Annual General Meeting · Rumba Field Capachos-2 Great country to build a profitable business. ......
Transcript of Annual General Meeting · Rumba Field Capachos-2 Great country to build a profitable business. ......
1Corporate Presentation | March 2017Annual General Meeting | May 2018 1
Annual General Meeting
www.parexresources.com | TSX:PXT | Annual General Meeting | May 2018
2Corporate Presentation | March 2017Annual General Meeting | May 2018 2
HOW PAREX MANAGEMENT THINKS ABOUT OUR BUSINESS
1. Focus on consistent per share returns
2. Maintain a pristine balance sheet
3. Access under-explored proven oil-prone basins
4. Perform industry leading technical work
5. Be a hands-on Management Team – deliver on promises
6. Take appropriate risks
Don’t do anything stupid!
3Corporate Presentation | March 2017Annual General Meeting | May 2018 3
WHY ARE WE COLOMBIA FOCUSED?
• Abundant Resources
• Good Fiscal Regime
• Stable Politics
• Access To Tidewater
• Leverage our expertiseoTechnical
oOperational
oSocial
Rumba Field Capachos-2
Great country tobuild a profitable business
4Corporate Presentation | March 2017Annual General Meeting | May 2018 4
COLOMBIA HAS LOTS OF OIL-PRONE BASINS TO ACCESS
• Oil production ~850,000 bopdRank #2 LATAM onshore
• USGS conventional onshore oil assessed potential=o 15 billion bbls discovered-to-date
o 5.6 billion bbls undiscovered potential Ranks #2 LATAM onshore
• Our exploration focus:o Llanos and Magdalena basins
Major Producing BasinsExplored Portions
Colombian Sedimentary Basins
Llanos
Putumayo
UpperMag
MiddleMag
LowerMag
9.23.5
Legend (billion bbls)DiscoveredYet-to-Find
0.60.3
1.10.4
3.30.5
0.80.9
Significant remaining potential
Sources: USGS & IHS – May 2018
5Corporate Presentation | March 2017Annual General Meeting | May 2018 5
LIGHT & MEDIUM OIL RESOURCE PYRAMID (ONSHORE)
Poor
Good Immature
Mature
Colombia basins are similar to theWCSB 30 years ago
Conventional- Primary recovery, natural drive
- Secondary recovery, waterfloods
Tight OilVertical & Horizontal stimulations
Unconventional Horizontal multi-fracs
6Corporate Presentation | March 2017Annual General Meeting | May 2018 6
UNDEREXPLORED FOR CONVENTIONAL PLAYS
• Limited exploratory drilling Y-O-Y
• Above ground issues have historically limited exploration activities
• “Old” technology application o 3D seismic
o Directional drilling
• Basins are still yielding large discoveries(>20MMBOE)
o 29 discoveries since 2000
CostayacoQuifa
Tigana
Jacana
Tua
Acordionero
There’s more to find!0
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Nu
mb
er
of
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cove
rie
s >
20
MM
BO
E
Nu
mb
er
of
Exp
lora
tio
n W
ells
Exploration Drilling in Colombia
Annual Exploration Drills
Discoveries > 20 MMBO
CostayacoQuifa
Tigana
Jacana
Tua
Acordionero
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• Gross production
• LLA-32, LLA-34 & Cabrestero net reserves last 5 years
0
50
100
150
200
250
2012 2013 2014 2015 2016 2017
RES
ERV
ES (
MM
BO
E)
1P 2P 3P
0
10
20
30
40
50
60
70
2012 2013 2014 2015 2016 2017 Q1 2018
MB
OE/
DSOUTHERN CASANARE – FOUNDATION FOR FUTURE GROWTH
As per the independent reserve report prepared by GLJ Petroleum Consultants Ltd. effective Dec. 31/17
LLA-32
LLA-34Chachalaca
Tilo
Tigana
Jacana
Akira
Tua
Tarotaro
Aruco
Kananaskis
Calona
Chiricoca
Herradura
Bacano
Curucucu
Jacamar
Cabrestero
3-5 years of production growth Faults GLJ 3P (2017YE) Exploration
Max
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TIGHT OIL – NEXT GROWTH AREA?
Size of the Provincia Sub Basin
WCSB Unconventional& Tight Oil Plays
Provincia Sub-Basin
Existing oil wells
PXT appraisal
Coyote 1/2/3
Aguas Blancas
De Mares Block
Potentially material plays for Parex
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COLOMBIA FISCAL REGIME
• Simple tax/royalty system
• Royalties fixed inside block contracts-law, never been changed
• Corporate tax rate declining
• Revenue paid offshore
• No currency controls
Attractive and stable terms
$0
$2
$4
$6
$8
$10
$12
VII
OB
E
KEL
BN
E
VET
PG
F
YGR
TVE
RR
X
SGY
PX
T
WC
P
CP
G CJ
SPE
TOG
ERF
BTE
GTE
Royalties (Q4/17, $/Boe)
0%
5%
10%
15%
20%
25%
30%
VII
OB
E
BN
E
VET KEL
RR
X
YGR
TVE
PG
F
PX
T
SGY
CP
G
WC
P CJ
SPE
GTE
TOG
BTE
ERF
Royalties (Q4/17, % of Revenue)
Source: Another Year In The Trenches, But Green Shoots Emerging - April 18, 2018, CIBC World Markets Inc.
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VALUABLE OIL: PREMIUM PRICING & CASH NETBACKS
• Brent referenced pricing
• Parex 21o API blend has discount of $4.56/bbl (Q4 2017)
• Multiple egress routesoPipelines – under-utilized
oTrucking
oBargingSurplus take-away capacity
$25
$35
$45
$55
$65
$75
$85
PG
F
BTE
FRU
SGY
PSK C
J
OB
E
GTE
RR
X
WC
P
SPE
CP
G
TVE
TOG
KEL
BN
E
ERF
VII
YGR
PX
T
VET
Realized Oil Price (Q4/17, $/Bbl)
$5
$10
$15
$20
$25
$30
$35
$40
$45
PG
F
OB
E
KEL C
J
BTE V
II
SGY
BN
E
ERF
WC
P
VET
TVE
GTE
YGR
TOG
CP
G
SPE
PX
T
RR
X
Cash Netback (Q4/17, $/Boe)
Source: Another Year In The Trenches, But Green Shoots Emerging - April 18, 2018, CIBC World Markets Inc.
Conventional oil + world price +good fiscal terms = profitability
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IMPROVING LANDSCAPE - POLITICAL UPDATE
• OECD accession process underway
• Peace Negotiations - ongoingo Peace reduces above-ground risks
oOpens up more accessible acreage
• Congressional Elections (March 11)o Generally strong pro-business mandate
• Presidential electiono Round 1 - May 27
o Round 2 – June 17 Leading candidate is Iván Duque, 41,
leader of the right-wing political party Centro Democrático
Election trending towards pro-industry candidate
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23 CONSECUTIVE QUARTERS OF CONSISTENT GROWTH
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
-
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
Jun
-12
Sep
-12
Dec
-12
Mar
-13
Jun
-13
Sep
-13
Dec
-13
Mar
-14
Jun
-14
Sep
-14
Dec
-14
Mar
-15
Jun
-15
Sep
-15
Dec
-15
Mar
-16
Jun
-16
Sep
-16
Dec
-16
Mar
-17
Jun
-17
Sep
-17
Dec
-17
Mar
-18
Jun
-18
PR
OD
UC
TIO
N (
BO
E/D
)
BO
E P
ER T
HO
USA
ND
SH
AR
ES Production Debt Adjusted Production Per Share
20
18
E
Our growth is the result of resources, execution & jurisdiction
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DA
PS
(BO
E/M
M B
ASI
C S
HA
RES
)
Production Per Share (Debt Adjusted)
-
200
400
600
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1,000
1,200
2013 2014 2015 2016 2017
2P
RES
ERV
ES
(MB
OE/
MM
BA
SIC
SH
AR
ES)
2P Reserves (Debt Adjusted)
MANAGEMENT FOCUS IS ON GROWING SHAREHOLDER VALUE
15% 15%
34%
66%
7%15%
-16%-25%
40%
-11%
-30%
-15%
0%
15%
30%
45%
60%
75%
2013 2014 2015 2016 2017
TOTA
L R
ETU
RN
PXT vs. S&P/TSX Energy Index (TTEN))
PXT S&P/TSX Energy Index
Source: Scotiabank, The Valuation Book, 2018
PXT is ticking all the boxes
Top Metrics for Total Return – PXT 2017 Results
1. D/CF: Zero Debt, WC Surplus US$163mm2. Recycle Ratio: 3 year average 2P = 5x3. ROACE: 2017 = 20%4. CFPS Growth = 91%5. Production per Share (debt adjusted) = 15%
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20% Production
growth DAPS
Big “E” –VIM-1 &
Capachos
Tight oil: Aguas
Blancas & De Mares
Deliver top quartile
per share growth
Surpass 50,000 bopd
Replenish & diversify portfolio
2018 2019 - 2021
WHERE DO WE GO FROM HERE?
Our focus is on profitable future growth
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HOW WE OPERATE: VIM-1 PROJECT, APURE-3 DRILLING
We’re from Parex
and we arehere to help!Seriously…
16Corporate Presentation | March 2017Annual General Meeting | May 2018 16
THANK YOU FOR YOUR SUPPORT
On behalf of our Board of Directors
and the team at Parex, we thank all
our stakeholders for their continued
support.
Investor RelationsContact us:Mike KruchtenVP, Capital Markets & Corporate PlanningTel: +1 (403) 517-1733
Mike is the good looking guywho will now answer any questions!
17Corporate Presentation | March 2017Annual General Meeting | May 2018 17
ADVISORIES HOW TO REACH USThis presentation is provided for informational purposes only as of May 9, 2018 is not complete, andmay not contain certain material information about Parex Resources Inc. ("Parex" or the "Company"),including important disclosures and risk factors associated with an investment in Parex. Thispresentation does not take into account the particular investment objectives or financial circumstancesof any specific person who may receive it and does not constitute an offer to sell or a solicitation of anoffer to buy any security in Canada, the United States or any other jurisdiction. The contents of thispresentation have not been approved or disapproved by any securities commission or regulatoryauthority in Canada, the United Sates or any other jurisdiction, and Parex expressly disclaims any duty onParex to make disclosure or any filings with any securities commission or regulatory authority, beyondthat imposed by applicable laws.
Forward-Looking Statements and FOFI
Certain information regarding Parex set forth in this document contains forward-looking statements thatinvolve substantial known and unknown risks and uncertainties. The use of any of the words "plan","expect", “prospective”, "project", "intend", "believe", "should", "anticipate", "estimate" or other similarwords, or statements that certain events or conditions "may" or "will" occur are intended to identifyforward-looking statements. Such statements represent Parex' internal projections, estimates or beliefsconcerning, among other things, future growth, results of operations, production, future capital andother expenditures (including the amount, nature and sources of funding thereof), plans for and resultsof drilling activity, business prospects and opportunities. These statements are only predictions andactual events or results may differ materially. Although the Company’s management believes that theexpectations reflected in the forward-looking statements are reasonable, it cannot guarantee futureresults, levels of activity, performance or achievement since such expectations are inherently subject tosignificant business, economic, competitive, political and social uncertainties and contingencies. Manyfactors could cause Parex' actual results to differ materially from those expressed or implied in anyforward-looking statements made by, or on behalf of, Parex.
In particular, forward-looking statements contained in this document include, but are not limited to,statements with respect to the Company's vision, strategy, focus and values; benefits associated withoperating in Colombia; the discovered-to-date and undiscovered potential of assessed conventionalonshore oil in the Colombia sedimentary basins; the Company's expectation that the Colombiasedimentary basins are similar to the Western Canadian Sedimentary Basin 30 years ago; the 3-5 years ofproduction growth in Southern Casanare;
PAREX RESOURCES INC.
2700 Eighth Avenue Place, West Tower
585 8th Avenue SW Calgary
AB T2P 1G1 Canada
Tel: 403-265-4800
Fax: 403-265-8216
Email: [email protected]
Website: www.parexresources.com
MIKE KRUCHTEN
Vice President, Capital Markets & Corporate Planning
18Corporate Presentation | March 2017Annual General Meeting | May 2018 18
ADVISORIESthe attractiveness of Colombia's fiscal regime; expectations regarding the political landscape in Colombia and the potential benefits associated with the 2018 Colombian presidential election; and theCompany's future plans for its business, including production growth and operational plans in 2018 and its production growth, per share growth and plans with respect to portfolio diversification in 2019through to 2021.
Statements relating to "reserves" are forward-looking statements, as they involve the implied assessment, based on estimates and assumptions that the reserves and resources described exist in thequantities predicted or estimated and can be profitably produced in the future.
• These forward-looking statements are subject to numerous risks and uncertainties, including but not limited to, the impact of general economic conditions in Canada and Colombia; industry conditionsincluding changes in laws and regulations including adoption of new environmental laws and regulations, and changes in how they are interpreted and enforced, in Canada and Colombia; competition; lack ofavailability of qualified personnel; the results of exploration and development drilling and related activities; risks related to obtaining required approvals of regulatory authorities, in Canada and Colombia andpartner and community approvals in Colombia; risks associated with negotiating with foreign governments as well as country risk associated with conducting international activities; volatility in market pricesfor oil; fluctuations in foreign exchange or interest rates; environmental risks; changes in income tax laws, tax rates and/or incentive programs relating to the oil industry; changes to pipeline capacity; ability toaccess sufficient capital from internal and external sources; failure of counterparties to perform under the terms of their contracts; and other factors, many of which are beyond the control of the Company.Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could effect Parex' operations and financial results are included in reports onfile with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).
• 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 willbe consistent with these forward-looking statements. With respect to forward-looking statements contained in this document, Parex has made assumptions regarding, among other things: current commodityprices and royalty regimes; outcomes of the 2018 Columbian presidential election; availability of skilled labour; timing and amount of capital expenditures; future exchange rates; the price of oil, including theanticipated Brent oil price; the impact of increasing competition; conditions in general economic and financial markets; availability of drilling and related equipment; effects of regulation by governmentalagencies; receipt of partner, regulatory and community approvals; royalty rates; future operating costs; effects of regulation by governmental agencies; uninterrupted access to areas of Parex' operations andinfrastructure; recoverability of reserves and future production rates; timing of drilling and completion of wells; on-stream timing of production from successful exploration wells; operational performance ofnon-operated producing fields; pipeline capacity; that Parex will have sufficient cash flow, debt or equity sources or other financial resources required to fund its capital and operating expenditures andrequirements as needed; that Parex' conduct and results of operations will be consistent with its expectations; that Parex will have the ability to develop it's oil and gas properties in the manner currentlycontemplated; current or, where applicable, proposed industry conditions, laws and regulations will continue in effect or as anticipated as described herein; that the estimates of Parex' reserves volumes andthe assumptions related thereto (including commodity prices and development costs) are accurate in all material respects; that Parex will be able to obtain contract extensions or fulfill the contractualobligations required to retain its rights to explore, develop and exploit any of its undeveloped properties; and other matters.
• Management has included the above summary of assumptions and risks related to forward-looking information provided in this document in order to provide shareholders with a more complete perspectiveon Parex' current and future operations and such information may not be appropriate for other purposes. Parex' actual results, performance or achievement could differ materially from those expressed in, orimplied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do, whatbenefits Parex will derive. These forward-looking statements are made as of the date of this document and Parex disclaims any intent or obligation to update publicly any forward-looking statements, whether
19Corporate Presentation | March 2017Annual General Meeting | May 2018 19
ADVISORIESas a result of new information, future events or results or otherwise, other than as required by applicable securities laws. The forward-looking statements contained in this presentation are expressly qualifiedby this cautionary statement.
Oil and Gas Information
• The estimates of Parex' December 31, 2017 reserves set forth in this presentation have been prepared by GLJ Petroleum Consultants Ltd. ("GLJ") as of December 31, 2017 with a preparation date of February2, 2018 (the "GLJ 2017 Report") in accordance with National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities ("NI 51-101") and the Canadian Oil and Gas Evaluations Handbook (the"COGEH") and using GLJ's forecast prices and costs as at January 1, 2018. The estimates of Parex' December 31, 2016 reserves set forth in this presentation have been prepared by GLJ as of December 31, 2016with a preparation date of February 6, 2017 in accordance with NI 51-101 and the COGEH and using GLJ's forecast prices and costs as at January 1, 2017. The estimates of Parex' December 31, 2015 reservesset forth in this presentation have been prepared by GLJ as of December 31, 2015 with a preparation date of February 5, 2016 in accordance with NI 51-101 and the COGEH and using GLJ's forecast prices andcosts as at January 1, 2016. The estimates of Parex' December 31, 2014 reserves set forth in this presentation have been prepared by GLJ as of December 31, 2014 with a preparation date of February 13, 2015in accordance with NI 51-101 and the COGEH and using GLJ's forecast prices and costs as at January 1, 2015. The estimates of Parex' December 31, 2013 reserves set forth in this presentation have beenprepared by GLJ as of December 31, 2013 with a preparation date of February 20, 2014 in accordance with NI 51-101 and the COGEH and using GLJ's forecast prices and costs as at January 1, 2014. Theestimates of Parex' December 31, 2012 reserves set forth in this presentation have been prepared by GLJ as of December 31, 2012 with a preparation date of February 28, 2013 in accordance with NI 51-101and the COGEH and using GLJ's forecast prices and costs as at January 1, 2013.
• "Proved" or "1P" reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated provedreserves. "Probable" reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or lessthan the sum of the estimated proved plus probable reserves ("2P" reserves). "Possible" reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10percent probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves ("3P" reserves).
• This presentation contains certain oil and gas metrics, including cash netbacks and recycle ratios, which do not have standardized meanings or standard methods of calculation and therefore such measuresmay not be comparable to similar measures used by other companies and should not be used to make comparisons. Such metrics have been included herein to provide readers with additional measures toevaluate the Company's performance; however, such measures are not reliable indicators of the future performance of the Company and future performance may not compare to the performance in previousperiods and therefore such metrics should not be unduly relied upon. Management uses these oil and gas metrics for its own performance measurements and to provide investors with measures to comparethe Company's operations over time.
• Readers are cautioned that the information provided by these metrics, or that can be derived from the metrics presented herein, should not be relied upon for investment or other purposes. A summary of thecalculations of such metrics are as follows:
o Recycle ratio is calculated as cash netback per boe (or Funds Flow From Operations per boe) divided by F&D or FD&A, as applicable.o Cash netback per boe (or Funds Flow From Operations netback per boe) is calculated as Funds Flow From Operations divided by production for the period.o FD&A costs represent the costs of property acquisition, exploration, and development incurred. The aggregate of the exploration and development costs incurred in the most recent financial year and
the change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserves additions for that year.o FD&A costs are calculated as capital expenditures plus change in F&D costs. FD&A per boe is calculated as FD&A costs divided by reserves additions for the applicable period.o Cash flow per share (“CFPS”) is determined by dividing cash flow from operations by weighted average shares outstanding.o Return on average capital employed (“ROACE”) is determined by dividing net income by average capital employed.
20Corporate Presentation | March 2017Annual General Meeting | May 2018 20
ADVISORIES• "BOEs" may be misleading, particularly if used in isolation. A BOE conversion ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent (6 mcf: 1 bbl) is based on an energy equivalency
conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to naturalgas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
• All of Parex’ crude oil reserves disclosed herein are located in Colombia. The Company does have light, medium and heavy crude oil and natural gas liquids. The recovery and reserve estimates of crude oilreserves provided in this document are estimates only, and there is no guarantee that the estimated reserves will be recovered. Actual crude oil reserves may eventually prove to be greater than, or less than,the estimates provided herein. All evaluations and reviews of future net revenue contained in GLJ's reports are stated prior to any provision for interest costs or general and administrative costs and after thededuction of royalties, development costs, production costs, well abandonment costs and estimated future capital expenditures for wells to which reserves have been assigned.
• Certain information in this document may constitute "analogous information" as defined in NI 51-101. Such information includes production estimates, reserves estimates and other information retrieved fromother publicly available sources. Management of Parex believes the information is relevant as it may help to define the reservoir characteristics and production profile of lands in which Parex may hold aninterest. Parex is unable to confirm that the analogous information was prepared by a qualified reserves evaluator or auditor and is unable to confirm that the analogous information was prepared inaccordance with NI 51-101. Such information is not an estimate of the production, reserves or resources attributable to lands held or to be held by Parex and there is no certainty that the production, reservesor resources data and economic information for the lands held or to be held by Parex will be similar to the information presented herein. The reader is cautioned that the data relied upon by Parex may be inerror and/or may not be analogous to such lands held or to be held by Parex.
• Certain other information contained in this presentation has been prepared by third-party sources, which information has not been independently audited or verified by Parex. No representation or warranty,express or implied, is made by Parex as to the accuracy or completeness of the information contained in this document, and nothing contained in this presentation is, or shall be relied upon as, a promise orrepresentation by Parex.
Financial Matters
• The Company discloses several financial measures (“non-GAAP measures”) that do not have any standardized meaning prescribed under International Financial Reporting Standards ("IFRS"), including cashnetbacks. Management believes that this non-GAAP measure is useful supplemental information to analyze operating performance and provide an indication of the results generated by the Company’sprincipal business activities. Investors should be cautioned that this measure should not be construed as an alternative to net income or other measures of financial performance as determined in accordancewith IFRS. Parex’ method of calculating this measure may differ from other companies, and accordingly, it may not be comparable to similar measures used by other companies. Please see the Company’s mostrecent Management’s Discussion and Analysis, which is available at www.sedar.com for additional information about these financial measures
21Corporate Presentation | March 2017Annual General Meeting | May 2018 21