Q2 2020 Parex Resources Inc Earnings Call

All participants please standby your conference Insightics weekend.

Good morning, everyone and welcome Eric Resources second quarter earnings webcast [noise].

Yesterday.

Yes.

Financial and operating results for the quarter.

30 2020 [noise].

Like all parents disclosure document.

<unk> financial statements related.

They are available on the company's website at Www Dot Harris resources Dot com and.

Before turning the meeting over to Mr.

President and CEO of parents.

I would like some nice.

Isn't being recorded.

Accordingly will be available for playback on the company's website.

Our next would like to remind everyone that March for me.

And are subject to forward looking statements, which involve significant risks factors and assumptions.

Haskins fully described in the company's continuous disclosure reports.

For me some discussed if need.

Steve Steve tight and parents assumes no obligation to update or revise this information to reflect new 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 Todd at the top up the webcast interface and participants on the phone can press star one.

I would now like to pass on to meeting Terex, President and CEO. Please go ahead Mr. Taylor.

Thank you operator, thanks to everyone on the line for joining myself and the senior leadership team for Q2 conference call.

Appreciate your support work sources.

First started acuity session I like to provide some highlights of our Q2 financial results discuss our plans for the remainder of 2020.

I'll begin by stating our priority during the cold 19 pandemic remains the health and safety or employees.

Contractors and the communities, where we operate [noise].

Minimize social interactions, we changed our operating procedures and reduce field activity, which impacted both capex and production in Q2.

Our office stuff and over time Caldron continue to work primarily from home.

And the second quarter financial results for strong despite declining global oil prices and ongoing market uncertainty.

The result of voluntary shut ins Q2 production averaged.

Well 40900 barrels per day, 25% decrease from the previous quarter.

Sure, it's catching up back was $9 96.

Elite generating funds flow from 39 million or 28 cents a shares.

Was limited operational activity or capital expenditures were 5 million, we repurchased 1.1 million shares.

The company maintained its financial strength with 334 million in cash and note that we exited the second quarter with working capital of 339 million 200 million Undrawn credit facility.

For a 2020 outlook parks as an exceptional financial position in the industry as a company continues to maintain a best in class balance sheet.

Liquidity exceeding 500 million.

In early March we took decisive action to protect our financial position to weather the ongoing crisis as well as take advantage of potential growth opportunities that may arise.

Stated last quarterly conference call production levels in the second half of 2020 will be dependent on commodity prices showing stabilization.

During Q2, we began to observe greater visibility to stronger netbacks, providing options for the company to personally planned a gradual restart production volumes from shut in fields, which were reduced to preserve value.

Currently we are producing approximately 44000 barrels oil per day.

Targeting Q3 average production in the range from 40 to 44000 oil barrels oil equivalent per day [noise].

Secondly, we <unk>, we're going to resume our capital expenditure programs and that's contingent on ensuring the welfare stuff in the community surrounding your operations.

We estimate capex to be in the range of 50, 65 70 million for the second half 2020, with a priority being southern Cal scenario core area completions on development wells.

Lansing am one level, Lisa discovery was civil works initial facilities and long lead items.

And finally drilling a brenda appraisal well Fortuna exploration well in the middle Magdalena base.

We will continue to review and evaluate business development opportunities in Colombia, as well as other jurisdictions.

What this brief overview I'd like turn line back to the operator to start QNX session operator over to you.

Thank you we will now take questions from the telephone line gets you have a question you're using speakerphone. Please mr. himself before taking your question. Please press star one when you're seeing keypad and she has a question.

Our first question is fun, Phil Skolnick from <unk> capital. Please go ahead. Your line is now open.

Yeah. Thanks, a capital I'm just a couple of questions first on the the Capex with it you know there's little bit lower than what you had pre guided I'm, assuming that's because the whole cobot 19 situation, but how's activity looking now for you and you know how should we think about it I mean as commodity prices.

Driven is that really is.

Is there anything kobin related to that kinda could still be a bit of a headwind.

Yeah as I was mentioning fill the others still concerned around the communities, where we operate in the safety of our employees and then those people in the communities.

So it's taking some time to get back to work and some of those areas were communities don't want outside people coming in so we're very cautious about kind of taking our time. So the capital program has some contingencies on us being able to get back into those communities and get fully started up having said that you know in block 34, we have to non operated rigs.

Drilling no, we're getting ready to spud won or kind of sterile block here shortly.

We've had construction operations going on in the field in Indiana to complete the flow on and we're getting ready to start or completion work could I was buying because.

And the drilling of the two wells in the Middle Magdalena basins. So no. We do have plans to do that work today outlines the 65 70 million.

But as some of it is contingent on getting into that communities.

I would say just the consistent piece is more around exploration growth capital that the development capital Phil.

We're not tickets.

Okay, perfect yet I was going to be my another question just on the M&A opportunities.

Hello, looking is it still at a wide bid ask spread out there.

I think we out we're going to continue to see a discrepancy between expectations of buyers and sellers, but I think I would say generally we're starting to see a few more opportunities come to the table. It thinks more distressed situations are starting to show up and so we are evaluating the things that fit our criteria.

Okay. Thanks, and just the final one just on a transportation costs that were lower this quarter or what the increase wellhead cells.

Yeah that transportation costs or anything that is that a new trend or is that just because of the higher sales that happened.

Yes, just because of the higher wellhead sales, we stopped doing cargos. After April so main Jim had no cargoes and cargos, we incur the transportation costs. The port wellhead sales, we don't incur them. So we don't report them their data, though it has a differential so.

So you'll start to see transportation costs in Q3 go up as we have to cargos August and September.

And so therefore, you will see a shift between differential and transportation costs, but it all kind of makes the same Brent minus transportation differential number so it'd be consistent with a bit of an increase speech or improvement in Q3, because that's going he has tightened write up in about you.

Absolutely okay, great. Thanks.

Thank you.

Once again, please press star one if he would like question.

Our next question.

Evan.

She bank. Please go ahead. Your line is now open.

Yeah. Thanks, So just a quick question for me on taxes, I wish and a couple of the Colombian guys were not or announced that they've got some VHP recoverable and then also some tax credits that are being later in layered into the second half of the year I'm. Just wondering if you guys have anything like that coming for second half of this year.

In terms of credits and to be count against cash taxes. Thanks.

[noise] cabinet question on cash taxes.

We didn't have the big V. two receivable like some of our competitors and we don't know why they did but we never really got it we just keep collecting ours kind of on an ongoing basis [noise].

We patti taxi covering the second quarter, because effectively you know our first quarter taxes.

And second quarter taxes combine equaled the first half a year tax and that's how you do your tax and that's how you think your tax accrual effectively and so in the second quarter. We just effectively had a recovery due to lower lower realizations.

Price realizations, and therefore, lower taxable income to three in Q4, we're expecting to have taxes in the range of $70 million per quarter.

You know so that will build up our tax payable balance again as far as credit score. We did receive a small credit in respect of a program that we're doing it I was like us.

Two or government program, but you know what did I think it was two or $3 million so nothing significant.

As you know the government has announced a few programs like that but we are taking advantage of them, but I don't see it if anything significant or anything you have to model and theirs and you can't really won't come until you actually.

I've got confirmation that you will receive.

So I hope that answers your question.

That's perfect. Thank you.

Thank you our next question.

Starting with RBC. Please go ahead. Your line is now open.

Yes. Good afternoon, guys can I just took a bit about production or can you talk a bit about production in terms of warranties restraining into the movements or no.

It is an issue, but just looking at some of the big numbers coal purchases is running it's sort of perhaps half capacity at five to six remember is 1500 thousand barrels a day.

It's it's a jet right and you know if you look at March to seize maybe that's been 70000 barrels a day [laughter] gross production rose So [laughter] I almost feel that you could go back and switch some are they don't quite easily I know that's [laughter] are you going.

Right.

Thanks.

Well it sounds today.

Seems to be the topic will range from Q3.

Should we be.

Looking towards the top end of your range and second huh.

Eric.

I'll answer that it's Eric here.

As far as production goes as we indicated earlier when we had the big downturn and price scenario and the elimination of netback, we started shutting everything in our so called was a big focus on us.

You know both in the off and on off we started taking production down that was to preserve that the quality barrels. We haven't we saw no reason to blow them down that at essentially no value.

And then we had the whipsaw effect with the price of oil has started to turn things back on that is continuing today, but it does take some time.

And with the other fields like Roomba et cetera that is also the same case, we turned everything down we send everyone hall and bringing them all back.

This takes more time and is more difficult. During these calls at times. So what would be a typical one we start off of a feels like white house smaller feel like roomba oxygen can take several weeks, but we are proceeding down not trap, we don't have as far as bringing feels backhaul production. We don't have any any big surprises there.

Coming back on production.

You lost wells and so we're continuing down that path.

The other part of this is we we also stopped a lot of the capital program and development program. So you know in Soca area for example.

Probably going to deliver just over half of our capital program. Her for 2020 compared to what we originally as plan. So that if that is a bit of a slowdown.

And your final question on capacity and Andina.

For the most park Fascists Andina has been held back while we wait on final infrastructure.

As a company we have a policy to.

Not flare gas or minimize any kind of gas flaring and I'll hold there's no permit restrictions to to produce capacitor sandeen as you indicated it has much higher capability.

We've kept it essentially choke back or I don't back well wait for the final infrastructure in place and we are nearing the startup that file infrastructure in the next couple of weeks, mainly that pipeline that allows us to conserve all the gas.

So I hope that answered all your questions. Let me know if there's anything else.

No that was a that was great. Thank you.

Thank you.

I have no further questions.

Thank you operator, let's take this opportunity to thank you for your interest in parks and your continued support or the company further information. We invite you to visit our website or call us. Thank you again and have a great day.

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