Parex Resources Announces 2012 First Quarter Results

CALGARY, ALBERTA--(Marketwire - May 10, 2012) -

NOT FOR DISTRIBUTION TO US NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Parex Resources Inc. ("Parex", the "Company" or "we") (TSX:PXT), is pleased to announce financial and operating results for the three months ("first quarter") ended March 31, 2012. An update of the Company's operations is also provided below.

Parex is focused on oil exploration and production in Colombia and Trinidad. Copies of the Company's consolidated financial statements and the related Management's Discussion and Analysis ("MD&A") have been filed with Canadian securities regulatory authorities and will be made available under the Company's profile at www.sedar.com and on the Company's website at www.parexresources.com. All amounts herein are in United States dollars unless otherwise stated.

First quarter 2012 highlights:

• Achieved quarterly oil production of 11,679 barrels of oil per day ("bopd") compared to 11,342 bopd for the fourth quarter of 2011;
• Quarterly Colombian oil sales of 12,219 bopd realized an average sales price of $116.90 per barrel generating an operating netback of $81.79 per barrel. The Company markets its oil production with a Brent reference price, realizing an approximate $14 per barrel premium to WTI on average for the Company's first quarter oil sales;
• Generated funds flow from operations of $83.8 million ($0.77 per share basic), a 33 percent increase over the fourth quarter of 2011. First quarter funds flow from operations were in excess of the $59.4 million invested in capital expenditures;
• Generated net income of $27.3 million ($0.25 per share basic);
• Drilled six wells in Colombia (6.0 net) and one well in Trinidad (0.5 net); and
• Strengthened the Company's balance sheet with working capital increasing from $92.9 million at December 31, 2011 to $116.3 million at March 31, 2012.

Subsequent to the first quarter of 2012 highlights include:

• Parex closed an acquisition of a wholly owned Bermuda based subsidiary ("Acquisition") with operations in Colombia that include five exploration blocks located in the Llanos Basin and two blocks located in the Middle Magdalena Basin, 2.3 mmbbl of probable reserves and approximately 100 bopd of production for total consideration of approximately $72.6 million in cash, including closing adjustments; and
• Made an oil discovery on Block LLA-32 (30% working interest) with the Maniceño-1 well testing approximately 3,000 bopd of 25° API oil on natural flow.

Operating & Financial Highlights

			Three Months ended March 31,				Three Months ended Dec 31,
(Unaudited) (1)			2012		2011		2011
Operational
Average daily production
		Oil (bopd)	11,679		1,146		11,342
		Oil inventory - end of period (barrels)	232,300		-		281,500
Average daily sales
		Oil (bopd)	12,219		1,146		10,233
Operating netback ($/bbl)
		Oil revenue	116.90		95.54		102.15
		Royalties	(8.65	)	(6.61	)	(8.04	)
		Net revenue	108.25		88.93		94.11
		Production expense	(6.94	)	(4.06	)	(6.97	)
		Transportation expense	(19.52	)	(21.77	)	(15.90	)
	Operating netback		81.79		63.10		71.24
Financial
($000s except per share amounts)
Oil and natural gas sales			129,989		9,853		96,169
Net income			27,304		1,023		4,477
	Per share - basic		0.25		0.01		0.04
Adjusted net income (2)			26,934		1,023		6,470
	Per share - basic		0.25		0.01		0.06
Funds flow from operations			83,754		2,960		63,135
	Per share - basic		0.77		0.04		0.58
Capital expenditure			59,395		18,152		53,677
Total assets			703,343		220,521		660,177
	Working capital surplus		116,277		101,672		92,893
	Convertible debentures(3)		(62,148	)	-		(60,001	)
	Long-term debt		-		-		-
Outstanding shares (end of period) (000s)
	Basic		108,410		77,165		108,300
	Diluted(4)		112,070		82,608		111,970

1. The table above contains non-GAAP measures. See "Non-GAAP Terms" for further discussion.
2. Net income has been adjusted for the International Financial Reporting Standards ("IFRS") accounting effects of changes in the derivative financial liability related to the convertible debenture. Management considers adjusted net income a better measure of the Company's financial performance.
3. Face value of the convertible debenture is Cdn $85 million with a conversion price of Cdn $10.15 per share.
4. Diluted shares include the effects of common shares, in-the-money stock options and potential shares issuable on conversion of in-the-money convertible debentures outstanding as at the period-end date. The March 30, 2012 closing stock price was $7.04. Diluted shares outstanding per the MD&A of 125.1 million shares include all potential dilution.

First Quarter 2012 Financial Summary

For the first quarter of 2012, sales volumes averaged 12,219 bopd (net working interest before royalty) and the average realized sales price in Colombia was $116.90 per barrel, generating an operating netback of $81.79 per barrel. Parex markets its crude oil production pursuant to contracts with Brent benchmark pricing.

Oil sales exceeded oil production as crude oil inventory was reduced by approximately 49,200 barrels during the first quarter of 2012, leaving 232,300 barrels on March 31, 2012. Inventory is valued at historical cost.

The Company's net income for the first quarter of 2012 was $27.3 million ($0.25 per share basic) compared to $4.5 million ($0.04 per share basic) for the fourth quarter of 2011. Adjusted net income of $26.9 million included a $0.4 million non-cash gain associated with the accounting treatment under IFRS for the Company's convertible debenture. Funds flow from operations was $83.8 million ($0.77 per share basic), a 33 percent increase over the fourth quarter of 2011.

The Company's first quarter capital expenditures were $59.4 million, entirely funded from funds flow from operations with surplus funds flow increasing working capital.

Parex Operations Update

Block LLA-16 (100% Working Interest)

During the first quarter of 2012 three Kona wells were drilled. Two wells were drilled to test the down dip limits of the Gacheta Formation which tested wet and were converted to water disposal wells. The third well was completed as an oil producer in the Mirador formation. Kona recompletion activities are ongoing. The next well scheduled to be drilled on the Kona field is Kona-16, a Mirador delineation well targeting a southern extension of the field.

At the Sulawesi field, a workover rig is moving to the field to reactivate zones that were previously suspended due to water handling limitations along with completing a water disposal zone. After commissioning of the water disposal well, the field is expected to be on production at a rate of 500 to 700 bopd. The Malawi-1 well located immediately south of the Sulawesi field was spud on May 1, 2012. The programmed target depth is approximately 12,100 feet and the well is currently drilling through 9,000 feet.

The Java-2 well was spud on April 1, 2012 and was drilled to a bottom-hole target located 740 meters north of the Java-1 well. The target reservoir was encountered lower than expected and tested wet. The drilling rig has been moved to a new prospect. The Company plans to re-evaluate its geological interpretation of the Java structure to determine the potential for follow-up drilling locations.

Block LLA-17 (Operated 40% Working Interest)

The Celeus-1 well was drilled and cased during April 2012. Parex expects to test the Gacheta Formation later in 2012 when conditions allow easier access. The drilling rig has moved to the Mapora-1 prospect, which is the final commitment well for Block LLA-17 initial exploration phase. The Mapora-1 well is expected to be drilled to a target depth of 12,000 feet.

Block LLA-20 (100% Working Interest)

The Cumbre-2 well was drilled 300 meters north of the Cumbre-1 well and encountered 10 feet of net pay in the C7 Formation. The well was completed and tested at a rate of 515 bopd at a 39 percent water cut after a 20 hour cleanup flow period utilizing an electric submersible pump. The Cumbre-2 well will remain on production and the drilling rig on location will skid to drill the Cumbre-3 well targeting both the C7 and Gacheta formations approximately 250 meters south of Cumbre-1.

Parex is mobilizing a rig to the Morocoto prospect located on the south-east corner of Block LLA-20. The programmed target depth is approximately 7,700 feet.

Block LLA-29, LLA-30 & LLA-57 (100% Working Interest)

As reported previously, due to civil disruptions in the eastern Llanos region and now with the onset of the rainy season, Parex elected to defer the commencement of its exploration program to the next dry season. Parex had planned to drill up to four exploration wells on the three blocks in the first quarter of 2012. That activity is now expected to commence in the fourth quarter of 2012 or early 2013. The initial exploration phase of the exploration contract for blocks LLA-29 and LLA-30 has been extended to April 19, 2013 to accommodate the delay.

Block LLA-32 (Non-Operated 30% Working Interest)

The Maniceño-1 well was spud on March 2, 2012 and after side-tracking the original wellbore due to stuck logging tools, reached total measured depth of 11,027 feet on April 18, 2012. Log interpretations in the Mirador Formation indicate net pay of approximately 50 feet. The top 14 feet (10,750' - 10,764') of the indicated pay in the Mirador Formation was perforated and production tested over a 21 hour period both on natural flow and utilizing a down-hole pump. The well flowed naturally 25° API oil at an average rate of 3,036 bopd over a 6 hour period with water cut of less than 5 percent. Pressure recorders were placed in the wellbore and the pressure buildup is being evaluated to determine reservoir properties. Initial production rates are expected to be constrained by the capacity of the long-term testing facility. Initial production test results should be viewed as preliminary until pressure analysis and well test interpretation are completed.

The Maniceño-1 well was the first of two commitment exploratory wells on Block LLA-32. After the Maniceño-1 well, the drilling rig is being mobilized to the second commitment exploratory well, Samaria Norte-1 which is expected to spud in the second half of May 2012 with a target drilling depth of 11,000 feet.

Block LLA-34 (Non-Operated 45% Working Interest)

The Max-1 prospect was drilled and cased during the first quarter of 2012. Immediately following Max-1 rig release, the Agami-1 prospect was drilled and cased. Testing operations at Max-1 are expected to commence shortly with four zones approved for testing. A third prospect, Tua-1 was spud on May 6, 2012 and is expected to drill to a target depth of 11,000 feet.

Block LLA-40 (Operated 50% Working Interest)

Parex has acquired and now is processing 210 square kilometres of 3D seismic. The Company is in the process of identifying prospects to fulfill its four well exploration phase commitment.

Cabrestero Block (Farm-in 50% Working Interest)

Parex has entered into a farm-in agreement on the 29,562 gross acres Cabrestero Block, located in the Llanos Basin immediately south of LLA-34. The Company will earn 50 percent working interest on the block and will be operator after completing its farm-in obligations by paying 100 percent of the cost to drill and evaluate the Kitaro-1 exploration well, subject to regulatory approval. Kitaro-1 was spud on April 16, 2012 and has been drilled to a target depth of 10,800 feet. The well encountered the Mirador formation as anticipated and will be cased and tested.

Los Ocarros Block (50% Working Interest)

The Las Maracas-2 side-track well has commenced production at a rate of approximately 1,000 bopd of 37° API oil from the Mirador Formation. Construction has commenced on the long-term production facility which is expected to be completed in May 2012. Parex expects to drill the first follow-up appraisal well on the Las Maracas discovery, subject to regulatory approval that is expected to be received in June 2012.

El Eden (60% Working Interest)

Parex expects that construction for the La Casona-1 prospect will commence shortly and that the well will spud in July 2012, drilling to a target depth of 16,000 feet.

Colombia Production Update

Average production for April was approximately 10,450 bopd. The second quarter 2012 exit rate production is expected to range between 10,000-12,000 bopd dependent upon on-stream timing of the Maniceño-1 well, and testing results and on-stream timing for the Max-1 and Kitaro-1 wells.

Trinidad Exploration Update

On the Moruga Block the Green Hermit-1 well has reached a total depth of approximately 7,500 feet and testing operations are expected to commence in during second quarter 2012.

Also on the Moruga Block, the Company re-entered Firecrown-1 and sidetracked the well to evaluate two Herrera objectives that it was unable to test in the original wellbore. The drilling rig is currently being moved off location prior to testing operations.

The first Central Range block deep exploration well lease site is under construction and the spud date is still expected for July 2012.

Conference Call Information

Parex will host a conference call to discuss these results on Friday, May 11, 2012 at 9:30 am MST (11:30 pm EST). Media, analysts and investors wishing to participate can access it by calling 1-866-696-5910, pass code: 3726765.

The live audio will be carried at:

http://www.bellwebcasting.ca/audience/index.asp?eventid=75312005

Corporate Overview

Parex, through its direct and indirect subsidiaries, is engaged in oil and natural gas exploration, development and production in South America and the Caribbean region. Parex is conducting exploration activities on its 1,410,000 acre holdings in Colombia and its 219,000 acre holdings onshore Trinidad. Parex is headquartered in Calgary, Canada.

Non-GAAP Terms

Funds flow used in, or from operations, working capital, adjusted net income, and operating netback per barrel may from time to time be used by the Company, but do not have any standardized meaning under IFRS and may not be comparable to similar measures presented by other companies. Funds flow used in, or from operations includes all cash generated from operating activities and is calculated before changes in non-cash working capital. Funds flow used in, or from operations is reconciled with net earnings in the consolidated statements of cash flows. Funds flow per share is calculated by dividing funds flow used in, or from operations by the weighted average number of shares outstanding. Working capital includes current assets less current liabilities but may not include the change in non-cash working capital from one period to the next. Adjusted net income is determined by adding back any losses or deducting any gains associated with the Company's derivative financial liability. Operating netback per barrel equals sales revenue, less royalties, production expense and transportation expense, divided by total equivalent sales volume. Management uses these non-GAAP measures for its own performance measurement and to provide shareholders and investors with additional measurements of the Company's efficiency and its ability to fund a portion of its future growth expenditures.

Advisory on Forward Looking Statements

Certain information regarding Parex set forth in this document contains forward-looking statements that involve substantial known and unknown risks and uncertainties. The use of any of the words "plan", "expect", "prospective", "project", "intend", "believe", "should", "anticipate", "estimate" or other similar words, or statements that certain events or conditions "may" or "will" occur are intended to identify forward-looking statements. Such statements represent Parex's internal projections, estimates or beliefs concerning, among other things, future growth, results of operations, production, future capital and other expenditures, plans for and results of drilling activity, business prospects and opportunities. These statements are only predictions and actual events or results may differ materially. Although the Company's management believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievement since such expectations are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Many factors could cause Parex' actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, Parex.

In particular, forward-looking statements contained in this document include, but are not limited to, statements with respect to the performance characteristics of the Company's oil properties and wells; results of drilling and testing; results of operations; drilling plans; activities to be undertaken in various areas; capital plans in Colombia and exit rate production; expected production in the first quarter 2012; quarter over quarter growth; timing of drilling and completion; planned capital expenditures, the timing thereof and the source of funding for such capital expenditures; and details of the Company's exploration drilling and testing program. In addition, statements relating to "reserves" or "resources" are by their nature forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions that the resources and reserves described can be profitably produced in the future. The recovery and reserve estimates of Parex' reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered.

These forward-looking statements are subject to numerous risks and uncertainties, including but not limited to the impact of general economic conditions in Canada, Colombia and Trinidad & Tobago; industry conditions including changes in laws and regulations including adoption of new environmental laws and regulations, and changes in how they are interpreted and enforced, in Canada, Colombia and Trinidad & Tobago; competition; lack of availability of qualified personnel; the results of exploration and development drilling and related activities; obtaining required approvals of regulatory authorities in Canada, Colombia and Trinidad & Tobago; risks associated with negotiating with foreign governments as well as country risk associated with conducting international activities; volatility in market prices for oil; fluctuations in foreign exchange or interest rates; environmental risks; changes in income tax laws or changes in tax laws and incentive programs relating to the oil industry; ability to access sufficient capital from internal and external sources; the factors described under "Risk Factors" in the Company's annual information form for the year ended December 31, 2011; and other factors, many of which are beyond the Company's control. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could effect Parex' operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).

Although the forward-looking statements contained in this document are based on assumptions which management believes to be reasonable, the Company cannot assure investors that actual results will be consistent with these forward-looking statements. With respect to forward-looking statements contained in this document, Parex has made assumptions regarding: current commodity prices and royalty regimes; availability of skilled labour; timing and amount of capital expenditures; future exchange rates; the price of oil; the impact of increasing competition; conditions in general economic and financial markets; availability of drilling and related equipment; effects of regulation by governmental agencies; royalty rates, future operating costs, and other matters. Management has included the above summary of assumptions and risks related to forward-looking information provided in this document in order to provide shareholders with a more complete perspective on Parex' current and future operations and such information may not be appropriate for other purposes. Parex' actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do, what benefits Parex will derive. These forward-looking statements are made as of the date of this document and Parex disclaims any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.

In addition, the well test results are not necessarily indicative of long-term performance or of ultimate recovery.

This news release does not constitute an offer to sell securities, nor is it a solicitation of an offer to buy securities, in any jurisdiction.