Parex Resources Inc.
TSX VENTURE : PXT

Parex Resources Inc.

October 19, 2010 16:15 ET

Parex Resources Announces Successful Kona-2 Preliminary Drilling Results

CALGARY, ALBERTA--(Marketwire - Oct. 19, 2010) -

NOT FOR DISTRIBUTION TO US NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Parex Resources Inc. ("Parex" or the "Company" or "we") (TSX VENTURE:PXT) announces preliminary results for the Kona-2 well drilled on Block-LLA 16 in the Llanos basin in Colombia. Parex also provides an update on the exploration drilling program in Colombia, the award of an additional exploration block in Colombia and status of testing in Trinidad.

Colombia Exploration Update

The Kona-2 well on Block LLA-16 (Parex 50 percent working interest), reached a final total depth of 13,200 feet. Kona-2 was drilled to a bottom hole location at the Mirador formation level of approximately 625 meters south of the Parex Kona-1 oil discovery well to appraise the C7 and Mirador formations and to test the deeper Gacheta/Une intervals.

Kona-2 penetrated multiple objectives as programmed and encountered shows of hydrocarbons during drilling from the C7, Mirador and Gacheta/Une formations. The well was logged to its final total depth of approximately 13,200 feet using logging while drilling tools which indicate potential net oil pay, measured as true vertical depth, of approximately 130 feet consisting of 50 feet in the C7, 60 feet in the Mirador and 20 feet in the Gacheta formation. Subsequently, the well was successfully cased to allow testing of these potential pay intervals.

The drilling rig used on the Kona-2 well will be mobilized to the Company's next exploration prospect, Goroka over the following week. A service rig is on stand-by and is expected to arrive on the Kona location to test Kona-2 after the drilling rig has been moved and subsequently, to perform remediation work on the Kona-1 well prior to testing and completing that well. As previously disclosed in our press release dated July 21, 2010, Kona-1 encountered 82 feet of pay in the C7 and Mirador formations but could not be cased to the final total depth due to poor hole conditions. Due to the casing not reaching final total depth cementing of the casing could not be properly completed, preventing proper testing of each prospective oil pay zone at that time.

The testing program for both Kona wells is expected to take several weeks and an update of these operations will be included in the Company's third quarter 2010 release. Further Kona field delineation drilling will commence in early 2011 subject to receiving regulatory approvals and site preparation.

As previously disclosed by the Company, with the encouraging Mirador formation test results on Kona-1, Parex began to design and build a seven kilometre oil pipeline to transport produced fluids from the Kona location to a treatment facility and terminal to be located on the main paved all-season road. That facility construction is ongoing with first oil production from the Kona drilling pad expected to commence in late fourth quarter of this year.

Further, Parex has contracted a 1,500 hp light triple drilling rig to drill the Supremo exploration prospect on Block LLA-16. Supremo is programmed to drill to a depth of 11,900 feet and test the C7 through to the Gacheta/Une formations. The rig is currently being mobilized to the site. Drilling and casing operations are expected to take 45 days after rig up is complete. The drilling rig used on the Kona-2 prospect will be mobilized to the Goroka prospect which is programmed to drill to a depth of 12,100 feet and test the C7 through to the Gacheta/Une formations. Drilling time for Goroka is expected to be approximately the same as for the Supremo prospect.

On Block LLA-20 (Parex 50 percent working interest) Conoto-1 was drilled and cased to a depth of 8,100 feet. Wireline logs and mud gas logs identified reservoir quality sand in the C7 and Mirador formations, although we caution that nearby wells suggest that it is difficult on the basis of wireline log interpretation in this area to differentiate between oil saturated reservoirs and those that have been flushed by fresh water. We have identified several intervals that look prospective to be perforated and tested following completion of testing operations on the Block LLA-16 wells.

The next exploration well on Block LLA-20, Zocay-1, is scheduled to be drilled in December. The Zocay-1 well is programmed to be drilled to a depth of 8,700 feet and test the C7 and Mirador formations.

Parex expects that at least one other Block LLA-16 exploration well will be spud prior to year-end 2010 but will likely not reach total final depth until late January 2011. Further, Parex has been advised by the operator of Block LLA-30 (Parex 50 percent working interest) that the 2010 scheduled exploration well for that block will not likely spud until the first quarter of 2011. Accordingly, in 2010 we expect to participate in drilling six wells in Colombia versus the eight originally budget. The Company anticipates that it will enter 2011 operating two drilling rigs and a service rig in Colombia on a continuous basis.

Colombia New Exploration Block

The Company has received final confirmation from the National Agency of Hydrocarbons ("ANH") that it has been awarded Llanos basin Block LLA-57. Block LLA-57 covers 104,532 acres and lies immediately north of Parex operated Block LLA-20. The Company's bid terms for Block LLA-57 (100 percent working interest) were a Phase 1 work program of $10.1 million and a supplemental royalty (x-factor) of one percent over the base ANH royalty. Parex anticipates signing the block award contract in the first quarter of 2011. After signing the contract Parex is required to place a guarantee of approximately US$3.85 million with the ANH.

Trinidad Exploration Update

We had previously reported on June 14, 2010 that Firecrown-1, the first of three Trinidad exploration wells planned in 2010, reached a total measured depth of 8,701 feet and penetrated both the primary and secondary objectives in the Herrera Formation. The well was cased in to a depth of 8,400 feet to evaluate the potential of these prospective zones. Testing of this well has been delayed as regulatory approval has not yet been received. Snowcap-1 the second Trinidad Moruga Block exploration well was drilled and cased in the second quarter of 2010 and is also waiting on testing pending regulatory approval. Based on the Company's interpretation of wireline logs, mud gas, and cuttings samples, this well also encountered potential hydrocarbon bearing sandstones. A multi-zone testing program for this well has been submitted for regulatory approval. Although both Firecrown-1 and Snowcap-1 are ready for testing the Company has not secured a firm date by which the regulatory approvals required for testing these wells will be received.

The third exploration well of the 2010 Trinidad program is also awaiting regulatory approval and the drilling of this well could be delayed into 2011.

Preliminary 2011 Outlook

Parex is currently finalizing its 2011 capital expenditure and operating plans. At this time and, subject to regulatory and partner approvals, and future drilling results, Parex expects to drill up to 15-25 wells in 2011 with three to five wells allocated to Trinidad and the balance in Colombia on existing lands, excluding Block LLA-57. The average working interest is approximately 50 percent with an average drilling depth in Colombia in excess of 11,300 feet. Additional disclosure of our 2011 capital expenditure and operating plans is anticipated to be provided in our third quarter 2010 press release noted below. The unaudited preliminary estimate of working capital at September 30, 2010 is US$57 million.

Conference Call and Webcast

Parex will host a conference call and live webcast to discuss its third quarter unaudited financial results on November 25, 2010 beginning at 10:30 am Mountain Standard Time (12:30 pm Eastern Standard Time). Media, analysts or any other interested parties wishing to participate in the call can access it by calling 1-866-696-5910 (toll free in North America). No access codes are required. The live audio webcast of the conference call will be available through Windows Media Player by following the link posted under the Investor Relations, Events section of the Company's website at www.parexresources.com. Following the conclusion of the call, a link to a replay of the webcast will also be posted on the Company's website.

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 489,000 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's 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; timing of drilling and completion; and planned capital expenditures, the timing thereof; the method of funding.

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. The Company's drilling activities have not yet resulted in continuous production operations and recognized oil and natural gas reserves. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could effect Parex's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).

Although the forward-looking statements contained in this document are based upon assumptions which Management believes to be reasonable, the Company cannot assure investors that actual results will be consistent with these forward-looking statements. With respect to forward-looking statements contained in this document, Parex has made assumptions regarding: current commodity prices and royalty regimes; availability of skilled labour; timing and amount of capital expenditures; future exchange rates; the price of oil; the impact of increasing competition; conditions in general economic and financial markets; availability of drilling and related equipment; effects of regulation by governmental agencies; 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 Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture 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)
    or
    Parex Resources Inc.
    Kenneth G. Pinsky
    Vice President, Finance and Chief Financial Officer
    (403) 517-1729
    (403) 265-8216 (FAX)
    www.parexresources.com