Parex Resources Inc. (PXT) Earnings Call Transcript & Summary

Hi. My name is Michael Kruchten, I'm Senior Vice President of Capital Markets and Planning at Parex. Thank you very much for joining us in Bogotá today. We really appreciate you investing your time and resources to learn and really have a deep dive into the strategy and transformational opportunities available to Parex in Colombia. I just want to let you know, we do have an advisory. We are making forward-looking statements. Please look at that after the presentation. The purpose of hosting our first Capital Markets Day since 2014 is really to demonstrate how the business has been transformed over the last 2 years. We have 3 key elements that we want to go over today. One is the depth of the opportunities and the competitive advantages the Parex has in Colombia. Two, has really reinforced the value of our business. We have over 200 million barrels of reserves and exploration opportunities that really can provide a step change for us as we go forward. And third, how can we execute our strategic plan with increasing capital efficiency and delivering a growing free cash flow and consistent shareholder returns in the future. With that, we've built our agenda to address those 3 topics today. We're going to review the key components of our clubbing strategy and operations to then hold a question-and-answer at the end. Before wrapping up today, we are very honored to have Ecopetrol's EVP of Operations, Alberto Consuegra, join us also. But before we kick off, there's one thing I need to get off my chest. How should we pronounce this company's name? I hear different versions all the time. So just going back, the history of our company is we started off in Argentina with a company called Petro Andina and we were listed on the TSX and the ticker was called PAR, PAR. So we sold those assets, and then we started in Colombia with 4 exploration blocks and $100 million of cash, and we needed a new company name. At the time, we kicked around the usual names. Ken Pinsky lives on Lawrence, Crescent, so we thought Lawrence oil and gas. That's a good name. That didn't sound right. And then everyone else was saying, "Well, just call it Petro and insert your name. There's lots of those companies around. We wanted to be a little bit different. We wanted to name ourselves to really what we were at that time in 2009, and we were an exploration company. So we said it's par ex for exploration. So there you go, Parex, Parex, the real name is PAR EX, okay. Keep that in mind. Before we jump into the section presentations, I want to describe the Parex opportunity to you and how we've evolved since those early days where we just had exploration blocks. The Parex equity has underperformed since the end of COVID. I think there's multiple reasons. One, we are underleveraged. We had no debt in a rising price environment. A new government came in talking about higher taxes and focus on energy transition. Consequently, we had new social demands from our communities. Using blockades as a negotiation tactic. We also faced natural disasters destroying key infrastructure, bridges, cause and delays and the resulting performance not mean at market expectations. But as we look forward into 2023 and beyond, our focus is going to be on delivering the production growth, leveraging the investments we've made over the last 2 years with improving capital efficiency and reducing our maintenance CapEx; and third, executing high-impact exploration. We think this will justify valuation rerate. Just going to the 2.5 multiple is effectively a $25 share price. Getting into the average band of 3, is closer to 30. Plus we're delivering over a 5% dividend in yield and free cash flow to grow our dividends and share buybacks over time. This is why we feel we're poised to outperform going forward. And just as a data point of the progress we're making, this morning, we had a news release saying we're at the 60,000 BOE per day production mark. So today, we're going to talk about the future, how we're positioning Parex. We recognize that Columbia E&P has different risks compared to the mature North American basins. But we also want to characterize how Colombia, specifically Parex can provide outsized returns from our starting base of 60,000 barrels a day and 200 million barrels of proven plus probable reserves. What have we done? We've upgraded our inventory. We added 4 million acres of land, 25 new blocks in the last 3 years, including 18 this year. We're accessing new play types like foothills, liquid-rich gas that could transform our company. We're applying proven technology like synthetic mud and horizontal drilling to a basin that is underdeveloped, and we're starting from a valuation that appears like we're blowing down PDP. So I don't believe the equity reflects where we are and where we're going. And this is a disproportionate risk/reward profile. With that, I want to introduce you to our CEO, Imad Mohsen, to provide an overview of our vision and strategy.

Thank you, Mike. And I'd like to echo Mike's comments and thank you all for coming here, taking the effort. We'll do our best today of making it worthwhile, not only in terms of the data, which you will see a bit more of the logic behind what we're trying to achieve, but also about you'll get the opportunity on the margins of this meeting and tomorrow through the field visit to get to know the people, to get to know, interact with us, ask questions, please feel free to just get a feel for what makes this company so special. And I hope you -- for the ones who don't know Bogotá, you also managed to see how this country is fascinating place. For the people who don't know me, I'm Imad Mohsen, I'm the CEO of Parex. A bit of background, I'm originally from Lebanon. I started in France before working for Shell for 15 years. And then I run a private equity company in Europe. After that, I joined the Parex a couple of years ago. And if you ask me what makes you passionate, what drives you in professionally, I'd say it is creating value. It's just taking a great company, make it exceptional is taking any asset and creating additional value we can share with shareholders. And when the Board of Parex selected me, the mandate was go and make this company sustainable in growing returns to shareholders over time. And to do this, like, I could have gone anywhere. We had the BIG 'E'. We had -- the oil price was down, COVID was there. And I still decided to focus on Colombia's set of M&A. And I had every reason to do so. This is because Colombia is a place with unparalleled opportunity set. And I hope that would be part of your takeaway today. You will see an exciting portfolio of opportunities. You'll see, hopefully, we made the right choices to deliver on our objectives and recognize that we are already a long way in the journey towards delivering on our vision. So Mike mentioned that 2 seconds ago, promise made, Promise kept. In the very special year for Colombia, we are delivering the exit trade of 60k a day. And Eric will give you a bit more background. But just for the record, this is not a blip. We see that as a baseline from which we want to keep ramping up. This year, what have we achieved? We delivered record cash flow from operations, record free cash flow in [indiscernible]. Last year, we started the dividend for the first time and we're committed to returning all free cash flow from operations to shareholders -- sorry, free cash flow, yes. And we did that through an increased dividend, which is now CAD 1 annualized share as well as buybacks. What have we also done we started bringing successfully industry-proven technology to Colombia, stuff, which is routine elsewhere, but has not been always used here. And as you will see today, the strategy is already showing fruits through vastly improved drilling efficiencies, outcomes and improved recovery in rates. We are delivering in 2022 sustainable growth. We grew 23% our production per share. And more importantly, we are building strategically foundational -- foundation for a very sustainable portfolio and an efficient deployment of capital. We're doing that without forgetting our roots. We're laying groundwork for outsized return in [BOE]. We've grown our portfolio by Factor IV, and that allows to high-grade the portfolio and give us exposure to amazing opportunities. So what are we forward -- looking forward is to focusing on. But simply, we are transitioning from mainly a single asset company. Historically, SoCa delivered excess of 85% of the company's cash flow. And that's [indiscernible] to a Colombia-wide operator. We already made great progress in that as demonstrated by our operated production growth. Today, more than 50% of our production is operated by Parex. For the first time since 2015, we are taking control of our destiny. And why are we transitioning to a countrywide operation because there is value and diversification. It expands our portfolio across product types. Now we have -- in addition to -- we have oil, we have light oil, we have gas, we have condensate. We created a pipeline of projects that will ensure sustainable profitable growth. And that put together will give us the foundation to deliver growing shareholders' returns as I have been mandated by the Board. Our strategy has been deliberate in selecting -- sorry, what's happening here. Okay. So today with the help of the leadership team, we're going to talk to you about how we are delivering this strategy. Daniel and Mike, you saw him before, they will talk about the Columbia's competitive advantage for Parex, the ESG performance. How do we differentiate ourselves in gaining access to regions where others have trouble operating? Eric, our COO, will cover how we deliver safe, sustainable base operation, flawless execution and safety is foundational to Parex because it has good business. And what I like about what Eric does is how we -- he will define how we elevated the company execution world-class level. This is a bit of a journey to improve in a step-change way our capital efficiency and the profitability. KG and EM behind, we'll talk about the upside, big e-transformation upside and the gas opportunity in foothill. And we all work ultimately for Ken to deliver the cash to shareholders. He will wrap up with how all this combines robust finances and enables a growing return of capital. I am a type of old fashion person. I -- When I learned economics at school, the way I value a company is the NPV of all the cash you give to shareholders over time. So that's key of how we want to deliver that strategy to shareholders. So what are the levers we've been trying to use. One is technology, and again, it's proven technology as well. It's routine stuff. One of the reasons why I decided to focus on Colombia when I had the choice was the sheer amount of low-hanging fruits in there. Colombia oil and gas landscape, when I looked at the portfolio looked to me the same as North America, 1970s. We're talking about a place where people -- including Parex were spoiled by easy to produce prolific reservoirs. This left a vast amount of value to be unlocked. If you look at the history of the oil industry in the last 2, 3 decades, in conventional reservoirs, more than 80% of the reserve adds didn't come through exploration. They came through using very simple things like exploitation technologies, EOR, horizontal, advanced completions and stems and adding to the recovery from existing discoveries. This is a cornerstone of our strategy as well is bring that expertise into Colombia, where it's not being used and basically make easy money, no risk. So Parex has taken a deliberate strategic approach in terms of bringing the capability to Colombia equipment expertise in order to deploy these as Eric will show more detail. In terms of gas, we looked at the gas potential in Colombia, and it's a fantastic market. There's demand in here. The country is importing the marginal stuff from expensive LNG, as Katie will share with you. And frankly speaking, when we're going through our assets, looking for oil, we started to find lots of liquid opportunities. So these are -- can be extremely profitable, quick monetization as we are approving with [indiscernible] cycling project. It's strategically a good fit. It fits with the government energy transition. It fits with the regulation, the new taxes, the way they've been defined was to encourage gas. It has our profitability, it helps from ESG's standpoint. Now you'll get much more story about our partnership with Ecopetrol in the foothills from Ian and Katie but as well as our guests, [indiscernible]. In terms of exploration, we believe there is asymmetric big potential, and we're going after it. We're going after it in a responsible way. We put between 10% to 15% of our CapEx every year at risk. But we think that's enough to give us an opportunity every quarter, 2 quarters to come up with potentially game-changing results. It's a differentiator. I don't think any of our unconventional competitors can pretend to double or triple the size of the company overnight organically. In the last [indiscernible] as Mike mentioned, we managed to high grade our portfolio. We have now a fantastic set of opportunities that we can pick from. So as I was mentioning, we were deliberate to where we deploy our technologies. In some places like Fortuna, we stopped investing when the reservoir didn't response was apparent. But that doesn't mean that we didn't take that experience and not light it elsewhere. So you can see that we have do ideally our Cabrestero. We're doing efficient multi-zone drilling development in Capachos, something we saw already in terms of drilling techniques in Fortuna. VIM-1 is using that expertise as well when we're looking at step change in drilling. Now these places have the beauty of being able to be scaled up. So when you succeed in Cabrestero, which is the [indiscernible]you can replicate that experience in Llanos-34, Capachos first couple of wells, learnings are now going to be applied in all of our development program in the Northern Llanos. The VIM-1 is just cycling is just the first step into monetizing very exciting opportunities that you'll hear about today, orders of magnitudes larger in VIM-43 and the Foothills. You'll see here the map of Colombia and our blocks. And we now have what I'd call a diversified portfolio. I'm trying to explain to you how -- what the logic for deploying capital in each area. So if you take SoCa, Southern Casanare, which includes Llanos-34 and Cabrestero, the idea here was to build and invest in infrastructure for water flood and infill so that over time, and we're seeing these results already in Cabrestero, you get lower decline rates. Once you finish spending money on this in the next couple of years, it stays as a cash cow for years to come was very limited decline. In Magdalena, Northern Llanos, VIM, we have invested infrastructure and techniques will be foundational for sustainable growth going forward. But the beauty here is it is a step change in capital efficiency. I'll show you a bit more detail on that. And across the portfolio, we are going for now what we can -- the picks of BIG ‘E’ exploration opportunities that we see as for the cost of asymmetric award we filed. In terms of '23 budget that we released today, Mike will give you a bit more detail. But I would say we are looking for a 15% production increase year-on-year, and that's aided by our stronger exit rate in '22. We have one full-time operated rig by key areas. So Capachos, Arauca, Cabrestero and roaming rig for quick wins. And what that does is it increases capital efficiency, we've seen fantastic efficiencies by campaign drilling. But also, we think is a minimum level we can use right now to maintain and finish that build the foundation campaign started and keep some momentum. The average well -- average project payout we're looking at right now included allocated infrastructure costs operationally is 8 months since start of spend. So we're not building for the future well for getting in the short term. These are very profitable projects. the whole logic is to say we have built on the foundations in terms of infrastructure investment for lower future cat requirements. You do that, you minimize decline rates and the combination of growing production, lower decline, higher efficiency leads to exceptional free flow from operation blocks. On top of that, there are 3 BIG 'E' opportunities already in the coming year that our catalysts potentially for step change in the company. This is a bit more detail on the previous slide. So we have, in the area of Llanos 26/81. What I say is a continuation of what we started this year, go after areas where have low-risk car productivity and have these quick wins that pay out within months. These are the payouts by the way, including excluding infrastructure from first spend. In SoCa, we build the infrastructure and we are getting close in '23 to finishing the waterflood infill campaign, while starting it in Llanos-34. This is set to minimize decline rate. In Northern Llanos, we have their fantastic combination. Once this infrastructure is being debottleneck in fact, is in place, what you end up with are fantastic wells. We're talking about wells that typically go from 3,000 barrels gross in Capachos or 5,000 gross in Arauca. And which means that by the time you drilled well #2, well #1 has already paid back. This is how beautiful they are. And on top of that, these are wells that are -- have solid volumes behind them, good water drive, so you don't see much decline for years. This is the kind of outstanding growth I'm talking about. You move a company from $25,000 per barrel cost of capital to once the infrastructure is in place, and we're talking basically now, while in our algo Capachos, would or any of these places, including Brand sub-$10,000 barrel flowing barrel wells. You get half of that back from taxman. This, when you compare to our current valuation shows you why we still put CapEx in this place because it's extremely profitable with very low risk in terms of timing -- there's lots of information on this slide, but I do want to attract your attention first to the visual, the graph. What comes very apparent is our efforts on water drive, what they do to SoCa, which is Llanos-34 plus Cabrestero, they create a relatively flat profile. We're not chasing 10,000 barrels gross a year replacement of declining here. On top of that, you see that the growth in the other assets is very balanced between many different fields. We're not depending on one field or one area to drive that growth up. We've seen already the successes in what we drilled in '22. So we're replicating. And that gives us the base plan, excluding any exploration upside. Now the table below shows how that adds up. So you're growing at 5% a year base -- you leave $50-ish million a year to have that exposure to the disproportion outside through exploration, which made us what we are today. And with reduced maintenance capital, all that combination gives us growing and growing free flow from operations that we promised, and we still commit to deliver to shareholders. Now by the end of year 3, we end up with a round number that I know always puts a big smile on Ken's face of $1 billion of free flow we can give back to you. This is another way to look at it, CapEx going down reduce maintenance capital, growing production, and that improves the cash flow. I would say that it's noteworthy that if you look at the graph to the right, we have our cash flow per share at different brand assumptions. And like-for-like between '22 and '23, if you take any same price scenario, it's relatively flat. In fact, we managed through buybacks and growth to neutralize the tax reform effects. And after that, you can see that year after year, we're making a very robust company here. Ian will talk to you a lot about exploration, multiple asymmetric game-changing opportunities, and they will deliver potential catalysts every quarter and 2. In a way, if you ask me, what's the best time to buy per shares. I would answer that we -- the ideal timing will be just before the next discovery. So that's why we need to keep these potential upside coming. I think this day is a success. If you turn with these key takeaways. We worked very hard in the last couple of years to transition this company from a single asset company and any single asset company is poised to decline to a Colombia wide operator. We're doing that while delivering top-tier ESG performance. This is a differentiator for us. We are seeing already the flattening in our decline and that leads to lower maintenance capital requirements. We did that while we built a sustainable base for production growth while delivering step change in capital efficiency. And we're doing that with a bonus of potential outsized return from BIG 'E'. We'll continue to return 100% of free funds flow from operations to shareholders through dividends and buybacks. I know this seems an ambitious plan. And I hope that us delivering on the 600 exit rate that we announced today is incredible first step in achieving this. I don't want to move on to the next step without giving you a bit of an idea about the team that's helping lead this change. It is the people who are behind the strategy that really make the company a success. I'll start by Daniel, who introduce his team here. He's been with the company since his [indiscernible] He has a pulse on the ground. He's there. He talks to communities. He talks to politicians. He looks after safety, talks to the operators. He's there every day with his team making sure things go right. I would say that with his foresightedness, with his style, with his vision here in Colombia, he is managing to make us a real special company to operate. And Daniel didn't exist, I would know how to invent you. Ken, the founder of Parex been there from the beginning. He guided this company as a tight ship when it came to avoiding many troughs other sell into. And I think that steady hand in the finances and making sure that the shareholder returns are there, make sure we never exceed what's cautious is also a differentiator for us. Other companies talk about buybacks. We've done 4 years of it in a row before it was fractional. Eric was here from the beginning. And as I said before, I was really impressed how he embraced and executed the transformation of Parex to become an operator at world-class standards. We are not average in Colombia, and that's big time. Thanks to you, Eric. You met Mike today, he's our voice. He worked very hard on putting this together. Thank you. And Ryan, you wouldn't see him today. He's a kind of crazy exploration who will tell you, "Oh, let me drill this well. I'll find your oil underwater in cabrestero. And then he finds it. He is exceptional oil finder, he understands strategy, he understands short and long term when it comes to exploration. And unfortunately, he took the expression break a leg, too literally. So his home was now broken knee and being treated. And Ian behind is representing him. I can't think about anybody else to defend exploration as well as you would, Ian. Where's Josh? So Josh is our Senior Vice President, HR. And you'll get time to talk to them hopefully today, what people were often missed in terms of upgrading the company the way we did. You're talking about almost doubling the staffing category, bringing exception skill sets to Colombia, getting the right people in the right place and motivating the company to do that, Josh was instrumental in doing that. That -- without that, we wouldn't have been able to increase our operated capital multifold like in record time and execute safely and efficiently. Where's Katie? Here she is. She joined us a year ago. She has exceptional pedigrees from her time and [Sean Seat] is our VP New Business Development, and she'll be talking about the hotel opportunity and MOU with ex-petrol today. You might notice that Katie is the only new phase here in the exit since I joined Parex 2 years ago. I've been told that's not very usual for new CEOs in Canada. The reality is when I joined, I believe that the team with such accomplishments in Parex will and is now delivering exceptional outcomes and will keep surprising us in the future. So please get the time to know them if you don't. So I'll pass now to Daniel to talk to you about Colombia. Thank you, Mr.

Good afternoon, everybody. So yes, as Imad said, I'm Daniel Ferreiro. I'm the Country Manager and President of the branch in Colombia. I joined Petro Andina, the predecessor of Parex back in 2006. And I've been with the company since then. I worked for 3 years in Argentina, where I am originally from, and since 2009, I started working for Colombia, where we grew from 0 barrels a day to 60,000 barrels a day just now this week. I'm petroleum engineer by profession. I started looking after production and reservoir engineering, then came to Colombia's Ops Manager, moved to VP operations. And in 2020, I became a country manager. So what can I tell you about Colombia? I think Colombia is a beautiful country. I'm not from here, so I can say that it's objective. It has beautiful people. A sense of happiness in everybody that we meet -- and that makes it a nice place to do business. But Colombia also has some attributes. It's OECD member. It has strong institutions. And there is a balance of power. The President has a strong position, but the Congress and the judiciary system is -- provides checks and balance to the administration. And you get access to the free markets. Ana, who met before exports, our oil, we export our oil directly. And we negotiated with traders, with consumers anywhere in the world, and we have access to them. Now the country has been going through some internal conflict for many, many years since 2016, as this process started, and that was the time of the first [indiscernible]. And now we're getting into a new one. So we do see a good evolution for the country, and it's a good place to do business basically. When it comes to the oil sector, a few numbers there, would represent 3.2% of the country's GDP. But I think the most rising number is oil exports. Oil exports is about 36% of the country's exports. And when we put it together with coal, it's more than 50%. And regardless of what we hear in the media, the energy sector is key to the country's economy. We think the energy sector will continue to succeed in the long term in this country. I've been in Colombia for 13 years. As I said, we grew from 0 to 60,000 barrels a day. And we have done that through exploration and development of our own assets, either directly or through our partners. Today, we're the largest independent producer in Colombia next to Ecopetrol with three NOC. Now that wouldn't have been possible in a country, if you don't have the human resource. Today, in Colombia, we are 350 employees. I'm proud to say that we started as a handful of people. Today, we're on the handful of non-Colombian employees. Everybody is local here. And that is a must if you want to grow in a country. Now when I look back at what we have achieved over these many years, I think we have begun a successful operator. It's not only possible to become a successful operator by being safe and responsible but we have become well known for being successful in areas where other companies or other operators didn't succeed or at the end, gave up because they couldn't execute their projects. That is usually called to have a social license. So in Colombia, you can apply for an environmental license, you apply for contracts, social license is one you don't apply for. So you have to work for it every day. This -- at the end of the day, you are it from the communities that are next to us and sometimes even from the local authorities. They work for it on a daily basis and you're projected for ever. So what does it mean? It means creating a bond of trust and understanding with the people who are dealing with. Every time we do a new project, at the end of the day, we do want people to realize that or to know that they are better off with us operating there than without us. And it is true that all of our team makes an effort. And wherever we have the opportunity, we leave a positive footprint in the area. And it is not just an economic footprint. This is also about improving the quality of life of the people. I still see Colombia as a land of opportunities. The amount of opportunities and the diversity of opportunities here is incredible. And since this process started, access to land now is better. We are accessing land that 15 or 20 years ago or even 10 years ago was impossible for any operator to access. And we are doing that. And because we have a reputation that we built over time, we are the ones that can execute those projects. I'm sure that we can be successful where we or won't be. And I think we can do it better than anybody else in the country. Now how do we operate in Colombia? I think there is -- there are 2 elements you have to deal with is how you deal with the administration, including Ecopetrol, as NOC and also how we deal with communities. So first, I'll talk about administration. And you know, there has been a change in administration, but also in change in direction in the administration. What we see is that actually, there is a lot of overlap of interest between the current administration and as an operator. I mean the administration wants us to deliver on the contracts that we have, we were in for that. And it doesn't matter if it's exploration or development, they want us to fulfill our contracts. They also want us to maximize reserves or to maximize recoveries. Well, we also want to do that. Ordering horizontal wells or start the new ore projects, we're starting a recycling project in the lower amount. And then this government is a lot about bringing progress to areas of post-conflict. Well, we operate in areas of post conflict. So at the end of the day, we see -- there are lots of coincidence between the wishes of the current government and what we do and what we have been doing for many years here. And when it comes to the environment, our ESG, we started trying to be very efficient when it comes to our energy matrix. So we connected our fields to the grid -- we are geothermal, we are solar. So we are doing exactly what the -- what this government also wants. But we are also targeting gas. We see gas as the key element for the energy transition. Well, it's also a key element for our business plan. And especially when we target gas in areas that comes with condensates or liquids because it makes them a lot more profitable projects. Overall, now you will see constant talking sodas EVP from Ecopetrol. I'm proud to say that I believe we're a partner of choice for Ecopetrol we execute projects for them in partnerships with them. And because of that, we have access to new land, but also to infrastructure. Maybe last but definitely not least is how we get our projects done on the ground. It's all about engaging communities in our projects. And maybe there are a few steps with the projects happening first communities expects you to give them jobs employment. Well, for nonqualified position, we do it by law. But for qualified positions, which we usually don't find on the ground, we train them, and then we put them on our teams toward the fields that we operate. You also expect goods and services. The easy part is, you hire pickups and you hire catering services. Well, we go beyond that. If there is a welding shop nearby, we use them to do [indiscernible]. And eventually, they will grow into becoming certified welders for our operations. Committees also expect social investment. And we also do that. We do house improvements with the productive projects. But again, we go beyond that. We have projects where we provide clean water or we provide clean energy for the communities. It is very common that in the areas where we operate, schools are not tied to the grid. So we have a special line of projects, which is energy for all. We put solar panels on the schools. Now they have electricity. They can use computers. And again, another key element that comes from the previous administration has been worked for taxes. If you've heard of that, but it's a mechanism that the government put in place or basically dollar for dollar instead of paying the income tax to the government, you apply to execute the project in an area that has to meet certain conditions. The key condition is it has to be a post-conflict area. Again, what we operate. So we became the first oil company to execute ever works for projects. That is thanks to Rafa, they are sitting in the back, which you can talk to him later on. But work for projects allows us to do infrastructure, which means roads allows us to provide access to fresh water. This also allows us to do educational projects and health. And it's a major thing. This year, we were assigned $22 million worth of taxes to be invested in the community and we get to do it. Why do we get to do it because everybody sees. We are not corrupt. We are efficient. Every dollar that we invested is truly invested there. The people that execute the projects are the same people that build parts and build roads for our operations. So this is the same quality of personnel that is dedicated to invest basically the government's money. Now this is all good. But hiccups happen, and I think you saw them in the last couple of press releases. We have an issue in Southern [ Casanare ] with locate there limited our production. And we also have recently an issue in the [indiscernible] in Northern Llanos, where we had to shut down Capachos. We only opened it up again a few days ago. Now these things happen, but there is a positive side to everything. With the relocation southeast scenario, I think with the change of government, there has been higher expectations and more pressure negotiating with companies. And what I'm happy with is we didn't kick off the blockades in the area started with a nearby operator. It affected all of us in the area. But our relationship with the local community has meant that in our municipality was the first place where [indiscernible] was lifted. And that started also to spread around until all the locations were lifted and we agree how to negotiate the solution. It's not only us and the people blocking us, it's us, the local authorities, some politicians and national authorities that can grant the process that we're going through. I'm confident we reach a sustainable solution there that will last for long. When it comes to Capachos, we shut down because of security incident. In that area of the country, there are 2 gorilla groups that are basically that were at war between themselves and basically as an operator, we are in the middle there, and that was the reason we had to shut down. The priority for us is to protect the life of the people that work for us. So we thought at that moment that the security situation was escalating. We decided to stop. And then we did many meetings, minister of Defense, Minister of Interior, [indiscernible] man in the area. And I just came from the field because yesterday, we did a security council with the governor with the local major representatives of all the authorities, but also the community and everybody was really happy that we were starting the operations again. When we shut down, 400 people were left out of work, 80% are local. So the impact in the economy is immediate because we prioritize local labor local loosened services. What I mean with this is hiccups may happen -- and we are trying to incorporate that in our planning for next year when it comes to delivery of production. But I do see a sustainable future. I do see 2023 that's going to be more stable in the last few months that we have this year. I think yes, that's it for me. This is short video. It's -- I think it's evidence of what we do on the ground, how we deal with our communities. You're investors so you are representing investors, so you should take a piece of it. If you don't get to see it tomorrow. So -- thank you. [Presentation]

Thank you very much, Daniel. As you can see, ESG and particularly social is very fundamental to Parex and we think it's a competitive advantage for us in Colombia. When we started the company in 2009, we knew that would be an important plan of our business. We actually had our first social response build report published in 2011 and then it was called CSR. We certainly have evolved that from CSR to ESG to include environment, governance and human capital. But being a Colombian company, as you saw, will always be fit for purpose with us, have a significant focus with improving the lives of our stakeholders, the local people that you saw in that video. And this is really going to help us move forward and execute our programs going forward. I do think that Parex is a unique offering. We provide Brent-priced crude exports, conventional exposure, exploration upside, emerging market traits, they are framed through strong governance. This slide provides the progress of our ESG journey since 2019. And something I want to highlight, Daniel talked about the work for taxes where we can provide a direct impact in the communities where we work. Not only that, where do we -- our offices are, where we live, the communities given back such as installing a burn unit in Bogota, putting in innovation fellowships at the University of Calgary. We're making step changes with new energy sources like geothermal and solar panels. Energy sources that are actually reducing our total cost of energy in our operations. And finally, we're being recognized in ESG indices like Jansen. The advantage of being a conventional oil producer is that our production is efficient and requires low rent usage. In 2019, we set our greenhouse gas emissions target of a 50% reduction from its baseline. So far, we've achieved about 65% of that goal. The key initiatives, reducing flaring, adding gas processing facilities, or reinjection, electrifying our key facilities from the National Grid, which is 70% hydro, connecting fields to pipelines and reducing our trucking. And for the next phase of reducing our emissions. We're going to add more gas processing facilities. We're going to attack methane emissions, and we're going to be adding gas production. The point of this slide is really to demonstrate our ESG leadership. There's a bunch of scores here, and I'll just point you to the S&P Global score. We've gone from 16 to 60, and it's hard to figure out, is that good or bad. While being 6 to have a score of 60, puts us in the 85th percentile of roughly the 100 companies that S&P covers. Now I recognize that the prominence of ESG has shifted greatly over the last 5 years. 2018, we didn't talk about it at all. 2020, '21 during COVID, it's probably on the second page of our presentation and many of our peers. This year, with higher oil prices and returns of being the focus is shifted back to the end of the presentations for most companies. Now I want you to think what's the right analogy of ESG and how does it fit into our program. I think the best way to think of it, it's almost like personal hygiene. It's really noticeable if you don't do it. And that's why we need to keep doing this for all the advantages it gives us. Now in summary, and tying back to our strategy, the key ESG message is it's a real lever for all of our stakeholders, from shareholders to government, to the employees, and most importantly, the communities where we work. Now I'm going to move into the '23 budget that we released this morning. The headline messages production midpoints $60,000 a day, something that we reached this week. CapEx of $450 million which is $100 million lower than our expected CapEx in 2022, and that includes a $45 million carry for the Northern Llanos. So at $80, it's roughly $700 million of funds sold from operations, and that would roughly leave about $250 million of free cash flow that we can return 100% to shareholders. A key focus since 2011 for Parex has been -- or 2021 for Parex has been to increase our operating activity, controlling our destiny, as Imad said, I want you to note that 75% of our CapEx is allocated to operated blocks. And now we have over 50% of our production coming from operated blocks. It's higher, probably about from 2/3. Now looking at the capital itself, I think it's important to look, we've reduced our capital approximately $100 million from this year. And our production is actually going to be on a year-to-year basis, 15% higher. And if you look at it from a per share basis, that's greater than 20%. And I think this starts to demonstrate that our capital investments since 2021 are delivering returns. For example, in Cabrestero in Block 34, the amount of CapEx is starting to roll over. We are going to have lower declines, installed infrastructure and generate significant amounts of free cash flow. You can see that the majority of the CapEx is actually on development activities, and that's where we have discovered fields. Our investment in the carry capital and facilities are going to pay dividends as we go forward, reducing our capital cost and improving our capital efficiencies. And then with Big E, we're targeting liquids-rich gas and oil and Roka. Now for production, you can see that we're passing our all-time high production from 2019 with substantial growth. Year-over-year, the production growth is diversified. We have over 7 fields, providing more than 1,000 barrels a day of growth. We view this as low risk and achievable, demonstrating our strategy of diversifying from 1 key asset. With the 2022 election behind us, we believe that the social downtime that we experienced will be reduced. As Daniel explained, the work that we do in the communities is really going to help us improve on that and deliver our production guidance. Now we've included a low end of the range being 57,000 that reflects the possibility of higher-than-anticipated above-ground downtime. And that's not to do with subsurface. We've also added 2% extra downtime to our overall guidance for the 60,000 midpoint. Now the tax reform, we've considered and we've included it into our analysis. Since the election earlier this spring, Parex shareholders have faced a great deal of uncertainty, what would be the new impacts of the tax reform on the oil sector. Fortunately, we now have certainty as the government has passed the reform. Our initial analysis indicates the net impact for 2023 at strip pricing of roughly Brent $80 to $85 will be a 30% to 35% effective tax rate. Although our cash taxes are higher going forward, Parex is able to generate strong netbacks compared to many North American producers. Overall, Parex has gone from likely the highest netback -- cash netback to still being in the top half of the regime. This is an environment where we can succeed. I've also done a like-to-like comparison just what the -- what we think the actual type numbers will be a forecast of our funds for this year. And the overall average this year is roughly $100. What would it be like in this tax regime going forward next year? And with the reduction in our capital and growing our production 15%, we can generate similar amounts of free cash flow that we can return to shareholders. If I do this analysis at $80, it's even more compelling. So in closing, with production growth, lower CapEx, higher efficiencies. We are able to deliver this free cash flow to shareholders consistently into the future. Now we're going to have a short break. And if you have any questions online, please submit them to investor relations at parexresources.com. Thank you. [Break]

Okay. Good afternoon, everyone. You've heard my name a few times. And Matt mentioned me. My name is Eric Furlan. I'm the COO of Parex. I've been working with many here for over 20 years. I started working with this group back in Petro Andina, I'm sure some people remember those days. I started my career with Chevron, both in Canada and internationally, and then started working with this group and I've been with the same group for about 20 years now. We've seen this slide a few times today. People are talking about diversification. I'm going to dive into a little bit more of the detail behind this and show you not just the numbers, but how we're doing things. And we'll talk about the diversification and where we've had success. The key takeaways as been said before, we were known as Block 34 company, non-op. We're now more than 50% operated. All of our growth that we're projecting is coming from operated assets. And I'm going to give you a couple of themes to think about as I take you through this presentation. One is access. Our competitive advantage here is a lot of what Daniel talked about, accessing areas that other people can access. The other theme that I'll highlight as I go through this is technology. And I'll show you some key examples of what we've done with technology to drive better performance out of all of these assets. And we do it all in the frame of safety. Safety is paramount. In the way we do our operations, we focus on that. We are a top safety performer and strive to continue to do so. I'll highlight on this slide, up in the Magdalena Basin, the 2 most green areas, not the most northern one, but the one down. That's where we will be visiting tomorrow. And I'll talk a little bit about why that area is important to us. There's a few key ways in which we're trying to achieve our goals. And what I'm talking about is really the work that's underway to achieve what's in our budget. Really, Biggie is not in our budget. So what I'm talking about today is what we consider to be our main focus. And there's 3 real pillars there. One is get -- maximize what we can get out of all of the assets through EOR, that amounts in areas like Solco, for example, that has over 1 billion barrels on that whole trend in very high-quality reservoir, getting all we can out of that. Exploiting the assets, the most we can, getting everything that we can out of the assets today, accelerating production and flattening the declines. And then finally, we'll talk about gas cycling and that exciting opportunity not only for the project that you'll see tomorrow that is underway, but many projects to Parex has coming up. It's an exciting growth area for us. So I'll start off talking about Cabrestero, what we've done in Cabrestero. Those of you that have followed the stories for a lot of years, probably known Cabrestero is our swing field. We used to develop 1 or 2 wells there here and there just to kind of keep production at 4,000 to 5,000 barrels a day. And in 2021 and especially 2022, we started developing the field in earnest. And what we did there was we focused on waterflood. You can see we were focused on waterflood exploitation, expanding the facilities and investing now to provide a long-term stable base, low decline asset. And this picture really shows the results of that. You can see on this slide, we used to have that -- where we used to produce Cabrestero in that big growth that started in 2020, '21, '22. To a large extent, it was a change in our philosophy in our company to go after development in more of a campaign style and achieve everything we can of the assets. This slide actually hasn't been updated recently. We just recently surpassed about 16,000 barrels a day in Cabrestero. And how we did that, we did that with waterflood. We did that with continued exploitation step out of what we thought existed and found more. We did that by finding new zones that in some cases, we didn't even know existed. And in a lot of ways, you can see the old GLJ assessments of reserves, and Imad mentioned earlier that a lot of the reserves over the last 20 years have come from getting more out of existing fields, not new discoveries. Well, this is a great example of building on that. So you can see today, we're doing about 16,000 barrels a day from a field that we used to have as a small swing field and continuing to grow, and we have a big program in place for next year also. Big investment, shallow decline and then for years to come, a big cash flow generator for Parex. And then, of course, we've got Cabrestero big brother to the North, Block 34. And to a large extent, what we're doing in Block 34 is moving forward with a lot of the things that we've done in Cabrestero that is expansion of waterflood to flatten declines and pressure support areas. That is already underway, and there is a big focus to that next year. Debottlenecking facilities. The theme here is to take the 40 years of production and bring it forward. So we produce it now. I don't want to produce for years, process the reservoir more quickly, cycle it more quickly. find those new opportunities. In Block 34, there's about 120 million barrels of oil in the Mirador reservoirs that are hardly exploited at this point. And we're going to try to exploit that using some new technology not new technology for the world, but for Colombia using horizontal drilling to try to get more out of those pools. Moving north into the Northern channels. One of our most exciting areas. When I show you this and show you some of the details, the first question that will come up is why does this even exist today? Why do these conventional high-quality reservoirs exist in this year? And why weren't they depleted in the 1970s or '80s like they would have been in Canada. There's 2 reasons. One is access. So Daniel went through a lot of detail on how we gain access, how we build that social connection and trust. That is paramount to this. The other part of it is it was a technically challenging place to operate from a drilling perspective. When we first got into Capachos, people were talking about $50 million wells. We just drilled our last well of $14 million, and we think we can do better. Multilayer reservoirs, very prolific, very high netbacks, very favorable royalty regime here and debottlenecking facilities. When we took over Capachos, we had 2 Capachos was a field that was found 20 years ago. It had 2 million barrels of recovery, and it was shut in because of access issues or inability to execute. We started executing in earnest in about 2018, '19. We produced 9 million barrels from there since then and are currently at peak rates. That's the excitement of this area. Getting into a little bit more detail, what do we love so much about Capachos multi-zone, okay? I highlight the Andina-1 well. We decided to do a test on the Mirador in that Andina-1 well. That well was making 2,500 barrels a day of oil still after accumulating over 3 million barrels of oil. And we tested -- we wanted to test the Mirador to see its productivity, and we tested it at 6,800 barrels a day. That's the kind of productivity you see in these single zones in this area. That's the same kind of productivity we saw in the lower zone when it first came on production. We actually put this well on production at that rate because we're going to test it long term to learn. You can see we've just started our recompletion campaign here. We've got about 6 more recompletions on existing wells. In addition, we have a development campaign over the next several years, an exploration campaign that will have about 6 wells in it, 2 of which will be next year. And all of those wells also have the same multiple zone opportunities. There's a lot of potential for near-field exploration. And again, it's the excitement of these wells that drives us to this area. Arauca, we're just going to be -- we've started operations in Arauca from a civil construction perspective, but we'll be moving our first rig there very shortly. Arauca, call it, the big brother of Capachos, we've loved Arauca for a long time. We're excited to be there with our partner, Ecopetrol. Again, here's the field, 3 zones were -- 3 wells were drilled. This would be about 40 years ago. They produced 10 million barrels. No pumps were installed and you wonder why does this exist today? Three wells that penetrated some of the reservoirs and didn't even access most of the pool, recovered what would be in today's market, $0.75 billion worth of oil. It exists because difficulty drilling and access. And we've already proven we can operate in this area with the access. And I'll show you later how we're advancing our drilling taking those wells that people would have thought would have cost $50 million and taking it into the low teens. That's what we're trying to do. In Arauca, the only reservoir that we think could be one of the most interesting hasn't even been penetrated by any of the historic wells. So that will be a fresh penetration. Again, highlighting a very high productivity the wells that were tested and produced in the past would have produced 5,000, 6,000 barrels a day from single zones with Parex producing strategies. So again, this is the area that -- this is the reason why we love this area and want to put so much effort into getting into this area. Let's talk about some of the technology advances, especially in the area of drilling. One of the big things that we've done in the last couple of years is to bring in synthetic mud, not only bringing synthetic mud, but bring in all the technology from a Canadian vendor that allows us to use it, recycle it and handle it correctly. Those that are familiar with synthetic might now the problem is what do you do with it after. Well, we process it all on site and reuse it. Highlight a couple of wells. And I picked these 2 because Capachos and VIM were kind of known to be 2 of the most challenging areas to drill. You can see our latest well in produce. We got to depth in about half the time that historic wells have taken us. When we first started here, we thought wells to reach the CDO res of our top would be in the $20 million range. This well reached that depth for $6.6 million, and we think we can further optimize that. That is the step change that we're talking about applying throughout Colombia where it's applicable. Capachos, we just set our pacesetter well. And these are not one-off wells. We believe it's this technology that's making the difference, and we can repeat it on every single well going forward. In fact, we think we can improve upon it. So the next steps to this will be even going further, looking at casing sizes. How can we optimize this? I could have brought a Cabrestero, Cabrestero chart of here also. We just drilled our 3 best pacesetters in Cabrestero we knocked about 30% off of our drilling times there. So even though there's a lot of talk recently about inflationary environment, our well costs are getting substantially lower as time goes on. Inflation is in Colombia, but we more than surpassed that with technology. You'll see that VIM rig, when we go out to the field tomorrow, the rig is on location, so you will be able to see that. Switching gears, talking about some of the short cycle opportunistic ads. So when I talk about short-cycle opportunistic ads, I'm talking about existing pools where we have what would be classically known as those old infill and exploitation opportunities. So the beauty of these are the facilities and infrastructure are in place. We pull a rig in, we can do it quickly. We can get the production online. Here's an example of our focus this year. It was Block 32 and Block 40. This is a combination of those 2. Those are 2 blocks that we focused on this year. We had a baseline of just over 1,000 barrels a day through infill drilling, recompletion facilities optimization, you can see we're up to about 7,000 barrels a day there. This program is actually already paid out. before the year comes to an end. So we've got all our money back and now we're at 7,000 barrels a day. So that was 2022, 2023 will be about Block 81 and Block 26, and we hope to repeat the success there. Now we'll talk a little bit about them, and I'll talk about them as a project in itself, but also the future and where it could lead to. One of the pillars I talked about was getting the most we can out of our reservoirs. And so we're chasing gas reservoirs where we are that are very liquids rich. These are reservoirs that have 220 million, 240 barrels a million of condensate a highly valued product. And in blast we're just starting up our first gas, high-pressure gas reinjection scheme. Gas reinjection scheme is meant to maximize the recovery of those liquids while we put infrastructure in place to allow us to more efficiently sell the gas into the market at a later date. The project itself is exciting for us. But it becomes really exciting when we look at the entire foothills trend that we're looking at with our partner with Ecopetrol and into Janos Norte, where we can also use this technology to increase oil production. La Belleza 2. I'll talk about this. Again, this is multiple technologies. So we're doing gas injection, but we also changed this well to be a horizontal well using oil-based -- using synthetic mod to drill the top section and through the main reservoir zone. We drilled a 2,000-foot horizontal well. And that horizontal well has capabilities that are exceptional. You can see we tested the well at almost 40 million a day and 7,500 barrels of liquids. It's almost 15,000 BOE a day, and that was at a 10% drawdown. Clearly, we don't have a facility on location that can handle all this fluid. We are going to be initially limited to about 20 million cubic feet of gas processing. We're already working on expansion plans. And when you're there tomorrow, you'll see that the facility on site already has all the flanges to allow us to double the facility, which is what we're currently working. But again, exciting project as we learn the high-pressure injection. So how have we done all this really, we've built the capabilities in-house with key staff additions, okay, in both the drilling technology, EOR technology. We work with our contractors to bring the level of their game up to what we want. So we take rigs and we modify them and build them and change them the way we need them to deliver the results that I showed you that we delivered on many of these wells. And then we preorder all of our long lead times to make sure that we can execute the program that we have in front of us without delay. And that really comes together in replicating our success. I'm not going to go through this slide, but you can see that Capachos streams into the next phase of Capachos and Arauca, Block 34 and then VIM-43 in the foothills. And when Ian takes you through the exciting part of the exploration portfolio, just remember those key concepts, it's access and technology that's opening up our ability to do not only the development that I'm talking, but also feed into the exploration. So in summary, I believe our portfolio and what Mike showed you, that is based off our existing assets and this development portfolio is got the depth to drive the growth in the organization. And now Ian and Kate are going to come up and talk a little bit about what the opportunities are beyond that, beyond our current base plan. Thank you very much.

Thank you, Eric. Hello, everyone. My name is Ian Zapfesmith. I'm the Vice President of Exploration here at Parex. The next few minutes, Katie and I are going to walk you through the exciting opportunities we've got on the exploration side. All right. So I started with Parex in 2008. I was actually part of the team that brought us into Colombia to begin with. All right. And when we got there, what was exciting was we're in a good situation where we started out with 4 blocks. There were regular mid rounds that were going on with the ANH every couple of years. that we're ensuring that we had access to new prospects, new opportunities. Unfortunately, as many of you may know, in 2014, they stopped having those bid rounds, right? And that created a situation that was pretty uncomfortable, I got to say, in 2018, I felt like I was looking at my golf bag and I was only seeing a driver in a putter. So when we saw in 2019, the ANH with the PPA process for accessing new land, man, I'll tell you, I felt like I walked in the Gulf town, right? You could have whatever you want, you just like the blocks that you wanted. And that's what got us excited. And that's what you see here. And you've heard this from many of the people speakers who've come up here. We picked up from 2019 to 2021, 25 new blocks in Colombia. And we've done this across many different basins. And we've got experience now in all these basins. So we've been able to go through and use prospect -- the experience that we have in the country over the last 14 years to high-grade opportunities and build a diversified portfolio. You can see in the top left corner here, we've got 50 -- just over 50 prospects on the blocks that we have now, and that's going to grow as we shoot additional seismic, 15 of which of these are high-impact prospects, okay? That's 30%. And I don't really going to see that for many of our competitors. And that's what we're really excited about that opportunity to grow and chase after these blocks. Great. All right. So why am I excited about the portfolio? Well, part of it, we selected it ourselves, right? We picked out the blocks. We knew what we wanted. We've been around. We've been working in this country, like we said. And we knew the plays that we're working. We knew the plays that have been overlooked. We've developed technology. You've heard about it from several of the speakers so far. And so we were able to get ourselves in a position where we had a diversified portfolio. So really for exploration, what is it that we do? We have 2 parts in the next few years for Parex. One was to bring in more reliable quick wins that you've heard about and some of what Eric was showing. So these are prospects that are basically in our backyard, okay? This is from the [indiscernible] in the Llanos Basin, where we grew up. We know these place, we chase these ourselves. What we're doing is we're looking for opportunities underneath existing fields that people miss. They were willing to take the chance to get down there or there are in areas where size needs to work out. And with our experience, we've been able to show that we can make that work. So adding a full pipeline of these opportunities will allow us to build a sustainable growth on top of the expiration or the production, sorry, that Eric was doing. In addition to this, part I'm really excited about, and I suspect many of you are here to see is our operation -- exploration opportunities. Really what we're trying to do in exploration is try to ensure that with the 15 prospects that we've got, that we can have at least 4 of these ready to drill every year. So in essence, we're going to be getting shots at big wins. These are asymmetric risk properties opportunities where you've got low-cost wells with major upside potential, and that's what we're going to show you here in the next few slides. We're very excited about this opportunity because we've got prospects that are in multiple different basins. You're going to see we have big wins that are in the lower mad. We have big wins that are in the Llanos. We have big wins that are in the upper bag, and they have different costs, different fluid types, different risks, which means they don't have major contingencies on each other. So it's not a case where we drill one of these and the players will work out and all of a sudden, everything falls apart. Now these are independent, and that is exciting for us. All right. So you've heard a little bit about this already from Eric. This is the Arauca field, Arauca prospect, Arauca H. That's the exciting opportunity that we've got going for us now. And I got to tell you, I wish I could find more of these in the country. We've got proven oil down dip. We already got wells that have been producing 10 million barrels out of one zone here. From our experience in Capachos, we know there's 3 zones that are here. And we've shown you some of the rates that you can get out of these additional zones. I've got, after doing some reprocessing on the 3D seismic that's there, there are some challenges on imaging in this area. So we did depth processing on it. There's a 4-way closure sitting there. great, big 4-way closure, and we're going to up dip of proven oil on a multilayered opportunity, that's built high chance of success. And you can see from the volumes, this is the big brother of Capachos. And you can see the comparable volumes in the corner there, 37 million barrels, we're bigger than that, right? So we're very excited to get after this first half of this -- of next year and can't wait to have the results after that and follow on from there. All right. Why do I like the Upper Mag Basin. Well, when I came in 2008 to Colombia in the analyst Basin, you could go for long walks through that basin without ever stepping on 3D seismic data. And why does that matter? Well, seismic data for that play was the tool necessary to be able to place wells in the right locations, okay, and take advantage of the opportunities, ensure there have been some big discoveries have been made off the 2D, but to really make that grow and the production that you saw take off through 2008 to present was because it's redeciding today, you can't take a step in that basin without stepping on seismic, right? This basin to me looks just the same. This has been an overlook basin since the '90s due to social and access issues, again, the strength of ours. We're sitting in around. There's proven fields that were found on 4-way closures, right? And that's what's been chased by the national oil company and other operators in this area. But because they weren't able to get in during the '90s when size 3D seismic was invented, they were not able to take full advantage of it. So what we're going to do is we've got a block here in BSM 37, where there's existing 3D, we've got a major combination trap that's sitting there, very large size in between proven fields. The other thing we love about this basin is the reservoir. This is the same reservoir as the analyst basin. So unlike the mid bank that you guys have heard about, it doesn't have the clay content. It doesn't have the other problems that make it difficult to be successful to produce. These are easy productive horizons. These have IP30s in the range of 500 to 600 barrels a day. And the beauty of it is that in the area that we're going after, we can map the reservoir from productive oil reservoirs into or stratigraphic traps or combination traps, so that we can see them on 3D seismic. We can use inversion, which we've proven to be successful in other basins. So those are going to be strength that are going to allow us to be successful here. In addition, like I said, there's 3D right where the productive area is, but away from that, nobody shot any size. So we can see indications of more structural closures that need 3D seismic to be able to map them effectively. But once you've got that you can map the reservoirs, you can map the seals. These are not deep wells. These are 8,000 foot wells. These things are going to cost us $5 million, $6 million to drill in a development scenario. So we're very excited about getting into this area. The last piece I want to point out because there's long-term existing fields here, there's infrastructure. So there's a gas pipeline and an oil pipeline in this base in our rate. So we'll be able to turn these on to quick turnaround opportunities. All right. Now I'm going to hand it over to Katie to talk about the gas opportunity here.

Good afternoon. It's a pleasure to meet you all. For those of you that don't know me, my name is Katie Bernard, and I'm the Vice President of New Ventures here at Parex. I've been with Parex a little over a year now. And prior to Parex, as him I've mentioned, I worked for Shell in the Netherlands and for these in Madrid. As you probably can tell from my accent in British, although it has spent most of my life living overseas. And today, as Ian mentioned, I'm here to talk to you about gas in Colombia. So Colombia, as you probably all heard, it's in the news quite often it's facing a gas supply shortfall. And for decades, the gas industry has been sustained by the giant fields of Cusiana and Cupiagua which is in the Llanos foothills and Guajira on the North Coast. And these fields are now in steep decline. There has been some recent success in replacing gas production in the north of the country, but the decline in gas production in the Llanos foothills continues unabated, and gas needs to pay found in areas close to Bogota. It could be argued that the gas price shortfall has already come into existence reason we haven't seen a bigger gas supply shortfall is because gas that was intended for enhanced liquid production has been redirected to supply the gas market instead. Gas demand is rising and security supply will encourage further demand growth, especially from the industrial sector. There are options that exist for replacing the gas such as LNG and pipeline imports as well as the offshore exploration that we've heard a lot about recently. But these are either expensive or they will take until the end of the decade to materialize. So we see that this provides Parex with an opportunity. We're well positioned to supply new sources of onshore gas to the Colombian market within a shorter time frame. Gas not only helps diversify Parex' revenue stream by creating portfolio resilience by reducing carbon intensity and enhancing long-term sustainability. It also keeps us aligned with government objectives on energy transition on the security of supply and on eliminating Colombia's reliance on expensive LNG imports. The government -- the new government has shown itself to be supportive of gas development in Colombia. You'll notice it has not applied the income surtax to gas, and it understands the significance of connecting more Colombian households to a cleaner, safer and more reliable source of energy. So in summary, gas is falling gas supply is falling, demand is growing and importing LNG is expensive. This provides an opportunity for Parex. Colombia has fantastic liquid-rich potential and large gas targets with high productivity. You heard so many of us talking about that today. Our gas strategy is designed to benefit from these opportunities and is made up of 3 pillars which we're executing in parallel. The first pillar is to develop our liquid-rich proven resources. We're doing this now in VIM-1 in the Lower Magdalena and at Capachos and a race in the Northern Llanos, where we're using short-term solutions such as gas cycling, trucking and infield power to monetize and fast track our liquid production without having access to regional pipelines. In the meantime, we're pursuing access to higher netback markets through the building, permitting and reuse of existing infrastructure. That's our second pillar. Once we have access to regional pipeline infrastructure, we have the option to monetize our gas, thus unlocking further gas potential. And thirdly, once we start selling into the regional gas market, we can explore and appraise our large multi-TCF transformational gas targets, whether they are liquid rich or dry gas. We're progressing this as part of our strategy, both independently in the lower Magdalena and as mentioned earlier by Imad jointly with Ecopetrol in the prolific trend of the Janos foothills. I hand back to Ian, who's going to talk to you a bit more about the VIM opportunity, and I will come back and tell you all about the MOU with Ecopetrol.

Thank you very much, Katie. All right. So yes, the next couple of slides we're going to show. We're going to basically highlight the gas strategy that we've got and show you where we're at today. One of the most exciting things about VIM-1, you guys would have heard about it in our press release this morning, and Eric referred to it earlier. So our Belleza 2 horizontal that we drilled. I mean, obviously, the rate is exciting. We're super excited that, that was able to work. But the more important to me on the exploration side is that we used seismic inversion to predict where that porosity was. We were able to drill a 2,000-foot lateral in the porosity. Now to remind you, for those who aren't aware, there were 3 other attempts into the structure, 2 by Chevron back in the '80s and then the first one of ours that drilled in the structure and didn't find any pricing. So it's not like it's fishing a barrel. So that success has emboldened us to be able to continue chasing that play on this block and also within that basin. You can see to the right here, the nano prospect is also into that same play concept. So we're looking forward to moving -- going after that opportunity. But in addition to that play that we've got on the block, we've actually got a couple of other places, 2 proven and another one that's sort of exciting for us. We're really excited about bringing in what we think could be a new resource play. So the other play, the heat on the left side, you can see there's 2 sand play in the bottom that's going after the basal one is the lower CDO sandstones, and that's actually a productive horizon from [indiscernible] from our partners, Frontera about 50 kilometers to the southwest, and this is a fantastic horizon, right? 15 million to 30 million a day IP30s. These are great wells with good liquid rates to go along with them as part of the story that Katie discussed. We have 3 prospects of that type on this block. And these are also transformational in size. These can take this block to an even higher level than where it is today and which, of course, is important while we're building the infrastructure to put this on production. I won't go ahead, sorry. The last one I don't want to forget is [indiscernible],You heard Eric discussed that prospect. We just drilled the well recently. So as with many resource plays, this started out as a formation that was a big pain in our butt, right? This is the big gold horizons that you see on the top here. This is a 2,500-foot section of interbedded sands and shales, overpressured gas didn't respond well to water-based muds and you ended up with lots of sluffing in the hole and became a real problem for people to drill. As with many resource plays as I was alluding to, that type of thing turns into an opportunity. And much of what's going on in North America is driven around that. There has been successful production from this horizon down to the Southwest in Canacol's area in their sub-basin, which is a dry basin, our dry gas basin in this base. And there's been a few tests that have been really -- that have done well, but no one's been able to sort of crack on turning this into a commercial operation. We think the 2 things that are going to help us is using the synthetic-based mud to drill through this One of the challenges when the reservoir is swelling up, it's squeezing down on the porosity and permeability. So you can't get the delivery you want. So by drilling this well with a synthetic but, we have a much better chance that we're going to get communication from the well to all the sands, not just the big ones. The other thing is other people try to target individual sands as has been done many times in other places in the world and just couldn't quite get the deliverability or the volumes that they wanted. We're going to open the whole 2,500 feet up altogether and just let the whole thing flow to us. It would be like a Deep Basin well in Western Canada. And that's the thing that we think is going to make a difference. If that's successful, we're talking about hundreds of well locations on this block and our block to the Northeast. All right. This is my favorite prospect. I've been waiting to tell you guys about it. [indiscernible]. So we picked this up in 2020 bid round. We had existing 2D seismic varying qualities. So we shot a 3D seismic program over this, and we're actually just getting all the information in together today. This is a huge structure. 4-way closures, what we've identified from the 3D seismic. And anybody who's familiar with Western Canada, on the bottom left corner of the map, you can see that grid there. That's a township. That's 10 kilometers across the top. That's how big the structure is. To give you a sense of how big that is, if you know Calgary, if you were standing downtown, the other side of the structure would be self line driving. So this is a big opportunity that we're excited about. We've got 3 different zones, 2 of them are already proven in the basin. The third one is actually proven productive in the adjacent basin Mecanicnto. This is transformative. With success, this could double the triple the size of this company. You can see that this isn't new. Other people have tried to get to this before, 1940s and 1970s. There was a couple of 2 wells drilled that tried to get to the targets. But as I just discussed with you, problem is the [indiscernible]. The overpressure and the water-based muds, they could not get to the target zones. They were struggling. So we've got that experience. We've proven we can do it in the offset area. So we'll be moving in here to drill this well. This is going to be a lengthy well for us to drill. So we'll be looking to spudding it here in early half of the next coming year, but we should have results by the end of the year. So we're excited and looking forward to getting after this one. All right. Now I'll hand it back.

Thanks, Ian. All right. So the foothills. It's one of the most promising gas trends in Colombia, high-quality prospects. And earlier this year, we signed an MOU with a national oil company, Ecopetrol to exploit potential synergies in developing gas volumes along the full length of the Llanos foothills. The MOU area covers 13 blocks and stretches 270 kilometers from Gibraltar in the north through our fields at Arauca and Capachos to Llanos 122 in the South, that's the same day systems as we're doing distances of Calgary to Edmonton. And for anyone that doesn't know what that means, it's about London to Manchester. It's on trend also with the world class, Cusiana and Cupiagua field that attracted the IOCs to Colombia in 1980s. This is an enormously exciting collaboration built upon the successful relationship between the 2 companies. And working in partnership with -- in Capachos, Arauca has demonstrated that we're stronger together and we intend to deepen this relationship through this MOU. Parex acquired a number of blocks in the last 2 bid-rounds together with Ecopetrol, we now have over 90% of available acreage in this trend. We decided to join forces. The MOU provides an opportunity to jointly collaborate on blocks in the area of coverage and maximize the use of existing infrastructure. There are many ways that this corridor could be developed, but they will all take time and probably cost a lot more than what we're proposing to do with Ecopetrol. So these are the highlights of the gas corridor is a long-term collaboration and progress is already underway. And later on, you'll be hearing from Alberto. At the back, I see, hello, who's going to tell you more about this. I hand back to Ian.

Yes. The one last thing I want to add, and I didn't mention at the beginning that my original career started in North America, and I worked Foothills trends through Western Canada and the U.S. And what was exciting about this, other than these are the most prolific existing fields in the country, if you see those bottom left gold or green diamonds they're sitting on the red polygons in the background, those are the existing fields that Katie talked about. And those represent about 10 Tcf and 3 billion barrels of recoverable fluid, right? And you can see the length of that relative to the length of the foothills. At the north end, you can see [indiscernible] and Capachos. So those are our robot Gibraltar, Ecopetrol and Capachos. And you've got more production up there. And then there's a big gap in the middle. And the question is the prospects there? Every foothills belt that I've ever worked, you don't see gaps to that size. That is a massive gap. And there will be fields to fill in that space. And how come they have gone after as of now. Part of the issue was security and access in the late '90s, getting in here to develop these fields. Another issue was enough demand for gas, the gas prices were low and some of the contract issues were a problem. So as we just discussed, we can see that the demand for gas is coming up. The supply of gas is going down. And we've got the tools for access. And we've also got the tools for drilling these wells. I mean, there's wells that were drilled in here for $100 million. right? And Parex has shown time and time again in the areas that we go into, that we can take those well costs and drop them dramatically, right, as we did at Capachos. And if we can do that again in this area, is going to change what you need to find to make this work, and it's going to allow us to extend this trend from the south to the north and fill in that gap along with our control, which we're very excited to do. All right. So I think what we've shown here about Katie and I over the last few minutes is the exciting potential that we have in our portfolio. We've got a diverse set of prospects. We have both regular consistent prospects that are going to give us quick returns, and we're going to keep a steady flow of those going through. And then we've got the big wins that we have here that we're going after transformational opportunities that are diverse across the country in different basins obviously, we're very excited. So thank you very much, and I'll hand it over to Ken.

Thanks, guys. My name is Ken Pinsky, and I've been the CFO for Parex since inception. I don't like filing exploration because then you guys say to me, "Well, what do you got after that"? And we're pretty boring. We just -- we give shareholders money back through a dividend or buyback, and I could have 1 slide and do my old presentation, and I'd like to hear more about Ian. And how did you manage to trip Rinerokes Lake that you could cover. Anyway, 2022 is a great year for us. We got back on track with growing our production, which is what we do like to do. We delivered or are poised to deliver 21% to 23% annual production per share growth. We focus on per share at Parex and record funds flow of about USD 860 million, which I'm pretty simple. So I like to think of it as CAD 1.2 billion. And we utilized that pre-fund flow that we generated to purchase back another 10% of our stock. We do that quite a bit and increased our annual dividend to CAD 1 per share. So a good overall return framework, both full buyback and an increasing dividend. I don't know anybody else who did that, but maybe there's a few. So as a shareholder, I can't really complain what we accomplished that was within our control. As you heard from Daniel and Eric, there are some things that weren't in our control, but we still had a good year notwithstanding. Financial frameworks for a return of capital. You've all seen them from my follow industry players. However, as you know, as I just said, and as you know about the company, we just don't talk about it. We don't talk about debt targets that once we get there, we'll do it, we actually perform it. And we've been living it for the past 5 years, returning approximately 100% of our free funds flow back to our shareholders. And what excites me about what you're seeing today is our combination, which I think is unique, the base development that's growing the exploration upside that we have within the portfolio, plus we can do them with our free cash flow for the shareholder. That's truly a one-in-a-kind opportunity I think in an oil and gas company today. At least I'm not aware of any other one. Now focusing on 2023, we've given you the budget through Mike. We've also got it at $60, $80, $100 Brent. Our current dividend is approximately $80 million per year. Capital expenditure is midpoint [ 4.50 ] million. And what that generate is free funds of up to $200 million in excess of our $80 million dividend. So that gives us a lot of capability still, notwithstanding the tax reform that we've talked about, to reward the shareholders for sticking with the story. And if oil prices go below $60, we'll do what we did in 2020, 2015, we'll chop back some CapEx to maintain that free funds flow to our shareholders. Now I also have my working capital at December 31, 2022, around $200 million to help bolster returns. The Board will review our dividend in February of 2023 as part of their annual process, and that's coinciding with the Board's approval of our independent reserve report. We will seek TSX approval of our next NCIB shortly. And that should commence early January, subject to TSX approval. They like me to say that. And I promised our Board -- his name is Wayne Foo, he's one of the guys. I wouldn't say too much more today of how we allocate our pool of free funds flow. That's what they want to talk to us about in February. But I will add that regular dividends are expected to grow because that's what we like to do. And we always want to get our share count below 100 million shares because it's easy math for my old brain. Thank you, Brittany, for building that. And what's our track record of returning capital? I can only think of Imperial Oil in recent history that can compete with us on consistent returns to our shareholders. We returned back today CAD 1.3 billion and forecast, including next year, CAD 1.6 billion. And if you look at our market capitalization, that's very significant. The majority of our shareholder returns has been to the consistent application of a normal course issuer bid as we have reduced our outstanding share count by 33%. And we will be applying with the TSX in December for our 2023 bid, as I said. Another factor to consider is we rearranged all our long-term incentive plan so that they're cash settled. They're not settled by treasury stock. So about 90% of that dilution that people would have from an issue of long-term incentive for us is gone now. So we did that about 3 years ago. So we're not issuing equity to grow. We're not issuing equity to reward our employees for their work. So our buyback is more meaningful than what you'll find for most of our peers. Growth metrics. What does that buyback do over time? Well, it gives you some pretty good growth metrics on a per share basis. 16% CAGR for production per share growth since 2017, 19% on PDP reserves. But I like to look at it a different way. Right now, every share of Parex has its own 2 barrels of Parex best blend. I kind of like to look at it that way. The other thing I'd like to talk about is when we're reducing our share count and growing organically, that exposes the shareholder to double-digit per share growth, as you've seen here in these charts. And as you know, I think we can continue to do that, from what you've seen. It's been an impressive run for Parex. That's not the only story today. There's the stories hethe we're going to do next. Colombia tax reform is law, and Mike has discussed the effects. I think it's -- there are further mitigation strategies we can pursue. But for now, it's a good representation or a fair presentation. The tax reform and lower Brent [ share ] prices into 2023 results in a forecast drop of funds from that yellow line. But as you've seen, if we saw the same oil prices that we had in 2022, it's pretty flat. Other thing is, too, is on a per share basis in Canadian dollars, the weak Canadian dollar offsets that a bit. We do get paid, and we do our business in U.S. dollars. Further, the forecast isn't reflecting a share buyback in 2023, which, as you know, we will commence and provide guidance on later. But as I've said in prior slides, we do like being consistent. One last comment today, I've never been so confident in our portfolio of opportunities and our ability to deliver. Parex has always been an instrument of diversification for the shareholder. We are different. That's not just Mike. We don't have Western Canadian Select, Bakken or AECO pricing exposure. We have access to all the crude markets in the world for oil, as Daniel explained, and that's a big deal. We are conventional exploration production company with real biggy opportunities, as Ian explained. We've always been able to self-fund our growth and rely upon the drill bit to deliver that growth. Third, finally, we remain unhedged and with no debt. And I could talk about our debt management strategy today. But as we have no debt, I don't have anything to talk about. So I'm done, whereas most of my peers are keep talking. So I will now pass putting back to our President and CEO, Imad, for some final comments. Thank you.

Thank you very much, Ken, and I'm glad you promised our Board not to give too many hints. I hope none of them is listening. Let me close here and leave you some takeaways. You've seen this slide when I started, and I hope we did manage to convince you that you'll leave with them. I'll repeat them one more time. I hope they sound a bit more credible. We are transitioning from a single-asset company to Colombia-wide successful operator. We delivered that as part of [ D&A ] through top-tier ESG performance, something we started doing, as Mike said, even before ESG was a word. We're flattening our decline, leading to lower maintenance capital requirements. We're building a sustainable base for production growth while delivering a step-change in capital efficiency. And we're doing that while being exposed as in managed to excite us about the outsized return driven by big E explorations completely asymmetrical. We're talking about stuff that normally only the majors get the privilege to playing with, prospects which are offshore sized with basically near-field kind of risk profiles. And we're continuing to return, as Ken mentioned, 100% of our free funds from operations to shareholders through dividends and buybacks. I feel humbled by your confidence in Parex and taking this long trip to listen to our story. The least we could do in return is to deliver. To end this presentation, all what I can say is a big thank you. Let me introduce our guests, Mr. Alberto Consuegra, and we'll go back after that to the Q&A. So Alberto served as Executive Vice President for Ecopetrol since March 2019. He holds a BS in civil engineering from the University of Cartagena and then MS in pavement and construction management from Texas M&A -- A&M University, sorry. He has extensive experience in the hydrocarbon industry, and he held positions of Vice President, exploration production in other companies. I'll let him, if he wants to talk about the CV, but that's not what counts. When I got to see Alberto for the first time, I was really impressed. He was on the ball, he knew all the technicals, he knew all the location of things, and he cared. But then I got to know him a little bit better. This guy -- nobody I've met in Colombia doesn't liked him. I'm really honored to have you here, Alberto, as our partner, our colleague, and I dare say, a friend. Thank you so much for coming. Please go ahead.

Good afternoon to you all. I'm very honored to be here. Thanks for the invitation. Katie, good to see you. Okay. I'm not going to talk about my CV. And first, I'm going to start saying congratulations to Parex, great results. Reaching 60,000 barrels per day of oil equivalent is something to admire, and you have done it pretty fast. And I'm pretty excited about also the financial results. Very good. Okay. So what I wanted to do is take you through what is a [indiscernible] and then at the end, talk a little bit about what is our expectation in terms of our -- the relationship with Parex. So you know that we are recognized as a hydrocarbon company that has been traditionally behind [indiscernible]. But now we are playing a different game. We want to be considered more as an energy company, a diversified energy company. So we are already in 3 business segments: hydrocarbons, of course, low-emission solutions, and I'll talk about that; and transmission and oil, electric transmission. We recently acquired ISA. And because of that, we are giving a lot of importance to the transmission sector. We believe that's a way to -- not only to diversify, but also to start lowering our emission portfolio. When you look at the presence of Ecopetrol, it's not only Colombia. We are basically in all the Americas, beginning on the Southern [ corn ] in Chile and then in the Permian and the U.S. the -- almost Gulf of Mexico. We recently created a company in Singapore, and it's mostly to commercialize our products, crude and refined products. So if I take you through our presence, I would say that in the Southern [ corn ], it's mostly about ISA. ISA is present in Chile, is present in Brazil, Bolivia and Peru. We are building our hydrocarbon business in Brazil, slow, but I believe that we will have a nice future. We are currently maturing one big project, offshore project in the pre-salt with Shell and Total. We hope that next year, we can take the project to sanction. In Colombia -- I'll talk to Colombia and then Permian and U.S. Gulf of Mexico. I'll talk a little bit about Permian because probably you have some questions about unconventionals in Colombia. So I'll take you a little bit about the Permian business that we have. So in terms of the hydrocarbon business, today, it represents about 82% of our EBITDA. That's today's. But in the future, we still want to see a decarbonized hydrocarbon section representing about 60% in 2040. Then you'll see the slow growth of our low-emission portfolio. By 2040, it will represent about 14% in terms of EBITDA. But from now until then, it will be all about investment and a lot of investment. The target in there, the challenge is about at least $2.5 billion in that segment. And then in transmission, it's growing, and it's a business that we'll see growing. When you look at what President Petro in Colombia wants to do, he talks a lot about regional connectivity, meaning connecting South America, even Central America, and ISA is present in most of the territory. So we believe that's a great opportunity of growth. So we are the #1 producer, the #1 and only refiner. And also, we have all -- basically all the pipelines for both oil and refined products. We don't get into the gas pipelines business because of regulation limitation. So our reserve portfolio is about 2 billion barrels of oil equivalent per day. I'm sorry, total. 9,000 kilometers of pipelines, a current production of 700,000 barrels of oil equivalent per day, but growing. When you look at the third quarter of this year, we are in about 727,000 barrels per day. So we are seeing the growth, despite that the shortage in terms of production because of the pandemic and because of the blockages that we have back in 2020 and 2021. And we are increasing our presence in terms of refining throughput. Both refineries are now in -- have a total capacity of about 420,000 to 430,000 barrels per day, okay? Low emissions, we cannot -- we have one condition because of regulation. We are self-generators, self-generators, meaning that we cannot sell electricity to the grid because we are in the gas business. And so that's the kind of limitation as we are gas producers. But we are doing part of our generation, self-generation with renewables and slowly growing that portfolio. It's actually been doubled year-by-year. We hope to get to the 400 [ megas ] to 500 [ megas ] in 2024. We'll talk about ESG and the importance of ESG later on. And we already have completed one pilot of green hydrogen, and we expect to start growing in green hydrogen because of our refinery needs, okay? In terms of energy transmission, 48,000 kilometers around South America. And also, we have growth concessions. This is a business with most presence in Chile and also one [ route ] concession here in Colombia. And we already launched a successful first energy storage project with batteries in Sao Paulo, Brazil. Okay. So in terms of strategy, well, we have defined is that we have a strategy for 2040, and we call it Energy that Transforms. Based on 4 pillars, the first one, grow with the energy transition. If you ask me where I see Parex helping us to deliver our strategy, that's a place to start. Growing with energy transition because we want to grow our production. And when I -- we have already found a portfolio curve that basically targets reaching a production of about 850,000 barrels by 2030. So ideally, we want also gas to be growing in our portfolio. It represents about 22% today. We want to take it to 30% to 35%. Also, we want to move from a portfolio of heavy oil -- basically heavy oil to light oil. So when I talk about gas and light oil, I see Parex playing a big role, okay? Now the other thing is that, as I mentioned before, we want to start moving to be a more lower-emission company. So by 2040, 30% to 50% of our EBITDA will come from low emission businesses. Now, growing for what reason? The first one, our major shareholder is the government. So we need to ensure that we continue the trend of transferring the resources that the government needs. And we are going to be doing so. I don't know if you are familiar with the Colombian -- the currency, but in terms of transfers during the last 10 years, it's been COP 250 trillion, which is a substantial amount of money. That represents year-by-year, it's like a tax reform. That's the size of the transfers that Ecopetrol provides to the government. But we also want to grow to ensure energy security for the country. We are, in such means, responsible for providing the gas, the oil for our refineries and the fuels that the country needs. But also, when you look at the risks about climate change and especially about adaptability and vulnerability, we believe that we can play an important role on that because we can do that, we can make a change in the regions in which we operate. And that takes me to the second pillar, which is generating value through TESG. And why TESG? Because we believe that technology will play an important role, a fundamental role in the future. So we put technology at the heart of sustainability. And we already have committed to zero emissions, net emissions by 2050, Scope 1 and 2, but also reducing Scope 3 emissions by 50%. And I have to share with you that we were at ADIPEC just in October. I told this in [ to Mike ]. And we sat in the table, talking about methane emissions. And I was surprised to see that our strategy was one of our -- the most exciting, if I can share that with you. In what sense? Because we have moved already from identifying and measuring methane emissions to actually starting to execute and reduce our fugitive emissions. And we already have committed to reduce methane emissions by 45% in 2025. So we're giving a lot of importance to that. And when I look to Parex, I would like to see Parex doing the same. It's not going to be that difficult. When I looked at the 45%, at least...

46%.

46%. Perfect. Then, we also have talked about this new concept, which is water neutrality. Basically, it's reduce the amount of water that we collect from surface waters and also reduce water disposal in superficial in the surface. This is something that we want to do by 2045, and this is something that the country expects. Water is becoming quite important in this country, I believe, everywhere in the world. And the third one, when we talk about ESG, social and environmental impact will be fundamental. So we want to ensure that our regions and the towns in which we operate, we see them moving from the line of poverty that they currently have. That's something that we need to do. So diversification, new jobs will be very important. It's not jobs related to our industry. It's jobs by incentivizing, promoting, things like you do in your operation like creating supply chains that we need for services. That type of things is what we need to do in order to ensure sustainability in our areas. The third one is cutting-edge knowledge, and I told you about technology. Technology is going to be quite important. And it's technology mostly around sustainability. It's how we can be more energy efficient, how can we reduce the water footprint. I mean, we have a lot of opportunities in there, and we believe that by using our innovation centers because we have one that is recognized in this part of the Americas, we can do a lot in terms of actually reducing costs in our operations, but also ensuring that we fulfill the goals that we have established for growth. And the other one, which is mostly related to recognizing that we are a company, that we are a group that is responsible for delivering competitive returns. So we still want to maintain an attractive ROAC, 8% to 10%, recognizing that some of our business don't deliver a high ROAC, like the case of refining. But in others, like in this year, because of price and everything, our return on capital [ employed ] is around 18%. Okay. So in terms of results, just a few minutes -- just in here. When you compare 2016 and then 2022, Ecopetrol was a company that in 2014 and 2015 was delivering a production of about 800,000 barrels per day, back in 2014. And at that time, the breakeven of our projects was $65. $65. So now, one of the big reasons of why we are delivering these results, which are historical in terms of EBITDA -- revenues, EBITDA and profit, is because we have done a lot in terms of efficiencies, in achieving efficiencies. It's been COP 23 trillion. So efficiencies in all senses. Efficiencies specifically about how we reduce the cost of the heavy oil crude, of evacuating the heavy oil crude. In there, at least, I would say, 20% of the reduction of the efficiencies are associated with our dilution strategy. So the other message in here is that despite the lower production in average, we are seeing, and if you in a way normalize TRM, which is exchange rate, and you normalize also price, we are still delivering an underlying performance compared to 2021. So we still believe that we can do it better and better every year. ROAC, again, 19%. That's a bit higher than I was saying, 18%. And -- so the outlook for the rest of the year is okay. It's going to be great. Look that we already -- when you compare it to 2021, we almost -- we already are doubling the results, okay? Okay. So that's kind of where we are in terms of results. I'll take you now to the -- this one, which is the MOU with Parex. And -- well, Katie, you landed all the messages, but what I'm going to say from the Ecopetrol side is that we are excited. And why? Because we have seen the capabilities that Parex is delivering. When you look at the way Parex provides good results in terms of drilling in an area in which we have tried and we have not been that successful. So we need those technical capabilities, but also the focus because right now, what we see is focus in terms of Parex strategy in ensuring that light oil and gas that the country needs can deliver in that area of the country. That's very important to us. Now we have challenges. We have challenges. And Ecopetrol only cannot do it. We need a partnering here. Challenges in what sense? And you mentioned something, top-tier ESG strategy. That's fundamental. Your strategy of anticipating when you go into a new territory and what you're doing in there is something that we want to learn from. And I think that's the right thing to do. If you are providing water, if you are providing energy to the area which you are accessing, that's about 50% chance of success that you are adding to your initiatives. So that's something that we see that can create a lot of value in terms of not only adding to this relationship, but also with the communities that are close to our areas. Secondly, we need to use existing infrastructure. We understand that we have now a government that is going to be hard in terms of providing, issuing new environmental licenses. So if we use existing infrastructure, we are not going to run that risk. So what we are building here is ensuring that all the existing infrastructure that belongs to Ecopetrol or to the Ecopetrol Group, is going to be used to, first, make sure that we reduce the time to market in our projects. But second, also that we ensure viability to our projects. That will be fundamental. The third thing that we need to ensure in here is that we, of course, we need to clarify and define exactly where it's going to be Parex between some activities, in which ones Ecopetrol will be kind of the operator, and that's something that will take time. So one of the challenges for us is to ensure that we try to deliver and get to the MOU execution and probably to contracts in the least time possible, something that we are looking at. Now, I insist in terms of the importance of oil and gas. Katie already explained about gas. There will be a deficit, a shortage in the country, particularly around 2025, 2026. So we have a great opportunity here to fill. But when we talk about light oil, what is happening? We had a lot of expectation about unconventionals in Colombia. It's not going to happen. It's not going to happen. There is currently a movement in the Congress to pass a law prohibiting unconventionals. And basically, will be fracking. That's -- so we need to ensure that we find some other sources of light oil. And why? Because both refineries will need the light oil. To ensure that we have the right blend that goes to the markets, we need light oil. And all the [indiscernible] will provide us that, okay? So that's the importance that this MOU have for Ecopetrol and for the country. So that was all I wanted to share with you. Thank you for your time, and I'm open to any questions if you have.

[indiscernible]?

I still have some minutes, yes.

How any minutes do you have?

Let me check my -- still have like 15 minutes.

So [indiscernible] we do it all together? Or we [indiscernible]...

Yes. I think if there's any [ specific ] questions, [ Alberto ] will address it right now.

Okay.

Yes. When you mentioned the use of the existing infrastructure, is there enough in place that you don't really have to worry about that infrastructure challenge?

Well, there will be some connections, some pipeline connections that we'll need to do. If you look at Gibraltar, in order to tie Gibraltar to an existing oil pipeline, we'll need to probably build about a 25 to 30-kilometer line. That's on one side. And you look here, [ Piedemonte ] probably we will need separation -- gas separation facilities at some point in Ecopetrol facility and convert one existing oil pipeline into gas pipeline. So there will be some changes. Probably, we will need to add some gas injection facilities in Ecopetrol existing infrastructure. That's right now what I believe. Now if -- there will be also some transfer lines, connecting lines from the new assets. For example, [ Arantes ] to [ Piedemonte ], probably we will need to connect that. If we want to connect Capachos to the Bicentenario pipeline, probably we will need to have do something in there. Arauca is very close, very close. So there are a lot of advantages right now because the connecting lines are -- when you look at our territory, the history is that we are able to build them without any problems. And also, we can use licensing restrictions or limitations to ensure that we can actually design the pipelines with the size that don't require a new license process.

Just one other question. What is the right blend that you're [ talking ] about with the oil because you need more light oil? What equivalent is that?

Okay. So light oil, in -- when I look at our needs and you talk about a period, a specific period, it will be 2028 beyond. And it will be in one refinery as much as 110,000 barrels. So where I'm seeing this area, providing some of them. But the other area is where you also have resources, which is the area close to the [ Barrancabermeja ] refinery, what you call the Magdalena Middle Valley.

Let me thank you, Alberto. It's really always a pleasure to see you. I just want to highlight that part of our strategy and desire is to be a partner of first choice for Alberto in a wonderful company. We are much stronger together. Ecopetrol have fantastic acreage, infrastructure, experience and people who work in that place. And I'm as excited as you are.

We're very excited. Thanks again for the invitation.

We'll break now for a couple of minutes to set up the place for Q&A and meet again.

Thank you. We're going to close out our Capital Markets Day with a question-and-answer session. If you have any questions, and you're online, please submit them at [email protected]. Thank you. We're happy to take some questions from the audience, yes.

[indiscernible]. First question. The MOU with Ecopetrol -- and that's awesome, but what do you think realistic timing is for you hammer-out terms and you can actually progress some activities in the area?

Our objective is to get very quickly, I'd say, in the first half of the year to get the terms all finalized. Makes sense, Katie? We are already working some engineering works about connections, as you heard from Alberto, subsurface work together with our groups to look at potential targets. And I think this is a process that will take time. So not big CapEx will be spent in the short term. It's a longer-term horizon thing. But we can get very quickly some concrete description on this whole MOU. [indiscernible]?

[indiscernible] from Canaccord. So one question regarding the operations in Arauca. I know you have these issues. And historically, we've seen a lot of issues with the pipelines there. So what's the transportation and marketing strategy there? And how are you coping with these issues with security and social unrest?

I'll take that one. So I believe there is a peace process happening. And some of the latest disruptions are probably now the different factions trying to make a last attempt to be part of the negotiations table and how they get into that -- into those negotiations. So far, we have been tracking all of our production there. We're now producing 10,000 barrels a day. We track it from Arauca into [indiscernible] or into the system without any issues, unless when we'll have to suspend our operations. The Arauca field is already tied into the system. It's a very short connection. And the good thing about the system is it works in two directions. So we can flow at times along [indiscernible] demand to the coast, and at other times, the system can flow in the other direction. And we still have tracking eventually. Our view -- Arauca is already tied in. That's our plan, but we have alternatives to keep overall flowing.

We did have a couple of questions online. So we're going to go to a shareholder from the Netherlands. Will the focus on gas imply any limitations for your oil-related activities? And to what extent does the Colombian government have any direct influence on this?

So as far as our activities and our plans going forward, no, it's not changing our outlook on oil. Most of our targets are wet gas, and we are trying to produce both liquids and gas. So I wouldn't say it's taking away. It's adding to it. As far as the influence on the government, Daniel, do you want to comment on that?

I see it basically as an opportunity because it basically shares the agenda. Its part of that overlapping interests between now an E&P company and the interest of the government. So I don't see any negative side to dedicating resources to us, and I think it's a huge opportunity. The country will need it. You've heard it from us, from Alberto. So I see it as a huge opportunity.

[indiscernible] from Eight Capital. How much of your approvals do you have in place with respect to that 3-year plan? And how much are you still waiting on?

So we continuously file environmental licenses as we -- if you are talking about environmental permitting, I guess, yes. So we continuously file. As we get new land and we get an exploration plan, we prepare the license, we file it in and -- so far, I can tell you what has happened in the last few months. We obtained one license that we have applied for in normal times. So we haven't seen delays so far. And the government has been very explicit about actually pushing operators to execute on existing contracts. In order to execute, we did our permitting in place. So we'll continue filing them. One thing that I can tell you is we have -- over the past few years, we learned a lot about filing licenses, understanding the regulators' expectations and prepare and documents up to them, even we have been very proactive in making them more interactive so that the regulator has an easier time understanding what we are asking for. So initially, I think we're in good shape for that.

Maybe I can add to that. I mean I've seen some responsible from the government, who all, to my face, said -- and [ Rafael ] was there, we want to help you get these licenses the same way or quicker than the past because we need that oil income for the country. We are not aware about any place that's being blocked in terms of licenses. To the opposite, I would say, we managed to get some approvals to -- in terms of injection, in terms of different way of looking at things, [indiscernible], you name it, that people would have thought in the past were not easy to obtain. I've not seen -- because we do our planning to apply for these licenses long in advance, we're not seeing any bottlenecks because of government actions. And they've seen -- showing all the positive side of it.

So just a question from a Canadian shareholder. What is the plan for Parex to increase its share value, so that shareholders are seeing the gains in share prices that shareholders of Canadian oil and gas companies are seeing?

Well, I think the key factor for us will be actually to deliver on our plan. And I think we've taken the steps so far this year to build that foundation, where now, as our press release demonstrates this morning, we've reached that 60,000 boe/d milestone. And we're building off that as we go forward.

I'll just add one thing. Mike, you had a good chart that showed our valuation versus our peers. And some of that is to do with what happened in the news with respect to the change in the government. And there's always some uncertainty that goes with that and with tax reform now being certain. And we can model it, and we can show the patience to it. I think now shareholders can look at that and then look at the plan and go, "Okay, I can look at this plan and see if I like it or not and not be worried about what could happen." So I think I like that idea, the certainty now that this is signed and we're going forward. And part of having this Investor Day is to show the plan and show the certainty.

Another question, I believe, from a retail shareholder. The strategy of the company has recently changed from a lot of discipline to more growth in exploration, and that has had an impact on the multiple. They're wondering, is the company still run for shareholders, and is the strategy the right way to take the company from disciplined to more of a growth and exploration type company?

I'll start with that, and then I'll leave it to you -- to Ken to finish. If you look at the CapEx we're putting on big E, in fact, it's not increasing, it's reducing. We have put adequate emphasis on growing the company and maintaining it through [ exploitation ], which is what Eric talked about in terms of water floods, infrastructure, [ UR ] and getting the current fields to produce more. We are not betting the company on exploration. There's 10% to 15% of our capital going to get exposure to upside, but that's the history of the company. It's an exploration-driven company, who started with exploration blocks. That being said, we're definitely not betting the company on exploration. I would argue we are even more disciplined than any time in terms of showing a roadmap of how we can keep delivering production to shareholders without depending on exploration. You want to add to that, Ken?

Sure, Imad. Part of the answer to that question as well is return to capital to shareholders, that's in our DNA. We've been doing it longer than any other company we can think of in a fulsome manner, not just a couple of percent here and there. We filed for an NCIB. We buy back 10% of the stock, have done that 4 years in a row. We now are growing dividend. And it's fundamental to our strategy is that return of capital piece. And as Imad said, we -- the business was built on exploration and being successful. And as Ian was talking about, there's a lot of opportunity there because there's opportunity when there's nobody else around you. If you think about [ SoCa ] and for some of your Canadian analysts, [indiscernible] SoCa is the Clearwater, Eric?

Yes.

Yes, pretty much. This is just us and our partner. We've got it all. So that's the type of opportunities we see this country is still providing for us. And that's why we're here. That's why Imad said when he got here, he looked at it and said we've got to focus here. So I think -- I hope that answers it.

Cody Kwong at Stifel FirstEnergy. I got a question for maybe the exploration team. You talked about the 15 high-impact prospects. And then I saw something where in the slide deck that you said greater than 20,000 barrel a day type potential. Is that just on the 15? And how would that look like when you throw in the [ 50 ] greater prospects that you have that, if you recall that?

Yes, in terms of defining what that high impact is that it was targeting around 20,000 barrels a day. So the 15 prospects that we've identified, that's sort of their impact. And then sort of everything scales down from there [ directly ] down the portfolio. We've got a big range of opportunities that exist that are not on miles below that threshold. But -- yes, so we've got a long runway there.

And that was just a single prospect or was that like a full development [indiscernible]?

No. No, that's -- that would be a prospect. That's right. If one -- each one of those prospects, if you looked at them, all of them are the likely production that would come out of them or sort of mid-case production when come out of them was around 20,000 barrels a day. That's what we used as a threshold. So we have 15 of those within our portfolio, in addition to the remainder of the prospects that we have, with more to come on the existing acreage we picked up.

That leads me to my next question. How much of your acreage that you picked up over the last couple of years, do you feel like you reasonably evaluated? I mean, 50% or 75%?

That's great question. I'd say, we're probably in around -- evaluated in terms of having the prospects identified, is that what you're asking for?

Yes.

Yes, I'd say we're probably around 60% of that acreage that's been evaluated. I mean, every block that we picked up, we had prospects on. And that's something that we've always done, is we see something and we go after it. So there's not a lot of trend acreage getting picked up here. We did make sure that when we picked up land on a play that we own the play. So that was part of it. But yes. No, most of the time, when we picked up a block, it's got something already on it. But in terms of shooting the seismic, there's still some time for that.

So 60% is identified leads on the 2D, but you still have to shoot 3D on a lot of that?

Yes. I think that says it. So basically, we -- before we got adding these prospects, we picked each of them in this block because we had somebody we liked on the existing seismic or 2D or no seismic or extension of existing fields we saw. But when Ian says 60%, he still doesn't shoot the seismic. So I think we're at the beginning of where we are. Basically, we managed to survive as a company and thrive for 12 years on a quarter of what we acquired just like 6 months ago, yes.

Thank you very much. That concludes our Capital Markets Day for 2022. We appreciate your participation. And if you have any questions, feel free to reach us. Thanks.