Parex Resources Inc.

Parex Resources Inc.

October 25, 2011 17:06 ET

Parex Resources Announces Current Oil Production of 11,000 bopd

CALGARY, ALBERTA--(Marketwire - Oct. 25, 2011) -


Parex Resources Inc. ("Parex" or the "Company") (TSX:PXT), a company focused on oil exploration and production in Colombia and Trinidad, is pleased to announce that net working interest production has recently reached 11,000 barrels of oil per day ("bopd").

Recent Highlights (post September 12, 2011 press release):

  • Signed a farm-in agreement to acquire 35 percent working interest on the El Eden Block in the Llanos Basin;
  • Continued successful delineation of the Kona field with Kona-3 and Kona-10 brought on-stream at a total production rate of approximately 2,500 bopd;
  • Signed a contract to import two modern and efficient drilling rigs to Trinidad, with anticipated drilling to begin prior to year end 2011; and
  • Increased current production up to approximately 11,000 bopd.

Colombia Exploration Update

On September 23, 2011, Parex signed a farm-in agreement with Petroamerica Oil Corp. ("Petroamerica") for the El Eden Block ("Farm-in"), which is located south-west of Block LLA-16 in the Llanos Basin. The Farm-in excludes the Chiriguaro discovery area, and the Farm-in is subject to approval by the Colombian National Hydrocarbon Regulatory Authority ("ANH"). Under the terms of the Farm-in, Parex has paid US$ 3.5 million for reimbursement of prior 3-D seismic costs and will fund the first 65 percent of an exploratory commitment well to be spud before June 9, 2012 to earn 35 percent working interest in the block. Including this farm-in, since entering Colombia in 2009, Parex has increased it net acreage in excess of 650,000 acres.

For the remainder of 2011 on Block LLA-16 (Parex 100 percent working interest), Parex will continue appraisal and delineation activity at Kona, Kona Norte, Supremo and Sulawesi. Exploration wells scheduled to be spud prior to year end 2011 are Merida and Java. The Merida location has been built and lease construction has commenced on Java.

On blocks LLA-20, LLA-29, LLA-30 and LLA-57 (Parex 100 percent working interest), Parex has identified several prospects and has begun the regulatory process to allow for civil work and drilling to begin in early 2012. In addition, Parex plans to drill on El Eden and Los Ocarros blocks during 2012, subject to receiving ANH recognition of the two farm-in agreements.

Parex has initiated a large 3-D seismic program that will cover 75 square kilometres ("km2") on Block LLA-16, 135 km2 on Block LLA-20, and 165 km2 on Block LLA-57. At the completion of the seismic acquisition program, Parex will have approximately 60 percent of the Company's 814,000 gross acres in Colombia covered by 3-D seismic.

Colombia Operations Update

Current production is approximately 11,000 bopd. A summary of the Company's current operations is provided below:

Current Operations

Formation Status
Kona-11 Mirador Drilled. Casing
Kona Norte-2 Guadelupe Drilled. Preparing to case for water disposal
Supremo-2 C7/Mirador Drilled. Logging
Sulawesi-3 C7 Completing

Following Parex' last press release on September 12, 2011, the Company has drilled and completed the Kona-3 and Kona-10 wells, which have added approximately 2,500 bopd to production. The Kona 10 well was drilled as a Gacheta development well with the secondary objective of evaluating the Une formation. Well logs indicated oil pay in the Une Formation and the well subsequently tested light oil on natural flow at rates up to 1,000 bopd. Structural interpretation indicated a better up-dip location for production in the Une formation so the well was subsequently completed as a Gacheta production well. A Kona appraisal well targeting the Une formation will be included in the 2012 drilling program.

Approximately 1 kilometre north of the Kona field, Kona Norte-2 was drilled with the dual objectives of evaluating the Mirador Formation and adding a second water disposal well. The well logs and shows of oil during drilling indicated the potential for oil pay in the Mirador Formation and consequently Parex expects to spud Kona Norte-3 during November 2011 to test the Mirador Formation and evaluate other prospective formations including the C7, Gacheta and the Une. Operations are underway to case Kona Norte-2 as a water disposal well in the Guadelupe Formation. Until Kona Norte-2 is on-line, Kona field production may be restricted due to the water disposal constraints.

On September 5th, 2011 the Sulawesi-1 well commenced production at a rate of 1,300 bopd through a temporary, flow rate short-term restricted facility. Parex is currently installing a long-term test facility for the Sulawesi discovery. The Sulawesi-3 well was spud on August 29, 2011 as a follow-up appraisal well to the north of Sulawesi-1 to evaluate the C7 Formation and the drilling rig was released on September 30, 2011. Parex expects to commence completion and testing of Sulawesi-3 with a service rig by the end of October 2011. The Company intends to drill a third well into the prospect during the fourth quarter of 2011, to be coordinated with the facility expansion.

On October 9, 2011, Supremo-2 was spud to test the potential up-dip of the Supremo-1 well, which produced from the Mirador formation at facility restricted rates of 500 bopd and 2,000 barrels of water per day. Parex expects to have Supremo-2 test results by the end of December 2011.

Parex estimates that average production for the three months ending September, 2011 ("third quarter") was approximately 7,030 bopd and that September 2011 production averaged 7,990 bopd. During the third quarter Kona field oil production was restricted as a result of constrained water handling. Further, Parex expects that third quarter sales volumes will be lower than production volumes as a significant portion of Parex' September oil production was contracted at a Brent crude reference price and has been recorded as inventory until the volumes were exported from Colombia.

Trinidad Exploration Update

In order to accelerate Parex' ongoing onshore Trinidad exploration activity, the Company has signed a contract with Tuscany International Drilling Inc. to import to Trinidad two modern and fit for purpose drilling rigs. Rig 120 is a new build 850 horsepower dual purpose drilling and completion rig and Rig 110 is a one year old 1,500 horsepower drilling rig that is being moved from Guyana. Both rigs are currently being shipped to Trinidad and subject to receiving regulatory approvals, will begin operations prior to year end 2011. Parex expects that the two new rigs will be used to spud a second Central Range Block ("CRB") Shallow exploration well and drill the Firecrown side track well on the Moruga Block. The Company plans to spud its first CRB Deep well following drilling operations on the Moruga Block.

On the CRB Shallow (50 percent working interest), the Cribo-1 well was spud on July 22, 2011 and drilled to a target depth of approximately 6,000 feet using an existing onshore Trinidad rig. The rig was released September 25, 2011 and Parex expects a service rig to start completion and testing operations during November, 2011. The final CRB Shallow commitment well, Mapepire-1 is scheduled to be drilled by one of the new imported rigs.

In preparing for the 2012 exploration program, Parex has now received environmental permits for Snowcap-2 and a new prospect Green Hermit, both located on the Moruga Block.

2011 Guidance Confirmation

In Colombia, the Company plans to continuously operate with three drilling rigs and one service rig. For the remainder of 2011, Parex expects to deploy its drilling rigs to: the Kona field, Sulawesi/Supremo, and exploration. In addition, the Company expects to begin operating two drilling rigs in Trinidad. Parex reiterates its previous guidance that the 2011 light oil production exit rate is expected to be 14,000 bopd.

Q3 2011 Release

Parex expects to release its Q3 2011 results following the close of markets on November 9, 2011. Parex will host a conference call to discuss these results on Thursday November 10, 2011 beginning at 10:30 am MST (12:30 pm EST). Media, analysts and investors wishing to participate in the call can access it by calling 1-866-696-5910, pass code: 1520456.

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 814,000 acre holdings in the Llanos Basin of Colombia and 223,500 acre holdings onshore Trinidad. Parex is headquartered in Calgary, Canada.

This news release does not constitute an offer to sell securities, nor is it a solicitation of an offer to buy securities, in any jurisdiction.

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 exit rate production; plans to acquire and process 3-D seismic; timing of drilling and completion; and planned capital expenditures and the timing thereof. In addition, statements relating to "reserves" or "resources" are by their nature forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions that the resources and reserves described can be profitably produced in the future. The recovery and reserve estimates of Parex' reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered.

These forward-looking statements are subject to numerous risks and uncertainties, including but not limited to, the impact of general economic conditions in Canada, Colombia and Trinidad & Tobago; industry conditions including changes in laws and regulations including adoption of new environmental laws and regulations, and changes in how they are interpreted and enforced, in Canada, Colombia and Trinidad & Tobago; competition; lack of availability of qualified personnel; the results of exploration and development drilling and related activities; obtaining required approvals of regulatory authorities, in Canada, Colombia and Trinidad & Tobago; risks associated with negotiating with foreign governments as well as country risk associated with conducting international activities; volatility in market prices for oil; fluctuations in foreign exchange or interest rates; environmental risks; changes in income tax laws or changes in tax laws and incentive programs relating to the oil industry; ability to access sufficient capital from internal and external sources; the risks that any estimate of potential net oil pay is not based upon an estimate prepared or audited by an independent reserves evaluator; that there is no certainty that any portion of the hydrocarbon resources will be discovered, or if discovered that it will be commercially viable to produce any portion thereof; and other factors, many of which are beyond the control of the Company. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could effect Parex's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (

Although the forward-looking statements contained in this document are based upon assumptions which Management believes to be reasonable, the Company cannot assure investors that actual results will be consistent with these forward-looking statements. With respect to forward-looking statements contained in this document, Parex has made assumptions regarding: current commodity prices and royalty regimes; availability of skilled labour; timing and amount of capital expenditures; future exchange rates; the price of oil; the impact of increasing competition; conditions in general economic and financial markets; availability of drilling and related equipment; effects of regulation by governmental agencies; receipt of all required approvals for the Acquisition; royalty rates, future operating costs, and other matters. Management has included the above summary of assumptions and risks related to forward-looking information provided in this document in order to provide shareholders with a more complete perspective on Parex's current and future operations and such information may not be appropriate for other purposes. Parex's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do, what benefits Parex will derive there from. These forward-looking statements are made as of the date of this document and Parex disclaims any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.

Neither the TSX Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • Parex Resources Inc.
    Michael Kruchten
    Manager, Investor Relations
    (403) 517-1733
    (403) 265-8216 (FAX)

    Parex Resources Inc.
    Kenneth G. Pinsky
    Vice President, Finance and Chief Financial Officer
    (403) 517-1729
    (403) 265-8216 (FAX)