oil and natural gas production volumes divided by the weighted average number of basic shares outstanding.
Oil & Gas Matters Advisory
The term "Boe" means a barrel of oil equivalent on the basis of 6 Mcf of natural gas to 1 barrel of oil ("bbl"). Boe’s may be misleading, particularly if used in isolation. A boe conversation ratio of 6 Mcf: 1 Bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6 Mcf: 1Bbl, utilizing a conversion ratio at 6 Mcf: 1 Bbl may be misleading as an indication of value.
This press release contains a number of oil and gas metrics, including, operating netbacks and FFO netbacks. These oil and gas metrics have been prepared by management and do not have standardized meanings or standard methods of calculation and therefore such measures may not be comparable to similar measures used by other companies and should not be used to make comparisons. Such metrics have been included herein to provide readers with additional measures to evaluate the Company's performance; however, such measures are not reliable indicators of the future performance of the Company and future performance may not compare to the performance in previous periods and therefore such metrics should not be unduly relied upon. Management uses these oil and gas metrics for its own performance measurements and to provide security holders with measures to compare the Company's operations over time. Readers are cautioned that the information provided by these metrics, or that can be derived from the metrics presented in this news release, should not be relied upon for investment or other purposes.
Dividend Advisory
The Company's future shareholder distributions, including but not limited to the payment of dividends and the acquisition by the Company of its shares pursuant to an NCIB, if any, and the level thereof is uncertain. Any decision to pay further dividends on the common shares (including the actual amount, the declaration date, the record date and the payment date in connection therewith and any special dividends) or acquire shares of the Company will be subject to the discretion of the Board of Directors of
Advisory on Forward Looking Statements
Certain information regarding
In particular, forward-looking statements contained in this document include, but are not limited to, statements with respect to: the Company’s focus, plans, priorities and strategies; the anticipated timing of the resumption of drilling activity at the Arauca Block; that
These forward-looking statements are subject to numerous risks and uncertainties, including but not limited to, the impact of general economic conditions in
Although the forward-looking statements contained in this document are based upon assumptions which Management believes to be reasonable, the Company cannot assure investors that actual results will be consistent with these forward-looking statements. With respect to forward-looking statements contained in this document,
Management has included the above summary of assumptions and risks related to forward-looking information provided in this document in order to provide shareholders with a more complete perspective on
This press release contains information that may be considered a financial outlook under applicable securities laws about the Company's potential financial position, including, but not limited to:
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