Mr. Imad Mohsen reports

PAREX RESOURCES ANNOUNCES ACHIEVEMENT OF 60,000 BOE/D PRODUCTION MILESTONE, PROVIDES BUSINESS UPDATE AND PUBLISHES 2023 GUIDANCE AHEAD OF CAPITAL MARKETS DAY IN BOGOTA, COLOMBIA

Parex Resources Inc. has provided a fulsome business update, alongside its 2023 budget and guidance. The company is hosting a capital markets day, which will be presented by members of Parex's senior leadership team. The event will be webcast on Dec. 6, 2022, with a link available on the company's website, beginning at 1:30 p.m. EST (11:30 a.m. MST). All amounts herein are in U.S. dollars unless otherwise stated.

Key highlights:

• Current production exceeded 60,000 barrels of oil equivalent per day in early December, 2022, the highest in the company's history;
• Incorporating recent Colombia tax reform, the company continues to have robust netbacks; at a Brent pricing of $80 per barrel, Parex's 2023 guidance is approximately $450-million of capital expenditures (midpoint), average production of roughly 60,000 barrels of oil equivalent per day (midpoint) and is expected to fully self-finance this plan with capacity for potential incremental dividends as well as normal course issuer bid (NCIB) share repurchases;
• Making further investments in facilities and infrastructure in 2023 to actively mitigate and arrest declines in core production areas, such as LLA-34 and Cabrestero, which are expected to reduce maintenance capital in future years;
• Unveiled plan for 2023 through 2025, where post-2023 annual base production growth is expected to be approximately 5 per cent, excluding exposure to a world-class exploration portfolio that has potential for transformational discoveries in both oil and gas plays;
• Signed a memorandum of understanding with Ecopetrol SA, Colombia's national oil company, along the high-potential Foothills trend in the Llanos basin. Recent positive well test results at the Capachos block and VIM-1 block, either of which would currently rank among the top producing wells in Colombia.

"I am extremely proud of our teams in Canada and Colombia that overcame challenges throughout the year and delivered on our promise of a 60,000-barrel-of-oil-equivalent-per-day production rate by year-end. This achievement demonstrates the resiliency of our employees and contractors, our world-class portfolio, and the potential we see in Colombia for the years to come," commented Imad Mohsen, president and chief executive officer.

"The 2023 plan builds on our 2022 successes and our three-year outlook shows that, even before exploration potential is considered, Parex can grow its production at highly efficient capital rates while increasing its returns to shareholders."

Strategy

Parex's corporate strategy is unchanged and based on four key pillars: leveraging the company's Colombian advantage and ESG (environmental, social and governance) performance, driving safe and sustainable operations, strategically providing transformational exploration upside (big E), as well as delivering return of capital to shareholders.

The company's strategic priorities build on 2022 successes, and, for 2023, Parex's priorities continue to be across three areas:

• Exploitation and technology -- unlocking the company's extensive land base using technology as Parex applies proven techniques to drive step changes in capital efficiency;
• Onshore liquids and gas potential -- increasing the company's recovery factors and growing liquids production while pursuing longer-term, underexplored gas plays;
• Outsized exploration potential -- focusing on material conventional oil and gas prospects and giving investors asymmetric risk and reward opportunities through a world-class exploration portfolio.

2023 budget

2023 budget highlights:

• Program includes approximately 65 gross wells, with five operated rigs and three non-operated rigs;
• Capital expenditures at approximately $450-million (midpoint), which is roughly 18 per cent lower compared with 2022. This demonstrates the company's commitment to capital discipline in a lower-netback environment while ensuring strong free funds flow generation that is to be returned to shareholders.
• Approximately 75 per cent of total capital is focused on investments in operated blocks, with balanced deployment across multiple areas and basins as the company further diversifies its operations from Southern Llanos blocks LLA-34 and Cabrestero;
• Average production is expected to be between 57,000 to 63,000 barrels of oil equivalent per day, and forecasted to be approximately 15-per-cent year-over-year absolute growth (midpoint);
• The production guidance range for 2023 has been widened relative to previous years to better account for uncontrollable above-ground factors, with the midpoint including an increased downtime contingency assumption; the low case accounts for increased uncontrollable above-ground factors and is not reflective of forecast production decline;
• Free funds flow (FFF) estimated to be approximately $230-million at $80-per-barrel-Brent guidance, which is expected to be 100 per cent returned to shareholders through a combination of dividends and share repurchases; currently, the company's regular dividend is $1 per share annualized, which is approximately $80-million, and leaves an estimate of $150-million to be further returned to shareholders;
• 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 plan includes the spudding of three big E wells (blocks Arauca, VIM-43 and LLA-122) that have the potential to be transformational opportunities for the company;
• Approximately $45-million of capital expenditures relate to carry capital from the Arauca and LLA-38 farm-in agreement with Ecopetrol, announced on July 7, 2021, whereby Parex agreed to solely finance the initial work plan in exchange for proved reserves, along with development and drill-ready exploration prospects.

Long-term capital allocation framework

Parex has a long-term capital allocation framework based off its total funds provided by operations (FFO). As previously disclosed, the company aims to reinvest approximately 66 per cent of total FFO, while returning at least 33 per cent of total FFO to shareholders through a combination of dividends and share repurchases.

2023 corporate guidance

In 2023, Parex plans to continue adhering to its capital allocation framework, which provides sufficient reinvestment dollars for sustainable operations and to execute on step-change growth opportunities as well as the return of capital to continue bolstering shareholder returns.

2023 activity overview

Development:

• Northern Llanos -- Arauca (50-per-cent working interest): The first well of a multiwell program is expected to spud in the first half of 2023; the first well will be drilled in a discovered field and the second will be an appraisal well; preinvesting in infrastructure and building facility capacity for approximately 40,000 barrels per day.
• Northern Llanos -- Capachos (50-per-cent working interest): Two wells are expected to be drilled: one injector well to cycle associated gas and maximize liquids production and one near-field exploration well; beginning a facility expansion to increase fluid handling and allow for future production growth.
• Southern Llanos -- LLA-26 and LLA-81 (100-per-cent working interest): Following the drilling successes at LLA-32 and LLA-40, the company is executing short-cycle opportunistic production adds at LLA-26 (timing shifted to predominantly 2023) and LLA-81 (newly identified area to exploit), representing some of the most attractive paybacks in Parex's portfolio.
• Southern Llanos -- Cabrestero (100-per-cent working interest): The company expects to drill 13 to 15 wells to continue follow-up infill drilling and full waterflood implementation, plus infrastructure investments to continue optimizing operations and maximize reserves recovery.
• LLA-34 (55-per-cent working interest): The company expects to drill 35 to 40 gross wells plus infrastructure and facilities to replicate Cabrestero success, optimizing operations and expansion of waterflood.

Big E -- Parex's exploration targets that have transformational properties for the company:

• Northern Llanos -- Arauca (50-per-cent working interest): The Arauca-8 well is a multizone, high-impact exploration prospect that is targeting light crude oil.
• Magdalena -- VIM-43 (100-per-cent working interest): The Chirimoya well is in an area where there are stacked reservoirs, which highly increases the chance of success of a gas and condensate discovery; this prospect is one of the most potentially impactful in the Parex gas exploration portfolio.
• Llanos Foothills -- LLA-122 (50-per-cent working interest): Arantes is the first well within the Ecopetrol memorandum of understanding coverage area, targeting gas and condensate in an area where historical pool sizes are significant and the wells can be extremely prolific; this prospect is the first one to be drilled by Parex within the high-potential Foothills trend.

2023 netback sensitivity estimates

The netback sensitivity estimates herein are based on the company's current interpretation of the 2023 Colombia tax reform and the expected tax position of the company.

Colombian government tax reform update

In November, 2022, the Colombian Congress approved a tax reform that increases costs on oil and gas producers:

• Establishment of an income surtax of up to 15 per cent linked to the historical Brent oil price;
• Prevents the deduction of base royalties paid to the Colombian government from the income tax calculation.

This new tax provision is expected to go into effect in January, 2023, and does not affect current tax bases or the tax rate for fiscal year 2022.

Compared with 2022 forecast values, the company's interpretation and forecasts of the tax reform impact on its effective tax rate for 2023 are as follows.

Capital flexibility for lower-commodity-price scenarios

Management has pro-actively included flexibility in the company's 2023 capital expenditure program. In the event of a lower price cycle, where the oil price is sustained at lower than approximately $60 per barrel Brent, the company can reduce capital by up to $100-million to align with its long-term capital allocation framework.

In the event of higher oil prices, Parex will continue to demonstrate capital discipline and maintain its capital program as presented, in the absence of any significant discoveries that warrant additional capital deployment.

Three-year outlook

To highlight Parex's forecast declining capital expenditure profile, portfolio growth and FFF potential, the company has provided an outlook through 2025 in the form of a three-year base development plan. Assuming a commodity price environment of approximately $80 per barrel Brent oil price and forecast total capital expenditures within a range of $325-million to $450-million per year, the company is projected to generate cumulative FFF of approximately $1-billion, or $1.35 billion (Canadian) at current foreign exchange rates. Under this scenario, capital reinvestment adheres to the targeted long-term capital allocation framework, projects approximately 5-per-cent-per-annum average production growth, and increases return of capital to shareholders.

The three-year base development plan does not include upside from the big E portfolio. Given Parex is forecast to allocate 10 per cent to 15 per cent of the annual capital expenditure budget to actively pursue transformational exploration opportunities, the plan does not include any associated capital and production from successful exploration follow-up that may occur over the outlook period.

Encouraging well test results at Capachos and VIM-1 blocks

Northern Llanos: Capachos (50-per-cent working interest) -- Andina-1 well

The Andina-1 well has been on production since September, 2018, and has accumulated 3.5 million barrels of oil from the Guadalupe formation. During a well service on the Andina-1 well, a test was conducted on the previously unproduced Mirador formation to test the capability of this zone in the Andina field on the block. The well was tested for 53 hours in mid-November and produced a total of 8,612 barrels of 39-degree API oil and 1,277 barrels of water for an average daily rate of 3,900 barrels of oil per day and 578 barrels of water per day at a measured bottom hole drawdown of 13 per cent. The well was tested at a maximum rate of 6,838 barrels of oil per day during a four-hour period and bottom-hole pressure recorders indicated a drawdown of 30 per cent at this rate. The final water cut of the well was 1 per cent and produced water during the test was associated with wellbore completion fluids. Parex has completed the Andina-1 well as a Mirador-only producer.

Magdalena: VIM-1 (50-per-cent working interest) -- La Belleza-2 well

The La Belleza-2 well was drilled to a total depth of 14,166 feet, approximately 2.5 kilometres east of the La Belleza-1 well. The well was drilled as a horizontal well and encountered 2,000 feet of porous limestone in the Cielo de Oro (CDO) formation then completed for natural flow production. Over an eight-day period in early November, the well produced a total of 15,610 barrels of condensate and 62 million cubic feet of natural gas, representing an average test rate of 1,993 barrels of condensate per day and eight million cubic feet per day of gas (3,326 barrels of oil equivalent per day). Due to liquid storage limitations, the true capability of the well could only be tested over a one-hour period where the well produced 7,530 barrels of condensate and 38.5 million cubic feet per day of gas (13,953 barrels of oil equivalent per day). Bottom-hole pressure recorders indicated a producing drawdown of 4 per cent during the average flow period and a maximum drawdown of 10 per cent at the highest rate tested during the one-hour period. A total of 817 barrels of formation water and water of condensation was produced during the test for an average water cut of 5 per cent, consistent with the long-term trends at the La Belleza-1 well.

Gas strategy update

Memorandum of understanding with Ecopetrol

In 2022, Parex signed a memorandum of understanding with Ecopetrol, Colombia's national oil company. The memorandum of understanding builds on the relationship between Parex and Ecopetrol, with an area of coverage spanning 13 blocks in the Llanos basin, along the high-potential Foothills trend, and include the general scope of:

• Build on companies' strengths to exploit potential synergies in developing gas volume in the area;
• Maximize the use of existing infrastructure;
• Seek joint co-operation in general when it comes to blocks in the area of coverage.

In the second half of 2023, the first well that would be under the memorandum of understanding area of coverage is expected to be spudded at block LLA-122 (50-per-cent working interest).

Production update -- 2022:

• Current production is in excess of 60,000 barrels of oil equivalent per day; operated production for the company is over 50 per cent for the first time since 2015;
• For the period of Oct. 1, 2022, to Nov. 30, 2022, estimated total average production was approximately 53,200 barrels of oil equivalent per day; current production increases have primarily come from operated blocks in Cabrestero, Capachos and VIM-1;
• 2022 full-year production expected to average 52,000 to 53,000 barrels of oil equivalent per day and Q4 2022 production is expected to average 54,000 to 58,000 barrels of oil equivalent per day, both in line with prior guidance.

Northern Llanos -- Capachos block (50-per-cent working interest) update:

• On Nov. 19, 2022, the company pro-actively shut in its Capachos block due to temporary security concerns; for Parex, the safety of the company's employees and contractors is its top priority. As a result of this shut-in, there was an approximately 5,000-barrel-of-oil-equivalent-per-day net production impact from current wells in addition to delays in bringing new production on line.
• On Dec. 4, 2022, following meetings with national and local authorities, activities resumed at the Capachos block and production is actively being brought back on line, with full operating rates expected in the coming days.

Capital market day webcast

Parex is holding a webcast for investors, analysts and other interested parties on Tuesday, Dec. 6, 2022, at 1:30 p.m. EST (11:30 a.m. MST).

Please note that a capital market day presentation has been posted to the company's website, which includes additional detail in relation to the three-year outlook, including forecast production, FFO, capital expenditures and FFF.

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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