Parex Resources Inc. (“Parex” or the “Company”) and its strategic partner Ecopetrol S.A. (“Ecopetrol”), are pleased to announce that they have executed agreements whereby Parex will earn a 50% working interest (“W.I.”) in four blocks located in the Putumayo Basin of Colombia (“Putumayo Blocks”) as well as the Farallones Block in the Llanos Foothills of Colombia (“Farallones Block”). Additionally, the Company provides an operational update and reports that it is abandoning the Arantes exploration well at LLA-122 (50% W.I.). All amounts herein are in United States Dollars (“USD”) unless otherwise stated.
“The agreements announced today align with Parex’s strategy and add significant, lower-risk development & exploitation inventory, while consolidating our position in the Llanos Foothills trend where world-class exploration potential exists,” commented Imad Mohsen, President & Chief Executive Officer.
“The longstanding partnership between Parex and Ecopetrol is further reinforced by these agreements. I am particularly excited about the re-development opportunities that exist in the Putumayo, and Parex’s enhanced exploration position in the Llanos Foothills, the most prolific trend in Colombia.”
Key Highlights
Executed Putumayo business collaboration agreements to establish a new core area for Parex, where over 350 million barrels of oil have been recovered to date(1) through primary recovery methods with limited recent drilling.
The Putumayo Blocks offer significant upside potential and the ability to meaningfully improve recovery factors through the application of lower-risk infill drilling, re-completions, facility upgrades, and enhanced oil recovery (“EOR”) implementation.
Parex’s independent qualified reserve evaluator, GLJ Ltd. (“GLJ”), has recognized Company interest proved plus probable reserves (“2P”) of 18 million barrels(2).
Parex will assume operatorship in all future drilling and capital activities; Ecopetrol will retain operatorship of current and future production.
Extended Llanos Foothills position through the addition of a top-ranked exploration target on the Farallones Block(3).
November 2024 average production was 44,700 boe/d(4); the Company expects to achieve its FY 2024 average production guidance of 49,000 to 50,000 boe/d(5).
Putumayo Blocks – Development & Exploitation
Acquired 50% W.I. under business collaboration agreements in the Orito, Area Sur, Occidente and Nororiente Blocks in the Putumayo Basin of Colombia via an initial work plan commitment with no up-front acquisition cost.
Phase I: Parex receives 50% of future incremental production through funding development wells and implementing secondary recovery programs; expenditure commitment for carry capital by Parex of approximately $175 million on a gross capital program of roughly $350 million, with the Company having the flexibility to shift commitment carry capital to other Parex and Ecopetrol partnerships as required.
Assets are expected to receive approximately $20 to $50 million of budgeted capital expenditures(1) in the FY 2025 Parex program to begin Phase I development and exploitation activity, with investment level depending on access timing; the Company currently expects initial access to be approximately Q2 2025.
Phase II: Upon completion of Phase I, or after three years, thereafter Parex will receive 50% of all base existing production, in addition to the 50% of incremental production, with an ongoing 3% capital carry in favour of Ecopetrol; current average production from the base existing producing wells is approximately 5,800 bbl/d of oil(2).
Dated December 10, 2024, GLJ has recognized Company interest of:
Proven reserves (“1P”) of 10 million barrels and future development capital of approximately $167 million(3).
Proved plus probable reserves (“2P”) of 18 million barrels and future development capital of approximately $171 million(3).
Provides low-risk development drilling inventory with gross 2P future locations of approximately 19(3), in addition to existing producing wells and re-complete opportunities.
The Putumayo Blocks currently produce and are prospective for light & medium crude oil, with an average API generally above 25°.
In addition to development opportunities, the acquired Putumayo Blocks add near-field exploration prospects in proven plays that materially enhance Parex’s portfolio.
Farallones Block – Llanos Foothills
Acquired 50% W.I. and operatorship in the Farallones Block in the Llanos Foothills of Colombia(1), in exchange for drilling the Farallones exploration well, as well as the further expenditure commitment for carry capital of approximately $30 million on a gross capital program of roughly $60 million; commitment carry capital can be executed until 2029, with the Company having flexibility to shift commitment carry capital to other Parex and Ecopetrol partnerships as required.
Extends Parex’s Foothills position and includes Farallones, which is an exploration prospect that offsets Cusiana by approximately 70 kilometres and represents one of the highest-ranking prospects in Parex’s high-impact, big ‘E’ exploration portfolio.
In the FY 2025 Parex program, plan to commence initial access work to prepare for civil works activity and the expected spud of Farallones in 2026.
Operational Update
November 2024 Production
During the month, corporate production was affected by downtime that resulted in average production of 44,700 boe/d(1). The primary drivers of heightened downtime were electrical interruptions at Cabrestero, as well as social factors at LLA-32 and Capachos. While LLA-32 has regained full operational status, beginning November 28, 2024, ongoing social protests have caused the Company to temporarily shut in operations at Capachos.
(1) Light & medium crude oil: ~8,517 bbl/d, heavy crude oil: ~35,499 bbl/d, conventional natural gas: ~4,105 mcf/d; rounded for presentation purposes.
Current Production
For the period of December 1, 2024, to December 9, 2024, estimated average production was 42,800 boe/d(1), with lower production primarily due to the aforementioned shut-in at Capachos. Based on recent constructive dialogue, the Company expects a near-term resolution that will enable Capachos operations to resume.
Parex’s production guidance incorporates contingencies for downtime events. At current production levels, the Company expects to achieve its FY 2024 average production guidance of 49,000 to 50,000 boe/d(2).
Arantes Exploration Well at LLA-122(1)
As previously announced(2), Parex had drilled the well to a depth of roughly 17,750 feet. Since that announcement, the well was drilled to approximately 18,000 feet; during operations to set the final liner in place above the zones of interest, a mechanical issue emerged during the cementing process. After a thorough evaluation by the Company and its partner, it was determined that further operations on the well were technically unfeasible at an acceptable risk tolerance. The well will be abandoned, with an estimated total cost net to Parex of approximately $35 million.
The Llanos Foothills of Colombia remain a core component of Parex’s long-term strategy, and drilling the Arantes well resulted in improved drilling proficiency and additional subsurface knowledge that can be utilized for future exploration wells.
