Parex Resources Inc. · TSX:PXT
Parex Resources — Investor Presentation (October 2021)
36 slides from Parex Resources's investor presentation, October 2021
Slide 1: Optimizing Shareholder Value
PAREX RESOURCES INC. OPTIMIZING SHAREHOLDER VALUE OCTOBER 2021 CORPORATE PRESENTATION | OCTOBER 2021 1
Slide 2: Who is Parex?
WHO IS PAREX? Parex is a Calgary based company that focuses on sustainable, profitable, conventional oil and gas production. Parex is committed to developing energy resources in a manner that is economically, environmentally and socially sustainable as it builds a portfolio of drilling opportunities
Slide 3: Corporate Snapshot
CORPORATE SNAPSHOT Capital Structure Operating Results 2020 H1 2021 Cash - US$ million(3) Brent ($/bbl) $43.30 $65.23 ~$371 Production (boe/d) 46,518 45,332 Net Working Capital - US$ million(3) DAPS Growth(1) -3% 2% ~$352 FCF Yield (%) 9% 8% US$200 MM Undrawn Credit Facility(3) Capital Expenditures
Slide 4: Parex' Strategy: Building a Balanced Portfolio
PAREX’ STRATEGY: BUILDING A BALANCED PORTFOLIO Uncompromised Commitment Disciplined Capital Allocation Sustainable Business Model Investigate New Core Areas to ESG Excellence Advancement of key ESG initiatives Profitable reserves conversion Validating Colombian discoveries Leveraging existing core c
Slide 5: Current ESG Priorities
CURRENT ESG PRIORITIES Environment Social Governance Water for All - increase community Introduce GHGs emissions 2023 diversity target — reductions targets (July 2021) access to clean water 30% women on the Board Invest in geothermal and solar energies to Clean Energy Program — 30% of 2021 variable
Slide 6: ESG Performance – 2020 Highlights & Ratings
ESG PERFORMANCE – 2020 HIGHLIGHTS & RATINGS(1)(2) Environment Social ESG Risk Rating – 28.5 23% reduction in scopes 1 & 2 GHG emissions intensity Strong safety records – improvements in LTI (↓93%) th (6 percentile among E&Ps, 1=lowest risk) to 23 Kg CO2e/boe from 30 Kg CO2e/boe in 2019 and TRIF (↓93
Slide 7: Building a Sustainable Low Carbon Future
BUILDING A SUSTAINABLE LOW CARBON FUTURE Parex aspires to become one of the least carbon intensive E&P companies 35 Reduce Scopes 1 & 2 GHG 30 Zero routine flaring by 2025 emissions intensity from operated assets by: 25 Reduce operated o Reducing flaring volumes, assets’ scopes 1 & KG CO2E/BOE(1) 20
Slide 8: Emission Free Geothermal Energy Powers Parex Production
EMISSION FREE GEOTHERMAL ENERGY POWERS PAREX PRODUCTION Parex installed Colombia’s first geothermal power unit that captures the heat from hot water by-product from oil production. The first pilot unit is on the Las Maracas’ field and the second pilot unit is anticipated to be completed in September
Slide 9: Capital Allocation – Options to Grow Shareholder Returns
CAPITAL ALLOCATION – OPTIONS TO GROW SHAREHOLDER RETURNS Industry leading Cash Flow generation provides optionality for: o Resilient Dividend Program o Growth Capex o Flexible Share Buy-Back $600 Optionality $75/bbl $500 ~$150-$250 $65/bbl $400 USD MM $300 $55/bbl Remaining FFO provides $200 Brent ~
Slide 10: Why Invest in Parex?
WHY INVEST IN PAREX? DEBT-ADJUSTED PRODUCTION PER SHARE (DAPS) PPS DAPS Share Price (QE) 1. No Debt & Positive Q2’21 Working Capital of US $352 MM 0.50 $25 2. High Margins o Q2’21 operating netback → US $41.29/boe at Brent 0.40 $20 $69.08/bbl BOE/D PER 1,000 SHARES o Q2’21 FFO netback → US $32.02/bo
Slide 11: Growth Opportunities – M&A Criteria
GROWTH OPPORTUNITIES – M&A CRITERIA M&A is an option, not a requirement for Parex. Conventional Oil Onshore/Shallow Clear Path to & Gas Water Asset Growth Compete Against Transparent FX & Colombia Project Payment Regime Returns CORPORATE PRESENTATION | OCTOBER 2021 11
Slide 12: Delivering Consistent Shareholder Value
DELIVERING CONSISTENT SHAREHOLDER VALUE PRODUCTION PER SHARE (DEBT ADJUSTED) RESERVE LIFE INDEX 18 500 BOE/MILLION WA BASIC SHARES 450 16 400 14 350 12 300 10 YEARS 250 8 200 6 150 4 100 2 50 0 - 2015 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 2021E PDP RLI 1P RLI 2P RLI 3P RLI FUNDS FLOW PER
Slide 13: Strong Reserve Per Share Growth
STRONG RESERVE PER SHARE GROWTH PDP RESERVES PER SHARE DEBT ADJUSTED 1P RESERVES PER SHARE DEBT ADJUSTED 0.8 140% 1.4 RESERVES (BOE/BASIC SHARE) RESERVES (BOE/BASIC SHARE) 0.7 120% 1.2 0.6 100% 1.0 0.5 80% 0.8 0.4 60% 0.3 0.6 40% 0.2 0.4 20% 0.1 123% 27% 28% 49% 30% 24% 18% 0.2 34% 52% 33% 25% 7% 99
Slide 14: Increasing Production While Returning FCF to Shareholders
INCREASING PRODUCTION WHILE RETURNING FCF TO SHAREHOLDERS 300 Production (MBOE/D) Current Shares Outstanding Working Capital Since 2017(1): 169% • Production increased by 35% (67% prior to COVID-19 in Q1 2020). 250 • Working Capital increased from $131 MM to $352 MM. FACTOR OF 2017 BASE VALUES o Deb
Slide 15: Industry Leading Share Buy-Back Program
INDUSTRY LEADING SHARE BUY-BACK PROGRAM Parex Resources is committed to returning capital # Shares Bought Back Cost of Share Buybacks to shareholders through the NCIB and share buy- 8 120 back program. 7 100 Since the first NCIB in 2017, PXT has repurchased roughly 43 MM shares and has returned C$83
Slide 16: Parex Funds Flow Netback
PAREX FUNDS FLOW NETBACK(1) $75 $71.59 $69.08 $70 $64.21 $65 $61.32 $60 $54.75 $12.41 $55 $50 $8.69 $43.30 $45 $6.70 $40 $2.88 USD/BOE $35 $6.38 $30 $25 $20 $15 $10 $5 $22.29(2) $24.65(2) $29.61(2) $17.52(2) $29.98(2) $32.02(2) $0 -$5 2017 2018 2019 2020 Q1 2021 Q2 2021 Cash Netback Tax G&A-Finance
Slide 17: Industry Leading Profitability
INDUSTRY LEADING PROFITABILITY Despite a year of volatility and record low oil prices, Parex was able to earn a positive net income and recorded industry leading operating netbacks. 2020 Operating Netback(1)(2) 2020 Net Income for E&Ps with Market Cap > $1B(2)(3) $25 $500 Parex Parex $- $20 $(500) $
Slide 18: Conventional Oil Reserves Generate Value
CONVENTIONAL OIL RESERVES GENERATE VALUE $9 $8.45 Proved Proved+ $8 $7.57 $7.58 $7.29 Developed Proved + Probable+ $7 2020YE Producing Proved Probable Possible 2P FD&A (USD/BOE)(1) $6.15 FD&A USD/boe(1) $7.73 $12.33 $8.45 $4.02 $6 $5.03 $5 Recycle Ratio (FD&A)(1) 2.5x 1.6x 2.3x 4.8x $4 After Tax NPV
Slide 19: Foundation for Long-Term Production: Appraise & Develop
FOUNDATION FOR LONG-TERM PRODUCTION: APPRAISE & DEVELOP NET WORKING INTEREST PRODUCTION (LLA-32, LLA-34 & Cabrestero) 50,000 40,000 30,000 BOE/D 20,000 10,000 0 2016 2017 2018 2019 2020 NET WORKING INTEREST RESERVES* - LAST 5 YEARS (LLA -32, LLA -34 & Cabrestero) 250 RESERVES (MMBOE) 200 150 Faults
Slide 20: Building a Sustainable Business – 2021 Activities
BUILDING A SUSTAINABLE BUSINESS – 2021 ACTIVITIES VIM-43 VMM-46 Commence 3D seismic Acquisition of 215 sq km of 3D seismic expected October 2021 VIM-1 Planadas-1 exploration well spud VIM-43 Fortuna on July 30, 2021. Continuing to Drilling Perla Negra horizontal well testing evaluate oil and CNG the
Slide 21: Strategic Partnership with Ecopetrol
STRATEGIC PARTNERSHIP WITH ECOPETROL • On Strategy: Partnership with Ecopetrol in Regional Arauca Map the highly prolific Llanos Basin in Arauca • Meaningful Portfolio Additions: Near term, proven production potential and reserves plus drill ready exploration prospects and future exploration leads.
Slide 22: Asset Overview – Potential for Sustainable Development
ASSET OVERVIEW – POTENTIAL FOR SUSTAINABLE DEVELOPMENT Arauca Block & LLA-38 Map Arauca Block – Reactivation, Existing Infrastructure • Partially developed, proven light oil field • Leveraging existing 3D seismic & infrastructure accelerates timeline to production and cash flow • High deliverability
Slide 23: VIM-1: La Belleza Discovery
VIM-1: LA BELLEZA DISCOVERY Gas fields VIM-1 (50% WI, Operator) Oil fields • Main target is a Cienaga De Oro formation draped over Gas pipeline Oil Pipeline a basement high River • Analogue fields at Cicuco, Boquete and El Dificil El Dificil Field VIM-1 Discovered: 1943 • Advancing La Belleza discov
Slide 24: Expanding Llanos Inventory
EXPANDING LLANOS INVENTORY CPO-11 (50% WI, Operator) LLA-32 • Additional leads and prospects being evaluated LLA-34 • Shallow drilling targets testing stratigraphic prospects Cabrestero LLA-94 (50% WI, Operator) LLA-94 • Multiple play types identified on 3D seismic data LLA-134 Rubiales • Short turn
Slide 25: Boranda & VMM-46
BORANDA & VMM-46 Boranda (50% WI, Operator) • Exploration discovery at Boranda-1 Boranda • Testing has begun on Boranda Sur Boranda-1 o In the process of testing multiple formations Boranda Centro-1 Boranda Sur-2 VMM-46 • Testing has started at the Boranda Centro-1 appraisal location • Producing at
Slide 26: Fortuna
FORTUNA Fortuna (100% WI, Operator) Fortuna • Acquired in Q4 2018 • No drilling since 2012 • Target conventional oil prospects in Lisama and La Luna Formations Midas (Acordianero) • Acquired 3D seismic in 2019 • 2021 Plan: Drill 2 horizontal appraisal wells Boranda • Drilled Cayena-1 exploration wel
Slide 27: Corporate Presentation | October 2021
CORPORATE PRESENTATION | OCTOBER 2021 27
Slide 28: Colombia - Current Land Base
COLOMBIA - CURRENT LAND BASE # Block Working Interest Gross Acres(1) 1 VIM-1 50% 139,575 2 VIM-43 100% 90,457 Cartagena 3 Fortuna(2) 100% 26,205 4 Boranda(2) 50% 43,367 5 De Mares(2) 50% 174,387 Covenas 6 Aguas Blancas(2) 50% 13,386 7 VMM-9 100% 152,412 8 VMM-46 100% 111,026 LOWER 9 Capachos(2) 50%
Slide 29: Appendix - Industry Leading Performance Metrics
APPENDIX - INDUSTRY LEADING PERFORMANCE METRICS 2018 2019 2020 Production growth % 25 19 -12 2P Reserves growth % 14 7 -2 3-Year TSR % 61 43 -4 ROACE(1) % 45 31 10 CROIC(2) % 31 28 13 EBITDA(3) US$ MM 641 663 309 Net income (loss) per share – basic $ 2.59 2.24 0.72 Cash flow per share – basic $ 2.58
Slide 30: Appendix – Summary of Quarterly Results
APPENDIX – SUMMARY OF QUARTERLY RESULTS(1) (Unaudited Results) 2021 2020 2019 2018 Q2 Q1 FY Q4 Q3 Q2 Q1 FY Q4 Q3 Q2 Q1 FY Q4 Q3 Q2 Q1 Operating Production (thousands of boe/d) 43.9 46.8 46.5 46.6 44.3 40.9 54.3 52.7 54.2 53.1 52.3 51.2 44.4 49.3 45.0 42.6 40.6 Brent Price ($/bbl) 69 61 43 45 43 33 5
Slide 31: Advisories
ADVISORIES This presentation is provided for informational purposes only as of October 14, 2021, is not complete and may not contain certain material information about Parex Resources Inc. ("Parex" or the "Company"), including important disclosures and risk factors associated with an investment in P
Slide 32: Advisories
ADVISORIES outlook; the Company’s ESG initiatives and the benefits to be derived therefrom; and activities to be undertaken in various areas. Statements relating to "reserves" or "resources" are forward-looking statements, as they involve the implied assessment, based on estimates and assumptions th
Slide 33: Advisories
ADVISORIES • This document also contains a financial outlook, in particular the information set forth on slides 2, 4, 5, 6, 8, 17, 19 and 23. Such financial outlook has been prepared by Parex' management to provide an outlook of the Company's activities and results. The financial outlook has been pr
Slide 34: Advisories
ADVISORIES • This presentation contains certain oil and gas metrics, including F&D, FD&A, FD&A/boe, reserves life index (or RLI), operating netbacks, cash netbacks, funds flow from operations netback, CAGR, replacement ratio, and recycle ratios, which do not have standardized meanings or standard me
Slide 35: Advisories
ADVISORIES • All of Parex’ crude oil reserves disclosed herein are located in Colombia. The Company has light, medium and heavy crude oil, natural gas liquids and conventional natural gas product types. The recovery and reserve estimates of reserves provided in this document are estimates only, and
Slide 36: Corporate Presentation | October 2021
CORPORATE PRESENTATION | OCTOBER 2021 36
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