AGM 2022

May 12, 2022

Slides

Hello, and welcome to the Annual General and Special Meeting of the shareholders of Parex Resources Inc. Please note that today's meeting is being recorded. During the meeting, we'll have a question and answer session in relation to the business of the AGM. You can submit questions or comments at any time by clicking on the message icon. At the conclusion of the normal business of the meeting, Mr. Imad Mohsen, Parex President and CEO, will provide corporate presentation and conduct an additional question and answer session. It is now my pleasure to turn today's meeting over to the Board Chair of Parex Resources Inc., Wayne Foo. Mr. Foo, the floor is yours. Thank you, operator. Good morning, everyone. Thank you for joining us, and welcome to the Annual General and Special Meeting of common shareholders of Parex Resources Inc. The meeting will now come to order. My name is Wayne Foo, and I'm the Board Chair of Parex. With the approval of the meeting, I will also act as Chair of the meeting. The meeting is being hosted on the Computershare virtual shareholder meeting platform. This allows registered shareholders and duly appointed proxy holders 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 system. Questions directly 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 will ask Bruce Alford to serve as Secretary of the meeting and Donald Santini of Computershare Trust Company of Canada to act as Scrutineer of this meeting. In order that the meeting covers all of the business for which it was convened within a reasonable period of time, we have prearranged with certain people to move and second certain resolutions. This procedure is not an attempt to discourage participation, but merely a way to expedite proceedings. In addition to Mr. Santini and Mr. Alford, Mr. Imad Mohsen, President and CEO, Mr. Kenneth Pinsky, the CFO and Corporate Secretary, and Mr. Mike Kruchten, Senior Vice President of Capital Markets and Corporate Planning, are joining me at the virtual head table for the meeting. As mentioned by the operator, at the conclusion of the normal business of the meeting, I will call upon Mr. Mohsen to provide a corporate presentation and conduct an additional Q&A session. We have previously mailed to the shareholders the meeting materials and the financial statements of the Company for the year ended December 31st, 2021, and the auditor's report thereon. I direct that copies of the documents mailed to shareholders, along with confirmation of mailing of such documents provided by Computershare, be kept by the Secretary with the minutes of this 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 Scrutineer's 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 conduct each vote by way of vote cast on the Computershare platform and those submitted by proxy. Registered shareholders and duly appointed proxy holders will be asked to vote on each business item after the presentation of all business items. When you are asked to vote, you will receive a message on the Computershare virtual interface requesting you to register your votes. You will have only a certain amount of time to do so when the polls are open. Please note that while the Computershare system permits voting by registered shareholders and duly appointed proxy holders, you should not use this feature to vote if you have already submitted a proxy, as it will automatically cause your prior vote to be revoked. Particulars of the votes cast on all matters may be obtained from the Secretary after the meeting. I direct that the Scrutineer's report on all matters be annexed to the minutes of the meeting as a schedule. The first item of business is the presentation to the shareholders of the financial statements of the company for the fiscal year ended December 31st, 2021, and the Auditors' report thereon. A copy of the financial statements have been mailed to each registered shareholder, with a copy also located on the Computershare 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. As previously noted, voting on this resolution will be conducted on the Computershare virtual platform once all of the motions for matters to be considered at the meeting have been made and seconded. The next item of business is the election of Directors. I nominate Lisa Colnett, Sigmund Cornelius, Robert Engbloom, Wayne Foo, Bob MacDougall, Glenn McNamara, Imad Mohsen, Carmen Sylvain, and Paul Wright 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 (Alberta) and the bylaws of the company. I second the nominations. Again, as previously noted, voting on this resolution will be conducted on the Computershare virtual platform once all of the motions for matters to be considered at the meeting have been made and seconded. 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. As previously noted, voting on this resolution will be conducted on the Computershare virtual platform once all of the motions for matters to be considered at the meeting have been made and seconded. 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 30th, 2022. Say on pay is not a requirement in Canada, but the 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 Management Information Circular of the company, dated March 30th, 2022. I second the motion. Again, as previously noted, voting on this resolution will be conducted on the Computershare virtual platform once all of the motions for matters to be considered at the meeting have been made and seconded. 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 this 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 the meeting? Mr. Chair, I make that motion. I second the motion. As previously noted, voting on this resolution will be conducted on the Computershare virtual platform. Are there any questions on any of the motions from any registered shareholders or duly appointed proxy holders? I see none. I will now ask Computershare to open the balloting to registered holders and duly appointed proxy holders. The polls are now open. At this point, all registered holders and duly appointed proxy holders who have properly logged in with their control numbers or username and who wish to vote will be able to see on the screen all motions being brought forth at this meeting, including a motion to terminate the meeting, which will be enacted after the announcement of the voting results on the matters considered at this meeting. The polls will be open for approximately one minute. Please register your votes by selecting the for, against, or withheld buttons, as applicable, next to each of the resolutions. We will provide registered shareholders and duly appointed proxy holders approximately 30 more seconds to complete the electronic ballots. The polls are now closed. The voting page will now disappear, and your votes will automatically be submitted. I would ask that the Scrutineer compile a report regarding the results of voting on all business matters. I have been advised by the Scrutineer that the ballots and proxies deposited for the meeting have been voted more than 50% in favor of all resolutions. Therefore, I declare all of the resolutions carried. I direct that the results of the poll be included with the minutes of this meeting. The results on the appointment of directors will be press released in accordance with the policies of the TSX, and the results on all matters considered at this meeting will be disclosed in a report filed on Parex's profile on SEDAR. In adherence to the approved termination motion, I declare this meeting terminated. With the formal portion of the Annual Meeting complete, I would now like to invite Mr. Mohsen to provide our corporate presentation, which will be followed by a Q&A session. Mr. Mohsen. Thank you very much, Wayne. We'll start this presentation with sharing with you our vision. It is about profitably growing our production up to 100,000 barrels per day. The base production will grow at approximately 5% a year from our tried and tested Llanos acreage. Please note this is all operated growth. There is also a step change expected to come from our exploitation and exploration activities. We are big believers in applying proven technology that is new to Colombia to unlock our substantial discovered resources in place. As I indicated to you before, our strategy is to solely focus on Colombia. We have their top product quality assets. We have the means to develop them profitably. We are industry leading when it comes to returning capital to shareholders. All that while being a top quartile ESG performer. What happened 2021? As for our earlier guidance, we substantially grew production. You can see the numbers, 15% from beginning to end of 2021. We also quadrupled our asset base through an exceptionally successful bid round for Parex while expanding our strategic partnership with Ecopetrol as a first-choice partner, which gave us access to the highly prospective Arauca and LL-38 blocks. Now, in the current cycle, we are generating record fund flow and returning cash to shareholders. We are doing all that while making a difference for our Colombian hosts and neighbors in places we operate. We try to be a little bit countercyclical. We've been talking for a while about being a first mover and taking that advantage and positioning ourselves for the cycle when it hits. We are there. We grew our land base. We secured all the rigs we need for our program at fixed rates, cut long leads, and increased the capability and the numbers of our teams in Canada and Colombia. All this allows us to execute our program unhindered in an environment of less than 4% inflation in 2022 for Barrick. We also shared with you that we will stick to a capital allocation framework, which is returning at least a third of our free funds from operations to the shareholders. So we're anchoring on that through 10% buyback and increasing dividend to $1 per share Canadian on a full-year basis. We're also putting our capital to good use as foundation for 2023 and beyond. We're also being opportunistic. We're pursuing short-cycled projects that deliver... I've been told I cannot say spitting out cash. A windfall of cash. This graph shows both the production progression in line with the capital deployment. You can see when I joined Parex, we were in the low 40s for production. We think we have deployed cash in a wise and productive way. We are now capturing the full potential of the portfolio. We reaped out the rewards of the pre-investment we made, with a clear correlation between the times we added funds and production growth. We think we have a very large portfolio of projects to come. To give you an example, the short cycle projects we looked at were only focused on less than 20% of our portfolio. By exiting above 60,000 barrels per day, we are setting ourselves up to be a much stronger company in 2023 and beyond. If you look at the track record, what makes Parex unique, it's one of the few companies that can manage to deliver a very strong absolute growth and returns on every metric, be it production or reserves or cash flow, strong balance sheet, but also managing to reduce its share count through buyback and non-dilutive SIB programs. The result of that, you can see in the free funds from operations, cash per share, which we believe is the best correlation to the long-term value of the company. The numbers are outstanding and exceed what you'd expect based on Brent prices alone. The combination of production growth resulting in cash flow growth, doing that in a prudent manner in terms of capital deployment, allows us to consistently increase our return of capital to shareholders. We supplemented that this year with 4% cash dividend yield or above 4% at today's prices. These numbers add up. We are now returning more than CAD 1 billion return since 2017. I did promise you that if we are producing hydrocarbons, we'll do it the best way we can, the best possible way. We are being now acknowledged to be top quartile ESG company performers. We are always aiming to improve on that. As key takeaways, I'd like you to know that we are focused on unlocking our exceptional assets portfolio in Colombia through technology and exploration. We do have a first-mover advantage. We have exceptional acres to explore. We secured rigs, we secured long-lead items. We strengthened our teams. We got ready for this moment. If you look at the forecast for this year, the guidance will deliver year-over-year absolute production growth of 17%, which is close to a 30% per-share basis growth. We also repurchased 50 million shares since 2017, doubling the dividend to CAD 1 per share annually. We are a top ESG performer with ambition to become one of the least greenhouse gas-intensive oil and gas E&P companies. Thank you. We got more questions. Any questions? Yes, there is one question. I can see a question here. What will change for Parex Resources should Gustavo Petro become Colombia's next president after the summer's election? For people who don't know, in Colombia, which is a strong democracy, Mr. Petro, who is left-leaning and indicated that he will stop new exploration contracts, is one of the potential leading parties to win the election. What will change for Parex? This is not our first election in Colombia. We've got three or four of them. There are things we can control. We did take a preemptive move by securing 18 new contracts of the ones that will not be awarded. No other company can pretend to have so much running room like we do. We think we are a force for good for Colombia, where we operate, whether it's in the projects we do, the employment, the cash and taxes we pay to the government, and the effect we create in terms of social projects in places that Candidate Petro also holds dear to himself. All in all, elections in Colombia are one term, and we think we will be able to thrive regardless of the election outcome. No other questions at this time. You can throw it back to the Operator. Thank you, Operator. Thank you, Operator. Over to you. Thank you. This concludes the meeting. You may now disconnect.