Update: Resilient and leveraged to the upside
Despite macro headwinds, Parex’s operational strength is evident from material production growth in 2015 and a 114% increase in 2P reserves. Production guidance of 26.5mb/d (representing 18% growth y-o-y) has room for upside if exploration is successful, while the $145-155m should be fully funded at around $50-60/bbl oil prices. Our remodelled valuation indicates a RENAV of C$9.5/share, indicating upside to the shares even without exploitation of 3P reserves, which we see as likely in time and would take valuation to $10.2/share. Importantly, we see this value increasing in the coming years as production increases, supported by recovering oil prices.Parex Resources is engaged in oil and natural gas exploration, development and production in South America and the Caribbean region. As of Dec 31 2010, Co. had gross proved light and medium oil reserve of 1,066 thousand barrels (net: 980 thousand barrels).
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