Q3 Financial Statements & MD&A

CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Consolidated Balance Sheets (unaudited)

	As at		September 30,		December 31,
	(thousands of United States dollars)		NOTE	2021		2020
	ASSETS
	Current assets
	Cash and cash equivalents		$	361,353	$	330,564
	Accounts receivable		5	173,420		80,166
	Prepaids and other current assets		13,767		13,457
	Current income tax receivable			-		16,534
	Crude oil inventory		6	2,378		1,915
				550,918		442,636
	Deferred tax asset			6,490		42,729
	Goodwill			73,452		73,452
	Exploration and evaluation		7	85,149		79,365
	Property, plant and equipment		8	953,234		902,899
			$	1,669,243	$	1,541,081
	LIABILITIES AND SHAREHOLDERS' EQUITY
	Current liabilities
	Accounts payable and accrued liabilities	$	184,206	$	115,427
	Current income tax payable			12,490		-
	Current portion of decommissioning and environmental liabilities	12	4,528		7,054
				201,224		122,481
	Lease obligation		9	1,366		1,820
	Cash settled share-based compensation liabilities	14	12,877		11,843
	Decommissioning and environmental liabilities	12	42,250		44,057
	Deferred tax liability			56,583		20,402
				314,300		200,603
	Shareholders' equity
	Share capital		13	734,006		763,372
	Contributed surplus			27,336		43,228
	Retained earnings			593,601		533,878
				1,354,943		1,340,478
			$	1,669,243	$	1,541,081
	Commitments (note 20)
	See accompanying Notes to the Consolidated Interim Financial Statements
	Approved by the Board:
"signed"	"signed"
Paul Wright	Bob MacDougall
Director	Director

Consolidated Statements of Comprehensive Income (unaudited)

			For the three months		For the nine months
			ended September 30,		ended September 30,
(thousands of United States dollars, except per share amounts)	NOTE		2021		2020		2021		2020
Oil and natural gas sales	10	$	272,481	$	146,231	$	741,857	$	420,256
Royalties			(41,653)		(12,054)		(102,948)		(42,013)
Revenue			230,828		134,177		638,909		378,243
Commodity risk management contracts (loss)	18		-		-		-		(3,940)
Revenue			230,828		134,177		638,909		374,303
Expenses
Production			25,798		20,339		77,741		64,773
Transportation			12,966		12,130		39,818		42,209
Purchased oil			3,252		7,145		8,380		20,705
General and administrative			10,043		8,572		29,645		26,110
Impairment of exploration and evaluation assets	7		19,600		-		19,600		-
Impairment of property, plant and equipment assets	8		-		-		-		7,000
Equity settled share-based compensation expense	13		283		747		1,434		2,627
Cash settled share-based compensation expense (recovery)	14		6,763		(793)		19,493		(3,412)
Depletion, depreciation and amortization	8		30,406		26,285		87,729		81,204
Foreign exchange (gain) loss			2,208		(248)		(6,012)		(9,813)
			111,319		74,177		277,828		231,403
Finance (income)	11		(340)		(281)		(1,048)		(1,879)
Finance expense	11		2,108		2,363		7,623		7,858
Net finance expense			1,768		2,082		6,575		5,979
Income before income taxes			117,741		57,918		354,506		136,921
Income tax expense
Current tax expense			26,533		6,541		75,022		9,789
Deferred tax expense			23,266		23,758		72,420		84,002
			49,799		30,299		147,442		93,791
Net income and comprehensive income for the period		$	67,942	$	27,619	$	207,064	$	43,130
Basic net income per common share	15	$	0.55	$	0.20	$	1.63	$	0.31
Diluted net income per common share	15	$	0.55	$	0.20	$	1.63	$	0.30

See accompanying Notes to the Consolidated Interim Financial Statements

2	September 30, 2021

Consolidated Statements of Changes in Equity (unaudited)

For the nine months ended September 30,
(thousands of United States dollars)		2021		2020
Share capital
Balance, beginning of period	$	763,372	$	812,684
Issuance of common shares under share-based compensation plans		29,394		10,736
Repurchase of shares		(58,760)		(33,523)
Balance, end of period		734,006		789,897
Contributed surplus
Balance, beginning of period		43,228		48,573
Share-based compensation		1,434		2,627
Options, RSUs and PSUs exercised		(17,326)		(6,374)
Balance, end of period		27,336		44,826
Retained earnings
Balance, beginning of period		533,878		541,188
Net income for the period		207,064		43,130
Repurchase of shares		(135,320)		(60,819)
Dividends		(12,021)		-
Balance, end of period		593,601		523,499
	$	1,354,943	$	1,358,222

See accompanying Notes to the Consolidated Interim Financial Statements

3	September 30, 2021

Consolidated Statements of Cash Flows (unaudited)

		For the three months		For the nine months
		ended September 30,		ended September 30,
(thousands of United States dollars)	NOTE	2021		2020		2021		2020
Operating activities
Net income	$	67,942	$	27,619	$	207,064	$	43,130
Add (deduct) non-cash items
Depletion, depreciation and amortization	8	30,406		26,285		87,729		81,204
Non-cash finance expense	11	1,605		1,556		5,238		5,331
Equity settled share-based compensation expense	13	283		747		1,434		2,627
Cash settled share-based compensation expense (recovery)	14	6,763		(793)		19,493		(3,412)
Deferred tax expense		23,266		23,758		72,420		84,002
Impairment of exploration and evaluation assets	7	19,600		-		19,600		-
Impairment of property, plant and equipment assets	8	-		-		-		7,000
Unrealized foreign exchange (gain) loss		2,986		(162)		(3,927)		(4,769)
Loss (gain) on settlement of decommissioning liabilities	12	(138)		374		233		361
Net change in non-cash working capital	16	(34,415)		(9,291)		(50,986)		(12,444)
Cash provided by operating activities		118,298		70,093		358,298		203,030
Investing activities
Property, plant and equipment expenditures	8	(51,637)		(15,857)		(135,699)		(82,022)
Exploration and evaluation expenditures	7	(22,652)		(1,899)		(23,029)		(12,310)
Net change in non-cash working capital	16	16,274		(3,078)		29,114		(47,257)
Cash (used in) investing activities		(58,015)		(20,834)		(129,614)		(141,589)
Financing activities
Issuance of common shares under equity-settled plans	13	781		1,670		12,068		4,362
Common shares repurchased	13	(58,049)		(30,816)		(194,080)		(94,342)
Dividends	13	(12,021)		-		(12,021)		-
Payments on lease obligation	9	(151)		(229)		(610)		(649)
Net change in non-cash working capital	16	-		-		-		(2,046)
Cash (used in) financing activities		(69,440)		(29,375)		(194,643)		(92,675)
Increase (decrease) in cash for the period		(9,157)		19,884		34,041		(31,234)
Impact of foreign exchange on foreign currency-denominated		(843)				(3,252)
cash balances			(1,016)			(12,348)
Cash, beginning of period		371,353		334,389		330,564		396,839
Cash, end of period	$	361,353	$	353,257	$	361,353	$	353,257
Supplemental Disclosure of Cash Flow Information (note 16)
See accompanying Notes to the Consolidated Interim Financial Statements

4	September 30, 2021

Notes to the Condensed Interim Consolidated Financial Statements

For the period ended September 30, 2021

(Tabular amounts in thousands of United States dollars, unless otherwise stated. Amounts in text are in United States dollars unless otherwise stated.)

1. Corporate Information

Parex Resources Inc. and its subsidiaries ("Parex" or "the Company") are in the business of the exploration, development, production and marketing of oil and natural gas in Colombia.

Parex Resources Inc. is a publicly traded company, incorporated and domiciled in Canada. Its registered office is at 2400, 525-8th Avenue S.W., Calgary, Alberta T2P 1G1. The Company was incorporated on August 17, 2009, pursuant to the Business Corporations Act (Alberta).

The condensed interim consolidated financial statements were approved and authorized for issuance by the Board of Directors on November 3, 2021.

2. Basis of Presentation and Adoption of International Financial Reporting Standards ("IFRS")

a) Statement of compliance

The condensed interim consolidated financial information for the three and nine months ended September 30, 2021 has been prepared in accordance with IAS 34, 'Interim financial reporting'. The condensed interim consolidated financial information should be read in conjunction with the annual financial statements for the year ended December 31, 2020, which have been prepared in accordance with IFRS as issued by the International Accounting Standards Board ("IASB").

The policies applied in these condensed interim consolidated financial statements are based on IFRS issued and outstanding as of November 3, 2021, the date of approval by the Board of Directors.

b) Basis of measurement

The condensed interim consolidated financial statements have been prepared under the historical cost convention except for derivative financial instruments and share-based compensation transactions which are measured at fair value. The methods used to measure fair values are discussed in note 4 - Determination of Fair Values.

1. Use of management estimates, judgments and measurement uncertainty

The timely preparation of the consolidated financial statements requires that management make estimates and use judgment (including those affected by and related to the future effects of the COVID-19 pandemic) regarding the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Such estimates primarily relate to unsettled transactions and events as at the date of the consolidated financial statements. Accordingly, actual results could differ from estimated amounts as future confirming events occur.

In preparing these condensed interim consolidated financial statements, the significant judgements made by management in applying the group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements for the year ended December 31, 2020.

3. Summary of Significant Accounting Policies

The accounting policies adopted are consistent with those of the previous financial year as described in note 3 of the Company's consolidated financial statements for the year ended December 31, 2020 with the addition of the dividend policy below for dividends recorded in the interim period ended September 30, 2021.

Dividends on common shares are recognized in the Company's financial statements in the period in which the dividends are declared by the Board of Directors.

5	September 30, 2021