Parex Resources reports strong Q3 results with production increase and robust financial performance, positioning for growth amid volatile markets.

Regina - Conference Operator - (00:01:33)

Hello and thank you for standing by. My name is Regina and I will be your conference operator today. At this time I'd like to welcome everyone to the PAREX Resources third Quarter Operational and Financial Results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press Star then the number one on your telephone keypad. To withdraw your question, press Star one again. I'd now like to turn the conference over to Mike Crookston, Senior Vice President of Capital Markets and Corporate Planning. Please go ahead.

Mike Crutten - (00:02:10)

Good morning everyone and welcome to Parex Resources third quarter 2025 conference call and webcast. My name is Mike Crookston and on the call with me today are our President and Chief Executive Officer Imad Molson, our Chief Financial Officer Cam Granger and our Chief Operating Officer Eric Furlan. Please note that at any time telephone participants on the call can press star1 to submit a question. As a reminder, this conference call includes forward looking statements as well as non GAAP and other financial measures with the associated risks outlined in our news release and mda, which can be found on our website or@sedarplus ca. Note that all amounts discussed today are in US dollars unless otherwise stated. I'll now turn the call over to Ahmad. Please go ahead.

Ahmad - (00:03:02)

Thank you Mike and good morning everyone. Throughout the quarter we have made steady progress across our portfolio, successfully executing our ambitious activity plan and delivering strong results. With the majority of our planned activity now complete or underway, that momentum is translating into stronger production performance and positioning us to deliver a Q4 production average that exceeds the top end of our annual guidance. At our core assets, Capistero and Janus 34, we continue to see strong reservoir performance through application of scale recovery and EOR programs that are maximizing recovery rates from the field. At LLA-32, where we completed a Pacain acquisition in March, we've quickly demonstrated our ability to unlock value and deliver superior performance as the field operator. While Eric would provide more details on the momentum underway, I will say that our disciplined execution has already translated into steady production gains with current rates now exceeding three times what we inherited at the time of acquisition. Turning to exploration where performance this year has been strong, we delivered five near field successes at LLA-74, underscoring that our strategy is generating tangible in year production gains and we are now looking ahead to our WIM1 exploration prospects with results anticipated by year end. Our financial performance for the quarter was strong despite a softer price environment. Our top quartile netbacks reflect the strength of our operating model and durability of our business, driven by favorable Colombian crude oil differentials and continued internal cost optimization. With that, I'll now turn it over to Eric to provide an operational update.

Eric Furlan - Chief Operating Officer - (00:04:57)

Thanks Ahmad In Q3 2025, production averaged 43,953 boe per day, generally in line with our expectations. Building on the milestones Ahmad highlighted, we're now seeing strong performance carry into Q4 with October production averaging 49,300 boe per day, representing a 12% month over month increase from September. This growth stems from the exceptional execution of our teams against the demanding second half activity plan and I want to recognize their efforts. Let's take a closer look at some of the key performance highlights. At Cabrestero, we are building on the successful completion of the waterflood phase and are now executing our full field Polymer Implementation plan. With the project now 80% complete, we are on track to achieve full implementation by year end. At Janus 34, we continue to apply lessons learned from Cabostero. With ongoing optimization and waterflood expansion currently underway by year end, we also expect to complete the initial polymer implementation at two patterns on the field. At block 32, we've seen strong production ramp up driven by disciplined execution. In the quarter, we delivered four successful development and appraisal wells, growing production from 4,000 boe per day when we first took operatorship in April to over 12,000 boe per day today. What's even more encouraging for LLA32 is that we progress our activity. We are gaining valuable insights into the field, revealing even greater running room than we initially anticipated. We are looking forward to results in Q4 when we plan to spot a well in the northern part of the field which if successful will de risk additional areas and expand future drillable inventory. At Capachos, our activity is progressing as planned with the first two. With the first of a two well development campaign complete, the first well's performance has been strong. With drilling underway for the second well. At the Putumayo, we are making steady progress with our activity plan set to commence in the fourth quarter. We are currently mobilizing two rigs and expect to spud two wells, with one commencing a waterflood pilot process and the other applying horizontal drilling concepts. The results will provide valuable baseline production data to refine and optimize our 2026 development strategy. And lastly, turning to exploration, as Ahmad mentioned, we spot the Guapi Prospect located on the VIM-1 block in mid October. This prospect is targeting gas and condensate and the success here would help de risk nearby contingent prospects, confirm our egress plans for the area and solidify our gas strategy in the basin. We look forward to having preliminary results by year end. Our near field exploration program continues to deliver with the fifth well now online in block 74. The block success is contributing production in excess of 5,000 boe per day and demonstrating the value of targeting low risk high success prospects. As we look ahead to 2026, we're using our sizable land position to build a robust funnel of opportunities to sustain this performance. Overall, we have made strong progress over the quarter and we remain focused on operational execution to ensure we maintain momentum into 2026. With that, I'd invite Cam to please go ahead.

Cam Granger - Chief Financial Officer - (00:08:19)

Thanks Eric. Despite a lower price environment, we continue to deliver strong financial performance in the quarter. Funds flow provided by operations grew modestly to 105 million and our FFO netback was steady at $26.07 per boe based on an average Brent oil price of $68.17 per barrel. Also supporting netbacks has been an improved operated production expense profile. While we have recently seen a slight uptick in power costs, they remain at normalized levels and have been supported by the team's ongoing efforts to deliver internal optimizations which are proving successful for Q4. We have hedged roughly 25% of our planned production utilizing a Brent put spread at $60 and $65 per barrel, which is providing insulation for our cash profile and in an environment where we continue to see global volatility. Current taxes were 11 million for the quarter. Given Colombia's progressive tax and royalty system and at strip pricing, we expect our full year effective current tax rate to be between 5 to 8%. Capital spending for the quarter totaled 80 million, reflecting our increased activity levels. We expect expenditures to remain at similar levels through the year end, but we may look to deploy incremental capital to carry our momentum into 2026. The decision will depend on upcoming well results where ongoing success could support additional follow up drilling. We remain fully funded with our capital program advancing a regular dividend covered and a modest level of share repurchases. Continuing. Our balance sheet remains exceptionally strong, underpinned by ample liquidity and financial flexibility. This solid financial position enables us to execute our strategic priorities with confidence while remaining maintaining resilience in varying market conditions. With that, I will pass it over to AMAD for some final remarks.

Ahmad - (00:10:20)

Thank you Kam. As we've highlighted throughout the call, we are well positioned to meet our annual production guidance and finish the year strong. The team remains focused on sustaining momentum and leveraging near term opportunities to capture additional value and position Parks for a strong start to 2026. Achieving this has taken focus, discipline and teamwork across the organization and I want to thank all our employees and partners for their hard work and commitment. With that, I'll turn it over to Mike for closing remarks.

Mike Crookston - Senior Vice President of Capital Markets and Corporate Planning - (00:10:57)

Thank you again for your attention today. Before we move to the Q and a portion of the call, I want to state that we are committed to providing timely updates to the investment community on our proposed acquisition of geopark. But given the current situation at this time, we will not be providing any further comments or taking questions on this matter. This concludes our formal remarks. I would like to turn the call back to the operator and start the Q3 earnings Q& A session for the investment community.

Regina - Conference Operator - (00:11:30)

Thank you. We will now begin the question and answer session and in order to ask a question, press Star followed by the number one on your telephone keypad. Our first question will come from the line of Greg Pardi with RBC Capital Markets. Please go ahead.

Greg Pardi - Equity Analyst - (00:11:45)

Yeah, thanks. Thanks. Good morning. Thanks for the rundown. I had a couple of questions, but the first is: First is maybe just to get a better sense of what the trajectory looks. Like on from a unit operating cost. Standpoint, I know there's been some volatility. It was a lot lower in 2Q, it's up in 3Q. Just wondering how we should think about. That in more of a normalized state.

Cam Granger - Chief Financial Officer - (00:12:06)

Hey Greg, it's Cam. Yeah, so we had an uptick in OPEX in the quarter compared to Q2. That's driven by a few things. Power costs in August and September increased and that impacted our non operated LLA 34 field. Those have since subsided in October and normalized. We also had the Colombian peso increase about 5% over Q2 and then we also had a small non recurring adjustment that we recorded in the quarter. So that's what was really kind of driving that increase of $2.50. Looking forward to Q4. With flush production coming from our operated fields and power costs more in line, we're thinking we're expecting our OPEX number to be around 12 to $13 per barrel. Okay. Okay, terrific. Thanks for that. And maybe I'll ask this question in a bit of a roundabout way, but let's just say you owned 100% of block 34. What would be the plan? Perhaps how would the development plan change from maybe what's in place currently?

Matt - (00:13:26)

Let me answer that. It would be a very good plan. But other than that, I'd refer back to Mike's comment. We'd rather right now not talk about the Geopark offer because there's lots going on and we'd rather not talk about it or answer questions.

Greg Pardi - Equity Analyst - (00:13:49)

Okay. Okay. Thanks, Matt.

Regina - Conference Operator - (00:13:54)

Once again, for any questions, press star followed by the number one on your telephone keypad. And that will conclude our question and answer session. I'll hand the call back to Mike for any closing comments.

Mike Crookston - Senior Vice President of Capital Markets and Corporate Planning - (00:14:12)

Thank you very much, Operator. If you have any questions, please feel free to contact me@parksresources.com thanks for joining us today.

Regina - Conference Operator - (00:14:24)

That will conclude our call today. Thank you all for joining. You may now disconnect.