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spk01: Good morning, everyone, and welcome to Parex Resources' third quarter 2022 conference call and webcast. Please note that at any time, participants on the webcast can submit their questions under the Ask a Question tab at the top of the webcast interface, and participants on the phone can press star 1. I would now like to turn the call over to Mike Gresham, Senior Vice President of Capital Markets and Corporate Planning at Parex. Please go ahead, Mike.
spk04: Thank you, operator, and good morning, everyone. On the call with me today are Ahmad Moulton, Parks' President and Chief Executive Officer, Ken Pinsky, CFO, and Eric Ferland, Chief Operating Officer. As a reminder, this conference call includes forward-looking statements and 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 cdar.com. All amounts discussed today are in U.S. dollars unless otherwise stated. Please go ahead, Ahmad.
spk03: Thank you, Mike, and good morning, everyone. Production for the quarter was pre-released at approximately $51,000 a day, up 8% from the comparative quarter in 2021. With production on the per share basis up 19% over the same period. We are in the process of optimizing and maximizing our key assets by making significant investments at our Southern Lanos assets, LL34 and Capastero, as well as Northern Lanos infrastructure, EGRAS. We expect to lower our long-term corporate decline rate and sustaining lower capital expenditure requirements. This is expected to maximize our reserves as well as generate sustainable and significant free funds flow that can be used for both reinvestment and returns to shareholders. We are also showing new growth within our portfolio. Recently, we announced that successful drilling efforts year-to-date have translated to crude discoveries on multiple of our blocks. In Northern Llanos, we have had positive drilling results with two wells that have encountered new zones. We had a near-field exploratory discovery and new play in Southern Llanos, and in Magdalena Basin, at Lim 1, we are seeing encouraging results, where we are planning to cycle the gas for an enhanced condensate recovery at the first quarter. I will now turn the call over to Ken to discuss some of our financial highlights, return of capital, and the proposals for changes in the tax regime in Colombia, before I come make some final remarks. Please go ahead, Ken.
spk05: Thanks, Amad. In the third quarter, we generated funds from operations of US$206 million, which is up 35% over the comparative quarter, and our funds flow from operations per share was US$1.85, which was up 49% over the comparative quarter. As planned in the third quarter, we decreased our working capital surplus through the acceleration of our share buyback program and the purchase of long-lead capital expenditure items, such as well casing and gas turbines. That will support our 2023 capital expenditure program. At the end of the quarter, we had a working capital surplus of $230 million U.S. and are still debt free and we have an undrawn credit facility of $200 million. In quarter three, we completed the 2022 no more course issuer bid or NCIB, which marks the fourth consecutive year where PAREX has purchased the full 10% of common shares allowable for purchase under the program. Since 2017, we have returned over $1.1 billion Canadian to shareholders for these share repurchases, which I am proud to say is nearly half of our current market capitalization today. With the normal course issuer bid complete for 2022 and the fourth quarter dividend of Canadian $0.25 per share approved by the Board of Directors, we expect to return roughly Canadian $385 million to shareholders in 2022. meeting our goal of returning more than one-third of our annual fund slope operations and 100% of free fund slope to shareholders. Turning to 2023 and the Colombian government tax reform, yesterday a proposal passed in the Colombian Senate that will move on to the Colombian Chamber of Representatives. Although it is expected that this proposal will become law and or will receive final approval, it is still subject to change. Currently, we are assessing and evaluating the current proposal and its impact to PARECs, and once finalized, we expect to provide a clear outline of the impacts to PARECs, specifically our funds from operations and net back sensitivity. Until it is final, we will not have any specific comments on the proposed changes and their impact. We have operated in Colombia since 2009 and continue to see the country as a strong, stable, and profitable environment for long-term investment and where the energy sector is a vital sector. I would now like to turn the call back to Imad for some final remarks. Please go ahead, Imad.
spk03: Thank you, Ken. Looking ahead to the fourth quarter, over the past two weeks of October, we have been working through localized blockades in the southern Llanos, where the impact was roughly 4,000 by the day. As we actively work with communities, these localized blockades have been lifted and full production is being brought back online. Given laws that have been drilled and successes to date, we still expect to achieve our Q4 guidance of 54 to 58 thousand BOE a day and are focused on executing our 60,000 barrels a day exit milestone. This is credit to our staff who have managed and navigated many twists and turns this year and the overall depth and resilience of our portfolio. As Ken mentioned, Colombian tax reform is being finalized, and we are currently working through our budget process with the plan to release our 23 guidance in early December. With this release, we also plan to provide an awesome corporate update that outlines our long-term vision strategy operations, and future opportunities. I would like to confirm our commitment to Colombia, a country with an amazing resource base, strong dependable institutions, and following the tax reform would continue to provide a very competitive fiscal term and netbacks. With that, I'd like to thank everyone for their continuous support of PAREC, and the hard work that our employees and contractors execute for us every day. This concludes our formal remarks. I would now like to turn the call back to the operator and start the Q&A session for the investment community. Thank you.
spk01: Thank you. To ask a question over the phone, please press star 1 at this time. We have a question from Christopher Jones from Haywood Securities. Please go ahead.
spk00: Hey guys, thanks for taking my call. I know you're in the midst of the budgeting process for 2023. Just wondering what level of inflationary impacts you are expecting next year and maybe provide us with some preliminary high level thought on 2023 activity and spending levels.
spk03: Thank you. We expect year on year inflation like for lack of roughly 10% and that's credit to our program where we pre-ordered a good number of amounts of long leads at previous prices, but also because of the effects of the status exchange rate on our costs in Colombia for labor.
spk05: Yeah, Chris, we'll release the budget, like Inácio said, in December, and we'll give the guidance then.
spk00: Okay, that's helpful. And then just on 2022 CapEx, I know we're sitting here in early November. Are you able to give us a sense of where CapEx should sort of settle out within the range provided at your end? Are you guys sort of pointing to the low end, mid range, or high end?
spk04: Yeah, we'll be right within our guidance range. So once you exclude the long lead items that have been purchased, we should be in that $525 to $550 million range.
spk01: Thank you. Thank you. You may still press star one if you have a question. The next question is from Ariana Kovold from Balance. Please go ahead.
spk02: Hi, good afternoon. This is Ariana Kovold with Balance. I had two brief questions. The first is that we heard over the week some things from Minister Ocampo regarding the exploration agenda. So just if you could perhaps provide more details or thoughts in terms of the chain of reactivation of unused licenses and how would this impact PAREC's programs in the upcoming years.
spk03: So I'd like to highlight the fact that before this election last year, we managed to acquire 18 blocks, which has basically quadrupled our land area in Colombia, with the number of active licenses that we have in our portfolio, we don't see any constraints whatsoever for a decade plus on our running room in terms of exploration. So with that in mind, we are observing the the new government's views on opening blocks or reactivating them or not, but we don't see any impact given that we have more than enough effect to drill.
spk02: Got it. Thank you. And just one final one, understanding that you're not perhaps discussing the impact from the reform, just if you have any detail for information that you could share with regard to this sliding scale on income surcharge, Beyond the potential impact, what are you seeing from these drafts in terms of when would this 5% to 15% scale start impacting in reference prices?
spk05: Yeah, like I said, once the proposal is finalized, we'll come out with a full description of how it affects us and how it works. maybe seven proposals since they started talking about it, so we just don't feel that it's worthwhile to go through the seventh or eighth. We'll wait here because we're very close, we think, to the end of getting a final document in place.
spk02: That's perfectly clear. Thanks again for taking my questions and congratulations on the quarter.
spk05: Thank you.
spk01: Thank you. Once again, you may press star one if you have a question. We all know for the questions at this time on the phone, I would like to turn the meeting back over to Mr. Crescent.
spk04: Thank you very much for everyone joining our call today. If you have any questions, feel free to contact me at PAREX. Have a great day.
spk01: Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.
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