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, is pleased to report
its unaudited interim financial and operating results for the three months ended
September 30, 2011 ("Third Quarter"). 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 below are in United
States dollars unless otherwise stated.
Third Quarter highlights include:
-- Generated funds flow from operations of $31.8 million ($0.29 per share
basic);
-- Achieved quarterly oil production of 7,031 barrels of oil per day
("bopd"), a 334% increase over the second quarter of 2011;
-- Realized sales price in Colombia was $97.64 per barrel generating an
operating netback of approximately $67 per barrel. Throughout the Third
Quarter the Company marketed a significant portion of oil production
with a Brent related price realizing an approximate $8 per barrel
premium to WTI on average for the Company's Third Quarter oil sales;
-- Drilled four oil wells in Colombia (3.5 net) including light oil
discoveries in the Sulawesi-1 well and in the Las Maracas-2 side-track
well;
-- Signed Llanos basin El Eden Block farm-in;
-- Spud Cribo-1, the Company's first onshore Trinidad Central Range Shallow
Block well;
-- Graduated from the TSX Venture Exchange to the Toronto Stock Exchange
effective October 5, 2011; and
-- Maintained a strong balance sheet with cash and cash equivalents of
$93.3 million and working capital of $77.9 million at September 30,
2011.
Third Quarter Financial Summary
Sales volumes, net working interest before royalty, for the Third Quarter of
2011 averaged 6,058 bopd. During the Third Quarter of 2011 the realized sales
price in Colombia was $97.64 per barrel generating an operating netback of
$67.40 per barrel. During the Third Quarter Parex continued to market a
significant portion of its crude oil production pursuant to contracts with Brent
benchmark pricing. Not included in Third Quarter sales was the net increase in
crude oil inventory of approximately 89,500 barrels of oil.
For the Third Quarter of 2011, the Company's net income was $14.8 million ($0.14
per share basic) and funds flow from operations was $31.8 million ($0.29 per
share basic).
The Company's capital expenditures for Third Quarter were $54.4 million, with
$49.8 million invested in Colombia and $4.6 million invested in Trinidad.
Capital expenditures were funded from available cash and funds flow from
operations.
Three Months ended Nine Months ended
Sept 30, Sep 30,
(Unaudited) 2011 2010 2011 2010
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Operational
Average daily production
Oil (bopd) 7,031 - 3,324 -
Natural gas (boe/d) - 11 - 12
Total (boe/d) 7,031 11 3,324 12
Average daily sales
Oil (bopd) 6,058 - 2,795 -
Natural gas (boe/d) - 11 - 12
Total (boe/d) 6,058 11 2,795 12
Operating netback
($/boe)
Oil and natural gas
sales 97.64 31.13 98.30 30.62
Royalties (8.04) - (8.33) -
----------------------------------------------------------------------------
Net revenue 89.60 31.13 89.97 30.62
Production expense (6.15) (22.70) (6.11) (19.45)
Transportation expense (16.05) - (16.56) -
----------------------------------------------------------------------------
Operating netback 67.40 8.43 67.30 11.17
Financial
($000s except per share
amounts)
Oil and natural gas
sales 54,429 32 75,001 100
Net income (loss) 14,823 (4,297) 11,158 (12,319)
Per share - basic 0.14 (0.07) 0.13 (0.19)
Per share - diluted 0.13 (0.07) 0.12 (0.19)
Funds flow from (used
in) operations 31,814 (3,555) 35,109 (9,497)
Per share - basic 0.29 (0.06) 0.40 (0.15)
Per share - diluted 0.27 (0.06) 0.38 (0.15)
Capital expenditure
Exploration &
Development - Colombia 49,788 8,953 86,278 17,726
Exploration &
Development - Trinidad 4,591 3,663 9,518 11,966
Corporate Acquisition -
cash - - 252,987 -
Total assets 619,240 128,503 619,240 128,503
Working capital surplus 77,890 57,188 77,890 57,188
Convertible debentures 57,226 - 57,226 -
Long-term debt - - - -
Total net debt (surplus)
(20,664) (57,188) (20,664) (57,188)
Outstanding shares (end
of period) (000s)
Basic 108,215 63,870 108,215 63,870
Diluted 122,295 68,032 122,295 68,032
Colombia Update
Third Quarter and recent operational results were previously disclosed in our
release dated October 25, 2011. Since October 26, 2011 oil production has
averaged approximately 11,000 bopd. A service rig is being mobilized to the Kona
Norte-2 well to complete it as a water disposal well. Until Kona Norte-2 is
on-line, Kona field production may be restricted due to water disposal
constraints. Prior to the end of December 2011, Parex expects that Kona-7 and
Kona-9 wells will be drilled and producing. Although the Company is building
contingency plans for possible oil trucking disruptions around the December
holiday season, oil sales in the Llanos Basin are typically restricted over this
two week period.
The Sulawesi-3 well was spud on August 29, 2011 as a follow-up appraisal well to
the north of Sulawesi-1 and the drilling rig was released on September 30, 2011.
The primary objectives of Sulawesi-3 well were the Mirador Formation and the
lower C7 Formation as seen in the Sulawesi-1 well. As expected, Sulawesi-3 well
logs indicated that the upper C7 Formation was faulted out and not present in
Sulewasi-3. The Mirador and the lower C7 formations in Sulawesi-3 came in lower
than expected, and as a result tested light oil with a high water cut and have
been suspended due to lack of water handling in the well test facility.
Currently, the Sulawesi-1 well is producing approximately 1,500 bopd of oil with
a water cut of less than one percent. The Company intends to drill a third well
into the prospect to the south of Sulawesi-1 during the fourth quarter of 2011,
to be coordinated with the facility expansion.
On October 9, 2011, Supremo-2 was spud to test the potential up-dip of the
Supremo-1 well. The drilling rig was released on October 31, 2011. Parex expects
to have Supremo-2 test results by the end of December 2011.
Trinidad Update
On the Central Range Shallow Block (50 percent working interest), the Cribo-1
well was spud on July 22, 2011 and was rig released on September 25, 2011. Parex
expects a service rig to start completion and testing operations during
November, 2011.
In order to accelerate Parex' ongoing onshore Trinidad exploration activity, the
Company signed a contract with Tuscany International Drilling Inc. to import to
Trinidad two modern and fit for purpose drilling rigs. Both rigs are currently
being shipped to Trinidad and subject to receiving regulatory approvals, will
begin operations prior to year end 2011. Parex expects that the two new rigs
will be used to spud a second Central Range Block ("CRB") Shallow exploration
well and drill the Firecrown side track well on the Moruga Block. The Company
plans to spud its first CRB Deep well following drilling operations on the
Moruga Block.
2011 Guidance
The Company's 2011 exit rate production guidance is 14,000 bopd. Critical to
achieving our exit rate guidance will be: the production timing of the Kona-7
and Kona-9 wells in 2011; completion of the Kona Norte-2 water disposal well and
minimizing the impact of December holiday season trucking disruptions.
Following signing a contract to immediately mobilize two rigs to Trinidad,
Parex' 2011 capital program for Colombia and Trinidad is expected to be
approximately $140-$150 million, excluding acquisitions. Parex expects to fund
the remainder of the 2011 capital program with funds flow from operations with
any remaining requirements from existing working capital.
Parex expects to release its 2012 guidance in early December, 2011.
Conference Call Information
Parex will host a conference call to discuss these results on Thursday November
10, 2011 beginning at 10:30 am MST (12:30 pm EST). Media, analysts and investors
wishing to participate in the call can access it by calling 1-866-696-5910, pass
code: 1520456.
The live audio http://www.bellwebcasting.ca/audience/index.asp?eventid=58967226.
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, 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.
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