Canadian oil and gas producer Parex Resources outlined plans to push production beyond 90,000 barrels of oil equivalent per day by year-end, following the June acquisition of Frontera Energy’s Colombian assets, executives said at the EnerCom Denver conference.
Production reached 54,000 boe/d in the second quarter, roughly one month after the Frontera deal closed, and climbed to the mid-80,000 boe/d range in the third quarter. The company expects output to exceed 90,000 boe/d by December, with 98% of production oil-weighted. Parex’s market capitalization stands at approximately $1.8 billion, while total debt is about CAD 900 million, taken on via bond issuance to fund the Frontera transaction.
The company targets a leverage ratio of 0.5x cash flow within 24 months, implying a debt reduction of roughly CAD 450 million. Parex has returned approximately CAD 2 billion to shareholders historically, including CAD 1.6 billion prior to recent corporate actions, and maintains a 6% dividend yield. The dividend has been raised for five consecutive years, with a planned allocation of about CAD 100 million for the current year.
Parex’s asset base spans more than 7 million acres, with access to over 10 billion barrels of original oil in place. The Eastern Llanos trend, where the company holds a 100% working interest across 1.5 million acres, currently produces over 5,000 boe/d. Four of six drilled wells in the trend have resulted in immediate discoveries, with incremental output of 2,500 boe/d expected through the remainder of 2024. Drilling at the 50% owned Magdalena mature field is slated to begin in September or October, with first wells projected to add 7,000 to 8,000 boe/d as recovery rates rise from 15% to 30% via horizontal drilling, waterflooding and chemical polymers.
A 50-50 partnership with Ecopetrol on the Piedemonte Foothills trend, which holds over 1 billion barrels of historical production, is set to spud its first well in autumn 2024. Management highlighted a supportive policy backdrop under Colombia’s newly installed administration, anticipating faster regulatory processes and improved fiscal terms for the oil and gas sector.
Gas pricing dynamics were also noted, with sales at about $12 per Mcf in Q4 2023 and spot prices in Bogotá exceeding $15 per Mcf. Parex allocates roughly two-thirds of funds flow from operations to growth projects, with the remainder directed toward debt reduction and shareholder returns, targeting a 15% annual return on core assets and a 3% to 5% foundation growth rate.
