TSE:PXT Parex Resources Q2 2023 Earnings Report C$11.79 +0.15 (+1.29%) As of 04:00 PM Eastern Earnings HistoryForecast Parex Resources EPS ResultsActual EPSC$1.28Consensus EPS C$1.33Beat/MissMissed by -C$0.05One Year Ago EPSN/AParex Resources Revenue ResultsActual Revenue$440.83 millionExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/AParex Resources Announcement DetailsQuarterQ2 2023Date8/2/2023TimeN/AConference Call DateThursday, August 3, 2023Conference Call Time11:30AM ETConference Call ResourcesConference Call AudioConference Call TranscriptInterim ReportEarnings HistoryCompany ProfilePowered by Parex Resources Q2 2023 Earnings Call TranscriptProvided by QuartrAugust 3, 2023 ShareLink copied to clipboard.There are 11 speakers on the call. Operator00:00:00Good morning, everyone, and welcome to Parx Resources Second Quarter 2023 Conference Call and Webcast. My name is Mike Crookton, Senior Vice President of Capital Markets and Corporate Planning at Parex. On the call with me today are Ahmad Moulson, Parex's President and Chief Executive Officer, Ken Pinsky, Chief Financial Officer and Eric Furlan, Chief Operating Officer. This quarter we are pleased to offer a new online video webcast in addition to the regular conference call telephone line for analysts. Please note that at any time participants on the phone can press star 1 to submit a question. Operator00:00:38As a reminder, this conference call includes forward looking statements as well as non GAAP and other financial measures with the associated risks outlined in our news release and MD and A, which can be found on our website or atsedarplus. Ca. All amounts discussed today are in U. S. Dollars unless otherwise stated. Operator00:00:57Please go ahead, Ahmad. Speaker 100:01:04Thank you, Mike. I would also echo your comments regarding our terrific sustainability efforts. Moving on, as Ken brief Sorry for that. Let's start again. Thank you, Mike. Speaker 100:01:35Good morning, everyone. Before I turn it over to Ken for an overview of our quarterly financial and operational results And to Mike for his comments on our 9th annual sustainability report, I'd like to share some opening remarks regarding the progress of our overall strategy. I will end the call with comments on the momentum that we are building in the North of Nianos as well as our updated 2023 guidance and outlook. In the first half of twenty twenty three, I'm proud to say that we continue to progress the 3 core pillars of our strategy. First, exploitation and technology. Speaker 100:02:10In Soca, we are seeing success from the horizontals that we have drilled And we are continuing to progress our waterflood plants. Also in the end of 30 8, we had an oil discovery in the C7 reservoir on one of our QuickHit wells where we have spot the follow-up horizontal well to maximize recovery. On the gas strategy part, We are making concrete progress in our discussions with Ecopetrol regarding the MoU and we also made the decision to expand the facility of in VIM-1 in 2024. And 3rd, on Big E exploration, we did drill and test the Chermoya well At VIM4 3, which was the first of the 3 big wells for the 2023 program, despite the well not delivering the outcome that we hoped for, We continue to see significant exploration upside potential in Colombia. We plan to spot 2 more high impact Big E wells in the second half of twenty twenty three, there's more to follow in 2024. Speaker 100:03:12With that said, I continue to be excited about our trajectory and the organic opportunity set that we have in Colombia for the next for both development and exploration. With that, please go ahead, Ked. Speaker 200:03:26Thank you, Ahmad. Despite production impacts experienced in the Northern Llanos at our Capachos block, the Q2 delivered strong operational and financial results that highlight the robust profitability derived from our Colombia operations. Funds flow provided by operations was US 155 million which was lower than prior quarters primarily due to decline in global crude pricing notwithstanding our production volume growth. Average Q2 20 20 feet production of 54,120 BOE per day was up 6% compared to Q2 2022 and up 5% from the prior quarter. Estimated average production would have been close to 58,000 BOE a day if it not for the temporary shut ins experienced at our Capachos block that were outside of our control. Speaker 200:04:13The net effect was lost production and drilling progress at both Capachos as well as Irelka, which overall had an estimated impact of approximately 3,500 or 3,800 barrels of oil equivalent per day on the quarter. Ahmad will discuss the annual impacts and the update to our guidance later in this call. Production per share increased by 14% year over year, which was supported by the higher production levels and the reduction of shares through our normal course issuer bid or NCIB. Year to date 2023, we have repurchased approximately 3,600,000 shares or approximately 3% of the float As a mechanism to return free funds, funds flow to the shareholders over and above our CAD0.375 per share quarterly regular dividend. We ended up the quarter with a slight working capital deficit, which we expect to turn to working capital surplus by year end Due to expected higher fund slope from operations, which will be due to increased production, higher benchmark oil prices And our narrower differential for our heavy crude stream. Speaker 200:05:18All the while capital expenditures are forecast for being flat based on our first half twenty twenty three run rate. With that, I will pass it on to Mike to provide a brief ESG update. Operator00:05:30Thanks, Ken. As part of our commitment to delivering superior ESG performance and disclosure, we're now pleased to release our 9th annual sustainability report which for the 2nd year in a row integrates the Task Force on Climate Related Financial Disclosure or TCFD. Some noteworthy achievements from our 2022 report are making progress against our 20.30 emission intensity target of 50% by achieving a 37% cumulative reduction in GHD emissions from our 2019 baseline and invested over $5,000,000 in the communities where we operate. As the company works to continuously enhance its ESG performance and disclosure, This year's report sets targets within 4 core priorities: Communities, GHD emissions and climate, People and culture and water, the hard work and dedication exhibited by our teams in both our ESG initiatives and reporting reflects our commitment to responsible resource development. I encourage those interested to explore the complete report which is now available on our website. Operator00:06:42And with that, I would like now to return the call back to Ahmad for some final remarks. Speaker 100:06:49Thank you, Mike. This is a paragraph I was looking at in the beginning. I would also echo your comments regarding our terrific sustainability report. Moving on, as Ken briefly mentioned, the company has faced social related challenges throughout the first half of the year at the Northern Ionis, which resulted in temporary shutdowns at both Capalcio's and Raubka. Through continuous engagement with stakeholders, community leaders and government officials, both assets have been fully operational since late June and we are exiting the quarter with positive momentum. Speaker 100:07:26At Capachos, we are ramping up production on wells already drilled, notably Capachos Sur III, Sur IV and Andida II, which are the main drivers to And at Orauka, we are optimistic about our multiyear drilling campaign and have made the decision to accelerate our program there by bringing a second rig onto the block. We are currently drilling a Rauka 15 well, which is at 11,500 feet and expected to TD in late Q3. And we are expecting to spot Araka 8, our 2nd big EOL in The trend 2023 program in the late Q3 as well. Turning to our 2023 guidance. The aforementioned shutdowns are estimated to have combined impact on the company yearly production of approximately 3,100 barrels a day. Speaker 100:08:17We experienced lower than expected production from, SOKA asset because of higher downtime, Both technical and social. When we originally said guidance, We widened it to take into account for uncontrollable above ground factors, which in my mind constitute an approximately 3 to 4 months deferment of our gross plans. Given the duration and the We are updating our 2023 average production guidance to 54000 BOE to 57000 BOE a day. Our capital expenditure guidance is also being updated to a range of $450,000,000 to $475,000,000 The tightening of our priority guidance is driven by the standby costs associated with the shutdowns and the increased spending at VIM-forty three exploration well, mainly because of the testing. Looking forward the remaining of the year, I'm encouraged by our company's momentum and the work our team is doing to build the strategy foundations for future upside. Speaker 100:09:27Having just returned from Bogota last week, Where we had extremely productive meetings with Ecopetrol and the relevant ministries, I'm pleased with the progress that we are making to leverage the value of or MoU. In Q4, we have plans to spot the 3rd and final Big E exploration well of the 2023 program at Eynos 1 hundred and twenty two called Arantes, which is a prospect under our MoU and located in the foothills of Colombia. This opportunity excites me because Imagine just the long term potential if the Western Canadian foothills had only been controlled by 2 partners. To finish, As a part of the ongoing Colombian peace process, a bilateral cessation of hostilities is set to come into effect today, which is encouraging and should help the long term stability in some of our key operating regions. My outlook is that we are well positioned for strong back half of twenty twenty three. Speaker 100:10:29Our updated guidance implies Q4 2023 production rates that exceed 60,000 barrels a day and that puts us back on track to deliver on our 3 year plan objectives. I want to thank our employees in Calgary and Colombia for their hard work and our shareholders for their continued support. This concludes our final remarks. I would like now to turn the call back to the operator to start the Q and A session for the investment community. Thank you. Speaker 300:11:16Our first question will come from the line of Anthony Linton with Barclays. Please go ahead. Speaker 400:11:23Hey, good morning guys and thanks for taking my questions. I guess maybe just to start on the capital budget side, Final cost for the Cura Moi Oil was $49,000,000 or about 10% of the original allocation. How do you think about that 10% Of the budget going towards Big E for the balance of the year and then into 2024? Operator00:11:49Thanks, Anthony for that question. When we look at the Biggie, We have roughly $50,000,000 allocated to Big E every year. And turmoil we had Cost overruns online and certainly the decision to case and test it added extra capital to that. One factor was this was 100% working interest well and most of our other wells forward, we're going to be 50% working interest. We're comfortable with that $50,000,000 allocation as we go into 'twenty four as a good proxy for how we'll allocate to Big E as we go forward. Speaker 400:12:25Got it. Okay. Thanks. And then staying on capital, you laid out a pretty comprehensive 3 year plan at your Investor Day in the fall. How do you sort of think about that guidance into 24 beyond, based on the updated guidance for the balance of the year. Operator00:12:41Anthony, I'm going to pass that to Ahmad to talk more about high level of strategy, how we see the business? Speaker 100:12:48Yeah, I mean, for me what we did having seen the disruption beginning of the year Is to we decided to deliver on our capital program. So What that does is we do spend the CapEx this year as per originally planned with some small variations, but The key is we deliver all the plan and we come out strong at Q4. Yeah, we don't get the full production this year because many of the wells now come end of Q4 or early 2024, but we that allows us to stick to The spirit of the plan, which is get the production that we set in 3 years and reduce the Capital as we go doing it. Lots of The upside will come from just normalizing things that we have now behind pipe and we're bringing into production. Speaker 400:13:56Got it. Okay. And then maybe just one more if I can. The lower effective Tax rate, what's sort of driving the change there and how long is that expected to kick around for? Speaker 200:14:09Ken? Yeah. Thanks, Mike, and thanks, Anthony. What drives it is reduction in production that we had in our guidance, lower Commodity prices in higher Vasconia just reduced taxable income expectations for 2023. But we're still on track on the capital program. Speaker 200:14:25And we did a reorganization the prior year as you recall, with the Caballero reorganization. And so our effective tax rate just comes down by about 3% For 2023 and 2024 it will be really driven by what your price expectation is, but if you kept it around $80 Brent, I see the same range as being accurate for 2024 as well, Anthony. And then after that, it's The range of broaden out because it depends on how successful we are with the exploration program, production levels and that sort of thing. But for this year and then going into 24, I'd use the same range that we stated in our MD and A. Speaker 500:15:04Okay, that's it for me. I'll turn it back. Thanks. Speaker 300:15:12Your next question will come from the line of Konrad Bereznicki with Peters and Co. Conrad, your line may be on mute. Speaker 600:15:27Thanks guys for taking my question. Can you hear me? Speaker 200:15:31Yes. Yes. Speaker 100:15:32Awesome. Speaker 600:15:33I just wanted to know how should we think about capital allocation in the back half of the year? Is the preference still NCIB after the base dividends or could there be some base dividend increases or specials coming? Operator00:15:46Thanks Conrad. When we look at capital allocation it really is on looking at holistically on the full year. We have a commitment on The dividend for the year and that annual dividend is really reviewed once a year. When we look at how we're going to return the 1 third of capital Back to shareholders, 1 third of the funds flow back to shareholders. We take our base dividend, we subtract that, we're buying back shares And you can see the first half of the year we actually returned about 37% of our overall funds flow back to shareholders. Operator00:16:19Our goal is 1 third. So we'll adjust that with pricing and realizations as we get through the second half of the year. As for special dividends, it's always an option. Our preference right now would be to fulfill the 1 third using the share buyback. Speaker 600:16:39Got it. Thanks for the color. Just one more question, just around the gas cycling expansion at BIM-one next year. Just wondering what does that mean for liquids recovery and Are you expecting for a liquid growth from VIM-one going into 2024? Operator00:16:54Great. I'll pass that to Eric Furlan. Speaker 700:16:57Thanks Mike. In VIM, just remind, we're producing about 20,000,000 cubic feet of raw gas Right now I'm making about 3,200 barrels a day of gross liquids. We are expanding the facility and the operations triple that. So you could say that operationally we could get liquids growth up to 10,000 barrels a day and recycling of up to 60,000,000 cubic feet a day. So that is our plan. Speaker 700:17:23We're expecting that to be online later in 2024. But we're excited about that opportunity. It's performing very well for us and we see it as Great opportunity in 'twenty four for us. Speaker 600:17:37Got it. Thanks. That's all I had for questions. Speaker 300:17:42Your next question will come from the line of Luke Davis with RBC Capital Markets. Please go ahead. Speaker 500:17:49Yes, thanks. Good morning, guys. Just curious if you can provide a little bit more context in terms of the drivers for the protests that caused the shut ins In the quarter, sounds like, Ahmad, in your closing remarks, you suggested there might be some mitigation factors going forward. But What's the likelihood of any of that continuing through the back half? And then as kind of a follow-up, just curious how much downtime you have built into second half guidance as well? Operator00:18:16Great. I'll pass that to Ahmad. Speaker 100:18:18Yeah. So we are seeing very positive momentum here. As I mentioned, the cessation of hostilities took place or should take place today. The President Petro was in Bogota, this week together in fact with our Country Manager, Daniel Ferreiro. And We are seeing completely change of the dynamic in the area like in our we are on the ground, We see how the politics are, how the community mood is and it's pretty encouraging to be honest. Speaker 100:18:57That's why we Took the decision to bring a second rig to Arauca. We are being invited by the civil society in that area as well as the government contribute to solutions, one example of that is already we grew our work for taxes program, which is for Perrigs to invest government Tax money into infrastructure in the area. So last year we spent $5,000,000 2023 we got $23,000,000 approved. So that's a big Overall, John. And last month, we've been invited by the Iraq different stakeholders to deliver an additional $20,000,000 of infrastructure works to remediate the damages and roads and infrastructure So we're becoming really part of the solution. Speaker 100:19:49So overall, I would say in terms of the government support, The overall social situation, I'm cautiously optimistic. Are there guarantees? No. So, we did take that The fact that there is always a large and predictable element to Colombia and thus we think we are reflecting that in the new guidance. Speaker 700:20:15Thanks, Sumedad. And maybe I'll just call From a downtime, to answer the downtime, we are expecting a more normalized downtime going forward of around 5%. That does incorporate some social disruptions, but not the major ones and reiterating Ahmad's comments, We do see a different situation right now in the Northern Janos and have some confidence moving forward with operations. We currently have 2 service rigs and a drilling rig operating in the area, fairly steady. And so we do have some momentum going forward here. Speaker 500:20:54Great. That's helpful. Thanks. Just one follow-up. I'm just curious if you can frame out, and I know you're probably going through the 2024 budgeting process now, but even just directionally, if you could frame out where you expect Most of the growth in the portfolio to come from? Speaker 500:21:10And if you could sort of frame that on a field by field basis, that'd be helpful. Operator00:21:16I'm going to let Dima talk about the overall strategy for 2024. Speaker 100:21:23Okay. Let me start by 2023, like if you start with CapEx and bring it back to pre shut in levels, That's a reasonable amount of growth. We have in general the quick hits like the Lucero one we mentioned That will also keep delivering reasonable amount of production. And we are seeing also very good Outcomes in Ioannis on the horizontals we've been drilling there and there's many more to come, including this year. What that does is it does sets us up for strong exit. Speaker 100:22:02So we mentioned the outlook of above 60,000 barrels a day for Q4. If you just average that and start from there for the year, you're already having reasonable growth year on year. On top of that, If I think about 2024, we have different places where we're investing. We are investing in VIMP, Although that will come to the end of the year, we are bringing 2 rigs to our Auca this year, but most of the production impact will come Next year, so there will be growth there. And in Llanos, we completed the catastrophe waterflood, but we are Late on the rejection volume. Speaker 100:22:43So we're ramping up and we expect to see more of the impact and in addition to the horizontals that will And of course there's the big E and we have big hopes for example, Arauca 8 while coming late This quarter that will happen next year. So it is the same thing as the gas and BIM or the gas strategy, you have the exploration, Also a lot of exploitation based on technology and based on getting the most of our assets. In fact, we're getting better than What we hope for when we started trying these horizontals and waterflaws and oil based mud, you name it. And these quick hits or Optimization of big fields like SOKA will only continue. Eric, do you want to add to that? Speaker 700:23:32Yes. Thanks, Ahmad. I mean, we have had a big shift in focus to I think about our focus in 3 mature fields that were very mature, producing about 1500 barrels a day a year and a half ago, They're up over 8,000 barrels a day today. So new technology, looking at all the opportunities the second time is creating a lot of Low risk opportunity for us to go forward in optimization. Speaker 500:24:03Just one follow-up for me as well. Just wondering if you can speak a little bit to capital and where you would expect that to trend going forward? Operator00:24:15Yeah, sure, Luke. I think what you can do as you want to look into the future, Still reference our 3 year plan. We're on track to deliver that and really set ourselves up well Going into the Q4, over 60,000 barrels a day and what we're aiming for is to improve capital efficiency And that means really higher production with less capital required as we've made these investments really in infrastructure over the last 2 years. Speaker 800:24:47That's great. Appreciate the detail. Thanks, guys. Operator00:24:50Thanks Luke. Speaker 300:24:52Your next question will come from the line of Roman Rossi with Canaccord. Please go ahead. Speaker 900:24:58Good morning and thanks for taking my question guys. Just regarding Beam 43, now that And the capital commitments to fill, are you expecting to relinquish the block or are you considering any other activities there? Operator00:25:18I'll pass that one over to Eric. Speaker 700:25:21Sure. Thanks, Mike. We haven't come to a final conclusion there, of course. We've just tested it well. We're understanding what we saw and looking at That play that we were chasing there an additional play, so we don't have a conclusion there. Speaker 700:25:34We don't have any immediate activity planned In BIM43, but we are looking at all the prospects yet. So that is still to be decided. Speaker 900:25:48Okay, thanks. And regarding reaching full capacity, Production capacity and CapEx was when are you expecting to reach that and does it depend on new wells or just existing ones? Speaker 700:26:02Go ahead, Eric. Thanks. For the most part or fully that is existing wells. We have 3 wells that have been basically shut in for the majority of the year so far. Andina 2, that's a very prolific well and the entire Capachas sewer compartment. Speaker 700:26:21So really, this is bringing volumes online with pump changes and final completions, And we expect to complete a large majority of that work in August. So we are expecting to go back up to capacity in the very short term. Speaker 900:26:38Okay, same time. And just a follow-up on that. So if I look at your The ER based development program, you are projecting like 63,000 barrels for 2024. So what's the exit rate for 2023? Operator00:26:57Roman, we put into our news release with our revised guidance that we want to exit above 60,000 barrels a day in Q4 and that really positions us well for that 3 year plan where we said we'd be at 63,000 as an average for next year. Speaker 300:27:27Your next question will come from the line of Kevin Fisk with Scotiabank. Please go ahead. Speaker 900:27:32Thanks for taking my question. The Brent Best Pony differential narrowed in Q2 and I'm curious how you're thinking about the differential going forward? Operator00:27:42Yeah. Thanks, Kevin. I think traditionally the best going a differential kind of you look at a 5 year average is probably been between $4 to $5 a barrel. We had it much higher at the start of this year. It was about $8 to $10 a barrel. Operator00:27:59And it's gone down and we've seen even some bids below $4 in the last couple of months here. Differentials as you know looking at Canadian differentials is very tricky to forecast. But we are seeing very positive things with the TMX or Dos Bocos in Mexico really moving crude out of the Gulf Coast, which is really the price marker for us. So we're forecasting it to be in this $4 to $5 as we go forward here for the rest of the year. Speaker 900:28:36Okay, thanks. That's it for me. Operator00:28:39Thanks, Evan. Speaker 300:28:41Your next question comes from the line of Samuel Chen with AllianceBernstein. Please go ahead. Speaker 800:28:47Thank you. Just a quick question. If you can help me to understand, how are we getting from the 54,000 this quarter To 60,000, I read your press release. We got Kapasha for about 2,000, arouka for about 1,000 a bit. You have the production declines at SOCA. Speaker 800:29:07But even if I add a mobile, we're not getting back to 60,000. If you can help me understand, that'll be great. Thank you. Operator00:29:15Great. I'll pass that to Eric. Speaker 700:29:18Sure. Thanks, Mike. The main areas for our production growth As I mentioned already, the Capachos area, that is essentially bringing the field back online. 2nd, of course, we've mentioned Arauca. Those wells as I talked about in our Investor Day, historically have capabilities of 5,000 plus Gross per day, so there's a lot of potential there. Speaker 700:29:43In addition, we have a very robust program underway in SoCa regarding the horizontal wells. So we talked a little bit about the horizontal wells we drilled. We're exploiting the Mirador reservoir there It has about 120,000,000 barrels in place, but we have not yet found a good way to produce it. We think we found that now. The horizontal wells are producing well above expectations. Speaker 700:30:06So that horizontal program in 34 replacing some of the program we had Means that we grow in 34 more than replaces declines and grows in 34 going forward. So We've highlighted the main areas we're focusing on. In addition to that, we still have the conventional development going on in Cabristero and Block 34 That continues to be stayed. We have some of the quick hits, Lucero. We are drilling that horizontal as we speak, almost in the horizontal zone. Speaker 700:30:37So we expect We have that on production shortly. We know there's oil there. We know it's very prolific reservoir that will be multi 1,000 barrels a day. So when we add it all up in addition to the key areas we've highlighted, and all the other program, that's how we get there. But the very short term catalysts, I would say, are going to be the Lucero online and just restoring Capachos. Speaker 700:31:00That in itself is going to be a very big jump for us. Speaker 800:31:07Thank you. So just quick follow-up, can I assume that the Roughly 3,000 barrels per day of sequential increase we're seeing from Q2 to Q1? This is just from the partial recovery. It's not related to any of those enhancement that you just mentioned at the last minute? Speaker 700:31:25Correct. We have not So far in the first half of twenty twenty three, our downtime in the Northern channels has been significant in the range of about 70%. And so we've been on partial production, and we're trying to get to that full production and we should be there in the next couple of few weeks. And as Matt alluded to earlier, we see a different scenario up in the area right now and in a different environment that we believe will continue to be able to continue operating with normal downtime and deliver those volumes. Speaker 300:32:06Your next question will come from the line of Orianna Kobold with balance. Please go ahead. Speaker 1000:32:12Hi, thanks for taking my questions. I have 2, if we may go 1 by 1, that would be great. And then first is a follow-up with regard To the horizontal drilling in Janus 34. Just to understand it and seeing that it has been successful and volumes continue to be Steadily going in Janus, like when do you expect to reap the benefits of this horizontal drilling program and when should we see what would be a Reasonable expected production growth in the area seen this horizontal drilling program. Speaker 800:32:50Eric? Speaker 700:32:51Thanks, Mike. Yes, the horizontal program in 34, so let me talk a little bit about What our expectations were and what we're seeing. Again, 120,000,000 barrels of oil in place of good quality oil, Trying a new technique to extract it, 1st horizontal well that's been on production for just over 4 months came on production over 3,000 barrels a day. We expected it to decline a lot more than it has. It's still producing about 2,500 barrels a day. Speaker 700:33:21So we've had payout in about 3 months. The second horizontal well has come online with similar type of performance and today we're in the 4,500 to 5,000 barrel a day gross Production from a couple of horizontals in Block 34. Both ourselves and our partner are very excited about this development. We have shifted capital based on the results to this horizontal program and are replacing this year in 2023. Now the impact of that is growth towards the end of the year in Block 34. Speaker 700:34:02So more than maintaining decline with a smaller number of wells and actual growth in production. So you're already seeing some of that benefit, a little bit of it. Like I say, the second well just came on production about a week ago. So you're not seeing the full potential. But going forward the exciting part is for us not only this program that's going to be 3 to 4 wells firm going into 2024, But where else can we apply this technology? Speaker 700:34:31We're getting better at it. We're drilling the wells more efficiently for lower cost And there are a lot of areas that we can use this technology to exploit even in SoCa and I wouldn't be surprised if you see this going into Thinner areas in the Mirador, possibly areas in the Paleocene. And so we're learning as we're going and getting better And it's exciting program for both ourselves and our partner. Speaker 1000:34:58Perfect. Thanks. That's very Clear and very encouraging for the area. Just one final one regarding seeing your cash position dropping below average levels, Of course, owing to the cash tax payments and so on, I just wanted to touch base to see if you provide like a Target cash balance or where do you see us as an optimal cash balance in of course the distributions to shareholders via dividends and buybacks For the remainder of the year. Operator00:35:29Great. I'll pass that to our CFO, Ken. Speaker 200:35:33Thanks for the question. We, the dividend and the buybacks are funded from the free cash flow that the generation that's generated from the operation. So I don't need cash on hand for that because we're pretty confident on what we're going to generate for The year and sure it's subject to commodity prices, but at the same time, we've been through lots of different commodity price scenarios in Colombia and it's a very profitable Business and we do have control over our capital discretionary, our capital expenditures. So, I don't look at our beginning cash balances Paying a dividend or anything like that. And where's an optimal? Speaker 200:36:10Well, we like that traditionally we run higher than A slight deficit. We do have a $200,000,000 line that we haven't drawn for 6 years with the banks. Don't expect to have to draw at this time either. But I think at the end of the year if at $80 oil in Vasconia and hitting our production midpoint of our production targets, We should build our working capital back up to that $50,000,000 to $100,000,000 range and that means probably $150,000,000 to $200,000,000 in cash Because included in that $50,000,000 to $100,000,000 is all our tax payable for that year for the current year that's paid in the following year. So cash is always ahead of working capital, if that helps. Speaker 1000:36:52Yes, perfect. That helps. Thanks very much. Speaker 300:36:57And with that, I'll turn the call back to Mike Crookton for any closing remarks. Operator00:37:03Well, thank you very much for joining us today and especially in this new format. We appreciate you being on the call and if you have any questions, please Feel free to engage us directly at Parex. And with that, we'll close the call and have a great summer.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallParex Resources Q2 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsInterim report Parex Resources Earnings HeadlinesEnergy Sector Strength: A Canadian Producer That Can Thrive in Any MarketJanuary 11, 2025 | msn.comParex Resources Inc.'s (TSE:PXT) Intrinsic Value Is Potentially 36% Above Its Share PriceDecember 25, 2024 | uk.finance.yahoo.comAltucher: Turn $900 into $108,000 in just 12 months?We are entering the final Trump Bump of our lives. But the biggest returns will not be in the stock market.April 28, 2025 | Paradigm Press (Ad)Here’s How Much Canadians Need in Their TFSA to RetireDecember 12, 2024 | msn.comInvestors Can Find Comfort In Parex Resources' (TSE:PXT) Earnings QualityNovember 14, 2024 | finance.yahoo.com3 Top High-Yield Stocks to Buy in NovemberOctober 31, 2024 | msn.comSee More Parex Resources Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Parex Resources? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Parex Resources and other key companies, straight to your email. Email Address About Parex ResourcesParex Resources (TSE:PXT) Inc engages in exploration, development, and production of crude oil. The company brings technology utilized in the Western Canada Sedimentary Basin to South American basins with large oil-in-place potential. Majority of the company's properties are focused in Colombia, where it pays a royalty or tax to the government for its operations. Parex depends on a team of geologists and geophysicists, in partnership with technologies such as 3D seismic surveying, to help exploration efforts. Oil production is sold to a small basket of participants in South and North America.View Parex Resources ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Alphabet Rebounds After Strong Earnings and Buyback AnnouncementMarkets Think Robinhood Earnings Could Send the Stock UpIs the Floor in for Lam Research After Bullish Earnings?Texas Instruments: Earnings Beat, Upbeat Guidance Fuel RecoveryMarket Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial Earnings Upcoming Earnings AstraZeneca (4/29/2025)Booking (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Regeneron Pharmaceuticals (4/29/2025)Starbucks (4/29/2025)American Tower (4/29/2025)América Móvil (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
There are 11 speakers on the call. Operator00:00:00Good morning, everyone, and welcome to Parx Resources Second Quarter 2023 Conference Call and Webcast. My name is Mike Crookton, Senior Vice President of Capital Markets and Corporate Planning at Parex. On the call with me today are Ahmad Moulson, Parex's President and Chief Executive Officer, Ken Pinsky, Chief Financial Officer and Eric Furlan, Chief Operating Officer. This quarter we are pleased to offer a new online video webcast in addition to the regular conference call telephone line for analysts. Please note that at any time participants on the phone can press star 1 to submit a question. Operator00:00:38As a reminder, this conference call includes forward looking statements as well as non GAAP and other financial measures with the associated risks outlined in our news release and MD and A, which can be found on our website or atsedarplus. Ca. All amounts discussed today are in U. S. Dollars unless otherwise stated. Operator00:00:57Please go ahead, Ahmad. Speaker 100:01:04Thank you, Mike. I would also echo your comments regarding our terrific sustainability efforts. Moving on, as Ken brief Sorry for that. Let's start again. Thank you, Mike. Speaker 100:01:35Good morning, everyone. Before I turn it over to Ken for an overview of our quarterly financial and operational results And to Mike for his comments on our 9th annual sustainability report, I'd like to share some opening remarks regarding the progress of our overall strategy. I will end the call with comments on the momentum that we are building in the North of Nianos as well as our updated 2023 guidance and outlook. In the first half of twenty twenty three, I'm proud to say that we continue to progress the 3 core pillars of our strategy. First, exploitation and technology. Speaker 100:02:10In Soca, we are seeing success from the horizontals that we have drilled And we are continuing to progress our waterflood plants. Also in the end of 30 8, we had an oil discovery in the C7 reservoir on one of our QuickHit wells where we have spot the follow-up horizontal well to maximize recovery. On the gas strategy part, We are making concrete progress in our discussions with Ecopetrol regarding the MoU and we also made the decision to expand the facility of in VIM-1 in 2024. And 3rd, on Big E exploration, we did drill and test the Chermoya well At VIM4 3, which was the first of the 3 big wells for the 2023 program, despite the well not delivering the outcome that we hoped for, We continue to see significant exploration upside potential in Colombia. We plan to spot 2 more high impact Big E wells in the second half of twenty twenty three, there's more to follow in 2024. Speaker 100:03:12With that said, I continue to be excited about our trajectory and the organic opportunity set that we have in Colombia for the next for both development and exploration. With that, please go ahead, Ked. Speaker 200:03:26Thank you, Ahmad. Despite production impacts experienced in the Northern Llanos at our Capachos block, the Q2 delivered strong operational and financial results that highlight the robust profitability derived from our Colombia operations. Funds flow provided by operations was US 155 million which was lower than prior quarters primarily due to decline in global crude pricing notwithstanding our production volume growth. Average Q2 20 20 feet production of 54,120 BOE per day was up 6% compared to Q2 2022 and up 5% from the prior quarter. Estimated average production would have been close to 58,000 BOE a day if it not for the temporary shut ins experienced at our Capachos block that were outside of our control. Speaker 200:04:13The net effect was lost production and drilling progress at both Capachos as well as Irelka, which overall had an estimated impact of approximately 3,500 or 3,800 barrels of oil equivalent per day on the quarter. Ahmad will discuss the annual impacts and the update to our guidance later in this call. Production per share increased by 14% year over year, which was supported by the higher production levels and the reduction of shares through our normal course issuer bid or NCIB. Year to date 2023, we have repurchased approximately 3,600,000 shares or approximately 3% of the float As a mechanism to return free funds, funds flow to the shareholders over and above our CAD0.375 per share quarterly regular dividend. We ended up the quarter with a slight working capital deficit, which we expect to turn to working capital surplus by year end Due to expected higher fund slope from operations, which will be due to increased production, higher benchmark oil prices And our narrower differential for our heavy crude stream. Speaker 200:05:18All the while capital expenditures are forecast for being flat based on our first half twenty twenty three run rate. With that, I will pass it on to Mike to provide a brief ESG update. Operator00:05:30Thanks, Ken. As part of our commitment to delivering superior ESG performance and disclosure, we're now pleased to release our 9th annual sustainability report which for the 2nd year in a row integrates the Task Force on Climate Related Financial Disclosure or TCFD. Some noteworthy achievements from our 2022 report are making progress against our 20.30 emission intensity target of 50% by achieving a 37% cumulative reduction in GHD emissions from our 2019 baseline and invested over $5,000,000 in the communities where we operate. As the company works to continuously enhance its ESG performance and disclosure, This year's report sets targets within 4 core priorities: Communities, GHD emissions and climate, People and culture and water, the hard work and dedication exhibited by our teams in both our ESG initiatives and reporting reflects our commitment to responsible resource development. I encourage those interested to explore the complete report which is now available on our website. Operator00:06:42And with that, I would like now to return the call back to Ahmad for some final remarks. Speaker 100:06:49Thank you, Mike. This is a paragraph I was looking at in the beginning. I would also echo your comments regarding our terrific sustainability report. Moving on, as Ken briefly mentioned, the company has faced social related challenges throughout the first half of the year at the Northern Ionis, which resulted in temporary shutdowns at both Capalcio's and Raubka. Through continuous engagement with stakeholders, community leaders and government officials, both assets have been fully operational since late June and we are exiting the quarter with positive momentum. Speaker 100:07:26At Capachos, we are ramping up production on wells already drilled, notably Capachos Sur III, Sur IV and Andida II, which are the main drivers to And at Orauka, we are optimistic about our multiyear drilling campaign and have made the decision to accelerate our program there by bringing a second rig onto the block. We are currently drilling a Rauka 15 well, which is at 11,500 feet and expected to TD in late Q3. And we are expecting to spot Araka 8, our 2nd big EOL in The trend 2023 program in the late Q3 as well. Turning to our 2023 guidance. The aforementioned shutdowns are estimated to have combined impact on the company yearly production of approximately 3,100 barrels a day. Speaker 100:08:17We experienced lower than expected production from, SOKA asset because of higher downtime, Both technical and social. When we originally said guidance, We widened it to take into account for uncontrollable above ground factors, which in my mind constitute an approximately 3 to 4 months deferment of our gross plans. Given the duration and the We are updating our 2023 average production guidance to 54000 BOE to 57000 BOE a day. Our capital expenditure guidance is also being updated to a range of $450,000,000 to $475,000,000 The tightening of our priority guidance is driven by the standby costs associated with the shutdowns and the increased spending at VIM-forty three exploration well, mainly because of the testing. Looking forward the remaining of the year, I'm encouraged by our company's momentum and the work our team is doing to build the strategy foundations for future upside. Speaker 100:09:27Having just returned from Bogota last week, Where we had extremely productive meetings with Ecopetrol and the relevant ministries, I'm pleased with the progress that we are making to leverage the value of or MoU. In Q4, we have plans to spot the 3rd and final Big E exploration well of the 2023 program at Eynos 1 hundred and twenty two called Arantes, which is a prospect under our MoU and located in the foothills of Colombia. This opportunity excites me because Imagine just the long term potential if the Western Canadian foothills had only been controlled by 2 partners. To finish, As a part of the ongoing Colombian peace process, a bilateral cessation of hostilities is set to come into effect today, which is encouraging and should help the long term stability in some of our key operating regions. My outlook is that we are well positioned for strong back half of twenty twenty three. Speaker 100:10:29Our updated guidance implies Q4 2023 production rates that exceed 60,000 barrels a day and that puts us back on track to deliver on our 3 year plan objectives. I want to thank our employees in Calgary and Colombia for their hard work and our shareholders for their continued support. This concludes our final remarks. I would like now to turn the call back to the operator to start the Q and A session for the investment community. Thank you. Speaker 300:11:16Our first question will come from the line of Anthony Linton with Barclays. Please go ahead. Speaker 400:11:23Hey, good morning guys and thanks for taking my questions. I guess maybe just to start on the capital budget side, Final cost for the Cura Moi Oil was $49,000,000 or about 10% of the original allocation. How do you think about that 10% Of the budget going towards Big E for the balance of the year and then into 2024? Operator00:11:49Thanks, Anthony for that question. When we look at the Biggie, We have roughly $50,000,000 allocated to Big E every year. And turmoil we had Cost overruns online and certainly the decision to case and test it added extra capital to that. One factor was this was 100% working interest well and most of our other wells forward, we're going to be 50% working interest. We're comfortable with that $50,000,000 allocation as we go into 'twenty four as a good proxy for how we'll allocate to Big E as we go forward. Speaker 400:12:25Got it. Okay. Thanks. And then staying on capital, you laid out a pretty comprehensive 3 year plan at your Investor Day in the fall. How do you sort of think about that guidance into 24 beyond, based on the updated guidance for the balance of the year. Operator00:12:41Anthony, I'm going to pass that to Ahmad to talk more about high level of strategy, how we see the business? Speaker 100:12:48Yeah, I mean, for me what we did having seen the disruption beginning of the year Is to we decided to deliver on our capital program. So What that does is we do spend the CapEx this year as per originally planned with some small variations, but The key is we deliver all the plan and we come out strong at Q4. Yeah, we don't get the full production this year because many of the wells now come end of Q4 or early 2024, but we that allows us to stick to The spirit of the plan, which is get the production that we set in 3 years and reduce the Capital as we go doing it. Lots of The upside will come from just normalizing things that we have now behind pipe and we're bringing into production. Speaker 400:13:56Got it. Okay. And then maybe just one more if I can. The lower effective Tax rate, what's sort of driving the change there and how long is that expected to kick around for? Speaker 200:14:09Ken? Yeah. Thanks, Mike, and thanks, Anthony. What drives it is reduction in production that we had in our guidance, lower Commodity prices in higher Vasconia just reduced taxable income expectations for 2023. But we're still on track on the capital program. Speaker 200:14:25And we did a reorganization the prior year as you recall, with the Caballero reorganization. And so our effective tax rate just comes down by about 3% For 2023 and 2024 it will be really driven by what your price expectation is, but if you kept it around $80 Brent, I see the same range as being accurate for 2024 as well, Anthony. And then after that, it's The range of broaden out because it depends on how successful we are with the exploration program, production levels and that sort of thing. But for this year and then going into 24, I'd use the same range that we stated in our MD and A. Speaker 500:15:04Okay, that's it for me. I'll turn it back. Thanks. Speaker 300:15:12Your next question will come from the line of Konrad Bereznicki with Peters and Co. Conrad, your line may be on mute. Speaker 600:15:27Thanks guys for taking my question. Can you hear me? Speaker 200:15:31Yes. Yes. Speaker 100:15:32Awesome. Speaker 600:15:33I just wanted to know how should we think about capital allocation in the back half of the year? Is the preference still NCIB after the base dividends or could there be some base dividend increases or specials coming? Operator00:15:46Thanks Conrad. When we look at capital allocation it really is on looking at holistically on the full year. We have a commitment on The dividend for the year and that annual dividend is really reviewed once a year. When we look at how we're going to return the 1 third of capital Back to shareholders, 1 third of the funds flow back to shareholders. We take our base dividend, we subtract that, we're buying back shares And you can see the first half of the year we actually returned about 37% of our overall funds flow back to shareholders. Operator00:16:19Our goal is 1 third. So we'll adjust that with pricing and realizations as we get through the second half of the year. As for special dividends, it's always an option. Our preference right now would be to fulfill the 1 third using the share buyback. Speaker 600:16:39Got it. Thanks for the color. Just one more question, just around the gas cycling expansion at BIM-one next year. Just wondering what does that mean for liquids recovery and Are you expecting for a liquid growth from VIM-one going into 2024? Operator00:16:54Great. I'll pass that to Eric Furlan. Speaker 700:16:57Thanks Mike. In VIM, just remind, we're producing about 20,000,000 cubic feet of raw gas Right now I'm making about 3,200 barrels a day of gross liquids. We are expanding the facility and the operations triple that. So you could say that operationally we could get liquids growth up to 10,000 barrels a day and recycling of up to 60,000,000 cubic feet a day. So that is our plan. Speaker 700:17:23We're expecting that to be online later in 2024. But we're excited about that opportunity. It's performing very well for us and we see it as Great opportunity in 'twenty four for us. Speaker 600:17:37Got it. Thanks. That's all I had for questions. Speaker 300:17:42Your next question will come from the line of Luke Davis with RBC Capital Markets. Please go ahead. Speaker 500:17:49Yes, thanks. Good morning, guys. Just curious if you can provide a little bit more context in terms of the drivers for the protests that caused the shut ins In the quarter, sounds like, Ahmad, in your closing remarks, you suggested there might be some mitigation factors going forward. But What's the likelihood of any of that continuing through the back half? And then as kind of a follow-up, just curious how much downtime you have built into second half guidance as well? Operator00:18:16Great. I'll pass that to Ahmad. Speaker 100:18:18Yeah. So we are seeing very positive momentum here. As I mentioned, the cessation of hostilities took place or should take place today. The President Petro was in Bogota, this week together in fact with our Country Manager, Daniel Ferreiro. And We are seeing completely change of the dynamic in the area like in our we are on the ground, We see how the politics are, how the community mood is and it's pretty encouraging to be honest. Speaker 100:18:57That's why we Took the decision to bring a second rig to Arauca. We are being invited by the civil society in that area as well as the government contribute to solutions, one example of that is already we grew our work for taxes program, which is for Perrigs to invest government Tax money into infrastructure in the area. So last year we spent $5,000,000 2023 we got $23,000,000 approved. So that's a big Overall, John. And last month, we've been invited by the Iraq different stakeholders to deliver an additional $20,000,000 of infrastructure works to remediate the damages and roads and infrastructure So we're becoming really part of the solution. Speaker 100:19:49So overall, I would say in terms of the government support, The overall social situation, I'm cautiously optimistic. Are there guarantees? No. So, we did take that The fact that there is always a large and predictable element to Colombia and thus we think we are reflecting that in the new guidance. Speaker 700:20:15Thanks, Sumedad. And maybe I'll just call From a downtime, to answer the downtime, we are expecting a more normalized downtime going forward of around 5%. That does incorporate some social disruptions, but not the major ones and reiterating Ahmad's comments, We do see a different situation right now in the Northern Janos and have some confidence moving forward with operations. We currently have 2 service rigs and a drilling rig operating in the area, fairly steady. And so we do have some momentum going forward here. Speaker 500:20:54Great. That's helpful. Thanks. Just one follow-up. I'm just curious if you can frame out, and I know you're probably going through the 2024 budgeting process now, but even just directionally, if you could frame out where you expect Most of the growth in the portfolio to come from? Speaker 500:21:10And if you could sort of frame that on a field by field basis, that'd be helpful. Operator00:21:16I'm going to let Dima talk about the overall strategy for 2024. Speaker 100:21:23Okay. Let me start by 2023, like if you start with CapEx and bring it back to pre shut in levels, That's a reasonable amount of growth. We have in general the quick hits like the Lucero one we mentioned That will also keep delivering reasonable amount of production. And we are seeing also very good Outcomes in Ioannis on the horizontals we've been drilling there and there's many more to come, including this year. What that does is it does sets us up for strong exit. Speaker 100:22:02So we mentioned the outlook of above 60,000 barrels a day for Q4. If you just average that and start from there for the year, you're already having reasonable growth year on year. On top of that, If I think about 2024, we have different places where we're investing. We are investing in VIMP, Although that will come to the end of the year, we are bringing 2 rigs to our Auca this year, but most of the production impact will come Next year, so there will be growth there. And in Llanos, we completed the catastrophe waterflood, but we are Late on the rejection volume. Speaker 100:22:43So we're ramping up and we expect to see more of the impact and in addition to the horizontals that will And of course there's the big E and we have big hopes for example, Arauca 8 while coming late This quarter that will happen next year. So it is the same thing as the gas and BIM or the gas strategy, you have the exploration, Also a lot of exploitation based on technology and based on getting the most of our assets. In fact, we're getting better than What we hope for when we started trying these horizontals and waterflaws and oil based mud, you name it. And these quick hits or Optimization of big fields like SOKA will only continue. Eric, do you want to add to that? Speaker 700:23:32Yes. Thanks, Ahmad. I mean, we have had a big shift in focus to I think about our focus in 3 mature fields that were very mature, producing about 1500 barrels a day a year and a half ago, They're up over 8,000 barrels a day today. So new technology, looking at all the opportunities the second time is creating a lot of Low risk opportunity for us to go forward in optimization. Speaker 500:24:03Just one follow-up for me as well. Just wondering if you can speak a little bit to capital and where you would expect that to trend going forward? Operator00:24:15Yeah, sure, Luke. I think what you can do as you want to look into the future, Still reference our 3 year plan. We're on track to deliver that and really set ourselves up well Going into the Q4, over 60,000 barrels a day and what we're aiming for is to improve capital efficiency And that means really higher production with less capital required as we've made these investments really in infrastructure over the last 2 years. Speaker 800:24:47That's great. Appreciate the detail. Thanks, guys. Operator00:24:50Thanks Luke. Speaker 300:24:52Your next question will come from the line of Roman Rossi with Canaccord. Please go ahead. Speaker 900:24:58Good morning and thanks for taking my question guys. Just regarding Beam 43, now that And the capital commitments to fill, are you expecting to relinquish the block or are you considering any other activities there? Operator00:25:18I'll pass that one over to Eric. Speaker 700:25:21Sure. Thanks, Mike. We haven't come to a final conclusion there, of course. We've just tested it well. We're understanding what we saw and looking at That play that we were chasing there an additional play, so we don't have a conclusion there. Speaker 700:25:34We don't have any immediate activity planned In BIM43, but we are looking at all the prospects yet. So that is still to be decided. Speaker 900:25:48Okay, thanks. And regarding reaching full capacity, Production capacity and CapEx was when are you expecting to reach that and does it depend on new wells or just existing ones? Speaker 700:26:02Go ahead, Eric. Thanks. For the most part or fully that is existing wells. We have 3 wells that have been basically shut in for the majority of the year so far. Andina 2, that's a very prolific well and the entire Capachas sewer compartment. Speaker 700:26:21So really, this is bringing volumes online with pump changes and final completions, And we expect to complete a large majority of that work in August. So we are expecting to go back up to capacity in the very short term. Speaker 900:26:38Okay, same time. And just a follow-up on that. So if I look at your The ER based development program, you are projecting like 63,000 barrels for 2024. So what's the exit rate for 2023? Operator00:26:57Roman, we put into our news release with our revised guidance that we want to exit above 60,000 barrels a day in Q4 and that really positions us well for that 3 year plan where we said we'd be at 63,000 as an average for next year. Speaker 300:27:27Your next question will come from the line of Kevin Fisk with Scotiabank. Please go ahead. Speaker 900:27:32Thanks for taking my question. The Brent Best Pony differential narrowed in Q2 and I'm curious how you're thinking about the differential going forward? Operator00:27:42Yeah. Thanks, Kevin. I think traditionally the best going a differential kind of you look at a 5 year average is probably been between $4 to $5 a barrel. We had it much higher at the start of this year. It was about $8 to $10 a barrel. Operator00:27:59And it's gone down and we've seen even some bids below $4 in the last couple of months here. Differentials as you know looking at Canadian differentials is very tricky to forecast. But we are seeing very positive things with the TMX or Dos Bocos in Mexico really moving crude out of the Gulf Coast, which is really the price marker for us. So we're forecasting it to be in this $4 to $5 as we go forward here for the rest of the year. Speaker 900:28:36Okay, thanks. That's it for me. Operator00:28:39Thanks, Evan. Speaker 300:28:41Your next question comes from the line of Samuel Chen with AllianceBernstein. Please go ahead. Speaker 800:28:47Thank you. Just a quick question. If you can help me to understand, how are we getting from the 54,000 this quarter To 60,000, I read your press release. We got Kapasha for about 2,000, arouka for about 1,000 a bit. You have the production declines at SOCA. Speaker 800:29:07But even if I add a mobile, we're not getting back to 60,000. If you can help me understand, that'll be great. Thank you. Operator00:29:15Great. I'll pass that to Eric. Speaker 700:29:18Sure. Thanks, Mike. The main areas for our production growth As I mentioned already, the Capachos area, that is essentially bringing the field back online. 2nd, of course, we've mentioned Arauca. Those wells as I talked about in our Investor Day, historically have capabilities of 5,000 plus Gross per day, so there's a lot of potential there. Speaker 700:29:43In addition, we have a very robust program underway in SoCa regarding the horizontal wells. So we talked a little bit about the horizontal wells we drilled. We're exploiting the Mirador reservoir there It has about 120,000,000 barrels in place, but we have not yet found a good way to produce it. We think we found that now. The horizontal wells are producing well above expectations. Speaker 700:30:06So that horizontal program in 34 replacing some of the program we had Means that we grow in 34 more than replaces declines and grows in 34 going forward. So We've highlighted the main areas we're focusing on. In addition to that, we still have the conventional development going on in Cabristero and Block 34 That continues to be stayed. We have some of the quick hits, Lucero. We are drilling that horizontal as we speak, almost in the horizontal zone. Speaker 700:30:37So we expect We have that on production shortly. We know there's oil there. We know it's very prolific reservoir that will be multi 1,000 barrels a day. So when we add it all up in addition to the key areas we've highlighted, and all the other program, that's how we get there. But the very short term catalysts, I would say, are going to be the Lucero online and just restoring Capachos. Speaker 700:31:00That in itself is going to be a very big jump for us. Speaker 800:31:07Thank you. So just quick follow-up, can I assume that the Roughly 3,000 barrels per day of sequential increase we're seeing from Q2 to Q1? This is just from the partial recovery. It's not related to any of those enhancement that you just mentioned at the last minute? Speaker 700:31:25Correct. We have not So far in the first half of twenty twenty three, our downtime in the Northern channels has been significant in the range of about 70%. And so we've been on partial production, and we're trying to get to that full production and we should be there in the next couple of few weeks. And as Matt alluded to earlier, we see a different scenario up in the area right now and in a different environment that we believe will continue to be able to continue operating with normal downtime and deliver those volumes. Speaker 300:32:06Your next question will come from the line of Orianna Kobold with balance. Please go ahead. Speaker 1000:32:12Hi, thanks for taking my questions. I have 2, if we may go 1 by 1, that would be great. And then first is a follow-up with regard To the horizontal drilling in Janus 34. Just to understand it and seeing that it has been successful and volumes continue to be Steadily going in Janus, like when do you expect to reap the benefits of this horizontal drilling program and when should we see what would be a Reasonable expected production growth in the area seen this horizontal drilling program. Speaker 800:32:50Eric? Speaker 700:32:51Thanks, Mike. Yes, the horizontal program in 34, so let me talk a little bit about What our expectations were and what we're seeing. Again, 120,000,000 barrels of oil in place of good quality oil, Trying a new technique to extract it, 1st horizontal well that's been on production for just over 4 months came on production over 3,000 barrels a day. We expected it to decline a lot more than it has. It's still producing about 2,500 barrels a day. Speaker 700:33:21So we've had payout in about 3 months. The second horizontal well has come online with similar type of performance and today we're in the 4,500 to 5,000 barrel a day gross Production from a couple of horizontals in Block 34. Both ourselves and our partner are very excited about this development. We have shifted capital based on the results to this horizontal program and are replacing this year in 2023. Now the impact of that is growth towards the end of the year in Block 34. Speaker 700:34:02So more than maintaining decline with a smaller number of wells and actual growth in production. So you're already seeing some of that benefit, a little bit of it. Like I say, the second well just came on production about a week ago. So you're not seeing the full potential. But going forward the exciting part is for us not only this program that's going to be 3 to 4 wells firm going into 2024, But where else can we apply this technology? Speaker 700:34:31We're getting better at it. We're drilling the wells more efficiently for lower cost And there are a lot of areas that we can use this technology to exploit even in SoCa and I wouldn't be surprised if you see this going into Thinner areas in the Mirador, possibly areas in the Paleocene. And so we're learning as we're going and getting better And it's exciting program for both ourselves and our partner. Speaker 1000:34:58Perfect. Thanks. That's very Clear and very encouraging for the area. Just one final one regarding seeing your cash position dropping below average levels, Of course, owing to the cash tax payments and so on, I just wanted to touch base to see if you provide like a Target cash balance or where do you see us as an optimal cash balance in of course the distributions to shareholders via dividends and buybacks For the remainder of the year. Operator00:35:29Great. I'll pass that to our CFO, Ken. Speaker 200:35:33Thanks for the question. We, the dividend and the buybacks are funded from the free cash flow that the generation that's generated from the operation. So I don't need cash on hand for that because we're pretty confident on what we're going to generate for The year and sure it's subject to commodity prices, but at the same time, we've been through lots of different commodity price scenarios in Colombia and it's a very profitable Business and we do have control over our capital discretionary, our capital expenditures. So, I don't look at our beginning cash balances Paying a dividend or anything like that. And where's an optimal? Speaker 200:36:10Well, we like that traditionally we run higher than A slight deficit. We do have a $200,000,000 line that we haven't drawn for 6 years with the banks. Don't expect to have to draw at this time either. But I think at the end of the year if at $80 oil in Vasconia and hitting our production midpoint of our production targets, We should build our working capital back up to that $50,000,000 to $100,000,000 range and that means probably $150,000,000 to $200,000,000 in cash Because included in that $50,000,000 to $100,000,000 is all our tax payable for that year for the current year that's paid in the following year. So cash is always ahead of working capital, if that helps. Speaker 1000:36:52Yes, perfect. That helps. Thanks very much. Speaker 300:36:57And with that, I'll turn the call back to Mike Crookton for any closing remarks. Operator00:37:03Well, thank you very much for joining us today and especially in this new format. We appreciate you being on the call and if you have any questions, please Feel free to engage us directly at Parex. And with that, we'll close the call and have a great summer.Read morePowered by