Q3 2021 Parex Resources Inc Earnings Call

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All participants thank you for standing by the conference is ready to begin.

Good morning, everyone and welcome to Parex resources third quarter earnings call and webcast yesterday, Parex released its unaudited financial and operating results for the quarter ended September 30th 2021.

Like all Parex disclosure documents, the complete financial statements and related MD&A are available on the company's website at www Dot Parex resources Dot com and on SEDAR before.

Before turning the meeting over to Mr. Ken Pinsky, Chief Financial Officer of Spirit Resources, Inc. I would like to mention that this event is being recorded so the recording will be available for playback on the company's website.

<unk> would like to remind everyone that remarks made during this session are subject to forward looking statements, which involve significant risk factors and assumptions and have been fully described in the company's continuous disclosure reports.

The information discussed is made as of today's date and time and Parex assumes no obligation to update or revise this information to reflect new events or circumstances, except as required by law.

There's no doubt that anytime participants on the webcast kits can submit their questions and ask a question tab at the top of the webcast interface and participants on the phone can press star one.

I would now like to pass on the meeting to Parex Chief Financial Officer. Please go ahead Mr. Lipinski.

Thank you operator, and thanks to everyone on the line for joining myself and the senior leadership team for our Q3 conference webcast.

We appreciate your ongoing support for park's resources.

Before we begin our Q&A session I would like to provide some highlights of our Q3 financial results.

So you can keep production averaged approximately 47500 barrels a day, which was an 8% increase from the previous quarter, whereby our production was temporarily temporarily affected from transportation blockades that were experienced across Colombia in the spring of 2021.

<unk> does not currently experiencing any social disruptions in our production currently is in excess of 49000 barrels a day.

For the third quarter, our funds flow provided by operations totaled $153 million or $1 24 U S for sure.

And our Q3 capital expenditures were $74 million.

Generated free funds flow of $78 million, bringing.

Our year to date total of free funds flow to $250 million reallocated.

We allocated Q3 free funds flow to share buybacks and the regular and special dividend.

<unk> <unk> 25 per share each respectively for a total of $37.05 for the quarter.

We also continued to buy back shares under our automatic normal course issuer bid.

And our over 90% through our 10% share buyback target as we talk.

We maintained our financial strength with our working capital of $361 million and continue to have no debt year to date, we exited the third quarter with $200 million.

The credit facility I would also like to point out that <unk> remains unhedged in 2021, providing full exposure to the current high Brent oil pricing.

A further highlight for us in Q3 was parts expanding a strategic partnership with that control whereby parks will earned and operated 50% interest in two blocks.

<unk> block in the <unk> 38 exploration block both located in the proven and highly prolific Mcdonald's basin, you're welcome province of northeastern Colombia, very close to our capacitors block that we've been operating with a control for the past four or five years.

Attractive for par <unk> blocks contain proved reserves, along with development and jewelry exploration prospects.

This builds on our operational and commercial success.

Yes.

Our goal is to start operations in the first quarter of 2022 and the rest of loss.

Lastly, with ESG as a key value of parks, we have released our 2020 sustainability report and.

And are committed to reduce our operated scopes, one and two greenhouse gas emissions intensity by 50% by 2030.

2019 baseline.

I would now like to pass as being two parts as president and CEO Mr. <unk>.

To go over the Q4 outlook and 2022 guidance, which was provided yesterday as well go ahead rod.

Got it.

As we move through the final quarter Forex would be focused on the capital program to enhance our long term sustainability in Colombia.

We strengthened our commitment to maximize long term <unk>.

Right.

I'm pleased to report the following upcoming operations in Q4.

Yes diverse drilling program and give us their approaches and photo books.

Based on the very positive results to date, we expect an additional three to four wells to be drilled by year end then kept us there.

Which is estimated to increase over 2021 exit production.

Our 2000 9000 barrels of oil per day there.

Let me also took on a six well program in early 2022 and the Fortuna field.

Two wells already drilled Guyana, multilateral and furlough Negra, we still are awaiting completion activities.

And we expect to test wells prior to year end this year.

With regards to 2020 two guidance.

I will now move to our 'twenty to 'twenty two guidance provide an update.

Our framework for returning cash to shareholders, which we are very excited to describe.

One of the elements that attracted me most to join back so the depth and quality of the company's ex foot exploitation and exploration portfolio.

Yes.

At current strip pricing funds flow provided by operations is estimated to be over $725 million.

This provides multiple late.

Levers to increase.

Shareholder returns that could be dividends share buybacks and that's.

Growth.

We are excited to move forward with the capital plan.

That's materially expanded the boundaries.

The development properties.

Also unlocking substantial new opportunities within our portfolio.

Underpinning the plan is the portfolio was substantial discovered in place volumes.

Those are being unlocked right now using techniques.

I'm familiar in Colombia.

Proven elsewhere.

The name of few multilateral drilling hydraulic stimulation synthetics drilling mud stimulation goes reasons relief or.

Airborne geophysics that could be incorporated in our survey operations.

They are all.

Two is we.

Our fingertips, so look our Colombian assets.

I'd focus on.

So $70 in 2020 to Barrick's corporate guidance consists of the following.

Average production range of 50 to 54000.

GE capital.

Capital expenditure totaling $400 million to $450 million split between development appraisal and exploration programs.

Which is allocated to exploitation activities.

We have substantially increased our capex program in 'twenty two for multiple reasons.

One is we are beginning operations.

That's a partnership that Ken referred to them earlier.

Earlier.

Second as we catching up on the exploration and gross capital that we deferred from 2020 one.

While we were focusing on the health and safety of our communities during the COVID-19 pandemic.

And finally as we have.

Yes.

Deep.

Diverse portfolio exploration discoveries already made.

We definitely have that much over the last three years.

All of this is a critical step to demonstrate he starts his future.

Many of them.

With this brief overview I would like to turn the line back to the operator.

Q&A session.

Later I'll go to.

Thank you.

Press Star one at this time, if you have a question.

We have a question from Phil Skolnick from eight capital. Please go ahead.

Yeah. Thanks, good morning.

A few questions. The first one is.

What is what contributed to the rise in production to an excess of 49000.

Hi, Phil its Ken mostly that is coming from Kevin sterile.

Okay.

The wells to date on that program, we continue to drill more as a bad was saying and we'll keep drilling into 2022, but yes. That's what the production volumes increase is primarily coming from.

Okay perfect.

When you look the answer Youre looking at your <unk>.

'twenty two.

I guess how.

How should we think about how is your maintenance capex requirements of the changed much versus 2021, and 2020 or is it kind of pretty much the same.

Also the fact that you do have higher little bit higher production.

Hi, Bill, it's Mike Kruchten.

Pretty well the same the maintenance capital is still primarily.

Allocated to keep producing blocks in soco and.

We don't see too much of a change there certainly isn't you know when we look at the development capital that's really accelerating the discoveries we've had in the past such as lab believes that.

And so we can get that production on stream in 2022.

Okay, perfect and then finally.

What what kind of triggers or targets do you look out.

Friday special dividend, just kind of give us a way to gauge them.

I guess, we looked at it fill in respect of we're mindful of our growth of our balance sheet and we didn't want to continue to grow working capital.

We looked at how our working capital was forecasted growth at strip prices and our free cash flow in our Capex program for Q4 looked at where we were in Q3 and wanted to make sure that we came in well below $400 million of working capital for Q4, So that led us to have incremental dollars to either do a share buyback or a special.

Dividend.

As I noted, we're almost through our 10% in CIB didn't feel the need to continue to do an incremental <unk> <unk> or something this year. So the board approved a special dividend of <unk> 25.

And how you should look at this going forward is we're giving a strong signal to the market that we are going to be managing our working capital at these current levels for the short term near term.

That as cash flow is free cash flow then starts to build we will be allocating it back to the shareholder in some fashion in some form.

Okay perfect. Thanks.

Thank you once again you May press Star one if you have a question.

The next question is from Luke Davis from RBC. Please go ahead.

Yes.

Hey, guys good morning.

You might Wanna outlined a fairly robust exploration program for 2022. So just wondering if you could provide some details or rankings I guess in terms of prospect viability and just if possible some parameters around.

Potential resource additions yes.

If it's drilling is successful there so just really trying to get a sense for a potential impacts here.

Okay.

Yeah, Hi, this is Mike Harrington.

We have a pretty diverse set of exploration blocks, especially the blocks that we've accumulated over the last three years about five blocks in plus the Echo patrol partnership. So those are the blocks will be targeting obviously, we didn't do a lot of work in 2020, as we worked our way through Covid the.

The blocks that we really will focus on include brand part shows which is block 38 includes the Cleveland prospect.

11.

Fortuna continuation $1 34 and <unk>.

And some of the.

Lower Magdalena blocks, including them $1 43 now.

We generally don't disclose what the resource assessments are what I can tell you is.

It's a diverse portfolio and we're always targeting to keep our reserve life index in that 9% to 11 years, while at the same time accelerating some of those production volumes upfront. So that's the way we approach our exploration programs for the year.

Okay helpful. Thanks, Mike.

Thank you.

No no further questions registered at this time I would like to turn the meeting back over to Mr. Moshe.

Okay.

Thank you all for attending this session.

Looking forward to even more results next quarter. Thank you.

Thank you the conference has now ended.

Disconnect your lines at this time and thank you for your participation.

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