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Parex Resources Corporate Presentation May 2014
- 1. May 2014 Corporate Presentation PAREXRESOURCES.COM| TSX:PXT Building The Runway
- 2. Significant land base(2.2 mm gross acres) Diversified production base Experienced operator (100 wells drilled) Historical exploration success rate (50%) Legend Columbia Focused 2Corporate Presentation May 2014
- 3. Objectives Q1 2014 OperatingNetback $61.20/bbl Q1 2014 Production 18,425 bopd Q1 Funds Flow $77 MM Reserves 2P (Dec. 31, 2013) 32 MMboe1 Doubled 2P reserves over 2012 year-end Capital Structure Market capitalization at $11.50/share Cdn$1,270 MM Convertible debenture PXT.DB Cdn$85 MM (5.25% coupon & $10.15/share conversion with 2016 maturity) Common shares outstanding (TSX listed) Basic 110.4 MM Fully Diluted 127.5 FD2 MM Snapshot (1) Parex net working interest, as per the independent reserve report prepared by GLJ Petroleum Consultants Ltd. effective December31, 2013. (2) Fully diluted shares does not include out of the money options based on a share price of $11.50 3Corporate Presentation May 2014
- 4. Existing Fields: Development& Appraisal Drilling -16,000 bopd Exploration Drilling 1,500-2,500 bopd New Play Concepts (types: heavy oil, tight sands, stratigraphic) “upside” 2014 Production* 17,500-18,500 bopd *Second quarter production to average approximately 19,000 – 19,500 bopd 2014 Guidance Delivering cash flow funded 15% year-year production growth Available to support Exploration Success #Wells Capex (Net $ million) Gross Net Wells Facilities Other Total Development /Appraisal (existing fields) 15 9.6 $54 $34 $2 $90 Exploration (proven plays) 19 11.5 $96 $20 $9 $125 New Play Concepts 3 2.3 $21 $5 $9 $35 Base (Firm) Total 37 23.4 $171 $59 $20 $250 Appraisal (Contingent) 8 4.7 $18 $12 $0 $30 4Corporate Presentation May 2014
- 5. Middle Magdalena Basin VMM-11 Morpho PPVelasquez Palagua Nare 40km Cocorna Parex Producing Oil Fields 2014 Planned Activity Colombia: Diversified & Extensive Asset Base Block Production Exploration Development & Appraisal New Play Types Cabrestero Cebucan El Eden LLA-24 LLA-26 LLA-29 LLA-30 LLA-40 LLA-57 Los Ocarros Morpho VMM-11 LLA-32 LLA-34 Gross Wells 19 15 3 Total 37 5Corporate Presentation May 2014 Parex Blocks Selected Oil Pools 40km Llanos Basin LLA-16 LLA-40 LLA-17 LLA-57 LLA-20 LLA-24 LLA-30 Meta River Cubiro Corcel Balay Cusiana & Cupiagua Rancho Hermosa Cravoviejo Las Maracas Los Ocarros El Porton Cabrestero LLA-34 LLA-32 Santiago LLA-26 Cebucan Kona Cerrero Capachos LLA-29
- 6. Proved + Probable +Possible Proved + Probable Proved 2P Reserves Life Index (1) After Tax PV10 (USD MM) Reserves* MMboe 31-Dec 09 - - - - - 31-Dec 10 10.4 5.8 1.1 - $149 31-Dec 11 17.6 10.7 4.6 2.6x $344 31-Dec 12 23.1 16.1 10.1 3.5x $450 31-Dec 12 49.9 32.0 17.4 5.1x $832 Track record of reserve category progression Increasing reserve life index (RLI) & sustainability Building A Sustainable Business June 30, 2013 Company’s reported reserves were 3P-36.4 Mmboe, 2P-23.7 Mmboe and 1P-14.1 Mmboe (1) RLI calculated using 2P year-end reserves divided by Q4 production annualized *Reserves are independently evaluated by GLJ Petroleum Consultants Ltd. 6Corporate Presentation May 2014
- 7. Median Llanos 100 acres Kona 300acres Low side closures 500 +1000 acres Oil Water Sandstone Shale Las Maracas 300 acres Bottom water drive Edge water drive Edge water drive Structures: Progressively Larger Corporate Presentation May 2014 7
- 8. Grow & DiversifyProduction 2014 Production Guidance is 15% higher than 2013 0 2 4 6 8 10 12 14 16 18 20 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 FY Bopd(000)byblock 2010 2011 2012 2013 2014 2014 Guidance* 17,500 – 18,500 bopd FY LLA-16 LLA-20 Los Ocarros Cabrestero LLA-32 LLA-34 LLA-30 Other 8Corporate Presentation May 2014
- 9. Parex Exploration LifeCycle Continue to deliver on our strategy to expand the asset base and added Meaningful positions for future sustainable growth Develop Concept Acquire Land Test Concept Initial Development Expand Land Exploitation Traditional 3-Ways Low Side Closures Stratigraphic Traps New Plays LLA-26, Cebucan LLA-24, LLA-29 & LLA-30 Cabrestero, LLA-34 VMM-11, Morpho, Llanos Deep Sands, Capachos 9Corporate Presentation May 2014
- 10. Characterized by: Parex’ deepbasin knowledge & operational experience Producing light oil 30-37º API from 5 fields Productive reservoirs: C7, Mirador, Gacheta & Une Ability to use fields as swing producers to manage quarterly growth. 2014 Activity Explore on blocks untested by Parex exploration wells on LLA-26/40/57 Manage existing production 2 development wells Ongoing recompletion program Traditional Llanos Structures Continue to exploit and manage producing fields 10Corporate Presentation May 2014 Discoveries 40km LLA-40 La Casona Rumi Las Maracas Sulawesi Kona Celeus Cumbre LLA-16 LLA-17 LLA-57 LLA-20 Los Ocarros El Porton LLA -26 Cebucan 2014 Drilling
- 11. Acquired blocks in2012 to develop concepts and prove-up in 2013 with discoveries Cabrestero (100% WI, Operator) Akira - new play type low side closures Facility start-up LLA 34 (45% WI, Non-operated) Increased new prospect inventory through 3D seismic acquisition on western side Significant development focus LLA-32 Kananaskis discovery 2 exploration wells to test 3 appraisal wells Southern Llanos: Low Side Closures Explore core position, appraise & develop discoveries, and leverage Parex’ costs and exploration know-how Corporate Presentation May 2014 11 2013 3D Seismic Corcel Cabrestero LLA-32 Jilguero Santiago Max Tarotaro LLA-34 Tigana Tigana Sur Kananaskis Tua Discoveries 2010/11 Seismic 20km Maniceño -Bandola Kitaro Akira
- 12. Verano Acquisition: PropertySummary Block Parex WI Verano WI Close PXT WI LLA-17 40% 23% 63% LLA-32 30% 40% 70% LLA-34 45% 10% 55% Acquisition subject to Verano shareholder vote. Refer to Parex news release dated May 13, 2014 Corporate Presentation May 2014 12 2013 3D Seismic Corcel Cabrestero LLA-32 Jilguero Santiago Max Tarotaro LLA-34 Tigana Tigana Sur Tua Discoveries 2010/11 Seismic 20km Maniceño -Bandola Kitaro Akira Kananaskis Carmentea Calono
- 13. LLA-30 (100% WI,Operator) New Discoveries 2013: Adalia-1 38° API at 1,000 bopd Adalia-2 waiting on completion Adalia-3 initial test of 38° API at 1,000 bopd Exploration well in 2014 LLA-24 (100% WI, Operator) New block for Parex: Exploration well in 2014 & test concepts New Play Type: Stratigraphic/Channels First drilled in 2013 and analyzing stratigraphic concepts. Drilling off structure prospect to prove-up concept. Corporate Presentation May 2014 13 LLA-20 LLA-24 LLA-29 LLA-30 20km Discoveries Adalia
- 14. Capachos (50% WI,Operator) Ecopetrol partnership ANH royalty contract Large structure, light oil Leverages our strengths: low cost drilling strong operator working with communities Capachos Farm-in 14Corporate Presentation May 2014 Capachos LLA-16 LLA-40 LLA-17 LLA-57
- 15. VMM-11 (60% WI,Operator) Farm-in to drill one well Testing of new play concepts for cold heavy oil production (CHOPS) Builds on management’s success with Petro Andina in Argentina’s Neuquén Basin Morpho (100% WI, Operator) Over 2000’ of gross pay in each of the Colorado (Oligocene) and Eocene Morpho-1 well completed in 3 of 6 Oligocene sands, > 100 bopd Next, new well & optimized frac program Acquiring new 2D seismic allows us to apply a resource concept over approximately 10,000 acres New Play Concepts New Play Concepts: applying proven technology in Colombia 15Corporate Presentation May 2014 Middle Magdalena Basin VMM-11 Morpho PP Velasquez Palagua Cocorna Nare 40km Discoveries Ocensa Pipeline
- 16. Llanos’ “Deep Basin” Foothills:large oil & gas structures, +$75MM wells Plains: small oil structures, $5-$10MM wells Transition Zone “Deep Basin”: undrilled, +$25MM wells Parex target $10-15 MM wells Apply low cost operator advantage to explore the Llanos Transition Zone Transition Zone Corporate Presentation May 2014 16
- 17. Expanding Capacity New take-awaycapacity exceeds basin production growth Source: Ecopetrol, 2013 0 500 1000 1500 2000 2500 2010 2011 2012 2013 2014 2015 2016 Colombian demand vs. Capacity* (mbd) Fuel Oil Third Parties production Partners Pipeline Capacity *includes trucks Diluent Royalties Ecopetrol’s Production Total Capacity Current Production 17Corporate Presentation May 2014 Growth Opportunity 2012 – 2014: Crude Oil Pipeline – Key Projects 1. San Fernando - Monterrey System: +390 mbod 2. Bicentenario Phase 1: +120 mbod 3. Magdalena Medio System: +75 mbod 4. Caño Limón - Coveñas: +55 mbod 988 1,133 1,287 1,377 1,446 1,472 2,020
- 18. Operating Netback: ColombiaPremium $63 $71 $67 $71 $82 $73 $71 $69 $67 $58 $64 $61 $62 $26 $22 $22 $23 $26 $26 $29 $29 $27 $28 $29 $29 $28 $7 $12 $8 $8 $9 $8 $8 $8 $15 $14 $14 $12 $14 0 20 40 60 80 100 120 140 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 RealizedPrice($/boe) Brent Price $/BBL Price Fiscal Costs Parex’ Take Q1 2014 5,000 bpd hedged > $105/bbl 2011 2012 2013 2014 Brent Price $/BBL RoyaltiesOpex & Transportation Operating Netback Corporate Presentation May 2014 18
- 19. Proven Management’s trackrecord Exposure to Brent Oil Pricing LATAM exposure Self-funded growth Parex’ Value Proposition Corporate Presentation May 2014 19
- 20. Appendix – BlockSummary 1) Post closing Verano acquisition WI would be: LLA-17 63%, LLA-32 70% & LLA-34 55% 2) Working interests are subject to regulatory approval. 3) Farm-in agreement for 50% participating interest in the block, excluding Curiara Area, subsequent to fulfilling certain financial obligations. 4) Morpho is also subject to a 4% Net Profit Interest. 5) Farm-out agreement awarding 51% participating interest subsequent to fulfilling certain financial obligations. Corporate Presentation May 2014 Block Operated/ Non-Operated Working Interest Partners Gross Acres Basin LLA-16 Operated 100% N/A 157,611 Llanos LLA-17(1) Operated 40% Geopark & Verano 108,726 Llanos LLA-20 Operated 100% N/A 144,292 Llanos LLA-24 Operated 100% N/A 147,100 Llanos LLA-26 Operated 100% N/A 184,061 Llanos LLA-29 Operated 100% N/A 69,914 Llanos LLA-30 Operated 100% N/A 117,321 Llanos LLA-32(1) Non-Operated 30% Verano, Apco & Geopark 100,325 Llanos LLA-34(1) Non-Operated 45% Geopark & Apco 82,286 Llanos LLA-40 Operated 50% Apco 163,090 Llanos LLA-57 Operated 100% N/A 104,532 Llanos Cabrestero Operated 100% N/A 29,562 Llanos Capachos(2) Operated 50% Ecopetrol 64,175 Llanos Cebucan Operated 100% N/A 109,150 Llanos Cerrero(2) Operated 65% Perenco 108,973 Llanos El Eden Operated 60% Petro America 109,249 Llanos El Porton(3) Operated 50% Petro America 109,476 Llanos Los Occarros Operated 50% Petro America 110,436 Llanos Morpho(4) Operated 100% N/A 51,398 Middle Magdalena VMM-11(2) Operated 60% Green Power 116,826 Middle Magdalena Moruga(5) (Trinidad) Operated 32.8% Touchstone 7,443 - 20
- 21. ($ millions, exceptper share amounts) 2014 2013 2012 Q1 FY Q4 Q3 Q2 Q1 FY Q4 Q3 Q2 Q1 OPERATING Average realized prices, prior to hedging 103 104 102 106 99 110 109 106 108 108 117 Brent Price ($/bbl) 108 109 109 110 103 112 112 110 110 108 119 Vasconia ($/bbl) 101 104 102 106 99 108 106 103 103 104 115 Production (thousands of bopd) 18.4 15.9 17.3 16.2 15.5 14.4 11.4 12.7 10.9 10.4 11.7 FINANCIAL Sales of crude oil 180 637 167 157 148 165 524 150 131 113 130 Funds flow from operations 77 270 76 68 66 60 242 54 42 61 84 Per share – basic 0.70 2.49 0.70 0.63 0.61 0.56 2.23 0.50 0.39 0.57 0.77 Net income (loss) 10 13 22 (28) 8 11 40 (16) 8 21 27 Per share – basic 0.09 0.20 0.20 (0.26) 0.07 0.10 0.37 (0.15) 0.07 0.19 0.25 Per share – diluted 0.09 0.18 0.18 (0.26) 0.04 0.05 0.31 (0.15) 0.07 0.09 0.25 EBITDA 97 325 92 82 80 72 258 46 62 68 83 Cash and cash equivalents 198 57 57 26 45 27 32 32 27 51 121 Working Capital 37 24 24 19 9 17 (13) (13) (9) (0.6) 116 Net Debt (1) 29 70 70 85 104 88 107 107 94 86 (31) Capital Expenditures 62 234 59 50 78 47 268 65 51 93 59 Weighed average shares outstanding 109 108 108 108 108 109 108 108 108 108 108 Weighed average shares outstanding, diluted 111 124 124 108 130 129 126 110 109 117 118 TRADING STATISTICS ($, based on intra-day trading) High 9.50 6.8 6.80 6.30 4.89 6.50 8.67 6.03 5.18 7.15 8.67 Low 6.59 4.05 5.60 4.10 4.05 4.39 4.07 4.27 3.85 4.29 6.49 Close (end of period) 9.50 6.58 6.58 5.83 4.12 4.63 5.80 5.80 4.83 4.72 7.04 Average daily volume (thousands) 360 216 258 193 203 210 236 235 148 335 264 Appendix – Summary of Quarterly Results (Unaudited) (1) Defined as WC+ Bank Debt + CD Face Value C$85 million. Bank credit facility currently has a borrowing base of $150 million & Face value of debenture is Cdn $85 million with conversion price of Cdn $10.50/share. Corporate Presentation May 2014 21
- 22. Certain statements inthis document are “forward-looking statements”. Forward-looking statements are frequently characterized by words such as “prospective”, “plan”, “expect”, “project”, “intend”, “believe”, “anticipate”, “estimate”, “forecast”, or other similar words, or statements that certain events or conditions “may” or “will” occur. Forward-looking statements are not based on historical facts but rather on the expectations of management of the Company ("Management") regarding the Company's future growth, results of operations, production, plans for and results of drilling activity, business prospects and opportunities. Such forward-looking statements reflect Management's current beliefs and assumptions and are based on information currently available to Management. In particular, this document contains forward-looking statements regarding, but not limited to, the Company's expected 2013 production rates and Parex' drilling plans. Forward-looking statements involve significant known and unknown risks and uncertainties. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements including the risks associated with negotiating with foreign governments as well as country risk associated with conducting international activities, competition, the ability to generate revenue and exploit operating margins, capital resources, the use of certain technologies and materials, annual impairment tests, labour relations, insurance, damage from weather and other disasters, operating and maintenance risks and environmental risks, new information regarding reserves, changes in demand for and volatility of commodity prices of oil and natural gas, failure to receive all required regulatory approvals for acquisition, the risk that the acquisition may not be completed as contemplated or at all, legislative, regulatory and political changes, the risks discussed under "Risk Factors" in Parex' annual information form for the year ended December 31, 2012 and other factors, many of which are beyond the control of the Company. The risks outlined should not be construed as exhaustive. Although the forward-looking statements contained in this document are based upon assumptions which Management believes to be reasonable, the Company cannot assure investors that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date hereof, and the Company assumes no obligation to update or revise them to reflect new events or circumstances, except as required by law. Statements relating to “reserves” are by their nature forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions that the reserves described can be profitably produced in the future. With respect to forward-looking statements contained in this presentation, the Company has made assumptions regarding: future exchange rates; the price of oil and natural gas; the impact of increasing competition; conditions in general economic and financial markets; availability of equipment; availability of skilled labour; current technology; cash flow; commodity prices; production rates; timing and amount of capital expenditures; royalty rates; effects of regulation by governmental agencies; future operating costs; receipt of all required regulatory approvals for the acquisition; successful completion of the acquisition; and the Company's ability to obtain financing on acceptable terms. Management has included the above summary of assumptions and risks related to forward-looking information provided in this presentation in order to provide shareholders with a more complete perspective on the Company's future operations and such information may not be appropriate for other purposes. This is not an offer to sell or a solicitation of an offer to purchase securities by Parex. Before making an investment, investors should refer to the Offering Documents for more complete information, including investment risks, fees and expenses and should also thoroughly and carefully review Parex' public disclosure documents available on SEDAR at www.sedar.com with their financial, legal and tax advisors to determine whether an investment is suitable for them. Legal Advisory How to Reach Us Parex Resources Inc. 1900 - 250 Second Street S.W., Calgary, Alberta, Canada T2P 0C1 Tel: 403-265-4800 Fax: 403-265-8216 Email: investor.relations@parexresources.com www.parexresources.com Michael Kruchten Vice President, Investor Relations & Corporate Planning 22Corporate Presentation May 2014