Parex Resources Announces 2012 Budget
December 05 2011 - 7:50AM
Marketwired Canada
NOT FOR DISTRIBUTION TO US NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED
STATES
Parex Resources Inc. ("Parex" or the "Company") (TSX:PXT), a company focused on
oil exploration and production in Colombia and Trinidad, announces its 2012
guidance. All amounts below are in United States dollars unless otherwise
stated.
Parex 2012 Budget Summary
Building on our 2011 operational and exploration success, Parex currently plans
a self funding 2012 capital investment program of $230-$275 million for
exploration and development operations in Colombia and Trinidad resulting in a
2012 production exit rate of approximately 17,000 bopd.
Key highlights:
-- High Colombia operating netback production provides for a self-funding
capital program and exit rate production growth of 20 percent;
-- Exploration activities across seven Colombia Llanos Basin blocks;
-- Focused program to test high impact onshore Trinidad prospects; and
-- Balance sheet strength to capitalize on new business opportunities.
A summary of the 2012 capital plans is provided below:
# Wells Planned Capex (Net $ million)
------------------------------ -------------------------------
Facilities &
Gross Net Drilling Seismic Capex Total
--------------------------------------------------------------
Colombia 20-25 20-23 165-185 25-35 190-220
Trinidad 5-10 3-7 30-40 10-15 40-55
Parex Total 25-35 23-30 195-225 35-50 230-275
In addition to an exploration program that accesses Parex' 814,000 gross acres
in Colombia's Llanos Basin, the Company is budgeting for a comprehensive
exploration program in onshore Trinidad, targeting high impact prospects in the
Central Range and Moruga blocks. The 2012 capital program is expected to be
fully funded from funds flow from operations. Additionally, Parex could increase
its 2012 program through accessing its existing $78 million of working
capital(1).
During the second quarter of 2012, Parex expects to provide a forecast of 2012
average production for its Colombia operation after evaluating the dry season
(typically Dec-March) exploratory drilling results. The Colombian production
average has inherent uncertainty due to its exploration focus and seasonal
constraints impacting timing of exploration work.
Colombia 2012 Capital Program Outlook
During 2012 Parex plans to drill 20-25 gross wells on seven blocks across its
Colombian portfolio. The number of wells drilled and the split between
exploration and appraisal/delineation is heavily dependent on timing of
regulatory approvals, seasonal variability and drilling success.
2012 Colombia Drilling Program
------------------------------
Los
LLA-16 LLA-20 LLA-29 LLA-30 LLA-57 Ocarros El Eden Total
----------------------------------------------------------------------------
# of gross
wells 8-10 3-4 1-2 4 2 1-2 1 20-25
During 2012, we plan on maintaining our current drilling activity by operating
three drilling rigs and one service rig on a continuous basis. The range of
capital investment reflects the exploration focus of the Company's operations in
Colombia.
Trinidad 2012 Capital Program Outlook
In 2012 Parex is embarking on an expanded Trinidad exploration program. The
Company has budgeted to operate with two newly imported rigs and drill 5-10
wells, for which regulatory approval has been received for four wells. The
planned 2012 exploration program includes drilling on the Central Range Block
("CRB") and on the Moruga Block as summarized below.
2012 Trinidad Drilling Program
------------------------------
Moruga CRB Shallow CRB Deep Total
---------------------------------------------------
# of gross wells 2-5 1-3 2 5-10
Parex has entered into an agreement to purchase an additional 33.8 percent
interest in the Moruga Block for approximately $10 million. Upon closing, Parex'
working interest in the Moruga Block would be 83.8 percent. The Company is
currently importing a drilling rig which is expected to mobilize on the Moruga
Block Firecrown location during December 2011.
2012 Outlook Key Assumptions
Key assumptions underlining the 2012 capital program are:
-- Oil prices remain approximately WTI $90/bbl and Brent $105/bbl;
-- Operating netback(2) of $65/bbl;
-- Colombia effective tax rate on cash flow of less than or equal to 20
percent; and
-- Regulatory and partner approvals are obtained at a similar pace to 2011
in Colombia and are obtained in a timely manner in Trinidad.
An updated corporate presentation has been posted at
http://www.parexresources.com/sites/default/files/presentations.pdf.
Operation Update
With the recent production addition of Kona-9, the current light oil production
is approximately 13,000 bopd, on-track to achieve the exit rate guidance of
14,000 bopd. In addition:
-- Drilling operations have begun on Trinidad CRB Mapepire prospect;
-- Kona Norte-2 water disposal well was dual zone completed and tested oil
in the Mirador Formation;
-- Merida exploration well is drilling at 10,500 feet;
-- Supremo-2 well drilled and awaiting testing;
-- Kona-7 has has cored the Mirador Formation and is being drilled to TD in
the Gacheta formation prior to running casing; and
-- Civil work on LLA-16 exploration prospect Java and LLA-20 prospect
Cumbre is progressing.
Corporate Overview
Parex, through its direct and indirect subsidiaries, is engaged in oil and
natural gas exploration, development and production in South America and the
Caribbean region. Parex is conducting exploration activities on its 814,000 acre
holdings in the Llanos Basin of Colombia and 223,500 acre holdings onshore
Trinidad. Parex is headquartered in Calgary, Canada.
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.
GAAP and Non-GAAP Terms
Effective January 1, 2011, Parex adopted International Financial Reporting
Standards ("IFRS"). The Corporation's interim consolidated financial statements
and the 2010 comparative information has been prepared under IFRS which are
generally accepted accounting principles ("GAAP") for publically accountable
enterprises in Canada.
Funds flow used in, or from operations, cash flow, working capital, operating
netback per barrel and total net debt may from time to time be used by the
Company, but do not have any standardized meaning under IFRS and Canadian GAAP
and may not be comparable to similar measures presented by other companies.
Funds flow used in, or from operations includes all cash generated from
operating activities and is calculated before changes in non-cash working
capital. Funds flow used in operations is reconciled with comprehensive net
income (loss) in the Consolidated Statements of Cash Flows. Funds flow per share
is calculated by dividing funds flow used in, or from operations by the weighted
average number of shares outstanding. Working capital includes current assets
less current liabilities. Operating netback per barrel equals sales revenue,
less royalties, production expense and transportation expense, divided by total
equivalent sales volume. Total net debt is a non-GAAP measure defined as the sum
of working capital less the convertible debentures (excluding the derivative
financial liability associated with the convertible debentures). The principal
amount of the convertible debentures is CDN$85 million. 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 growth expenditures.
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" 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's 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 performance
characteristics of the Company's oil properties; supply and demand for oil;
financial and business prospects and financial outlook; results of drilling and
testing, results of operations; drilling plans; activities to be undertaken in
various areas; capital plans in Colombia and exit rate production; plans to
acquire and process 3-D seismic; timing of drilling and completion; and planned
capital expenditures and the timing thereof. In addition, statements relating to
"reserves" or "resources" are by their nature forward-looking statements, as
they involve the implied assessment, based on certain estimates and assumptions
that the resources and reserves described can be profitably produced in the
future. The recovery and reserve estimates of Parex' reserves provided herein
are estimates only and there is no guarantee that the estimated reserves will be
recovered.
These forward-looking statements are subject to numerous risks and
uncertainties, including but not limited to, the impact of general economic
conditions in Canada, Colombia and Trinidad & Tobago; 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, Colombia and Trinidad & Tobago; 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, Colombia and Trinidad & Tobago; 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; ability to access sufficient capital from internal and external
sources; the risks that any estimate of potential net oil pay is not based upon
an estimate prepared or audited by an independent reserves evaluator; that there
is no certainty that any portion of the hydrocarbon resources will be
discovered, or if discovered that it will be commercially viable to produce any
portion thereof; 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 effect
Parex's 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: current commodity prices
and royalty regimes; availability of skilled labour; timing and amount of
capital expenditures; future exchange rates; the price of oil; the impact of
increasing competition; conditions in general economic and financial markets;
availability of drilling and related equipment; effects of regulation by
governmental agencies; receipt of all required approvals for the Acquisition;
royalty rates, future operating costs, 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's current and future operations and such
information may not be appropriate for other purposes. Parex's 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
there from. 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.
(1) Unaudited as at September 30, 2011.
(2) Operating netback is defined as oil sales less royalties, production expense
and transportation expense
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