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Price: CA$19.81
Discount category: Well below intrinsic value
Intrinsic value source: AI estimate
Next earnings: 2027-02-06
Next earnings is estimate: Yes
Company name: Parex Resources
Sector: Oil & gas exploration & production
About: Parex Resources finds and produces crude oil and natural gas in Colombia. Most of its production is heavy and medium crude oil from the Llanos basin. It also has fields in the Magdalena and Putumayo basins. On June 1, 2026, Parex bought all of the Colombian oil and gas business of Frontera Energy for US$500 million in cash and took on its debt. After this purchase, Parex says that it is the largest independent oil and gas producer in Colombia. Production was 83,264 barrels of oil equivalent a day in Q3 2026, against 43,953 a year earlier. From late October 2026, Parex also gets 50% of the production of the Casabe and Llanito blocks of Ecopetrol, the Colombian state oil company, in exchange for a capital program. Its head office is in Calgary, Canada. It reports in US dollars, and its shares trade in Canadian dollars on the Toronto Stock Exchange. It pays a quarterly dividend of CA$0.385 per share.
Thesis: The market prices Parex for Colombian country risk, for higher costs and for the new debt from the Frontera purchase. On November 6, 2026, Parex cut its H2 2026 guidance for funds flow from operations to US$435 million to US$450 million, from US$475 million to US$525 million, although it now assumes a higher Brent price. The company gave three reasons: wider price differentials for Colombian crude, higher diesel, diluent and power costs, and a stronger Colombian peso. The shares fell about 16% on the day of this release. Net debt was US$911 million at September 30, 2026, against almost none a year earlier. The intrinsic value on this page is an AI estimate from the company's reserves reports, so it depends on the reserves and on long-term oil prices. For the gap to close, three things must be true. Cash margins must recover as differentials and energy costs return to normal, so that the funds flow netback goes back to about US$30 per barrel of oil equivalent. The Frontera synergies must reach the more than US$20 million to US$50 million a year that management expects for 2027. Free funds flow must reduce net debt while production stays near 86,500 barrels of oil equivalent a day. The evidence arrives with the capital markets day on December 9, 2026, which can give the 2027 plan, with the full-year 2026 results and year-end reserves in early 2027, and with the VIM-1 gas pipeline, planned for mid-2027. If these tests pass, the gap can close over four to six quarters. If oil prices fall and costs stay high, the debt leaves less value for shareholders, and the gap will probably stay.
Valuation: The intrinsic value on this page for Parex is an AI estimate from November 6, 2026. It is not an analyst's value. An AI research agent calculated it from Parex's filings. The method is a net asset value: the after-tax value of the oil and gas reserves less net debt, divided by the number of shares. The intrinsic value is a weighted average of three cases, with weights of 25%, 50% and 25%. These weights are an assumption. For the Parex assets that it owned before 2026, the estimate uses the after-tax net present values of the GLJ reserves report with an effective date of December 31, 2025, from the Annual Information Form of March 3, 2026. GLJ used its January 1, 2026 price forecast, with Brent at US$63.25 a barrel in 2026 and US$70.00 in 2027, rising to US$85.95 in 2035. The low case uses proved reserves discounted at 15% a year, US$1,760 million. The middle case uses proved plus probable reserves discounted at 15% a year, US$2,405 million. The high case uses proved plus probable reserves discounted at 10% a year, US$2,871 million. The discount rate of 15% is an assumption for Colombian country risk. Parex has not published an after-tax present value for the Frontera assets, so the estimate uses the enterprise value of about US$725 million that Parex agreed to pay on March 10, 2026, as an assumption for their value in the high case. The low and middle cases reduce it in the same ratio as the Parex values. The estimate gives no value to the Casabe and Llanito blocks, because Parex must still pay US$125 million of capital for Ecopetrol's share there. Net debt is US$911.4 million at September 30, 2026, from the Q3 2026 MD&A, and includes the notes, the bank debt and a working capital deficit. The estimate assumes that the change in the reserves value from January to September 2026 is about equal to the cash that these reserves made in that time. The shares are the 96.26 million outstanding on November 5, 2026. The three cases give about US$13.44, US$21.83 and US$27.89 per share, or CA$18.81, CA$30.56 and CA$39.04 at 1.40 Canadian dollars per US dollar. This exchange rate is an assumption near the rate of early November 2026. The weighted average is about CA$29.70. The reserves values are older than the higher costs of 2026. Production expense was US$22.13 per barrel of oil equivalent in Q3 2026, against US$13.88 in 2025, and the company now expects a Vasconia differential of US$8 to US$12 a barrel in H2 2026, against US$4 in May 2026. The low case is the main allowance for these costs. Parex sells crude oil at prices linked to Brent, so it cannot set its prices, and buyers can get the same crude oil from other producers. Its rights to explore and produce are contracts with the National Hydrocarbons Agency and Ecopetrol that have end dates, and the Quifa contract needs an extension. Over the three years to 2025, the finding and development cost of proved plus probable reserves was US$71.00 per barrel of oil equivalent, against an operating netback of US$35.52 in 2025, and production costs rose in 2026. So the filings do not show a cost advantage or another advantage that can last for many years. As of 2026-11-06.
Risks: Cash flow depends on the oil price. Parex sells its crude oil at prices linked to Brent, so a fall in Brent lowers cash flow and slows the reduction of debt. Costs rose in 2026. Production expense was US$22.13 per barrel of oil equivalent in Q3 2026, against US$13.88 in 2025, and the Vasconia differential widened. If costs and differentials do not return to normal, cash flow stays lower. All of the production is in Colombia. Colombia changes its tax rules often, and oil producers can pay income tax surcharges of about 5% to 15% that depend on oil prices. New taxes, royalties or permit rules can lower the value of the reserves. Debt rose with the Frontera purchase. Parex has US$810 million of unsecured notes, and the US$310 million of notes due June 2028 must be repaid or refinanced. Quifa is the largest Frontera area by reserves, and its contract with Ecopetrol needs an extension. Without it, part of the purchased reserves can be lost. Parex plans expensive exploration wells in the Llanos Foothills, and it plans to start the first one, Piedemonte, before the end of 2026. Dry wells would use cash without adding reserves. Parex reports in US dollars, but its shares and dividend are in Canadian dollars, and most local costs are in Colombian pesos. Changes in exchange rates change its costs and the value of its earnings in Canadian dollars.
Balance sheet: Cash: $143M Debt: $893M Net debt: $750M EBITDA, last 12 months: $691M Net debt / EBITDA: 1.1× (low) Undrawn credit line: $158M, to May 2028 Last debt due: 2031 Parex funds itself mainly with two issues of senior unsecured notes and a secured bank credit facility. All amounts are in US dollars. Debt is the principal of the notes and the bank facility, and it excludes leases. At September 30, 2026, debt was US$500 million of 8.50% notes due May 2031, which paid for Frontera, US$310 million of 7.875% notes due June 2028, which came with Frontera, and US$82.5 million drawn on the bank facility. The company's own net debt, which also counts a working capital deficit of US$36.0 million, was US$911.4 million, against US$5.0 million at December 31, 2025. EBITDA is adjusted EBITDA for the 12 months to September 30, 2026, a calculation from the Q4 2025 and nine-month 2026 figures. It includes Frontera only from June 1, 2026, so it is lower than the EBITDA of a full year of the larger company. The bank facility has a borrowing base of US$240 million, is secured by the Colombian assets and matures on May 31, 2028, with its next review in May 2027. Its covenants limit total funded debt to 3.5 times adjusted EBITDA, and Parex met all of its covenants. Parex ended a Frontera crude oil supply agreement with Chevron, and it must settle the prepayment under it, US$75.6 million at September 30, 2026, by January 13, 2027. Parex also holds GeoPark shares with a fair value of US$63.6 million, and it has US$359.2 million of decommissioning and environmental liabilities. The company discloses no credit rating. Free funds flow after the dividend must reduce the debt before the 2028 notes are due. As of 2026-09-30.
Checkpoints: Dec 9, 2026: Capital markets day: 2027 plan. Pending. Watch: A 2027 plan with production at or above the H2 2026 range, lower costs per barrel and a clear path to lower net debt passes; lower production or higher spending with no debt reduction fails. Dec 2026 (estimate): Piedemonte Foothills exploration well spud. Pending. Watch: A spud before the end of 2026, as planned, passes; a delay into 2027 fails. Feb 6, 2027 (estimate): Full year 2026 results and year-end reserves. Pending. Watch: A funds flow netback near US$30 per barrel of oil equivalent at similar Brent prices, lower net debt and reserves that replace production pass; costs still near US$22 per barrel of oil equivalent or higher net debt fail. Jun 2027 (estimate): Quifa contract extension with Ecopetrol. Pending. Watch: An agreement to extend the Quifa Association Contract within 12 months of the June 1, 2026 closing passes; no agreement by then fails. Jun 2027 (estimate): VIM-1 gas export pipeline in service. Pending. Watch: Gas sales of up to 25 million cubic feet a day that start by mid-2027 pass; a delay past 2027 fails.
Recent events: 2026-11-06: Parex reported Q3 2026 results. Production rose to 83,264 barrels of oil equivalent a day, from 54,121 in Q2 2026, because Q3 was the first full quarter with the Frontera assets. Net income was US$75.3 million, or US$0.78 per share. Funds flow from operations was US$196.3 million, capital expenditures were US$161.8 million and free funds flow was US$34.6 million. The funds flow netback was US$26.33 per barrel of oil equivalent at an average Brent price of US$91.29. Parex declared a Q4 2026 dividend of CA$0.385 per share. 2026-11-06: Parex changed its H2 2026 guidance. It narrowed production to 85,500 to 87,500 barrels of oil equivalent a day and cut funds flow from operations to US$435 million to US$450 million, from US$475 million to US$525 million, at a Brent price of US$95 instead of US$90. It raised capital expenditures to US$285 million to US$315 million, so free funds flow falls to about US$140 million, from about US$215 million. It now expects a Vasconia differential of US$8 to US$12 a barrel, against US$4, and production expense of US$22 to US$23 per barrel of oil equivalent, against US$16 to US$20. The shares fell about 16% that day. 2026-11-06: Parex said that it expects Frontera synergies in 2027 of more than the US$20 million to US$50 million a year that it gave before. In late October 2026, it started to get 50% of about 14,000 barrels a day of oil from the Casabe and Llanito blocks. A well at VIM-1 tested at about 6,600 barrels of oil equivalent a day, and a gas export pipeline for up to 25 million cubic feet of gas a day is planned for mid-2027. Parex will hold a capital markets day on December 9, 2026. 2026-10-08: Parex said that preliminary Q3 2026 production was 83,259 barrels of oil equivalent a day and that it will report Q3 results on November 6, 2026. 2026-07-30: Parex reported Q2 2026 results and new GLJ reserves reports for the Frontera assets and the Casabe and Llanito blocks. Together with the Parex reserves at December 31, 2025, proved plus probable reserves are 305.5 million barrels of oil equivalent, 71% more than the Parex reserves alone. The Casabe and Llanito agreement closed on July 29, 2026, with all regulatory approvals. 2026-06-01: Parex completed the purchase of Frontera Energy's Colombian oil and gas business for US$500 million in cash. It took on Frontera's US$310 million of 7.875% notes due 2028 and a US$80 million crude oil prepayment from Chevron. A further US$25 million is payable if the Quifa contract with Ecopetrol is extended within 12 months. 2026-05-11: Parex sold US$500 million of 8.50% senior unsecured notes due May 11, 2031, to pay for the Frontera purchase. 2026-05-04: Parex agreed with Ecopetrol to get 50% of the production of the Casabe and Llanito blocks. In exchange, it commits to a gross capital program of US$250 million over five years, of which US$125 million is capital that Parex pays for Ecopetrol's share. 2026-03-10: Parex agreed to buy Frontera Energy's Colombian oil and gas business after Frontera ended an earlier agreement with GeoPark. Parex gave the enterprise value of the deal as about US$725 million. 2026-03-04: Parex reported 2025 results. Production was 44,701 barrels of oil equivalent a day, funds flow from operations was US$455 million and free funds flow was US$145 million. Proved plus probable reserves rose to 178.2 million barrels of oil equivalent at December 31, 2025.