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Press release from Marketwire

Parex Resources Announces Third Quarter Results

Wednesday, November 09, 2011

Parex Resources Announces Third Quarter Results16:38 EST Wednesday, November 09, 2011CALGARY, ALBERTA--(Marketwire - Nov. 9, 2011) - NOT FOR DISTRIBUTION TO US NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES Parex Resources Inc. ("Parex" or the "Company") (TSX:PXT), a company focused on oil exploration and production in Colombia and Trinidad, is pleased to report its unaudited interim financial and operating results for the three months ended September 30, 2011 ("Third Quarter"). Copies of the Company's consolidated financial statements and the related Management's Discussion and Analysis ("MD&A") have been filed with Canadian Securities Regulatory Authorities and will be made available under the Company's profile at www.sedar.com and on the Company's website at www.parexresources.com. All amounts below are in United States dollars unless otherwise stated.Third Quarter highlights include:Generated funds flow from operations of $31.8 million ($0.29 per share basic); Achieved quarterly oil production of 7,031 barrels of oil per day ("bopd"), a 334% increase over the second quarter of 2011; Realized sales price in Colombia was $97.64 per barrel generating an operating netback of approximately $67 per barrel. Throughout the Third Quarter the Company marketed a significant portion of oil production with a Brent related price realizing an approximate $8 per barrel premium to WTI on average for the Company's Third Quarter oil sales; Drilled four oil wells in Colombia (3.5 net) including light oil discoveries in the Sulawesi-1 well and in the Las Maracas-2 side-track well; Signed Llanos basin El Eden Block farm-in; Spud Cribo-1, the Company's first onshore Trinidad Central Range Shallow Block well; Graduated from the TSX Venture Exchange to the Toronto Stock Exchange effective October 5, 2011; and Maintained a strong balance sheet with cash and cash equivalents of $93.3 million and working capital of $77.9 million at September 30, 2011. Third Quarter Financial SummarySales volumes, net working interest before royalty, for the Third Quarter of 2011 averaged 6,058 bopd. During the Third Quarter of 2011 the realized sales price in Colombia was $97.64 per barrel generating an operating netback of $67.40 per barrel. During the Third Quarter Parex continued to market a significant portion of its crude oil production pursuant to contracts with Brent benchmark pricing. Not included in Third Quarter sales was the net increase in crude oil inventory of approximately 89,500 barrels of oil.For the Third Quarter of 2011, the Company's net income was $14.8 million ($0.14 per share basic) and funds flow from operations was $31.8 million ($0.29 per share basic).The Company's capital expenditures for Third Quarter were $54.4 million, with $49.8 million invested in Colombia and $4.6 million invested in Trinidad. Capital expenditures were funded from available cash and funds flow from operations.Three Months ended Sept 30,Nine Months ended Sep 30,(Unaudited)2011201020112010OperationalAverage daily productionOil (bopd)7,031-3,324-Natural gas (boe/d)-11-12Total (boe/d)7,031113,32412Average daily salesOil (bopd)6,058-2,795-Natural gas (boe/d)-11-12Total (boe/d)6,058112,79512Operating netback ($/boe)Oil and natural gas sales97.6431.1398.3030.62Royalties(8.04)-(8.33)-Net revenue89.6031.1389.9730.62Production expense(6.15)(22.70)(6.11)(19.45)Transportation expense(16.05)-(16.56)-Operating netback67.408.4367.3011.17Financial($000s except per share amounts)Oil and natural gas sales54,4293275,001100Net income (loss)14,823(4,297)11,158(12,319)Per share – basic0.14(0.07)0.13(0.19)Per share – diluted0.13(0.07)0.12(0.19)Funds flow from (used in) operations31,814(3,555)35,109(9,497)Per share – basic0.29(0.06)0.40(0.15)Per share – diluted0.27(0.06)0.38(0.15)Capital expenditureExploration & Development - Colombia49,7888,95386,27817,726Exploration & Development - Trinidad4,5913,6639,51811,966Corporate Acquisition - cash--252,987-Total assets619,240128,503619,240128,503Working capital surplus77,89057,18877,89057,188Convertible debentures57,226-57,226- Long-term debt- - - -Total net debt (surplus)(20,664) (57,188 )(20,664) (57,188 )Outstanding shares (end of period) (000s) Basic108,215 63,870108,215 63,870 Diluted122,295 68,032122,295 68,032 Colombia Update Third Quarter and recent operational results were previously disclosed in our release dated October 25, 2011. Since October 26, 2011 oil production has averaged approximately 11,000 bopd. A service rig is being mobilized to the Kona Norte-2 well to complete it as a water disposal well. Until Kona Norte-2 is on-line, Kona field production may be restricted due to water disposal constraints. Prior to the end of December 2011, Parex expects that Kona-7 and Kona-9 wells will be drilled and producing. Although the Company is building contingency plans for possible oil trucking disruptions around the December holiday season, oil sales in the Llanos Basin are typically restricted over this two week period.The Sulawesi-3 well was spud on August 29, 2011 as a follow-up appraisal well to the north of Sulawesi-1 and the drilling rig was released on September 30, 2011. The primary objectives of Sulawesi-3 well were the Mirador Formation and the lower C7 Formation as seen in the Sulawesi-1 well. As expected, Sulawesi-3 well logs indicated that the upper C7 Formation was faulted out and not present in Sulewasi-3. The Mirador and the lower C7 formations in Sulawesi-3 came in lower than expected, and as a result tested light oil with a high water cut and have been suspended due to lack of water handling in the well test facility. Currently, the Sulawesi-1 well is producing approximately 1,500 bopd of oil with a water cut of less than one percent. The Company intends to drill a third well into the prospect to the south of Sulawesi-1 during the fourth quarter of 2011, to be coordinated with the facility expansion.On October 9, 2011, Supremo-2 was spud to test the potential up-dip of the Supremo-1 well. The drilling rig was released on October 31, 2011. Parex expects to have Supremo-2 test results by the end of December 2011. Trinidad Update On the Central Range Shallow Block (50 percent working interest), the Cribo-1 well was spud on July 22, 2011 and was rig released on September 25, 2011. Parex expects a service rig to start completion and testing operations during November, 2011.In order to accelerate Parex' ongoing onshore Trinidad exploration activity, the Company signed a contract with Tuscany International Drilling Inc. to import to Trinidad two modern and fit for purpose drilling rigs. Both rigs are currently being shipped to Trinidad and subject to receiving regulatory approvals, will begin operations prior to year end 2011. Parex expects that the two new rigs will be used to spud a second Central Range Block ("CRB") Shallow exploration well and drill the Firecrown side track well on the Moruga Block. The Company plans to spud its first CRB Deep well following drilling operations on the Moruga Block. 2011 Guidance The Company's 2011 exit rate production guidance is 14,000 bopd. Critical to achieving our exit rate guidance will be: the production timing of the Kona-7 and Kona-9 wells in 2011; completion of the Kona Norte-2 water disposal well and minimizing the impact of December holiday season trucking disruptions.Following signing a contract to immediately mobilize two rigs to Trinidad, Parex' 2011 capital program for Colombia and Trinidad is expected to be approximately $140-$150 million, excluding acquisitions. Parex expects to fund the remainder of the 2011 capital program with funds flow from operations with any remaining requirements from existing working capital.Parex expects to release its 2012 guidance in early December, 2011.Conference Call InformationParex will host a conference call to discuss these results on Thursday November 10, 2011 beginning at 10:30 am MST (12:30 pm EST). Media, analysts and investors wishing to participate in the call can access it by calling 1-866-696-5910, pass code: 1520456.The live audio http://www.bellwebcasting.ca/audience/index.asp?eventid=58967226.Corporate OverviewParex, through its direct and indirect subsidiaries, is engaged in oil and natural gas exploration, development and production in South America and the Caribbean region. Parex is conducting exploration activities on its 814,000 acre holdings in the Llanos Basin of Colombia and 223,500 acre holdings onshore Trinidad. Parex is headquartered in Calgary, Canada.This news release does not constitute an offer to sell securities, nor is it a solicitation of an offer to buy securities, in any jurisdiction.GAAP and Non-GAAP TermsEffective January 1, 2011, Parex adopted International Financial Reporting Standards ("IFRS"). The Corporation's interim consolidated financial statements and the 2010 comparative information has been prepared under IFRS which are generally accepted accounting principles ("GAAP") for publically accountable enterprises in Canada.Funds flow used in, or from operations, working capital, operating netback per barrel and total net debt may from time to time be used by the Company, but do not have any standardized meaning under IFRS and Canadian GAAP and may not be comparable to similar measures presented by other companies. Funds flow used in, or from operations includes all cash generated from operating activities and is calculated before changes in non-cash working capital. Funds flow used in operations is reconciled with comprehensive net income (loss) in the Consolidated Statements of Cash Flows. Funds flow per share is calculated by dividing funds flow used in, or from operations by the weighted average number of shares outstanding. Working capital includes current assets less current liabilities. Operating netback per barrel equals sales revenue, less royalties, production expense and transportation expense, divided by total equivalent sales volume. Total net debt is a non-GAAP measure defined as the sum of working capital less the convertible debentures (excluding the derivative financial liability associated with the convertible debentures). The principal amount of the convertible debentures is CDN$85 million. Management uses these non-GAAP measures for its own performance measurement and to provide shareholders and investors with additional measurements of the Company's efficiency and its ability to fund a portion of its future growth expenditures.Advisory on Forward Looking StatementsCertain information regarding Parex set forth in this document contains forward- looking statements that involve 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 similar words, or statements that certain events or conditions "may" or "will" occur are intended to identify forward-looking statements. Such statements represent Parex's internal projections, estimates or beliefs concerning, among other things, future growth, results of operations, production, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, plans for and results of drilling activity, environmental matters, business prospects and opportunities. These statements are only predictions and actual events or results may differ materially. Although the Company's management believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievement since such expectations are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Many factors could cause Parex' actual results to differ materially from those expressed or implied in any forward- 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; supply and demand for oil; financial and business prospects and financial outlook; results of drilling and testing, results of operations; drilling plans; activities to be undertaken in various areas; capital plans in Colombia and exit rate production; plans to acquire and process 3-D seismic; timing of drilling and completion; and planned capital expenditures and the timing thereof. In addition, statements relating to "reserves" or "resources" are by their nature forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions that the resources and reserves described can be profitably produced in the future. The recovery and reserve estimates of Parex' reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered.These forward-looking statements are subject to numerous risks and uncertainties, including but not limited to, the impact of general economic conditions in Canada, Colombia and Trinidad & Tobago; industry conditions including changes in laws and regulations including adoption of new environmental laws and regulations, and changes in how they are interpreted and enforced, in Canada, Colombia and Trinidad & Tobago; competition; lack of availability of qualified personnel; the results of exploration and development drilling and related activities; obtaining required approvals of regulatory authorities, in Canada, Colombia and Trinidad & Tobago; 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 or changes in tax laws and incentive programs relating to the oil industry; ability to access sufficient capital from internal and external sources; the risks that any estimate of potential net oil pay is not based upon an estimate prepared or audited by an independent reserves evaluator; that there is no certainty that any portion of the hydrocarbon resources will be discovered, or if discovered that it will be commercially viable to produce any portion thereof; and other factors, many of which are beyond the 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's operations and financial results are 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 be consistent with these forward-looking statements. With respect to forward-looking statements contained in this document, Parex has made assumptions regarding: current commodity prices and royalty regimes; availability of skilled labour; timing and amount of capital expenditures; future exchange rates; the price of oil; the impact of increasing competition; conditions in general economic and financial markets; availability of drilling and related equipment; effects of regulation by governmental agencies; receipt of all required approvals for the Acquisition; royalty rates, future operating costs, 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 on Parex's current and future operations and such information may not be appropriate for other purposes. Parex's actual results, performance or achievement could differ materially from those expressed in, or implied 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, what benefits Parex will derive there from. 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 as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.FOR FURTHER INFORMATION PLEASE CONTACT: Michael KruchtenParex Resources Inc.Manager, Investor Relations(403) 517-1733(403) 265-8216 (FAX)ORKenneth G. PinskyParex Resources Inc.Vice President, Finance and Chief Financial Officer(403) 517-1729(403) 265-8216 (FAX)Neither the Toronto Stock Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Toronto Stock Exchange) accepts responsibility for the adequacy or accuracy of this release.