Parex to Nearly Double Production to 91,000 boe/d After Colombia Deals

A series of strategic transactions positions Parex Resources to become Colombia's largest independent producer, reshaping the country's energy landscape.

Parex Resources Inc. is set to nearly double its output after a series of acquisitions and partnerships that will make it Colombia's largest independent oil and gas producer. The transactions are expected to lift the company’s average production to between 82,000 and 91,000 barrels of oil equivalent per day in the second half of 2026, a significant increase from its first-quarter output of just under 45,000 boe/d.

"We executed a series of strategic transactions in the first half of 2026 intended to increase scale, expand the company’s portfolio and improve the durability of our business," Parex President and Chief Executive Officer Imad Mohsen said on the company’s recent earnings call. He described the deals as "highly accretive," with "strong industrial logic and compelling synergies."

The expansion is driven by two main transactions: the $725 million acquisition of assets from Frontera Energy Corp., which adds approximately 37,000 boe/d, and a new partnership with state-owned Ecopetrol. Under the Ecopetrol agreement, Parex will invest $250 million over five years to earn a 50% interest in the Casabe and Llanito blocks, which currently produce about 15,000 barrels per day. To fund the expansion, Parex completed a $500 million placement of 8.5% senior unsecured notes due in 2031.

The deals transform Parex from a mid-sized producer into a scale player in Colombia, but also introduce new financial considerations. While the Ecopetrol partnership carries no upfront acquisition cost, the combined capital commitments and integration costs could pressure free cash flow in the near term as the company absorbs the new assets and ramps up spending on development.

Transformed Guidance Signals Higher Cash Flow

With the Frontera acquisition and Ecopetrol partnership expected to close, Parex issued new guidance for the second half of 2026. The company projects funds flow from operations of $475 million to $525 million, with capital expenditures between $275 million and $295 million. This guidance is based on an assumed Brent crude price of $90 per barrel.

Chief Financial Officer Cameron Grainger noted that while first-quarter funds flow was strong at $114 million, it was impacted by $17 million in one-time costs. He cautioned that coming quarters will also include non-recurring integration and financing costs. Still, the company is targeting a medium-term net debt-to-EBITDA ratio of 0.5 times or lower, signaling a commitment to maintaining a strong balance sheet through the transition.

A Shift in Strategy

The expansion marks a strategic shift toward lower-risk, development-focused projects. The work program on the Ecopetrol blocks will concentrate on infill drilling, waterfloods, and enhanced oil recovery rather than higher-risk frontier exploration. This aligns with management’s stated capital allocation priorities of targeting 3% to 5% base production growth while advancing select high-impact exploration opportunities.

In response to questions from Roth Canada analyst Jamie Somerville, Mohsen outlined a long-term vision where capital spending of around $500 million in a $70 oil environment could generate this steady growth. A key long-term asset highlighted was the VIM-1 gas block, which Mohsen called one of his "favorite assets" and a potential "big cash cow" for the combined company once a pipeline is completed, likely in the second half of 2027.

This article is for informational purposes only and does not constitute investment advice.