Q4 2021 Parex Resources Inc Earnings Call
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Please standby your conference will begin momentarily to ask a question. Please wait for the moderator to start the conference then press Star one system, Tony will be heard when you request has been accepted to cancel your question Press Star two.
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All participants. Thank you for sending Baidu conference is ready to begin good morning, everyone and welcome to Parex resources fourth quarter and year end 2021 conference call and webcast. Please.
No doubt that anytime participants on the webcast can submit their questions on the ask a question tab at the top of the webcast interface and participants on the phone can press star one.
I will now like to turn the call over to Mike Kruchten Senior.
Senior Vice President of capital markets and corporate planning as Parex. Please go ahead Mike.
Thank you operator, and good morning to everyone on the call with me today.
Alright.
As President and CEO , Ken Pinsky, Chief Financial Officer, Eric Furlan, Chief operating Officer, and Ron <unk> Senior Vice President of exploration.
I would like to remind you that this conference call includes forward looking statements and non-GAAP and other financial measures with the associated risks outlined in our news release, and MD&A, which can be found on our website or SEDAR dot com all.
All amounts disclosed today are in U S dollars unless.
Otherwise stated please go ahead.
Thanks, Mike.
Good morning, everyone.
As we reflect on 2021, we are extremely proud of our record results.
Our team consistently executing in most countries and in Colombia.
Looking back we started the year at approximately.
45000 barrels a day.
Increased our capital budget significantly.
Exited that same year at roughly 51 5000 barrels a day.
Production rates.
In tandem with increasing our production. We also saw an increasingly constructive global commodity price environment.
Ultimately contribute are accelerating.
Funds flow from operations of $578 million.
U S, which was a record and the largest in the company's history.
More to come.
During the year.
I am pleased to say that we materially improve the depth and the quality of our land inventory we have.
Acquired 18, new blocks.
2021, Columbia the drop as.
As well as expanded our strategic partnership with Ecopetrol in the North Sea.
Which combined represent nearly four times increase in our total acreage.
In Colombia.
No the largest independent acreage holder in Colombia, which is a development.
So.
Long term strategy and vital to our commitment to grow our Columbia, all the oil and gas production.
Yeah.
Other noteworthy achievements for the year include our corporate ESG initiatives as Michael and briefly talk about as well as a return of capital track Records that Kevin will touch on therefore, I make some final remarks on our outlook.
Before I make some final remarks, and our outlook as well as Forex positioning for 2021.
Over the long term. Please go ahead Mike.
Thanks, Mark and 2021, we advanced our climate related disclosures.
Is there an ongoing task force for climate related financial disclosure report achieved above industry average ESG ratings from major providers, such as sustained Olympics Pvp and Bloomberg.
Critically during the year, we publicly committed to a 50% reduction in our greenhouse gas emissions by 2030.
And parks is actively progressing on its ambition to become one of the least greenhouse gas emissions intensive oil and gas exploration companies.
In 2021, we made progress towards this equipment this commitment reducing our greenhouse gas intensity from our operated assets by approximately 14%.
A reduction of approximately 35% from our 2019 baseline.
Moving forward we.
We expect to see more reductions from events in the implementation of geothermal energy full lines to reduce transportation needs gas plants to reduce flaring and energy efficiency initiatives.
Yeah.
Taking a step back and really looking at sustained build yet its core with the current volatility that we're seeing in LNG markets today.
And the follow on effects of that.
<unk> is in a position where we can do our part to provide secure reliable and environmentally friendly energy.
We can do that while continuing to improve the local communities, where we operate.
On that note, we look forward to 2022 and update our stakeholders throughout the year as we look to continue advancing our ESG story.
Meeting our overall sustainability objectives.
I will turn it over to Ken to briefly describe our recent results and return of capital track record.
Thank you Mike.
Closed 2021, with a strong fourth quarter, where we generated record funds flow from operations of $168 million that was up 200% quarter over quarter I'll add that Brent averaged in Q4 2021, approximately $80 a barrel.
And as our model will tell you we remain unhedged to global oil prices.
Quarterly net income was $96 million, while Q4 2021 production averaged nearly 50000 barrels a day and that was up 7% quarter over quarter over the full year 2021, we generated over $300 million of free funds flow and continue to add to returns capital track record.
The special dividend as well as initiated a quarterly regular dividend last year, which was just increased by our board to 12% in February .
During the year, we also repurchased 10% of our company's public float, which mark the third year in a row, where we have bought back the maximum allowable shares pursuant to our normal course issuer bid programs.
At the end of February 2022, Rx has now returned over 1 billion Canadian to shareholders through share repurchases.
Since 2017, we have reduced our fully diluted share count by over 25% repurchasing over 47 million shares at an average price of less than $20 Canadian per share.
Compared to our closed yesterday of $28.89 Canadian per share for reference.
Stating it in another way when we start buying back shares in 2017, we had an excess of 164 million fully diluted shares outstanding.
Which by year end 2022, we expect to have approximately $110 million fully diluted shares outstanding.
To add over the same period, our oil and natural gas production has grown by approximately 32%.
We continue to have an unmatched balance sheet ending the year with no debt and working capital of $326 million plus.
Plus an undrawn $200 million credit facility.
As we look to 2022 and <unk> spending on a comprehensive capital investment program.
We have expanded our return to capital plan raising the base dividend. This year already as I have mentioned and we are on track to repurchase 10% of our stock for the fourth year in a row.
Im extremely proud of our accomplishments for 2021, and I look forward to 2022 and beyond now.
Now I'd like to turn things back to Matt for some final remarks.
Thanks Scott.
This year 2020, the year 2021 was a record year for us.
Im excited for what is to come for <unk> and 'twenty two as the long term.
For 2022, there is no change to our capital expenditure production guidance as we release, especially if ever.
Continue to invest across our development exploitation and exploration program with our current production guidance is expected to generate year over year production growth of 13% or 23% on a per share basis.
Along with our ambitious capital expenditure program, we still expect to repurchase.
10% of our stock this year, yes, EIB as Ken mentioned.
While also having based system upside growth potential.
This is a track record of returning meaningful capital to shareholders moving forward, we want to be clear that we are targeting so we're trying to at least a third.
Oh from operations to shareholders.
Through share repurchases and dividends.
Was this philosophy at current strip prices Barrick expects to return approximately 40% of 2020 to annual <unk> Oh.
Shareholders.
The remaining free cash flow from operations would be investing to grow the company and their bench development inventory to support future return of capital activities.
There is an important part I'd like to comment on.
Right now over the last year.
Year, we have positioned <unk> to capitalize on the current market cycle.
<unk> is 100% unhedged.
And that is a clear first mover advantage in today's oil and gas markets.
As we move into 2022.
Firstly, we are entering the year having.
Florida has the most extensive land base in the company's history.
Foreign steel.
Second we have secured shrinks under long term contracts on the equipment in place to cater for our capital investment program, we used to call.
It is.
It does give you some some somehow.
I'm feeling of.
Or hard to see with <unk>.
The last either rigs in Colombia are under contract with BARDA.
Third we have increased critical organizations capabilities hiring significant stuff wasn't category in Bogota.
I would just call it around 30% of the category in 2021 increase.
So help us ramp up our programs.
Lastly.
We have placed orders for long lead items for the foreseeable future that includes casings wellhead.
<unk> turbine you name it in order to prove value installation from supply chain.
Sure.
Disruptions relative to hedge against cost.
Cost inflation going forward.
Combined these actions put us in an extremely competitive position.
Please go harvest the upside opportunities as you're asking which is.
<unk> pricing that could go.
Well above other than them.
Sure.
<unk> per barrel.
I guess I'll, let them today.
So.
For me not waiting for steel.
When you're drilling a well that pays back in the months or two.
He was optionality.
With that I would like to thank everyone for their continuous support for Baird.
Employees for their continuous hard work as we are.
Execute our strategy.
This concludes our formal remarks, and I would like turn the call back to the operator to start the Q&A session for the investment community.
Thank you.
Thank you you May press Star one at this time, if you have a question there won't be a brief pause while the participants register for questions. Thank you for your patience.
Once again, you May press Star one if you have a question.
We have a question from Matt.
Davies from RBC. Please go ahead.
Hey, Good morning, guys you mentioned.
Orders for long lead items and I'm, just curious if you could provide a little bit of commentary around what you're seeing or forecasting for kind of base inflation through the balance of the year and then wondering how long that Vince you can order. If are you just talking 2022 does that go multi years, just a little bit more detail there would be helpful. Thanks.
Yeah.
I would say something like eight months ago.
I agreed with the management team.
There is a first for Covid, but also the way the cycle was working.
Charles for supply disruption, so what we started to do since that moment.
Fine.
With three years of mine.
And wherever we could to place orders to fix the terms that doesn't mean, you don't get any inflation. So let's say you buy steel pipes, you wouldn't be having some indexing on steel prices.
That's very different than having to go in and busy war against that same city somebody's yard, we can get three or four times that.
Inflation.
We're not seeing much inflation right now in Colombia, just because the local conditions on rigs.
Other items, but I can see some very.
I can see some some signs for inflation going up but within that number that doesn't affect our margins any significantly do you want to add to that or anything here.
That summarizes it quite well I think.
The big things, we've done unsecured the rigs, especially the big rigs and and go forward. Those are all long term contracts and as <unk> alluded to.
Not seeing a big inflation component, we secured the critical equipment, we need and the pipe for program for the next couple of years. So I think we're sitting in pretty good shape and that also expands on surface facility equipments, where people were brave enough to say, let's order.
Power's generation kits or or turbine compressors or even gas treatment facilities.
Before the wells were put on the ground and I can tell you these things coming.
To deliver it in the coming few months and year.
These were you haven't I'm trying to expand.
Compared to our competitors.
Yeah.
Got it that's really helpful and if I could just.
Asking a follow up to that just curious to just get your general thoughts on the upcoming elections here something that comes up a fair bit. So just if you could go through kind of a couple of potential scenarios and kind of where you guys are sitting right now that would be helpful.
Sure Luke its Mike Kruchten.
Regarding the election, that's going to play out over the next couple of months up into June really we're not seeing anything too different than what we saw the path in 2018 there'll be some consolidation of all the candidates that are running.
And we really don't think we are well positioned to work with Columbia and continue investing heavily in Colombia, no matter what the outcome is.
We have a very strong land position and it gives us lots of exploration running room in production running room over the next five years and yet where we think it won't really change there our overall strategy.
That's helpful. Thanks very much.
Thank you once again you May press Star one that you can question.
Dawn.
No further questions on the phone for now I would like to turn the meeting back over to Mike.
Thank you very much for all the participants joining our call today and be any further questions feel free to contact me at parks have a good day.
Thank you Nick.
Conference has now ended please disconnect your lines at this time and we thank you for your participation.
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