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Parex Resources Announces Second Quarter Results, Declaration of Q3 2023 Dividend, and Operational Update03.08.2023 | 1:38 Uhr | GlobeNewswire
CALGARY, Aug. 02, 2023 - Parex Resources Inc. ("Parex" or the "Company") (TSX: PXT) is pleased to announce its financial and operating results for the three-month period ended June 30, 2023, and the declaration of its Q3 2023 regular dividend of C$0.375 per share. Parex also announces an operational and guidance update. All amounts herein are in United States Dollars ("USD") unless otherwise stated. Key Highlights
Q2 2023 Results
(1) Capital management measure. See "Non-GAAP and Other Financial Measures Advisory."
(1) Reference to crude oil or natural gas in the above table and elsewhere in this press release refer to the light and medium crude oil and heavy crude oil and conventional natural gas, respectively, product types as defined in National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities. Operational Update
Northern Llanos - Arauca and Capachos Blocks (50% W.I.) Update Following the resumption of operations at Capachos in mid-April and Arauca in late May, a social-related shut-in occurred in early June, which affected both blocks and further halting drilling and production. The shut-in has been resolved and the Company has been fully operational at both blocks since late June. Arauca Arauca-15, a development well with exploration upside, is at roughly 11,500 feet and is expected to reach total depth in late Q3 2023. Civil works for the Arauca-8 well, which is a multi-zone high-impact exploration prospect targeting light crude oil, are currently being completed in anticipation of a late Q3 2023 spud. While Parex originally planned to spud the Arauca-8 well after the completion of the Arauca-15 well, the Company has revised its drilling plan and is accelerating the development program by bringing a second rig onto the block. Going forward, the Company will have two active drilling rigs on the block as it targets proven, multi-zone reservoirs over a multi-year drilling campaign. Capachos Since late June 2023, production has been ramping up, with the block expected to return to full rates prior to being temporarily shut-in of roughly 6,500 boe/d net in Q3 2023. For the remainder of the year, the Company is focused on completing the facility expansion from 15,000 to 25,000 bbl/d of fluid handling capacity in Q3 2023, as well as completions and workovers to optimize the field and bring on additional productive zones. 2023 Big 'E' Exploration Program
2023 Corporate Guidance Update On an annual basis, the temporary shut-ins at Capachos (50% W.I.) and delayed drilling operations at Arauca (50% W.I.) are estimated to have a combined impact on the Company's average production of roughly 3,100 boe/d (Capachos: 1,900 boe/d; Arauca: 1,200 boe/d). The Company was also affected by lower than expected production from its SOCA (Cabrestero (100% W.I.); LLA-34 (55% W.I.)) assets as a result of increased downtime. Parex is updating its 2023 annual average production guidance range from 57,000-63,000 boe/d to 54,000-57,000 boe/d to reflect the aforementioned temporary shut-ins and production impacts in SOCA. With normalized operations, Parex expects its Q4 2023 average production to exceed 60,000 boe/d. Parex is also updating its 2023 capital expenditure(3) guidance to $450-475 million, which is being driven by standby costs associated with the shut-ins at Capachos (50% W.I.) and Arauca (50% W.I.) as well as increased spending at VIM-43 (100% W.I.).
(1) Effective tax rate is the expected current tax effective rate on funds provided by operations. Return of Capital Update ESG Update The full report, including performance metric tables, can be found at www.parexresources.com under Sustainability. Q2 2023 Results - Conference Call & Video Webcast Parex will host a conference call and video webcast to discuss the second quarter 2023 results on Thursday, August 3, 2023, beginning at 9:30 am MT (11:30 am ET). To participate in the conference call or video webcast, please see the access information below:
About Parex Resources Inc. Parex is the largest independent oil and gas company in Colombia, focusing on sustainable, conventional production. The Company's corporate headquarters are in Calgary, Canada, with an operating office in Bogotá, Colombia. Parex is a member of the S&P/TSX Composite ESG Index and its shares trade on the Toronto Stock Exchange under the symbol PXT. For more information, please contact: Mike Kruchten Steven Eirich NOT FOR DISTRIBUTION OR FOR DISSEMINATION IN THE UNITED STATES Non-GAAP and Other Financial Measures Advisory Non-GAAP Financial Measures Capital expenditures, is a non-GAAP financial measure which the Company uses to describe its capital costs associated with oil and gas expenditures. The measure considers both property, plant and equipment expenditures and exploration and evaluation asset expenditures which are items in the Company's statement of cash flows for the period. In Q3 2022, the Company changed how it presents exploration and evaluation expenditures. Amounts have been restated for prior periods to conform to the current year's presentation, refer to note 2 of the Company's interim consolidated financial statements for the period ended June 30, 2023.
Free funds flow, is a non-GAAP financial measure that is determined by funds flow provided by operations less capital expenditures. In Q3 2022, the Company changed how it presents exploration and evaluation expenditures included in total capital expenditures. Amounts have been restated for prior periods to conform to the current year's presentation refer to note 2 of the Company's interim consolidated financial statements for the period ended June 30, 2023. The Company considers free funds flow to be a key measure as it demonstrates Parex's ability to fund return of capital, such as the NCIB and dividends, without accessing outside funds and is calculated as follows:
EBITDA, is a non-GAAP financial measure that is defined as net income adjusted for interest, taxes, depletion, depreciation and amortization. The Company considers EBITDA to be a key measure as it demonstrates Parex' profitability before interest, taxes, depletion, depreciation and amortization. A reconciliation from net income to EBITDA is as follows:
Non-GAAP Ratios Operating netback per boe, is a non-GAAP ratio that the Company considers to be a key measure as it demonstrates Parex' profitability relative to current commodity prices. Parex calculates operating netback per boe as operating netback (calculated as oil and natural gas sales from production, less royalties, operating, and transportation expense) divided by the total equivalent sales volume including purchased oil volumes for oil and natural gas sales price and transportation expense per boe and by the total equivalent sales volume excluding purchased oil volumes for royalties and operating expense per boe. Funds flow provided by operations per boe or FFO netback per boe, is a non-GAAP ratio that includes all cash generated from operating activities and is calculated before changes in non-cash working capital, divided by produced oil and natural gas sales volumes. The Company considers funds flow provided by operations netback per boe to be a key measure as it demonstrates Parex's profitability after all cash costs relative to current commodity prices. Basic funds flow provided by operations per share is a non-GAAP ratio that is calculated by dividing funds flow provided by operations by the weighted average number of basic shares outstanding. Parex presents basic funds flow provided by operations per share whereby per share amounts are calculated using weighted-average shares outstanding, consistent with the calculation of earnings per share. Capital Management Measures Funds flow provided by operations, is a capital management measure that includes all cash generated from operating activities and is calculated before changes in non-cash working capital. The Company considers funds flow provided by operations to be a key measure as it demonstrates Parex's profitability after all cash costs. A reconciliation from cash provided by (used in) operating activities to funds flow provided by operations is as follows:
Working capital (deficit) surplus, is a capital management measure which the Company uses to describe its liquidity position and ability to meet its short term liabilities. Working capital (deficit) surplus is defined as current assets less current liabilities.
Supplementary Financial Measures References in this press release to short-term production rates, such as IP90, are useful in confirming the presence of hydrocarbons, however such rates are not determinative of the rates at which such wells will commence production and decline thereafter and are not indicative of long-term performance or of ultimate recovery. Additionally, such rates may also include recovered "load oil" fluids used in well completion stimulation. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production of Parex. Distribution Advisory Advisory on Forward Looking Statements Certain information regarding Parex set forth in this document contains forward-looking statements that involve substantial known and unknown risks and uncertainties. The use of any of the words "plan", "expect", "prospective", "project", "intend", "believe", "should", "anticipate", "estimate", "forecast", "guidance", "budget" or other similar words, or statements that certain events or conditions "may" or "will" occur are intended to identify forward-looking statements. Such statements represent Parex's internal projections, estimates or beliefs concerning, among other things, future growth, results of operations, production, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, plans for and results of drilling activity, environmental matters, business prospects and opportunities. These statements are only predictions and actual events or results may differ materially. Although the Company's management believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievement since such expectations are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Many factors could cause Parex's actual results to differ materially from those expressed or implied in any forward-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 focus, plans, priorities and strategies; that the horizontal well that has spud at Block LLA-81 will maximize recovery and production rates on the block; the anticipated timing of when the first well at the Arauca Block will reach its total depth; Parex's plan to move a second rig to the Arauca Block and the anticipated benefits to be derived therefrom; anticipated production levels at the Capachos Block in Q3 2023; Parex's 2023 annual guidance, including its anticipated Brent crude average price, 2023 effective tax rate estimate, funds flow provided by operations netback per boe, production average, capital expenditures, funds flow provided by operations and free funds flow; Parex's expectations that its 2023 capital expenditures will be towards the higher end of its guidance range; Parex's expectations that it will be towards the lower end of its 2023 annual average production guidance range for the year ended December 31, 2023; Parex's expectations that it will drill four more wells at the Cabrestero Block over the remainder of 2023; that Parex's horizontal wells will efficiently maximize recovery and production rates; Parex's expectations that the pump failure at C7 will be remediated shortly; the anticipated benefits to be derived from Parex's follow-up horizontal well at Block LLA-81; the anticipated benefits to be derived from Parex's first gas cycling project and its expectations that it will expand its facility capacity in 2024; Parex's anticipated average production at Block LLA-26 and the anticipated timing thereof; that Parex and its partner will drill up to four additional horizontal wells on Block LLA-34 and the anticipated timing thereof; the anticipated timing of when the Arauca-8 well will reach total depth and when it will spud; Parex's expectations that the Arauca-8 well will spud prior to the Arauca-15 well reaching its total depth; Parex's expectation that it will have two active drilling rigs on the Arauca Block and the anticipated benefits to be derived therefrom; Parex's expectations that production at the Capachos Block will return to rates prior to being temporarily shut-in; Parex's focus and plans at the Capachos Block including completing the facility expansion as well as completions and workovers and the anticipated benefits to be derived therefrom; the anticipated timing of when the Arantes well will spud; the anticipated impact that the temporary shut-in at the Capachos Block and the delayed drilling operations at the Arauca Block will have on production; the anticipated terms of the Company's Q3 2023 regular quarterly dividend including its expectation that it will be designated as an "eligible dividend"; that Parex will continue to utilize its current NCIB to return free funds flow back to its shareholders; and the anticipated date and time of Parex's conference call to discuss second quarter 2023 results. 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; prolonged volatility in commodity prices; industry conditions including 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; determinations by OPEC and other countries as to production levels; competition; lack of availability of qualified personnel; the results of exploration and development drilling and related activities; obtaining required approvals of regulatory authorities in Canada and Colombia; the risks associated with negotiating with foreign governments as well as country risk associated with conducting international activities; volatility in market prices for oil; fluctuations in foreign exchange or interest rates; environmental risks; changes in income tax laws or changes in tax laws and incentive programs relating to the oil industry; changes to pipeline capacity; ability to access sufficient capital from internal and external sources; failure of counterparties to perform under contracts; the risk that Brent oil prices may be lower than anticipated; the risk that Parex's evaluation of its existing portfolio of development and exploration opportunities may not be consistent with its expectations; the risk that Parex may not have sufficient financial resources in the future to provide distributions to its shareholders; the risk that the Board may not declare dividends in the future or that Parex's dividend policy changes; the risk that Parex may not be responsive to changes in commodity prices; the risk that Parex's increased short-cycle activity may not be successful or maximize value for its shareholders; the risk that selectively choosing the location of Parex's horizontal wells may not lead to maximum recovery and production rates; the risk that Parex may not meet its production guidance for the year ended December 31, 2023; the risk that Parex's 2023 funds flow provided by operations netback per boe, funds flow provided by operations and free funds flow may be less than anticipated; the risk that Parex's 2023 capital expenditures may be greater than anticipated; the risk that the pump failure at C7 may not be remediated when anticipated, or at all; the risk that Parex's production at Block LLA-26 may be less than anticipated; the risk that Parex may not drill any additional horizontal wells on Block LLA-34 when anticipated, or at all; the risk that Arauca-8 well and the Arantes well may not spud when anticipated, or at all; the risk that the temporary shut in at the Capachos Block and the delayed drilling operations at the Arauca Block may have a greater impact on production than anticipated; the risk that Parex may not realize the benefits that it anticipates at its gas cycling project and that it may not expand the facility when anticipated, or at all; the risk that Parex may not utilize its current NCIB to return free funds flow back to its shareholders; 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 affect Parex's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR+ website (www.sedarplus.ca). 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. With respect to forward-looking statements contained in this document, Parex has made assumptions regarding, among other things: current and anticipated commodity prices and royalty regimes; availability of skilled labour; timing and amount of capital expenditures; future exchange rates; the price of oil, including the anticipated 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 governmental agencies; receipt of partner, regulatory and community approvals; royalty rates; future operating costs; uninterrupted access to areas of Parex's operations and infrastructure; recoverability of reserves and future production rates; the status of litigation; timing of drilling and completion of wells; on-stream timing of production from successful exploration wells; operational performance of non-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 and requirements as needed; that Parex's conduct and results of operations will be consistent with its expectations; that Parex will have the ability to develop its oil and gas properties in the manner currently contemplated; that Parex's evaluation of its existing portfolio of development and exploration opportunities is consistent with its expectations; 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's production and reserves volumes and the 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 contractual obligations required to retain its rights to explore, develop and exploit any of its undeveloped properties; that Parex will have sufficient financial resources to pay dividends and acquire shares pursuant to its NCIB in the future; that by selectively placing its horizontal wells, Parex will maximize recovery and production rates; 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 perspective on Parex's current and future operations and such information may not be appropriate for other purposes. Parex's actual results, performance or achievement could differ materially from those expressed in, or implied 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, what benefits 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 as a result of new information, future events or results or otherwise, other than as required by applicable securities laws. This press release contains information that may be considered a financial outlook under applicable securities laws about the Company's potential financial position, including, but not limited to: Parex's 2023 annual guidance, including its anticipated 2023 effective tax rate, funds flow provided by operations netback per boe, capital expenditures, funds flow provided by operations and free funds flow; Parex's expectations that its 2023 capital expenditures will be towards the higher end of its guidance range; and the anticipated terms of the Company's Q3 2023 regular quarterly dividend including its expectation that it will be designated as an "eligible dividend"; all of which are subject to numerous assumptions, risk factors, limitations and qualifications, including those set forth in the above paragraphs. The actual results of operations of the Company and the resulting financial results will vary from the amounts set forth in this press release and such variations may be material. This information has been provided for illustration only and with respect to future periods are based on budgets and forecasts that are speculative and are subject to a variety of contingencies and may not be appropriate for other purposes. Accordingly, these estimates are not to be relied upon as indicative of future results. Except as required by applicable securities laws, the Company undertakes no obligation to update such financial outlook. The financial outlook contained in this press release was made as of the date of this press release and was provided for the purpose of providing further information about the Company's potential future business operations. Readers are cautioned that the financial outlook contained in this press release is not conclusive and is subject to change. The following abbreviations used in this press release have the meanings set forth below:
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