Release Date: November 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Production levels have stabilized, leading to an increase in midpoint guidance from 49,000 BOE a day to 49,500 BOE a day.
- Projected higher free funds flow of $220 million at the midpoint of guidance range due to conservative capital focus.
- Successful drilling results at LLA-32 with a new well producing roughly 2,000 barrels per day gross.
- Strong performance from the latest well at Capachos, producing roughly 5,000 BOE per day gross.
- Significant reduction in current taxes due to lower corporate production and oil prices, enhancing financial flexibility.
Negative Points
- Lower corporate growth outlook than originally planned, impacting future expansion strategies.
- Higher downtime and natural decline in production, particularly affecting the Arauca asset.
- Increased operational expenses due to intensive Q3 workover and higher fixed costs per BOE.
- Social challenges delaying the Hydra prospect, pushing its drilling to 2025.
- High-risk exploration projects like Arantes with only a one in five chance of success, adding uncertainty to future growth.
Q & A Highlights
Q: When can we expect more clarity on the dividend and 2025 production guidance? Also, any progress on resolving asphalt team issues?
A: We plan to release 2025 guidance in January, which will include more context on capital returns. We've approved the dividend for Q4 and will discuss its progression through 2025. Regarding Arauca, we're completing the Arauca-81 well and planning stimulation on Arauca-15. For Arantes, drilling is progressing well, and we expect results by year-end.
Q: Can you provide insights on the base production at Llanos 34 and expected decline rates?
A: The major assets in SoCa, including Llanos 34, are following long-term decline expectations. We are implementing EOR strategies, such as polymer expansion, to stabilize and lower declines. Some sharper declines are due to prolific horizontal wells in the Mirador reservoir, which have high initial production but decline rapidly.
Q: What is Parex's approach to M&A and farm-in opportunities, and is there any interest in expanding outside Colombia?
A: We are not looking outside Colombia. We see significant potential within the country. We've observed more assets on offer, particularly from Ecopetrol, and are focusing on opportunities that fit our strategy, especially those with low volatility and high predictability.
Q: How much of the OpEx guidance increase is due to lower production versus higher costs, and what is the outlook for OpEx beyond 2024?
A: The 10% production decrease impacts BOE unit costs. We had an intensive Q3 workover, which increased costs, but expect normalization in Q4. The BOE impact will remain until we can show growth and dilute fixed OpEx.
Q: With free cash flow guidance adjustments, will there be enough to sustain dividends, buybacks, and capital investments?
A: We are taking a conservative approach to CapEx, focusing on stable production with lower capital requirements. Our capital allocation strategy includes maintaining a strong dividend and using buybacks as a lever, adjusting based on market conditions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
