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  5. PXT: Can you provide some insight into why Parex is dropping again? [Parex Resources Inc.]
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Q: Can you provide some insight into why Parex is dropping again? Results today looked reasonable.
Asked by Debrah on August 03, 2023
5i Research Answer:

The stock is up 30% this year, well ahead of many in the sector. The quarter was decent, but it did lower guidance. Parex's rare downward revision to full-year production guidance of 7.5% to 54,000-57,000 barrels a day reflects security issues in Northern Colombia disrupting operations, raising concerns of a future re-emergence. Results in 2Q were marginally below expectations due to lower 2023 free-cash-flow visibility, as the 17% guidance cut demonstrates. Higher costs and the unsuccessful Chirimoya-1 exploration well led to this year's spending-guidance floor being raised $25 million to $450-$475 million. All in, the guidance adds some uncertainty, which of course investors don't like. It remains cheap at 5X earnings with $370M net cash. We would still be fine owning it.