NOT FOR DISTRIBUTION TO US NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED
STATES
Parex Resources Inc. ("Parex", the "Company" or "we") (TSX:PXT), is pleased to
announce financial and operating results for the three months ("fourth quarter")
and year ended December 31, 2011. An update on current field activities and the
Company's drilling schedule for the first half of 2012 are also provided below.
Parex is focused on oil exploration and production in Colombia and Trinidad.
Copies of the Company's consolidated financial statements and the related
Management's Discussion and Analysis ("MD&A") have been filed with Canadian
securities regulatory authorities and will be made available under the Company's
profile at www.sedar.com and on the Company's website at www.parexresources.com.
All amounts herein are in United States dollars unless otherwise stated.
Fourth quarter 2011 highlights:
-- Achieved quarterly oil production of 11,342 barrels of oil per day
("bopd"), a 61% increase over the three months ending September 30,
2011;
-- Realized sales price in Colombia averaged $102.15 per barrel generating
an operating netback of $71.24 per barrel. Throughout the fourth quarter
the Company marketed a significant portion of oil production with a
Brent reference price, realizing an approximate $8 per barrel premium to
WTI on average for the Company's fourth quarter oil sales;
-- Generated funds flow from operations of $63.1 million ($0.58 per share
basic), a 98% increase over the third quarter of 2011. Fourth quarter
funds flow from operations were in excess of the $53.7 million invested
in capital expenditures;
-- Generated adjusted net income of $6.5 million ($0.06 per share basic);
-- Drilled six wells in Colombia (6.0 net);
-- Entered into an agreement to purchase an additional 33.8 percent working
interest in the Moruga Block in Trinidad;
-- Independent reserve evaluation for Colombia as prepared by GLJ Petroleum
Consultants Ltd. ("GLJ") reported proved plus probable reserve growth of
83 percent, increasing from 5.9 million barrels ("mmbbl") of light oil
at year-end 2010 to 10.7 mmbbl of light oil (net company working
interest) at December 31, 2011;
-- Strengthened our balance sheet with working capital increasing from
$77.9 million at September 30, 2011 to $92.9 million at December 31,
2011.
Operating Highlights
Three Months ended
Dec 31, Year ended Dec 31,
(Unaudited)
2011 2010 2011 2010
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Average crude oil volumes
(before royalties) (1)
Crude oil production (bopd) 11,342 306 5,345 77
Crude oil sales (bopd) 10,233 306 4,670 77
Operating netback ($/boe)
Oil and natural gas sales 102.15 89.69 100.43 83.51
Royalties (8.04) (6.21) (8.17) (5.57)
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Net revenue 94.11 83.48 92.26 77.94
Production expense (6.97) (10.14) (6.58) (11.11)
Transportation expense (15.90) (18.71) (16.20) (16.75)
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Operating netback 71.24 54.63 69.48 50.08
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Financial Highlights(2)
($000s except per share amounts)
Oil and natural gas sales 96,169 2,521 171,170 2,621
Net income (loss) 4,477 (1,212) 15,635 (13,531)
Per share - basic 0.04 (0.02) 0.17 (0.20)
Adjusted net income (loss)
(2)(3) 6,470 (1,212) 10,545 (13,531)
Per share - basic 0.06 (0.02) 0.11 (0.20)
Funds flow from (used in)
operations 63,135 1,797 97,916 (7,699)
Per share - basic 0.58 0.03 1.05 (0.12)
Capital expenditures 53,677 13,075 149,643 42,765
Corporate acquisition - cash - - 252,987 -
Total assets 660,177 210,702 660,177 210,702
Working capital surplus 92,893 115,136 92,893 115,136
Convertible Debentures(4) 60,001 - 60,001 -
Long-term debt - - - -
Outstanding shares (end of period) (000s)
Basic 108,300 76,968 108,300 76,968
Diluted(5) 124,963 82,608 124,963 82,608
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1. Excludes 9 boe/d of 2010 natural gas production that was divested prior
to October 1, 2010.
2. The table above contains Non-GAAP measures. See "Non-GAAP Terms" for
further discussion.
3. Net income has been adjusted for the International Financial Reporting
Standards ("IFRS") accounting effects of changes in the derivative
financial liability related to the convertible debenture. Management
considers adjusted net income a better measure of the Company's
financial performance.
4. Face value of the convertible debenture is Cdn $85 million with a
conversion price of $10.15 per share.
5. Diluted shares include the effects of issued stock options and
convertible debenture potential shares. Based on the December 31, 2011
closing stock price of $6.97, diluted shares outstanding not including
out of the money options and convertible debenture potential shares is
112.0 million shares.
Fourth Quarter and Fiscal 2011 Financial Summary
For the fourth quarter of 2011, sales volumes averaged 10,233 bopd (net working
interest before royalty) and the average realized sales price in Colombia was
$102.15 per barrel, generating an operating netback of $71.24 per barrel. Parex
continued to market a significant portion of its crude oil production pursuant
to contracts with Brent benchmark pricing. Not included in fourth quarter sales
was the crude oil inventory of approximately 281,500 barrels of oil.
The Company's adjusted net income for fourth quarter of 2011 was $6.5 million
($0.06 per share basic). Net income of $4.5 million included a $2.0 million
non-cash loss associated with the accounting treatment under IFRS for the
Company's convertible debenture. Funds flow from operations was $63.1 million
($0.58 per share basic), a 98% increase over the third quarter of 2011.
The Company's capital expenditures were $53.7 million in the fourth quarter,
entirely funded from funds flow from operations with surplus funds flow
increasing working capital.
2011 Reserve Summary
As announced on February 15, 2012, the independent reserves report ("GLJ
Report") prepared by GLJ effective December 31, 2011 reported the Company's
reserves in Colombia's Llanos Basin. Proved reserves were approximately 5.0
mmbbl, proved plus probable reserves were approximately 10.7 mmbbl and proved
plus probable plus possible reserves were approximately 17.6 mmbbl.
The Company's three-year average finding and development ("F&D") cost including
future development capital ("FDC") was $39.14 per barrel for total proved plus
probable reserves. Factoring out the Trinidad and Canada capital expenditures
covering areas not evaluated for reserves, the three-year average F&D costs for
the total proved plus probable reserves would have been $33.51 per barrel
representing a recycle ratio of 2.1 times.
Parex' three-year average finding, development & acquisition ("FD&A") cost
including FDC was $43.66 per barrel. Parex' Colombia FD&A (excluding Trinidad
and Canada capital expenditures) was $40.25 representing a recycle ratio of 1.7
times.
Company Total Total Proved plus Probable
Three-Year Average F&D FD&A
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Reserve additions mmbbl 7.7 12.7
Capital(1) $000s 214,791 467,778
Future development capital $000s 85,106 85,106
F&D $/bbl 39.14 43.66
Recycle ratio (2) - three-year
average times 1.8 1.6
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Parex Colombia Total Proved plus Probable
Three-Year Average F&D FD&A
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Reserve additions mmbbl 7.7 12.7
Capital (1) $000s 171,654 424,641
Future development capital $000s 85,106 85,106
F&D $/bbl 33.51 40.25
Recycle ratio (2) - three-year
average times 2.1 1.7
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(1) Total capital expenditures from 2009 to 2011. Capital expenditures for
2009 are disclosed under previous Canadian GAAP prior to the adoption of
IFRS.
(2) Recycle ratio was calculated using 2011 operating netback of $69.48 per
barrel.
The GLJ Report was prepared in accordance with definitions, standards and
procedures contained in the Canadian Oil and Gas Evaluation Handbook and
National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities
("NI 51-101"). Additional reserve information as required under NI 51-101 will
be included in the Company's Annual Information Form which will be filed on
SEDAR by March 30, 2012.
Colombia Exploration Update
The Java exploration prospect is located on Block LLA-16 between the Kona field
and the Sulawesi field along the Kona fault trend. The Company spud Java-1 on
February 26, 2012 and reached total depth of approximately 12,500 feet on March
7, 2012. The C7 and Gacheta formations have been interpreted as potentially
oil-bearing, based on cuttings and logging while drilling. Parex expects to case
and test Java-1 during March 2012 to confirm fluid content and reservoir
productivity. Subject to test results, we expect to skid the existing drilling
and completion rig and drill an appraisal well, Java-2.
Immediately south of the Sulawesi field is the Malawi prospect which is
scheduled to be drilled after the Java prospect during the second quarter of
2012.
North of the Supremo prospect and on the same fault trend, Merida-1 was drilled
and cased in the fourth quarter of 2011. Merida-1 is expected to have similar
reservoir characteristics as the previously drilled Supremo wells and Parex
plans to complete and test Merida-1 during the second quarter of 2012.
On Block LLA-20, the Company has drilled and cased the Cumbre-1 well to a total
depth of 9,500 feet. The C7 and Gacheta formations have been interpreted as
potentially oil-bearing, based on wireline logs and cuttings. Parex expects to
test Cumbre-1 during March 2012 to confirm fluid content and reservoir
productivity.
On Block LLA-30, Parex plans start its 2012 exploration program with the Adalia
prospect. Prospective formations are the C3, C5 and C7 to a maximum drilling
depth of approximately 5,000 feet. The Adalia-1 well is expected to spud in
April 2012 and is planned to be followed by two additional LLA-30 exploration
prospects. In order to deliver its 2012 Block LLA-30 exploration program, Parex'
requires surface access prior to the start of the rainy season. At present,
pre-drill activity of the Adalia location has been delayed due to on-going civil
disruptions in the eastern Llanos region.
As previously reported, the Las Maracas-2 side-track well on the Los Ocarros
Block was drilled to the Mirador Formation and with formation damage tested
rates of up to 938 bopd of 37 degrees API oil under natural flow. Parex has been
designated contract operator of the Los Ocarros Block. For safety reasons, we
have elected not to conduct simultaneous production operations during
construction of the long-term production facility on the existing lease as
inherited by the prior operator. Parex expects to place the Las Maracas-2
sidetrack on a long-term production test within 6-8 weeks. Subject to regulatory
approval in the second quarter of 2012, Parex expects to drill the first
follow-up well to appraise the discovery.
Colombia Operations Update
The Kona-15 well was drilled to test the southern limit of the Gacheta
Formation. There were no Gacheta Formation reserves ascribed to the Kona-15
location in the GLJ Report. The well encountered water bearing reservoir below
the oil-water contact and will be converted to a water disposal well. The next
wells scheduled to be drilled on the Block LLA-16 Kona field are Kona-14 and
Kona-16. Kona-14 is positioned to test the northern limit of the Gacheta and Une
formations. Kona-16 is a Mirador delineation well targeting a southern extension
of the field. Currently, Parex is actively recompleting Kona wells in order to
optimize field production.
Sulawesi-1 and Sulawesi-2 are currently producing from the Mirador and C7
formations respectively. During the second quarter of 2012 Parex expects to test
the Gacheta Formation in the Sulawesi-4 well and, if unsuccessful, will be
converted to a water disposal well. Following the commissioning of a water
disposal well, the currently shut-in Sulawesi-3 is expected to produce from the
Mirador Formation.
Current production is approximately 12,500 bopd and as previously reported Parex
expects first-quarter 2012 production to average approximately 12,000-13,000
bopd. Current civil disruptions in the eastern Llanos region have not impacted
production; however as noted above, pre-drill activity on Block LLA-30 has been
limited.
Trinidad Exploration Update
We had previously reported that the Firecrown-1 well, located on the onshore
Moruga Block, had reached a qualifying depth of 10,300 feet and penetrated the
primary and secondary objectives in the Herrera Formation, however that we were
unable to properly evaluate these objectives due to non-repairable cement
conditions in the well. The Company has imported a larger and more modern rig to
re-enter Firecrown-1 and sidetrack the well to evaluate both objectives. The rig
has re-entered the well and is currently drilling. Parex expects to case and
test Firecrown-1 ST2 by the end of April 2012.
The Green Hermit prospect is located on the Moruga Block between the Carapal
Ridge field and the Snowcap fault block. The Company spud Green Hermit-1 on
March 8, 2012. Parex' working interest for the Moruga Block is 83.8% subject to
closing of the purchase of the additional 33.8% working interest.
The Company plans to start drilling its first high-impact Central Range Block
("CRB") Deep well, Tigre-1 during the second quarter of 2012. Construction
activities are on-going.
First-Half 2012 Drilling Schedule
A summary of the near-term exploration and appraisal drilling program is
provided below:
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# Prospect Block Expected Timing
1 Kona-14 LLA-16 Spud March 2012
2 Kona-16 LLA-16 Spud Q2 2012
Spud Feb 26. TD March 7. Case
3 Java-1 LLA-16 and test.
4 Merida-1 LLA-16 Testing Q2 2012
5 Malawi-1 LLA-16 Spud Q2 2012
Spud Feb 21. TD March 2. Case
6 Cumbre-1 LLA-20 and test.
Produce LM-2ST and spud
7 Las Maracas Los Occaros appraisal well Q2 2012
8 Adalia-1 LLA-30 Spud Q2 2012
9 Earning Well-1 El Eden Spud Q2 2012
10 Firecrown-1 ST2 Trinidad Moruga Drilling sidetrack
11 Green Hermit-1 Trinidad Moruga Drilling
12 Tigre-1 Trinidad CRB Deep Spud Q2 2012. Constructing
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For 2012 Parex maintains its previously provided guidance that capital
expenditure plans in Colombia and Trinidad of $230-$275 million and exit rate
production of approximately 17,000 bopd, net before royalty.
Conference Call Information
Parex will host a conference call to discuss these results on Wednesday, March
14, 2012 at 10:30 am MST (12:30 pm EST). Media, analysts and investors wishing
to participate can access it by calling 1-866-696-5910, pass code: 3726765.
The live audio will be carried at:
http://bellwebcasting.ca/audience/index.asp?eventid=58285158
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 its 223,500 acre holdings onshore
Trinidad. Parex is headquartered in Calgary, Canada.
Non-GAAP Terms
Funds flow used in, or from operations, working capital, adjusted net income,
operating netback per barrel and net debt may from time to time be used by the
Company, but do not have any standardized meaning under IFRS 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, or
from operations is reconciled with net earnings 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 but may not
include the change in non-cash working capital from one period to the next.
Adjusted net income is determined by adding back any losses or deducting any
gains associated with the Company's derivative financial liability. 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). 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.
Reserve Advisory
"Proved" reserves are those reserves that can be estimated with a high degree of
certainty to be recoverable. It is likely that the actual remaining quantities
recovered will exceed the estimated proved reserves.
"Probable" reserves are those additional reserves that are less certain to be
recovered than proved reserves. It is equally likely that the actual remaining
quantities recovered will be greater or less than the sum of the estimated
proved plus probable reserves.
"Possible" reserves are those additional reserves that are less certain to be
recovered than probable reserves. There is a 10 percent probability that the
quantities actually recovered will equal or exceed the sum of proved plus
probable plus possible serves. It is unlikely that the actual remaining
quantities recovered will exceed the sum of the estimated proved plus probable
plus possible reserves.
All evaluations and reviews of future net cash flow are stated prior to any
provision for interest costs or general and administrative costs and after the
deduction of estimated future capital expenditures for wells to which reserves
have been assigned. It should not be assumed that the estimated future net cash
flow shown below are representative of the fair market value of the Company's
properties. There is no assurance that such price and cost assumptions will be
attained, and variances could be material. The recovery and reserve estimates of
crude oil reserves provided are estimates only, and there is no guarantee that
the estimated reserves will be recovered. Actual crude oil reserves may be
greater or less than the estimates provided.
Readers are cautioned that test results disclosed herein are not necessarily
indicative of long-term performance or of ultimate recovery.
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, plans for and results of drilling activity, 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 and wells; 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; expected
production in the first quarter 2012; quarter over quarter growth; timing of
drilling and completion; planned capital expenditures, the timing thereof and
the source of funding for such capital expenditures; and details of the
Company's exploration drilling and testing program. 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 factors described under "Risk Factors" in the Company's annual
information form for the year ended December 31, 2010; and other factors, many
of which are beyond the Company's control. Readers are cautioned that the
foregoing list of factors is not exhaustive. Additional information on these and
other factors that could effect 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 on
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; 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' 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 news release does not constitute an offer to sell securities, nor is it a
solicitation of an offer to buy securities, in any jurisdiction.
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