Negative Points

• Parex Resources Inc ( PARXF ) incurred $59 million in one-time transaction fees and realized hedging losses in the second quarter, which negatively impacted reported financial results.

• Elevated energy prices, partly driven by El Nino weather patterns, along with Colombian peso appreciation, are placing upward pressure on production costs, which are now trending toward the upper end of the guidance range.

• Vasconia differentials have widened in recent months, impacting projected realized pricing and potentially reducing revenue.

• Seasonal weather constraints are temporarily limiting output at POC 111, where current production is averaging over 5,000 barrels per day, below its potential.

• The company faces integration and transition costs associated with the Frontera acquisition and the Magdalena partnership, which are expected to be temporary but could affect near-term financial performance.

• Market conditions continue to evolve, and actual results will vary depending on where oil prices settle, introducing uncertainty to the company's financial outlook.

Q & A Highlights

Q: What is the strategic significance of the recently closed Frontera acquisition and the Equipetrol partnership for Parex's overall business transformation? A: Imad Mohsen, President and CEO, stated that these transactions have transformed Parex into Colombia's largest independent E&P company, nearly doubling production guidance to roughly 86,000 boe/d at the midpoint and expanding the footprint to over 7.9 million acres. The Frontera acquisition has added stable production and top-tier technical talent, while the Magdalena partnership with Equipetrol secured a 50% interest in the Cassaba and Yanito blocks for a $250 million five-year capital program with zero upfront costs, adding roughly 15,000 barrels a day of production growth.

Q: What are the key operational highlights and growth plans for the Eastern Llanos 111 block? A: Eric Furlan, COO, reported that the company has delivered four discoveries in 2026 at Eastern Llanos 111, with current production averaging over 5,000 barrels per day, temporarily limited by seasonal weather. The company is actively developing a multi-year strategy to drill up to 20 wells over the next 12 months and is advancing a phased egress expansion plan to address seasonal weather challenges and support long-term production growth.

Q: What are the company's financial expectations and guidance for the second half of 2026? A: Cameron Grainger, CFO, reaffirmed second-half 2026 guidance, which incorporates the Frontera acquisition and Equipetrol partnership. At a $90 Brent assumption, the company expects funds flow from operations of $475 million to $525 million against capital expenditures of $275 million to $295 million. He noted that elevated energy prices and Colombian peso appreciation are placing upward pressure on production costs, and Vasconia differentials have widened, impacting projected realized pricing.

Q: How did the pro forma reserves evaluation validate the company's acquisition thesis? A: Eric Furlan highlighted that the released pro forma reserves evaluation marked a significant milestone, with both PDP and 1P reserves increasing by more than 80%. This validates the acquisition thesis for the Frontera and Magdalena assets and highlights the value created through these transactions, reinforcing the company's capital allocation strategy.

Q: What are the company's three core priorities moving forward? A: Imad Mohsen outlined three core priorities: first, capturing synergies and integrating recent acquisitions to build an operational base; second, building on exploration momentum in the Eastern Llanos to establish a new operating area; and third, advancing high-impact exploration in the Llanos foothills, starting with the Piedemonte prospect this fall.

Q: What is the current production level and trajectory for the company? A: Eric Furlan stated that current production is averaging over 83,000 boe/d, putting the company on a clear upward trajectory for the second half of 2026. This follows Q2 production averaging over 54,000 boe/d, which included the first month of Frontera volumes.

Q: How are the Magdalena assets (Casabe and Yanito blocks) progressing? A: Eric Furlan reported that the company is completing initial activities to drill first wells in the Casabe and Genito programs, with the initial rig expected to begin moving shortly. These campaigns are expected to add stable, low-decline production and establish a new core operating and development area for Parex.

Q: What were the one-time items affecting Q2 financial results? A: Cameron Grainger explained that Q2 results included $59 million of one-time transaction fees and realized hedging losses. He emphasized that these temporary integration and transition costs, along with disclosed hedging losses, were anticipated and should be excluded to provide a clear view of underlying operational and financial performance.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .