Parex's 2Q operational results, though disappointing amid a consecutive volume miss, point to a 2H-weighted recovery with only the low-end of the 2024 production target likely achievable. Conversely, a solid financial performance was underscored by a 32% surge in free cash flow and a gradual debt repayment plan and show potential for the share-buyback momentum to extend in 3Q. As noted, PXT continues to buy back stock, and still has $60M (net) cash. It also generated $602M in cash flow in the past 12 months so we would expect buybacks to continue. Exploration results have not been as expected and it is pausing Arauca and redeploying capital elsewhere. It still plans to spend $400M. Guidance is for 54,000 b/d which is at the lower end of the previous range. The stock has been hit hard and is now less than 4X earnings with an 8.3% dividend. Investors are questioning the dividend but 12-month payout ratio was less than 30%. There has been a bit of insider buying in the last six months. We would still consider it a HOLD on valuation. Any positive news could shift sentiment here.
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