CALGARY, ALBERTA--(Marketwire - July 5, 2012) -
NOT FOR DISTRIBUTION TO US NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES
Parex Resources Inc. ("Parex", the "Company") (TSX:PXT), is pleased to provide an update of the Company's operations and announces exploration success on the Cabrestero, LLA-20, LLA-32 and LLA-34 blocks.
Cabrestero Block (Operated 50 percent Working Interest)
Kitaro-1 was spud on April 16, 2012 and was drilled to a target depth of 10,800 feet. The well encountered prospective oil pay in the Mirador and Une formations. Kitaro-1 was completed in the Une Formation and commenced production June 28, 2012 at a rate of approximately 1,500 barrels of oil per day ("bopd") of 32° API light oil.
On June 28, 2012 Parex spud the Kitaro-2 well. Parex expects to drill the Kitaro-2 well to the Une Formation. This well is currently drilling through 7,000 feet and is expected to reach its target depth in July. Following Kitaro-2, the Company expects to immediately spud the next exploration prospect, Akira-1 also targeting the Une formation at a depth of 10,000 feet.
Operatorship and working interest are pending regulatory assignment.
El Eden Block (Operated 60 percent Working Interest)
Construction for the La Casona-1 exploration prospect has commenced and we expect the well to spud in September 2012, drilling to a depth of 16,000 feet.
Los Ocarros Block (Operated 50 percent Working Interest)
In April 2012 the Las Maracas-2ST well commenced production at a rate of approximately 1,000 bopd of 37° API oil from the Mirador Formation. The Las Maracas-3 well was spud June 28, 2012 to evaluate the Une, Gacheta and Mirador formations. This well is currently drilling through 8,000 feet and is expected to reach its target depth in July.
Block LLA-16 (Operated 100 percent Working Interest)
The Malawi-1 well, located immediately south of the Sulawesi field, was spud on May 1, 2012, was drilled to a target depth of approximately 13,170 feet and was rig released on June 3, 2012. The well was completed in the C7 Formation and has been on production at a rate in excess of 1,000 bopd of 30° API oil since June 17, 2012. Future production performance of this well will largely determine if any appraisal wells will be drilled on the Malawi structure.
Block LLA-17 (Operated 40 percent Working Interest)
The Mapora-1 exploration well was spud on May 12, 2012, was drilled to a target depth of approximately 12,600 feet, and was rig released on June 8, 2012. Log analysis indicated that the well did not encounter commercial oil pay and the well was abandoned. Parex expects to start the Celeus-1 well completion during July 2012. Following the completion of the Celeus-1 well, the Phase 1 work commitment program on Block LLA-17 will be satisfied.
Block LLA-20 (Operated 100 percent Working Interest)
The Cumbre-3 well was spud May 11, 2012, was drilled to a target depth of approximately 9,650 feet and was rig released on May 30, 2012. The well encountered prospective oil pay in the C7 and Gacheta formations and was completed in the Gacheta Formation. The well began production on June 28, 2012 at an average rate of 700 bopd of 36° API oil with a 50 percent water-cut.
Block LLA-32 (Non-Operated 30 percent Working Interest)
As previously reported (May 10, 2012), the Maniceño-1 well encountered approximately 50 feet of net pay in the Mirador Formation and over a 6 hour production test period the well flowed naturally at an average rate of 3,036 bopd of 27° API oil with water-cut of less than 5 percent. A pump was installed in the Maniceño-1 well and the well was re-tested over a 7 day period with varying rates from approximately 1,500 bopd to over 4,000 bopd. Over the final 12 hours of the test, the average production rate was 4,344 bopd with an average water-cut of 0.7 percent. The well is expected to commence production during the first half of July 2012 at a rate of approximately 3,000 bopd.
The second and final Phase 1 commitment well on Block LLA-32, Samaria-1, was spud May 26, 2012. The well has reached its target drilling depth of approximately 11,200 feet and has encountered prospective oil pay in the Gacheta, Gaudalupe and Mirador formations. The Samaria-1 well was cased and in July 2012, and completion and testing work is scheduled to commence.
Block LLA-34 (Non-Operated 45 percent Working Interest)
Tua-1 was spud on May 6, 2012, was drilled to a target depth of approximately 11,000 feet and was rig released on June 10, 2012. The well encountered potential pay in the Gaudalupe and Mirador formations.
The Gaudalupe formation was perforated over a 19 feet interval and was flow tested over a period of 11 hours under natural flowing conditions. A total of 169 barrels of 12.8° API oil was recovered during the test at a final measured rate of approximately 400 bopd with a 1 percent water-cut. Bottom-hole pressure recorders indicated the producing drawdown during the test was approximately 12 percent. The Gaudalupe formation was temporarily suspended to allow testing of the Mirador formation.
The Mirador Formation was perforated over a 24 feet interval and tested with a pump. After 53 hours of testing a total of 2,118 barrels of 19.4° API oil was recovered with a final water-cut of 0.5 percent. The maximum rate achieved during the test was 1,915 bopd and an average rate of 1,700 bopd was achieved during the final 13 hours of the test at the final pump speed setting. The Mirador formation will be placed on long term test and the partners in the Tua-1 well are evaluating delineation options for both the Mirador and Gaudalupe formations.
The Max-1 prospect was drilled and cased during the first quarter of 2012 and prospective pay was encountered in the Gacheta, Gaudalupe A, Gaudalupe B and Mirador formations. The well was completed and tested in all zones to determine flow capability and oil gravity.
The Gacheta formation was perforated in two separate intervals totalling 23 feet and tested under natural flowing conditions for a period of 37 hours. A total of 279 barrels of 35° API oil was recovered during the test for an average daily production rate of 181 bopd. The final water-cut was less than 1 percent and bottom-hole pressure recorders indicated a bottom-hole drawdown of 35 percent during the test.
The Gaudalupe B Formation was perforated over a 25 feet interval and the well was swabbed. A fluid sample of 12° API oil was recovered from the well and the zone was temporarily suspended to allow for testing of the zone with a pump at the end of completion operations. Swabbing operations are not an effective method to evaluate productivity in heavy oil zones due to the difficulties swabbing oil with higher viscosity. The Gaudalupe A zone was perforated over a 34 feet interval and 14.5° API oil was recovered during limited swabbing operations. As in the case of the Gaudalupe B zone, the zone was temporarily suspended to allow testing of the zone with a pump at the end of completion operations.
The Mirador formation was perforated over a 26 feet interval and was tested with a jet pump over a 26 hour period. A total of 148 barrels of 22° API oil was recovered during the test along with 470 barrels of water. The final measured water-cut was 85 percent. The Mirador formation will be suspended to allow testing of the Gaudalupe A and B formations with the use a pump which is expected to commence in the next week.
Average production for June 2012 and the second quarter of 2012 was approximately 10,100 bopd and 10,300 bopd respectively. Over the past week, the Kitaro-1, and Cumbre-3 wells have commenced production bringing the current production rate to approximately 10,500 bopd. Parex expects the Maniceño-1 and Tua-1 wells to commence production during July 2012, subject to partner and regulatory approval.
Parex has increased its working interest of the Moruga Block to 83.8 percent after closing of the purchase of an additional 33.8 percent. The Company now expects to complete and test the Firecrown-1ST2 and Green Hermit-1 wells during the third quarter of 2012. Additionally, the Company expects to commence long-term test from the Snowcap-1 well, subject to regulatory and partner approvals.
To fulfill the Central Range Deep Block ("CRB") work commitments, Parex is obligated to drill one well to a depth of 12,000 feet and acquire 168 square kilometers of 3D seismic. The Company has agreed with its partner to acquire seismic data prior to drilling an exploratory well. We expect to begin seismic acquisition activities during the third quarter of 2012 and spud the Deep CRB well in 2013.
Capital Expenditure Activity
Following Parex' Colombia acquisition on April 12, 2012, the Company's capital program included exploration and appraisal activity in Colombia's Llanos Basin Parex was utilizing eight drilling rigs and three service rigs in Colombia and Trinidad. With a review of the capital activity and the satisfaction of certain commitment exploration drilling Parex has reduced the capital activity on its lands so as to internally fund capital programs in Colombia and Trinidad. For the remainder of 2012, Parex expects to fund a capital program in Colombia based on three drilling rigs and one service rig (approximately 50 percent working interest). In Trinidad, the Company's capital program will be based on one service rig (approximately 83.8 percent working interest) and a seismic program (approximately 50 percent working interest).
The Company expects to fund the remaining 2012 capital program from cash flow from operations, with surplus funds flow, if any, increasing working capital.
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.
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 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.