Exploration Focus Drives Parex Success

In the decade since Parex Resources began operations in Colombia, the Calgary-based company has seen its production jump from zero to average around 52,000 boe/d and 2P reserves climb from zero to 186 million boe. Market capitalization has seen a similar ascent, rising from $175 million to around $3 billion.

Driving the company’s success has been a strategy to leverage its leaders’ South American and Western Canadian experience and capabilities to create shareholder value, Michael Kruchten, Parex Senior VP, Capital Markets & Corporate Planning, says in a new report commissioned by the Canadian Global Exploration Forum (CGEF).

The CGEF report, entitled Global Opportunities: Taking Canadian Exploration and Production Expertise to International Markets, outlines the Canadian industry’s competitive advantages in finding and developing oil and gas resources in petroleum producing basins around the world, and then highlights potential opportunities for investment.

Kruchten says there are a lot of similarities between Colombia and Canada.

 “We’re an exploration company, and a lot of the skills applied in the foothills in Alberta are the same skills applied in Colombia,” says Kruchten. “A lot of the play types here in Canada that have worked can be applied in Colombia.”

Kruchten says the main opportunity for Canadian companies in international markets is in, “under-explored or exploited basins that enable them to chase onshore conventional resources.”

In 2008, when Colombia opened up its resource sector, Parex found this type of opportunity available.

“It opened up under-explored land that didn’t have extensive 3D seismic on it. It was just an emerging basin that hadn’t seen much work before,” says Kruchten.

From 2005-2015 the company focused on drilling large structures, building production to current levels. Its next phase is exploring for stratigraphic traps.

“You need lots of drilling for data points. We have a block of 500,000 acres with three or four wells,” he says of the challenge ahead. “That’s one of the advantages in Western Canada. There is a lot of data to analyze.”

Kruchten says this lack of data is as much an opportunity as a challenge. As more wells are drilled the opportunity will grow, as less competition compared to Canada will enable the company to capture more resource.

Parex has built its prospect inventory over the last decade, ensuring it has future growth opportunities. The company now has rights to over 2.3 million acres onshore in Colombia.

Higher oil prices can be another advantage of international production. Parex’ heavy crude (21 API) in linked to Brent pricing, selling at a $3 per bbl discount. While higher transportation costs somewhat lessen this pricing advantage, Kruchten says wellhead prices average around $12-$14 less than Brent.

While understanding the geology of a prospective opportunity is paramount to success, understanding the social context the country you are operating in is also very important, says Kruchten.

“You have to get a license to operate from the community to grow in every jurisdiction,” he points out.

In Colombia, it is very similar to working with First Nations in Canada, he says. “You need consultations with communities in your area of interest on what you can provide and where the needs of the community are.”

Parex has invested $15 million in local projects since 2014, including investing in clean water supplies and home improvement initiatives.

It is also focused on economic development in areas it works, providing opportunities in trucking, and helping start laundromats and cafeterias to serve workers.

Kruchten says it can be challenging for companies to meet social obligations, particularly during the exploration phase when they are in the area for short periods of time. Often, during the exploration phase, the focus is on infrastructure like roads. Later on, when development begins, longer-term investments take over.

CGEF, in collaboration with JWN, will be holding a report launch event on January 16 where attendees can gain insights and network with successful international Canadian operators.

To download the free report and register for a free breakfast event with Canadian companies telling their international stories, click here.

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