Parex Resources Inc. · TSX:PXT
Parex Resources — Investor Presentation (May 2023)
42 slides from Parex Resources's investor presentation, May 2023
Slide 1: Parex Resources Investor Presentation – May 2023
Parex Resources Investor Presentation – May 2023
Slide 2: TSX:PXT
TSX:PXT • Largest Independent Oil & Gas Company in Colombia • Deep Portfolio with Transformational Exploration Opportunities • Debt-Free Balance Sheet • Target Return of 100% of Free Funds Flow to Shareholders • Top-Tier ESG Performance Stock Symbol TSX:PXT Shares Outstanding(1) 107.4 million Market
Slide 3: Colombia: The Parex Advantage
Colombia ~750,000 Independent Free OECD US$4.4B BBL/D Branches of Capital Movement Member Excepted Total Oil Production(1) Government & No Foreign Country E&P Investment(2) Currency Controls The Parex Advantage Offshore Top Quartile Established Strong Strategic Partner with Oil Sales Cash Flow per B
Slide 4: Track Record, Strategy, Capital Allocation, ESG, Big 'E' Exploration
▪ Track Record ▪ Strategy ▪ Capital Allocation ▪ Sustainability & ESG ▪ Big ‘E’ Exploration
Slide 5: Track Record of Growth
Track Record of Growth PRODUCTION PER SHARE(1)(2) PDP RESERVES PER SHARE(3)(4) 0.17 0.76 16% (2017-2022) CAGR 18% (2017-2022) CAGR 0.67 0.14 0.13 0.12 0.55 0.10 0.50 0.08 0.40 0.33 2017A 2018A 2019A 2020A 2021A 2022A 2017A 2018A 2019A 2020A 2021A 2022A 36 52 51 83 Absolute Production Growth CAGR: 8%
Slide 6: Track Record of Creating Value
Track Record of Creating Value PRODUCTION AND FUNDS FLOW PROVIDED BY OPERATIONS PER SHARE Production (boe/d) FFO per Share(1) 60,000 Average Production(1) FFO per Share(2) $9.00 40,000 $6.00 20,000 $3.00 0 $0.00 (3) 2010A 2011A 2012A 2013A 2014A 2015A 2016A 2017A 2018A 2019A 2020A 2021A 2022A 2023F
Slide 7: Track Record of Returning Capital
Track Record of Returning Capital RETURN OF CAPITAL TRACK RECORD (CAD MM)(1) USING FREE FUNDS FLOW TO LOWER THE SHARE COUNT ~$400 ~$1,700 164 162 148 $384 134 122 $334 110 $230 $300 $55 2018A 2019A 2020A 2021A 2022A 2023F(2) Total 2017A 2018A 2019A 2020A 2021A 2022A Share Repurchases Dividends Fully
Slide 8: Track Record, Strategy, Capital Allocation
▪ Track Record ▪ Strategy ▪ Capital Allocation ▪ Sustainability & ESG ▪ Big ‘E’ Exploration
Slide 9: Strategically Investing in 2023 & Beyond
Strategically Investing in 2023 & Beyond Northern Llanos Basin Diversified (Operated) Operations ▪ SOCA (Southern Casanare): Reduce Magdalena Basins decline rate & future (Operated) capital requirements ▪ Northern Llanos & Mag: Foundation for Southern Llanos Basin high capital efficiency (Operated)
Slide 10: Strategy: Strategic Levers to Grow
Strategy: Strategic Levers to Grow Outsized Exploitation Onshore Exploration & Technology Gas Potential Potential ▪ Unlocking extensive ▪ Targeting liquid-rich ▪ Focusing on land base using gas fields transformational big proven technology ▪ Pursuing longer-term, ‘E’ exploration targets ▪ Step chang
Slide 11: Cabrestero: Waterflood & Exploitation Delivering Success
Cabrestero: Waterflood & Exploitation Delivering Success Basin: Southern Llanos Operator: PXT W.I.: 100% Waterflood Performance & Forecast(1) Water Injection (bbl/d) Production (bbl/d) 50,000 Production 15,000 Bests 2P YE2021 40,000 12,000 Injection Begins Ramp Up 30,000 9,000 Started 20,000 Origina
Slide 12: Using Proven Technology to Increase Efficiency
Using Proven Technology to Increase Efficiency Key Takeaways 0 2,000 VIM-1 Vaduz-1 well delivered Well Depth (feet) in ~22 days ▪ Synthetic mud has created a step 4,000 change in the ability to drill 6,000 challenging formations 8,000 ▪ E.g., VIM-1 and Capachos 10,000 12,000 ▪ Only Colombian company
Slide 13: Significant Running Room for Growth
Significant Running Room for Growth NET LAND POSTION(1) First-Mover Advantage (Million Net Acres) 6 Expanded by ▪ Now the largest independent acreage holder ~4x in 2021 in Colombia with 40 blocks 5 ▪ Added 18 blocks in the 2021 Colombia bid round 4 ▪ Built on existing relationship with Ecopetrol S.A
Slide 14: 2023 Guidance: Leveraging 2022 Growth
2023 Guidance: Leveraging 2022 Growth Total Funds Capital 57,000-63,000 $705-780(1)(2) $425-475(3) Production ~15% growth vs. 2022 Flow $80/bbl Brent Expenditures ~18% lower than 2022 boe/d $ millions $ millions Lower Magdalena 2023F CAPITAL DISTRIBUTION VIM-43 Arauca & Capachos ~5 wells 1 Big ‘E’ w
Slide 15: Deep Portfolio Can Deliver Quick Paybacks in 2023
Deep Portfolio Can Deliver Quick Paybacks in 2023 2023 PLAN – PAYBACKS FROM FIRST CAPITAL SPEND(1)(2) Paybacks Improve Over Time ▪ Short-cycle projects provide Illustrative Payback (Months) insultation from commodity price changes ▪ Cabrestero and LLA-34 focused on waterflood ▪ Facilities capital is
Slide 16: Three-Year Plan: Efficiently Grow Production & Free Funds Flow
Three-Year Plan: Efficiently Grow Production & Free Funds Flow (boe/d) BASE DEVELOPMENT PLAN(1)(6)(7) (Excludes Exploration Upside) Exploration Strategy(6) 80,000 ▪ Approach: ~$50MM per Magdalena year on high-impact 60,000 prospects for step-change Northern Llanos exposure Southern Llanos 40,000 ▪ U
Slide 17: Track Record, Strategy, Capital Allocation
▪ Track Record ▪ Strategy ▪ Capital Allocation ▪ Sustainability & ESG ▪ Big ‘E’ Exploration
Slide 18: Long-Term Capital Allocation Framework
Long-Term Capital Allocation Framework 1. Invest ~2/3 of FFO(1) back into the business 2. Return ≥1/3 to shareholders Dividends + Near-Field Investments Big ‘E’ Share Buybacks ▪ Drive sustainable business model ▪ Quarterly base dividend ▪ Invest in long-term growth ▪ Target dividend growth ▪ Repleni
Slide 19: Reinforcing the Capital Allocation Framework in 2023
Reinforcing the Capital Allocation Framework in 2023 2023F CAPITAL ALLOCATION(1) Focused on ($ millions) Efficient Capital $900 Allocation $100 ▪ Treatment of Excess FFF(6) ▪ Target 100% to $80 shareholder returns $600 ▪ Capital Flexibility ▪ Below sustained $60/bbl $60/bbl $425-475 Brent, option to
Slide 20: Track Record, Strategy, Capital Allocation
▪ Track Record ▪ Strategy ▪ Capital Allocation ▪ Sustainability & ESG ▪ Big ‘E’ Exploration
Slide 21: Working Collaboratively with Communities
Working Collaboratively with Communities WE GENERATE SHARED BENEFITS TRUST – GOOD NEIGHBORS – PARTNERS FOR DEVELOPMENT OPERATIONAL CONTINUITY Political Polarization We are Complex Committed We Mitigate & We Create We Generate Environments to Long-term Manage Risk Opportunities Shared Benefits Partne
Slide 22: Continued Top-Tier ESG Performance
Continued Top-Tier ESG Performance E External Recognition ▪ Reduced GHG intensity by 43% since 2019 ▪ Cabrestero solar field completed; projected to avoid 3,500 tCO2-e per year ▪ Plan to eliminate routine flaring by 2025 S ▪ Invested ~US$6 million in communities in 2022 27.2 Rating(1) 6th Percentile
Slide 23: Track Record, Strategy, Capital Allocation
▪ Track Record ▪ Strategy ▪ Capital Allocation ▪ Sustainability & ESG ▪ Big ‘E’ Exploration
Slide 24: Big 'E' Exploration: Transformational Opportunities
Big ‘E’ Exploration: Transformational Opportunities Strategy targets prospects ~15 High-impact exploration >20,000 prospects in portfolio boe/d Asymmetrical Diversified across both Oil & Gas Risk & opportunities Reward Expect to deliver roughly one catalyst per quarter 24
Slide 25: VIM-43 (Chirimoya): Transformational Exploration Prospect
VIM-43 (Chirimoya): Transformational Exploration Prospect Basin: Magdalena Operator: PXT W.I.: 100% VIM-43 Seismic Stacked reservoir highly increases chance of success ▪ Identified three potential Chirimoya reservoirs Chirimoya Target ▪ Successfully reached wells’ target depth of ~17,500 feet Zone 1
Slide 26: MOU with Ecopetrol in High-Potential Foothills Trend
MOU with Ecopetrol in High-Potential Foothills Trend Memorandum of Understanding (MOU) MOU Coverage Area with Ecopetrol S.A. Gibraltar Arauca ▪ MOU signed with Ecopetrol, Colombia’s national oil company ▪ Building on existing, successful relationship with Ecopetrol Capachos ▪ Area of coverage spans
Slide 27: Key Takeaways
Key Takeaways ▪ Transitioned from a single asset company to a Colombia-wide operator ▪ Flattening decline, leading to lower maintenance capital requirements ▪ Building a sustainable base for production growth while delivering a step change in capital efficiency ▪ Providing exposure to outsized retur
Slide 28: Appendix
Appendix
Slide 29: Colombia Tax Reform – 2023 Impact
Colombia Tax Reform – 2023 Impact New Government Surtax & Change to Royalty Deductions ▪ Government has established an income surtax of up to 15% linked to Brent crude oil price ▪ Indexed to 120-month (10 years) historical Brent crude oil price ▪ Government will prevent the deduction of base royalti
Slide 30: Cabrestero: Waterflood & Exploitation
Cabrestero: Waterflood & Exploitation Basin: Southern Llanos Operator: PXT W.I.: 100% Focused on pressure management, minimizing decline & near-field exploration ▪ Current development plan includes down spacing and waterflood injection ▪ Flattens decline rate and accelerates oil recovery ▪ Facility
Slide 31: LLA-34: Replicating Success from Cabrestero
LLA-34: Replicating Success from Cabrestero Basin: LLA-34 (Llanos) Non-Operator W.I.: 55% Focused on accelerating production, minimizing decline and delineation ▪ Current development plan includes down spacing and waterflood injection ▪ Down spacing to ~40 acres and waterflood injection pattern ▪ Ma
Slide 32: Capachos & Arauca: Northern Llanos Future Growth Engine
Capachos & Arauca: Northern Llanos Future Growth Engine Basin: Northern Llanos Operator: PXT W.I.: 50% Accelerating development with high growth potential in the future ▪ Historically difficult to access and challenging to drill ▪ Operating successfully in Capachos since 2018 ▪ First Arauca well spu
Slide 33: Capachos: Leveraging Multi-Zone Potential
Capachos: Leveraging Multi-Zone Potential Basin: Northern Llanos Operator: PXT W.I.: 50% Andina-1 Depth Sur-3 Sur-4 2ST Andina -2 Andina-3 Andina Norte-1 Well: Andina-1 Recent ~6,800 bopd (gross) Testing 30% Drawdown Success(1) First test of the Mirador in the Andina field Zone 1 Key Takeaways Mirad
Slide 34: Arauca: Building Off of Capachos to Drive Future Growth
Arauca: Building Off of Capachos to Drive Future Growth Basin: Northern Llanos Operator: PXT W.I.: 50% Arauca-8 Depth Arauca-15 Arauca-81 (Big ‘E’) Historical Capability Historical >5,000 bbl/d Zone 1 Wells Utilizing PXT production practices Barco Tested(1) ~10MM bbl produced from three wells Zone 2
Slide 35: Arauca (Arauca-8): Multi-Zone, High-Impact Exploration Target
Arauca (Arauca-8): Multi-Zone, High-Impact Exploration Target Basin: Northern Llanos Operator: PXT W.I.: 50% Arauca 3D Seismic Proven light-oil reservoir with high chance of success ▪ Previous development was on 2D seismic and halted due to social issues Arauca-8 Target ▪ What success looks like: de
Slide 36: VIM-1: Steppingstone that Diversifies the Portfolio
VIM-1: Steppingstone that Diversifies the Portfolio Basin: Magdalena Operator: PXT W.I.: 50% Growing long-term liquids recovery through reinjecting gas ▪ Liquids-rich gas condensate reservoir ▪ Successfully started gas reinjection, enabling the approximate doubling of liquids production to roughly 4
Slide 37: VIM-1: Exceptional Well Results Driving Facility Expansion
VIM-1: Exceptional Well Results Driving Facility Expansion Basin: Magdalena Operator: PXT W.I.: 50% VIM-1 Facility Depth La Belleza-1 La Belleza-2 Zone 1 Upper CDO Key Takeaways CDO Limestone Zone 2 ▪ La Belleza-2 well tested at ~38.5 mmcf/d gas Lower CDO and ~7,500 bbl/d (gross) at 10% drawdown(1)
Slide 38: Contact Information
Contact Information Mike Kruchten Senior Vice President, Capital Markets & Corporate Planning 403-517-1733 investor.relations@parexresources.com Steven Eirich Investor Relations Advisor 587-293-3286 investor.relations@parexresources.com Parex Resources Inc. 2700 Eighth Avenue Place, West Tower 585 8
Slide 39: Advisory
Advisory This presentation is provided for informational purposes only as of May 10, 2023, 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 Parex.
Slide 40: Advisory
Advisory Forward-Looking Statements and Financial Outlook (Continued) Management does not have firm commitments for all of the costs, expenditures, prices or other financial assumptions used to prepare the financial outlook or assurance that such operating results will be achieved and, accordingly,
Slide 41: Advisory
Advisory Market, Independent Third Party and Industry Data Certain market, independent third party and industry data contained in this presentation is based upon information from government or other independent industry publications and reports or based on estimates derived from such publications an
Slide 42: Advisory: Historical Production
Advisory Historical Production(1) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Light & Medium Crude Oil (bbl/d) - - - - - - - - 4,668 7,214 6,021 6,831 7,471 Heavy Crude Oil (bbl/d) - - - - - - - - 39,120 44,494 39,197 38,449 43,008 Average Oil Production (bbl/d) 77 5,345 11,407