Parex Resources Q2 Earnings Call Highlights

Key Points

• Major expansion: Parex completed its Frontera acquisition and Magdalena Basin partnership with Ecopetrol, nearly doubling production guidance to about 86,000 BOE per day and expanding its Colombian land position to more than 7.9 million acres.
• Growth plans: The company plans up to 20 exploration and development wells in the Eastern Llanos over the next 12 months and expects to begin drilling its high-impact Piedemonte prospect in the fall.
• Cash flow and cost outlook: Parex reaffirmed second-half 2026 funds-flow guidance of $475 million to $525 million and capital spending of $275 million to $295 million, while warning that elevated energy costs, a stronger Colombian peso and wider Vasconia differentials are pressuring margins.

Parex Resources TSE: PXT said its second-quarter results marked a turning point following transactions that expanded its production base, reserves and Colombian operating footprint, with management focusing on integration, cost synergies and organic exploration opportunities in the second half of 2026.

President and Chief Executive Officer Imad Mohsen said the company completed major transactions during the first half of the year that made it Colombia’s largest independent exploration and production company. The transactions nearly doubled Parex’s production guidance to approximately 86,000 barrels per day at the midpoint and expanded its land position to more than 7.9 million acres, he said.

Frontera Integration and Magdalena Partnership

Mohsen said Parex’s acquisition of Frontera has officially closed and that the integration process is proceeding smoothly. The acquisition added stable production, technical personnel and long-term reserves, according to management.

Chief Operating Officer Eric Furlan said Parex produced more than 54,000 barrels of oil equivalent per day during the second quarter, supported by its first month of production volumes from Frontera. He added that current company production is averaging more than 83,000 BOE per day.

The company is reviewing the broader Frontera portfolio to optimize production and pursue field-level efficiencies, Furlan said. Parex also released a pro forma reserves evaluation during the quarter, with proved developed producing and proved reserves each increasing by more than 80%, according to Furlan.

Separately, Parex closed its Magdalena Basin partnership with Ecopetrol and received the associated regulatory approvals. Under the arrangement, Parex committed to a $250 million capital program over five years in exchange for a 50% interest in the Casabe and Llanito blocks, with no upfront acquisition cost.

Mohsen said Parex expects its participation in the blocks to begin once it drills its first wells, providing access to production that is currently about 15,000 barrels per day. The company is completing preliminary activities for the drilling campaign, and Furlan said the first rig is expected to begin moving shortly.

Management described the assets as a potential new core operating and development area, with longer-term opportunities in waterflood optimization, enhanced oil recovery and development drilling.

Eastern Llanos Development and Foothills Exploration

Parex also highlighted exploration progress at Llanos-111 in the Eastern Llanos, where it has made four discoveries so far in 2026. Production at Block 111 is averaging more than 5,000 barrels per day, though Furlan said seasonal weather constraints are temporarily limiting output.

The company is advancing a phased egress expansion plan intended to accommodate drilling success and mitigate weather-related operating constraints. Parex plans to drill up to 20 exploration and development wells in the area over the next 12 months, supported by ongoing seismic acquisition.

Mohsen said the company is also preparing to spud its Piedemonte exploration prospect in the Llanos Foothills during the fall. He characterized the prospect as a major growth opportunity and identified advancing high-impact foothills exploration as one of Parex’s three near-term priorities.

The other priorities are integrating recent acquisitions and capturing operating synergies, as well as building a new operating area in the Eastern Llanos, Mohsen said.

Cash Flow Outlook and Cost Pressures

Chief Financial Officer Cam Grainger said the second-quarter results position Parex for higher cash generation as contributions from the expanded business take effect. He said results included $59 million of one-time transaction fees and realized hedging losses, which management characterized as temporary integration, transition and hedging-related items.

Parex reaffirmed its guidance for the second half of 2026, including the expected contributions from Frontera and the Ecopetrol partnership. At an assumed Brent oil price of $90 per barrel, the company expects:

• Funds flow from operations of $475 million to $525 million;
• Capital expenditures of $275 million to $295 million.

Grainger cautioned that actual results will depend on oil prices. He also said elevated energy prices, partly associated with El Niño weather patterns, and appreciation in the Colombian peso are increasing production-cost pressure, with costs trending toward the upper end of Parex’s guidance range.

In addition, wider Vasconia differentials have affected projected realized pricing, he said. Still, Grainger said the larger production base and expected operating performance should support significant free cash flow.

Management said it intends to use free cash flow from its foundational assets to invest in its exploration and development inventory, while also pursuing balance-sheet improvement and shareholder returns. Parex also published its 12th annual sustainability report, covering environmental stewardship, community partnerships and governance across its Colombian operations.

About Parex Resources (TSE:PXT)

Parex Resources Inc engages in exploration, development, and production of crude oil. The company brings technology utilized in the Western Canada Sedimentary Basin to South American basins with large oil-in-place potential. Majority of the company's properties are focused in Colombia, where it pays a royalty or tax to the government for its operations. Parex depends on a team of geologists and geophysicists, in partnership with technologies such as 3D seismic surveying, to help exploration efforts.

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