Q3 2019 Earnings Call

Please standby your meeting its about begins.

Good morning, everyone and welcome to Terex resources second quarter earnings call and webcast yesterday Terex released its.

On audited financial and operating results for the quarter ended September Thirtyth 2019, like all parents disclosure documents that come see financial statements and related M.D. and they are available on the company's website at www dot hair ex resources Dot com and onstar.

Before turning the meeting over to Mr., Dave Taylor, President and Chief Executive is lot Executive Officer Parex resources Inc.

I would like to mention that this call is being recorded.

Well for play back on the company's website.

Parents that likes to remind everyone that remarks made during this session are subject to forward looking statements, which involve significant risks risk factors and assumptions and have been fully described in the company's continuous disclosure report.

The information discussed in his name as of today's date and time and Keryx assumes no obligation to update or revise this information.

Well events or circumstances, except as required by law.

Please note that at any time participants on the webcast can submit their questions under the ask a question tab at the topic the webcast interface and participants on the phone can press star one I'd like to turn the call over to Terex is president and Chief Executive Officer. Please go ahead Mr. Taylor.

Thank you operator, and thanks, everyone for joining our Q3 conference call for your support parks resources.

Today are 10, Penske Chief Financial Officer, <unk>, Chief operating Officer, Ryan Solar senior VP exploration and Mike Cronin Senior VP choppy markets in corporate planning.

Before we start acuity I'd like to provide an overview to our shareholders on our Q3 financial results operations and discuss 2020 gods.

Third quarter was highlighted by strong up actually U.S. $29.61 per barrel and funds flow from operations up 143 million or Canadian dollars 31 of the sure.

But free cash flow of 94 million, we repurchased 3.2 million shares and return of $66 million Canadian towards shareholders, while increasing our working capital to 280 million U.S. Q3 earnings were 57 million or Canadian 53 cents sure.

I'd like to give a brief operational update that highlights the fuel to keep projects for making significant progress.

An exploration and Q4 2019, we're planning a robust exploration program with wells on board.

They tend to tell talk a well and be I'm, one let believes a well which are nearing their primary objectives.

Over the next four weeks, we plan to spud wells on El <unk> 32.

Prospect She PEO 11, Daisy prospect at two had was baucus southern extension exploration wells [noise].

A couple chose we anticipate moving a service right from a workover operationally coupled chose to do the idea that threed development well to complete a place about production in the coming weeks construction of a flow line from the idea that tied to the central gas processing facility located on the central pad, that's been delayed due to a permitting issue to mid year 2002.

90, thus, reducing Q4 2019 of the first top 2020 production by approximately 2500 barrels a day that.

We're confident that we will receive the regulatory approval in Q1 2020 to allow for the flow like construction to begin in the spring up 2020.

With respect to hear some G.

Our commitment to social responsibility and the communities, where we operate or have employees continues to be important to the company.

I mean were 29 team parts jointly with the chairman of the Board made a Canadian 3.24 million dollar gift to the faculty of science at the University of Calgary to Mark the company's 10 year anniversary.

Skip establish a six innovation fellowships intended to support elevators and encourage research with positive social it.

And Bogota first donated 1.6 million U.S. the hospital assigning Boulevard.

Turning to the most especially central for Colombia.

And also serving patients from the Caribbean crew in Ecuador. This is a public hospital treating all patients regardless of income [noise].

Well there are 2020 initial guidance, we're targeting 14% year over year production per share growth for the full year production arranged with 54500 56250 barrels oil equivalent per day.

Including the forecasted increase in working capital on it does adjusted basis, we expect to achieve a 23% year over year production for sure growth.

We will have U.S. 20, 520 to 550 million in funds flow, assuming Brent oil prices of $60 per barrel for the year.

We will have U.S. 210 to 240 million of spending for the full year capital program and this includes the drilling of 11 exploration prospects in Colombia.

Following the completion of our full 10% share buyback program in 2019, anticipating returning more cash for shareholders and 2020 subject to the approval of the trial stock exchange plans for a newer and see I'd be on December 20, Threerd 2019, with the intent to repurchase another 10% of public float were approximately 14 million shares.

Parts is unique in our industry as the company continues to generate significant free cash flow against the best in class balance sheet.

Expect exit 2019 debt free with over 300 million of working capital and based on $60 Brent forecast for 2020 budget, we will reduce our shares by 14 million.

It's a 2020 with nearly 400 million of working capital or approximately Canadian $4 a share.

This balance sheet strength provides significant <unk> significant optionality to invest unconventional resource growth opportunities, which may include clue jurisdictions outside of Latin America.

With this brief introduction I'd like turn line back over to the operator to start the acuity upgrader overtime.

Thank you will not take questions from the telephone lines. If you have a question. Please press star one on your telephone keypad.

Please press star one at this time, if you have a question.

Just first question is from Daryl Bishop from Haywood Securities. Please go ahead.

Hey, good morning, guys I just have two quick questions both related to the 2020 guidance.

Well with respect to your production guidance. So you mentioned the flow line potentially reducing 2500 barrels a day in the first half of 2025, but I think when a lot of clients are looking at the 5% growth year over year guys were looking at is being conservative. So just want to get a break down from you guys on where that capital is going from a developer.

And in exploration perspective, and then second question here is just related to some of the Optionality, Dave that you mentioned Youre your free cash flow in the cash on hand for next year, where the opportunity might lie.

Particularly you guys mentioning opportunities outside of Colombia in a in Latin America I, just wonder if you can give some more color around what jurisdictions might be Pete and your interest right now.

Sure I'll start with the second question barrel analysts can maybe to address the first question you know right now the premises, though how does want to be opportunistic given the balance sheet strength and strong working capital position that we have we believe there should be something high quality assets on the market is as larger companies potentially shed some assets. So.

We're well positioned us to look after some of this and take care of maybe picking up some of those opportunities when we want to look for us material.

Additional assets and proven basins prefer oil.

Politically stable.

Places without strong netbacks recycle ratios and future growth. So it's kind of a more of a global look at the possible places, we could invest rather than having a specific place right now but we.

We would look outside Colombia, and potentially outside of Latin America, we can find opportunities that fit those criteria.

Our already accounted for the first part [noise].

Thanks, Dave I respect your.

Comments on capital in our presentation, we have outlined our sources of cash going through to incremental cash at different prices and you can see that's on page eight and when do you can see is for maintenance capital, which is really production or capital to keep our production flat from Q4.

Into 2020, we have about 100, 1500 25 million with about 100 to that 90 to 100 being spent on block 34, and the rest on various operated properties on the development side. We have 30 to 40 million, that's mostly I just like there's some brenda.

Exploration of 65 to 75 billion and we have up to 11 exploration prospects in Colombia, we detail those in the presentation by block and then we ever share buyback that we expect will cost approximately 200 million.

And then that gives us that could all be funded so lower than $6. Brent. So we will have 60 milligram, we'd still be increasing our working capital from 300 million at the end of 20 point 2019 forecast to that the into 2020, approximately 400 million and this gives us optionality as Dave discussed that allow us to look for other.

Other prospects and opportunities that in this world where reduction any new cash for doing doubts business. We think we'll see companies have to divest some good assets and we won't be able to look at these and see if they fit within what we want to do going forward, but the company.

Okay. Okay. That's helpful guys I'll leave the space for other guys. That's question. Thanks.

Thank you once again, please press star one at this time, if you have a question.

The next question is from outstanding from RBC Capital markets. Please go ahead.

Hi, Yes. Good morning, guys a couple of largely unrelated questions. Just on the question about acquisitions in terms of whether you feel there's a need for to expand outside of Calgary in terms of the logistics and what the you're actively looking for right well.

Are there any out opportunities you're currently reviewing at the moment and then the next question would be would you consider opening offices, let's say in London or elsewhere to give you a launch a geographical footprint and then as I say completely unrelated does just wondering if there's any guidance on on the spend through next year or whether it was first half second half weighted.

Thank you.

Yes, just in terms of acquisitions, it's Dave we're always looking at things that are on the markets and especially things that are our own back yard, which is Latin America or Columbia, specifically and you know we're just as we mentioned starting to depart put in the water outside of [noise].

Maybe a little bit so we don't have any specific things that we're looking at that I can talk about in terms of relocating offices outside of Calgary yet.

We haven't talked about that I'm looking around the table here and none of the guys seem to want to move to.

Houston.

[laughter].

So we haven't really done that in terms of.

The weighting of the capital program, Mike Yeah, It's probably 60 40 in the first half the year compared to the second half the year.

Okay.

Cool thank you very much.

Thank you.

Once again, please press star one if you have a question.

Mr. Taylor there no further questions on the telephone line.

Thank you operator.

Let's take this opportunity to thank you for your interest in parts and your continued support of the company for further information. We invite you to visit our website or color. Thank you again and have a good day operator.

Thank you that concludes this morning's conference call and webcast you would like to replay the call. Please visit the events page on the company's website under newsroom, Thank you and goodbye.

This conference is no longer being recorded.

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