CALGARY, Alberta, Nov. 06, 2019 (GLOBE NEWSWIRE) -- Parex Resources Inc. (“Parex” or the “Company”) (TSX:PXT), a company focused on Colombian oil exploration and production, announces its unaudited financial and operating results for the three months ended September 30, 2019 (“Third Quarter” or “Q3”). All amounts herein are in United States Dollars (“USD”) unless otherwise stated.
Please note Parex will hold a conference call on Thursday, November 7, 2019 beginning at 9:30 am Mountain Time to discuss the Third Quarter results.
2019 Third Quarter Highlights: Executing Share Buy-backs and Growing Working Capital
- Funds flow provided by operations ("FFO") of $142.7 million ($0.99 (or CAD $1.31)(1) per share basic);
- Capital expenditures ("Capex") were $48.6 million in the period and $149.9 million year to date. Capital expenditures were funded from FFO. Parex expects to invest approximately $220-230 million in capital projects in 2019;
- Utilized a portion of free cash flow of $94.1 million to purchase 3,150,000 of the Company's common shares for a total cost of $50.2 million (average price of CAD$21.11/share) pursuant to the Company's normal course issuer bid program ("NCIB");
- Quarterly production was 53,045 barrels of oil equivalent per day ("boe/d")(98% crude oil), representing a production per share increase of 5% over the previous quarter ended June 30, 2019 and an increase of 27% on a per basic share basis over the prior year comparative period;
- Earned net income of $57.3 million ($0.40 per share basic) compared to net income of $101.5 million ($0.69 per share basic) in Q2 2019;
- Generated an operating netback of $36.21 per boe and FFO netback of $29.61 per boe from an average Brent price of $62.03 per barrel ("bbl");
- Working capital was $279.9 million (CAD $2.58 per share basic)(2) at September 30, 2019 compared to $240.1 million at June 30, 2019 and $143.2 million at September 30, 2018. The Company has an undrawn syndicated bank credit facility of $200.0 million; and
- Participated in drilling 9 gross (5.30 net) wells(3) in Colombia resulting in 8 oil wells and 1 well under test, for a success rate of 100%.
(1) Using USD-CAD Bank of Canada 2019 Q3 average rate of 1.3204.
(2) Using USD-CAD Bank of Canada September 30, 2019 rate of 1.3243 and outstanding shares.
(3) Oil wells: Block Cabrestero: Bacano Oeste-2; Block Boranda: Boranda-3 and Block LLA-34: Tigana Sur-13 & 14, Jacana 28, 29 & 51 and Guaco-1. Under test: Block Capachos: Andina-3
|Three Months Ended||Nine months ended|
|Sept 30,||June 30,||Sept 30,|
|Average daily production|
|Oil & Gas (boe/d)||53,045||45,020||52,252||52,173|
|Average daily sales of produced oil & natural gas|
|Oil & Gas (boe/d)||52,401||43,600||51,971||51,752|
|Oil inventory - end of period (bbls)||175,813||324,300||116,592||175,813|
|Operating netback ($/boe)(1)|
|Reference price - Brent ($/bbl)||62.03||75.84||68.52||64.79|
|Oil & natural gas revenue (excluding hedging)||53.59||61.69||59.92||55.33|
|Operating netback ($/boe)(1)||36.21||44.41||41.25||37.90|
|Funds flow provided by operations ($/boe)(1)(4)||29.61||37.55||31.92||30.24|
|Financial (USD$000s except per share amounts)|
|Oil and natural gas revenue||275,693||250,909||301,750||824,037|
|Per share - basic||0.40||0.57||0.69||1.63|
|Funds flow provided by operations(1)(4)||142,733||150,616||150,973||427,211|
|Per share - basic||0.99||0.97||1.03||2.90|
|Working capital surplus||279,949||143,243||240,087||279,949|
|Outstanding shares (end of period) (000s)|
|Weighted average basic||144,081||155,424||147,016||147,531|
(1) The table above contains Non-GAAP measures. See “Non-GAAP Terms” for further discussion.
(2) Borrowing limit of $200.0 million as of September 30, 2019.
(3) Diluted shares as stated include the effects of common shares and in-the-money stock options outstanding at the period-end. The September 30, 2019 closing stock price was Cdn$20.30 per share.
(4) In the second quarter of 2019, Parex changed the way it calculates and presents funds flow from operations. For further details refer to the "Non-GAAP Terms" on page 22 of the Company's Q2 2019 MD&A. Comparative periods have also been adjusted for this change.
Production: We expect Q4 2019 production average to exceed 53,500 boe/d.
Capachos: (WI Parex 50%, Ecopetrol S.A. 50%): A service rig is currently performing a work-over on the Capachos-2 (Centro pad) well and will be moving to the Andina-3 development well in November 2019 for completion and production activities.
Q4 2019 Exploration program:
|Block||Prospect Name||Current status|
|LLA-32||Azogue||Spud November 2019|
|LLA-10||Tautaco||Drilling at 14,500 feet (TD 16,560 ft)|
|Aguas Blancas||Southern Extent||Spud November 2019|
|CPO-11||Daisy||Spud November 2019|
|VIM-1||La Belleza||Drilling at 9,840 feet (TD 12,080 ft)|
|Fortuna||170km2 3D Seismic||In progress|
2020 Corporate Guidance
As per the Company's normal annual disclosure practices, provided below is Parex’ corporate guidance for 2020:
|2019 Estimate||2020 Guidance|
|Brent crude average price||$63/bbl||$60/bbl|
|Production (average for period)||52,500-53,000 boe/d||54,500-56,250 boe/d|
|Total Capital Expenditures||$220-$230 million||$210-$240 million|
|Funds Flow provided by Operations (FFO)(1)||$550-$560 million||$520-$550 million|
|Free Funds Flow (FFO mid-point less Total Capex mid-point)||$330 million||$310 million|
|Outstanding shares (end of period)(2)||143 million||130 million|
|Production per share growth||26%||14%|
(1) Assumes Brent/Vasconia crude differential less than $3/bbl.
(2) It is expected free funds flow will be used to fund the 2020 share buy-back program and assumes TSX approval of the program renewal in December 2019. Outstanding shares at Dec 31, 2020 assumes 1 million units of equity settled LTI exercised in the period.
The planned capital expenditures are split between maintenance, development/appraisal and exploration/new growth programs. The midpoint of the 2020 production guidance reflects year-over-year growth of approximately 5% as compared to 2019 and does not include potential production volumes resulting from the 11 wells included in the exploration program.
Under this guidance scenario, at current Brent pricing levels of $60/bbl, the Company expects to generate a significant amount of free cash flow. With forecast working capital to be in excess of $300 million at December 31, 2019 and significant free cash flow in 2020, the Company will have significant optionality to invest in conventional growth opportunities, that may include jurisdictions outside Latin America.
2020 Netback Sensitivity Estimates
|Brent crude price ($/bbl)||$55||$60||$65|
|Operating Netback ($/boe)||$29.75||$33.50||$37.50|
|Effective tax rate (%)(1)||15%||17%||19%|
|FFO Netback ($/boe)(2)||$23.75||$26.50||$29.00|
(1) Effective tax rate is the expected current tax effective rate on funds flow from operations.
(2) Assumes Brent/Vasconia crude differential less than $3/bbl.
Share Repurchases: On December 21, 2018, Parex began a NCIB with the intent to repurchase for cancellation approximately 15.0 million shares (10% of public float). As at October 11, 2019, the Company repurchased the maximum amount of shares under its NCIB (approximately 15.0 million shares) at an average cost of C$20.21 per share for a total of C$304 million. Basic shares outstanding as at November 6, 2019 were 142.9 million compared to 155.0 million as at December 31, 2018. The total cost of the NCIB program was funded from free cash flow. As at September 30, 2019, Parex' cash balance was USD$350 million and working capital was USD$280 million (December 31, 2018 USD$219 million).
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 working capital, including exploration growth, business development and share repurchases.
Q3 2019 Conference Call & Webcast
Parex will host a conference call to discuss the Third Quarter results on Thursday, November 7, 2019 beginning at 9:30 am Mountain Time. To participate in the conference call or webcast, see details below:
|Toll-free dial number (Canada/US)||1-866-696-5910|
|International dial-in number||Click to access the dial-in number of your location|
|Webcast||Join the audio webcast|
This news release does not constitute an offer to sell securities, nor is it a solicitation of an offer to buy securities, in any jurisdiction.
For more information, please contact:
Senior Vice President, Capital Markets & Corporate Planning
Parex Resources Inc.
Phone: (403) 517-1733
NOT FOR DISTRIBUTION OF FOR DISSEMINATION IN THE UNITED STATES
The Company discloses several financial measures ("non-GAAP Measures") herein that do not have any standardized meaning prescribed under International Financial Reporting Standards ("IFRS"). These financial measures include operating netback per boe, funds flow provided by operations, funds flow provided by operations netback, and free funds flow. Management uses these non-GAAP measures for its own performance measurement and to provide shareholders and investors with additional measurements of the Company’s efficiency and its ability to fund a portion of its future capital expenditures.
The Company considers operating netbacks per boe to be a key measure as it demonstrates Parex' profitability relative to current commodity prices. The following is a description of each component of the Company's operating netback per boe and how it is determined:
- Oil and natural gas sales per boe is determined by sales revenue excluding risk management contracts divided by total equivalent sales volume including purchased oil volumes.
- Royalties per boe is determined by dividing royalty expense by the total equivalent sales volume and excludes purchased oil volumes;
- Production expense per boe is determined by dividing production expense by total equivalent sales volume and excludes purchased oil volumes; and
- Transportation expense per boe is determined by dividing transportation expense by the total equivalent sales volumes including purchased oil volumes.
Funds flow provided by operations is a non-GAAP measure that includes all cash generated from operating activities and is calculated before changes in non-cash working capital. In Q2 2019, the Company changed how it presents funds flow provided by operations to present a more comparable basis to industry presentation.
Funds flow provided by operations per boe is a non-GAAP measure 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.
Free funds flow is determined by funds flow provided by operations less capital expenditures.
Shareholders and investors should be cautioned that these measures should not be construed as an alternative to net income or other measures of financial performance as determined in accordance with IFRS. Parex' method of calculating these measures may differ from other companies, and accordingly, they may not be comparable to similar measures used by other companies. Please see the Company's most recent Management’s Discussion and Analysis, which is available at www.sedar.com for additional information about these financial measures and for a reconciliation of the non-GAAP measures.
Oil & Gas Matters Advisory
The term "Boe" means a barrel of oil equivalent on the basis of 6 Mcf of natural gas to 1 bbl of oil. 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. 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 metric 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.
Advisory on Forward Looking Statements
Certain information regarding Parex set forth in this document contains forward-looking statements that involve substantial known and unknown risks and uncertainties. The use of any of the words "plan", "expect", “prospective”, "project", "intend", "believe", "should", "anticipate", "estimate", “forecast”, "guidance", “budget” or other similar words, or statements that certain events or conditions "may" or "will" occur are intended to identify forward-looking statements. Such statements represent Parex' internal projections, estimates or beliefs concerning, among other things, future growth, results of operations, production, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, plans for and results of drilling activity, environmental matters, business prospects and opportunities. These statements are only predictions and actual events or results may differ materially. Although the Company’s management believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievement since such expectations are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Many factors could cause Parex' actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, Parex.
In particular, forward-looking statements contained in this document include, but are not limited to, statements with respect to the Company's operational strategy and focus; the Company's expected 2019 capex; the 2019 and 2020 capital expenditures, its allocation, and the Company's plans to fund its 2019 and 2020 capital programs from funds flow from operations and its plans to retain working capital for future opportunities and to buy back outstanding shares; the Company's forecasted 2019 and 2020 funds flow provided by operations based on certain oil prices; the Company's anticipated free funds flow for 2019 and 2020; the Company's estimated 2019 and 2020 average production and the expected average production for Q4 2019; Q4 2019 exploration plan and expected timing thereof; the Company's expectation regarding 2019 and 2020 Brent oil prices; the Company's estimated outstanding shares at end of period 2019 and 2020 and underlying assumptions; the estimated production growth for 2019 and 2020 and year-over-year production growth; the expectation that Parex will generate a significant amount of free cash flow and its forecasted working capital at December 31, 2019; future growth opportunities; potential options for its surplus working capital; the expectation of Parex to renew its NCIB and the expected timing thereof; and the expectation that the NCIB will be founded from existing working capital or free funds flow.
These forward-looking statements are subject to numerous risks and uncertainties, including but not limited to, the impact of general economic conditions in Canada and Colombia; volatility in commodity prices; industry conditions including changes in laws and regulations including adoption of new environmental laws and regulations, and changes in how they are interpreted and enforced, in Canada and Colombia; competition; lack of availability of qualified personnel; the results of exploration and development drilling and related activities; obtaining required approvals of regulatory authorities, in Canada and Colombia; risks associated with negotiating with foreign governments as well as country risk associated with conducting international activities; volatility in market prices for oil; fluctuations in foreign exchange or interest rates; environmental risks; changes in income tax laws or changes in tax laws and incentive programs relating to the oil industry; changes to pipeline capacity; ability to access sufficient capital from internal and external sources; risk that Parex' evaluation of its existing portfolio of development and exploration opportunities is not consistent with its expectations; that production test results may not necessarily be indicative of long term performance or of ultimate recovery; failure to reach production targets; and other factors, many of which are beyond the control of the Company. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect Parex' operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).
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, Parex has made assumptions regarding, among other things: current and anticipated commodity prices and royalty regimes; availability of skilled labour; timing and amount of capital expenditures; future exchange rates; the price of oil, including anticipated Brent oil prices; the impact of increasing competition; conditions in general economic and financial markets; availability of drilling and related equipment; receipt of partner, regulatory and community approvals; royalty rates; future operating costs; effects of regulation by governmental agencies; uninterrupted access to areas of Parex’ operations and infrastructure; recoverability of reserves and future production rates; timing of drilling and completion of wells; on-stream timing of production from successful exploration wells; operational performance of non-operated producing fields; pipeline capacity; that Parex will have sufficient cash flow, debt or equity sources or other financial resources required to fund its capital and operating expenditures and requirements as needed; that Parex' conduct and results of operations will be consistent with its expectations; that Parex will have the ability to develop its oil and gas properties in the manner currently contemplated; current or, where applicable, proposed industry conditions, laws and regulations will continue in effect or as anticipated as described herein; that the estimates of Parex' reserves and production volumes and the assumptions related thereto (including commodity prices and development costs) are accurate in all material respects; that Parex will be able to obtain contract extensions or fulfill the contractual obligations required to retain its rights to explore, develop and exploit any of its undeveloped properties; and other matters.
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 Parex' current and future operations and such information may not be appropriate for other purposes. Parex' actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do, what benefits Parex will derive. These forward-looking statements are made as of the date of this document and Parex disclaims any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.
This press release and, in particular the information in respect of the Company's expected capital expenditures for 2019, may contain future oriented financial information ("FOFI") within the meaning of applicable securities laws. The FOFI has been prepared by management to provide an outlook of the Company's financial results and activities and may not be appropriate for other purposes. The FOFI has been prepared based on a number of assumptions including the assumptions discussed in this press release. The actual results of operations of the Company and the resulting financial results may vary from the amounts set forth herein, and such variations may be material. The Company and management believe that the FOFI has been prepared on a reasonable basis, reflecting management’s best estimates and judgments. FOFI contained in this press release was made as of the date of this press release and Parex disclaims any intent or obligation to update publicly the press release, whether as a result of new information, future events or otherwise, unless required pursuant to applicable law.