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Energy Summary for July 7, 2015

2015-07-07 20:22 ET - Market Summary

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by Stockwatch Business Reporter

West Texas Intermediate crude for August delivery lost 20 cents to $52.33 on the New York Merc, while Brent for August added 31 cents to $56.85 (all figures in this para U.S.). Western Canadian Select traded at a discount of $11.55 to WTI ($40.78), down from a discount of $11.45. Natural gas for August lost four cents to $2.716. The TSX energy index added 2.78 points to close at 202.98.

Wayne Foo's Parex Resources Ltd. (PXT) added 14 cents to $9.76 on 1.28 million shares, after releasing mixed news from Colombia. The good news was that its second quarter production was 27,025 barrels of oil a day, nicely above its full-year guidance of 26,500 to 26,700 barrels a day. In addition, production has started from the Rumba-1 well, which was not factored into the guidance because it was an exploration well. Parex, one of few companies risking exploration in today's tough market, is not counting on success from any of this year's dozen or so exploration wells, but previously promised to "revisit" its guidance after drilling five: Rumba-1, Bazar-1, Zorro Rojo-1, Guepardo-1 and Carcayu-1. The fact that the first was a success bodes well for a potential guidance boost. Unfortunately, it looks as though the second and third were both busts. Parex says it ran into mechanical problems while drilling Bazar-1 and had to abandon it (though it will still drill Bazar-2 later this year), and Zorro Rojo-1 was also abandoned; presumably it was dry. Parex is putting on a brave face and has even accelerated its exploration program. It is moving a rig to drill the above-mentioned Guepardo-1 and Carcayu-1, and is already drilling a well called Chachalaca-1, a new addition to the program. Scotia analyst Gavin Wylie wrote in a research note this morning that results from Chachalaca-1 will be interesting because the structure is west of, and looks similar to, Parex's producing Tigana field. The company also has plenty of non-exploration drilling coming up. One intriguing development well will be at the Capachos block, where Parex has a farm-in agreement with state-owned Ecopetrol SA (ECP: $15.41) under which Parex must pay to drill two wells. They reached this agreement over a year ago and Parex originally wanted to start drilling its first well in the first quarter of 2015. After a lengthy regulatory delay, it finally expects to start drilling in the fourth quarter.

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