Mr. Imad Mohsen reports

PAREX RESOURCES ANNOUNCES RECORD FULL-YEAR & FOURTH QUARTER PRODUCTION, ARAUCA DISCOVERY, AND PUBLISHES 2024 GUIDANCE

Parex Resources Inc. has published its 2024 budget, alongside an updated three-year outlook, has released positive test results at its Arauca-8 exploration well (50-per-cent working interest), and has provided its estimated full year 2023 and fourth quarter 2023 average production.

All amounts herein are in U.S. dollars unless otherwise stated.

Key highlights:

• Targeting FY 2024 average production of 57,000 barrels of oil equivalent per day, which is forecast to be 5-per-cent year-over-year growth;
• Budgeting FY 2024 capital expenditures of $410-million, which is expected to be approximately 15 per cent lower than 2023;
• Expecting to generate approximately $625-million of funds flow provided by operations and roughly $215-million of free funds flow in 2024 at the midpoint of guidance based on $75-per-barrel Brent;
• Updated three-year outlook for 2024 through 2026, where annual average production growth is targeted at 5 per cent or higher, excluding high-impact, big E exploration potential;
• Discovery at the Arauca-8 exploration well (50-per-cent WI), where two zones have been tested, with two zones still to be tested in the coming weeks;
• Achieved record FY and Q4 average production of 54,356 boe/d and 57,329 boe/d, respectively, in 2023.

"Our plan for the year builds on the work completed in 2023 and is focused on increasing overall cash that can be used to reward shareholders. This will be achieved not only through increasing total production, but also through a reduction in year-over-year capital expenditures and the deployment of inventory from our balance sheet. I am optimistic about the promising outcomes that we have seen at Arauca, which are laying the foundation for further follow-ups in an area where we see significant potential," commented Imad Mohsen, president and chief executive officer.

2024 budget:

• Program includes approximately 35 gross wells, with a targeted capital expenditure guidance range of $390-million to $430-million.
• Approximately 75 per cent of capital expenditures are focused on investments in operated blocks.
• Average annual production is expected to be approximately 54,000 to 60,000 boe/d, representing 5-per-cent year-over-year growth at the midpoint.
• FFF is estimated to be approximately $215-million at the midpoint guidance based on $75-per-barrel Brent after paying the company's current regular dividend of $1.50 (Canadian) per share annualized, which is currently forecast to be roughly $115-million in 2024, and leaves an estimated $100-million for further returns to shareholders through regular dividends and share repurchases; additionally, the company expects to deploy $30-million to $50-million of long-lead material and equipment inventory from its balance sheet during the year.
• In due course, the company will submit a notice of intention to make a normal course issuer bid to the Toronto Stock Exchange for calendar 2024.
• Capital plan includes spudding three high-impact, big E exploration wells (blocks: LLA-122, LLA-38 and VIM-1: 50-per-cent WI), all of which have the potential to be transformational opportunities for the company.

2024 corporate guidance

An attached table summarizes the company's 2024 annual guidance.

                             2024 GUIDANCE

Category                                                       2024 guidance
     
Brent crude oil average price                                        $75/bbl        
Average production                                       54,000-60,000 boe/d  
Funds flow provided by operations netback                        $29-$31/boe       
Funds flow provided by operations               $590-million to $660-million    
Capital expenditures                            $390-million to $430-million    
Free funds flow                                       $215-million (midpoint)

 
                       2024 NETBACK SENSITIVITY ESTIMATES
 
Brent crude oil price ($/bbl)                           $65          $75          $85    
Effective tax rate                                    10-12%       19-21%       25-27%   
Funds flow provided by operations netback        $25-27/boe   $29-31/boe   $31-33/boe 

Near-field exploration

In 2024, Parex is planning to drill approximately five near-field exploration targets across various strategic blocks. By focusing on three-way closure targets identified through 3-D seismic analysis, the identified targets have a higher chance of success and are complementary to the company's unchanged big E exploration strategy that has higher risk and reward characteristics.

Big E exploration -- high-impact targets with transformational potential:

• Llanos foothills -- LLA-122 (50-per-cent WI): The Arantes well is targeting gas and condensate in the high-potential Foothills trend of Colombia, where historical pool sizes are significant and wells can be extremely prolific. This prospect was spudded in early January, 2024, with preliminary results expected in first half 2024.
• Magdalena -- VIM-1 (50-per-cent WI): The Hydra well is targeting gas and condensate on the VIM-1 block, where Parex previously had the material La Belleza discovery in 2018. Parex plans to utilize new seismic processing technology to drill this prospect, which is expected to spud midyear 2024.
• Northern Llanos -- LLA-38 (50-per-cent WI): The Berilo Oeste well is targeting light crude oil and gas on an adjacent trend to Arauca. This multizone prospect is targeting the same zones as the Arauca-8 well, where Parex has seen positive test results. This prospect is expected to spud in fourth quarter 2024.

Production update

Parex's fourth quarter 2023 average production was 57,329 boe/d, which was an increase of 6 per cent from Q4 2022. During the quarter, the company experienced multiple factors that led to production being lower than management's expectations, including, but not limited to, slower on stream timing because of extended testing and operational setbacks, as well as higher-than-expected water cut on a single high-rate well.

Arauca (business collaboration agreement with Ecopetrol SA (Parex 50-per-cent participating share)) update

"Over all, the initial results that we are seeing from the first two wells at Arauca are promising. The Arauca-8 well has successfully tested the first two zones with discoveries in each, with two more zones to test where logging and pressure measurements show the presence of oil -- while the Arauca-15 well is being sidetracked to an optimal location after having demonstrated the presence of hydrocarbons in multiple layers. We are optimistic and planning to proceed with follow-up wells in each area based on the initial results that we are seeing today," commented Eric Furlan, chief operating officer.

Arauca-8 exploration well

Arauca-8 was drilled to a total depth of 21,010 feet as a pace-setting well and encountered the expected Guadalupe, Gacheta and Une zones. Based on positive wire line logging and modular formation dynamics tester pressure measurements, a comprehensive testing program commenced, beginning with the Une zone that resulted in a gas discovery that tested at roughly 9.0 million cubic feet per day and over 1,000 barrels of condensate per day. Following the successful Une gas test, the Gacheta zone was tested that resulted in an oil discovery that tested at over 6,000 boe/d.

In the coming weeks, the remaining zones will be tested, and following that, a formal development and production plan for the area will be developed by Parex and Ecopetrol.

The adjacent follow-up well, Arauca-81, is expected to spud in late first quarter 2024.

Arauca-15 well

Although the well came in structurally low, it encountered hydrocarbon sands in the Barco zone and the deeper Une zone that previously had not been penetrated in the area. However, wellbore conditions resulted in an ineffective completion that affected overall test results and compromised the commercial viability of the stand-alone well.

Based on the vertical seismic profile from downhole data, Parex plans to sidetrack the well to a more optimal updip location and utilize the existing wellbore to reduce costs and overall drilling time. The sidetrack is expected to be completed in late first quarter 2024, with the well brought on stream in early second quarter 2024.

In addition to the sidetrack of Arauca-15, which will be drilled to the originally planned Arauca-11 location, Parex also plans to drill a follow-up well, Arauca-12.

Updated three-year outlook

Parex's updated plan for 2024 through 2026 shows operational sustainability, as well as the ability to generate increased FFF.

The plan has been updated to include 2026, incorporate management's forecast of inflationary impacts and drilling results to date, as well as additional contingency related to well timing and overall field execution.

Highlights of the updated three-year plan, based on a constant $75-per-barrel Brent oil price outlook and forecast annual capital expenditures of $375-million to $450-million, include:

• Annual average production growth of approximately 5 per cent or higher per year;
• Reinvestment ratio of 54 to 66 per cent;
• Cumulative FFF of approximately $850-million or over $1.1-billion (Canadian) at current foreign exchange rates.

The plan continues to not include any associated capital and production from successful exploration follow-up that may occur over the outlook period.

Please note that an updated investor presentation has been posted to the company's website, which includes additional detail in relation to the updated three-year outlook.

Q4 2023 results -- conference call and video webcast

Parex will host a conference call and video webcast to discuss its Q4 2023 results on Friday, March 1, 2024. Additional details will be available on the company's website in due course.

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 is in Calgary, Canada, with an operating office in Bogota, Colombia. Parex shares trade on the Toronto Stock Exchange under the symbol PXT.

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