Focus on Shareholder Value - Parex Resources€¦ · Corporate Presentation | September 2018...


Operating results 2016 2017 2018E

Production (boe/d) FY Average 29,715 35,541 ~43,800

Capital Expenditures(1) - US$ million $112 $212 ~$325

Drilling Program (# wells) 17 38 55-60

Reserves (year-end)

2P Reserves (Dec. 31)(2) - Mmboe 112 162

2P Reserve Life Index - years 9.9 11.4

Capital structure – June 30, 2018

Net Working Capital - US$ million $66

US$100 MM Undrawn Credit Facility No Debt

Market Capitalization(3) ~C$2.9Bn

Common Shares Basic Outstanding (TSX listed)(3) 155.4 MM

CORPORATE SNAPSHOT

(1) Assuming US$73 Brent Oil Price in H2 2018(2) Parex’ working interest, as per the independent reserve report prepared by GLJ Petroleum Consultants effective Dec. 31, 2017(3) August 31, 2018 closing share price & basic shares outstanding See “Advisories” at the end of this presentation


EXPLORING REPOSITIONING STRATEGY(1)

❖Why now?

✓Strength of Portfolio

✓Track Record of Value Creation

❖Timing rationale

❖Possible outcomes (1) Refer to July 17, 2018 news release “Parex to Explore Potential Strategic Repositioning”(2) Per the independent reserve reports prepared by GLJ Petroleum Consultants Ltd. effective Dec. 31, 2017See advisories at the end of this presentation

Block (Parex’ WI)

Dec 31, 2017

GLJ 3P Reserves

(MMBOE)(2)

GLJ 2P Reserves

(MMBOE)(2)

Production (boe/d)

Jan. 1 – June 30 2018

LLA-32 4,492 3,590 1,710

LLA-34 202,205 134,657 31,287

Cabrestero 17,832 12,675 4,251

Total SoCa 224,529 150,922 37,248

Other Parex 16,405 11,314 4,364

Total Parex 240,934 162,236 41,612


WHY INVEST IN PAREX?

1. No debt and positive Q2’18 working capital exceeding US$66MM

2. High margins: Q2’18 Operating Netback US$45/boe @ Brent $75/bbl

3. Ability to grow within cash flow:

o 2017 Growth: production 19.6% yoy & RLI increased to 11 years from 10

o 2018 Production Growth Guidance: ~23% self-funded

4. Focused management - ability to grow within a single country Colombia

5. Delivering shareholder value


WHY COLOMBIA: IMPROVING LANDSCAPE

Pro-industry candidate elected

• OECD accession process underway

• Peace Negotiationso Peace reduces above-ground risks

oOpens up more accessible acreage

• Congressional Elections (March 11, 2018)o Generally strong pro-business mandate

• New Federal Administration President Iván Duque was sworn in August 7, 2018

Oil industry support from key ministries


-

200

400

600

800

1,000

1,200

2013 2014 2015 2016 2017

2P

RES

ERV

ES

(MB

OE/

MM

BA

SIC

SH

AR

ES)

2P RESERVES (DEBT ADJUSTED)

-

50

100

150

200

250

300

2013 2014 2015 2016 2017

DA

PS

(BO

E/M

M B

ASI

C S

HA

RES

)

PRODUCTION PER SHARE (DEBT ADJUSTED)

DELIVERING CONSISTENT SHAREHOLDER VALUE

15% 15%

34%

66%

7%15%

-16%-25%

40%

-11%

-30%

-15%

0%

15%

30%

45%

60%

75%

2013 2014 2015 2016 2017

TOTA

L R

ETU

RN

PXT VS. S&P/TSX ENERGY INDEX (TTEN)

PXT S&P/TSX Energy Index

$-

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

$-

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

2013 2014 2015 2016 2017B

REN

T P

RIC

E (U

SD/B

BL)

FUN

DS

FLO

W P

ER S

HA

RE

(USD

/BA

SIC

SH

AR

E)

FUNDS FLOW PER SHARE (BASIC)

FUNDS FLOW PER SHARE (USD/BASIC SHARE) BRENT (USD/BBL)

See advisories at the end of this presentation


Base assets (LLA-34/Cabrestero) growing production & exploration adds new resource

BUSINESS IS STRONG – PRODUCTION GROWTH AND FREE CASH FLOW

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

-

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

Mar

-13

Jun

-13

Sep

-13

Dec

-13

Mar

-14

Jun

-14

Sep

-14

Dec

-14

Mar

-15

Jun

-15

Sep

-15

Dec

-15

Mar

-16

Jun

-16

Sep

-16

Dec

-16

Mar

-17

Jun

-17

Sep

-17

Dec

-17

Mar

-18

Jun

-18

Sep

-18

PR

OD

UC

TIO

N (

BO

E/D

)

BO

E P

ER T

HO

USA

ND

SH

AR

ES Production Debt Adjusted Production Per Share

20

18

F


UPDATED 2018 GUIDANCE: CASH FLOW FUNDED GROWTH

Assumptions

H2 2018 Full Year

Oil (Brent) (US/bbl) $73 $72

FFO netback(1)(2)(3) (US/boe) $33 $32

Production - period average (Boe/d) 46,000 43,800

Capital expenditure (midpoint) (US$ MM) $165 $325

Funds flow from operations (US$ MM) $280(3) $510(3)

YOY Production growth/share ~22% ~23%

Maintenance Capex 14 wells 38,000 boe/d~ $90MM

Growth Capex41-46 wells ~5,000-6,000 boe/d~$235MM

CAPEX

ALLOCATION

(1) FFO netback is defined as Funds Flow From Operations per bopd.(2) Netback is a non-GAAP Measure.(3) Excluding $137.5 million one-time voluntary tax restructuring cost & decommissioning/environmental liabilities


PAREX CASH NETBACK(1)

$28.10 $31.62 $26 $29 $32 $35 $38

($9.25)

($4.10)($3.13)($5.76)

($8.10)

($13.01)

$-

$10

$20

$30

$40

$50

$60

$70

$80

$90

Q1 2018 Q2 2018

REA

LIZE

D P

RIC

E (U

SD/B

OE)

2018 H2 Guidance

2018 H2 TARGET CASH NETBACKS(2)

(1) Cash netbacks are a non-GAAP measure defined as funds flow from operations per barrel of oil (2) 2018 H2 target cash netbacks are based on production guidance mid-point excluding hedges and decommissioning & environmental liabilities.(3) Adjusted to exclude a $137.5 million one-time voluntary tax restructuring during the three months ended June 30, 2018See advisories at the end of this presentation

Cash Netback (3)

Royalties

Differential

TransportationOpex

Tax(3)

G&A, Finance & Misc. Costs

BRENT PRICE

$67.27$74.97

$60$65

$70$75

$80


Dec. 31, Proved + Probable+ Possible

Proved +Probable

Proved Annual Production

2P Reserve Life Index

Millions of Barrels of Oil EquivalentBased on Annualized

Q4 Production

2013 50 32 17 6 5 years2014 104 68 40 8 7 years2015 125 82 46 10 8 years2016 169 112 64 11 10 years

2017 241 162 96 13 11 years

TRACK RECORD OF PROGRESSING RESERVES* FROM 3P TO CASH FLOW

*Per the independent reserve reports prepared by GLJ Petroleum Consultants Ltd. effective December 31 of the reported year. Future development capital (FDC) included in the 2017 GLJ Report are: 1P US$302 mm, 2P US$432 mm & 3P US$537 mmSee advisories at the end of this presentation

SOLID FOUNDATION SUPPORTS GROWTH

241 Mmboe ~ 60,000 boe/d & 11 yr RLI


CONVENTIONAL OIL RESERVES GENERATE VALUE

Total Company - 2017YE ProvedProved + Probable

Proved+Probable+

Possible

FD&A USD/boe(1) $6.00 $4.71 $3.87

Recycle Ratio (FD&A)(1) 4.4x 5.6x 6.8x

After Tax NPV10% - CAD/sh(2) $12.81 $20.32 $28.92

Working Capital - CAD/Sh(3) $1.33 $1.33 $1.33

Total CAD/Sh(3) $14.14 $21.65 $30.25(1) Per the independent reserve reports prepared by GLJ Petroleum Consultants Ltd. effective December 31 of the reported year,

including Future Development Cost. Recycle Ratio is calculated using Q4 2017 Funds Flow From Operations per barrel divided byannual F&D or FD&A as applicable.

(2) Based on GLJ Petroleum Consultants Ltd. price forecast, as at January 1, 2018, which assumes $65.40/bbl over 2018-2022(3) Working Capital of US$163 million (CAD 205 million) and 154.7 million shares at December 31, 2017See advisories at the end of this presentation

(1)


KEY EVENTS H2 2018

• Llanos wellso Capachos: Andina

o CPO-11: Anacaona

o Cabrestero: 2 Bacano

o LLA-34: 14 Tigana-Jacana

• Magdalena wellso AB: complete, test 7 wells

o De Mares: Coyote – complete, test 3 wells

Capachos

CPO-11

LLA-32LLA-34

CabresteroDe Mares: 3 wells

Aguas Blancas: 7 wells

Lower Magdalena

MiddleMagdalena

Llanos Basin


2018 GUIDANCE: Q4 INCREASED FROM 46,000 TO 48,000 BOE/D

• Production Increase. New Guidance Q4 2018 of 48,000 boe/doQ4 2018: +2,000 bopd LLA-34

oQ1 2019: +1,000 bopd LLA-34 plus +1,000 bopd Cabrestero (Q4 2018 capex, on-stream in Q1 2019)

2019 corporate production target > 50,000 bopd

• Capital Expenditure increase $45MM. New Guidance FY $325MMoLLA-34: 10 wells

oCabrestero: 2 injectors + 4 producing wells

oBusiness Development: farm-in CPO-11 block in Llanos Basin

See advisories at the end of this presentation


SOCA: FOUNDATION FOR GROWTH

CABRESTERO (100% WI, operator)• Swing producer block

• Successful Bacano appraisal in 2017

• Drilled 6 wells of ~12 wells planned in 2018

LLA-34 (55% WI, Non-operated)• Producing ~64,000 boe/d gross (~35,200 boe/d net)• Tested extent of Jacana-Tigana trend to SW in 2017 • Drilled 15 of 28 wells planned in 2018

Explore core position, appraise & develop discoveries, and leverage Parex’ costs &

exploration strengths As per the independent reserve report prepared by GLJ Petroleum Consultants Ltd. effective Dec. 31/17

Faults GLJ 3P (2017YE) 2018 Exploration

2018 Drilled Well 2018 Planned Well

LLA-32

LLA-34Chachalaca

Tilo

Tigana

Jacana

Akira

Tua

Tarotaro

Aruco

Kananaskis

Calona

Chiricoca

Bacano

Curucucu

Jacamar

Cabrestero


0

5

10

15

20

25

30

35

40

2012 2013 2014 2015 2016 2017 Q1 2018 Q2 2018

MB

OE/

D

• Net production

• Net reserves last 5 years

0

50

100

150

200

250

2012 2013 2014 2015 2016 2017

RES

ERV

ES (

MM

BO

E)

1P 2P 3P

SOCA– FOUNDATION FOR FUTURE GROWTH

3-5 years of production growth

As per the independent reserve report prepared by GLJ Petroleum Consultants Ltd. effective Dec. 31/17

Faults GLJ 3P (2017YE) 2018 Exploration

2018 Drilled Well 2018 Planned Well

LLA-32

LLA-34Chachalaca

Tilo

Tigana

Jacana

Akira

Tua

Tarotaro

Aruco

Kananaskis

Calona

Chiricoca

Bacano

Curucucu

Jacamar

Cabrestero

*Per the independent reserve reports prepared by GLJ Petroleum Consultants Ltd. effective December 31 of the reported year. See advisories at the end of this presentation


SOCA: WORLD CLASS DEVELOPMENT

As per the independent reserve report prepared by GLJ Petroleum Consultants Ltd. effective Dec. 31, 2017See advisories at the end of this presentation

Block (Parex’ WI)

Dec 31, 2017

GLJ 3P Reserves(MMBOE)

GLJ 2P Reserves(MMBOE)

LLA-32 4,492 3,590

LLA-34 202,205 134,657

Cabrestero 17,832 12,675

Total SoCa 224,529 150,922

Jan. 1 - June 30, 2018

Production(boe/d)

Brent$/bbl

Op. Netback$/boe

LLA-32 1,710

LLA-34 31,287

Cabrestero 4,251

Total Soca 37,248 $71.12 $43 CabresteroAkira

Bacano

Jacana

2017 GLJ 3P Outline2017 GLJ 2P Outline

Jacamar

LLA-34

Curucucu

T-1

TSO-5

TSO-4

20

21

22

Tigui Sur 1

TSO-8

B-7

Tigui 1

TSO-6

T-2T-4

T-3B-6

Tigana

T-5

Exploration Appraisal/Dev Drilled Potential Stratigraphic Edge


ANDINA-1

CAPACHOS-2

CAPACHOS SUR-2

GUADALUPE DEPTH STRUCTURECAPACHOS DEVELOPMENT AND EXPLORATION POTENTIAL

• Drilled 2 wells to earn 50% WI in the blocko Capachos-2 restricted production of 1,000 bopd

o Capachos Sur-2 water disposal well

• Test 3 prospective zones in Andina-1 exploration well

• Prepare to drill Andina Norte-1 exploration well

• Construction of gas processing facility in Q4’18

Future exploration

Development well

Legacy wells

Parex wells

ANDINA NORTE-1


CAPACHOS: ANDINA-1 WELL

• Prospective Zones oMirador

o Guadalupe

o Une

• Currently testing Une

• Guadalupe test upcoming

• Andina Norte prospect will test the next fault compartment

Andina-1 Andina Norte Prospect

Mirador

Guadalupe

Une


CPO-11: EXPANDING LLANOS INVENTORY

• Farm-in: drill 2 wells & acquire 2D seismic to earn 50% WI

• Plan to drill Anacaona exploration prospect in Q4 2018

• Apply key learnings from Cabrestero & LLA-34

Anacaona

Montuno

Cabrestero

CPO-11

LLA-34LLA-32

Rubiales


MAGDALENA BASIN: NEXT GROWTH PLATFORM

(1) Farm-in on EcopetrolSee advisories at the end of this presentation

Barranquilla

Cartagena

Barrancabermeja

Vasconia

Monterrey

Terminal Covenas

Hidrocasanare

Cusiana

Trucking

Parex Blocks

Pipeline

River

Ayacucho

Jaguey

GuaduasLerida

VIM-1

PLAYON

DE MARES

VMM-9

VMM-11

AGUAS BLANCAS

De MARES(1)

• Tested Coyote-1, produced oil• Evaluate follow-up drilling

locations• 2 wells drilled in 2018

VIM-1• Identifying gas prospects from 3D

Seismic data using AVO• Drill 2 exploration wells

AGUAS BLANCAS(1)

• Light oil opportunity• Drill 7-10 wells

VMM-9• Acquire 400 km2 of 3D Seismic


TIGHT OIL – NEXT GROWTH AREA?

Size of the Provincia Sub Basin

WCSB Unconventional& Tight Oil Plays

Provincia Sub-Basin

Existing oil wells

PXT appraisal

Coyote 1/2/3

Aguas Blancas

De Mares Block

Potentially material plays for Parex


SUMMARY OF THEAGUAS BLANCAS OPPORTUNITY

1. Drill 7 development wells: extend water flood pattern - Complete

2. Stimulate 2 wells to increase productivity

3. Drill 3 appraisal wells: test southern extent & identify oil in place

.

West Area (FW)

East Area (HW)

Phase II Dev. Area

D/E Compartment Appraisal

Existing Injector

Existing Producer

New Water Injector

New ProducerFuture Pad

Existing Standing Well

Waterflood Pattern


VIM-1: TARGET GAS

• Proven play on Porquero Formation sandstone reservoirs

• Applying 3D seismic Amplitude Variation with Offset (AVO) has achieved a very high success rate identifying gas sweet spots

20 km

La Creciente

La Belleza Prospect

Esperanza

Existing facilitiesGas Fields

Gas pipelines


2018 SUMMARY

1. Self-funded industry leading production growth

2. Grow & develop Southern Casanare blocks

3. Prove play concepts in Middle/Lower Magdalena Basins

4. Expand portfolio through Business Development


APPENDIX – BLOCK SUMMARY# Block Operated/Non-Operated Working Interest Partners Gross Acres(1) Basin1 LLA-10 (2) Operated 50% Gran Tierra 189,544 Llanos

2 LLA-16 Operated 100% N/A 10,057 Llanos




6 LLA-32 Operated 87.5% Geopark 57,040 Llanos

7 LLA-34 Non-operated 55% Geopark 68,382 Llanos

8 LLA-40(3) Operated 100% N/A 82,422 Llanos

9 Balay Non-operated 10% Perenco 4,500 Llanos

10 Cabrestero Operated 100% N/A 7,605 Llanos

11 Capachos(2) Operated 50% Ecopetrol 64,073 Llanos

12 CPO-11(2) Operated(2) 50% Hupecol Meta CCL 570,276 Llanos

13 Los Ocarros Operated 100% N/A 31,066 Llanos

14 VIM-1 Operated 100% N/A 223,651 Lower Magdalena

15 Aguas Blancas(2) Operated 50% Ecopetrol 13,386 Middle Magdalena

16 De Mares(2) Operated 50% Ecopetrol 174,387 Middle Magdalena

17 Morpho(3) Operated 100% N/A 51,420 Middle Magdalena

18 Playon(2) Operated 50% Ecopetrol 43,200 Middle Magdalena

19 Sogamoso Operated 100% N/A 3,695 Middle Magdalena

20 VMM-9 Operated 100% N/A 152,412 Middle Magdalena

21 VMM-11(4) Operated 100% N/A 116,826 Middle Magdalena

1) Exploration properties deemed non-commercial will be relinquished in due course. Accordingly, the gross acres described above may decrease as non-commercial lands are relinquished2) Lands are subject to farm-in agreement earning terms and/or regulatory approval 3) Morpho is subject to a 4% Net Profit Interest4) The Company plans to relinquish VMM-11 in 2018.


APPENDIX – SUMMARY OF QUARTERLY RESULTS(1)

(1) Values are round up or down to the nearest dollar figure (2) 2017 transportation expense on a gross dollar and per boe basis were restated as a result of the Company adopting IFRS 15(3) Including a $ 137.5 million voluntary tax, Q2 2018 adjusted cash netback was $31.62 and adjusted funds flow from operations was $122 million (4) EBITDA is defined as is defined as net income (loss) + interest+ taxes + DDA + Impairment (5) Net Debt is defined as Bank Debt - Working Capital

(Unaudited Results) 2018 2017 2016

Q2 Q1 FY Q4 Q3 Q2 Q1 FY Q4 Q3 Q2 Q1

OPERATING

Production (thousands of boe/d) 42.6 40.6 35.5 39.0 36.2 34.3 32.6 29.7 31.1 29.8 29.1 28.9

Brent Price ($/bbl) 75 67 55 62 52 51 55 45 51 47 47 35

Average realized prices, prior to hedging ($/boe) 62 56 43 50 41 40 42 38 45 40 40 27

Royalties ($/boe) 8 7 5 6 4 4 4 3 4 3 3 2

Opex ($/boe) 6 5 5 5 6 5 5 5 6 5 5 5

Transportation ($/boe)(1) 3 4 4 4 4 4 5 12 11 12 12 12

Operating Netback ($/boe) 45 39 29 35 28 27 28 18 24 21 20 8

Funds Flow Netback ($/boe)(1) (4) 28 22 26 20 17 23 13 19 16 13 5

FINANCIAL(millions of USD, except per share amounts)

Funds flow from operations(2)

(16) 101 280 94 66 52 68 144 52 45 32 16

Net income (loss) 189 72 155 56 56 4 40 (46) (45) 6.8 (0.2) (8)

EBITDA(3)

392 123 314 113 73 59 71 134 56 43 30 6

Cash and cash equivalents 323 295 235 235 196 203 185 149 149 132 94 92

Working Capital 66 206 163 163 140 128 131 93 93 118 98 80

Net Debt (Surplus)(4) (66) (206) (163) (163) (140) (128) (131) (93) (93) (118) (98) (80)

Capital Expenditures 101 58 212 66 51 59 36 112 67 26 14 5

Bank Credit Facility 100 100 100 100 100 100 175 175 175 175 175 200

Weighted average shares outstanding 156 155 154 155 155 154 153 152 153 153 152 152

TRADING STATISTICS (CAD) – PXT(based on intra-day trading)

Share Price

High 25.70 19.87 18.46 18.46 16.14 18.19 17.73 18.22 18.22 17.40 14.61 11.96

Low 17.52 16.82 12.19 14.64 12.19 13.59 14.64 7.74 14.86 12.00 10.50 7.74

Close (end of period) 24.82 18.12 18.16 18.16 15.05 14.75 16.95 16.90 16.90 16.65 12.51 10.95

Average daily volume (thousands) 1,034 983 762 790 847 606 808 693 679 547 678 970


COLOMBIA – CURRENT LAND BASE

Source: ArcGIS, Parex Resources – August 2018


ADVISORIES HOW TO REACH USThis presentation is provided for informational purposes only as of September 10, 2018 is not complete,and may not contain certain material information about Parex Resources Inc. ("Parex" or the"Company"), including important disclosures and risk factors associated with an investment in Parex.This presentation does not take into account the particular investment objectives or financialcircumstances of any specific person who may receive it and does not constitute an offer to sell or asolicitation of an offer to buy any security in Canada, the United States or any other jurisdiction. Thecontents of this presentation have not been approved or disapproved by any securities commission orregulatory authority in Canada, the United Sates or any other jurisdiction, and Parex expressly disclaimsany duty on Parex to make disclosure or any filings with any securities commission or regulatoryauthority, beyond that imposed by applicable laws.

Forward-Looking Statements and FOFI

Certain information regarding Parex set forth in this document contains forward-looking statements thatinvolve 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 similarwords, or statements that certain events or conditions "may" or "will" occur are intended to identifyforward-looking statements. Such statements represent Parex' internal projections, estimates or beliefsconcerning, among other things, future growth, results of operations, production, future capital andother expenditures (including the amount, nature and sources of funding thereof), plans for and resultsof drilling activity, business prospects and opportunities. These statements are only predictions andactual events or results may differ materially. Although the Company’s management believes that theexpectations reflected in the forward-looking statements are reasonable, it cannot guarantee futureresults, levels of activity, performance or achievement since such expectations are inherently subject tosignificant business, economic, competitive, political and social uncertainties and contingencies. Manyfactors could cause Parex' actual results to differ materially from those expressed or implied in anyforward-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; theCompany's vision, strategy and values; Parex' estimated 2018 capital budgets, including the expectedallocation of such budget to the number of wells and capital expenditures for each ofdevelopment/appraisal in existing fields, exploration, appraisal and maintenance;

PAREX RESOURCES INC.

2700 Eighth Avenue Place, West Tower

585 8th Avenue SW Calgary

AB T2P 1G1 Canada

Tel: 403-265-4800

Fax: 403-265-8216

Email: [email protected]

Website: www.parexresources.com

MIKE KRUCHTEN

Vice President, Capital Markets & Corporate Planning


ADVISORIESthe Company's forecasted 2018 and 2019 average production; the Company's estimated average daily production for full year 2018 & full year 2019; the Company's planned capital program, includinganticipated amounts focused on existing discoveries and the appraisal programs and the timing of drilling key exploration prospects, seismic programs and development drilling; anticipated cash flow, cash flowper share, funds flow from operations netback, capital expenditures, percentage of cash flow growth, cash netbacks, and funds flow from operations for 2018; the Company's exploration, development andappraisal program for 2018 including anticipated number and type of wells, drill ready prospects, the focus of development/appraisal drilling and the potential for drilling of additional follow-up appraisal wellsand facilities in 2018; exploration prospects; the Company's exploration schedule; the Company's drilling plans and production capability/potential; anticipated drilling locations, including the Company'sdelineation and drilling plans; the Company's plans to target additional growth opportunities; the Company's future plans for its business, including plans to complete further acquisitions and increaseproduction; financial and business prospects and financial outlook; and activities to be undertaken in various areas. Statements relating to "reserves" or "resources" are forward-looking statements, as theyinvolve the implied assessment, based on estimates and assumptions that the reserves and resources described exist in the quantities predicted or estimated and can be profitably produced in the future.

• These forward-looking statements are subject to numerous risks and uncertainties, including but not limited to, the impact of general economic conditions in Canada and Colombia; industry conditions includingchanges 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 availabilityof qualified personnel; the results of exploration and development drilling and related activities; risks related to obtaining required approvals of regulatory authorities, in Canada and Colombia and partner andcommunity approvals in Colombia; 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, tax rates and/or incentive programs relating to the oil industry; changes to pipeline capacity; ability to accesssufficient capital from internal and external sources; failure of counterparties to perform under the terms of their contracts; risk that Parex’ evaluation of its existing portfolio of assets and exploration anddevelopment opportunities is not consistent with its expectation’s; that production test results may not be indicative of long-term performance or ultimate recovery and other factors, many of which are beyondthe 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' operations and financial resultsare 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 beconsistent with these forward-looking statements. With respect to forward-looking statements contained in this document, Parex has made assumptions regarding, among other things: current commodityprices and royalty regimes; availability of skilled labour; timing and amount of capital expenditures; future exchange rates; the price of oil, including the anticipated Brent oil price; the impact of increasingcompetition; conditions in general economic and financial markets; availability of drilling and related equipment; effects of regulation by governmental agencies; receipt of partner, regulatory and communityapprovals; royalty rates; future operating costs; effects of regulation by governmental agencies; uninterrupted access to areas of Parex' operations and infrastructure; recoverability of reserves and futureproduction rates; the status of litigation; timing of drilling and completion of wells; on-stream timing of production from successful exploration wells; operational performance of non-operated producing fields;pipeline capacity; that Parex 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 Parex'conduct and results of operations will be consistent with its expectations; that Parex will have the ability to develop it's oil and gas properties in the manner currently contemplated; current or, where applicable,proposed industry conditions, laws and regulations will continue in effect or as anticipated as described herein; that the estimates of Parex' reserves volumes and the assumptions related thereto (includingcommodity prices and development costs) are accurate in all material respects; that Parex will 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; 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 onParex' current and future operations and such information may not be appropriate for other purposes. Parex' actual results, performance or achievement could differ materially from those expressed in, orimplied 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, whatbenefits 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 asa result of new information, future events or results or otherwise, other than as required by applicable securities laws. The forward-looking statements contained in this presentation are expressly qualified bythis cautionary statement.


ADVISORIES• This document also contains a financial outlook, in particular the information set forth on slides 2, 4, 7-9, & 13. Such financial outlook has been prepared by Parex' management to provide an outlook of the

Company's activities and results. The financial outlook has been prepared based on a number of assumptions including the assumptions discussed above and assumptions with respect to the costs andexpenditures to be incurred by the Company, capital equipment and operating costs, foreign exchange rates, taxation rates for the Company, general and administrative expenses and the prices to be paid forthe Company's production. Management does not have firm commitments for all of the costs, expenditures, prices or other financial assumptions used to prepare the financial outlook or assurance that suchoperating results will be achieved and, accordingly, the complete financial effects of all of those costs, expenditures, prices and operating results are not objectively determinable. The actual results ofoperations of the Company and the resulting financial results will likely vary from the amounts set forth in the analysis presented in this presentation, and such variation may be material. The Company and itsmanagement believe that the financial outlook has been prepared on a reasonable basis, reflecting the best estimates and judgments, and represent, to the best of management's knowledge and opinion,Parex's expected expenditures and results of operations. However, because this information is highly subjective and subject to numerous risks including the risks discussed above, it should not be relied on asnecessarily indicative of future results. Except as required by applicable securities laws, Parex undertakes no obligation to update such financial outlook.

Oil and Gas Information

• The estimates of Parex' December 31, 2017 reserves set forth in this presentation have been prepared by GLJ Petroleum Consultants Ltd. ("GLJ") as of December 31, 2017 with a preparation date of February2, 2018 (the "GLJ 2017 Report") in accordance with National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities ("NI 51-101") and the Canadian Oil and Gas Evaluations Handbook (the"COGEH") and using GLJ's forecast prices and costs as at January 1, 2018. The estimates of Parex' December 31, 2016 reserves set forth in this presentation have been prepared by GLJ as of December 31, 2016with a preparation date of February 6, 2017 in accordance with NI 51-101 and the COGEH and using GLJ's forecast prices and costs as at January 1, 2017. The estimates of Parex' December 31, 2015 reservesset forth in this presentation have been prepared by GLJ as of December 31, 2015 with a preparation date of February 5, 2016 in accordance with NI 51-101 and the COGEH and using GLJ's forecast prices andcosts as at January 1, 2016. The estimates of Parex' December 31, 2014 reserves set forth in this presentation have been prepared by GLJ as of December 31, 2014 with a preparation date of February 13, 2015in accordance with NI 51-101 and the COGEH and using GLJ's forecast prices and costs as at January 1, 2015. The estimates of Parex' December 31, 2013 reserves set forth in this presentation have beenprepared by GLJ as of December 31, 2013 with a preparation date of February 20, 2014 in accordance with NI 51-101 and the COGEH and using GLJ's forecast prices and costs as at January 1, 2014.

• “Proved" or "1P" 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 provedreserves.

• "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 thesum 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 thesum 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.

• "2P" means Proved Plus Probable reserves.

• "3P" means Proved Plus Probable Plus Possible reserves.

• Estimates of the net present value of the future net revenue from Parex' reserves do not represent the fair market value of Parex' reserves. The estimates of reserves and future net revenue from individualproperties or wells may not reflect the same confidence level as estimates of reserves and future net revenue for all properties and wells, due to the effects of aggregation.


ADVISORIES• This presentation contains certain oil and gas metrics, including F&D, FD&A, FD&A/boe, reserves life index (or RLI), operating netbacks, cash netbacks, funds flow from operations netback, CAGR, and recycle

ratios, which do not have standardized meanings or standard methods of calculation and therefore such measures may not be comparable to similar measures used by other companies and should not beused to make comparisons. Such metrics have been included herein to provide readers with additional measures to evaluate the Company's performance; however, such measures are not reliable indicators ofthe future performance of the Company and future performance may not compare to the performance in previous periods and therefore such metrics should not be unduly relied upon. Management usesthese oil and gas metrics for its own performance measurements and to provide investors with measures to compare the Company's operations over time.

• Readers are cautioned that the information provided by these metrics, or that can be derived from the metrics presented herein, should not be relied upon for investment or other purposes. A summary of thecalculations of such metrics are as follows:

o FD&A costs represent the costs of property acquisition, exploration, and development incurred. The aggregate of the exploration and development costs incurred in the most recent financial year andthe change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserves additions for that year.

o FD&A costs are calculated as capital expenditures plus change in F&D costs. FD&A per boe is calculated as FD&A costs divided by reserves additions for the applicable period.

o Reserves life index is calculated as proved plus probable reserves divided by annualized fourth quarter production.

o Recycle ratio is calculated as cash netback per boe (or Funds Flow From Operations per boe) divided by F&D or FD&A, as applicable.

o Cash netback per boe (or Funds Flow From Operations netback per boe) is calculated as Funds Flow From Operations divided by production for the period.

o Operating netback is calculated as oil & gas revenue less expenses (royalties, production and transportation) divided by production for the period.

o CAGR is calculated as:

i. (2017 debt adjusted production per share divided by 2013 debt adjusted production per share)1/4 – 1, and

ii. (2017 2P reserves per share divided by 2013 2P reserves per share)1/4 - 1

• "BOEs" may be misleading, particularly if used in isolation. A BOE conversion ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent (6 mcf: 1 bbl) is based on an energy equivalencyconversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to naturalgas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

• All of Parex’ crude oil reserves disclosed herein are located in Colombia. The Company has light, medium and heavy crude oil and natural gas liquids product types. The recovery and reserve estimates ofreserves provided in this document are estimates only, and there is no guarantee that the estimated reserves will be recovered. Actual reserves may eventually prove to be greater than, or less than, theestimates provided herein. All evaluations and reviews of future net revenue contained in GLJ's reports are stated prior to any provision for interest costs or general and administrative costs and after thededuction of royalties, development costs, production costs, well abandonment costs and estimated future capital expenditures for wells to which reserves have been assigned.

• Certain information in this document may constitute "analogous information" as defined in NI 51-101. Such information includes production estimates, drilling results, test rates, reserves estimates and otherinformation retrieved from other publicly available sources. Management of Parex believes the information is relevant as it may help to define the reservoir characteristics and production profile of lands inwhich Parex may hold an interest. Parex is unable to confirm that the analogous information was prepared by a qualified reserves evaluator or auditor and is unable to confirm that the analogous information


ADVISORIES

was prepared in accordance with NI 51-101. Such information is not an estimate of the production, reserves or resources attributable to lands held or to be held by Parex and there is no certainty that theproduction, reserves or resources data and economic information for the lands held or to be held by Parex will be similar to the information presented herein. The reader is cautioned that the data relied uponby Parex may be in error and/or may not be analogous to such lands held or to be held by Parex.

• Certain other information contained in this presentation has been prepared by third-party sources, which information has not been independently audited or verified by Parex. No representation or warranty,express or implied, is made by Parex as to the accuracy or completeness of the information contained in this document, and nothing contained in this presentation is, or shall be relied upon as, a promise orrepresentation by Parex.

• This presentation contains references to type well production and economics, which are derived, at least in part, from available information respecting the well economics of other companies and, as such,there is no guarantee that Parex will achieve the stated or similar results, capital costs and return costs representative per well.

• References in this presentation to initial production test rates, initial "flow" rates, initial flow testing, and "peak" rates are useful in confirming the presence of hydrocarbons, however such rates are notdeterminative of the rates at which such wells will commence production and decline thereafter and are not indicative of long term performance or of ultimate recovery. While encouraging, investors arecautioned not to place reliance on such rates in calculating the aggregate production for Parex. Parex has not conducted a pressure transient analysis or well-test interpretation on the wells referenced in thispresentation. As such, all data should be considered to be preliminary until such analysis or interpretation has been done.

Financial Matters

• The Company discloses several financial measures that do not have any standardized meaning prescribed under International Financial Reporting Standards ("IFRS"). These financial measures includeoperating netbacks, cash netbacks, funds flow netbacks, funds flow per share, free cashflow, and funds flow from operations. Management believes that these financial measures are useful supplementalinformation to analyze operating performance and provide an indication of the results generated by the Company’s principal business activities. Investors should be cautioned that these measures should notbe construed as an alternative to net income or other measures of financial performance as determined in accordance with IFRS. Parex’s method of calculating these measures may differ from othercompanies, and accordingly, they may not be comparable to similar measures used by other companies. Please see the Company’s most recent Management’s Discussion and Analysis, which is available atwww.sedar.com for additional information about these financial measures.

Focus on Shareholder Value - Parex Resources€¦ · Corporate Presentation | September 2018...

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