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Press release from Marketwire

Parex Announces Closing of the Cabrestero Block Acquisition, New Oil Discoveries and Record Production

Monday, June 10, 2013

Parex Announces Closing of the Cabrestero Block Acquisition, New Oil Discoveries and Record Production

17:13 EDT Monday, June 10, 2013

CALGARY, ALBERTA--(Marketwired - June 10, 2013) -

NOT FOR DISTRIBUTION OR FOR DISSEMINATION IN THE UNITED STATES

Parex Resources Inc. ("Parex") (TSX:PXT) announces closing of the Cabrestero Block acquisition and recent drilling success. The company also expects that its second quarter 2013 production to be 15,000-15,500 bopd.

"This year we've consistently stated that our key goal is to demonstrate the sustainability of our business. So far in 2013 we've had two significant discoveries, two material field extensions and continued strong performance on our Kona field. Over the next 2 months we will conduct extended production tests on the new wells to help us evaluate the potential reserves impact and based on that we'll set out our remaining year 2013 production strategy and our first pass at the 2014 capex and production budgets", commented Wayne Foo, President and CEO.

  • Q2 2013 Production: We expect that production for the period April 1, 2013 to June 30, 2013 to average 15,000-15,500 bopd, compared to Q1 2013 average of 14,440 bopd and 2012 full year average of 11,407 bopd.
  • Cabrestero Acquisition Closed: On May 31, 2013 Parex (block operator) increased its Cabrestero Block working interest from 50 percent to 100 percent through acquiring its partner's working interest for a cash consideration of approximately $12.5 million before adjustments. The block currently has two producing fields, Kitaro and Akira. Parex successfully drilled the Akira-2 appraisal well approximately 700 meters north of Akira-1 and outside of the 2012 GLJ Reserves Report Possible ("3P") mapped area. Akira-2 is currently producing approximately 340 bopd of 14° API oil. Subsequently, the company drilled Akira-3 as a water disposal well. At present, Akira-4 has been drilled to its target depth approximately 850 meters to the northeast of Akira-1 to evaluate a target outside of the 2012 GLJ Reserve Report Probable ("2P") mapped area. After encountering indications of oil pay in the Guadalupe Formation, Akira-4 is being cased and will be completed. Future development plans for the Cabrestero Block include additional infilling drilling and replacement of the temporary rental tanks with an installation of a permanent production facility.
  • Tarotaro (Block LLA-34, WI 45%): The Tarotaro-1 exploration well (non-operated) was drilled to a target depth of approximately 11,000 feet. The well was cased after encountering indications of oil pay in the Mirador and Guadalupe formations. The Guadalupe formation is the deeper and first zone to be tested and was perforated over a 60 foot interval. Testing has been underway for the last 22 hours with the use of an Electric Submersible Pump ("ESP") and the average oil rate over the last 12 hours has been 1,700 bopd at a water-cut of 3.5 percent. Parex believes the current measured water-cut rate is due to remaining residual work-over fluids in the wellbore. A total of 1,087 bbls of oil and 186 bbls of water have been recovered from the test and subsurface pressure recorders installed on the ESP indicate a drawdown of under 15 percent. Lab analysis will be required to confirm the API of the produced oil but Parex anticipates an API of between 13 and 17 degrees based on production from the Guadalupe formation at surrounding fields Tua and Max. Parex expect Tarotaro-1 to be immediately placed on a long-term production test. Tarotaro is a new independent discovery outside the current 2012 GLJ Reserve Report and is approximately 6 kilometers north-east from the Tua discovery. The operator is currently drilling the Tarotaro-2 appraisal well and we anticipate that additional delineation drilling will be required to find and test the limits of the field;
  • Las Maracas (Block Los Ocarros, WI 50%): The oil treatment plant has been commissioned. Parex expects initial total field production between 10,500-11,000 bopd for the balance of 2013 and will re-evaluate production targets based on well performance and results of future appraisal/development drilling;
  • Adalia (Block LLA-30, WI 100%): As reported April 8, 2013, the Adalia-1 exploration well was flow tested from the C5 Formation over a 32 hour period at an average rate of 1,980 bopd and 38° API oil was recovered during the test. Civil works including road construction have been completed and Parex expects to commence a long-term production test in late June 2013. Future Adalia appraisal drilling will be largely dependent on well performance during the long-term test;
  • Tua (Block LLA-34, WI 45%): The Tua-4 and Tua-5 wells were drilled as Guadalupe delineation wells outside of the 2012 GLJ Report Possible ("3P") mapped area. On March 25, 2013, Tua-5 began producing at a rate of approximately 1,000 bopd of 16° API oil from the Guadalupe Formation. Tua-4 was drilled to appraise the southern flank of the Basal Guadalupe structure and is producing at an initial rate of approximately 850 bopd. We anticipate that additional delineation drilling throughout 2014 will be required to find and test the limits of the field;
  • Celeus (Block LLA-17, WI 40%): The Celeus Sur-1 exploration well was spud May 23, 2013 and was drilled to a target depth of 10,700 feet to evaluate the C7 and Gacheta formations. The well is being cased and Parex expects to test the well. Recall that the Celeus-1 produced 200 bopd from each of the Gacheta and C7 formations on natural flow. Parex is planning to alternate the use of the Celeus-1 and Celeus-Sur-1 wells by producing one well while the other well operates as a disposal well to minimize operating costs. Test results from Celeus Sur-1 will determine which well will be placed on production first. Celeus-1 production is currently shut-in;
  • La Casona (Block El Eden, WI 60%): On May 30, 2013 the La Casona-2 well was spud and is currently drilling at approximately 11,150 feet. The target depth of the well is 16,500 feet approximately 700 meters northeast of La Casona-1 to further evaluate the Une, Gacheta and Mirador (untested in Las Casona-1) formations. The construction of the long-term test facility at La Casona-1 is ongoing and we expect that the La Casona-1 well will be placed on production towards the end of the third quarter of this year;
  • Kona (LLA-16, WI 100%): Kona continues to produce at 5,000-6,000 bopd. During May 2013, Kona Norte-1 and Kona Sur-1 were placed on extended production tests at a combined rate of approximately 1,400 bopd. This deliverability will be incorporated in setting future Kona field production targets. The Kona field has cumulatively produced over 5 million barrels of oil and therefore the field is subject to an additional "High Price Share" royalty of approximately 20 percent. As such, Parex continues to utilize the Kona field as a swing producer within the company's portfolio, enhancing our ability to achieve quarter over quarter production growth and deliver sustainable production growth.
Drilling Schedule
A summary of the current drilling/testing program plus the immediately following locations is provided below:
# Prospect Block Timing / Status
1 Akira-4 Cabrestero Drilled to TD; preparing to test
2 Las Maracas-11 Los Ocarros Spud following Akira-4
3 Celeus Sur LLA-17 Casing, preparing to test
4 La Casona-2 El Eden Drilling
5 Rumi-1 El Eden Spud following La Casona-2
6 Tarotaro-2 LLA-34 Drilling

Corporate Overview

Parex, 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 1,349,000 gross acre holdings primarily in the Llanos Basin of Colombia and 219,000 gross 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.

Advisory on Forward Looking Statements

Certain 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 annual production rates; 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 and partners, 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. 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.

Any references in this press release to test production rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will commence production and decline thereafter. These test results are not necessarily indicative of long-term performance or ultimate recovery. Readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Company.

FOR FURTHER INFORMATION PLEASE CONTACT:

The TSX has not received and does not accept responsibility for the adequacy or accuracy of this news release.

Contact Information:
Parex Resources Inc.
Mike Kruchten
Vice President, Corporate Planning & Investor Relations
(403) 517-1733


Parex Resources Inc.
Kenneth G. Pinsky
Chief Financial Officer
403.517.1729
Investor.relations@parexresources.com

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