CA - Parex Resources: Colombia Is The Place To Be

2024-05-24 05:10:31 ET

Summary

• Parex Resources operates in Colombia, a supportive country for the oil and gas industry, despite some government inefficiencies and infrastructure issues.
• The company has a conservative balance sheet with minimal debt, making it well-positioned in its main business location.
• Parex Resources maintains a significant working capital surplus, providing a strong financial position to withstand business interruptions in Colombia.
• Management plans to grow the business for this heavy oil and medium oil producer.
• The company has grown to diversify operations into several locations.  This minimizes the impact of business interruptions.

Parex Resources (PARXF) is a Canadian company that reports using United States dollars while doing business in Colombia in South America. Colombia has long been supportive of the oil and gas business. However, the government is not quite as effective as it could be, and the infrastructure could use a little upgrading (even if it is better than some other places I cover). Because of the situation there, and the fact that the government is widely believed to have taken a left-hand turn, the risk of doing business in Colombia is somewhat complicated, though not nearly as bad as elsewhere on the South American Continent. In fact, overall, it is probably one of the better places for an oil and gas company to do business when it comes to South America.

Debt

Because of where the main business is located, a conservative balance sheet is probably advisable. Parex has long either had a debt free balance sheet or a nominal amount of debt. The latest balance sheet shows roughly $60 million in bank debt. This is down from $90 million in debt at yearend but up from zero in the previous fiscal year....

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