Mr. Mike Kruchten reports

PAREX RESOURCES ANNOUNCES OPERATIONAL UPDATE, OIL DISCOVERIES AND COMPLETION OF NORMAL COURSE ISSUER BID

Parex Resources Inc. has provided an operational update inclusive of crude oil discoveries. The company has also completed purchases under its current normal course issuer bid (NCIB) and has provided an update on its balance sheet. All amounts herein are in United States dollars unless otherwise stated.

Key highlights

• Q3 2022 average production is estimated to be 51,100 boe/d (barrels of oil equivalent per day) (1), up approximately 8 per cent from Q3 2021.
• Current production is approximately 55,000 boe/d (2), demonstrating strong production growth to start Q4 2022.
• Expect FY 2022 production to average 52,000 to 53,000 boe/d (3), with a 2022 exit rate in excess of 60,000 boe/d.
• Successful drilling efforts in the Llanos basin year to date have resulted in crude oil discoveries on the Cabrestero, Capachos and LLA-40 blocks.
• Encouraging well results in the Magdalena basin at the VIM-1 block where Parex plans to begin reinjecting gas for enhanced oil recovery (EOR) starting in Q4 2022.
• Completed the current NCIB at the end of Q3 2022, marking the fourth consecutive year where Parex has purchased the maximum allowable shares under its NCIB programs, and equates to over $1.1-billion (Canadian) returned to shareholders through share repurchases since 2017.

Operational update

Production -- Q3 2022

• Q3 2022 average production is estimated to be 51,100 boe/d (1), up approximately 8 per cent from Q3 2021 and consistent with Q2 2022.
• Q3 2022 average production varied from management's guidance of 53,000 to 55,000 boe/d (4) due to delays from the unplanned testing of new zones, operational and weather-related setbacks, as well as temporary localized blockades.
• Temporary localized blockades following the election are estimated to have lowered total average production for Q3 2022 by approximately 1,500 boe/d, with potential future impacts anticipated to be lower and incorporated into the company's long-term planning.

Production -- current and guidance

• Current production is approximately 55,000 boe/d (2), demonstrating strong production growth to start Q4 2022.
• Q4 2022 production is expected to average 54,000 to 58,000 boe/d, with incremental volume to come from already drilled wells at Capachos, continued drilling at block LLA-40 for short-cycle opportunistic adds and the VIM-1 block gas reinjection project once on line.
• FY 2022 revised production guidance to average 52,000 to 53,000 boe/d, with the exit rate to still exceed 60,000 boe/d (3); FY 2021 average production was 46,998 boe/d (5).

1. Estimated production volume for the three months ended Sept. 30, 2022 (light and medium crude oil: 6,906 bbl/d (barrels of oil per day), heavy crude oil: 43,066 bbl/d and conventional natural gas: 6,766 mcf/d (thousands of cubic feet per day)).
2. Estimated total average production for the 12-day period of Oct. 1, 2022, to Oct. 12, 2022.
3. FY 2022 average production guidance, as originally announced May 11, 2022, was 54,000 to 56,000 boe/d.
4. As originally announced Aug. 3, 2022.
5. Production volume for the year ended Dec. 31, 2021 (light and medium crude oil: 6,831 bbl/d, heavy crude oil: 38,449 bbl/d and conventional natural gas: 10,308 mcf/d).

Llanos basin -- Capachos and Arauca blocks (50-per-cent working interest) -- positive drilling results with multizone wells coming on line at Capachos and progressing Arauca for 2023

• Parex drilled the first new well at the Capachos block since 2019, which encountered a new deeper zone resulting in a crude oil discovery. Work is currently being completed on the well to commingle production across the different zones and expected to be on line in Q4 2022.
• Also at the Capachos block, successfully recompleted an existing well that is now producing out of a new shallower zone with coming led production.
• As a result of these successes at Capachos, Parex and its partner are continuing development with a follow-up well that is currently being drilled. Longer term, Parex sees three proven zones on the block, resulting in multiple recomplete and commingling opportunities for both existing and planned new wells.
• At the Arauca block, civil works is completed for the first well and the rig is expected to arrive in Q1 2023 as a result of delays from testing at the Capachos block. Further, Parex has added marketing optionality through offloading a portion of Capachos block production to facilities at the Arauca block.

Llanos basin -- Cabrestero block (100-per-cent WI) -- near-field exploration success and effective waterflood expansion

• Executing near-field exploration with a discovery in a new play that is now producing approximately 1,800 bbl/d (1) of heavy oil. Building on this success, the company is evaluating potential follow-up locations, including a horizontal development well, and is planning to construct a new well pad in Q4 2022 to further delineate the potential.
• The acceleration of infill drilling as well as waterflood optimization is proceeding as planned and has resulted in production gains. Production has increased over 45 per cent year over year from the block, with Q3 2022 production of approximately 11,000 bbl/d of heavy crude oil and current production of over 12,100 bbl/d (1) of heavy crude oil.

Llanos basin -- block LLA-40 and LLA-26 (100-per-cent WI) -- short-cycle opportunistic production adds

• Performed a successful recompletion in a new zone on block LLA-40 that resulted in a follow-up drilling campaign. The first follow-up well was drilled near the end of Q3 2022, which has produced crude oil and is expected to be on full production in early Q4 2022 following facility upgrades. A second appraisal well is planned for Q4 2022 to further define the zone size as well as increase short-term production.
• The block LLA-26 and LLA-40 drilling campaigns have experienced weather-related setbacks, specifically a land slide that destroyed the main road to the blocks, affected rig moves and delayed spud timing. In response, the rig for the block LLA-26 campaign was diverted to drill an exploration well on block LLA-94. The block LLA-26 drilling campaign will now begin in late Q4 2022 and is expected to add production beginning in Q1 2023.

Magdalena basin -- VIM-1 block (50-per-cent WI) -- liquids-rich gas developments

• A horizontal development well has been drilled to its total depth with encouraging results and the well is expected to be completed in early Q4 2022. The existing vertical well on the block produced approximately 1,400 bbl/d (light and medium crude oil) and 5,900 mcf/d (conventional natural gas) gross during Q3 2022. Once the horizontal well is completed, the two wells will be used for gas reinjection.
• Parex's strategy is to grow long-term liquids recovery by reinjecting gas for EOR and the company has identified several other opportunities within its portfolio for this application. In this instance at VIM-1, Parex estimates the potential to double the liquids recovery factor.

1. Estimated total average production for the 12-day period of Oct. 1, 2022, to Oct. 12, 2022.

Magdalena basin -- Boranda (50-per-cent WI) and Fortuna (100-per-cent WI) blocks -- exploitation potential

• Completed the assessment of four prospective formations at the Fortuna block, which indicated non-economic results and ended the campaign. Experience applying proven technologies on this block, such as horizontal drilling, advanced stimulations and synthetic drilling fluid, is being utilized on other blocks across the company's inventory.
• Parex drilled the first ever horizontal well on the Boranda block, which is currently producing roughly 500 bbl/d (1) of heavy oil on jet pump. Based on this success, the company is evaluating using similar horizontal drilling techniques in the field and estimates there are 10 to 15 potential follow-up locations on the block.

Return of capital update

Dividend

With the payment of the Q3 2022 regular dividend of 25 Canadian cents per share on Sept. 30, 2022, Parex has paid over $130-million (Canadian) in dividends since Q3 2021.

Share buybacks

As at Sept. 30, 2022, Parex has completed the maximum allowable share purchases under its current NCIB through the purchase of 11.8 million shares, representing 10 per cent of the public float as at Dec. 22, 2021. The share purchases under the 2022 NCIB returned approximately $285-million (Canadian) to shareholders.

The completion of this year's NCIB marks the fourth consecutive year where Parex has purchased the maximum allowable shares under its NCIB programs, reducing the fully diluted share count by one-third from approximately 164 million in 2017 to 110 million in 2022. Since 2017, Parex has returned over $1.1-billion (Canadian) to shareholders through share repurchases.

As at Sept. 30, 2022, Parex had 109.3 million basic shares outstanding. In due course, the company expects that it will submit a notice of intention to make an NCIB to the Toronto Stock Exchange for calendar 2023.

Capital allocation framework

Parex targets at least one-third of annual funds flow from operations (FFO) (2) and 100 per cent of free funds flow (FFF) (3) to be returned to shareholders through dividends and share buybacks. Based on current management estimates, Parex expects to be able to meet this goal in 2022.

Balance sheet update

Parex estimates its working capital surplus (2) to be approximately $225-million as at Q3 2022, a decrease of roughly $85-million from Q2 2022. Cash on the balance sheet has been reduced by the acceleration of share buybacks as noted above and the purchase of long-lead items such as well casing to support the 2023 capital expenditure program.

As at Sept. 30, 2022, Parex continues to be debt free and has an undrawn $200-million credit facility.

1. Estimated total average production for the 12-day period of Oct. 1, 2022, to Oct. 12, 2022;
2. Capital management measure;
3. Non-GAAP (generally accepted accounting principles) financial measure.

Q3 2022 results -- conference call and webcast

The company is holding a conference call and webcast for investors, analysts and other interested parties on Friday, Nov. 4, 2022, at 9:30 a.m. MT (11:30 a.m. ET). To participate in the conference call or webcast, please see access information:

Toll-free dial number (Canada/United States):  1-800-806-5484

Passcode:   8312227 followed by the pound key

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 Bogota, 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.

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