Parex Resources, an energy company operating in Colombia and T&T but headquartered in Calgary, more than quintupled its net income on its Colombia production, and expects even “larger deposits” in Trinidad, country manager Brian Lynam told the Business Guardian last Thursday. The company generated net income of US$27.3 million during the first three months of 2012, a 510 per cent increase over the previous quarter. Second-quarter results are expected in two weeks. Explaining the dramatic increase in net income, Lynam said, “Those income numbers are coming out of our Colombian operations where we’ve been producing significant production for the last year.” While ongoing testing in Trinidad is showing positive signs, Parex produces only in Colombia at the moment. In the first three months of 2012, Parex achieved quarterly oil production of 11,679 barrels of oil per day (bopd), compared to 11,342 bopd for the fourth quarter of 2011. The company’s exit rate at the end of 2011 in Colombia was circa 14,000 barrels per day.
Quarterly, Colombian oil sales fetched an average sales price of US$116.90 per barrel. The company sells its oil production with a Brent reference price. Asked which between Trinidad and Colombia is larger, Lynam said, “In Colombia, we knew that the production there has its high-rate wells but they kind of decline quickly. So you get on a bit of a treadmill, and we were successful in our exploration programme there, and it gave us the ability to chase that with subsequent development wells.”
The Parex executive said the company has the ability in Colombia to get production going quite quickly, and that the time a well is drilled to getting it onstream is a matter of months not years. “So what we’ve gotten into is a programme of development drilling following our exploration success there and as a result of that success, we went and committed acquisition of a company in Colombia to keep that going, and the plan was that we knew that in Trinidad, we were exploring for much larger reserve sizes and we knew that it would take a bit longer to get the wells in production, so we’re looking for larger deposits here.” Parex operates the onshore Central Range Deep and Shallow Blocks that extend from the west to the east coast of central Trinidad. Parex is partnered with Niko Resources Ltd and Petrotrin on this block. Niko and Parex each have a 50 per cent working interest in the block. Petrotrin is the state-owned petroleum company that stands to benefit from the production-sharing contract. Parex’s Central Range Block commitments include an extensive 2D seismic programme; a 3D seismic programme and to drill three exploration wells; annual considerations include commitments to a number of scholarships at the University of West Indies and the University of Trinidad & Tobago. To date, Parex has completed the 2D seismic programme and drilled two of the three commitment wells, Cribo 1 and Mapepire 1, both relatively “near” Princes Town. The wells in the Central Range Block are named after local snakes. “Unfortunately, they were not successful but we learnt something from the operations and the drilling of them, but we didn’t find economic accumulations of oil.
“The Central Range block is split into two production-sharing contracts (PSC), a deep and a shallow. So those two shallow wells were part of the shallow commitment that we had, and then there is the deep drill commitment that we haven’t yet drilled. So that would be the deep target that we had planned for this year, but we had made a proposal to the ministry that we would drill an additional deep well, two deep wells, instead of doing some seismic, and the Ministry of Energy disagreed with us. It’s within the PSC that we have a 3D seismic commitment, and so what we propose to do was to do a 2D seismic programme to meet the seismic commitment for the PSC, and as a result of that, we will do the seismic first before we drill the deep well. We’re preparing to do seismic over the next six to eight months, and then based on that information we will choose a deep location to drill.” Asked by when he expects to see first production in Trinidad, Lyman said: “In the Central Range block, we won’t see production until for the earliest, late 2013 and that would be test production if anything and to build infrastructure would take an additional CEC (Certificate of Environmental Clearance) application through the EMA (Environmental Management Authority), which is a much more rigorous process to get the pipelines, and then we’d have to build the pipelines if we’re successful. That’s just on the Central Range block.
In its first-quarter 2012 report, Parex told investors, “Programming of the latest seismic programme is underway in advance of drilling the deep prospect to a depth of around 12,000 feet.” The two shallow wells were at around 4,500 feet. Parex is partnered with Primera Energy Resources Ltd on the Cory Moruga block. Parex has an 83.8 per cent working interest, while Primera has 16.2 per cent. To date, Parex has drilled three wells on this block—Snowcap 1, Firecrown 1 and Green Hermit 1.
Plans are underway to test Firecrown 1 and Green Hermit 1 in the third quarter of 2012. The wells in the Cory Moruga Block are named after hummingbirds. Asked if testing was at a stage where he could tell what kind of production to expect from Moruga, Lynam said: “No, not at all, and the reason being that during drilling, the evaluation of the zones is—I don’t want to use the word ambiguous—but until we actually perforate the zones and see what flows out of them, we’ll have no real idea about what the potential is. “Right now it’s geological estimates and there are still substantial risks in assessing what might come out of the zones (from) those wells. So on those zones, we’re cautiously optimistic but we’re in the explorations business, which has significant risk to it, so we’re just designing the programmes to test those wells. The range of outcome is actually pretty significant. “The test facilities we use are designed for handling, or operates 1,000 barrels per day of oil and 10,000,000 a day of gas, but that’s just a design of equipment. It has nothing to do with the well. We just want to know what the equipment with which we’re going to test is capable of handling, and we’re being optimistic about it. “Our big opportunity was the Snowcap well where we’re doing the extended production test. When we did the test there (was) an instantaneous 1,400-barrel high-rate spike for five minutes, but when we did that test, the end of the test rate, we were producing about 500 barrels per day of oil, and in the order of 6,000,000 per day of gas.
So in that well, we’re actually getting ready to put it on an extended test, and the extended test is to help us evaluate just how big the reservoir is, to make sure there’s economic volumes there for us to be able to tie it in. “So we’re doing some more testing, and we’ve got the approval from the ministry to do that extended testing right now. With the test, what we would do is, as much as the well could produce at 500 barrels of oil per day, we’re going to produce it at a much lower rate, for an extended period of time and see how the reservoir reacts.” Asked if this is a very good sign, Lynam said, “Well, you know, we’re pleased (with) the high-rate numbers. Those are big numbers. We’re quite pleased on it. It’s just that you can have high-rate wells with low reserves, which means the high rate doesn’t last very long, and that’s the concern we’re assessing. We want to make sure that it will actually ‘hold on’ so to speak. So that’s part of the evaluation that we’re doing.” However, if actions speak louder than words, in its first-quarter 2012 report, Parex said it had acquired an additional 33.8 per cent of the Cory Moruga block to raise its working interest in the block to 83.8 per cent. Parex Resources (Trinidad) Ltd established operations in 2008. The company estimated its capital budget for 2012 in Trinidad at US$65 million.