Good morning, everyone, and welcome to Parex Resources Second Quarter 2025 Conference Call and Webcast. My name is Mike Kruchten, and on the call with me today are our President and Chief Executive Officer, Imad Mohsen; our Chief Financial Officer, Cam Grainger; and our Chief Operating Officer, Eric Furlan.

[Operator Instructions] As a reminder, this conference call includes forward-looking statements as well as non-GAAP and other financial measures with the associated risks outlined in our news release and MD&A, which can be found on our website or at www.sedarplus.ca. Note that all amounts discussed today are in U.S.

dollars unless otherwise stated. I'll now turn the call over to Imad.

Please go ahead.

Thank you, Mike, and good morning, everyone. With the first half of 2025 behind us, I'm pleased to say that we are seeing steady progress across the portfolio.

At our core assets, Cabrestero and Llanos 34, the secondary recovery and EOR programs are advancing as per our plan. Development drilling has begun at Llanos 32, and near-field exploration success is being delivered in Southern Llanos.

All of these are key activities supporting strong momentum and continued growth in the second half of the year. Our financial results for the quarter were strong, and our robust netback underscore the resilience of our business even in a lower commodity price environment.

Netback performance was supported by favorable Colombian crude oil differentials as well as lower production costs driven by external power pricing in addition to an ongoing internal optimization effort. I want to recognize our team's internal efforts across several projects and initiatives where we are seeing real improvements in our cost structure and corporate processes.

As noted at the start of the year, our program is back-end weighted. In the second half of 2025, we expect to deliver steady production growth and achieve our annual guidance of 44,000 to 47,000 barrels of oil equivalent per day, with an anticipated strong exit that will set us up favorably in 2026.

This momentum will also position us to continue to generate meaningful free funds flow, fully funding our current capital program, sustaining a robust dividend and executing on our planned share buybacks with surplus cash flow that can further strengthen the balance sheet. With that, I'll turn it over to Eric to provide an operational update.

Please go ahead, Eric.

Thanks, Imad. For Q2 2025, production averaged 42,542 BOE per day.

These volumes were generally consistent with our expectations. During the quarter, we achieved several key milestones that not only supported base production but also positions us to efficiently execute our activity plan for the remainder of the year.

In LLA-34, we completed our 6-well infill drilling program, achieving time and cost improvements for the program utilizing a new generation rig. And at both LLA-34 and Cabrestero, we continue to progress our secondary recovery efforts via waterflood and are advancing our polymer injection programs at both logs.

At LLA-32, following completion of the tuck-in acquisition, in the second quarter, we launched a 5-well drilling campaign. With the first well completed in July, we are making steady progress and expect this block to be one of our key drivers of growth in the second half of the year.

At Capachos, we are working on infrastructure upgrades to enhance production capacity for the block and intend to drill 2 development wells targeting established compartments over the remainder of the year. At LLA-74, we delivered encouraging results for our near-field exploration program, where 3 wells are now producing a combined approximately 2,500 BOE per day.

These opportunities are part of our Small 'E' program, which is focused on targeting prospects with high probability of success. The wells have come on stream quickly with strong netbacks and are supporting in-year production growth.

In the second half of the year, we plan to drill at least 2 similar prospects and continue to build broader funnel of opportunities across the portfolio to replicate the success long term. Lastly, we are making progress in the Putumayo.

In the second quarter, following community and stakeholder engagement, we reached the milestone of securing initial field access, and we have begun operations. We now have a workover rig that is progressing and expect to kick off our drilling campaign later this year.

Our objective is to test a number of concepts to optimize our 2026 program. With a continued focus on development and lower-risk activities for the remainder of 2025, we anticipate steady increases in production as we execute our operational plans.

With that, I'd invite Cam to please go ahead.

Thanks, Eric. For the quarter, funds flow provided by operations was $105 million, and our FFO netback was $26.90 per BOE based on an average Brent oil price of $67 per barrel.

During the quarter, netbacks benefited from favorable oil pricing differentials, particularly tight Vasconia benchmark differentials, which we had originally budgeted at roughly $5 per barrel, but have seen an improvement to less than $2 per barrel since February of this year. Also supporting netbacks has been an improved production expense or OpEx profile.

A key contributor to this has been lower power costs and ongoing internal optimizations. In 2024, power prices spiked significantly due to dry conditions that impacted hydroelectric generation capacity.

This year, however, we are seeing power prices return to more normalized levels. Beyond the external pricing relief, we've also realized meaningful internal efficiency gains across our operations, further supporting improved OpEx numbers.

Some examples of this include optimizing power generation and usage in key blocks, streamlining maintenance scheduling and enhancing staffing and security protocols. For Q3, we have hedged roughly 50% of our planned production, utilizing a Brent put spread at $60 and $65 per barrel, which is providing insulation for a cash flow profile in an environment where we have seen recent global volatility.

Current taxes were $9 million for the quarter. Given Colombia's progressive and royalty -- progressive tax and royalty system and at strip pricing, we expect our full year effective current tax rate to be between 5% to 10%.

This is slightly up from our previous forecast, largely due to a better cash flow profile than we had originally projected, supported by stronger netbacks. Quarterly capital expenditures totaled $89 million, consistent with our ramp-up in activity.

Looking ahead to the third quarter, capital spending is expected to remain at similar levels, while a lighter capital outlay is forecast for the fourth quarter. We remain fully funded with our capital program advancing, our regular dividend covered and a modest level of share repurchases continuing.

Our balance sheet remains exceptionally strong, underpinned by ample liquidity and financial flexibility. This solid financial position enables us to execute our strategic priorities with confidence while maintaining resilience in varying market conditions.

With that, I will pass it over to Imad for some final remarks.

Thank you, Cam. I want to reiterate our focus on building production momentum throughout the remainder of the year as we safely deliver our activity plan, which is back-end weighted.

Our operations have performed well year-to-date, and we continue to anticipate steady incremental production increases to meet our full year annual guidance. Our objective for 2025 was to deliver low-risk development opportunities across our portfolio, demonstrating our ability to sustain production volumes while managing capital expenditures and ensuring strong shareholder returns.

Halfway throughout the year, I'm pleased with our progress and believe we are on track to deliver. Looking beyond 2025, we are actively advancing 2 major initiatives in both the Putumayo basin, where we see significant untapped upside potential given the oil in place and the Llanos Foothills, where we are progressing exploration plans for 2026.

The Llanos Foothills remains one of Parex's core opportunities with exceptional promise and represents a key component of our long-term growth strategy. Lastly, I'm pleased to share that our 11th Annual Sustainability Report has been released that highlights the meaningful work we are doing to manage our environmental impact, build mutually beneficial relationships with communities and uphold strong governance practices.

Our commitment to our stakeholders remains unwavering, and our strategic focus continues to be exclusively on Colombia. I want to thank all our employees and contractors for their hard work and their safety-first approach.

Furthermore, I'd like to thank our shareholders and partners for their ongoing support. This concludes our formal remarks.

I would like -- I would now like to turn the call back to the operator to start the Q&A session for the investment community. Thank you.

That concludes our second quarter conference call. Thank you for joining us, and have a good day.

Operator, we're ready for questions.

Just wondering if we could dig a little bit into planned activities in the Putumayo Basin. And then secondly, whether -- I know it's -- you're probably still framing what the program will look like, but what is your thinking around maybe a Bigger 'E' program in the Llanos Foothills in 2026?

Talking about the plan for the Putumayo, we're testing 2 key concepts. We're testing the use of horizontal drilling and step out to check the extent of an existing pool.

And we are also looking at a larger accumulation of oil in place that has never been subject to waterflood or any kind of EOR. So we are commencing a pilot immediately to repressure that reservoir.

And really, as Imad indicated earlier, our goal is to test a number of concepts in 2025 to help build the program for 2026 and see where we want to focus our capital. As far as the Foothills program, we are advancing that as per our schedule.

We expect to spud 1 to 2 exploration wells next year in the Foothills and are excited about this opportunity and getting into an area that has really been overlooked for a number of years.

Okay. Terrific.

And is it maybe too much to ask in terms of the bigger 'E' program next year, perhaps what working interest you'd be drilling those at? Or can you provide any description around those?

Or is it just too early at this point?

I mean we do -- as a part of our harmonization agreement with Ecopetrol and the Foothills, we have a number of commitments to carry them. So my expectation that any foothill drilling next year will be to fulfill these carrier commitments.

So it will be drilled at 100% with a 50% working interest.

Are you able to comment on what you're expecting for an exit rate in 2025?

2025, when we get to the fourth quarter, we certainly see our production growing off of our base, which we provided, we're in the 44s for July. So we're going to see that get to, I would say, in the high 40s in order to meet our production target of 45% for the year.

Congratulations on a good quarter in a difficult environment. I have 2 questions about the exploration program.

One, is the Hydra exploration well still on board for the second half of this year? And a related question about La Belleza.

What is the oil production at La Belleza now, and how much gas is being reinjected and what are the plans for monetizing that gas?

Okay. So let's talk about that block and our long-term program.

So yes, the Hydra well is being drilled in Q4 of this year. We are progressing that, and we don't see any issues there.

So we are expecting to drill that well in 2025. The results from that well and the implications on further opportunities in that block will further define the infrastructure requirements for the area.

We are planning to commence with pipeline tie-in of the VIM area to the overall system so we can capture what is really required gas in Colombia right now as they have significant gas shortfalls. So we are putting it in place.

We have already the environmental approvals to do so. So it's just a matter of final sizing, and I would expect that program to commence next year.

We are drilling the -- as I said, the Guacowell and the La Belleza, 3 wells setting up for a gas sales -- gas sales strategy late '26, early '27.

How much liquid you're producing.

And the liquids right now, I believe the latest number was about 2,100 barrels a day net liquids that we're currently producing.

And how much gas is being reinjected.

At this time, about 30 million a day is being reinjected.

Okay. And that could come on in late '26, '27, if all goes well?

That is the plan right now. Again, that is pretty much a firm plan to go to a sales strategy here in the not-too-distant future.

And it's really a matter of finalizing pipeline size. And then we'd like to understand some of our exploration potential, not only with the Guapa well, but potential follow-ups to make that final sizing decision.

And one more exploration question, if I may. Is the final launch prospects still part of your thinking for the 1 or 2 exploration wells in 2026.

Yes. That will be a definite drill in 2026.