Everyone. I'd ask you to take your seats if you're in the room. Thank you for joining us, and welcome to the annual general and special meeting of shareholders of Parex Resources Inc. The meeting will now come to order. My name is Wayne Foo, and I am the Board Chair of Parex. With the approval of the meeting, I will also act as chair of the meeting.
This year's meeting is being held in a hybrid format to allow registered shareholders and duly appointed proxy holders to attend the meeting in person or virtually through the Lumi virtual shareholder meeting platform. Registered shareholders and duly appointed proxy holders attending virtually will be able to vote and submit questions and comments to the moderator to be read and addressed at the meeting. If you have a question or comment, please submit it through the Lumi virtual platform.
Questions related to the motions before the meeting may be addressed during the meeting. All other questions will only be addressed during the question period at the end of the meeting. I'd like to now introduce the other Directors who have joined us in person here today. I would ask that each Director stand when their name is called. Lynn Azar, Alberto Consuegra, Mona Jasinski, Jeff Lawson, Bob MacDougall, Glenn McNamara, Carmen Sylvain, and Imad Mohsen, Parex's President and Chief Executive Officer.
I'd also like to introduce the other executives of Parex in attendance today. Eric Furlan, Chief Operating Officer, Cameron Grainger, Chief Financial Officer, Mike Kruchten, Senior Vice President, Capital Markets and Corporate Planning, Josh Share, Senior Vice President, Corporate Services, Katie Bernard, Senior Vice President, New Ventures, and Daniel Ferreiro, President and Country Manager of Parex Colombia.
As this will be my final annual general meeting, I'd like to thank my fellow directors, management, and our shareholders for their continued support. It's with precursor company, it's been 23 years now and it's been a great ride. It's been a privilege to serve in this role and I'm confident that the company is well-positioned for continued success. I'm also pleased to welcome Glenn McNamara as incoming Chair, h is experience and leadership will serve the board and the company well.
I will ask Candace Herman to act as Secretary of the meeting and Nazim Nathoo of Odyssey Trust Company of Canada to act as Scrutineer of this meeting. That all business matters are covered within a reasonable period of time, we have prearranged movers and seconders for certain resolutions. This procedure is not intended to discourage participation, but rather to expedite proceedings.
After the formal business of the meeting, I will pause to address any questions submitted through the virtual portal, specifically those related to the AGM. We've previously mailed to the shareholders the meeting materials and financial statements of the company for the year ended December 31st, 2025, and the auditor's report thereon. I direct that copies of the documents mailed to the shareholders, along with the confirmation of mailing of such documents provided by Odyssey, be kept by the secretary with the minutes of the meeting.
Further, the reading of the notice of the meeting has been dispensed with. Pursuant to the bylaws of the company, business may be transacted at this meeting if not less than two holders are present, owning or representing by proxy 25% of the shares entitled to be voted at the meeting. The scrutineers' report has now been received and it shows that there is a quorum of shareholders present at the meeting. I declare that the meeting is regularly called and properly constituted for the transaction of business.
We will now conduct each vote by way of in-person ballot and by way of a vote cast on the Lumi virtual platform. I understand that the scrutineers have tabulated all the votes received prior to the voting cutoff. Thank you to our shareholders who have voted in advance. If you have previously voted, you do not need to vote again. By voting again, you will revoke any previous vote made prior to the voting cutoff.
I will now ask Odyssey to open the balloting for registered shareholders and duly appointed proxy holders voting on the Lumi virtual platform for all resolutions. The polls are now open. At this point, all registered shareholders and duly appointed proxy holders attending the meeting virtually that have properly logged in with their control numbers or username and who wish to vote will be able to see on their screen all motions being brought forth at this meeting.
These include a motion to terminate the meeting which will be enacted after the announcement of the voting results on the matters considered at the meeting. Please register your votes by selecting the for, against, or withheld buttons as applicable next to each of the resolutions. If you are attending the meeting in person, you should have completed your ballot when you entered the meeting. If you have not yet submitted your ballot, please provide it to the scrutineer now.
Details of the votes cast on all matters may be obtained from the secretary after the meeting. I direct that the scrutineers' report on all matters be annexed to the minutes of the meeting as a schedule. The first item of business is the presentation to shareholders of the financial statements of the company for the fiscal year ended December 31st, 2025, and the auditor's report thereon. A copy of the financial statements has been mailed to each registered shareholder and is also available on the Lumi dashboard page.
The next item of business is to fix the number of directors of the company to be elected at the meeting.
I move that the number of directors to be elected at the meeting be fixed at nine directors.
I second the motion.
Are there any questions from any registered shareholders or proxy holders? The next item of business is the election of directors.
I nominate Lynn Azar, Alberto Consuegra, Sigmund Cornelius, Mona Jasinski, Jeff Lawson, Bob MacDougall, Glenn McNamara, Imad Mohsen, and Carmen Sylvain as directors of the company to hold office until the next annual election of directors or until their successors are elected or appointed, subject to the provisions of the Business Corporations Act and the bylaws of the company.
I second the nominations.
Are there any questions from any registered shareholders or proxy holders? The next item of business is the appointment of auditors.
I move that PricewaterhouseCoopers LLP Chartered Professional Accountants be appointed auditors of the company until the next annual meeting or until their successors are appointed and that their remuneration as such be fixed by the board of directors.
I second the motion.
Are there any questions from any registered shareholders or proxy holders? The next item of business is the approval of unallocated options issuable under the company's stock option plan for a three-year period.
I move that the ordinary resolution, as set forth on page 24 of the information circular dated March 24th, 2026, approving all unallocated options under the company's stock option plan for a three-year period, be approved.
Motion.
Are there any questions from any registered shareholders or proxy holders? The next item of business is an advisory non-binding resolution on the company's approach to executive compensation described in the information circular of the company dated March 24th, 2026. Say on pay is not a requirement in Canada, t he Parex board of directors has made the decision to voluntarily put our compensation practices to a non-binding vote again this year.
I move that on an advisory basis and not to diminish the role and responsibilities of the board of directors of Parex, shareholders accept the company's approach to executive compensation as disclosed in the Statement of Executive Compensation section in the information circular of the company dated March 24th, 2026.
I second the motion.
Are there any questions from any registered shareholders or proxy holders? The final item of business is to arrange for the termination of the formal portion of the meeting following the announcement of the voting results on the matters considered at the meeting. May I have a motion that the formal portion of the meeting be terminated following the announcement of the voting results on the matters to be considered at this meeting?
Mr. Chair, I make that motion.
I second the motion.
As voting has been previously enabled for all motions on the Lumi Virtual Platform, if a shareholder attending virtually has not voted yet, please do so now. If you are attending the meeting in person, you should have completed your ballot when you entered the meeting. If you have not yet submitted your ballot, please provide it to the scrutineer now. I will pause briefly to allow final voting. Voting is now closed. The voting page on the Lumi Virtual Platform will now disappear, and your votes will automatically be submitted.
I will now pause to receive voting confirmation from the scrutineer. Thank you, Nat. I've been advised by the scrutineer that all resolutions have been approved by more than the requisite majority, therefore, I declare the resolutions carried. Details of the votes cast on each matter may be obtained from the secretary of the meeting. I direct that the results of the poll and the scrutineers' report be included with minutes of this meeting.
The results on the appointment of directors will be press released in accordance with the policies of the Toronto Stock Exchange. The results on all matters considered at this meeting will be disclosed in a report filed on Parex's profile on SEDAR+. I will now pause and address questions related to the matters of the AGM that have been submitted, if any. There being none, in adherence with the approved termination motion, I declare this meeting terminated.
Thank you to our registered shareholders and duly appointed proxy holders for joining us in person or virtually. That concludes the formal business of the meeting, I will now turn the meeting over to our Chief Executive Officer for a corporate strategy update.
Hello, everyone. It's an honor to thank Wayne for all the great things he's done for us. Wayne founded Parex. In fact, after he founded Petro Andina. Not many people discover oil, make multi-hundred million dollar or billion dollar companies twice. If you have time to discuss with Wayne all the other great things he's done before, you need to save like a couple of hours. There's amazing history of a man, h e had impact on all our lives in Parex.
But I would say also to have that positive impact on tens of thousands of people down in Colombia, that's fully in line with his values and that's a accomplishment of a man to say, "I look back at my life and I helped tens of thousands of people have much, much better life than otherwise." You can be very proud, Wayne. Thank you for that, I owe him a lot. My wife Micah is there. When I was interviewing for Parex, I told her, "They're never gonna take me. I don't know anybody in that board in Canada, and never worked in Colombia.
They just wanna have somebody with colors for the diversity slide the consultants give." Wayne saw something, w e had very similar values, including delivering excellence business-wise, but also having the stakeholders benefit from it. Somehow it clicked and somehow that was the first time he trusted me. I appreciate that faraway throw in the middle of COVID to someone sitting in Holland, yeah? There after that, at different points, he also would come to me and say, "Now that you passed this and that milestone, I can relax.
I trust you to run the company." Yesterday, he's like, "You run with it." Which has lots of weight, but that's the person Wayne is. When you're worried about joining a founder company, you're worried about being micromanaged, you're worried about history, you're worried about the interaction. I would say the interaction with Wayne as a Board Chair and the founder of Parex has been exemplary. I learned tons from him. He would be generous with advice, but very careful never to take away the accountability.
Thank you for that, Wayne. Wayne was Founder, Chair, and CEO. I wouldn't pretend that his shoes ever will be filled, but I'll do my best to continue that route. You chose your time, huh?
Thank you.
Yeah. You knew, like, the share price will be up there, and we'll double the company, of course, this week. Thank you so much, Wayne. There'll be more talk this afternoon when we have a small reception to say thank you to Wayne. Where are we now? I know we're careful here. We say positioned to, w e're the largest independent company in Colombia, yeah? We were the largest before the mergers and the two deals, and now we're just far largest. Largest in terms of value creation, not only production, not only market cap.
We have wonderful portfolio with growth run rate and fantastic exploration upside, as well as a track record of being fair to our shareholders and return of capital to them. That's while being good neighbors, while having good ESG track record where we leave the places better than we get into them t hat's how we think about stuff. If you ask me about the investment case for Parex, I would say if you look at many of the Canadian equivalents we have, they would deliver the first part.
Usually, good companies will have track record of value delivery on base assets. We aim for more than 15% annual shareholder return, probably much higher at these oil prices, but you cannot count on them forever. That's through 3%-5% base growth using proven technology and dividend and now repayment of debt. What distinguish Parex is we can do all that and spare enough capital to have a chance every year, I would say 50/50 to double the company by drilling transformational exploration prospects.
We shouldn't forget that Parex was built on exploration. The success, the cash flow, the uncertainty for the history, we discovered all that, and we want to keep doing it. This slide, the part of it which is probably a little bit repetitive because I've been showing that slide for four years. It's exactly the same slide about our strategy. Somebody told me a long time ago, a good strategy doesn't change every six months. The fact that we're maintaining the strategy is that it's proving that it's working for us.
One of the core things when we decided to focus on Colombia was that the technology used in country was still very much behind what you see in Europe and Northern America and Middle East, most of the mature areas in the world. There was lots of low-hanging fruit where experts in our company would say, "But why aren't we doing waterflood or horizontal?" God forbid a multilateral, w e're drilling the second one in the history of the country as we speak. Polymer flood surfactants, all that was really either rarity or nonexistent.
Given that the last year conventional oil and gas replaced reserves in the world was 1986. Last 50 years of reserves, additions and production came from what the things I just mentioned which is use of technology to increase recovery factor. This thing has proven itself over and over again. Physics doesn't stop at the borders of Colombia. We decided to learn, bring the expertise, the contracting capability, break the psychological barriers to try these things, and they paid off handsomely.
The second part of our strategy has to do with exploration. Some of it we put it into low risk, high payout exploration. Last couple of years, that's been working fantastically. The other part which also feeds into the gas strategy, where we saw upcoming shortage three, four years ago in gas in Colombia had to do with developing the VIM field which soon will be owning 100% of, and the foothill exploration, which is, I would say, the heartland of onshore gas in Colombia. This strategy still works.
In fact, it's been proven more and more necessary for the company. Good part of the reason why we did these two additional transaction is to have the base income, the base production to enable us to either deploy technology across a bigger base or to fund the exploration and other at-risk activities with less volatility for the company, t he strategy remains. I wanna give you small examples here. This is a field which is, we call Cabrestero because this is where the line of Llanos-34 block ends.
We operate at 100%. In 2021, the base black line was our internal forecast. We started doing waterflood that cost us $370 million and it paid off handsomely already since, increasing production to a peak of close to 15,000. The beauty of building a waterflood is when you tuck in polymer to it, adding another wedge of benefit t hat only cost us $10 million in capital and some OpEx. This is what technology does, t his is how the world replaced the reserves, and production worldwide.
You have that black line and suddenly you have the gray and green line coming. On the exploration side, we are by far the biggest landowner in Colombia on par with Ecopetrol, the state-owned company t hat's because we decided before the elections in 2022 to say, "Let's go and do a land grab." We did it at fantastic terms, at minimum terms, in fact, in terms of tax and commitment when everybody was worried about COVID. We spent the last three, four years maturing these prospects.
We had environmental impact assessment consultation with local communities, w e shot seismic, w e looked at the wiggly lines a lot, and we came up with a huge number of very good prospects. In fact, right now we are looking at 140 prospects and the funnel adds another 30-40 per year. Out of that funnel, we basically try to high-grade them and we end up with 20-30 drill-ready projects. How much do we drill on average? 7 or 8 out of the 30. That's one of the reasons why the we had potential for very, very accretive, very profitable projects.
With our capital limitations, we are capital constrained in an opportunity-rich, rich environment in Parex alone t hat's where the story starts of why do you wanna add, for example, Frontera assets to this. This is an example of the gas story I was telling you. Netback on gas today in Colombia is $11 or so per MMBtu for gas connected to pipe. When you track it, we get $9 at wellhead, u nthinkable for North America. That's because there's a shortage, and the shortage is not getting any better next two, three, four, five years.
The beauty here is we started talking to Ecopetrol about this, making evaluations years ago and we managed to agree basically to, through a couple of agreements, farm-ins, et cetera, to homogenize the whole foothill trend, except of that small area in the middle which was used to produce 450,000 barrel of liquids peak at 3 Bcf a day. We have with Ecopetrol the whole trend, 50/50. I like to be partner with the government because everybody has a stake.
They trusted us to operate which is a huge honor for a company the size of Parex's, 10x smaller than Ecopetrol. Because of the excellence of the people in terms of social access, drilling, and willingness to provide capital, exploration capital. We have agreement also to use existing infrastructure where, whether it's treatment facilities of pipelines to go straight to market. When I talk about the possibility to double the company overnight, yeah, any of these discoveries has the potential to add another Parex.
We will do that. We will do it in a paced way so that we don't have too much money at risk at any given year. As a percentage of the total, the bigger company we have now has less exposure by doing the same level of activities, because that fits the strategy. The way we look at things in terms of the lower risk up to the higher risk, we have now a very robust base, the cash cows, Llanos-34, Cabrestero, Capachos to some extent, Quifa, CPE-6, Magdalena.
These are fields that will last for decades, providing cash flow with minimum investment, w e invested a lot, in fact, already in these fields like Llanos-34, and capped reduced decline rate. The idea is you'll have relatively moderate or low decline fields delivering cash for a long time. Our shareholders are confident and comfortable we will pay them their dividend and also our bondholders get their interest, and we have the money to fund the business almost at any reasonable oil price.
On top of that, we have now built a good development inventory, part of it through the partnerships in Ecopetrol, like the Putumayo, Magdalena, part of it through the acquisition like CPE-6 and existing fields like Cabrestero or Vanoa, t hese are predictable infill wells, water floods, the type of technology I talked about before, polymer flood. We have the near field, the 30 drillable targets a year, t hese are looking really interesting because they make lots of money in terms of quick payback, good production.
These are not meant to replace long-term reserves, e very year they generate amazing amount of value. On top of that, there's the foothill transformational opportunities I talked about. We aim to drill one to two wells a year, call it 1/2 well a year, one rig, to have that exposure that option value to jump at any time that normal unconventional companies cannot do. If I look at the coming catalysts and I know it's a strategy presentation, but some of you here also care about the short term.
We need to close and integrate the transaction with Frontera. I dare say the hardest is behind us in terms of closing, and we need to go through the paper-papering of it. We need to progress some of the very promising discoveries we're having in small E, near field exploration. Get going on drilling in the Magdalena, where the timing of that will affect when we start to get half of the existing production which is significant, and get on with the development plan there.
That spot date for me is a catalyst. Drill the foothill well which we have high hopes for. There will be Colombian elections in June this year. The way I look at it is we work very well with the current left government and w e will keep working with, let's say, a successor if it stays on the left. If it does swing to the right and if you see some neighboring countries, that has a very positive effect on the share price. We're ready for both, and we'll take the upside on share price. What have we done with the Frontera acquisition?
Now we have much bigger company, much more stable base to that pyramid with the production coming from Frontera. We can deploy the technologies and the skills we've been investing in for the last few years in much bigger footprint. We have more running room, t here's more potential for capital allocation. Frontera had 1 million acres to our 6 million because they didn't get acres in the last 6 years which meant they had less choice on where to deploy their capital than we did.
You're merging an opportunity-rich company with capital constraint with another company which is opportunity-poor but very cash flow generate and t hat's the industrial logic for it. You get much stronger combination for the two. There's lots of synergies, s ome of it are tax, some of it are dilution of marketed oil, some of it are just G&A i f you think about the executive of Frontera staying with the mothership, and other areas. I would say there's synergy in terms of talent.
There are areas where Frontera are been doing best-in-class delivery. I would think about the operation performance, c ost of their horizontal drilling, for example, in Quifa is unequaled. There are areas where Frontera have things we would love to learn from. Many of these opportunities I was talking about need good people to run, n ow we're having much bigger pool to choose from. The value of the deal was already fantastic at $65 a barrel when we were evaluating it.
I would say given that the effective date of the transaction is January 1st, 2026 and that they are unhedged, a little bit of luck doesn't hurt. With today's oil price, this is beyond good for our shareholders. I can say that they voted already for the deal like two weeks ago. The whole combination will create, I believe, very sustainable shareholder returns. I would say similar story in the Magdalena. The question I got from analysts was, why did they even do that?
Because if you look at the numbers, we are getting access to huge in-place volumes, more than 3 billion barrels where we can use technology. We pay $125 million carry capital, we get half of 15,000 barrels a day of production and production income. Basically, that should more than pay for the $125 million carry capital over five years that we're committing to. The logic here is we sat down with Ecopetrol, and we looked for a win-win. The reality is this, these fields were not high on their priority in terms of capital deployment.
The do-nothing case would have led over three, four, five years to, especially when we were talking about the deal at $65 to the wells not being economic. The projects and specific technologies we committed to deploying on these fields would generate a growing production which means higher per barrel margin which means more benefit for both companies and job security for the people working there. They calculated they'd rather have 50% of a growing production over 20 years than 100% of declining production over 3 or 5.
Financially, this makes fantastic sense for us. Of course, with the oil price jumping the way they did, it became even more so. The idea here is to benefit our partner, the stakeholders in both assets, and our shareholders, that was the basis for this deal. We are joined at the hip with Ecopetrol, but the reality is all of Colombia is joined at the hip with Ecopetrol.
I don't see more company risk being close to Ecopetrol than operating in Colombia. Ecopetrol is Colombia. We are working with them, and now, as I mentioned, in the Magdalena, but we have a long history of operating in Los Llanos and Capachos, where we're producing 8,500 barrels a day gross and where they, a year or two ago, extended our lease there by 15 years.
The Putumayo is extremely promising area where we are deploying technology and capital and we think that will be one of the areas where we will have a stable, predictable set of development opportunities that the new scale of the company would require, campaign drilling, campaign developments, and the footers that I mentioned before, that good part of the country's politicians, its industry is looking at as the solution, the potential solution to the gas crisis in the country.
At the time of the acquisition, our valuation was $33,000 per barrel flowing. $20,000 was what we paid for Frontera EV, and $16,000 for the Magdalena. Of course, with the oil price going up, our valuation is probably north of $40 today. The other two numbers didn't move. Probably, I'd say the Frontera number net of what they'll make until closing is going down over time. This is beyond accretive, I think the timing of it will help all Parex shareholders. It completely changes the size of Parex.
It's a new company today. It's double the company it used to be with lots of upside inventory, we have ways to invest the cash while returning more so I would say through debt payment to shareholders than we ever did before. If you look at the history of Parex, we had a first phase which was dark result of exploration success. Yeah, i t was a growth phase. First, some smaller fields in Llanos-34 trend, and Cabrestero.
This golden age made lots of profit to the people who invested early in the company. Came the second phase where the challenge was, how do you deal with the decline of the biggest field in Parex that was responsible for more than 80% of the cash flow and three quarters of the production, yeah, if you add Llanos-34 and Cab. There was lots of doubt there that Parex will follow the same route and other companies that would just fail to replace that big field and become half what they are.
Now, the strategy I mentioned before, which was let's use technology, drill horizontals over water, use waterflood, reduce decline, become our own mainly operated company, t hat was that phase. We were learning while doing, running behind the decline at 30% a year, while finding other opportunities to do. I remember the fear in eyes of Daniel when I told him our capital on operated fields will multiply by a factor of four. Get your access social execution people ready, because that's what it takes, yeah? People jumped to the challenge.
Over that period, we managed to stabilize the company, replace all production and reserves, distribute $1.5 billion to the shareholders through buybacks and through dividend, while building the capability of the company that's sustainable in the future and that could take on the two acquisitions today. That period, combined with the two transactions is putting us at phase III, a new beginning. I'm glad to be here today at that point where we the sky is the limit for Parex's.
This is how we compare in terms of the compare to oil producers. The first set of numbers is our competitors in Colombia. We didn't wanna be mean, so we didn't put the market cap, just the production numbers. You can see we became by far the force to reckon with in Colombia when it comes to public-private partnership in developing oil and gas. To the right you see how we compare to the oil-weighted companies, I'm talking about mid-cap producers on Toronto Stock Exchange.
Again, we are becoming much more relevant as a company on the TSX. Mike would also try to put us on the Colombian secondary listing to get access to the funds allocated capital there. Yeah, it's good to be relevant, w ith our market cap today we'll be the 4th biggest company in Colombia. It took lots of work of lots of people in this room to close these transactions, to work them midnight and beyond.
People knew the value of urgency, given the political environment, the oil prices going up, and just to make sure these things close before anybody changes their mind. Once you close the transaction and you think, "Okay, now we can breathe," the real work starts. We have to keep optimizing the base business which is much bigger, integrate the companies without losing value. We wanna get the best of all these companies, all these assets, is and not just duplicate Parex's or triplicate Parex's. We wanna have one plus one plus one equals six.
We'll continue the high impact to us in the foothills and d iscipline capital allocation which I had mentioned before was the rationale for some of these deals. We don't like debt at Parex's, yeah, you'll see the debt in that we accumulated to buy Frontera reduced very quickly in the next few years. It is a new chapter, w e're all excited about it. The value proposition doesn't change.
It's a company where you are paid to wait, making very decent return, and on the base predictable part of the portfolio, but also has a promise of repeating the first growth spur you saw in Parex's history at any point in time. The best time to buy is just one week before we announce that discovery. Thank you. Mr. Chairman, do you wanna?
Sure. One final, Oh. You have the microphone. Yeah. You know, I think Imad gave a fairly comprehensive discussion there, but what I like about the story is the part where we go from discovery to distributions, and now we have both. That's great, l ove it. There are a couple of people who've wandered in that I see familiar faces, I'd just like to acknowledge one of them. Glenn Russell came in and is sitting at the far end of the room. Glen was the first chair of PetroAndina, so if you wanna look for long service, he's my rival.
Glen said, when we started the company, he used to run with a Mark Twain quote, and he'd said, "There's a time in every boy's life when you should go and explore for treasure." The treasure hunt is Glen, when you looked at the slide, the treasure was there. Thank you for your help at the start and all of you who came along the way. I hope that I have a chance later in the day or here to just meet with you and express appreciation for your support. Thank you, I think that's it. Is it? With no questions, off we go.