Parex _Corporate_Presentation _March_72017
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1Corporate Presentation | March 2017Corporate Presentation | March 2017 1
Solid Foundation.Building New Platforms.
www.parexresources.com | TSX:PXT | Corporate Presentation | March 2017
2Corporate Presentation | March 2017Corporate Presentation | March 2017 2
Operating results 2016 2017EProduction (boe/d) FY Average 29,715 34,000-36,000Capital Expenditures(1) (million) US $112 US $200-$225Exploration Drilling (# prospects) 7 14Appraisal Drilling (# wells) 4 15-20Development Drilling (# wells) 6 12Total (# wells) 17 41-46
Reserves (2016 year end)2P Reserves (Dec. 31)(2) 112 Mmboe2P Reserve Life Index (RLI) 10 years
Capital structure Net Working Capital(3) US $93 MMUS $175MM Credit Facility Undrawn – No DebtMarket Capitalization(3)(4) ~ CAD $2.5 BillionCommon Shares Outstanding (TSX listed)
• Basic(3) • Fully Diluted(5)
153 MM164 MM
CORPORATE SNAPSHOT
(1) Assuming $50/bbl Brent oil price in 2017 (2) Parex’ working interest, as per the independent reserve reports prepared by
GLJ Petroleum Consultants Ltd. effective December 31, 2016(3) As at December 31, 2016(4) Assuming CAD $16 share price (5) Diluted shares include the effects of common shares and in-the-money stock
options outstanding at December 31, 2016; closing stock price at the end of the period was CAD $16.90.
3Corporate Presentation | March 2017Corporate Presentation | March 2017 3
2017 GUIDANCE: CASH FLOW FUNDED GROWTH
AssumptionsOil (Brent) US $50/bblFFO netback(1) US $17/boeProduction 34,000-36,000 bopdCapital Expenditure US $200-225MMFunds Flow From Operations US $211-223MMYOY Production growth/share 16-21%Annualized CF/Basic Share US $1.42 (C$1.92)
Exploration Capex 14 wells 2,000-3,000 boe/d$85-90MM
Maintenance Capex 12 wells 30,000 boe/d$45-55MM
Appraisal Capex 15-20 wells 2,000-3,000 boe/d$70-80MM
CAPEX ALLOCATIO
N
(1) FFO netback is defined as Funds Flow From Operations divided by production for the period
4Corporate Presentation | March 2017Corporate Presentation | March 2017 4
Basin & Block H1/2017 H2/2017 Total WellsExploration Dev/Appraisal Exploration Dev/Appraisal
LLANOS LLA-34 5 4 2 8 19Capachos - 1 - 2 3Other Llanos 3 2 - - 5
MAGDALENA Aguas Blancas - 9 - 1-6 10-15VMM-11 2 - 1 - 3Other Magdalena - - 1 - 1
TOTAL 10 16 4 11-16 41-46
2017 DRILLING PROGRAM
5Corporate Presentation | March 2017Corporate Presentation | March 2017 5
2016FY Q4 2016 2017 Guidance$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
$55
$13.20 $18.74 $14 $17 $20
REAL
IZED
PRI
CE (U
SD/B
OE)
Brent $51.13
Brent $45.12
2017 TARGET CASH NETBACKS
Brent $45Brent $50
Brent $55
Differential ($6.29)
Royalties ($3.75)
Opex ($5.56)
Transportation ($11.13)
G&A/Finance ($4.23)Tax ($1.43)
Cash Netback
(excluding hedges)
* Cash netback is defined as funds flow from operations per bopd
($7.49)
($3.14)
($4.88)
($11.58)
($4.32)($0.51)
Cash Netback
PAREX CASH NETBACK*
6Corporate Presentation | March 2017Corporate Presentation | March 2017 6
Q1 2017 GUIDANCE 32,000 BOE/D
CONSISTENT GROWTH: PATH TO 50,000 BARRELS
2012 2013 2014 2015 2016 2017E -
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
11,407
15,854
22,526
27,43429,715
34,000-36,000
AVER
AGE
DAIL
Y PR
ODU
CTIO
N (B
OE/
D)
7Corporate Presentation | March 2017Corporate Presentation | March 2017 7
Proved + Probable + Possible
(mmboe)
Proved + Probable (mmboe)
Proved(mmboe)
Annual Production (mmboe)
2P Reserve Life Index based on annualized
Q4 Production
31-Dec-11 18 11 5 2 3 years
31-Dec-12 23 16 10 4 4 years
31-Dec-13 50 32 17 6 5 years
31-Dec-14 104 68 40 8 7 years
31-Dec-15 125 82 46 10 8 years
31-Dec-16 169 112 64 11 10 years
Gross 2P Development Locations (#)
FDC (USD MM)
FDC Per Boe (USD/boe)
31-Dec-15 102 318 $3.90
31-Dec-16 157 347 $3.10 99% OIL
*Per the independent reserve reports prepared by GLJ Petroleum Consultants Ltd. effective December 31 of the reported year
TRACK RECORD OF PROGRESSING RESERVES* FROM 3P TO CASH FLOW
SOLID FOUNDATION SUPPORTS GROWTH
8Corporate Presentation | March 2017Corporate Presentation | March 2017 8
CONVENTIONAL OIL RESERVES: INDUSTRY LEADING RESULTS
Total Company* 2016 3 Year
PDP 1P 2P 2PFD&A $/boe $6.47 $6.99 $3.40 $7.69Recycle Ratio (FD&A) 2.9x 2.7x 5.5x 2.5x
* Per the independent reserve reports prepared by GLJ Petroleum Consultants Ltd. effective Dec. 31, 2014; Dec. 31, 2015 and Dec. 31, 2016, including Future Development Cost. Recycle Ratio is calculated using Q4 2016 Funds Flow From Operations per barrel divided by annual F&D or FD&A as applicable, except for 3 Year which uses 3 year average Funds Flow From Operations.
2014 2015 2016$0
$3
$6
$9
$12
$15
$18
1 Year $/boe 3 Year $/boe2P
FD&
A (U
SD/B
OE)
9Corporate Presentation | March 2017Corporate Presentation | March 2017 9
CABRESTERO (100% WI, operator)• Akira: swing producer• Bacano-2 producing ~575 bopd
• Added 2 appraisal wells in H1/17
SOUTHERN LLANOS: FOUNDATION FOR GROWTH
LLA-34 (55% WI, Non-operated)
• Chiricoca-1 producing ~940 bopd • Drill 7 exploration wells and 12 development wells in 2017• Objective in 2017 to test extent of Jacana-Tigana trend to
South West
Explore core position, appraise & develop discoveries, and leverage Parex’ costs and exploration strengths
As per the independent reserve report prepared by GLJ Petroleum Consultants Ltd. effective Dec. 31/16
Faults GLJ 3P (YE 2016) New pads
LLA-34
Cabrestero
LLA-32
Chachalaca
Tilo
Tigana
Jacana
Akira
Tua
Tarotaro
Aruco
Max
Kananaskis
Calona
Chiricoca
Bacano
Carmentea
10Corporate Presentation | March 2017Corporate Presentation | March 2017 10
BLOCK LLA-34: TEST EXTENT & FIELD DEVELOPMENTField
(Parex’ WI)GLJ 3P Reserves
(MMBO)GLJ 2P Reserves
(MMBO)
YEAR END 2015 2016 2015 2016
Tigana Guadalupe 41 51 28 34
Jacana Guadalupe 14 45 5 30
Other LLA 34 41 33 27 23
LLA 34 TOTAL 96 129 60 87
Cabrestero 8 18 6 11
2017 Exploration
2017 Appraisal
2017 Drilled
2017 Dry Season Pads
Guadalupe Stratigraphic Edge
2015 GLJ 3P Outlines
2016 GLJ 3P OutlinesAs per the independent reserve report prepared by GLJ Petroleum Consultants Ltd. effective Dec. 31, 2016
Chiricoca
Sinsonte
Jacamar
Curucucu
Tigana
Tua
Akira
Tarotaro
Aruco
Bacano
Jacana
Cabrestero
LLA-34JACANA-11
JACANA SUR-1
JACANA SUR-2
JACANA-12
BACANO 3
11Corporate Presentation | March 2017Corporate Presentation | March 2017 11
Tigana Norte-1
Tigana Sur-1
Tigana Sur Oeste-1
Tigana Sur-2
Tigana-3
Tigana-4
Tilo-1
Tilo-2
Jacana-1
Jacana-2
Jacana-3
Jacana-4
Jacana-5
Jacana-60
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
1 3 5 7 9 11 13 15 17 19 21 23PRODUCING MONTHS
TIGANA GUAD TREND – PRODUCTION HISTORYPR
ODU
CIN
G DA
Y BO
PD
TREND AVERAGE
• IP Range: 500-3,500 bopd• Flat production profile • Low decline
12Corporate Presentation | March 2017Corporate Presentation | March 2017 12
SUR
CENTRO
NORTE
NORESTE
NORTE-1 EXPLORATION
CAPACHOS-2
CAPACHOS SUR-2
NORTESTE-1 EXPLORATION
GUADALUPE DEPTH STRUCTURE
2017 PLAN
• Drill 2 firm development wells (Capachos–2 and Capachos Sur–2) to earn 50% in the block.
• Disposal well.
• Development wells are targeting proven structural compartments that have produced ~2 mmbbls.
• Targeting ~34 API Oil in the Guadalupe Formation.
Future exploration targets at Capachos Norte and Capachos Noreste targeting the Guadalupe and Une formations.
CAPACHOS DEVELOPMENT AND EXPLORATION POTENTIAL
Future Exploration
2017 Development
Legacy Wells
13Corporate Presentation | March 2017Corporate Presentation | March 2017 13
MAGDALENA BASIN: NEXT GROWTH PLATFORM
(1) Farm-in on Ecopetrol
VIM-1
PLAYON
DE MARES
VMM-9
VMM-11
MORPHO
AGUAS BLANCAS
SOGAMOSO
2017 ACTIVITIES
Pipeline
Oil fields
Gas fields
AGUAS BLANCAS(1)
• Light oil opportunity• Drill 10-15 appraisal wells
PLAYON(1) • Boranda-1: drilled & cased;
ongoing testing
VIM-1• Interpreting 525 km2 of 3D
seismic • 1 exploration well
VMM-9• Environmental Impact
Assessment underway• Acquire 290 km2 of 3D Seismic
in 2017
VMM-11 • 3 exploration wells
De MARES(1) • Re-enter and test Coyote-1
14Corporate Presentation | March 2017Corporate Presentation | March 2017 14
2017 PROGRAM1. Identify oil in place; 35 API.
2. Develop production strategy.
3. Understanding waterflood potential.
DEFINITION OF SUCCESS1. Achieve Unstimulated IP Rates = 50-200 bopd
• Target stimulated rates 1.5x to 2x
2. Primary Recovery per well = 100 – 250 mbbls
3. Increase Recovery Factor from current primary of 10% to waterflood recovery > 25%
4. Demonstrate Development Phase Capital • Per well cost: $1.2 million • Fully loaded capex per producing well: $2.0 million
AGUAS BLANCAS OBJECTIVES
MUGROSA C RESERVOIR
570’
700’
AB-5
AB-9
Drilled 1964 Drilled 2016
15Corporate Presentation | March 2017Corporate Presentation | March 2017 15
*2P PRIMARY RECOVERY AT 10%
AGUAS BLANCAS: IDENTIFYING RESERVE* POTENTIAL
Footwall “B” Area
2P Area (ac)
2P OOIP (MMBO)
2P Reserves (MMBO)
YE 2015 789 33.5 2.8
YE 2016 832 34.7 3.0
TOTAL FIELD (Parex W.I.)
* Per the independent reserve report prepared by GLJ Petroleum Consultants Ltd. effective December 31, 2016
Footwall “C” Area
2P Area (ac)
2P OOIP (MMBO)
2P Reserves (MMBO)
YE 2015 0 0 0
YE 2016 847 32.7 3.1
Hanging Wall Area
2P Area (ac)
2P OOIP (MMBO)
2P Reserves (MMBO)
YE 2015 266 6.5 0.5
YE 2016 709 14.7 1.4
Potential Area (ac)
2P Area (ac)
2P OOIP (MMBO)
2P Reserves (MMBO)
YE 2015 5800 - 8400 1055 40 3.3
YE 2016 5800 - 8400 2388 82 7.5
Prospective Resource Area
AB-26
AB-9
AB-34AB-32
AB-14
AB-2
AB-5
AB-3AB-15
GLJ 2015 2P
GLJ 2016 2P
Legacy Wells
H2/2017 Location
H1/2017 Location
Drilled
Max Potential Area
Min Potential Area
16Corporate Presentation | March 2017Corporate Presentation | March 2017 16
PAREX’ TRANSPORTATION ALTERNATIVES: 1. Export Cargo – 60% Volume
• Truck/Pipeline – Tender process
2. Magdalena River - 35% Volume• Truck/Barge • Wellhead sale to Trafigura
3. Casanare Refinery - 5% volume
Multiple Evacuation Routes Surplus Take-away Capacity
TRANSPORTATION
Trucking
Parex Blocks
Pipeline
River
BARRANQUILLA
CARTAGENA
BARRANCABERMEJA
VASCONIA
MONTERREY
TERMINAL COVENAS
HIDROCASANARE
CUSIANA
17Corporate Presentation | March 2017Corporate Presentation | March 2017 17
SUMMARY: EXCEL AT WHAT WE DOCORE COMPETENCIES1. Identify and acquire large prospective resources.
2. Engage stakeholders.
3. Focus on being a low cost operator.
18Corporate Presentation | March 2017Corporate Presentation | March 2017 18
APPENDIX – BLOCK SUMMARY# Block Operated/Non-Operated Working Interest Partners Gross Acres(1) Basin
1 LLA-10 Operated 50% Gran Tierra 189,544 Llanos2 LLA-16 Operated 100% N/A 11,736 Llanos3 LLA-20 Operated 100% N/A 2,891 Llanos4 LLA-24 Operated 100% N/A 147,100 Llanos5 LLA-26 Operated 100% N/A 184,061 Llanos6 LLA-29 Operated 100% N/A 69,915 Llanos7 LLA-30 Operated 100% N/A 117,322 Llanos
8 LLA-32 Operated 70% Geopark & Pluspetrol 57,040 Llanos
9 LLA-34 Non-Operated 55% Geopark 68,382 Llanos10 LLA-40 Operated 50% Pluspetrol 83,465 Llanos11 LLA-57 Operated 100% N/A 52,285 Llanos12 Cabrestero Operated 100% N/A 29,562 Llanos13 Capachos(2) Operated 50% Ecopetrol 64,073 Llanos 14 Cebucan Operated 100% N/A 109,185 Llanos15 Cerrero Operated 100% N/A 83,903 Llanos 16 El Eden Operated 100% N/A 6,397 Llanos17 Los Ocarros Operated 100% N/A 31,066 Llanos18 VIM-1 Operated 100% N/A 223,651 Lower Magdalena19 Aguas Blancas(2) Operated 50% Ecopetrol 13,386 Middle Magdalena20 De Mares(2) Operated 50% Ecopetrol 174,387 Middle Magdalena21 Morpho(3) Operated 100% N/A 51,420 Middle Magdalena22 Playon(2) Operated 50% Ecopetrol 43,200 Middle Magdalena23 Sogamoso Operated 100% N/A 3,695 Middle Magdalena 24 VMM-9 Operated 100% N/A 152,412 Middle Magdalena25 VMM-11 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 relinquished.2) Working interests are subject to regulatory approval.3) Morpho is subject to a 4% Net Profit Interest.
19Corporate Presentation | March 2017Corporate Presentation | March 2017 19
APPENDIX – SUMMARY OF QUARTERLY RESULTS
Notes: • Values have been round up or down to the nearest dollar figure. • Net Debt is defined as Bank Debt + Convertible Denture Face Value ( C$ 85 million) - Working Capital. Current Borrowing limit of US $175 million ($200 million at March 31, 2016 and December 31, 2015; $175 million at December 31,
2014). convertible debentures with a face value of Cdn$85 million with a conversion price of Cdn$10.15 per share were fully redeemed on September 25, 2014.
(Unaudited Results) 2016 2015 2014
FY Q4 Q3 Q2 Q1 FY Q4 Q3 Q2 Q1 FY Q4 Q3 Q2 Q1
OPERATING
Production (thousands of boe/d) 29.7 31.1 29.8 29.1 28.9 27.4 28.6 27.4 27.0 26.7 22.5 26.5 25.2 19.9 18.4
Brent Price ($/bbl) 45 51 47 47 35 54 45 51 64 55 100 77 104 110 108Average realized prices, prior to hedging ($/boe) 38 45 40 40 27 47 37 45 56 49 88 60 94 105 103
Royalty ($/boe) 3 4 3 3 2 4 3 4 5 4 11 7 11 15 15Opex ($/boe) 5 6 5 5 5 7 7 7 8 8 11 11 12 11 10Transportation ($/boe) 12 11 12 12 12 14 13 13 14 16 17 17 18 16 18
Operating Netback ($/boe) 18 24 21 20 8 22 15 21 30 22 48 25 53 62 61Funds Flow Netback ($/boe) 13 19 16 13 5 13 12 5 20 14 37 21 39 46 45
FINANCIAL (millions of USD, except per share amounts)
Funds flow from operations 144 52 45 32 16 130 34 14 50 33 294 50 89 77 77Net income (loss) (46) (45) 6.8 (0.2) (8) (45) (4) (27) 2 (16) (109) (147) 17 11 10EBITDA 134 56 43 30 6 170 36 41 52 41 340 45 114 84 97Cash and cash equivalents 149 149 132 94 92 95 95 75 104 33 39 39 34 63 40Working Capital 93 93 118 98 80 77 77 63 90 10 3 3 45 31 37Net Debt (Surplus) (93) (93) (118) (98) (80) (77) (77) (63) (90) 30 32 32 (3) 110 52Capital Expenditures 112 67 26 14 5 126 24 38 37 27 297 84 57 95 62
Weighed average shares outstanding 152 153 153 152 152 145 151 150 144 135 120 135 126 111 109
TRADING STATISTICS (CAD) – PXT(based on intra-day trading)
High 18.22 18.22 17.40 14.61 11.96 11.55 11.55 10.57 11.10 9.24 15.49 12.88 15.49 13.25 9.50Low 7.74 14.86 12.00 10.50 7.74 5.97 9.07 7.15 8.05 5.97 6.07 6.07 11.98 9.33 6.57Close (end of period) 16.90 16.90 16.65 12.51 10.95 10.16 10.16 9.25 10.47 8.07 7.58 7.58 12.45 12.55 9.50Average daily volume (thousands) 693 679 547 678 970 821 729 742 906 907 872 1,140 982 808 553
20Corporate Presentation | March 2017Corporate Presentation | March 2017 20
COLOMBIA – CURRENT LAND BASE
Source: Divestco, February 2017
21Corporate Presentation | March 2017Corporate Presentation | March 2017 21
LEGAL ADVISORY HOW TO REACH USCertain statements in this document are “forward-looking statements”. Forward-looking statements are frequently characterized by words such as “prospective”, “plan”, “expect”, “project”, “intend”, “believe”, “anticipate”, “estimate”, “forecast”, or other similar words, or statements that certain events or conditions “may” or “will” occur. Forward-looking statements are not based on historical facts but rather on the expectations of management of the Company ("Management") regarding the Company's future growth, results of operations, production, plans for and results of drilling activity, business prospects and opportunities. Such forward-looking statements reflect Management's current beliefs and assumptions and are based on information currently available to Management. In particular, this document contains forward-looking statements regarding, but not limited to, the Company's expected production rates and Parex' drilling plans. Forward-looking statements involve significant known and unknown risks and uncertainties. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements including the risks associated with negotiating with foreign governments as well as country risk associated with conducting international activities, competition, the ability to generate revenue and exploit operating margins, capital resources, the use of certain technologies and materials, annual impairment tests, labour relations, insurance, damage from weather and other disasters, operating and maintenance risks and environmental risks, new information regarding reserves, changes in demand for and volatility of commodity prices of oil and natural gas, failure to receive all required regulatory approvals for acquisition, the risk that the acquisition may not be completed as contemplated or at all, legislative, regulatory and political changes, the risks discussed under "Risk Factors" in Parex' annual information form (“AIF”) and other factors, many of which are beyond the control of the Company. The risks outlined should not be construed as exhaustive. 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 be consistent with these forward-looking statements. These forward-looking statements are made as of the date hereof, and the Company assumes no obligation to update or revise them to reflect new events or circumstances, except as required by law.
Statements relating to “reserves” are by their nature forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions that the reserves described can be profitably produced in the future. With respect to forward-looking statements contained in this presentation, the Company has made assumptions regarding: future exchange rates; the price of oil and natural gas; the impact of increasing competition; conditions in general economic and financial markets; availability of equipment; availability of skilled labour; current technology; cash flow; commodity prices; production rates; timing and amount of capital expenditures; royalty rates; effects of regulation by governmental agencies; future operating costs; receipt of all required regulatory approvals for the acquisition; successful completion of the acquisition; and the Company's ability to obtain financing on acceptable terms. Management has included the above summary of assumptions and risks related to forward-looking information provided in this presentation in order to provide shareholders with a more complete perspective on the Company's future operations and such information may not be appropriate for other purposes.
This is not an offer to sell or a solicitation of an offer to purchase securities by Parex. Before making an investment, investors should refer to the Offering Documents for more complete information, including investment risks, fees and expenses and should also thoroughly and carefully review Parex' public disclosure documents available on SEDAR at www.sedar.com with their financial, legal and tax advisors to determine whether an investment is suitable for them.
PAREX RESOURCES INC.2700 Eighth Avenue Place, West Tower585 8th Av SW Calgary AB T2P 1G1 Canada
Tel: 403-265-4800Fax: 403-265-8216Email: [email protected] Website: www.parexresources.com
MIKE KRUCHTENVice President, Corporate Planning & Investor Relations
22Corporate Presentation | March 2017Corporate Presentation | March 2017 22