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Shares of Parex Resources (PXT.TO) plummeted in early trading on Thursday after the Calgary-based oil and gas producer operating in Colombia announced the departure of its chief financial officer and a host of operational troubles in the South American country.
The company’s Toronto-listed stock fell as much as 34 per cent on Thursday. Shares closed 23.64 per cent lower at $13.18 per share.
The oil-weighted producer is focused on onshore exploration and development in Colombia. On Wednesday, it announced weaker-than-expected results at its Arauca site will have a material impact on its 2024 production.
Parex cut its mid-point production estimate for this year by 14 per cent to 49,000 barrels of oil equivalent per day (boe/d) from 57,000 boe/d previously. The company also withdrew its three-year outlook plan, based on Arauca’s underperformance.
At the same time, Parex says its chief financial officer Sanjay Bishnoi will resign to pursue another opportunity, effective Sept. 20. The company has appointed Cameron Grainger, who has held financial roles at the company since joining in 2011.
RBC Capital Markets analyst Greg Pardy slashed his target price on the stock from $23 per share to $17 in a note to clients on Thursday, while also downgrading Parex to ‘sector perform’ from ‘outperform.’
“Disappointing well productivity and water incursion at Arauca are at the heart of Parex’s operating challenges,” Pardy wrote.
“Parex’s disappointing operational update has caused the company to step back and technically regroup before it invests further at Arauca. In the meantime, the company will reorient its investment towards lower-risk development/exploitation initiatives.”
Parex also cut its cash flow guidance by 19 per cent at the mid-point, from US$215 million to US$175 million.
Kevin Fisk of Scotiabank Global Equity Research notes that Wednesday’s update from Parex also called for weaker performance at a number of the company’s other assets, as well as Arauca.
“We expect a negative share price reaction due to the lower production/free cash flow outlook and unexpected CFO resignation,” he wrote in a research note on Thursday.
Fisk maintains a $23 per share price target on the stock.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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