Parex Resources Inc. · TSX:PXT
Parex Resources — Investor Presentation (March 2020)
28 slides from Parex Resources's investor presentation, Mar 25, 2020
Slide 1: Disciplined Growth + Shareholder Returns
DISCIPLINED GROWTH + SHAREHOLDER RETURNS OUR 10 YEAR JOURNEY CORPORATE PRESENTATION MARCH 2020 CORPORATE PRESENTATION | MARCH 2020 1
Slide 2: Corporate Snapshot
CORPORATE SNAPSHOT Capital Structure Operating results 2018 2019 2020E(1) Production (boe/d) FY Average 44,408 52,687 55,375 Net Working Capital - US$ million(5) DAPS Growth(2) 26% 34% 20% ~$344 Drilling Program (# wells) 54 43 60 US$200 MM Undrawn Credit Facility(5) Capital Expenditures(3) - US$ mi
Slide 3: Why Invest in Parex?
WHY INVEST IN PAREX? DEBT-ADJUSTED PRODUCTION PER SHARE (DAPS) 1. No Debt & Positive Q4’19 Working Capital of US$344 MM PPS DAPS Share Price (QE) 0.50 $25 2. High Margins o 2019 FFO netback→ US$30/boe at Brent $64/bbl 0.40 $20 BOE/D PER 1,000 SHARES 4. Capital Allocation Discipline SHARE PRICE (C$)
Slide 4: Delivering Consistent Shareholder Value
DELIVERING CONSISTENT SHAREHOLDER VALUE PRODUCTION PER SHARE (DEBT ADJUSTED) 2P RESERVE PER SHARE (DEBT ADJUSTED) 500 1,800 MBOE/MILLION WA BASIC SHARES BOE/MILLION WA BASIC SHARES 450 1,600 400 1,400 350 1,200 300 1,000 250 800 200 150 600 100 400 50 200 - - 2015 2016 2017 2018 2019 2015 2016 2017
Slide 5: Business is Strong – Production Growth and Free Cash Flow
BUSINESS IS STRONG – PRODUCTION GROWTH AND FREE CASH FLOW ANNUAL PRODUCTION CAPITAL RETURNED TO SHAREHOLDERS 60,000 Brent: $6 $300 16 Brent: ANNUAL AVERAGE PRODUCTION (BOE/D) ~$60/Bbl 55,000 DEBT-ADJUSTED CASH FLOW PER SHARE (US$) $64/Bbl 14 $250 CAPITAL RETURNED (US$ MILLIONS) 50,000 Brent: $5 BUYB
Slide 6: Parex Cash Netback
PAREX CASH NETBACK(1) 2020 Target Cash Netbacks(2)(3) $80 $75 $71.59 $70 $64.21 $65 $60 $53.57 $54.75 ($13.88) $55 $50 $50 $45.12 $45 ($7.06) $40 USD/BOE $40 ($5.76) $35 ($1.66) ($6.24) $30 $30 $25 $20 $15 $10 $5 $13.20(4) $13.70(4) $22.29(4) $24.65(4) $29.61(4) Cash Netback $12 $19 $26 $0 2015 2016
Slide 7: 2020 Plan: High Netbacks Enable Shareholder Returns
2020 PLAN: HIGH NETBACKS ENABLE SHAREHOLDER RETURNS $950 $900 $850 Optionality … $800 2019 Working $750 Capital $700 ~US$344 $650 MILLIONS (USD) $600 $550 CFO at $65/bbl $500 CFO at $60/bbl $450 CFO at $55/bbl $400 Capex: ~$210-$240 ~$240(1)(2) $350 $300 CFO at $250 ~$65-$75 $50/bbl $200 BRENT ~$30-
Slide 8: 2020 Drilling Program: Gross Wells Planned
2020 DRILLING PROGRAM: 60 GROSS WELLS PLANNED Llanos Basin Expl. Wells Dev. Wells VIM-1 o SoCa 3 33 Lower Magdalena o CPO-11 2 - Fortuna o LLA-94 2 - Boranda Aguas Blancas Magdalena Basins Middle Magdalena o Aguas Blancas - 12 SoCa o Boranda 3 - LLA-94 Llanos Basin o Fortuna 3 - CPO-11 o VIM-1 1 1 T
Slide 9: Conventional Oil Reserves Generate Value
CONVENTIONAL OIL RESERVES GENERATE VALUE Proved Proved+ $8 Developed Proved + Probable+ $7 2019YE Producing Proved Probable Possible 2P FD&A (USD/BOE)(1) FD&A USD/boe(1) $7.63 $7.50 $7.57 $12.44 $6 Recycle Ratio (FD&A)(1) 3.9x 3.9x 3.9x 2.4x $5 $4 After Tax NPV10% - C$/sh(2) $12.45 $19.36 $25.72 $32
Slide 10: Foundation for Growth: Appraise & Develop
FOUNDATION FOR GROWTH: APPRAISE & DEVELOP NET WORKING INTEREST PRODUCTION (LLA-32, LLA-34 & Cabrestero) LLA-32 50,000 Kananaskis Azogue 40,000 LLA-34 Max 30,000 Tilo BOE/D Chachalaca Chiricoca 20,000 10,000 Guaco Tigana Tarotaro 0 2015 2016 2017 2018 2019 Tua Faults GLJ 3P (2019YE) NET WORKING INTER
Slide 11: Capachos Development and Exploration Potential
CAPACHOS DEVELOPMENT AND EXPLORATION POTENTIAL Guadalupe depth structure Capachos (50% WI, Operator) • Producing at restricted rate of 5,000 - 6,000 gross bopd ANDINA NORTE-1 • Flowline expected to be in service by mid-2020 ANDINA-3 o Construction commenced in January ANDINA-1 • Commissioned Phase-1
Slide 12: Asset Replenishment for Future Growth
ASSET REPLENISHMENT FOR FUTURE GROWTH Trucking Parex Blocks 1. ANH Bid Round (July & December 2019) Cartagena Pipeline o Acquired 5 blocks (VSM-25, VSM-36, LLA-94, LLA-122 & VMM-46) in 2019 River o 9% Royalty, no Cash Payments Terminal Covenas o Next Bid Round: expected in Q2 2020 2. CPO-11(1) o Acq
Slide 13: VIM-1: La Belleza Discovery
VIM-1: LA BELLEZA DISCOVERY Gas fields Oil fields VIM-1 (50% WI, Operator) Gas pipeline Oil Pipeline • Main target is a Cienaga De Oro River formation draped over a basement high • Analogue fields at Cicuco, Boquete and El Dificil Field El Dificil VIM-1 Discovered: 1943 *Cum Production = 12 MMBO, 35
Slide 14: Expanding Llanos Inventory
EXPANDING LLANOS INVENTORY LLA-32 CPO-11 (50% WI, Operator) LLA-34 • Additional leads and prospects being evaluated Cabrestero • Shallow drilling targets testing stratigraphic prospects LLA-94 • 2020 Plan: 2 exploration wells CPO-11 Rubiales LLA-94 (100% WI, Operator) • Multiple play types identifie
Slide 15: Fortuna, Boranda & VMM-46
FORTUNA, BORANDA & VMM-46 Fortuna Fortuna (100%WI, operator) • Acquired in Q4 2018 • No drilling since 2012 • Target conventional oil prospects in Lisama and La Luna Formations • Acquired 3D seismic in 2019 • 2020 Plan: 2 wells to test the Lisama & 1 horizontal well is planned for Midas the Cretaceo
Slide 16: Where Do We Go From Here?
WHERE DO WE GO FROM HERE? 2019 2020 - 2022 Our focus Is on Profitable Production growth Deliver top quartile Future Growth & Delivering & free cash flow per share growth Shareholder Returns New growth: Replenish & exploration & tight oil diversify portfolio Shareholder return: Return free cash Share
Slide 17: ESG Performance Highlights
ESG PERFORMANCE HIGHLIGHTS GHG emissions reduction initiatives: Promote innovation & research through Taxes & Royalties: Social Environment Governance o Pipeline (ODL) tie-in to reduce oil trucking 6 Parex Innovation Fellowships established US$378 million paid in Colombia (2016-2018) o Build gas pla
Slide 18: Environmental Performance Efficiency
ENVIRONMENTAL PERFORMANCE EFFICIENCY CO2e/Production Total GHG Emissions Energy Used /Production Total Energy Used Total Water/Production Total water withdrawn Efficient Management of Natural Resources Source: Scotiabank’s Industry Report (December 2019) - Circling the Globe to Better See the Unseen
Slide 19: Summary
SUMMARY Self-funded industry leading production growth Grow & develop Llanos Blocks Prove play concepts in Middle & Lower Magdalena Basins Expand portfolio through business development CORPORATE PRESENTATION | MARCH 2020 19
Slide 20: Colombia - Current Land Base
COLOMBIA - CURRENT LAND BASE # Block Working Interest Gross Acres(1) 1 VIM-1 50% 223,651 2 Fortuna(2) 100% 26,206 3 Boranda2) 50% 43,200 Cartagena 4 De Mares(2) 50% 174,387 5 Aguas Blancas(2) 50% 13,386 Coveñas 6 VMM-9 100% 152,412 7 VMM-46 100% 110,029 LOWER 8 Capachos(2) 50% 64,073 MAGDALENA 9 VSM
Slide 21: Appendix - Industry Leading Performance Metrics
APPENDIX - INDUSTRY LEADING PERFORMANCE METRICS 2017 2018 2019 Production growth % 20 25 19 2P Reserves growth % 45 14 7 3-Year TSR % 140 61 43 ROACE(1) % 23 45 31 CROIC(2) % 18 32 29 EBITDA(3) US$ MM 314 640 663 Net income (loss) per share – basic $ 1.01 2.59 2.24 Cash flow per share – basic $ 1.81
Slide 22: Appendix – Summary of Quarterly Results
APPENDIX – SUMMARY OF QUARTERLY RESULTS(1) (Unaudited Results) 2019 2018 2017 FY Q4 Q3 Q2 Q1 FY Q4 Q3 Q2 Q1 FY Q4 Q3 Q2 Q1 Operating Production (thousands of boe/d) 52.7 54.2 53.1 52.3 51.2 44.4 49.3 45.0 42.6 40.6 35.5 39.0 36.2 34.3 32.6 Brent Price ($/bbl) 64 63 62 69 64 72 68 76 75 67 55 62 52 5
Slide 23: Advisories
ADVISORIES This presentation is provided for informational purposes only as of March 11, 2020, 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 Par
Slide 24: Advisories
ADVISORIES funds flow from operations netback, capital expenditures, percentage of cash flow growth, cash netbacks, target cash netbacks and funds flow from operations for 2020; the Company's exploration, development and appraisal program for 2020 including anticipated number and type of wells, the
Slide 25: Advisories
ADVISORIES • This document also contains a financial outlook, in particular the information set forth on slides 2-3, 5-6, 8, 10 and 21. 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 prepared
Slide 26: 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 27: 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 28: CORPORATE PRESENTATION | MARCH 2020
CORPORATE PRESENTATION | MARCH 2020 28