Hi, my name is Mike Kruchten. I'm Senior Vice President of Capital Markets & Corporate Planning at Parex. Thank you very much for joining us in Bogotá today. We really appreciate you investing your time and resources to learn and really have a deep dive into the strategy and transformational opportunities available to Parex in Colombia. I just wanna let you know we do have an advisory. We are making forward-looking statements. Please look at that after the presentation. The purpose of hosting our first capital markets day since 2014 is really to demonstrate how the business has been transformed over the last two years. We have three key elements that we wanna go over today. One, is the depth of the opportunities and the competitive advantages that Parex has in Colombia. Two, is really reinforce the value of our business.
We have over 200 million barrels of reserves and exploration opportunities that really can provide a step change for us as we go forward. Third, how can we execute our strategic plan with increasing capital efficiency and delivering a growing free cash flow and consistent shareholder returns in the future? With that, we've built our agenda to address those three topics today. We're gonna review the key components of our Colombian strategy and operations, then hold a question and answer at the end. Before wrapping up today, we are very honored to have Ecopetrol's EVP of Operations, Alberto Consuegra, join us also. Before we kick off, there's one thing I need to get off my chest. How should we pronounce this company's name? I hear different versions all the time.
Just going back, the history of our company is we started off in Argentina with a company called Petro Andina. We were listed on the TSX. The ticker was called PAR, P-A-R. We sold those assets. Then we started in Colombia with four exploration blocks and $100 million of cash. We needed a new company name. At the time, we kicked around the usual names. you know, Ken Pinsky lives on Lawrence Crescent. We thought Lawrence Oil and Gas. That's a good name. That didn't sound right. Then everyone else was saying, "Well, just call it Petro," insert your name. There's lots of those companies around. We wanted to be a little bit different. We wanted to name ourselves really what we were at that time in 2009. We were an exploration company.
We said it's Parex for exploration. There you go, Parex. The real name is Parex, okay? Keep that in mind. Before we jump into the section presentations, I want to describe the Parex opportunity to you and how we've evolved since those early days where we just had exploration blocks. The Parex equity has underperformed since the end of COVID. I think there's multiple reasons. One, we were under-leveraged. We had no debt in a rising price environment. A new government came in talking about higher taxes and focus on energy transition. Consequently, we had new social demands from our communities using blockades as a negotiation tactic. We also faced natural disasters destroying key infrastructure, bridges, causing delays, and the resulting performance not meeting the market expectations.
As we look forward into 2023 and beyond, our focus is gonna be on delivering the production growth, leveraging the investments we've made over the last two years with improving capital efficiency and reducing our maintenance CapEx. Third, executing high-impact exploration. We think this will justify valuation re-rate. Just going to the 2.5 multiple is effectively a $25 share price. Getting into the average band of three is closer to 30. Plus, we're delivering over a 5% dividend yield and free cash flow to grow our dividends and share buybacks over time. This is why we feel we're posed to outperform going forward. Just as a data point to the progress we're making, this morning we had a news release saying we're at the 60,000 BOE per day production mark.
Today, we're going to talk about the future, how we're positioning Parex. We recognize that Colombia E&P has different risks compared to the mature North American basins. We also want to characterize how Colombia, specifically Parex, can provide outsized returns from our starting base of 60,000 barrels a day and 200 million barrels of proven plus probable reserves. What have we done? We've upgraded our inventory. We added 4 million acres of land. 25 new blocks in the last 3 years, including 18 this year. We're accessing new play types like foothills, liquid rich gas that could transform our company. We're applying proven technology like synthetic mud and horizontal drilling to a basin that is underdeveloped. We're starting from a valuation that appears like we're blowing down PDP. I don't believe the equity reflects where we are and where we're going.
This is a disproportionate risk-reward profile. With that, I want to introduce you to our CEO, Imad Mohsen, to provide an overview of our vision and strategy.
Thank you, Mike. I'd like to echo Mike's comments and thank you all for coming here, taking the effort. We'll do our best today of making it worthwhile, not only in terms of the data, which you will see a bit more of the logic behind what we're trying to achieve, but also about you'll get the opportunity on the margins of this meeting and tomorrow through the field visit to get to know the people, to interact with us, ask questions. Please feel free to just get a feel for what makes this company so special. For the ones who don't know Bogotá, you also manage to see how this country is. It's a fascinating place. For the people who don't know me, I'm Imad Mohsen. I'm the CEO of Parex. A bit of background.
I'm originally from Lebanon. I studied in France before working for Shell for 15 years, and then I ran a private equity company in Europe. After that, I joined Parex a couple of years ago. If you ask me, what makes you passionate? What's what drives you in professionally? I'd say it is creating value. It is taking a great company, make it exceptional. It's taking any asset and creating additional value you can share with shareholders. When the board of Parex selected me, the mandate was go and make this company sustainable in growing returns to shareholders over time. To do this, I could have gone anywhere. We had the big purchase.
We had, the oil price was down, COVID was there, and I still decided to focus on Colombia instead of M&A, and I had every reason to do so. This is because Colombia is a place with unparalleled opportunity set, and I hope that would be part of your takeaway today. You'll see an exciting portfolio of opportunities. You'll see, hopefully, we made the right choices to deliver on our objectives and recognize that we are already a long way in the journey towards delivering on our vision. Mike mentioned that two seconds ago, promise made, promise kept. In a very special year for Colombia, we are delivering the exit rate of 60,000 a day. Eric will give you a bit more background, but just for the record, this is not a blip.
We see that as a baseline from which we wanna keep ramping up. This year, what have we achieved? We delivered record cash flow from operations, record free cash flow in the history of Parex. Last year, we started the dividend for the first time committed to returning all free cash flow from operations to shareholders. Sorry, free cash flow, yeah. We did that through an increased dividend, which is now a CAD 1 annualized share, as well as buybacks. What have we also done? We started bringing successfully industry-proven technology to Colombia, stuff which is routine elsewhere, but has not been always used here. As you will see today, the strategy is already showing fruits through vastly improved drilling efficiencies, outcomes, and improved re-recovery and rates. We are delivering in 2022 sustainable growth.
We grew 23% our production per share. More importantly, we are building strategically foundational for very sustainable portfolio and an efficient deployment of capital. We're doing that without forgetting our roots. We're laying groundwork for outsized return in Big E. We've grown our portfolio by factor four, that allows to high grade the portfolio and give us exposure to amazing opportunities. What are we looking forward focusing on? Put simply, we are transitioning from mainly a single asset company. Historically, SoCa delivered excess of 85% of the company's cash flow, that's Cabrestero plus Llanos 34, to a Colombia-wide operator. We already made great progress in that, as demonstrated by our operated production growth. Today, more than 50% of our production is operated by Parex for the first time since 2015. We are taking control of our destiny.
Why are we transitioning to a countrywide operation? There's, there is value in diversification. It expands our portfolio across product types. Now we have, in addition to heavy oil, we have light oil, we have gas, we have condensate. We created a pipeline of projects that will ensure sustainable, profitable growth. That put together will give us the foundation to deliver growing shareholders returns as I've been mandated by the board. Our strategy has been deliberate in selecting... Sorry, what's happening here? Okay, today with the help of the leadership team, we're gonna talk to you about how we are delivering this strategy. Daniel and Mike, you saw him before, they will talk about the Colombia's competitive advantage for Parex, the ESG performance. How do we differentiate ourself in gaining access to regions where others have trouble operating?
Eric, our COO will cover how we deliver safe, sustainable base operation, flawless execution, and safety is foundational to Parex because it has good business. What I like about what Eric does is how he will define how we elevated the company execution to world-class level. This is a bit of a journey to improve in a step change way our capital efficiency and the profitability. Katie and Ian behind will talk about the upside, Big E transformational upside and the gas opportunity in the foothills. We all work ultimately for Ken to deliver the cash to shareholders. He will wrap up with how all this combines in robust finances and enables growing return of capital. I am a type of old-fashioned person.
When I learned economics at school, the way I value a company is the NPV of all the cash you give to shareholders over time. That's key of how we wanna deliver that strategy to shareholders. What are the levers we've been trying to use? One is technology, and again, it's proven technology as well. It's routine stuff. One of the reasons why I decided to focus on Colombia when I had the choice was the sheer amount of low-hanging fruits in there. Colombia oil and gas landscape, when I looked at the portfolio, looked to me as the same as North America 1970s. We're talking about a place where people, including Parex, were spoiled by easy to produce prolific reservoirs. This left a vast amount of value to be unlocked.
If you look at the history of the oil industry in the last two, three decades, in conventional reservoirs, more than 80% of the reserve as didn't come through exploration. They came through using very simple things like exploitation technologies, EOR, horizontal advanced completions and stems, and adding to the recovery from existing discoveries. This is a cornerstone of our strategy as well, is bring that expertise into Colombia where it's not being used and basically make easy money, low risk. Parex has taken a deliberate and strategic approach in terms of bringing the capability to Colombia, equipment, expertise, in order to deploy these, as Eric will show in more detail. In terms of gas, we looked at the gas potential in Colombia, and it's a fantastic market. There's demand in here.
The country is importing the marginal scuff from through expensive LNG, as Katie will share with you. Frankly speaking, when we're going through our assets looking for oil, we started to find lots of liquid risk opportunities. These can be extremely profitable. Quick monetization as we are approving with VIM-1 cycling project. It's strategically a good fit. It fits with the government energy transition. It fits with the regulation in the new taxes. The way they've been defined was to encourage gas. It helps our profitability. It helps from ESG standpoint. You'll get much more story about our partnership with Ecopetrol in the foothills from Ian and Katie, but our guest, Mr. Consuegra. In terms of exploration, we believe there's asymmetric Big E potential, we're going after it.
We're going after it in a responsible way. We put between 10% to 15% of our CapEx every year at risk. We think that's enough to give us an opportunity every quarter-to- quarters, to come up with potentially game-changing results. It's a differentiator. I don't think any of our unconventional competitors can pretend to double or triple the size of the company overnight organically. In the last bid round, as Mike mentioned, we managed to upgrade our portfolio. We have now a fantastic set of opportunities that we can pick from. As I was mentioning, we were deliberate where we deploy our technologies. In some places like Fortuna, we stopped investing when the reservoir didn't respond was apparent.
That doesn't mean that we didn't take that experience and applied it elsewhere. You can see that we are doing EOR in Cabrestero. We're doing efficient multi-zone drilling, development in Capachos, something we saw already in terms of drilling techniques in Fortuna. VIM-1 is using that expertise as well when we're looking at step change in drilling. These places have the beauty of being able to be scaled up. When you succeed in Cabrestero, which is a tenth of the in-place volume at LLA-34, you can replicate that experience in LLA-34. Capachos' first couple of wells learnings are now gonna be applied in all of our development program in the North Llanos. The VIM-1 is just a cycling.
It's just the first step into monetizing very exciting opportunities that you'll hear about today, orders of magnitudes larger in VIM-3 and the foothills. You'll see here the map of Colombia and our blocks. We now have what I'd call a diversified portfolio. I'm trying to explain to you what the logic be for deploying capital in each area. If you take SoCa, Southern Casanare, which includes Llanos 34 and Cabrestero, the idea here was to build and invest in infrastructure for waterflood and infill, so that over time, and we're seeing these results already in Cabrestero, you get lower decline rates. Once you finish spending money on this in the next couple of years, it stays as a cash cow for years to come with very limited decline.
In Magdalena, North Llanos, VIM, we have invested infrastructure and techniques will be foundational for sustainable growth going forward. The beauty here is it is a step change in capital efficiency. I'll show you a bit more detail on that. Across the portfolio, the picks of big exploration opportunities that we see as for the cost have asymmetric reward profile. In terms of 2023 budget that we released today, Mike will give you a bit more detail. I would say we are looking for a 15% production increase year-on-year, and that's aided by our stronger exit rates in 2022. We have one full-time operated rig by key area, so Capachos, Arauca, Cabrestero, and a roaming rig for quick wins. What that does is it increases capital efficiency.
We've seen fantastic efficiencies by campaign drilling, but also we think this is the minimum level we can use right now to maintain and finish that build the foundation campaign we started and keep some momentum. The average project payout we're looking at right now, included allocated infrastructure costs operationally, is eight months since start of spend. We're not building for the future while forgetting the short term. These are very profitable projects. The whole logic is to say we have built now the foundations in terms of infrastructure investment for lower future capital requirements. You do that, you minimize decline rates, and the combination of growing production, lower decline, higher efficiency, leads to exceptional free flow from operation growth. On top of that, there are three Big E opportunities already in the coming year that are catalysts potentially for step change in the company.
This is a bit more detail on the previous slide. We have in the area of Llanos 26, 81, what I say is a continuation what we started this year. Go after areas where have low risk, high productivity, and have these quick wins that pay out within months. These are the payouts, by the way, including and excluding infrastructure from first spend. In SoCa, we built the infrastructure, and we are getting close in 2023 to finishing the waterflood infill campaign while starting it in Llanos 34. This is set to minimize decline rate. In Northern Llanos, we have there a fantastic combination. Once this infrastructure is being debottlenecked, in fact, is in place, what you end up with are fantastic wells.
We're talking about wells that typically go from 3,000 barrels gross in Capachos or 5,000 gross in Arauca. Which means that by the time you drill well two, well one has already paid back. This is how beautiful they are. On top of that, these are wells that have solid volumes behind them, good water drive, so you don't see much decline for years. This is the kind of outstanding growth I'm talking about. You move a company from $25,000 per barrel cost of capital to once the infrastructure is in place, and we're talking basically now a well in Arauca or Capachos, or any of these places, including Miranda, a sub $10,000 barrel flowing barrel wells, you get half of that back from tax money..
This, when you compare to our current valuation, shows you why we still put CapEx in this place. It's extremely profitable with very low risk in terms of timing. There's lots of information on this slide, I do wanna attract your attention first to the visual, the graph. What comes very apparent is our efforts on water drive, what they do to SoCa, which is the answer to Port Las Casanare, is they create a relatively flat profile. We're not chasing 10,000 barrel growth a year, replacement of declining area. On top of that, you see that the growth in the other assets is very balanced between many different fields. We're not depending on one field or one area to drive that growth up. We've seen already the successes in what we've drilled in 22, we're replicating.
That gives us a base plan excluding any exploration upside. The table below shows how that adds up. You're growing at 5% a year base. You leave $50 million a year to have that exposure to this proportion outside through exploration, which made us what we are today. With reduced maintenance capital, all that combination gives us growing free flow from operations that we promised and we still commit to deliver to shareholders. By the end of year three, we end up with a round number that I know always puts a big smile on Ken's face of $1 billion of free flow he can give back to you. This is another way to look at it. CapEx going down, reduce maintenance capital, growing production, that improves the cash flow.
I would say that it's noteworthy that if you look at the graph to the right, we have our cash flow per share at different Brent assumptions. Like for like, between 2022 and 2023, if you take any same price scenario, it's relatively flat. In fact, we managed through buybacks and growth to neutralize the tax reform effects. After that, you can see that year after year, we're making a very robust company here. Ian will talk to you a lot about exploration, multiple asymmetric game-changing opportunities, and they will deliver potential catalysts every quarter too. In a way, if you ask me what's the best time to buy Parex shares, I would answer that The ideal timing would be just before the next discovery. That's why we need to keep these potential upsides coming.
I think this day is a success if you return with these key takeaways. We worked very hard the last couple of years to transition this company from a single asset company, and any single asset company is poised to decline, to a Colombia-wide operator. We're doing that while delivering top-tier ESG performance. This is a differentiator for us. We are seeing already the flattening in our decline, and that leads to lower maintenance capital requirements. We did that while we built a sustainable base for production growth while delivering step change in capital efficiency. We're doing that with a bonus of potential outsized return from Big E. We'll continue to return 100% of free funds flow from operation to shareholders through dividends and buybacks.
I know this seems an ambitious plan, and I hope that us delivering on the 60,000 exit rate that we announced today is a credible first step in achieving this. I don't wanna move on to the next step without giving you a bit of an idea about the team that's helping lead this change. It is the people who are behind the strategy that really make a company a success. I'll start by Daniel, who introduced his team here. He's been with the company since its inception. He has a pulse on the ground. He's there. He talks to communities, he talks to politicians, he looks after safety, he talks to the operators. He's there every day with his team, making sure things go right.
I would say that with his foresightedness, with his, with his style, with his vision here in Colombia, he is managing to make us a real special company to operate. Daniel didn't exist, I wouldn't know how to invent you. Ken is the founder of Parex. He's been there from the beginning. He guided this company as a tight ship when it came to avoiding many traps others fell into. I think that steady hand in the finances and making sure that the shareholder returns are there, making sure we never exceed what's cautious, is also a differentiator for us. Other companies talk about buybacks. We've done 4 years of it in a row. Before it was fashionable.
Eric was here from the beginning. As I said before, I was really impressed how he embraced and executed the transformation of Parex to become an operator at world-class standards. We are not average in Colombia. That's big time. Thanks to you, Eric. You met Mike today. He's our voice. He worked very hard to putting this together. Thank you. Ryan, you wouldn't see him today. He's the kind of crazy explorationist who will tell you, "Oh, let me drill this well. I'll find you oil under water." In Cabecera. Then he finds it. He is exceptional oil finder. He understands strategy, he understands short and long term when it comes to exploration. Unfortunately, he took the expression break a leg too literally.
He's home with now broken knee and being treated. Ian behind is representing him. I can't think about anybody else to defend exploration as well, as well as you would, Ian. Where's George? George is our Senior Vice President, HR. You'll get time to talk to him hopefully today. What people very often miss in terms of upgrading a company the way we did, you're talking about almost doubling the staff in Calgary, bringing exceptional skill sets to Colombia, getting the right people in the right place, and motivating the company to do that. George was instrumental in doing that. Without that, we wouldn't have been able to increase our operated capital multifold like in record time, and execute safely and efficiently. Where's Katie? Katie, here she is.
She has exceptional pedigrees from her time in Shell and Cepsa. Katie is our VP in New Business Development, and she'll be talking about the Foothills opportunity and MOU with Ecopetrol today. You might notice that Katie is the only new face here in the exec since I joined Parex two years ago. I've been told that's not very usual for new CEOs in Canada. The reality is, when I joined, I believed that a team with such accomplishments in Parex's past will and is now delivering exceptional outcomes and will keep surprising us in the future. Please get the time to know them if you don't. I'll pass now to Daniel to talk to you about Colombia.
Thank you, Imad. Afternoon, everybody. Yeah, as Imad said, I'm Daniel Ferreiro. I'm Country Manager and President of the branch in Colombia. I joined Petro Andina, the predecessor of Parex, back in 2006, and I've been with the company since then. I worked for three years in Argentina, where I am originally from. Since 2009, I started working for Colombia, you know, where we grew from 0 barrels a day to 60,000 barrels a day just now this week. I'm a petroleum engineer by profession. I started, you know, looking after production and reservoir engineering. Then came to Colombia as ops manager, moved to VP Operations, and in 2020, I became Country Manager. What can I tell you about Colombia? I think Colombia is, you know, a beautiful country.
I'm not from here, so I can say that it's objective. You know, it's has beautiful people, you know, a sense of happiness in everybody that you meet, and that, you know, that makes it a nice place to do business. Colombia also has some attributes. You know, it's OECD member. It has strong institutions, and there is a balance of power. You know, the president has a strong position, but the congress and the judiciary system is provides, you know, checks and balance to the administration. You know, you get access to free to the free markets. Ana, who I met before, exports our oil. We export our oil directly, and we negotiate with traders, with consumers anywhere in the world, and we have access to them.
The country has been going through some internal conflict for many, many years. Since 2016, a peace process started, and that was the time of the first peace accord, and now we're getting into a new one. We do see a good evolution for the country and it's, you know, it's a good place to do business basically. When it comes to the oil sector, you know, a few numbers there. We represent 3.2% of the country's GDP. I think the most amazing number is, you know, oil exports is about 36% of the country's exports, and when we put it together with coal, it's more than 50%. Regardless of what we hear in the media, you know, the energy sector is key to the country's economy.
We think the energy sector will continue to succeed in the long term in this country. I've been in Colombia, you know, for 13 years. As I said, we grew from 0 to 60,000 barrels a day. We have done that through exploration and development of our own assets, either directly or through our partners. Today, we are the largest independent producer in Colombia next to Ecopetrol, who is the NOC. That wouldn't have been possible in a country, you know, if you don't have the human resource. Today in Colombia, we're 350 employees. I'm proud to say that we started as a handful of people. Today, we're only a handful of non-Colombian employees. Everybody is local here. That is a must if you want to grow in a country.
When I look back at what we have achieved over, you know, these many years, I think we have become a successful operator. It's not only possible to become a successful operator by being safe and responsible, but we have become well-known for being successful in areas where other companies or other operators didn't succeed or at the end gave up because they couldn't execute their projects. You know, that is usually called to have a social license. In Colombia, you can apply for an environmental license, you apply for contracts. Social license is one you don't apply for. You have to work for it every day. At the end of the day, you earn it from the communities that are next to us, and sometimes even from the local authorities.
You work for it on a daily basis. You protect it forever. What does it mean? It means creating a bond of trust and understanding with the people, you know, we're dealing with. Every time we do a new project, at the end of the day, we do want people to realize that or to know that they are better off with us operating there than without us. You know, it is true that all of our team makes an effort that wherever we have the opportunity, we leave a positive footprint in the area. It is not just an economic footprint, it is also about improving the quality of life of the people. I still see Colombia, you know, as a land of opportunity. The amount of opportunities and the diversity of opportunities here is incredible.
Since the peace process started, access to land now is better. You know, we are accessing land that 15 or 20 years ago or even 10 years ago was impossible for any operator to access. We are doing that. Because we have a reputation that we built over time, we are the ones that can execute those projects. I'm sure that we can be successful where other operators won't be, and I think we can do it better than anybody else in the country. Now, how do we operate in Colombia? I think there are two elements you have to deal with, you know. It's how you deal with administration, including Ecopetrol as the NOC, and also how you deal with communities. First I'll talk about administration.
You know, there has been a change in administration, but also a change in direction in the administration. What we see is that actually there is a lot of overlap of interests between the current administration and us as an operator. I mean, the administration wants us to deliver on the contracts that we have. Well, we're in for that. It doesn't matter if it's exploration or development, they want us to fulfill our contracts. They also want us to maximize reserves or to maximize recoveries. Well, we also want to do that. We're drilling horizontal wells. We're starting new oil projects. We're starting a recycling project in the lower map. Then this government is a lot about, you know, bringing progress to areas of post-conflict. Well, we operate in areas of post-conflict.
At the end of the day, we see, you know, there are lots of coincidence between the wishes of the current government and what we do and what we have been doing for many years here. When it comes to the environment or ESG, you know, we started trying to be very efficient when it comes to our energy matrix. We connected our fields to the grid. We added geothermal, we added solar. We are doing exactly what this government also wants. We are also targeting gas. We see gas as the, you know, the key element for the energy transition. It's also a key element for our business plan, and especially when we target gas in areas that comes with condensates or liquids because it make them a lot more profitable projects.
Overall, now we, you know, you will see Consuegra talking. Consuegra is EVP from Ecopetrol. I'm proud to say that I believe we're a partner of choice for Ecopetrol. We execute projects for them, you know, in partnerships with them. You know, and because of that, we have access to new land, but also to infrastructure. Maybe last, but definitely not least, is, you know, how we get our projects done on the ground. It's all about engaging communities in our projects. Maybe there are a few steps to get the projects happening, first, you know, communities expects you to give them jobs, employment. Well, for non-qualified position, we do it by law. For qualified positions, which we usually don't find on the ground, we train them, and then we put them on our teams to work the fields that we operate.
You also expect goods and services. The easy part is you hire pickups and you hire catering services. Well, we go beyond that. If there is a welding shop nearby, we use them to do pipe racks, and eventually they will grow into becoming certified welders for our operations. Communities also expect social investment, and we also do that. You know, we do house improvements, and we do productive projects. Again, we go beyond that. We have projects where we provide clean water, or we provide clean energy for the communities. It is very common that in the areas where we operate, schools are not tied to the grid. We have a special, you know, line of projects, which is Energy for All. We put solar panels on the schools. Now they have electricity, they can use computers.
Again, another key element that comes from the previous administration has been Works for Taxes, if you've heard of that. It's a mechanism that the government put in place, where basically dollar for dollar, instead of paying the income tax to the government, you apply to execute a project in an area that has to meet certain conditions. The key condition is it has to be a post-conflict area, again, where we operate. We became the first oil company to execute ever Works for Taxes. That is thanks to Rafa there sitting in the back, which you can talk to him later on. Works for Taxes allows us to do infrastructure, which means roads. Allows us to provide access to fresh water. This also allows us to do educational projects and, you know, health. It's, you know, it's a, it's a major thing.
This year we were assigned $22 million worth of taxes to be invested in the community, and we get to do it. Why do we get to do it? Everybody sees, you know, we are not corrupt, and we are efficient. You know, every dollar that we invested is truly invested there. The people that executes the projects are the same people that build paths and build roads for our operations. It's the same quality of personnel that is dedicated to invest basically the government's money. Now, this is all good, but, you know, hiccups happen, and I think you saw them in the last couple press releases. We had an issue in southern Casanare, you know, with blockades there that limited our production.
We also had recently an issue in the Arauca area, in northern Llanos, where we had to shut down Capachos, and we only opened it up again a few days ago. Things happen, there is a positive side to everything. You know, with the blockades in southern Casanare, I think, you know, with the change of government, there has been higher expectations and more pressure, you know, negotiating with companies. What I'm happy with is we didn't kick off the blockades in the area. It started with a nearby operator. It affected all of us in the area. Our relationship with the local communities meant that in our municipality was the first place where the blockade was lifted. That started also to spread around until all the blockades were lifted, and we agree how to negotiate a solution.
It's not only us and the people blocking us, it's us, the local authorities, some politicians, and national authorities that can grant the process that we are going through. I'm confident we'll reach a sustainable solution there that will last for long. When it comes to Capachos, you know, we shut down because of a security incident. In that area of the country, you know, there are two guerrilla groups that are basically at, or that were at war between, you know, between themselves. Basically, as an operator, we are in the middle there, and that was the reason we had to shut down. The priority for us is to protect, you know, the life of the people that work for us. We thought at that moment that the security situation was escalating. We decided to stop.
We did, you know, many meetings, Minister of Defense, Minister of Interior, Ombudsman in the area. I just came from the field because yesterday we did a security council with the governor, with the local mayors, representatives of all the authorities, but also the community, and everybody was really happy that we were starting the operations again. When we shut down, 400 people were left out of work. 80% are locals. The impact in the economy is immediate because we prioritize, you know, local labor, local goods and services. What I mean with this is, you know, hiccups may happen, and we are trying to incorporate that in our planning for next year when it comes to delivery of production. I do see a sustainable future.
I do see a 2023 that's going to be more stable than the last few months that we had this year. I think, yeah, that's it for me. This is a short video. It's, I think it's evidence of what we do on the ground, how we deal with our communities. You're investors or you're representing investors, so you should take a piece of it if you don't get to see it tomorrow. Thank you.
At Parex, our community investment strategy creates shared benefits with local communities where we operate throughout Colombia. Our strategy has three pillars: sustainable communities, actions for the planet, and economic development. By investing in local infrastructure in the areas where we operate, we help build resilient and sustainable communities. The Water for All program improves infrastructure and access and has supplied approximately 30,000 local stakeholders with clean water throughout Colombia. We champion environmental protection and conservation initiatives to improve the sustainability of local ecosystems. We invest in biodiversity programs to increase local populations of endangered species. Launched in 2021, the Energy for All program enhances access to reliable and renewable energy for communities not connected to the grid. By the end of 2023, five schools will be powered by Energy for All.
We support the growth of local businesses to grow capability and create new sources of sustainable employment. Launched in 2018, our Growing Together program works with businesses to help them enhance their business plans and strategies to optimize performance. Since inception, the program has supported approximately 240 local companies. At Parex, our growth must not only be reflected in the value created for our shareholders, but also in tangible and positive impact we provide for the communities where we operate. In the year to come, we expect to invest approximately $31 million throughout Colombia. We're proud to say that since 2012, our total social and community investments will reach approximately $84 million from our community efforts, which includes the Works for Taxes program. We remain committed to delivering win-win benefits from local resource development now and into the future.
Thank you very much, Daniel. As you can see, you know, ESG, and particularly social, is very fundamental to Parex, and we think it's kind of advantage for us in Colombia. When we started the company in 2009, we knew that would be an important plank of our business. We actually had our first social responsibility report published in 2011, then it was called CSR. We certainly have evolved that from CSR to ESG to include environment, governance, and human capital. Being a Colombian company, as you saw, ESG will always be fit for purpose with us, having a significant focus with improving the lives of our stakeholders, the local people that you saw in that video. This is really gonna help us move forward in executing our programs going forward. I do think that Parex is a unique offering.
We provide Brent-priced crude exports, conventional exposure, exploration upside, emerging market traits that are framed through strong governance. This slide provides the progress of our ESG journey since 2019. Some things I want to highlight. Daniel talked about the Works for Taxes, where we can provide a direct impact in the communities where we work. Not only that, where our offices are, where we live, the communities giving back, such as installing a burn unit in Bogota, putting in innovation fellowships at University of Calgary. We're making step changes with new energy sources like geothermal and solar panels, energy sources that are actually reducing our total cost of energy in our operations. Finally, we're being recognized in ESG indices like Jantzi. An advantage of being a conventional oil producer is our production's efficient and requires low energy usage.
In 2019, we set our greenhouse gas emissions target of a 50% reduction from its baseline. So far, we've achieved about 65% of that goal. The key initiatives, reducing flaring, adding gas processing facilities or reinjection, electrifying our key facilities from the national grid, which is 70% hydro, connecting fields to pipelines and reducing our trucking. For the next phase of reducing our emissions, we're gonna add more gas processing facilities. We're gonna attack methane emissions, and we're gonna be adding gas production. The point of this slide is really to demonstrate our ESG leadership. There's a bunch of scores here, and I'll just point you to the S&P Global score. We've gone from 16 to 60, and it's hard to figure out, is that good or bad?
Well, having a score of 60 puts us in the 85th percentile of roughly the 100 companies that S&P covers. I recognize that the prominence of ESG has shifted greatly over the last five years. 2018, we didn't talk about it at all. 2020, 2021, during COVID, it's probably on the second page of our presentation and many of our peers. This year, with higher oil prices and returns of being the focus, it shifted back to the end of the presentations for most companies. I want you to think, you know, what's the right analogy of ESG, and how does it fit into our program? I think the best way to think of it's almost like personal hygiene. It's really noticeable if you don't do it.
That's why we need to keep doing this for all the advantages it gives us. Now, in summary, in tying back to our strategy, the key ESG message is it's a real lever for all of our stakeholders, from shareholders to government to employees, and most importantly, the communities where we work. Now, I'm gonna move into the 23 budget that we released this morning. The headline messages, production midpoints, 60,000 a day, something that we reached this week. CapEx of $450 million, which is $100 million lower than our expected CapEx in 2022, and that includes a $45 million carry for the Northern Llanos. At $80, it's roughly $700 million of funds sold from operations.
That would roughly leave about $250 million of free cash flow that we can return 100% to shareholders. A key focus since 2011 for Parex has been or 2021 for Parex has been to increase our operated activity, controlling our destiny, as Ahmad said. I want you to note that 75% of our CapEx is allocated to operated blocks. Now we have over 50% of our production coming from operated blocks. It's higher, probably about from 2/3. Now, looking at the capital itself, I think it's important to look. We've reduced our capital approximately $100 million from this year, and our production is actually gonna be on a year-to-year basis, 15% higher. If you look at it from a per share basis, that's greater than 20%.
I think this starts to demonstrate that our capital investments since 2021 are delivering returns. For example, in Cabrestero, in Block 34, the amount of CapEx is starting to roll over. We are gonna have lower declines, installed infrastructure, and generate significant amounts of free cash flow. You can see that the majority of the CapEx is actually on development activities. That's where we have discovered fields. Our investment in the carry capital and facilities are gonna pay dividends as we go forward, reducing our capital costs and improving our capital efficiencies. With Big E, we're targeting liquids rich gas and oil in Arauca. Now, for production, you can see that we're passing our all-time high production from 2019 with substantial growth. Year-over-year, the production growth is diversified.
We have over seven fields providing more than 1,000 barrels a day of growth. We view this as low risk and achievable, demonstrating our strategy of diversifying from one key asset. With the 2022 election behind us, we believe that the social downtime that we experienced will be reduced. As Daniel explained, the work that we do in the communities is really gonna help us improve on that and deliver our production guidance. We've included a low end of the range, being 57,000, that reflects the possibility of higher than anticipated above-ground downtime, and that's not to do with subsurface. We've also added 2% extra downtime to our overall guidance for the 60,000 midpoint. The tax reform we've considered, and we've included it into our analysis.
Since the election earlier this spring, Parex shareholders have faced a great deal of uncertainty. What would be the new impacts of the tax reform on the oil sector? Fortunately, we now have certainty as the government has passed the reform. Our initial analysis indicates the net impact for 2023 at strip pricing of roughly Brent $80-$85, will be a 30%-35% effective tax rate. Although our cash taxes are higher going forward, Parex is able to generate strong net backs compared to many North American producers. Overall, Parex has gone from likely the highest net back, cash net back, to still being in the top half of the regime. This is an environment where we can succeed.
I've also done a like-to-like comparison, just what we think the actual type numbers will be, a forecast of our fund flow from this year, and the overall average this year is roughly $100. What would it be like in this tax regime going forward next year? With the reduction in our capital and growing our production 15%, we can generate similar amounts of free cash flow that we can return to shareholders. If I do this analysis at $80, it's even more compelling. In closing, with production growth, lower CapEx, higher efficiencies, we are able to deliver this free cash flow to shareholders consistently into the future. We're gonna have a short break, and if you have any questions online, please submit them to investorrelations@parexresources.com. Thank you.
Good afternoon, everyone. You've heard my name a few times, and Imad mentioned me. My name is Eric Furlan. I'm the COO of Parex. I've been working with many here for over 20 years. I started working with this group back in Petro Andina. I'm sure some people remember those days. I started my career with Chevron, both in Canada and internationally. Then started working with this group, and I've been with the same group for about 20 years now. We've seen this slide a few times today. People are talking about diversification. I'm gonna dive into a little bit more of the detail behind this and show you not just the numbers, but how we're doing things. We'll talk about the diversification and where we've had success.
The key takeaways it's been said before. We were known as a Block 34 company, non-op. We're now more than 50% operated. All of our growth that we're projecting is coming from operated assets. I'm gonna give you a couple themes to think about as I take you through this presentation. One is access. Our competitive advantage here is a lot of what Daniel talked about. Accessing areas that other people can't access. The other theme that I'll highlight as I go through this is technology, I'll show you some key examples of what we've done with technology to drive better performance out of all of these assets. We do it all in the frame of safety. Safety is paramount in the way we do our operations. We focus on that.
We are a top safety performer and strive to continue to do so. I'll highlight on this slide up in the Magdalena Basin, the two most green areas, not the most northern one, but the one down. That's where we'll be visiting tomorrow. I'll talk a little bit about why that area is important to us. There's a few key ways in which we're trying to achieve our goals. What I'm talking about is really the work that's underway to achieve what's in our budget. Really biggie is not in our budget. What I'm talking about today is what we consider to be our main focus. There's three real pillars there. One is get maximize what we can get out of all of the assets through EOR. That amounts to...
In areas like SoCa, for example, that has over 1 billion barrels on that whole trend in the very high-quality reservoir. Getting all we can out of that. Exploiting the assets the most we can. Getting everything that we can out of the assets today, accelerating production and flattening the declines. Finally, we'll talk about gas cycling and that exciting opportunity, not only for the project that you'll see tomorrow that is underway, but many projects that Parex has coming up. It's an exciting growth area for us. I'll start off talking about Cabrestero, what we've done in Cabrestero. Those of you that have followed the stories for a lot of years probably know Cabrestero is our swing field.
We used to develop one or two wells there, here and there, just to kinda keep production at 4,000-5,000 barrels a day. In 2021, and especially 2022, we started developing the field in earnest. What we did there was we focused on waterflood. You can see, we focused on waterflood, exploitation, expanding the facilities and investing now to provide a long-term, stable base, low-decline asset. This picture really shows the results of that. You know, you can see on this slide, Where we used to produce Cabrestero and that big growth that started in 2020, 2021, 2022.
To a large extent, it was a change in our philosophy in our company to go after development in more of a campaign style, and achieve everything we can out of the assets. This slide actually hasn't been updated recently. We just recently surpassed about 16,000 barrels a day in Cabrestero. How we did that, we did that with waterflood, we did that with continued exploitation, step out of what we thought existed and found more. We did that by finding new zones that in some cases we didn't even know existed. In a lot of ways, you can see the old GLJ assessments of reserves, and Imad mentioned earlier that a lot of the reserves over the last 20 years have come from getting more out of existing fields, not new discoveries.
Well, this is a great example of building on that. You can see today, we're doing about 16,000 barrels a day from a field that we used to have as a small swing field and continuing to grow, and we have a big program in place for next year also. Big investment, shallow decline, and then for years to come, a big cash flow generator for Parex. Of course, we've got Cabrestero's big brother to the north, Block 34. To a large extent, what we're doing in Block 34 is moving forward with a lot of the things that we've done in Cabrestero. That is expansion of waterflood to flatten declines and pressure support areas. That is already underway, there's a big focus of that next year. Debottlenecking facilities.
The theme here is to take the 40 years of production and bring it forward. We produce it now. I don't wanna produce over 40 years. Process the reservoir more quickly, cycle it more quickly, find those new opportunities. In Block 34, there's about 120 million barrels of oil in the Mirador reservoirs that are hardly exploited at this point. We're gonna try to exploit that using some new technology. Not new technology for the world, but for Colombia, using horizontal drilling to try to get more out of those more out of those pools. Moving north into the Northern Llanos, one of our most exciting areas. When I show you this and show you some of the details, the first question that'll come up is, why does this even exist today?
Why do these conventional high-quality reservoirs exist in this year, and why weren't they depleted in the 1970s or '80s like they would have been in Canada? There's two reasons. One is access. Daniel went through a lot of detail on how we gain access, how we build that social connection and trust. That is paramount to this. The other part of it is it was a technically challenging place to operate from a drilling perspective. When we first got into Capachos, people were talking about $50 million wells. We just drilled our last well for $14 million, and we think we can do better. Multilayer reservoirs, very prolific, very high netbacks, very favorable, very favorable royalty regime here, and debottlenecking facilities. When we took over Capachos, we had two of the...
Capachos was a field that was found 20 years ago. It had 2 million barrels of recovery, and it was shut in because of access issues or inability to execute. We started executing in earnest in about 2018, 2019. We produced 9 million barrels from there since then and are currently at peak rates. That's the excitement of this area. Getting into a little bit more detail, what do we love so much about Capachos? Multi-zone, okay? I highlight the Andina one well. We decided to do a test on the Mirador in that Andina one well. That well was making 2,500 barrels a day of oil still after accumulating over 3 million barrels of oil. We wanted to test the Mirador to see its productivity, and we tested it at 6,800 barrels a day.
That's the kind of productivity you see in these single zones in this area. That's the same kind of productivity we saw in the lower zone when it first came on production. We actually put this well on production at that rate because we're gonna test it long term to learn. You can see we've just started our recompletion campaign here. We've got about 6 more recompletions on existing wells. In addition, we have a development campaign over the next several years, an exploration campaign that will have about 6 wells in it, 2 of which will be next year. All of those wells also have the same multiple zone opportunities. There's a lot of potential for near field exploration, again, it's the excitement of these wells that drives us to this area.
Arauca. We've started operations in Arauca from a civil construction perspective. We'll be moving our first rig there very shortly. Arauca, call it the big brother of Capachos. We've loved Arauca for a long time. We're excited to be there with our partner, Ecopetrol. Again, you know, here's the field. Three wells were drilled. This would be about 40 years ago. They produced 10 million barrels. No pumps were installed. You'd wonder, you know, why does this exist today? Three wells that penetrated some of the reservoirs and didn't even access most of the pool recovered what would be in today's market three-quarters of a billion dollars worth of oil. It exists because difficulty drilling and access.
We've already proven we can operate in this area with the access, I'll show you later how we're advancing our drilling, taking those wells that people would've thought would've cost $50 million and taking it into the low teens. That's what we're trying to do. You know, in Arauca, the Une reservoir that we think could be one of the most interesting hasn't even been penetrated by any of the historic wells. That will be a fresh penetration. Again, highlighting very high productivity. The wells that were tested and produced in the past would've produced 5,000-6,000 barrels a day from single zones with Parex's producing strategies. Again, this is the reason why we love this area and why we put so much effort into getting into this area.
Let's talk about some of the technology advances, especially in the area of drilling. One of the big things that we've done in the last 2 years is to bring in synthetic mud. Not only bring in synthetic mud, but bring in all the technology from a Canadian vendor that allows us to use it, recycle it, and handle it correctly. Those that are familiar with synthetic mud know the problem is, what do you do with it after? Well, we process it all on-site and reuse it. Highlight 2 wells, and I picked these two because Capachos and VIM were kind of known to be two of the most challenging areas to drill. You can see our latest well in Vaduz. We got to depth in about half the time that historic wells have taken us.
When we first started here, we thought wells to reach the CDO reservoir top would be in the $20 million range. This well reached that depth for $6.6 million. We think we can further optimize that. That is the step change that we're talking about applying throughout Colombia where it's applicable. Capachos, we just set our pacesetter well. These are not one-off wells. We believe it's this technology that's making a difference, and we can repeat it on every single well going forward. In fact, we think we can improve upon it. The next steps of this will be even going further, looking at casing sizes. How can we optimize this? I could have brought a Cabrestero, a Cabrestero chart up here also. We just drilled our three best pacesetters in Cabrestero.
We knocked about 30% off of our drilling times there. Even though there's a lot of talk recently about inflationary environment, our well costs are getting substantially lower as time goes on. Inflation is in Colombia, but we more than surpass that with technology. You'll see that VIM rig when we go out to the field tomorrow. The rig is on location, so you will be able to see that. Switching gears, talking about some of the short cycle opportunistic adds. When I talk about short cycle opportunistic adds, I'm talking about existing pools where we have what would be classically known as those old infill and exploitation opportunities. The beauty of these are the facilities and infrastructure are in place.
We pull a rig in, we can do it quickly, we can get the production online. Here's an example of our focus this year. It was Block 32 and Block 40. This is a combination of those two. Those are our two blocks that we focused on this year. We had a baseline of just over 1,000 barrels a day. Through infill drilling, recompletion, facilities optimization, you can see we're up to about 7,000 barrels a day there. This program is actually already paid out before the year comes to an end. We've got all our money back, and now we're at 7,000 barrels a day. That was 2022. 2023 will be about Block 81 and Block 26, and we hope to repeat the success there.
Now we'll talk a little bit about VIM, and I'll talk about VIM as a project in itself, but also the future and where it could lead to. One of the pillars I talked about was getting the most we can out of our reservoirs. So we're chasing gas reservoirs where we are, that are very liquids rich. These are reservoirs that have 220, 240 barrels of million of condensate, a highly valued product. In La Belleza, we're just starting up our first gas high-pressure gas reinjection scheme. A gas reinjection scheme is meant to maximize the recovery of those liquids while we put infrastructure in place to allow us to more efficiently sell the gas into the market at a later date.
The project itself is exciting for us, but it becomes really exciting when we look at the entire Foothills trend that we're looking at with our partner, with Ecopetrol and into Llanos Norte, where we can also use this technology to increase oil production. La Belleza-2. I'll talk about this. Again, this is multiple technologies, so we're doing gas injection, but we also changed this well to be a horizontal well using synthetic mud to drill the top section and through the main reservoir zone. We drilled a 2,000 ft horizontal well, and that horizontal well has capabilities that are exceptional. You can see we tested the well at almost 40 million a day and 7,500 barrels of liquids. It's almost 15,000 BOE a day, and that was at a 10% drawdown.
Clearly, we don't have a facility on location that can handle all this fluid. We are gonna be initially limited to about 20 million cu ft of gas processing. We're already working on expansion plans. When you're there tomorrow, you'll see that the facility on site already has all the flanges to allow us to double the facility, which is what we're currently working on. Again, exciting project, as we learn the high-pressure injection. How have we done all this? Really, we've built the capabilities in-house with key staff additions, okay? In both the drilling technology, EOR technology. We work with our contractors to bring the level of their game up to what we want.
We take rigs, and we modify them and build them and change them the way we need them to deliver the results that I showed you that we delivered on many of these wells. Then we pre-order all of our long lead times to make sure that we can execute the program that we have in front of us without delay. That really comes together in replicating our success. I'm not gonna go through the slide, but you can see that, you know, Capachos streams into the next phase of Capachos and Arauca, Block 34, and then VIM-43 and the Foothills. When Ian takes you through the exciting part of the exploration portfolio, just remember those key concepts.
It's access and technology that's opening up our ability to do not only the development that I'm talking, but also feed into the exploration. In summary, you know, I believe our portfolio and what Mike showed you, that is based off our existing assets and this development portfolio has got the depth to drive the growth in the organization. Now Ian and Katie are gonna come up and talk a little bit about what the opportunities are beyond that, beyond our current baseline. Thank you very much.
Hope we all be loud enough. I don't think that. Thank you, Eric. Hello, everyone. My name is Ian Zapfe-Smith. I'm the vice president of exploration here at Parex. Next few minutes, Katie and I are gonna walk you through the exciting opportunities we've got on the exploration side. All right. I started with Parex in 2008. I was actually part of the team that brought us into Colombia to begin with. All right? When we got there, what was exciting was, we're in a good situation where we started out with four blocks. There were regular bid rounds that were going on with the ANH every couple of years that were ensuring that we had access to new prospects, new opportunities.
Unfortunately, as many of you may know, in 2014, they stopped having those bid rounds, right? That created a situation that was pretty uncomfortable. I gotta say in 2018, felt like I was looking in my golf bag, and I was only seeing a driver and a putter, right? When we saw in 2019 the ANH come out with the PPAA process for accessing new lands, man, I tell you, I felt like I walked into golf town, right? You could have whatever you wanted, you could select the blocks that you wanted, that's what got us excited. That's what you see here. You've heard this from many of the people, speakers who've come up here. We've picked up from 2019 to 2021, 25 new blocks in Colombia. We've done this across many different basins.
We've got experience now in all these basins. We've been able to go through and use the experience that we have in the country over the last 14 years to high-grade opportunities and build a diversified portfolio. You can see in the top left corner here, we've got just over 50 prospects on the blocks that we have now, that's gonna grow as we shoot additional seismic. 15 of which of these are high impact prospects. Okay? That's 30%. I don't know you're gonna see that for many of our competitors. That's what we're really excited about, that opportunity to grow and to chase after these blocks. Sorry. All right. Why am I excited about the portfolio? Well, part of it, we selected it ourselves, right? We picked out the blocks.
We knew what we wanted. We've been around. We've been working in this country, like I said. We knew the plays that were working. We knew the plays that have been overlooked. We've developed technology. You've heard about it from several of the speakers so far. We were able to get ourselves in a position where we had a diversified portfolio. Really for exploration, what is it that we do? We have two parts in the next few years for Parex. One was to bring in more reliable quick wins that you've heard about and some of what Eric was showing. These are prospects that are basically in our backyard. Okay? This is from the Casanare, in the Llanos Basin, where we grew up. We know these plays. We chase these ourselves.
What we're doing is we're looking for opportunities underneath existing fields that people missed. They weren't willing to take the chance to get down there. They're in areas where seismic wasn't easy to work out. With our experience, we've been able to show that we can make that work. Adding a full pipeline of these opportunities will allow us to build a sustainable growth on top of the exploration or the production, sorry, that Eric was doing. In addition to this, the part I'm really excited about, and I suspect many of you are here to see, is our BE operation. Exploration opportunity, sorry. Really what we're trying to do in exploration is try to ensure that with the 15 prospects that we've got, that we can have at least four of these ready to drill every year.
In essence, we're gonna be getting shots at big wins. These are asymmetric risk properties, opportunities where you've got low-cost wells with major upside potential, that's what we're gonna show you here in the next few slides. We're very excited about this opportunity because we've got prospects that are in multiple different basins. You're gonna see we have big wins that are in the Lower Mag. We have big wins that are in Llanos. We have big wins that are in the Upper Mag, they have different costs, different fluid types, different risks. Which means they don't have major contingencies on each other. It's not a case where we drill one of these and the play doesn't work out and all of a sudden everything falls apart. No, these are independent, that's what's exciting for us. All right.
You've heard a little bit about this already from Eric. This is the Arauca field. Arauca prospect, Arauca East. That's the exciting opportunity that we've got going for us now. I gotta tell you, I wish I could find more of these in the country. We've got proven oil down dip. We already got wells that have been producing 10 million barrels out of one zone here. From our experience at Capachos, we know there's three zones that are here, and we've shown you some of the rates that you can get out of these additional zones. I've got after doing some reprocessing on the 3D seismic that's there's some challenges on imaging in this area. We did depth processing on it. There's a four-way closure sitting here.
Great big four-way closure, we're going up dip of proven oil on a multilayered opportunity that spells high chance of success. You can see from the volumes, this is the big brother of Capachos. You can see the comparable volumes in the corner there, 37 million barrels. We're bigger than that. All right? We're very excited to get after this first half of next year. I can't wait to have the results after that and follow on from there. All right. VSM. Why do I like the Upper Mag Basin? Well, when I came in 2008 to Colombia in the Llanos Basin, you could go for long walks through that basin without ever stepping on 3D seismic data. Why does that matter?
3D seismic data for that play was the tool necessary to be able to place wells in the right locations, okay. Take advantage of the opportunities. Sure, there have been some big discoveries that have been made off the 2D, but to really make that basin grow and the production that you saw take off through 2008 to present was because of 3D seismic. Today, you can't take a step in that basin without stepping on seismic. All right. This basin, to me, looks just the same. This has been an overlooked basin since the 1990s due to social and access issues. Again, a strength of ours. We're sitting in around. There's proven fields that were found on four-way closures. All right. That's what's been chased by the national oil company and other operators in this area.
Because they weren't able to get in during the 90s when 3D seismic was invented, they were not able to take full advantage of it. What we're gonna do is we've got a block here in VSM-37 where there's existing 3D. We've got a major combination trap that's sitting there, very large size in between proven fields. The other thing we love about this basin is the reservoir. This is the same reservoir as the Llanos Basin. Unlike the Mid-Band that you guys have heard about, it doesn't have the clay content, it doesn't have the other problems that make it difficult to be successful to produce. These are easy, productive horizons. These have IP30s in the range of 500-600 barrels a day.
The beauty of it is that in the area that we're going after, we can map the reservoir from productive oil reservoirs into our stratigraphic traps or combination traps, so that we can see them on 3D seismic. We can use inversion, which we've proven to be successful in other basins. Those are the strengths that are gonna allow us to be successful here. In addition, like I said, there's 3D right where the productive area is, but away from that, nobody's shot any seismic here. We can see indications of more structural closures that need 3D seismic to be able to map them effectively. Once you've got that 3D, you can map the reservoirs, you can map the seals. These are not deep wells. These are 8,000 ft wells.
These things are gonna cost us $5 million-$6 million to drill in a development scenario. We're very excited about getting into this area. The last piece that I wanna point out, because there's long-term existing fields here, there's infrastructure. There's a gas pipeline and an oil pipeline that is based in Arantes. We'd be able to turn these on to quick turnaround opportunities. All right, now I'm gonna hand it over to Katie to talk about the gas opportunity here.
Good afternoon. It's a pleasure to meet you all. For those of you that don't know me, my name's Katie Bernard, and I'm the Vice President of New Ventures here at Parex. I've been with Parex a little over a year now, and prior to Parex, as Imad mentioned, I worked for Shell in the Netherlands and, for Cepsa in Madrid. As you probably can tell from my accent, I'm British, although I have spent most of my life living overseas. Today, as Ian mentioned, I'm here to talk to you about gas in Colombia. Colombia, as you probably all heard, it's in the news quite often, is facing a gas supply shortfall. For decades, the gas industry's been sustained by the giant fields of Cusiana and Cupiagua, which is in the Llanos foothills, and Guajira on the north coast.
These fields are now in steep decline. There has been some recent success in replacing gas production in the north of the country, but the decline in gas production in the Llanos foothills continues unabated and gas needs to be found in areas close to Bogota. It could be argued that the gas price shortfall has already, you know, already come into existence. The reason we haven't seen a bigger gas supply shortfall is because gas that was intended for enhanced liquid production has been redirected to supply the gas market instead. Gas demand is rising, and security of supply will encourage further demand growth, especially from the industrial sector. There are options that exist for replacing the gas, such as LNG and pipeline imports, as well as the offshore exploration that we've heard a lot about recently.
These are either expensive or they will take until the end of the decade to materialize. We see that this provides Parex with an opportunity. We're well-positioned to supply new sources of onshore gas to the Colombian market within a shorter timeframe. Gas not only helps diversify Parex's revenue stream by creating portfolio resilience by reducing carbon intensity and enhancing long-term sustainability, it also keeps us aligned with government objectives on energy transition, on security of supply, and on eliminating Colombia's reliance on expensive energy imports. The government, the new government has shown itself to be supportive of gas development in Colombia. You'll notice it has not applied the income surtax to gas, and it understands the significance of connecting more Colombian households to a cleaner, safer, and more reliable source of energy.
In summary, gas is falling, gas supply is falling, demand is growing, and importing energy is expensive. This provides an opportunity for Parex. Colombia has fantastic liquid rich potential and large gas targets with high productivity. You've heard so many of us talking about that today. Our gas strategy is designed to benefit from these opportunities and is made up of three pillars, which we're executing in parallel. The first pillar is to develop our liquid rich proven resources. We're doing this now in VIM-1, in the Lower Magdalena and at Capachos and Arauca in the northern Llanos, where we're using short-term solutions such as gas cycling, trucking and infield power to monetize and fast-track our liquid production without having access to regional pipelines. In the meantime, we're pursuing access to higher net back markets through the building, permitting, and reuse of existing infrastructure.
That's our second pillar. Once we have access to regional pipeline infrastructure, we have the option to monetize our gas, thus unlocking further gas potential. Thirdly, once we start selling into the regional gas market, we can explore and appraise our large multi TCF transformational gas targets, whether they are liquid rich or dry gas. We're progressing this as part of our strategy, both independently in the Lower Magdalena, and as mentioned earlier by Imad, jointly with Ecopetrol in the prolific trend of the Llanos foothills. I'll hand back to Ian, who's going to talk to you a bit more about the VIM opportunity, and I will come back and tell you all about the MOU with Ecopetrol.
Thank you very much, Katie. All right. Yeah, the next couple of slides we're gonna show, we're gonna basically highlight the gas strides that we've got and show you where we're at today. One of the most exciting things about VIM-1, you guys would have heard about it in our press release this morning, and Eric referred to it earlier. Our La Belleza-2 horizontal that we drilled. I mean, obviously, the rate is exciting. We're super excited that that was able to work. The more important to me on the exploration side is that we used seismic inversion to predict where that porosity was. We were able to drill a 2,000 ft lateral in the porosity.
To remind you, for those who aren't aware, there were three other attempts into this structure, two by Chevron back in the '80s, and then the first one of ours that drilled into the structure and didn't find any porosity. It's not like it's fishing a barrel. That success has emboldened us to be able to continue chasing that play on this block and also within that basin. You can see to the right here, the Ingenio prospect is also into that same play concept. We're looking forward to going after that opportunity. In addition to that play that we've got on the block, we've actually got two other plays, two proven and another one that's sort of exciting for us.
We're really excited it will bring in what we think could be a new resource play. The other play, the Hidra on the left side, you can see there's two sand bodies in the bottom that's going after. The basal one is the lower CDO sandstones, and that's actually a productive horizon from La Creciente, from our partners Frontera, about 50 km to the southwest. This is a fantastic horizon, right? 15 to 30 million a day IP30s. These are great wells with good liquid rates to go along with them as part of the story that Katie discussed. We have three prospects of that type on this block, and these are also transformational in size.
These can take this block to an even higher level than where it is today, and which of course is important while we're building the infrastructure to put this on production. Up. I won't go ahead, sorry. The last one I don't wanna forget is Vaduz. You heard Eric discuss that prospect. We just drilled the well recently. As with many resource plays, this started out as a formation that was a big pain in our butt, all right? The big gold horizons that you see on the top here, this is a 2,500 ft section of interbedded sands and shales. Overpressure gas, didn't respond well to water-based muds, and so you ended up with lots of sloughing in the hole and became a real problem for people to drill.
As with many resource plays, as I was alluding to, that type of thing turns into an opportunity. Much of what's going on in North America is driven around that. There has been successful production from this horizon down to the southwest in Canacol's area, in their sub-basin, which is a dry basin or dry gas basin. In this basin, there's been a few tests that have done well, no one's been able to sort of crack the nut on turning this into a commercial operation. We think the two things that are gonna help us is using the synthetic-based mud to drill through this. One of the challenges when the reservoir is swelling up, it's squeezing down on the porosity and permeability, you can't get the delivery you want.
By drilling this well with synthetic mud, we have a much better chance that we're gonna get communication from the well to all the sands, not just the big ones. The other thing is other people have tried to target individual sands, as has been done many times in other places in the world, just couldn't quite get the deliverability or the volumes that they wanted. We're gonna open the whole 2,500 ft up altogether and just let the whole thing flow to us. It'd be like a deep basin well in Western Canada. That's the thing that we think is gonna make a difference. If that's successful, we're talking about hundreds of well locations on this block, on our blocks, the Northeast. This is my favorite prospect. I've been waiting to tell you guys about it. Chirimoya.
We picked this up in 2020 bid round. We had existing 2D seismic, varying qualities. We shot a 3D seismic program over this, and we're actually just getting all the information in together today. This is a huge structure. Four-way closure is what we've identified from the 3D seismic. Anybody who's familiar with Western Canada, on the bottom left corner of the map, you can see that grid there. That's a township. That's 10 km across the top. That's how big this structure is. To give you a sense of how big that is, if you know Calgary, if you were standing downtown, the other side of this structure would be Southland Drive. This is a big opportunity that we're excited about. We've got three different zones. Two of them are already proven in the basin.
The third one is actually proven productive in the adjacent basin, the San Jacinto. This is transformative. You can see that this isn't new. Other people have tried to get to this before. 1940s and 1970s, there was two wells drilled that tried to get to the targets. As I just discussed with you, the problem is the Porquero. The overpressure and the water-based muds, they could not get to the target zones. They were struggling. We've got that experience. We've proven we can do it in the Offset area. We'll be moving in here to drill this well. This is gonna be a lengthy well for us to drill.
We'll be looking to spudding it here in early half of the next coming year, but we should have results by the end of the year. We're excited and looking forward to getting after this one. All right, now I'll hand it back.
Thanks, Ian. The foothills, it's one of the most promising gas trends in Colombia with high-quality prospects. Earlier this year, we signed an MOU with the National Oil Company, Ecopetrol, to exploit potential synergies in developing gas volumes along the full length of the Llanos foothills. The MOU area covers 13 blocks and stretches 270 km from Gibraltar in the north through our fields at Arauca and Capachos to Llanos 122 in the south. That's the same day's distance, as we're doing distances, of Calgary to Edmonton. For anyone that doesn't know what that means, it's about London to Manchester. It's on trend also with the world-class Cusiana and Cupiagua fields that attracted the IOCs to Colombia in the 1980s. This is an enormously exciting collaboration built upon the successful relationship between the two companies.
Working in partnership in Capachos and Arauca has demonstrated that we're stronger together, and we intend to deepen this relationship through this MOU. Parex acquired a number of blocks in the last two bid rounds. Together with Ecopetrol, we now have over 90% of available acreage in this trend, we decided to join forces. The MOU provides an opportunity to jointly collaborate on blocks in the area of coverage and maximize the use of existing infrastructure. There are many ways that could this corridor could be developed, they will all take time and probably cost a lot more than what we're proposing to do with Ecopetrol. These are the highlights of the MOU. Building a gas corridor is a long-term collaboration, progress is already underway. Later on, you'll be hearing from Alberto at the back, I see.
Hello, good afternoon. Who's going to tell you more about this. I'll hand back to Ian.
Yeah. The one last thing I want to add, I didn't mention at the beginning, that my original career started in North America, and I worked foothills trends through Western Canada into the U.S. What was exciting about this, other than these are the most prolific existing fields in the country, is if you see those bottom left gold or green diamonds there sitting on the red polygons in the background, those are the existing fields that Katie talked about. Those represent about 10 TCF and 3 billion barrels of recoverable fluid. All right? You can see the length of that relative to the length of the foothills. At the north end, you can see Gibraltar and Capachos. Well, Gibraltar is Ecopetrol, Capachos is ours.
You've got more production up there, and then there's a big gap in the middle, and the question is there prospects there? Every foothills belt that I've ever worked, you don't see gaps of that size. That is a massive gap. There will be fields to fill in that space. How come they haven't gone after it as of now? Part of the issue was security and access in the late nineties, getting in here to develop these fields. Another issue was enough demand for gas. The gas prices were low. Some of the contract issues were a problem. As we've just discussed, we can see that the demand for gas is coming up, the supply of gas is going down, and we've got the tools for access, and we've also got the tools for drilling.
These wells, I mean, there's wells that were drilled in here for $100 million. All right? Parex has shown time and time again in the areas that we go into that we can take those well costs and drop them dramatically, right? As we did at Capachos. If we can do that again in this area, it's gonna change what you need to find to make this work, and it's gonna allow us to extend this trend from the south to the north and fill in that gap along with Ecopetrol, which we're very excited to do. All right. I think what we've shown here, Katie and I over the last few minutes, is the exciting potential that we have in our portfolio. We've got diverse set of prospects.
We have both regular, consistent prospects that are gonna give us, you know, quick returns, and we're gonna keep a steady flow of those going through. We've got the Big E wins that we have here that we're going after, transformational opportunities that are diverse across the country in different basins. Obviously, we're very excited. Thank you very much, and I'll hand it over to Ken.
Thanks, guys. My name is Ken Pinsky, I've been the CFO for Parex since inception. I don't like following exploration because then you guys say to me, "Well, what do you got after that?" We're pretty boring. We just, you know, we give shareholders money back through a dividend of buyback, and I could have one slide and do my own presentation. I'd like to hear more about Ian. How did you manage to trip Ryan so he broke his leg so you could come? Anyways, 2022 was a great year for us. We got back on track with growing our production, which is what we do like to do. We delivered or our employees delivered 21%-23% annual production per share growth. We focus on per share at Parex.
Record funds flow of about $860 million, which I'm pretty simple, so I like to think of it as CAD 1.2 billion. We reutilized that free funds flow that we generated to purchase back another 10% of our stock. We do that quite a bit. Increased our annual dividend to CAD 1 per share. A good overall return framework, both the full buyback and increasing dividend. Don't know anybody else who did that, but maybe there's a few. As a shareholder, I can't really complain what we accomplished that was within our control. As you heard from Daniel and Eric, there were some things that weren't in our control, but we still had a good year notwithstanding.
You know, financial frameworks for return to capital, you've all seen them from my fellow industry players. However, as you know, as I just said, and as you know about the company, we just don't talk about it, we don't talk about debt targets that once we get there, we'll do it. We actually perform it. We've been living it for the past five years, returning approximately 100% of our free funds flow back to our shareholders. What excites me about what you're seeing today is our combination, which I think is unique, of the base development that's growing, the exploration upside that we have within the portfolio, plus, you know, what we can do then with our free cash flow for the shareholder. That's truly a one in a kind opportunity, I think, in an oil and gas company today.
At least I'm not aware of any other one. Now focusing on 2023, we've given you the budget through Mike. We've also got it at $60, $80, $100 Brent. Our current dividend is approximately $80 million per year. Capital expenditures, midpoint $450 million. You know, what would that generate is free funds flow of up to $200 million in excess of our $80 million dividend. That gives us a lot of capability still, notwithstanding the tax reform that we've talked about, to reward the shareholder for sticking with the story. If oil prices go below $60, we'll do what we did in 2020, 2015. We'll chop back some CapEx to maintain that free funds flow to our shareholders.
Now I also have my working capital, December 31st, 2022, around $200 million to help bolster returns. The board will review our dividend in February 2023 as part of their annual process. That's coinciding with the board's approval of our independent reserve report. We will seek TSX approval of our next NCIB shortly. That should commence early January, subject to TSX approval. They'd like me to say that. I promised our board, his name is Wayne Foo, he's one of the guys, that I wouldn't say too much more today of how we allocate our pool of free funds flow. That's what they want to talk to us about in February.
I will add that regular dividends are expected to grow because that's what we like to do, and we always want to get our share count below 100 million shares because it's easy math for my old brain. Thank you, Brittany, for building that. What's our track record of returning a capital? You know, I can only think of Imperial Oil in recent history that could compete with this on consistent returns for our shareholders. We've returned back today CAD 1.3 billion and forecast including next year, CAD 1.6 billion. If you look at our market capitalization, that's very significant. The majority of our shareholder returns has been through the consistent application of a normal course issuer bid as we have reduced our outstanding share count by 33%.
We will be applying with the TSX in December for a 2023 bid, as I said. Another factor to consider is we rearranged all our long-term incentive plans so that they're cash settled. They're not settled by Treasury stock. About 90% of that dilution that people would have from issuing of long-term incentive for us is gone now. We did that about three years ago. You know, we're not issuing equity to grow. We're not issuing equity to reward our employees for their work. You know, our buyback is more meaningful than what you'll find for most of our peers. Growth metrics. What does that buyback do over time? Well, it gives you some pretty good growth metrics on a per share basis.
You know, 16% CAGR for production per share growth since 2017, 19% on PDP reserves. I like to look at it a different way. Right now, every share of Parex has its own two barrels of Parex best blend. I kind of like to look at it that way. The other thing I like to talk about is, you know, when we're reducing our share count and growing organically, that exposes the shareholder to double digit per share growth, as you've seen here in these charts. As you know, I think we can continue to do that from what you've seen. It's been an impressive run for Parex. That's not the only story today. The story is we're going to do next. Colombia tax reform is law. Mike has discussed the effects.
I think it's fair that there are further mitigation strategies we can pursue, but for now, it's a good representation or a fair representation. The tax reform and lower Brent prices into 2023 results in a forecast drop of funds from that yellow line. As you've seen, if we saw the same oil prices that we had in 2022, it's pretty flat. Other thing is too is on a per share basis in Canadian dollars, the weak Canadian dollar offsets that a bit. We do get paid, and we do our business in U.S. dollars. Further, the forecast isn't reflecting a share buyback in 2023, which as you know, we will commence and provide guidance on later. As I've said in prior slides, we do like being consistent. One last comment today.
I've never been so confident in our portfolio of opportunities and our ability to deliver. Parex has always been an instrument of diversification for the shareholder. We are different, and it's not just Mike. We don't have Western Canadian Select, Bakken or AECO pricing exposure. We have access to all the crude markets in the world for our oil, as Daniel explained, and that's a big deal. We are a conventional exploration production company with real biggie opportunities, as Ian explained. We've always been able to self-fund our growth and rely upon the drill bit to deliver that growth. Finally, we remain unhedged and with no debt. I could talk about our debt management strategy today, as we have no debt, I don't have anything to talk about. I'm done, whereas most of my peers will keep talking.
I will now pass putting back to our President CEO, Imad, for some final comments. Thank you.
Thank you very much, Ken. I'm glad you promised our board not to give too many hints. I hope none of them is listening, in fact. Let me close here and leave you some takeaways. You've seen this slide when I started, and I hope we did manage to convince you that you leave with them. I'll repeat them one more time. I hope they sound a bit more credible. We are transitioning from single asset company to Colombia-wide successful operator. We deliver that as part of DNA through top-tier ESG performance, something we started doing, as Mike said, even before ESG was a word. We're flattening our decline, leading to lower maintenance capital requirements. We're building a sustainable base for production growth while delivering a step change in capital efficiency.
We're doing that while being exposed, as Ian managed to excite us about, to outsize return driven by big explorations, completely asymmetrical. We're talking about stuff that normally only the majors get the privilege to playing with. Prospects which are offshore size with basically near-field kind of risk profiles. We're continuing to return, as Ken mentioned, 100% of our free funds from operations to shareholders through dividends and buybacks. I feel humbled by your confidence in Parex and taking this long trip to listen to our story. The least we could do in return is to deliver. To end this presentation, all what I can say is a big thank you. Let me introduce our guest, Sir Alberto Consuegra, and we'll go back after that to the Q&A. Alberto served as Executive Vice President for Ecopetrol since March 2019.
He hold a BS in Civil Engineering from the University of Cartagena, and an MS in Pavement and Construction Management from Texas A&M University, sorry. He has extensive experience in the hydrocarbon industry, he has positions of Vice President Exploration Production in other companies. I'll let him, if he wants to talk about his CV, that's not what counts. When I got to see Alberto for the first time, I was really impressed. He was on the ball, he knew all the technicals, he knew all the location of things, and he cared. I got to know him a little bit better. This guy, nobody I've met in Colombia doesn't like him. I'm really honored to have you here, Alberto, as our partner, our colleague, and I dare say a friend. Thank you so much for coming.
Please go ahead.
Good afternoon to you all. I'm very honored to be here. Thanks for the invitation. Katie, good to see you.
Thank you.
Okay, I'm not gonna talk about my CV. First, I'm gonna start saying congratulations to Parex. Great results, you know. Reaching 60,000 barrels per day of oil equivalent is something to admire, you have done it pretty fast. I'm pretty excited about also the financial results. Very good. Okay. So what I wanted to do is take you through what is Ecopetrol, and then at the end, talk a little bit about what is our expectation in terms of the relationship with Parex. No, I guess I'm doing This way. You know that we are recognized as a hydrocarbon company. That has been the history behind us. Now we're playing a different game. We want to be considered more as an energy company, a diversified energy company.
We are already in three business segments: hydrocarbons, of course, low emission solutions, and I'll talk about that, and transmission and oil. Electric transmission. We recently acquired ISA and, because of that, we are, you know, giving a lot of importance to the transmission sector. We believe that's a way not only to diversify, but also to start lowering our emission portfolio. When you look at the presence of Ecopetrol, it's not only Colombia. We are basically in all the Americas, beginning on the Southern Cone in Chile and then in the Permian and the U.S., the almost Gulf of Mexico. We recently created a company in Singapore, and it's mostly to commercialize our products, crude and refined products. If I take you through our presence, I would say that in the Southern Cone, it's mostly about ISA.
ISA is present in Chile, is present in Brazil, Bolivia, Peru. We are building our hydrocarbon business in Brazil. Slow, I believe that we will have a nice future. We are currently maturing one big project, offshore project in the pre-salt, with Shell and Total. We hope that next year we can take the project to sanction. In Colombia, I'll talk to Colombia, and then Permian and U.S. Gulf of Mexico. I'll talk a little bit about Permian because probably you have some questions about unconventionals in Colombia, so I'll take you a little bit about the Permian business that we have. In terms of the hydrocarbon business, today it represents about 82% of our EBITDA. That's today's.
In the future, we still want to see a decarbonized hydrocarbon section representing about 60% in 2040. You'll see the slow growth of our low emission portfolio. By 2040, it will represent about 14% in terms of EBITDA. From now until then, it will be all about investment and a lot of investment. The target in there, the challenge is at least $2.5 billion in that segment. Transmission, it's growing and it's a business that we'll see growing. When you look at what President Petro in Colombia wants to do, he talks a lot about regional connectivity, meaning connecting South America, even Central America. ISA is present in most of the territory. We believe that's a great opportunity of growth.
We are not the number 1 producer, the number 1 and only refiner, and also, we have basically all the pipelines for both oil and refined products. We don't get into the gas pipelines business because of regulation limitation. Our reserve portfolio is about 2 billion barrels of oil equivalent per day. I'm sorry, per total. 9,000 kilometers of pipelines, a current production of 700,000 barrels of oil equivalent per day, but growing. When you look at the third quarter of this year, we are in about 727,000 barrels per day. We are seeing the growth despite the shortage in terms of production because of the pandemic and because of the blockages that we have back in 2020 and 2021.
We are increasing our presence in terms of refining throughput. Both refineries are now in have a total capacity of about 420-430 thousand barrels per day. Okay? Low emissions, we have one condition because of regulation. We are self-generators. Self-generators, meaning that we cannot sell electricity to the grid because we are in the gas business. That's the kind of limitation as we are gas producers. We are doing part of our generation, self-generation, with renewables and slowly growing that portfolio. It's actually been doubled year by year. We hope to get to the 400-500 megas in 2024.
We'll talk about ESG and the importance of ESG later on. We already have completed one pilot of green hydrogen, and we expect to start growing in green hydrogen because of our refinery needs. In terms of energy transmission, 48,000 kilometers around South America. Also we have road concessions. This is a business with most presence in Chile and also one road concession here in Colombia. We already launched a successful first energy storage project with batteries in São Paulo, Brazil. In terms of strategy, what we have defined is that we have a strategy for 2040. We call it energy that transforms. Based on four pillars. The 1st one, grow with the energy transition.
If you ask me where I see Parex helping us to deliver our strategy, that's a place to start. Growing with energy transition because we want to grow our production. We have already defined a portfolio curve that basically targets reaching a production of about 850,000 barrels by 2030. Ideally, we want also gas to be growing in our portfolio. It represents about 22% today. We want to take it to 30%-35%. We want to move from a portfolio of heavy oil, basically heavy oil, to light oil. When I talk about gas and light oil, I see Parex playing a big role. Okay? The other thing is that as I mentioned before, we want to start moving to be a more lower emission company.
By 2040, 30%-50% of our EBITDA will come from low emission businesses. Growing for what? For what reason? The first one, our major shareholder is the government. We need to ensure that we continue the trend of transferring the resources that the government needs. We are going to be doing so. I don't know if you're familiar with the Colombian currency, in terms of transfers, during the last 10 years, it's been COP 250 trillion, which is a substantial amount of money. That represents, year by year, it's like a tax reform. That's the size of the transfers that Ecopetrol provides to the government. We also want to grow to ensure energy security for the country.
We are in such means responsible for providing the gas, the oil for our refineries, and the fuels that the country needs. Also, when you look at the risks about climate change, and especially about adaptability and vulnerability, we believe that we can play an important role in that. We can do that, we can make a change in the regions in which we operate. That takes me to the second pillar, which is generating value through TESG. Why TESG? We believe that technology will play an important role, a fundamental role in the future. We put technology at the heart of sustainability. We already have committed to zero emissions, net emissions by 2050, scope one and two, but also reducing scope three emissions by 50%.
I have to share with you that we were at ADIPEC just in October. I told this to Imad. We sat in a table talking about methane emissions. I was surprised to see that our strategy was one of the most exciting, if I can share that with you. In what sense? We have moved already from identifying and measuring methane emissions to actually starting to execute and reduce our fugitive emissions. We already have committed to reduce methane emissions by 45% in 2025. We're giving a lot of importance to that. When I look to Parex, I would like to see Parex doing the same. Doing the same. It's not gonna be that difficult. When I looked at the 45%, at least.
46? Perfect. We also have, you know, talk about this new concept, which is water neutrality. Basically is reduce the amount of water that we collect from surface waters and also reduce water disposal in the surface. This is something that we want to do by 2045. This is something that the country expects. Water is becoming quite important in this country, I believe everywhere in the world. The third one, when we talk about ESG, social and environmental impact will be fundamental. We want to ensure that our regions and the towns in which we operate, we see them moving from the line of poverty that they currently have. That's something that we need to do. Diversification, new jobs will be very important.
It's not jobs related to our industry, it's jobs by incentivizing, promoting, you know, things like you do in your operation, like creating supply chains that we need for services. That type of things is what we need to do in order to ensure sustainability in our areas. The third one is cutting-edge knowledge. I told you about technology. Technology, it's gonna be quite important. It's technology mostly around sustainability. It's how we can be more energy efficient. How can we reduce the water print?
I mean, we have a lot of opportunities in there, and we believe that by using our innovation centers, because we have one that is recognized in this part of the Americas, we can do a lot in terms of actually reducing costs in our operations, but also ensuring that we fulfill the goals that we have established for growth. The other one, which is mostly related to recognizing that we are a company, that we are a group that is responsible for delivering competitive returns. We still want to maintain, you know, an attractive ROACE, 8%-10%, recognizing that some of our business don't deliver, you know, a high ROACE, like the case of refining.
In others, like in this year, you know, because of price and everything, our return on capital employment is around 18%. Okay. In terms of results, just a few messages in here. When you compare 2016, and then 2022, Ecopetrol was a company that in 2014 and 2015 was delivering a production of about 800,000 barrels per day. Back in 2014. At that time, the break-even of our projects was $65. So now, one of the big reasons of why we're delivering these results, which are historical in terms of EBITDA, revenues, EBITDA, and profit, is because we have done a lot in terms of efficiencies, in achieving efficiencies. It's been I mean, COP 23 trillion . Efficiencies in all senses.
Efficiencies specifically about how we reduce the cost of the heavy oil crude, of evacuating the heavy oil crude. In there, at least, I would say 20% of the reduction of the efficiencies are associated with our dilution strategy. The other message in here is that despite the lower production in average, we are seeing. If you in a way normalize TRM, which is exchange rate, and you normalize also price, we are still delivering an underlying performance compared to 2021. We still believe that we can do it better and better every year. ROACE, again, 29, 19%. That's a bit higher than I was saying, 18. The outlook for the rest of the year is okay. It's gonna be great.
Look that, we already are doubling the results. Okay? So that's kind of where we are in terms of results. I'll take you now to this one, which is the MOU with Parex. Well, Katie, you landed all the messages, but what I'm gonna say from the Ecopetrol side is that we are excited. Why? Because we have seen the capabilities that Parex acts at is delivering. When you look at the way Parex provides good results in terms of drilling in an area in which we have tried and we have not been that successful. We need those technical capabilities, but also the focus.
Right now what we see is focus in terms of Parex strategy in ensuring that, you know, light oil and gas that the country needs can deliver in that area of the country. That's very important to us. We have challenges. We have challenges. Ecopetrol only cannot do it. We need a partner in here. Challenges in what sense? You mentioned something. Top-tier ESG strategy. That's fundamental. Your strategy of anticipating when you go into a new territory and what you're doing in there is something that we want to learn from. I think that's the right thing to do. If you are providing water, if you are providing energy to the area which you are accessing, that's about 50% chance of success that you are adding to your, to your initiatives.
That's something that we see that can create a lot of value in terms of not only adding to this relationship, but also with the communities that are close to our areas. Secondly, we need to use existing infrastructure. We understand that we have now a government that is gonna be hard in terms of issuing new environmental licenses. If we use existing infrastructure, we are not gonna run that risk. What we are building in here is ensuring that all the existing infrastructure that belongs to Ecopetrol or to the Ecopetrol Group is gonna be used to, first, make sure that we reduce the time to market in our projects. Second, also, that we ensure viability to our projects. That would be fundamental.
The third thing that we need to ensure in here is that we, of course, we need to clarify and try define exactly where is gonna be Parex, between, you know, some activities in which ones Ecopetrol will be kind of the operator, and that's something that will take time. One of the challenges for us is ensure that we try to deliver and get to the MOU execution and probably to contracts in the least time possible. That's something that we are looking at. I insist in terms of the importance of oil and gas. Katie already explained about gas. There will be a deficit, a shortage in the country, particularly around 2025, 2026. We have a great opportunity in here to fill. When we talk about light oil, what is happening?
We had a lot of expectation about unconventionals in Colombia. It's not gonna happen. It's not gonna happen. There is currently a movement in the Congress that to pass a law prohibiting unconventionals. Basically, it will be fracking. That's. Why? Because both refineries will need the light oil. To ensure that we have the right blend that goes to the markets, we need light oil. All the Piedemonte Foothills will provide us that.
Okay.
That's, that's the importance that this MOU have for Ecopetrol and for the country. That was all I wanted to share with you. Thank you for your time, and I'm open to any questions if you have.
Do you have time?
I still have some minutes, yes.
How many minutes do you have?
Let me check. Okay. We have like 15 minutes.
Who's organizing? We do it all together or we let Alberto?
Yeah. I think if there's any specific questions for Alberto, we could address right now.
Okay. Any questions?
Thanks. Excuse me. When you mentioned the uses of the existing infrastructure, is there enough in place that you don't really have to worry about that infrastructure challenge?
There will be some connections, some pipeline connections that we'll need to do. If you look at Gibraltar, in order to tie the Gibraltar to an existing oil pipeline, we'll need to probably build about a 25 km-30 km line. That's in one side. When you look here, Piedemonte, probably we will need separation, gas separation facilities at some point in an Ecopetrol facility and convert on existing oil pipeline into gas pipeline. There will be some changes. Probably, we will need to add some gas injection facilities in Ecopetrol existing infrastructure. That's right now what I believe. There will be also some transfer lines, connecting lines from the new assets. For example, Arantes to Piedemonte. Probably we will need to connect that.
If we want to connect Capachos to the Bicentenario pipeline, probably we will need to have, you know, do something in there. Arauca. Arauca is very close. There are a lot of advantages right now because the connecting lines are, when you look at our territory, the history is that we are able to build them without any problems. Also, we can use licensing restrictions or limitations to ensure that we can, you know, actually design the pipelines with a size that don't require a new license process.
Just one other question. What is the right blend that you're talking about with the oil? Because you need more light oil. What equivalent is it?
Okay. Light oil in. When I look at our needs and you talk about a period, a specific period, it will be 2028 beyond. It will be in one refinery as much as 110,000 barrels. Where I'm seeing this area providing some of them, but the other area is where you also have resources, which is the area close to the Barrancabermeja Refinery. What you call the Magdalena Middle Valley.
There are no more questions.
Let me thank you, Alberto.
Oh, thank you.
It's really always a pleasure to see you.
Thank you very much.
I just wanna highlight that part of our strategy and desire is to be a partner of first choice for Alberto and his wonderful company. We are much stronger together. Ecopetrol have fantastic acres, infrastructure, experience, and people work in that place. I'm as excited as you are.
Oh, we're very excited.
Thank you.
Thank you again for the invitation.
We'll break now for a couple of minutes to set up the place for Q&A and meet again.
Thank you. We're gonna close out our capital market today with question and answer session. If you have any questions and you're online, please submit them at investor.relations@parexresources.com. Thank you. We're happy to take some questions from the audience.
Jeff Lawson, . First question. I don't think I need a mic.
Make sure they're webcast.
All right. I need a mic. Thank you. First question. The MOU with Ecopetrol, that's awesome, but what do you think realistic timing is before you hammer out terms and you can actually progress some activities in the area?
Our objective is to get very quickly, I'd say, in the first half of the year to get the terms, all finalized. Make sense, Katie? We are already working some engineering works about connections, as you heard from Alberto, subsurface work together with our groups to look at potential targets. I think this is a process that will take time. Not big CapEx will be spent in the short term. It's a longer term horizon thing, but we can get very quickly some concrete description on this whole MOU. Wanna add to it?
Hi. Román Rossi from Canaccord. One question regarding the operations in Arauca. I know you have these issues, and historically we've seen a lot of issues with the pipelines there. What's the transportation and marketing strategy there, and how are you coping with these issues with security and social unrest?
I'll take that one. You know, I believe there is a peace process happening, some of the latest disruptions are probably, you know, the different factions trying to make a last attempt to be part of the negotiations table and how they get into those negotiations. So far we have been tracking all of our production there. We are now producing 10,000 barrels a day. We track it from Arauca into Casanare or into the system without any issues, unless when we have to suspend our operations. The Arauca field is already tied into the system. It's a very short connection. The good thing about the system is it works in two directions.
We can flow at times, you know, along Caño Limón to the coast, and at other times, the system can flow in the other direction. We still have tracking eventually. Our view, you know, Arauca is already tied in. That's our plan. We have alternatives to keep our oil flowing.
We did have a couple questions online. We're gonna go to a shareholder from the Netherlands. Will the focus on gas imply any limitations for your oil-related activities? To what extent does the Colombian government have any direct influence on this?
As far as our activities and our plans going forward, no, it's not changing our outlook on oil. Most of our targets are wet gas, and we are trying to produce both liquids and gas. I wouldn't say it's taking away, it's adding to it. As far as the influence of the government, Daniel, do you wanna comment on that?
I see it basically as an opportunity because it basically shares the agenda. It's part of that overlapping interests between, you know, an E&P company and the interests of the government. I don't see any negative side to dedicating resources to us. I think it's a huge opportunity. The country will need it. You've heard it from us, from Alberto. I see it as a huge opportunity.
Hi, Phil Skolnick from Eight Capital. How much of your approvals do you have in place? With respect to that three-year plan, and how much are you still waiting on?
We continuously file environmental licenses as we, if you are talking about environmental permitting, I guess, yes. We continuously file, you know, as we get new land, and we get an exploration plan. We prepare the license. We file it in. So far, I can tell you what has happened in the last few months. We obtained one license that we had applied for in normal times, so we haven't seen delays so far. The government has been very explicit about actually pushing operators to execute on existing contracts. In order to execute, we need our permitting in place. We continue filing them. One thing that I can tell you is we have
Over the past few years, we've learned a lot about filing licenses, understanding the regulators' expectations, and, you know, preparing documents up to them. Even we have been very proactive in making them more interactive so that the regulator has an easier time understanding what we are asking for. Initially, I think we're in good shape for that.
Maybe I can add to that. I mean, I've seen some responsible from the government who all, to my face said, [guess] there. "We want to help you get these licenses the same way or quicker than the past because we need that oil income for the country." I'm not aware about any place that's being blocked in terms of licenses. To the opposite, I would say, we managed to get some approvals in terms of injection, in terms of different way of looking at things, commingling, you name it, that people would have thought in the past were not easy to obtain. I've not seen that. We do our planning to apply for these licenses long in advance, we're not seeing any bottlenecks because of government action. They've seen all the shown all the positive signs of that.
Just a question from a Canadian shareholder. What is the plan for Parex to increase its share value so that its shareholders are seeing the gains in share prices that shareholders of Canadian oil and gas companies are seeing?
Well, I think the key factor for us will be actually to deliver on our plan. I think we've taken the steps so far this year to build that foundation, where now, as our press release demonstrates this morning, we've reached that 60,000 BOE per day milestone, we're building off that as we go forward.
I'll just add one thing. Mike, you had a good chart that showed, you know, our valuation versus our peers. You know, some of that is to do with, you know, what happened in the news with respect to the change in the government. There's always some uncertainty that goes with that. With tax reform now being certain, and we can model it, and we can show the implications to it. I think now shareholders can look at that and then look at the plan and go, "Okay, I can look at this plan and see if I like it or not, and not be worried about what could happen." I think I like that idea, the certainty now that this is signed and we're going forward. Part of having this investor day is to show the plan and show the certainty.
Another question, I believe from a retail shareholder. You know, the strategy of the company's recently changed from a lot of discipline to more growth and exploration, and that has had an impact on the multiple. You know, they're wondering, is the company still run for shareholders? Is this strategy the right way to take the company from discipline to more of a, you know, growth and exploration type company?
I'll start with that. Then I leave it to you to Ken to finish. If you look at the CapEx we're putting on Big E, in fact, it's not increasing, it's reducing. We have put adequate emphasis on growing the company and maintaining it through exploitation, which is what Eric talks about in terms of water floods, infrastructure, [guess], and getting the current fields to produce more. We are not betting the company on exploration. There's 10%-15% of our capital going to get exposure to upside. That's the history of the company. It's an exploration-driven company who started with exploration blocks. That being said, we're definitely not betting the company on exploration. I would argue we are even more disciplined than any time in terms of showing a roadmap of how we can keep delivering production to shareholders without depending on exploration. You wanna add to that, Ken?
Sure, Imad. You know, part of the answer to that question as well is return of capital shareholders, that's in our DNA. We've been doing it longer than any other company we can think of in a fulsome manner, not just, you know, a couple % here and there. We file for an NCIB, we buy back 10% of the stock, have done that four years in a row. We now are growing dividend, it's fundamental to our strategy is that return of capital piece. You know, as Imad said, the business was built on exploration and being successful. As Ian was talking about, there's a lot of opportunity there because there's opportunity when there's nobody else around you know.
If you think about SoCa, and for some of you Canadian analysts, O-WIP and SoCa is the Clearwater, Eric?
Yeah.
Yeah, pretty much. It's just us and our partner. We've got it all. You know, that's the type of opportunities we see this country still providing for us, and that's why we're here. That's why Imad said when he got here, he looked at it and said, "We've got to focus here." I hope that answers it.
Cody Kwong at Stifel FirstEnergy. I got a question for maybe the exploration team. You talked about the 15 high impact prospects. Then I saw something where in the slide deck that we said greater than 20,000 barrel a day type potential. Is that just on the 15? How would that look like when you throw in the 50 greater prospects that you have that if you risk all that?
Yeah. In terms of defining what that sort of high impact is, it was targeting around 20,000 barrels a day. The 15 prospects that we've identified, that's sort of their impact. Everything scales down from there, the rest of the way down the portfolio. We've got a b ig range of opportunities that exist that, you know, are not miles below that threshold. Yeah, we've got a long runway there.
Is that just a single prospect or is that like a full development?
No, no. That's that would be a prospect. That's right. Each one of those prospects, if you looked at them, all of them out, the likely production that would come out of them or sort of the mid case production would come out of them is around 20,000 barrels a day. That's what we used as a threshold. We have 15 of those within our portfolio in addition to the remainder of the prospects that we have with more to come on the existing acres we picked up.
That leads me to my next question. How much of your acres that you picked up over the last couple of years do you feel like you've reasonably evaluated? Are you 50%? Are you 75%?
That's a great question. I'd say, Evaluated in terms of having the prospects identified, is that what you're asking for?
Yes.
Yeah. I'd say we're probably around 60% of that acreage that's been evaluated. I mean, every block that we picked up, we had prospects on, and that's something that we've always done, is we see something and we go after it. Not a lot of trend acreage getting picked up here. We did make sure that when we picked up land on a play that we own the play. That was part of it. Yeah, no, most of the time when we picked up a block, it's got something already on it. In terms of shooting the seismic, there's still some time for that.
60% is identified leads, on the 2D, but you still have to shoot 3D on a lot of that.
I think that says it. Basically, before we got any of these prospects, we picked each of them in each block because we had something we liked on the existing seismic or 2D or no seismic or extension of existing fields we saw. When Ian says 60%, he still doesn't show the seismic. I think we're at the beginning of where we are. Basically, we managed to survive as a company and thrive for 12 years on a quarter of what we acquired just like six months ago.
Thank you very much. That concludes our capital markets day for 2022. We appreciate your participation, and if you have any questions, feel free to reach us. Thanks.