NOT FOR DISTRIBUTION OR FOR DISSEMINATION IN THE UNITED STATES
Parex Resources Inc. ("Parex" or the "Company") (TSX:PXT), a company focused on
Colombian oil exploration and production announces the results of its 2013
year-end independent crude oil and natural gas reserves evaluation. The
financial and operational information contained below is based on the Company's
unaudited expected results for the year ended December 31, 2013.
Highlights:
-- Total proved ("1P") reserve growth of 73 percent from the prior year,
increasing from 10.1 million barrels of oil equivalent ("MMboe") to 17.4
MMboe (net company working interest);
-- Proved plus probable ("2P") reserves double from the prior year,
increasing from 16.1 MMboe to 32.0 MMboe (net company working interest).
Over 98 percent of 2013 2P reserves are light and medium oil;
-- Replaced 2013 production 3.75 times with 2P reserve additions;
-- 2P reserve growth per share of 108 percent on a debt adjusted basic
share basis funded entirely with 2013 cash flow from operations;
-- 2P net present value of USD$832 million (CAD$915 (1) million) after tax
discounted at 10 percent compared to USD$449 million at 2012;
-- Net asset value of approximately CAD$7.70 per basic share using 2P net
present value after tax discounted at 10 percent (2);
-- Finding, developing and acquisition ("FD&A") costs for 2013 of USD$15.75
per barrel including changes in future development costs, generating a
recycle ratio of 4.0 times;
-- 2P reserve life index ("RLI") increases to 5.1 times compared to 3.4
times at 2012; and
-- Supported by strong reserves growth, Parex expects January 1 - March 31
2014 ("First Quarter") production to average approximately 18,300-18,700
barrels of oil per day ("bopd"). Q4 production averaged 17,285 bopd.
(1) At current spot rate of approximately 1.10 USD-CAD
(2) Using December 31, 2013 estimates of working capital, long-term debt and
convertible debenture face value totaling net debt of approximately
USD$70 million, 108.7 million basic shares and 2P net present value
after tax discounted at 10% of USD$832.4 million.
2013 Year-End Reserves
The following tables summarize information contained in the independent reserves
report prepared by GLJ Petroleum Consultants Ltd. ("GLJ") effective December 31,
2013 ("GLJ Report") with comparatives to the year ended December 31, 2012
contained in the report prepared by GLJ with an effective date of December 31,
2012 (the "GLJ 2012 Report"). The GLJ Report and the GLJ 2012 Report were
prepared in accordance with definitions, standards and procedures contained in
the Canadian Oil and Gas Evaluation Handbook ("COGE Handbook") and National
Instrument 51-101, Standards of Disclosure for Oil and Gas Activities ("NI
51-101"). Additional reserve information as required under NI 51-101 will be
included in the Company's Annual Information Form which will be filed on SEDAR
by March 31, 2014.
The recovery and reserve estimates of crude oil reserves provided in this news
release 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 reserves
presented for the year ended December 31, 2013 are based on GLJ's forecast
pricing effective January 1, 2014 and all reserves presented for the year ended
December 31, 2012 are based on GLJ's forecast pricing effective January 1, 2013.
Consistent with the Company's reporting currency, all amounts are in United
States dollars unless otherwise noted.
Discussion of Reserves
All of Parex' crude oil reserves are located in Colombia, primarily in the
Llanos basin. Reserve additions in 2013, as evaluated by GLJ were generated from
a successful 2013 oil exploration and drilling extension program. The GLJ Report
includes 597 Mboe (3,581 MMcf) of 2P gas reserves for the La Casona field which
is less than 2 percent of total 2P reserves (1P gas reserves of 1,282 MMcf).
The net present value after tax of proved plus probable reserves approximately
doubled and on a per share basis, adjusted for the decrease in debt increased by
108 percent at December 31, 2013 compared to the prior year end.
The quality of the Company's light and medium oil reserves and a favourable
Colombian fiscal regime combine to generate a net present value before tax
discounted at 10 percent of $35.62 per barrel for proved plus probable reserves
as at December 31, 2013 compared to $35.76 per barrel for the prior period.
Five Year Crude Oil Price Forecast - GLJ Report
2014 2015 2016 2017 2018
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ICE Brent (USD$/bbl) $107.50 $107.50 $105.00 $102.50 $102.50
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2013 Year-End Reserves Volumes
December 31, December 31, Increase Debt Adjusted
2012 2013 year-over Per Share
Reserves Category(1) (MBbl) (Mboe)(2) year Growth(3)
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Proved (1P) 10,063 17,368 73% 81%
Proved plus Probable
(2P) 16,100 32,021 99% 108%
Proved plus Probable
plus Possible (3P) 23,131 49,949 116% 125%
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(1) Reserves are greater than 98% light and medium crude oil, therefore
disclosure of heavy crude oil, liquids and natural gas volumes has not
been provided. All reserves are presented as Parex working interest
before royalties
(2) Mboe is defined as thousand barrels of oil equivalent.
(3) Calculated using: basic shares of 108.7 million, December 31, 2013 share
price of $6.58, convertible debenture face value Cdn$85 million, and
unaudited estimated net working capital of $15 million as at December
31, 2013.
Reserve Life Index ("RLI") (1)
2012 2013
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Proved Plus Probable (2P) 3.4x 5.1x
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(1) Calculated using estimated average fourth quarter (Q4) production of
17,285 bpd annualized
2013 Year-End Reserves Net Present Summary
Net Present Value Before Tax(1)(2)
Increase year-
December 31, 2012 December 31, 2013 over
Reserves Category (USD$000s) (USD $000s) year (10%)
------------------------------------------
0% 10% 0% 10%
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Proved (1P) $411,054 $364,463 $747,396 $635,490 74%
Proved plus
Probable (2P) $683,965 $575,756 $1,431,693 $1,140,735 98%
Proved plus
Probable plus
Possible (3P) $1,011,329 $808,475 $2,317,282 $1,723,293 113%
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Net Present Value After Tax(1)(2)
Increase year-
December 31, 2012 December 31, 2013 over
Reserves Category (USD $000s) (USD $000s) year (10%)
------------------------------------------
0% 10% 0% 10%
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Proved (1P) $349,672 $308,034 $591,542 $502,822 63%
Proved plus
Probable (2P) $539,362 $449,475 $1,047,004 $832,378 85%
Proved plus
Probable plus
Possible (3P) $758,786 $600,651 $1,639,187 $1,213,913 102%
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(1) The forecast prices used in the calculation of the present value of
future net revenue are based on the GLJ January 1, 2014 price forecast
and will be included in the Company's Annual Information Form.
(2) Includes proved plus probable future development capital ("FDC") of $232
million (2012 was $125 million). Total proved FDC is $147 million (2012
was $98 million).
2013 Year-End Reserves Reconciliation Company Gross
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Mboe Total Proved Total Proved plus Probable
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December 31, 2012 10,063 16,100
Technical Revisions(1) 4,063 3,728
Discoveries & Extensions(2) 8,397 16,740
Acquisition 632 1,240
Production (5,787) (5,787)
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December 31, 2013(3) 17,368 32,021
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(1) Proved plus probable reserve revisions are primarily associated with the
evaluations of the Tua and Las Maracas fields.
(2) Proved plus probable reserve discoveries and extensions are primarily
associated with the evaluations of the Adalia, Akira, Tarotaro, Tua,
Tigana and Tigana Sur discoveries.
(3) Subject to final reconciliation adjustments.
Proved plus Probable FD&A - Company Gross(1)
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2013 3 Year
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$ ('000) (Unaudited) Including FDC Including FDC
Proved+Probable Proved+Probable
Capital Expenditure - Colombia $219,716 $579,866
Capital Expenditure - Trinidad $2,039 $59,220
Capital Expenditure - change in FDC $101,651 $129,143
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Total (2) $323,406 $768,229
Net Acquisitions $12,489 $337,250
Net Acquisitions - change in FDC $6,050 $69,284
----------------------------------------
Total Net Acquisitions(3) $18,539 $406,534
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Total Capital including change in $341,945 $1,174,763
FDC
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Reserve Additions 20,468 29,547
Net Acquisition Reserve Additions 1,240 8,534
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Reserve Additions including
Acquisitions 21,708 38,081
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Company Metrics(4)
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F&D Costs $15.80/bbl $26.00/bbl
FD&A Costs $15.75/bbl $30.85/bbl
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Estimated Full Year Operating
Netback(5) $62.50/bbl $67.45/bbl
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Recycle Ratio - F&D 4.0x 2.6x
Recycle Ratio - FD&A 4.0x 2.2x
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Colombia Only Metrics (Excluding
Trinidad)
F&D Costs $15.70/bbl $24.00/bbl
FD&A Costs $15.66/bbl $29.29/bbl
Recycle Ratio - F&D 4.0x 2.8x
Recycle Ratio - FD&A 4.0x 2.3x
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(1) Calculated using unaudited estimated capital expenditures and operating
netback as at December 31, 2013.
(2) Capital expenditures include the costs of exploration land and minor
expenditures in Canada.
(3) Acquisitions and associated reserves and FDC are all related to
Colombia. 1P acquisition 2013 FDC was $3.9 million.
(4) 2012 Company metrics for 2P including FDC were: F&D $36.92/bbl and FD&A
$39.64/bbl
(5) Recycle ratio is calculated as operating netback divided by FD&A costs
(proved plus probable). Operating netback is calculated as revenue minus
royalties, production and operating expenses and transportation
expenses. 3 Year operating netback is calculated using weighted average
volumes and annual operating netbacks.
Summary of Company
FD&A
2012 2013 3 yr Average
Per bbl 1P 2P 1P 2P 1P 2P
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Total Company FD&A $ 42.61 $ 39.64 $ 21.66 $ 15.75 $ 39.66 $ 30.85
This news release does not constitute an offer to sell securities, nor is it a
solicitation of an offer to buy securities, in any jurisdiction.
Reserve Advisory
"Proved" 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 proved reserves.
"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 less than the sum of the estimated
proved plus probable reserves.
"Possible" reserves are those additional reserves that are less certain to be
recovered than probable reserves. There is a 10 percent probability that the
quantities actually recovered will equal or exceed the sum of proved plus
probable plus possible reserves. It is unlikely that the actual remaining
quantities recovered will exceed the sum of the estimated proved plus probable
plus possible reserves.
All evaluations and reviews of future net cash flow are stated prior to any
provision for interest costs or general and administrative costs and after the
deduction of estimated future capital expenditures for wells to which reserves
have been assigned. It should not be assumed that the estimated future net cash
flow shown below is representative of the fair market value of the Company's
properties. There is no assurance that such price and cost assumptions will be
attained, and variances could be material. The recovery and reserve estimates of
crude oil reserves provided are estimates only, and there is no guarantee that
the estimated reserves will be recovered. Actual crude oil reserves may be
greater than or less than the estimates provided.
The term "Boe" means a barrel of oil equivalent on the basis of 6 Mcf of natural
gas to 1 barrel of oil ("bbl"). Boe's may be misleading, particularly if used in
isolation. A boe conversation ratio of 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 the value ratio based
on the current price of crude oil as compared to natural gas is significantly
different from the energy equivalency of 6 Mcf: 1Bbl, utilizing a conversion
ratio at 6 Mcf: 1 Bbl may be misleading as an indication of value.
Unaudited Financial Information
Certain financial and operating results included in this news release such as
finding, development and acquisition costs, recycle ratio, net debt, capital
expenditures, production information and operating costs are based on unaudited
estimated results. These estimated results are subject to change upon completion
of the audited financial statements for the year ended December 31, 2013, and
changes could be material. Parex anticipates filing its audited financial
statements and related management's discussion and analysis for the year ended
December 31, 2013 on SEDAR on or before March 31, 2014.
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" 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'
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 performance
characteristics of the Company's oil properties; supply and demand for oil;
financial and business prospects and financial outlook; results of operations;
estimated Q4 production and estimated First Quarter production; and planned
capital expenditures and the timing thereof. In addition, statements relating to
"reserves" or "resources" are by their nature forward-looking statements, as
they involve the implied assessment, based on certain estimates and assumptions
that the resources and reserves described can be profitably produced in the
future. The recovery and reserve estimates of Parex' reserves provided herein
are estimates only and there is no guarantee that the estimated reserves will be
recovered.
These forward-looking statements are subject to numerous risks and
uncertainties, including but not limited to, the impact of general economic
conditions in Canada, Colombia and Trinidad & Tobago; 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; competition; lack of availability of qualified
personnel; the results of exploration and development drilling and related
activities; risks related to the ability of partners to fund capital work
programs and other matters requiring partner approval; imprecision in reserve
and resource estimates; the production and growth potential of Parex' assets;
obtaining required approvals of regulatory authorities and partners; 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; ability to access sufficient capital from internal
and external sources; risk that the Company will not 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; the risks
discussed under "Risk Factors" in the Company's Annual Information Form for the
year ended December 31, 2012; 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'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.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 will be consistent with these
forward-looking statements. With respect to forward-looking statements contained
in this document, Parex has made assumptions regarding: current commodity prices
and royalty regimes; availability of skilled labour; timing and amount of
capital expenditures; future exchange rates; the price of oil; pipeline
capacity; timing of production from successful exploration wells; operational
performance on non-operated producing fields; the impact of increasing
competition; conditions in general economic and financial markets; availability
of drilling and related equipment; effects of regulation by governmental
agencies; royalty rates, future operating costs; that the Company 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 the Company's conduct and results of operations will be consistent
with its expectations; that the Company will have the ability to develop the
Company's oil properties in the manner currently contemplated; that the
estimates of the Company's reserves volumes and the assumptions related thereto
(including commodity prices and development costs) are accurate in all material
respects; that the Company will receive all required partner and regulatory
approvals; 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.
Neither the TSX nor its Regulation Services Provider (as that term is defined in
the policies of the TSX) accepts responsibility for the adequacy or accuracy of
this release.
FOR FURTHER INFORMATION PLEASE CONTACT:
Parex Resources Inc.
Michael Kruchten
Vice-President Corporate Planning and Investor Relations
(403) 517-1733
Investor.relations@parexresources.com
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