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1. Company Snapshot

1.a. Company Description

Parex Resources Inc.engages in the exploration, development, production of oil and natural gas in Colombia.The company holds interests in onshore exploration and production blocks totaling approximately 6,521,632 gross acres.


As of December 31, 2021, it had proved plus probable reserves of 198,825 million barrels of oil equivalent.The company was incorporated in 2009 and is headquartered in Calgary, Canada.

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1.b. Last Insights on PXT

Negative drivers behind Parex Resources' recent performance include production challenges in Q4 2024, as highlighted during the Q4 2024 earnings call. Despite robust free funds flow and strategic advancements, the company faced production difficulties. Additionally, Scotiabank analyst Kevin Fisk lowered the firm's price target to C$14 from C$17, citing weak global oil prices that are expected to weigh on Canadian oil benchmarks in 2025 and 2026. This downward revision may have contributed to the company's recent performance.

1.c. Company Highlights

2. Parex Resources 2025: Robust Returns Amidst Strong Production

In 2025, Parex Resources delivered a solid financial turnaround, with revenues expanding 11.5% year‑over‑year and operating margins stabilizing around 25%. The company reported a diluted EPS of $1.07, well above the consensus estimate of $0.32, underscoring disciplined cost control and efficient asset deployment. Staff analysts highlighted the resilience of the FFO stream, noting that “the fourth‑quarter FFO of $123 million remains a testament to Parex’s operational excellence”【Staff】. Valuation remains attractive, with a P/E of 7.19 and a P/B of 0.94, signaling ample upside potential for investors.

Publication Date: Apr -13

📋 Highlights
  • Production Growth: 2025 average production of 45,000 barrels/day, with Q4 peaking at 48,606 BOE/day
  • Shareholder Returns: $134M returned in 2025, totaling CAD 2B over eight years, and 40% share repurchase reduction
  • Reserve Strength: 100%+ reserves replacement and 2x+ FD&A recycle ratios, with NAV/share at $23 (PDP), $28 (1P), $39 (2P)
  • Fundamentals Resilience: $123M funds flow in Q4 despite low commodity prices, sustaining 2026 guidance
  • Capital Efficiency: Multilaterals cut costs: $5M to reach 12,000 ft (Azogue) vs. $1M per lateral, enabling scale in Putumayo

Production Highlights

Parex averaged 45,000 barrels of oil equivalent per day in 2025, comfortably within its guidance band, while the fourth‑quarter average of 48,606 BOE/day confirmed on‑track growth. The company’s production momentum continues into 2026, with current output around 46,000 BOE/day, bolstered by successful enhanced‑recovery at Cabrestero and Block‑34 and the transformative Frontera acquisition that tripled peak production at Block 32.

Capital Discipline

Capital discipline remained a cornerstone of Parex’s strategy, as evidenced by a 40% share count reduction through aggressive buybacks and a net debt/EBITDA ratio of –0.05. The firm returned $134 million to shareholders in 2025, elevating its cumulative eight‑year capital return to CAD 2 billion. This disciplined approach has strengthened the balance sheet and freed cash for future growth.

Reserves and Asset Growth

Reserves per share surged, with a 100%+ reserves replacement rate and FD&A recycle ratios exceeding 2×. At a constant $70/barrel Brent, net asset values per share were $23 (PDP), $28 (1P), and $39 (2P), underscoring the company’s robust asset base and upside potential in a higher‑price environment.

M&A Outlook

Parex views Colombian M&A as a natural extension of its strong position, confident in unlocking significant shareholder value. A potential combination with Frontera Energy’s Colombian E&P assets could create the largest independent Colombian energy company, delivering scale and capital efficiency. The company remains open to strategic deals that enhance its footprint.

Capital Efficiency Initiatives

The firm is leveraging multilaterals to maximize capital efficiency, particularly in Azogue and Putumayo. With lateral costs below $1 million versus $5 million for 12,000‑foot targets, Parex can unlock the extension area at a fraction of the cost, targeting a larger productive footprint and higher recoverable volumes.

Valuation Snapshot

Key valuation multiples highlight Parex’s undervaluation: EV/EBITDA at 3.97, a dividend yield of 5.82%, free cash flow yield of 12.69%, ROIC of 12.47%, and ROE of 13.39%. These metrics reinforce the company’s position as an attractive buy for value‑oriented investors seeking exposure to a disciplined, high‑growth operator in the Colombian oil and gas sector.

3. NewsRoom

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FRONTERA ANNOUNCES DEFINITIVE AGREEMENT WITH PAREX TO DIVEST ITS COLOMBIAN E&P ASSETS PORTFOLIO FOR A FIRM VALUE OF APPROXIMATELY $750 MILLION, INCLUDING $525 MILLION EQUITY CONSIDERATION

Mar -11

Source: prnewswire.com

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Parex Resources Announces Update on Discussions with GeoPark Regarding a Potential Business Combination

Dec -09

Source: globenewswire.com

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Did Parex’s Deeper Ecopetrol Alliance and 50-50 Output Split Just Shift Parex Resources' (TSX:PXT) Investment Narrative?

Dec -06

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Parex Resources Expects to Hit Midpoint of 2025 Production Guidance

Dec -05

Source:

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Parex Resources Announces Llanos Foothills Strategic Alliance, Operational Strength, and Timing of 2026 Guidance

Dec -05

Source:

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RBC Names Suncor Energy, Canadian Natural Resources as Top Picks in Integrated Oil, Exploration and Production Cos

Nov -24

Source:

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Investors Can Find Comfort In Parex Resources' (TSE:PXT) Earnings Quality

Nov -11

Source:

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Is Parex Resources Attractively Priced After Recent Production Milestone and 54% Share Surge?

Nov -05

Source:

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.66%)

6. Segments

Crude Oil

Expected Growth: 4.65%

Parex Resources Inc.'s 4.65% growth in Crude Oil is driven by increased production from its Colombian assets, improved operational efficiency, and a favorable oil price environment. Additionally, the company's strategic acquisitions and exploration activities have contributed to the growth, along with a strong balance sheet and disciplined capital allocation.

Royalties

Expected Growth: 4.65%

Parex Resources Inc.'s 4.65% royalty growth is driven by increasing oil production in Colombia, successful drilling campaigns, and strategic acquisitions. Additionally, favorable crude oil prices, efficient operations, and a strong balance sheet contribute to the company's ability to generate higher royalties.

Natural Gas

Expected Growth: 4.83%

Parex Resources Inc.'s 4.83% growth in Natural Gas is driven by increasing demand from power generation and industrial sectors, coupled with strategic acquisitions and exploration activities in Colombia. Additionally, the company's focus on operational efficiency and cost reduction initiatives has contributed to the growth.

Other

Expected Growth: 8.37%

Parex Resources Inc.'s 8.37% growth is driven by increasing oil production, successful exploration and development activities, and strategic acquisitions. Additionally, favorable oil prices, efficient cost management, and a strong balance sheet contribute to the company's growth momentum.

7. Detailed Products

Light and Medium Crude Oil

Parex Resources Inc. produces high-quality light and medium crude oil, suitable for refining into various petroleum products such as gasoline, diesel, and jet fuel.

Natural Gas

Parex Resources Inc. extracts natural gas, a clean-burning fossil fuel, used for power generation, heating, and industrial processes.

Natural Gas Liquids (NGLs)

Parex Resources Inc. produces NGLs, a group of hydrocarbons that include ethane, propane, butane, and pentane, used as feedstocks for petrochemicals and fuels.

Condensate

Parex Resources Inc. produces condensate, a type of light oil, used as a diluent for heavy oil and as a feedstock for refineries.

8. Parex Resources Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Parex Resources Inc. operates in the oil and gas industry, which has a moderate threat of substitutes. While there are alternative energy sources, the demand for oil and gas is still high, and the company's products are not easily substitutable.

Bargaining Power Of Customers

Parex Resources Inc. has a diverse customer base, and no single customer has significant bargaining power. The company's customers are mostly large oil and gas companies, which reduces their bargaining power.

Bargaining Power Of Suppliers

Parex Resources Inc. relies on a few key suppliers for equipment and services. While the company has some bargaining power, the suppliers also have some leverage, which makes the bargaining power of suppliers moderate.

Threat Of New Entrants

The oil and gas industry has high barriers to entry, including significant capital requirements and regulatory hurdles. This makes it difficult for new entrants to join the market, reducing the threat of new entrants.

Intensity Of Rivalry

The oil and gas industry is highly competitive, with many established players competing for market share. Parex Resources Inc. faces intense competition from other companies, which increases the intensity of rivalry.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 4.67%
Debt Cost 3.95%
Equity Weight 95.33%
Equity Cost 11.70%
WACC 11.34%
Leverage 4.90%

11. Quality Control: Parex Resources Inc. passed 6 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Parex Resources

A-Score: 7.6/10

Value: 8.8

Growth: 6.1

Quality: 6.6

Yield: 10.0

Momentum: 9.0

Volatility: 5.3

1-Year Total Return ->

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Stock-Card
Freehold Royalties

A-Score: 7.4/10

Value: 5.2

Growth: 5.4

Quality: 7.4

Yield: 9.0

Momentum: 7.5

Volatility: 9.7

1-Year Total Return ->

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Stock-Card
Cardinal Energy

A-Score: 7.2/10

Value: 6.3

Growth: 4.2

Quality: 6.6

Yield: 10.0

Momentum: 8.5

Volatility: 7.7

1-Year Total Return ->

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Stock-Card
MorningStar Partners

A-Score: 7.2/10

Value: 7.0

Growth: 6.6

Quality: 4.8

Yield: 10.0

Momentum: 6.5

Volatility: 8.3

1-Year Total Return ->

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Stock-Card
Kiwetinohk Energy

A-Score: 6.9/10

Value: 6.3

Growth: 9.1

Quality: 7.3

Yield: 0.0

Momentum: 10.0

Volatility: 8.7

1-Year Total Return ->

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Stock-Card
VAALCO Energy

A-Score: 5.8/10

Value: 7.7

Growth: 6.7

Quality: 5.7

Yield: 9.0

Momentum: 1.0

Volatility: 5.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

25.7$

Current Price

25.7$

Potential

-0.00%

Expected Cash-Flows