All amounts herein are in
Key Highlights
- Targeting FY 2024 average production of 57,000 boe/d, which is forecast to be 5% year-over-year growth.
- Budgeting FY 2024 capital expenditures(2) of
$410 million , which is expected to be approximately 15% lower than 2023. - Expecting to generate approximately
$625 million of funds flow provided by operations (“FFO”)(3) and roughly$215 million of free funds flow (“FFF”)(2) in 2024 at the midpoint of guidance based on$75 /bbl Brent. - Updated three-year outlook for 2024 through 2026, where annual average production growth is targeted at 5% or higher, excluding high-impact, big ‘E’ exploration potential.
- Discovery at the Arauca-8 exploration well (50% W.I.) where two zones have been successfully tested, with two zones still to be tested in the coming weeks(4).
- Achieved record FY and Q4 average production of 54,356 boe/d and 57,329 boe/d, respectively, in 2023(1).
“Our plan for the year builds on the work completed in 2023 and is focused on increasing overall cash that can be used to reward shareholders. This will be achieved not only through increasing total production, but also through a reduction in year-over-year capital expenditures and the deployment of inventory from our balance sheet. I am optimistic about the promising outcomes that we have seen at Arauca, which are laying the foundation for further follow-ups in an area where we see significant potential,” commented
2024 Budget
- Program includes approximately 35 gross wells, with a targeted capital expenditure(2) guidance range of
$390 to$430 million . - Approximately 75% of capital expenditures(2) are focused on investments in operated blocks.
- Average annual production is expected to be approximately 54,000 to 60,000 boe/d, representing 5% year-over-year growth at the midpoint.
- FFF(2) is estimated to be approximately
$215 million at the midpoint guidance based on$75 /bbl Brent; after paying the Company’s current regular dividend ofC$1.50 per share annualized, which is currently forecast to be roughly$115 million in 2024, leaves an estimated$100 million for further returns to shareholders through regular dividends and share repurchases; additionally, the Company expects to deploy$30 to$50 million of long-lead material and equipment inventory from its balance sheet during the year. - In due course, the Company will submit a notice of intention to make a normal course issuer bid to the
Toronto Stock Exchange for calendar 2024. - Capital plan includes spudding three high-impact, big ‘E’ exploration wells (Blocks: LLA-122, LLA-38 & VIM-1 – 50% W.I.), all of which have the potential to be transformational opportunities for the Company.
(1) See “Production Update – 2023 Review” for a breakdown of production by product type.
(2) Non-GAAP financial measure. See “Non-GAAP and Other Financial Measures Advisory.”
(3) Capital management measure. See “Non-GAAP and Other Financial Measures Advisory.”
(4) See “Arauca Update” for oil and gas testing disclosure; see also “Oil & Gas Matters Advisory.”
2024 Corporate Guidance
The following table summarizes the Company’s 2024 annual guidance.
Category | 2024 Guidance |
Brent Crude Oil Average Price | |
Average Production | 54,000-60,000 boe/d |
Funds Flow Provided by Operations Netback(1)(2) | |
Funds Flow Provided by Operations(3) | |
Capital Expenditures(4) | |
Free Funds Flow(4) |
(1) Non-GAAP ratio. See “Non-GAAP and Other Financial Measures Advisory”.
(2) 2024 assumptions: Vasconia differential:
(3) Capital management measure. See “Non-GAAP and Other Financial Measures Advisory”.
(4) Non-GAAP financial measure. See “Non-GAAP and Other Financial Measures Advisory”.
2024 Netback Sensitivity Estimates
Brent Crude Oil Price ($/bbl) | $65 | $75 | $85 | |||
Effective Tax Rate | 10-12% | 19-21% | 25-27% | |||
Funds Flow Provided by Operations Netback(1) |
(1) Non-GAAP ratio. See “Non-GAAP and Other Financial Measures Advisory”.
2024 Capital Expenditure Breakdown and Activity Overview
Category | Total Capital Expenditures(1) (Midpoint) | Notable Planned Activity |
Development Activities | $210MM |
|
Development Facilities | $90MM |
|
Near-Field Exploration | $40MM |
|
Big ‘E’ Exploration | $50MM |
|
Carry Capital | $20MM |
|
(1) Non-GAAP financial measure. See “Non-GAAP and Other Financial Measures Advisory”.
(2) Subject to the required approvals.
Near-Field Exploration
In 2024,
Big ‘E’ Exploration – High-Impact Targets with Transformational Potential
Llanos Foothills – LLA-122 (50% W.I.): The Arantes well is targeting gas and condensate in the high-potential Foothills trend ofColombia , where historical pool sizes are significant, and wells can be extremely prolific. This prospect was spud in earlyJanuary 2024 with preliminary results expected in H1 2024.- Magdalena – VIM-1 (50% W.I.): The Hydra well is targeting gas and condensate on the VIM-1 Block where
Parex previously had the material La Belleza discovery in 2018.Parex plans to utilize new seismic processing technology to drill this prospect, which is expected to spud mid-year 2024. - Northern Llanos – LLA-38 (50% W.I.): The Berilo Oeste well is targeting light crude oil and gas on an adjacent trend to Arauca. This multi-zone prospect is targeting the same zones as the Arauca-8 well where
Parex has seen positive test results. This prospect is expected to spud in Q4 2024.
Production Update
2023 Review
Average Production | For the three months ended | For the year ended | ||
Product Type | 2023(1) | 2022 | 2023(1) | 2022 |
Light & Medium Crude Oil (bbl/d) | 9,700 | 10,511 | 8,417 | 7,471 |
Heavy Crude Oil (bbl/d) | 46,760 | 42,746 | 45,163 | 43,008 |
5,212 | 6,000 | 4,656 | 9,420 | |
Oil Equivalent (boe/d)(2) | 57,329 | 54,257 | 54,356 | 52,049 |
(1) Production volumes for the three months ended
(2) 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.
Parex’s Q4 2023 average production was 57,329 boe/d, which was an increase of 6% from Q4 2022. During the quarter, the Company experienced multiple factors that led to production being lower than Management’s expectations, including, but not limited to, slower onstream timing because of extended testing and operational setbacks, as well as higher-than expected water cut on a single high-rate well.
Arauca (Business Collaboration Agreement with Ecopetrol S.A. (
“Overall, the initial results that we are seeing from the first two wells at Arauca are promising. The Arauca-8 well has successfully tested the first two zones with discoveries in each, with two more zones to test where logging and pressure measurements show the presence of oil – while the Arauca-15 well is being sidetracked to an optimal location after having demonstrated the presence of hydrocarbons in multiple layers. We are optimistic and planning to proceed with follow-up wells in each area based on the initial results that we are seeing today,” commented
Arauca-8 Exploration Well
Arauca-8 was drilled to a total depth of 21,010 feet as a pacesetting well and encountered the expected Guadalupe, Gacheta, and Une zones. Based on positive wireline logging and modular formation dynamics tester (“MDT”) pressure measurements, a comprehensive testing program commenced, beginning with the Une zone that resulted in a gas discovery that tested at roughly 9.0 MMCFD and over 1,000 barrels of condensate per day(2)(3)(4). Following the successful Une gas test, the Gacheta zone was tested that resulted in an oil discovery that tested at over 6,000 boe/d(2)(3)(5).
In the coming weeks, the remaining zones will be tested, and following that, a formal development and production plan for the area will be developed by
The adjacent follow-up well, Arauca-81, is expected to spud in late Q1 2024(2).
Arauca-15 Well
Although the well came in structurally low, it encountered hydrocarbon sands in the Barco zone and the deeper Une zone that previously had not been penetrated in the area. However, wellbore conditions resulted in an ineffective completion that affected overall test results and compromised the commercial viability of the standalone well.
Based on the vertical seismic profile (“VSP”) from downhole data,
In addition to the sidetrack of Arauca-15, which will be drilled to the originally planned Arauca-11 location,
(1) Ecopetrol S.A. currently holds 100% W.I. in the Convenio Arauca while the assignment procedure is pending.
(2) Subject to the required approvals.
(3) The Arauca-8 well was drilled to a total depth of 21,010 ft in a record time of 69 days, approximately 3.15 kilometers north-east of the Arauca-3 well. The data acquisition program at the Arauca-8 well included wireline logging and MDT pressure measurements in the Guadalupe, Gacheta, and Une formations, indicating the presence of hydrocarbons.
(4) In the Une formation, over a 42-hour period, the well recovered 647 barrels of 50 API condensate and 9.7 MMCF of natural gas, representing an average test rate of 370 barrels of condensate per day and 5.5 MMCFD of gas for a combined rate of 1,293 boe/d. The peak production was at a restricted rate due to facility constraints of 9.0 MMCFD and 1,090 barrels of condensate per day, and the watercut was stable at 0.5% during the last 10 hours of the test. Downhole pressure sensors indicated an average producing drawdown of 1.2% during the flow period, and a maximum drawdown of 2.7% during the peak production period.
(5) In the Gacheta formation, over 38-hour period, the well recovered 2,783 barrels of 28 API crude oil, 3.0 MMCF of solution gas and 406 barrels of water, representing an average test rate of 1,758 barrels of oil per day, 1.9 MMCF of gas, and 256 barrels of water per day, for a combined rate of 2,075 boe/d. The peak production was at a restricted rate due to facility constraints of 5,426 barrels of oil per day and 4.7 MMCFD, for a total of 6,209 boe/d, with the watercut steadily decreasing throughout the test to 4% when the test was terminated due to oil storage capacity. Downhole pressure sensors indicated an average producing drawdown of 6% during the flow period, and a maximum drawdown of 20% during the peak production period.
(6) See “Oil & Gas Matters Advisory”.
Updated Three-Year Outlook
Parex’s updated plan for 2024 through 2026 shows operational sustainability as well as the ability to generate increased FFF(1).
The plan has been updated to include 2026, incorporate Management’s forecast of inflationary impacts, drilling results to date, as well as additional contingency related to well timing and overall field execution.
Highlights of the updated three-year plan, based on a constant
- Annual average production growth of approximately 5% or higher per year;
- Reinvestment ratio(2) of 54 to 66 percent; and
- Cumulative FFF(1) of approximately
$850 million or overC$1.1 billion at current foreign exchange rates.
The plan continues to not include any associated capital and production from successful exploration follow-up that may occur over the outlook period.
Please note that an updated investor presentation has been posted to the Company’s website, which includes additional detail in relation to the updated three-year outlook.
(1) Non-GAAP financial measure. See "Non-GAAP and Other Financial Measures Advisory".
(2) Supplementary financial measure; reinvestment ratio is defined as capital expenditures expressed as a percentage of funds flow provided by operations for the applicable period. See "Non-GAAP and Other Financial Measures Advisory".
Q4 2023 Results - Conference Call & Video Webcast
About
NOT FOR DISTRIBUTION OR 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 National Instrument 52-112 – Non-GAAP and Other Financial Measures Disclosure). Such measures are not standardized financial measures under IFRS, and might not be comparable to similar financial measures disclosed by other issuers. Such financial measures should not be considered as alternatives to, or more meaningful than measures determined in accordance with GAAP. 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.
Please refer to the Company’s Management’s Discussion and Analysis of the financial condition and results of operations for the period ended
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, refer to note 2 of the Company's consolidated interim financial statements for the period ended
Free funds flow, is a non-GAAP 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 consolidated interim financial statements for the period ended
Non-GAAP Ratios
Funds flow provided by operations netback ("FFO netback") 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 FFO netback to be a key measure as it demonstrates
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’s profitability after all cash costs relative to current commodity prices.
Supplementary Financial Measures
Dividends per share is comprised of dividends declared as determined in accordance with IFRS, divided by the number of shares outstanding at the applicable dividend record date.
Reinvestment ratio is capital expenditures expressed as a percentage of funds flow provided by operations for the applicable period.
Oil & Gas Matters Advisory
The term "Boe" means a barrel of oil equivalent on the basis of 6 thousand cubic feet ("Mcf") of natural gas to 1 bbl. Boe may be misleading, particularly if used in isolation. A boe conversion 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 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. A summary of the calculation of FFO netbacks is provided under "Non-GAAP and Other Financial Measures Advisory".
References in this press release to initial production test rates, initial "flow" rates, initial flow testing, and "peak" rates are useful in confirming the presence of hydrocarbons, however such rates are not determinative of the rates at which such wells will commence production and decline thereafter and are not indicative of long-term performance or of ultimate recovery. While encouraging, investors are cautioned not to place reliance on such rates in calculating the aggregate production for
Analogous Information
Certain information in this press release may constitute "analogous information" as defined in NI 51-101. Such information includes production estimates, reserves estimates and other information retrieved from the continuous disclosure record of certain industry participants from www.sedar.com or other publicly available sources. Management of
Advisory on Forward-Looking Statements
Certain information regarding
In particular, forward-looking statements contained in this press release include, but are not limited to, statements with respect to the Company's focus, plans, priorities and strategies and the benefits to be derived from such plans, priorities and strategies;
Although the forward-looking statements contained in this press release 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 press release,
Included in this press release are additional forward-looking statements which are estimates of
These forward-looking statements are subject to numerous risks and uncertainties, including but not limited to, the impact of general economic conditions in
Management has included the above summary of assumptions and risks related to forward-looking information provided in this press release in order to provide shareholders with a more complete perspective on
This press release contains a financial outlook, in particular:
Management does not have firm commitments for all of the costs, expenditures, prices or other financial assumptions used to prepare the financial outlook or assurance that such operating results will be achieved and, accordingly, the complete financial effects of all of those costs, expenditures, prices and operating results are not objectively determinable. The actual results of operations of the Company and the resulting financial results will likely vary from the amounts set forth in the analysis presented in this press release, and such variation may be material. The Company and its management believe that the financial outlook has been prepared on a reasonable basis, reflecting the best estimates and judgments, and represent, to the best of management's knowledge and opinion,
Distribution Advisory
The proposed aggregate quarterly dividend payments of approximately
Abbreviations
The following abbreviations used in this press release have the meanings set forth below:
API | |
bbl | one barrel |
bbl/d | barrels per day |
boe | barrels of oil equivalent of natural gas; one barrel of oil or natural gas liquids for six thousand cubic feet of natural gas |
boe/d | barrels of oil equivalent of natural gas per day |
mcf | thousand cubic feet |
mcf/d | thousand cubic feet per day |
mmcf/d | million cubic feet per day |
W.I. | working interest |
PDF available: http://ml.globenewswire.com/Resource/Download/ecea789d-3638-47d2-b752-dad7d1f81765
For more information, please contact:Mike Kruchten Senior Vice President,Capital Markets & Corporate Planning Parex Resources Inc. 403-517-1733 investor.relations@parexresources.comSteven Eirich Investor Relations & Communications AdvisorParex Resources Inc. 587-293-3286 investor.relations@parexresources.com
Source:
2024 GlobeNewswire, Inc., source