Wayne Foo - President and CEO Ken Pinsky - Chief Financial Officer Dave Taylor - Executive VP, Exploration and Business Development Mike Kruchten - VP, Corporate Planning and IR

Nathan Piper - RBC Capital David Dudlyke - Dundee Capital Markets Darrell Bishop - Haywood Securities Jamie Somerville - TD Securities

Thank you, operator, and thank you all for joining us this morning. With me today is Ken Pinsky, our Chief Financial Officer; Dave Taylor, our Executive VP of Exploration and Business Development; and Mike Kruchten, our VP of Corporate Planning and Investor Relations.

The format for today’s conference call will be a question-and-answer session with our audience. So, we’re opening the line to questions right away.

A few questions if I may, I maybe ask them all in one and hopefully you can pick them all up. First of all from operational point of view, I wanted to understand what limitations there could be for you drilling more wells at Rumba?

And indeed the cycle [ph] facilities, what constraints there are on you [indiscernible] potential of the field. I guess what I am trying to figure out here is have you got enough sellers on that one location or do you to build more locations in the block to test that potential?

And other question is really on constraints, similar constraints at Chachalaca and what cost savings you can attribute to lower rates rather than just the peso? And then finally do you expect to replace roughly 10 million barrels a day of production that you will produce this year with the drilling that you’ve achieved to-date?

Maybe if I can start with Rumba, Dave, operational limitations, we have enough sellers to drill 5 wells I believe. We’ve got Bazar-1 taken up one of those; we’ve got the two Rumba wells; we’re drilling Bazar-2 from that well as we speak from that seller location.

And we’ll evaluate whether we drill a Rumba-3 well depending on the outcome of the Bazar-2. We will need a disposal well in there eventually, although we’ve got pretty clean oil production right now.

So in terms of facilities constraints, we also have the additional issue there with the communities and we have to monitor transportation in out of that area, given the road use. We’re currently also adding one more seller to that Rumba pad right now.

So, it’s really the outcome of the Bazar-2 whether we need a third well at Rumba-3 and the community. So hope that kind of answers that part.

It does. Just briefly though on Bazar, what’s the technical analysis and what revised drilling plan have you got for Bazar-2?

We’ve changed the directional; we’ve added a casing string to get through to the problem area. The wells are really long reach wells.

As you’re aware, there is a big community issue and environmental issue above ground that we had to drill under and around and that made for an very extended long reach well that’s northwest -- or northeast actually of the existing two wells. And the angle that we’re going through that particular area is very close to the angle of the faulting of that.

And so it makes for some hole and stability. And we thought we had it under control at Bazar-1 and just as we get ready to drill ahead a little bit further, the hole collapse.

So, we’ve changed the drilling plan to address that issue. So Chachalaca, we’ve only got the first well into that right now.

We’ve talked a little bit about the fact that there is some interesting zones there, both in the Mirador and Guad. We’ll get the well tested, see what the rates are and then determine a second location as is warranted as a follow up appraisal well.

I’ll answer the fourth one about the 10 million barrels that we think we can replace production. I think the results right now are very encouraging.

And we think that’s definitely possible and hopefully we’ll do better than that. And then missed third…

The last one was for Ken before you pass the ball, just a quick one on that 10 million barrels. What I was trying to figure out is are you already moving into credit i.e.

with the Rumba discoveries and Chachalaca, is 10 million replaced and now you’re moving into credit territories potentially?

Well, what you’re saying is that -- what you’re asking is ROE passed our 68 barrels if we factor in 10 million barrel production for 2015 which would then say have you got 58 or 68 or 10 million barrels done. We didn’t do a mid-year reserve report this year because we didn’t really kick off the capital program till the end of March and we still haven’t invested.

I think it will be 35% to 40% through our capital that we have budget for the year. So, we’re not going to give you forward information on reserves because as you know we wait till the reserve report is out.

We’re very encouraged of course of what we see and then we also point out to people that of 15 to 17 wells that we have budget to drill this year, none of them are into 2P case. And I think one which is Tilo-2 may touch the 3P case as of December 31, 2014 reserves.

So, we’re very positive that we’ll have reasonable results and that we will have a continued growth in our reserves this year. But we’re not going to give you any more guidance on that until the wells are down and the reserves are in.

With respect to the third question, if you’re looking at operating costs and way went for me $8 a barrels to $7.50 a barrel, I would attribute half of that the peso depreciation and half of that to continued work with our vendors and reducing cost. Is that what you’re getting at Nathan on that question?

It was exactly that but I just wanted to see what your -- actually achieving through savings rather than just devaluation. But thanks very much, all very helpful answers to the questions.

Thanks a lot.

If I kick off with Rumba if I may. You speak about the Bazar results being key to rightsizing the proposed facility.

Can you perhaps provide any guidance as to the optimal Rumba production rates based on albeit the test data you have today which amounts for just six, seven weeks in aggregate? So excluding Bazar, what would Rumba look like given that it’s bottleneck currently?

Well, Bazar is important because the structure itself is really two culminations that maybe one. And we don’t know that until we get Bazar down, if Rumba hit, Bazar’s dry and it’s just Rumba, then there is a couple more wells maybe.

And I won’t speculate on the overall production rate because that will be controlled more or less by the community tracking and transportation out of there. But if Bazar comes in and the structure is quite a bit larger, it’s actually one structure instead of two separate structures, then we’ll have to investigate different ways to increase the production rate out of there, given the community access.

So far, the community has been very good. And from not wanting us to drill there at all in the first place to welcoming our production out there.

But we have to work with them on a daily basis to keep that community relationship working.

Perhaps the question should be rephrased then. Based on your understanding and your close network with the community, what would you believe the limiting factor for a truck led export from this area might be?

I understand that it might be a moving target but...

Currently we seem to be in the range with the communities of about 4000 barrels a day; that’s what they seem comfortable with. But again there is more work and more drilling and more success with Bazar and we would negotiate upwards from that.

And David before you leave that point, we’d have to go back, we’ve produced out of a portfolio of fields. And so I think it’s important to understand that management doesn’t take our production capacity in every field produced flat out and stack them together.

So, this is one of the 100% Parex operated fields that we can manage in a reasonable way to achieve our long-term objectives. So, I’d just caution you not to treat it as we don’t manage our own business.

We’re going to treat this the same way that we managed other thing.

On Bazar, just briefly, Nathan asked most of my questions But what’s the AFE indicates from a drilling time to TD given the extended reach nature of this well?

This sets an intermediate string here now; I’m going to guess it’s going to be about two to three weeks.

And was budgeted around 40 days.

And moving on, is there any material prospectivity beyond Rumba and Bazar on block 26 or is it very much limited by the environmentalists that you’ve cited, simply to establish and confirm the full trend on to the adjacent block...

That was the key prospect that we’d always indentified in that block. And we even back in the 2008 bid round when this block was bid, this structure you could see, certainly the fall trends on 2d seismic, the 3D that was subsequently shot by the previous operator that we had access to when we were negotiating a deal them, always showed us to be a what I’ll call a low-risk high quality prospect.

There are some smaller ones on there; this is the key one.

And without being too greedy, if I could just move to G&A, I just noticed from you MD&A that the gross G&A year-on-year is up about 13%. And obviously the impact on that part of the G&A was expenses amplified by the lower capitalization that was in this year, so the expense happens to be about 22%.

But moving back to the gross G&A, can you just give me a little bit color as to why the G&A costs are going up in U.S. dollars when the current G&A is likely expended in -- going down and because you know cost saving is very much from the mine?

Well, the cost saving is from the mine but we’re running a business that’s growing, David. So I want you to be aware of that.

But what we’ve stated in MD&A is that if previous comparative periods are employee count was 230 and our employee count today is 277, so you have an increase in number of headcount that goes into gross G&A. But on top of that we’re doing -- we talked about that we’re doing a look at our organizational structure and we’ve been using some consultants on that, so that costs hit the G&A line.

And on a per barrel basis of course on a net basis it’s gone down from previous 446 barrels down to 377 barrels. So, I think that’s what I look at because at the end of the day, as you grow a business especially in South America, you are going to grow your headcount; there is a no way around it.

But as long as you’re growing production in advance of that then I think we’re doing okay.

A couple of questions here as well, first of all with respect to your 2015 guidance. So, on the production front no change and of course your guidance doesn’t include any exploration success and we’re currently have some testing ongoing from Rumba as an example.

Just trying to get a sense of -- you mentioned managing production to about that 27,000 barrels a day. How much if any production is currently kind of being held back or shut-in to manage to that guidance?

We don’t disclose that number, Darrell, but we do continue to manage our production. You can tell that by -- you look at the block-by-block production levels from quarter-on-quarter; you get a sense for that and looking at our corporate presentation.

And as Wayne said, Rumba is another 100% field that once we determine what our guidance would be going forward, then that will be one of our levers that you use to maintain and achieve that again. What we’re looking for right now is that as we said before, the capital program started late this year because of uncertainty with commodity prices and we wanted to make sure that we got our costs in line.

And so we didn’t have a rig working from December till the middle March. And we still maintained flat or slightly upward production levels quarter-over-quarter.

Now we’ve got three rigs working and when we get some more wells down and we get a view of what those wells can deliver, then we’ll come back to the market with reasonable expectation of where we think 2015 will end up. And then of course in November, we normally have our Board approval of 2016 budget and that will be released around that time as well.

So, the timing for anything going forward will be into the fall and that will depend up our activity levels. Right now it looks like we can get back to three rigs working.

Next question, probably maybe this one for Dave, again coming back to what Nathan and David were going to on Rumba-2. Just over 1 kilometer away from Rumba-1, Bazar-2 going just over 2 kilometers to the north to test that northern limit.

Where do you see the other, I’ll call it edges of the field? Just trying to get a sense of what the areal extent of this Rumba pool could be; whether or not there are two combinations that are not -- recognizing that this was the highest pit block back in 2008 just given the size of the structures there?

Again, we don’t disclose the numbers or the sizes until we get reserves done. But the way it looks right now as that it’s larger than the average, backing up a little bit.

This is a typical high side, traditional high side closure, three way fault and a closure, very similar to a lot of the other fields in the basin. And I think you know what a lot of the average field sizes there are in that 2 million to 3 million barrel range.

We believe that this structure looks to be larger than that as initially mapped, but it’s not a big low side closure like Tigana, that’s a different structural style altogether. So, until we get Bazaar-2 down and see if -- even if it’s one larger accumulation, it is a high side closure, more of the traditional play type, trying to direct you to towards the statistics in the basin that I know you’re aware.

And just segwaying that then into Chachalaca, you mentioned the two at Tigana. Is it safe to say that Chachalaca, if that’s how you pronounce it, is a similar exploration target in term structure?

Yes. So, Chachalaca is the next fault trend to the west of Tigana.

It’s been undrilled until this point in time. They identified it on the 3D that was shot a year or so ago.

It is a low side closure. The fault itself isn’t quite as long as the Tigana fault but it sets up in that style, the low site closure.

So, we’ve got the first well into it now that looks interesting and we literally are getting raised and tested. So, we have no data to share; we would have released that.

But the structure does look that style.

And final question, again related to that and I guess Block LLA-34 and generally you guys are non-op. Have you seen any hesitation from the operator under the current lower commodities to slow the pace of development there in any way or are you guys satisfied with how things are playing out there.

We haven’t drilled and we don’t have any planned development wells at the current time for that block. And the operator has been very receptive to drilling a few exploration wells to make sure that we get all the prospects drilled in that block before we start into the first year [ph] exploration phase that’s going to be coming up soon.

The more we find, the more we keep. So, they understand that as well and it’s been a good relationship with them to get these few wells drilled here this quarter.

I wanted to follow up on that last question around Llanos 34, just with regards to your operating philosophy of having multiple fields in the portfolio. I’m just wondering Llanos 34 is now I think over 50% of your production.

Is that contributing to the positive trend in operating cost at all that you have this one larger asset that is producing more and more of your production. Can you comment if any of your assets are relatively higher costs?

I know that your operated production looks it’s come down over 15% in the last six months. Is that contributing there and to what extent does grown production of Llanos 34 fits with your philosophy of having numerous different assets that you can drill on?

Yes, the largest fields obviously on Block 34 are still relatively immature. And so the operating costs on numerous of those fields are very good, they’re less than some of our more expensive higher water cut fields that we operate.

Having said that, we’ve also got a couple of operated fields that are performing quite well Kananaskis for example which is contributing a significant amount of our production now at a very low operating cost. So, it’s really kind of a blend.

Any time we add new fields like a Rumba for example right now is that 2000 or 3000 barrels a day and no water is a fairly cheap field to operate. So it’s really the combination.

As some of the fields on Block 34 mature more, we’re going to see those costs go up. And as we find and develop newer fields, we’re going to find the costs to go down.

Our key is to try and manage those higher cost fields to a lower cost as possible.

The other point is your mentioning about Block 34 constituting over 5% of our production. That’s true but it doesn’t constitute over 50% of our productive capacity.

So, where we have volumes that we’re managing to meet targets, those volumes come off our 100% fields. If we produce those flat out, your operating costs per barrel go down because you got more barrels coming to fixed cost.

But we choose to believe that meeting guidance on production expectations is more important for a company than just trying to have a short term gain on where the production mix is. So again, as Wayne said, we always look at these things as where our long term goals are and then manage our production then capital to achieve those.

I guess as a final consideration, Jamie, if you look at the drilling schedule with the number of wells we’ve drilled in LLA-26 and then moving to [indiscernible] block and after that block, concurrently with that block 32. And then subsequent drilling activity more and more of that is operated.

So the timing of drilling and way the program has stacked up has made [Audio gap] but we’re not going into a period of getting back into operated activity.

And if you weren’t holding back production on some of your operated assets, unit operating costs on those assets would presumably be at least slightly better as well. I do have another question if you don’t mind though.

You’ve answered this one before in the past but with the dates -- with the Mexico rounds ongoing and I think you have until -- companies have until the end of the month to register for the onshore round which starts in December with some extraction assets. I’m just wondering if you can repeat or give us an update on your absolute [indiscernible] including Mexico et cetera.

Sure. You know that we’ve pulled back and focused on Colombia couple of years ago and it was a very good move for us, the ability to capture a number of assets at a critical time in our growth.

We always look a little bit outside of Colombia. And Mexico is something that it’s hard to ignore.

We know the onshore round is coming up. We will register for it; in fact we are signing some papers this morning just to get all the prequalification documents in.

I think there is hesitancy in the industry given the uncertainty in oil prices and the regime and what’s going to happen in Mexico. And I think that played out in the offshore round.

So, we’ll see -- just like I always said, until I see some data, I have no idea whether I’m interested or not, but we’re trying to a get hold of.

Thank you, operator. I’d like to take this opportunity to thank everyone on the call for your interest in Parex Resources and your continued support of the company.

For further information, we invite you to visit our website or call us for further information. Thank you again.

Have a good day. Operator?