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

Thank you. Hello everyone, thank you for joining us and welcome to the PARICS Resources Q2 2026 Operational and Financial Results. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. will now hand the conference over to Mike Cructon, Senior Vice President of Capital Markets and Corporate Planning. Mike, please go ahead.

Thank you. Good morning everyone and welcome to Park Resources second quarter, two thousand twenty six conference call and webcast. My name is Mike Crofton and on the call with me today are our president and chief executive officer, Ahmad Molson, our chief financial officer, Cam Granger, and our chief operating officer, Eric Furrier. Please note that any time telephone participants on the call can press star 1 to submit a question. As a reminder, this call includes forward-looking statements as well as non-GAAP and other financial measures, with the associated risks outlined in our news release and MD&A, which can be found on our website or at cdarplus.ca. Note that all amounts discussed today are in U.S. dollars, unless otherwise stated. I'll turn the call over to Ahmad. Please go ahead. Thank you, Mike, and good morning, everyone.

Over the first half of 2026, Barracks completed major transactions to become Colombia's largest independent EMP company. This has resulted in the company nearly doubling its production guidance to roughly 86,000 barrels per day at the midpoint. and expanding our footprint to over 7.9 million acres. With these transactions behind us, our focus shifts to capturing synergy and delivering strong operational performance. first the front-end transaction is officially closed with the integration of integration processing smoothly. This major acquisition has added stable production, both top tier technical talent to our team and significantly added to our long-term reserves. Today's updated reserves report information reinforces our acquisition thesis and validates our capital allocation strategy. As we continue to evaluate the portfolio, foundational work is already underway to unlock operational and strategic synergies that will generate compounding efficiencies over time. Second, our Magdalena partnership with Egg Patrol has closed and we have secured all regulatory approvals. through a $250 million five-year capital program and zero upfront acquisition costs. They have secured a 50% interest in the Casabianito blocks, which have significant oil in place. So pressure momentum is building as we prepare to begin turning our first walls, which will trigger our 50% participation. And the block is currently roughly 15,000 bars a day of production growth. Beyond current volume, this acreage offers significant long-term upside through water flood optimization, EOR, and development drilling. Third on the organic front, they are very encouraging. We are very encouraged by our recent success in Eastern 111, where we have delivered four discoveries so far in 2026. Our team views this area as highly prospective, and we are actively developing a multi-year development and egress strategy with plans to drill up to 20 wells over the next 12 months to grow and expand this region. Looking ahead to the second half of 2026, I'm energized by our operational momentum, especially as we prepare to spot our Piedmont exploration prospect in the foothills, which represents a major growth opportunity for Barracks. With that, I'll turn it over to Eric. Please go ahead, Eric.

Thanks Ahmad. In the second quarter, production averaged over 54,000 BOE per day, supported by the first month of Frontera volumes. Today we are building positive operational momentum. Starting with Frontera, the assets have delivered strong operational performance since closing, and we are actively evaluating the broader portfolio to optimize production and drive field level efficiencies. In the Magdalena Basin, we are completing initial activities to drill our first wells in the Casabe and Janito programs. The initial rig is expected to begin moving shortly, and we are excited to initiate these campaigns, which are expected to add stable, low decline production and establish a new core operating and development area for PAREX. At POC 111, current production is averaging over 5,000 barrels per day, with seasonal weather constraints temporarily limiting output. To support long-term production growth and address seasonal weather challenges, we're advancing a phased egress expansion plan that will scale alongside drilling success. As Ahmed mentioned, Over the next 12 months, we plan to drill up to 20 exploration and development wells. This is supported by plans for ongoing seismic acquisition to continuously replenish our exploration inventory. Together, these initiatives provide a clear pathway toward growing long-term production capacity with significant running room ahead. This quarter we also released our pro forma reserves evaluation, marking a significant milestone as both PDP and 1P reserves increased by more than 80%. These results validate our acquisition thesis for Frontera and Magdalena assets and highlight the value created through these transactions. Looking ahead, our capital allocation priority is clear. Leverage the bulk of the free cash flow generated by these foundational assets to continue investing in BioAXIS high-quality exploration and development inventory. We are energized by our current production, which is averaging over 83,000 DOE per day and puts Pyrrhax on a clear upward trajectory for the second half of 2026. With that, I'll turn it over to Cam. Thanks Eric. Our second quarter results mark an inflection point positioning the company for the.

generation as the benefits of our transformed business take hold. Adjusting for 59 million of one time transaction fees and realized hedging losses, second quarter results were strong. As previously communicated, these temporary integration and transition costs along with the disclosed hedging losses were anticipated and should be excluded to provide a clearer view of and financial performance. Looking ahead, we are reaffirming our second half 2026 guidance which fully incorporates the contributions of both the Frontier Acquisition and the Echo Patrol Partnership at a $90.00 Brent assumption for the second half of the year we expect funds flow from operations of $475 to $525 million against capital expenditures of 275 to 295 million, recognizing that actual results will vary depending on where oil prices settle. While While market conditions continue to evolve, we are closely monitoring the factors impacting cost and pricing. Elevated energy prices, partly driven by El Nino weather patterns, along with Colombian peso appreciation, are placing upward pressure on production costs, which are now trending toward the upper end of our guidance range. At the same time, VASCONIA differentials have widened in recent months, impacting projected realized pricing. Despite these factors, our expanded production base and expected strong operating performance should support significant pre-cash flow generation. As integration progresses for Frontera and we start operations at the Magdalena assets, our team is focused on portfolio optimization and cost synergies. This focus will drive compounding efficiencies and expand our free cash flow profile, giving us the flexibility to reinvest in organic growth, strengthen our balance sheet and return and capital to shareholders. To finish from a reporting lens, we are pleased to announce that we have published our 12th annual sustainability report, underscoring our ongoing commitment to environmental stewardship, community partnerships and strong governance across our operations in Columbia.