(Idea) Parex Resources - Working To Regain Credibility
By: Jon Costello
Parex Resources (PXT.TO) has had plenty of time to right its ways since its operational snafu in the second quarter of 2024. We covered that event here. At the time, the market overreacted by sending the shares down to $17.50. We viewed that share price as an attractive buying opportunity due to the 9% dividend yield and appreciation prospects that panned out. The shares have since recovered to $21.13.
The culprit behind the company’s loss of credibility was disappointing drilling results in Parex’s Arauca acreage, which delivered production significantly lower than expected due to water incursion. The results came after the company had invested $168 million to develop the acreage, which management promoted as a potential growth engine. In response to the poor results, Parex suspended drilling in the region and lowered its full-year 2024 production guidance. Aracua has since faded to the background of Parex’s development prospects.
Management added insult to injury to shareholders by fumbling the company’s response to the Aracua incident. It failed to provide a clear plan to the market after the production disappointment. The news also came as sentiment toward Colombian oil production hit new lows. The previous day, Gran Tierra GTE 0.00%↑ announced its acquisition of i3 Energy, which was aimed at diversifying away from Colombia, where Parex’s assets are located.
Parex’s operating footprint is comprised of far-flung development blocks, which entail a multitude of risks.
Source: Parex Resources, January 2026 Investor Presentation.
The 2024 results raised questions about Parex’s proved reserve volumes and management’s ability to operate in the complex Colombian environment.
Parex further disappointed investors in 2024 by failing to replace PDP lost to production. In fact, PDP reserve replacement was only 41% during the year. Proved reserves were flat year-over-year, at 112.1 million barrels. Proved reserves have a life of 6.2 years, and proved-plus-probable reserves span 9 years at the 2025 average production rate.
Source: Parex Resources, Q4 2024 earnings press release, March 5, 2025.
These figures are barely satisfactory given the difficulty Parex has had in replacing its proved reserves over the past two years. Any increase in production without commensurate reserve additions will further whittle down the company’s reserve life.