Parex resources colombia sustainability report

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Oil exploration company PAREX believes that the words growth and balance are closely associated. This is so because its partners and leaders understand that long-term success for the Company depends largely on its ability to articulate business prosperity with the prevailing social, economic and environmental concerns of its stakeholders in its areas of operations.

Balanced Growth

PAREX sets its priorities by looking ahead. During the five years of oil exploration work in Colombia, we have built a solid company with a record of sustained production and reserve growth. By the end of 2014, production peaked at 22.526 barrels of oil per day, while proven and probable reserves (2P) reached 68.4 MMboe. These results were possible by striving to diversify our production base, achieve operational success, and expand the number of exploration blocks awarded by the National Hydrocarbons Agency to twenty-two, two of which were added as a result of the 2014 Round.

Our success so far would not have been possible without the commitment, enthusiasm, and expertise of a great team of professionals, the dedication of our contractors, and the generosity of communities who have housed us in their territory. We can only hope to repay this generosity by implementing the most important pillar of our Social Responsibility: creating shared benefits.

Our Safety Policy conveys our concern for the people who work at PAREX. We want our employees to return home safely and this is only attainable by adopting safe practices in the workplace and meeting the highest standards.

At PAREX, we make sure that we build and maintain a relationship with the community that is based on respect and on direct, ongoing, two-way communication. Dialoguing openly has allowed us to identify points of contact with our stakeholders and to work together around projects that are both strategic for the Company and have an impact on the quality of life in the communities.

As for our commitment to the environment, I can proudly state that we have never let our guard down: the PAREX team undertakes hydrocarbon activities rigorously and complies with the provisions set by

national and regional environmental authorities. Inspired by the responsibility we have as a company and as individuals to the future of the new generations in Colombia, PAREX also fosters initiatives that go beyond the law.

This report states the results of the challenges that we undertook in 2014; to this end, we welcomed the standards of the Global Reporting Initiative, GRI, in its G4 version, gradually adopting them as PAREX guidelines. We present the issues that are a priority for our stakeholders as well as those that are essential for our organization, not only as a historic exercise but also as a platform from which to orient our company towards the future.

It is gratifying to see how our team was actively involved in guiding and producing this document; to know that it is expected to become not only a way of reporting the company’s performance to its shareholders, but a management tool that can help us to become even better.

We see 2015 as a great challenge, basically due to the drastic changes in the oil market. But we are moved by enthusiasm and confidence; we have a committed and experienced professional staff with the drive to tackle the situation successfully. We will anticipate the struggles that are particular to the industry and redefine priorities. We must think strategically, reprogramming our learning curve in order to grow and share value. The horizon we set for ourselves and that will guide our organizational culture from now on, is based on three pillars: (i) leadership in the complexity of the tasks we undertake, (ii) executive capacity and (iii) understanding environmental demands.

Lee Di StefanoPresidentPAREX Resources Colombia Ltd. Sucursal

Letter from the President

A History of Success

PAREX first shipment for exportCaribbean Sea - Colombia

004

PAREX resources Sustainability Report 2014

005

PAREX claims its success to the promotion of social, economic, and environmental balance in its areas of influence

“During the five years of oil exploration work in Colombia, we have built a solid company with a record of sustained growth in production and reserves.”

Lee Di Stefano President PAREX Resources Colombia Sucursal


PAREX is a Canadian Company engaged in exploring, developing and producing oil and gas. Its operation activities are focused primarily in the Casanare region and in the lower and middle Magdalena valleys in Colombia.

The Company also has interest in the Cory Moruga block in Trinidad and Tobago. The total gross acreage awarded to PAREX is 2,765,954 hectares.

PAREX Resources INC. manages its operations in Colombia through its branch, PAREX Resources Colombia LTD. Sucursal, a company registered under the laws of Barbados.

PAREX Resources headquarters are located in Calgary, Canada. The company’s common shares are traded in the Toronto Stock Exchange ("TSX") under the "PXT" symbol.

OUR Organization

006


PAREX adopted the G4 Global Reporting Initiative (GRI) standard as well as the Oil & Gas Supplement indicators to present its 2014 Sustainability Report. This entailed a major organizational effort, as the Company had to adjust its internal processes to address relevant stakeholder concerns.

This Report addresses PAREX exploration, development and production activities in Colombia during 2014. No information is included on the new blocks or those in which the company operates as a partner and not as an operator. The data reported was consolidated according to the structure of our organization. Price Waterhouse Coopers (PWC) audits PAREX financial information.

The consolidated financial information for PAREX’s operations in Colombia is stated in Colombian pesos (COP). When converting the figures stated in US dollars to Colombian pesos, the report uses the Colombian Market Index Rate (TRM) average for each year.

For our company, the ongoing dialogue with our stakeholders encourages clear relationships and builds commitment and trust between the parties. However, we are aware that for various reasons there may be undesired silences. This is precisely why PAREX contracted Signum Consulting to encourage an extensive set of interviews with stakeholders, both in Bogota and in Casanare in areas where our operations have an influence, including conducting two focus groups communities. The purpose of these activities was to identify substantial issues around which to focus future dialogue and management.

About this Report

007


PAREX builds long-term relations with its stakeholders

The material aspects identified by PAREX represent the main economic, social, and environmental concerns of its stakeholders, as they are perceived to influence them directly or indirectly. The Company believes that it can manage these issues to create a positive and sustainable environment in which all can prosper.

This will require patient work and the cooperation of many local and national stakeholders, including the interested publics. PAREX will act with determination to improve its processes and operations in order to consolidate its positive mark and, to the extent possible,

seek to influence other agencies, organizations and individuals to direct their efforts to the attention of these material matters.

This report took into account PAREX workers, contractors and suppliers, communities, local authorities and the media. In order to ensure independence, the firm Signum Consulting was invited to carry out an extensive visit to our areas of operation, and to come in contact with representatives from all the above groups. This exercise entailed having 86 interviews in 5 exploration blocks located in 5 municipalities and 8 villages in the department of Casanare.

- Im

porta

nce

of im

pact

s

Importance for stakeholders

CORPORATE AND HUMAN RIGHTS ISSUES

SOCIAL AND ENVIRONMENTAL

LABOR AND PROCUREMENT

Child labor Gender

Code of Conduct Ef fective communications

Salaries and benef its Labor training

Business ventures Education and training for work

EducationHousing

Local employment opportunities Health and Safety

Acquiring goods and services

Reforestation Dust and noise pollution

Water

Materiality

008


PAREX engaged

OF SUBSTANTIAL INTEREST TO THEM

WITH

865

REPRESENTATIVES OF ITS STAKEHOLDERGROUPS IN

MUNICIPALITIES OF CASANARE TO IDENTIFY ISSUES

in dialogue

009


PAREX is interested in meeting the communities’ development expectations

PAREX corporate governance is supported by a management system that seeks to tone the performance of their executive staff and guide the Company employees towards having upright behavior. Through this system, PAREX offers a quick and transparent response to its shareholders and stakeholders, and is accountable for its activities at every level of the organization.

The PAREX Board of Directors is the company’s highest governing body. It consists of eight members with a proven track record in the hydrocarbon sector.

Through three committees, the Board ensures the effectiveness of the Company’s overall management, oversees management practices, and verifies that legal requirements are met. This is to comply with its principles: a company geared to act clearly and objectively in detecting and managing business related risks, promoting teamwork, that is aware of the roles it will play, driven by the commercial legitimacy of its ideas and rewarded through the value generated for its shareholders.

NAME

Norman F. Mclntyre

Wayne K. Foo

John F. Bechtold

W.A. (Alf) Peneycad

Robert J. Engbloom

Paul D. Wright

Curtis D. Bartlet t

Ron D. Miller

President of the Board

President and Chief Executive Off icer (CEO)

President of the Operations and Reserves Commit tee

President of the Corporate Government, Human Resources, and Compensations Commit tee

Member of Corporate Governance, Human Resources, and Compensations Commit tee

President of the Auditing Commit tee

Member of the Auditing Commit tee

Member of the Auditing Commit tee

POSITION

Corporate Governance, ethics, transparency, and respect

Board of Governors PAREX Resources Inc.

010


At PAREX, the safety of our workers is a priority. The Company has a Health, Safety and Environment Handbook in which the organization’s commitments are detailed and all its employees agree to maintain a safe working environment. The Operations and Reserves Committee is responsible for maintaining the integrity of this system.

For its part, protecting Human Rights and Civil Liberties is a fundamental policy in the organization. Through this policy, PAREX protects and guarantees equal employment and contracting opportunities, rejects

discrimination based on race, creed, sexual orientation, age, status or income. It also condemns the harassment or abuse practiced against any of its employees. The Auditing Committee monitors the Protection and Promotion of Human Rights in PAREX and prevents any violation thereof.

Social responsibility is a value, which guides the overall performance of the Company and is manifested in the ability of the organization to create shared value with its stakeholders, especially in the communities where it undertakes its operations.

Corporate Governance,

Human Resources,

And Compensations

Operations and Reserves

Finance and Audit

MANAGEMENTCOMMITTEES

Management Committees

011


At PAREX, creating shared benefit is the principle that guides social responsibility.

In order to build and maintain its reputation, PAREX behaves as a good corporate citizen; the Code of Conduct sets guidelines to achieve this goal. The Code requires that all managers, employees or consultants strictly comply with the law, provide clear, complete and timely information when required by competent authorities, and report any violation to the rules contained therein.

Upon their admission, PAREX employees read the Code of Conduct as well as the Anti-Bribery and Corruption, and the Confidentiality of Information policies.

Employees are then requested to sign a document under which they declare they are familiar with and accept the provisions therein. PAREX staff annually attend an anti-corruption conference dictated by the Corporate Vice President of Human Resources and must answer an evaluation questionnaire. The idea is for everyone to be clear on how these issues may influence the sustainability of the business.

The Company Board of Directors and its committees are the highest organs in charge of monitoring and ensuring compliance with these guidelines. Any conduct contrary to these guidelines must be reported to the immediate supervisor. PAREX collaborators may occassionally report any such violations to the President of the Company or any member of the Board of Directors. Reports may also be filed through the www.ethicspoint.com complaint line, by dialing (1) 888-279-5269, contacting the legal consulting firm Burnet, Ducksworth & Palmer LLP or the Commission on Human Rights of Alberta, Canada.

PAREX is aware of the importance and impact of quality of living on the mental and physical health of its employees. This is why communications channels were created. This is why communication channels have been created through the Coexistence Committee (created by the current regulations - Law 1010 of 2006) that allow employees to express themselves freely and confidentially should they feel their rights are being violated, and once they have used regular channels to express their discontent. Preventive management has prevailed in the Committee, thus seeking to make employees aware of the needs of others while promoting fair and respectful relations.

Ethics and Integrity

012


Business RESULTSIn 2010, PAREX produced 500 equivalent barrels of oil a day. By the end of 2014 the average production was estimated at 22.526 bopd, 42% higher than the figure recorded in 2013. The growth in production was attributed mainly to successful exploration in Akira, Tigana, Tua and Llanos 32. Purchasing Verano Energy also boosted PAREX’s expected production.

The above achievements evidence the effectiveness of PAREX ‘s strategy, which is geared towards sustained business growth by acquiring new blocks, diversifying the production base, increasing reserves and managing costs efficiently.

PAREX’s exploratory experience is represented in a historical success rate of 50%.

By 2014, cash flow from operations was US $293.9 million ($587,896 million Colombian pesos), which were reinvested in full in financing the costs of capital goods worth US $ 286.9 million, excluding the costs of corporate acquisition. The difference between capital expenditures and cash flow was financed through a credit line for working capital.

During that period the company's net debt was reduced to US $31.7 million (COL $63,410 million Colombian pesos).

Discovery, Development and Acquisition costs for the year were US $ 13.79/boe (COL$ 27,584 pesos) for the most likely tested reserves, including capital goods for future development.

*The average representative exchange rate for 2014 was used when converting figures in US dollars to Colombian pesos.

013


Historical success rate for exploration at PAREX stands at 50%

22.526 $1.504 MM

232

$8.445 MILLON.Social Investment

$ 181.806 millon.

0,4812

Environmental Incidents

Human RightsIncidents

LTI per millionDirect employees

Roy

0

68.4

2014 Key F

Operations in Colombia Production 2P Reserves SALES

22 Blocks

acts

alties

014


Our Performance:

PAREX is a company whose growth is reflected in how production and reserves increased compared to 2013: while the former increased by 42%, the latter more than doubled (114%). The purchase of Verano Energy Limited on July 25, 2014 increased PAREX’s active participation in the Llanos 32, Llanos 34, and Llanos 17 Blocks by 70%, 55%, and 63% respectively.

In 2014, PAREX reached an exceptional exploration success rate of 81%. This was made possible through the drilling of thirty-six exploration wells; 26 showed the presence of hydrocarbon deposits, six were dry and abandoned, while the remaining six were classified as injection wells.

Despite the fall of oil prices in the last quarter of 2014, PAREX concluded its drilling program for the year. The company is also completing its engineering work to carry out exploratory work during 2015, thus complying with its current contractual obligations.

The success we enjoy creates new challenges for all company areas. On the one hand, strong company performance must produce positive impacts without upsetting the current balance in our operations’ surroundings. On the other hand, we must strive to overcome meaningful obstacles such as a limited pipeline capacity for oil transport, the shortage of tanker trucks that meet with required standards, and poor road conditions. Nevertheless, The Company will complete its engineering work and carry out its exploration program during 2015, thus complying with its current contractual obligations.

PROBABLE AND PROVEN2P Reserves

16,1

32,0

68,4

PRODUCTION(Thousand BPD)

11,4

15,9

22,5

015

A firm Stepping Stone for Growth


PAREX undertakes its exploration activities in harmony with the environment; to this end, it bases its activities on Environmental Impact Studies and the corresponding Management Plans. The Company makes a detailed plan for the management and exploitation of the natural resources required for the operation, so as to create a balance between its demand for environmental services and the need to preserve the environment for the benefit of society. At PAREX, sustainable development entails solid work to prevent, correct, mitigate or compensate its enviromental impact, carry out self-assesment processes and disclose espacio best practices, thus making them applicable to all stakeholders.

PAREX complies with Colombian laws and honors its duties in the blocks where operations are held. It also holds Environmental Licenses granted by the National Environmental License Authority (ANLA), has ongoing environmental audit programs and periodically reports its compliance to the relevant authorities.

In 2014, the Company invested a total of COL $22,672 million in environmental management.

Cooperation for SustainabilityEnvironmental Citizenship:


Caring for Natural Resources

Aware that the loss of biodiversity and the decline of ecosystems are critical to the wellbeing of the human species, PAREX takes the necessary measures to avoid operating in areas that are under protection. In compliance with the laws currently in force, the Company marks the areas excluded from its operations, springs and estuaries; it also anticipates will the impact its operations, including water springs and estuaries; it also anticipates the impacts its operations will have on other sensitive hydrologic and biotic areas in order to minimize them.

Additionally, during the field phase prior to preparing the Environmental Management Plan, PAREX also makes a base line of the area where projects are located, and registers the physical, biotic and socio economic conditions in the area of

interest. The fauna found in the area is also considered. To further Fauna found in the area is also considered. The study showed there are birds, mammals and reptiles as well as other species that are vulnerable, threatened or exposed to minor risks.

In 2014, PAREX prepared four Environmental Management Plans, which included an inventory of species, based on the IUCN Red List of Threatened Species and Resolution 383 of 2010 issued by the Ministry of the Environment. The study yielded that there are birds, mammals and reptiles in critical threat and other species that are vulnerable, threatened or exposed to minor risks. The environmental measures adopted reflect these results.

MamalsBirdsReptiles

CEBUCANPMA TARINGA

829

946

LLANOS 20PMA ZORRO ROJO

*

* No protected species found.

0

LLANOS 26PMA RUMBA

922

839

BLOQUELOS OCARROSPMA ZAMPOÑA

3960

15114

4 8 12 16 20 24 28 32 36 40 44 48 52 56 60


019

PAREX honors its environmental duties and protects natural resources.

INVENTORYOF PROTECTEDSPECIES IN FOUREXPLORATION

BLOCKS

On April 24, 2014 PAREX executed Agreement OS411000797 with Fundacion Reserva Natural La Palmita with the purpose of preserving the integrity of the ecosystems found in the area of direct influence of the Llanos 20 Block located in the Department of Casanare. The project has a team of specialized environmentalists and practicing students from the UNITROPICO University in Yopal.

“La Palmita” Biologic Diversity Preservation Program

The initial phase consisted studying and monitoring the birds and animal species in the area.VAAº In addition to contributing towards preserving fauna, this proyect aims at strengthening environmental education.

COL $174,947,720 were invested to develop this initiative.

020


During 2014, PAREX continued supporting regional cattle breeding in order to generate alternatives in times when food in Casanare is scarce, and to promote one of the department’s most important economic activities.

This initiative seeks to train farmers in breeding and raising cattle, preventing and controlling desease, as

in CasanareºSupporting Cattle-breeding

well as developing alternatives with which to face prolonged droughts.

Training was held in Aguazul, Yopal and Pore. At the end of each session, trainees were given basic kits with supplies and medication useful for cattle breeding

021


PAREX keeps in mind the community’s expectations in terms of development.

PAREX implements sound management practices to protect the environment and further sustainable development in its areas of operations.

The Company has made an important change in the type of fuel it uses in it its operations by going from diesel fuel to gas. This change has a positive impact on the environment as it reduces carbon dioxide (CO2) and nitrogen oxide (NOx) emissions among other harmful gas products and particles in suspension.

Environmental Management

Gas used in the operations mainly comes from La Casona facilities, and from there, it is transported to other fields such as Maracas and Kona. The Adalia facility also uses self-generated power coming from gas wells.

Diesel: 873.202 KWNatural Gas: 2.300.309 KWTotal: 3.173.511 KW

27,5%

72,5%

POWERGENERATION BY SOURCE:

Diesel and Gas(KW)

022

In 2014 energy intensity for PAREX was estimated at 0.39 kw/boe


Emissions

PAREX uses the 2010 Version 2 of the Protocol for the Control and Supervision of Atmospheric Pollution Generated by Permanent Sources to measure the emission of Particulate Material (PM) Sulfur Dioxide (SO2) and Nitrogen Oxides (NOx).

Residues

Solid residues generated as a result of PAREX operations are classified as organic, recyclable, useless and special (hazardous residues, perforation cuts, and residues for incineration, among others). In order to minimize environmental impacts from inadequate management of these residues, The Company undertakes source separation practices according to the materials involved. Hazardous residues are delivered to authorized companies for treatment and disposal.

VOLUME OFSOLIDRESIDUESGENERATED (TONS)

2014

18 356.02ORGANIC

43 948.27RECYCLABLE

44 009.62USELESS

113 363.84SPECIAL

023


PAREX relates its success to encouraging social, economic and environmental balance in its surroundings

Controlling SpillsPAREX takes on preventive measures to avoid eventual oil, untreated domestic and sewage water, chemical substances, and fuel spills, both within and outside of its facilities. Thus, the Company strives to control any damage to the ground, air, water, fauna, the public infrastructure or the communities.


024

CuTTINGS AND DRILLING MUDS

Contained spills are those that may occur within the platforms and are controlled with raises, auger plates, pumping holes and perimeter ditches connected through traps for oil and rain water. Uncontained spills are those that emerge from the oil platform and make direct contact with the environment.

The operations area has reinforced Contingency Plans in the facilities and undertakes periodic inspections to avoid possible leaks and the escape of fluids. For its part, HSEQ verifies and carries out permanent follow-up activities to ensure the optimum the condition of the equipment; it also performs environmental drills and organizes road safety campaigns, including the inspection of tanker trucks.

Drilling oil wells produces cuttings from rocks and soil that need to be brought to the surface. Drilling fluids are circulated up from the drill bit, lubricating them, keeping pressure under control, and reducing friction. Once on the surface, cuttings are separated from the fluids and placed in mud sieves, sand traps or grit chambers, among others. Drilling fluids are reused as they are recycled in the borehole.

Elements used to control drilling fluid properties can generate chemical reactions as they come into contact with the cuttings. PAREX carries out all required analyses of muds and solid wastes in order to guarantee that they will be disposed of safely pursuant to the law and oil industry standards. It is worth stressing that the Company has forbidden the use of benzene and sulfur in its operations.

SPILLS

TOTAL436,5 Barrels (bbls)

12 Incidents

5,33%

NON-CONTAINED385,0 Barrels (bbls)

5 Incidents

4,70%

CONTAINED51,5 Barrels (bbls)

7 Incidents

0,63%

5.000

10.000

15.000

20.000

25.000

Cabrestero

Los Ocarros

Llanos 40

Cebucán

Llanos 29

Llanos 57

Llanos 32

Cerrero

2175223206 22848

16376

3345

13260 11769

9440

BARRELS


025

PAREX honors its commitment to protect the environment and the natural resources

PAREX and its stakeholders share the global concern for the protection of quality water resources, both of which require collective management. Global warming has created a worldwide crisis. In 2014, Casanare suffered a prolonged drought that caused distress among the population and had negative effects on the fauna and flora.

PAREX is not unaware of the issues pertaining to the local water resources and has supported regional initiatives to protect them.

As a result of the environmental emergency of 2014, the Company hastened and deepened its investment programs in this area; it contributed to mitigate its effects by building 142 windmills and 40 drinking troughs in Caño Chiquito, Paz de Ariporo, investing a total of COL $908.478.812.

Additionally, the Company joined the Major’s Office of Paz de Ariporo and other local companies to trasport water in tanker trucks, thus making it available for those lacking it the most.

News Report

The Casanare savannah was hit by a drought almost nine months long, reaching its peak in March 2104 in what was labeled as an “environmental tragedy.”

Public attention focused particularly on the effects this situation had on some of the animal species in Paz de Ariporo.

This issue received nationwide news coverage. It evidenced the importance of building bridges for public, private, and civil society cooperation in order to minimize the negative impacts of human activity on the environment. It also signaled to the need to find common solutions to manage the effects of climate change.

Photgraph by:MIGUEL ANDRÉS MARTÍNEZ

At Pthe Wind Brings W

az de Ariporo, ater Back

028

142built

$691.000.000TOTAL COST:COL

WINDMILLS


Protecting the water resources is of paramount importance for PAREX as water is closely tied to each of its activities. This explains why, since the Company first arrived in Casanare in 2011, it has been promoting environmental initiatives to meet this goal. One such project came to life in 2013 to help the Caño Chiquito community, located in the proximity of the Llanos 40 Block, to overcome the water shortage brought on by the drought of early 2014 through ecologically sound alternatives that could ensure a constant water supply.

A CONTRIBUTION BENEFITTING THE FLORA AND FAUNA OF CASANARE

As early as 2013, peasant families and small farmers living in Caño Chiquito identified and prioritized their needs and were able to develop an action plan to install 142 windmills in the area. PAREX made this possible as it promoted the organization of community meetings in which local citizens participated actively to determine the beneficiaries of the project. PAREX paid for the installation of these structures, at a total cost of COL $691,000,000, while the Community Board provided the labor and technical resources required for the implementation of the project and agreed to carry out maintenance work for the wind mills. It took the local farmers only a short time to realize the effectiveness of this ancient method of water extraction, as it works using wind energy rather than expensive fuel driven pumps. As an organization committed to bringing about regional development and to generating social value, PAREX hired a technically qualified local Casanare-based firm, Molinos Tobo, to perform the work associated to the Windmills Project.

By the time the drought impacted Paz de Ariporo, windmill installation was underway in several properties in Caño Chiquito. However, considering the seriousness of the situation, PAREX provided additional crews to accelerate the process and was able to have 52 windmills operating within a three-month period. In addition to benefitting the local community, this project contributed to the preservation of the wildlife and the cattle in the region.

THE COMMUNITY FEELS SATISFIED

Filomena Franco, a resident in the El Guarataro farm, says she now feels more confident to face the next dry season: “The windmill was installed in March 2014; it has been an excellent addition because it doesn’t use energy and produces lots of water. It’s dry season now –November 2014- and the well remains full. It’s been just great.”“Before, as the dry season arrived, we had to use a motor pump. Now we save money on electricity and fuel, and the prairie is much better for the colts,” said Jose Ramon Salcedo, another beneficiary of the Windmills Project at Caño Chiquito.

For Ana Silva Gualdrón, owner of the Caracaral ranch, this project has made a big difference between this dry season and the previous ones. Thanks to the new mill, Ana and her neighbors can see how their cattle and other animals graze on their land in good health. “I have no complaints. On the contrary, I am grateful because last year’s dry season was terrible for us in Paz de Ariporo. This year, we haven’t suffered. I think it’s great that they do this, I’m very happy.”

029


PAREX considers the community’s development expectations

News Report

Efficient and cautious use of water

As an environmentally responsible company, PAREX implemented the Efficient Use and Water-Savings Program in all of its blocks. Under this program, the Company excavates waterproof reservoirs before the rainy season begins to store and use the rainwater accumulated in the lateral lending zones.

Together with the purchase of third party excess water capacity, this process reduces the amount of

water drawn from surface and underground sources for oil exploration.

In accordance with the permits granted by environmental authorities, the Company made water catchment for its operations from two water sources: the Upía River (Cabrestero Block) and the Cusiana River (Llanos 26 Block).

1

2

3

4

5

6

RíoAriporo

RíoCusiana

Tacuya RíoTua

RíoMirriba

RíoCharte

CañoMiel

CañoPetacas

RíoCharte

CañoGüira

CañoChiquito

Chitamena Caño Güira RíoUpía

CañoGandul

CañoIguamena

Brazo laPedragosa

RíoCabuyarito

RíoCusiana

CañoVigía

4 4

2 2 2 2

4,1 4,1 4,1

2,53 3 3 3

6,6

2

5

3

5 5

VOLUMESLicensed (Liters/sec)

SURFACE SOURCES

LLANOS 40 CABRESTERO EL PORTÓN CERRERO LLANOS 26

CEBUCÁN LLANOS 30 LOS OCARROS EL EDÉN LLANOS 32

• Restrictions on catchment

PERMITS FOR CATCHMENT OF SURFACE WATERS

2014

030


For the catchment of subterranean waters, the Company undertakes detailed technical analysis of water bearing sources and obtains the corresponding usage permits; it also measures water levels rigorously and makes sure that they are used and disposed of safely.

1

2

3

4

5

6

7

5 5

7,5

55,5

Hydric resource permits

LLANOS 40

LLANOS 32

LLANOS 16Exploration

LLANOS 16Development

LLANOS 30

LLANOS 20

LLANOS 57

perm

iso

de e

xplo

raci

ón

perm

iso

de e

xplo

raci

ón

Total water use for industrial purposes in PAREX was 54,255.6 gallons, while domestic water requirements reached 22,243.4 gallons. As a result, average water use during 2014 was 3,53 gallons per barrel of oil produced.

In regard to the water present in oil fields, known as formation waters, the Company strictly complies with the laws currently in force and the terms set

IN DRILLINGPER BLOQUEOPERATION

5,000,000

10,000,000

15,000,000

20,000,000

30,000,000

25,000,000

LLANOS 20 LLANOS 32 LLANOS 17LLANOS 16 LOSOCARROS

CABRESTERO LLANOS 40

4,057,852

16,635,85915,106,956

5,731,025492,634

157,308

647,428

42,829,064

TOTALBARRELS

Re-injection of water per block 2014

forth in the environmental licenses. PAREX controls formation waters by taking periodic samples, which are then sent to specialized and certified laboratories for analysis. In this manner, the Company monitors the physical and chemical conditions of the water and ensures its appropriate treatment and disposal.

PAREX does not make any direct discharge of these liquids to the surface water. In 2014 a total of 42,829,064 barrels of water were re-injected as a result of Company exploration activities.

031


PERMITS FOR CATCHMENT OF Subterranean WATERS

2014

VOLUMESLicensed (Liters/sec)

PAREX honors its commitment to the environment and protects natural resources

PAREX celebrated the World Environment Day with the communities and its workers. As part of the “Plant a tree, Grow life” campaign, plants and bio-germinators were distributed to the teachers and students at the Liceo Moderno school in Yopal, Casanare.

CelebraTINGNATURE

PLANTGROW

A TREE

LIFE

032

Additionally, specialists and environmental technicians taught students and faculty on how to plant a tree using the bio-germinators. As well PAREX staff and their families participated in an internal photography contest in which they could show pictures of how their trees were growing.


Since 2013, PAREX has sought to develop an environmentally friendly material to substitute the use of plastic and carton cups and containers in its Bogotá offices. This initiative led the Company to change these items for others made from corn bio-granules, sugar cane mash and wheat fiber. Nearly 30 kilos of used packs are collected every week for use as biodegradable residues.

The project also included talks with staff in different areas of the Company to inform on the advantages of the new products and the benefits of the biodegrading process, thus raising environmental awareness among PAREX employees.

This is where the process would begin to make the product:

Bio-p100% biodegradable and compost

acking Project 2013 - 2014able Clean fertilizer

COLLECTING ORGANIC RESIDUES

PHOTOSYNTHESIS

PHOTOSYNTHESIS

GROWING GRAIN AND WOOD

EXTRACTION

Corn bio-granules

CORN SEEDS AND GRANULES

PRODUCING PAPER AND FILM

END PRODUCT

1. Start of the process

2. Elaborating bio-containers with different

designs

3. Treating resudues, biomass

4. Going Back Into The Soil As Fertilizer

BIOMAS

COMPOST MAKING

033

PAREX behaves as a good corporate citizen


PAREX is convinced that its success must be reflected in the personal and professional growth of its staff. Company growth in Colombia has brought along new employment opportunities: more jobs, promotion, training, and competitive salaries and benefits as compared to the hydrocarbon industry. The Company generated conditions for individual advancement, work-family balance, as well as safety and security for its employees. PAREX is well aware that participation and cooperation from its personnel is essential to attain the business goals and that each employee represents the organization as it relates to its stakeholders.

STAFFPAREX2012 - 2014 50

100

150

200

250

2012

147

2013

154

2014

232

Direct Employees

50

100

150

200

250

2012

81

2013

36

2014

98

Admissions

50

100

150

200

250

2012

15

2013

22

2014

36

Retirement

Between 2013 and 2014, PAREX’s employment structure changed as it hired 82 additional direct employees. This figure represents an increase of more than 63.6%, while the personnel rotation index reached 26.72%. These results stem mainly from the job absorption resulting from the purchase of Verano Energy and to the increased scope of its operations. During 2014, the Company also sponsored 14 practicing students from the National Apprenticeship Service (SENA).

DISTRIBUTION OF PERSONNEL BY GENDER

164 MEN68 WOMENTotal: 232

29,3%

70,7%

33,1%

66,9%

103 MEN51WOMENTotal: 154

33,3%

66,7%

98 MEN49 WOMENTotal: 147

034

Human ResourcesAssociated to our growth


PAREX has an employment policy that values and promotes a diverse workforce and gender equality. When compared to the two previous years, employee distribution by gender evidences a reduction in the rate of female employment. However, the total number of female employees has risen and the Company’s staffing practices are comparable to other major oil companies operating in Colombia.

Approximately three out of every five PAREX employees are within the 31 to 50 year age range. This fact evidences that the Company’s personnel age structure blends productivity with the invaluable experience of its staff. PAREX focuses on creating deep long-term commitments with its staff, offering a safe and trusting working environment. All direct employees are hired under an indefinite contracting scheme in the the terms of Colombia’s labor laws. This same standard is recommended to all off PAREX’s contractors and suppliers.

The Company’s compensation policies ensure that employees will enjoy a competitive salary, close to the market average. The MERCER poll which includes a significant number of companies operating in Colombia’s hydrocarbon sector is taken as a reference point to determine compensation levels. The Company will pay special attention to any

wage differential that may exist between men and women in order to ensure equal pay for every professional category and to strengthen the Company’s staff retention policies.

All of PAREX’s employees are free to structure their own benefit plan from the moment they are hired, adjusting it to each person’s individual needs and expectations, and in accordance with the Company’s offer. Additionally, direct contracting allows employees to enjoy Stock Appreciation Rights (SAR), thus benefitting from the higher value of Company shares in the market. Staff members may also receive bonuses associated to each person’s contribution toward the attainment of corporate goals. This incentive is determined on individual performance according to corresponding annual assessments. The Company strictly honors maternity and paternity leaves; those who make use of these leaves of absence return to their jobs and resume their routine activities.

PERSONNEL DISTRIBUTION BY AGE RANGE

20

40

60

80

100

120

MENWOMEN

Underde 30

Between31 y 50

Overde 51

21

46

116

47

101

68

147

17

035


At PAREX, our staff is our main asset

PAREX plans career advancement programs after a careful review of the existing position profiles, and analyzing the skills required to fill them in accordance to Company requirements. Opportunities for job promotion and training are determined through careful assessment of job performance.

The Company supports its employee requirements for formal and non-formal education. Formal education includes undergraduate and graduate studies leading to “Specialist” level degrees; in this case, the Company sponsors up to 50% of the tuition fees. Non-formal education programs refer to professional courses and seminars, as well as short-term academic offerings, the cost of which is fully covered by the Company. Additionally, PAREX offers all of its personnel permanent English courses during work hours in an effort to encourage bilingualism.

Promotion and Development

STAFFPROMOTION

INDEX5

10

15

20

25

2012

16

2013

12

2014

25

year

No. Promoted

10,8% 7,8% 10,9%

TRAININGHIGHLIGHTS

50

100

150

200

250

WOMEN

155

MEN

144

229 PEOPLE TRAINED

Over the past three years, PAREX promoted more than 50 staff members within the organization.

In 2014, the number of full-time employees grew by 10.8%, 3% more than in 2013.

036


037

During 2014, PAREX invested more than COL $400 million pesos in personnel training, an increase of more than 40% as compared to the previous year. The Company organized field visits for its Bogota staff, and encouraged cultural, recreational and sporting activities, with the purpose of reducing work-related stress; it also celebrated special occasions such as Christmas holidays and family days with the purpose of integrating the members of staff.

500

1000

1500

2000

2500

3000

3500

Formal Education

3000

Non Formal Education

806

English

2400

HOURS

HOURS

TRAININGBY TYPE

TRAININGBY GENDER

48,2%

51,8%MENWOMEN

INVESTMENT IN TRAINING

221.322.490

287.801.000

401.920.000$

$

$


PAREX encourages professional advancement and growth for its staff

038


During the time that Daniela Palma taught preschool children in Buenos Aires Bajo, a township in Villanueva, Casanare, it never crossed her mind to dress in overalls, wear gloves, helmet and boots, let alone manipulate gauges and test tubes with which to analyze changes in the density and temperature of oil.

But Daniela is a woman who likes to face the challenge. She shyly admits she is driven to benefit from the opportunities life has to offer. That was just what she did when her father in law told her that a temporary employment company in the area was hiring people interested in working shifts at PAREX.

As people who like to take risks usually do, Daniela did not think twice; she presented herself to the bid, passed the qualification tests and took the position as Training Assistant in PAREX‘s Cabrestero field. From that moment on, life changed for Daniela, for her husband and four-year-old daughter. "Here, we all have benefits. We have been affiliated to the health and retirement fund, and that gives us more stability," said the worker.

However, Daniela’s dreams do not stop here; "I have many aspirations in my life, such as learning more about this job. I do not know what fate holds for me, but I'm happy with what I have achieved," she said. Surely, she will be able to meet all her goals, because she is both a determined person and committed worker. Daniela has managed to stand out in a mostly-male team; she obtained the highest scores on the technical proficiency tests the Company periodically executes for those working at its facilities.

Being so close to the hydrocarbons industry has helped Daniela to have a better understanding of the scope of the Company’s activities. She is also in a position from which to weigh the local impact of companies such as PAREX: "If we do not take advantage of the assistance provided and we spend the Company’s contributions and investments, then we won’t see the benefits later on."

039


Daniela PA STORY OF SELF-ACCOMPLISHMENT

PAREX understands and encourages gender equality at work

alma

Safe and Healthy Workers Ensuring the health and safety of its staff is a priority for PAREX. To this end, the Company takes a preventive approach: by identifying operational risks it can correct the circumstances that could eventually cause harm to the workers and implements timely measures to avoid those risks. PAREX urges every employee to commit to adopting safe practices. The Company clearly explains the requirements of each job and trains all the personnel to perform her duties in a self–caring manner. Physical, chemical, biologic, ergonomic, psychological, social, and safety risks for every activity are classified and monitored in accordance with Work Health and Safety Program standards (Safe Operations Systems – SOS, Awareness Campaigns, Work Permits, Safety Analysis at Work, Accident Investigation, and Preventive Healthcare, among others). Through HSEQ actions, the Company ensures that all staff members make their working time satisfactory and productive. It helps them to avoid work-associated risks, adopt a culture of risk prevention, and create value for society.

Safety and the well-being of PAREX employees and their families are of the utmost importance. The Joint Committee on Health and Safety at Work (COPASST) convenes regularly on a monthly basis in the terms provided by law. Its four Principal and four Deputy Members are elected by the employees.

In 2014, the Committee held field meetings to listen to the contractors as well as direct and temporary staff. This activity shed light on risks related to the transportation of hazardous substances, which were subsequently reported to

040


the contract managers in order for them to adopt the necessary corrective and preventive measures. Additionally, communications between the Committee and all Company personnel was strengthened via informative e-mails.

In 2015 the Committee’s goal is to work more closely with the HSEQ department and the Labor Risk Administrator, ARL, in order to strengthen safety prevention through active intervention in the Company’s operations. An addendum to the terms of agreement gives PAREX the tools to bind contractors to adopt the Company’s high HSEQ standards and fulfill the safety requirements determined by each Management System. Contractors and service providers are authorized to start their activities in the field once the Company certifies that they meet the required standards. Furthermore, all Company employees, contractor personnel, operational leaders, contract managers and Company HSEQ staff hold daily supervision, pre operational and pre shift meetings. The purpose of these meetings is to plan the work ahead and identify any unsafe behavior of individuals as well as insecure conditions of the tools and equipment used in previous shifts.

During the weekly HSEQ meetings, discussions are held and lessons drawn to anticipate any contingency, identifying opportunities for improvement, and optimizing the system through appropriate action plans. Additionally, health and safety performance results are compiled, drills are organized, and the status of accident investigations is reviewed.

Should any incident occur, PAREX will activate, its emergency plans, take action to mitigate its consequences, and carry-out the corresponding investigations to determine the root causes, devise action plans, and reinforce the lessons learned.

041


For PAREX, it is essential that employees return home safely

Response to Emergencies

Together with its Labor Risk Administrator (ARL), PAREX developed an Emergency Response Plan that details the actions to be taken in case of emergency. Once the crisis is controlled, corrective measures must allow for the reestablishment of normal operations, followed by the disclosure of the lessons learned.

A permanent communications effort by the Company ensures that all parties in the operations know the emergency plans. Contractors are expected to follow the guidelines issued by PAREX and to articulate them with their specific plans, in accordance with their own resources and emergency-calling tree. The Company has 24-hour medical and paramedical services available to respond to health related emergencies, including medevac by land or air. To execute these plans effectively, the Company coordinates its response system with key players such as Mayors’ Office, the Fire Department, and the local Healthcare Centers, among others. A fully equipped ambulance is available to provide assistance for those requiring specialized attention. If authorized by the Company, the ambulance may also assist the community in case of an emergency.

Photograph by: MIGUEL ANDRÉS MARTÍNEZ

PAREX RESOURCES Sustainability Report 2014

ABSENTEEISM AND LOST TIME INCIDENTS

PAREX’s HSEQ management system follows the guidelines provided by the International Association of Oil & Gas Producers (IOGP), an organization that promotes sound health, safety, and environmental protection practices for oil exploration activities.

The most common causes of employee absences are illness, frequently occurring pains, and work-related accidents. In 2014, PAREX had a global severity rate for work related incapacitating incidents of 22.4 per million hours worked and a total of 234 days lost; these figures do not include minor accidents that require first aid attention.

05

10

20

30

40

50

2014 2013 2012

0503

06

EVENTS

40

80

120

160

200

240

2014 2013 2012

234

25

189

DAYS LOST

2.000.000

4.000.000

6.000.000

8.000.000

10.000.000

12.000.000

2014 2013 2012

10.444.341

4.091.772

7.781.642

DAYS WORKED

PAREX: LOST-TIME INCIDENTS 2012-2014

In 2014, the lost-time frequency index for PAREX was 0.48, a result that is 50% less than the corporate goal of 0.9 accidents per million hours worked. It is

important to stress that in the five years PAREX has been operating in Colombia there have been no fatalities.

No

1

2

3

4

5

MONTH

FEBRUARY

JULY

OCTOBER

NOVEMBER

DECEMBER

POSITION

TECHNICAL ASSISTANT

FIELD MANAGER

GENERAL SERVICES ASSISTANT

QUALITY SUPERVISOR

FIELD MANAGER

BLOCK

CABRESTERO

LLANOS 32

CORPORATE

LLANOS 40

LLANOS 32

GENDER

M

X

X

X

X

F

XDETAILED INCAPACITATINGACCIDENTS PER ACTIVITY,

GENDER AND BLOCK

043


At PAREX, Human Resources are our most important asset

Respect

At PAREX, road accidents associated to the Company’s transportation activities are a reason for concern. In 2014 increasing transportation activities accounted for an accident rate of 0.94 per million kilometers travelled, lower than the corporate goal of 1.5. Indeed, between 2013 and 2014 the number of kilometers travelled grew by 20%, thus increasing transport associated risk. To address this issue, the Company carried out a number of preventive Road Safety campaigns to minimize said risk.

Through its Road Safety Policy, the Company set safety standards for passenger transport as well as liquid and dry cargo, including hazardous substances such as fuel and chemical products. PAREX’s policy meets the requirements set forth by Colombia’s Ministry of Transportation under Decree 1609 of 2002 regulating land transportation of hazardous materials.

PAREX operations require approximately 600 tanker trucks to transport oil, 150 dump trucks to move material, and 75 light vehicles to transport personnel. The Company is committed to the implementation of thorough and responsible management transportation practices to ensure the safety of its internal and external stakeholders. Consequently, PAREX actively develops communications campaigns to guarantee road safety for all.

“Respect for Life on the Road” became a Company slogan in 2014. It inspired 10 communications campaigns in its area of operations in Casanare. With the use of teaching guides, entertainment activities, discussions, musical performances, and role-playing, PAREX raised awareness of the importance of safe behavior on the road. The implementation of additional strategies, such as the use of radars to measure vehicle speed and alcohol testing, sought to reduce road accidents and generate respect for life the road. PAREX wants to make sure that the staff returns home safely. In 2015, PAREX will reinforce these campaigns to reduce transportation related accidents even further. The Company works preventively and proactively by supporting local transportation companies to meet road safety standards.

0,94%

21.342.604

17.833.953

15.788.619

0,73%

0,89%

for Life on the Road

ACCIDENT RATEPER MILLION KILOMETERS TRAVELLED


044

PHOTOGRAFY BY:MIGUEL ANDRÉS MARTÍNEZ

Social Responsibility (CSR) at PAREX originates in a corporate mandate; as such, it involves the entire organization. The Company not only observes the laws that govern the industry, but also attempts to go beyond those mandates as it seeks to meet its stakeholder’s expectations while generating positive and sustainable impacts on the society and the environment. Social Responsibility at PAREX summarizes management’s strategy to share business success.

Social Responsibility and Sust

Everyone has Something to Give: Investment for the Future

ainability

PResponsibility ModelAREX Social

ENVIRONMENTALECONOMIC

SOCIAL

SUSTAINABILITY

PUBLICINTERESTRESPONSIBILITY

CORPORATE

COMMITMENT

VALUESPRINCIPLESGOOD PRACTICEGOVERNANCE

SHARED BENEFITS

SHARED BENEFITS

VALUESPRINCIPLESGOOD PRACTICE

048


PAREX understands strategic communications as an essential element that cuts across the organization: the Company builds its reputation not only by doing things well, but also by communicating them effectively. Building a good reputation with its internal and external publics guarantees long-term success: a feeling of pride among the staff as well as commitment and a good working environment. Externally the Company encourages trusting relationships, Understanding, and stakeholder approval.

Strategic CommunicationS

049

At PAREX, sincere, ongoing two-way communication is paramount


Social Investment

At PAREX, social investment has a strategic purpose. The Company seeks to respond to its stakeholder’s concerns while contributing to the execution of regional Development Plans as they influence the communities located in the proximity of its areas of operation. The Company considers local authorities as potential allies to further sustainable development projects.

Between 2013 and 2014, PAREX more than doubled its resources for social investment, reaching a total of COL$ 8,445 million pesos. As the scope of exploration activities increased so did the number of projects benefitting the communities near 15 exploration blocks, as compared to 9 blocks in 2013. PAREX organizes its social investment around the following program categories: Support for the Community, Local Government Capacity building, Economic Development, Culture, Recreation and Sports, Contribution to Local Development Plans, and Special Projects.

2.000.000.000

4.000.000.000

6.000.000.000

8.000.000.000

10.000.000.000

12.000.000.000

2014 2013 2012

8.444.934.007

3.166.079.397 3.180,386.763

SOCIAL INVOLVEMENT CATEGORY

Support for the community

Local Government Capacity building

Economic Development

Culture, Recreation, and Sports

Contribution to Local Development Plans

SPECIAL PROJECTS

TOTAL

CABRESTERO

-

-

1.360.751.227

32.436.800

-

143.750.170

1.536.938.197

OCARROS

322.553.545

211.405.000

322.902.700

6.949.720

385.771.699

-

1.259582.664

LLANOS 16

137.503.900

36.190.800

96.452.165

80.951.158

577.894.875

156.867.265

1.085.860.163

LLANOS 17

16.475.000

-

-

-

-

-

16.575.000

LLANOS 40

69.967.197

-

89.696.923

54.350.000

1.091.360.612

-

1.305.374.732

SOCIAL INVESTMENT

BY BLOCK AND TYPE OF INVOLVEMENT

CATEGORY

050


LLANOS 57

22.009.200

-

177.373.506

5.570.200

11.927.999

-

216.880.905

LLANOS 30

171.786.040

24.657.460

87.125.312

6.732.600

190.000.000

21.600.000

501.901.412

LLANOS 29

-

-

228.000.000

15.000.000

60.000.000

17.216.480

320.216.480

EL EDEN

60.128.960

23.305.360

508.486.848

55.000.000

188.703.051

66.630.200

902.254.429

LLANOS 20

67.150.00

-

-

31.000.000

-

-

98.150.000

CERRERO

291.515.571

7.682.000

-

132.824.702

49.986.914

78.772.718

560.781.905

LLANOS 26

13.430.000

25.000.000

-

-

6.710.000

-

45.140.000

CEBUCAN

260.000

250.000.000

250.000.000

5.475.000

-

-

505.735.000

LLANOS 32

12.190.320

25.000.000

4.220.000

15.232.800

15.000.000

18.000.000

89.643.120

TOTALS

1.184.969.733

603.240.620

3135.008.691

441.522.980

2.577.355.150

502.836.833

8.444.934.007

PAREX keeps in mind the development expectations of the communities

051


052


CAPACITY BUILDING FOR LOCAL GOVERNMENTS

SUPPORT FOR the Community

PAREX strives to improve local institutional capacity by supporting high impact community projects in the territories where it operates. PAREX delivered a fully equipped Basic Transportation Unit (BTU) toto the municipality of San Luis de Palenque, with the purpose of supplying the local Voluntary Fire Department with basic tools with which to provide timely and efficient assistance to the population.

PAREX works on strengthening the Community Boards as they are an effective means to represent and organize the communities. Together with public and private organizations, the Company offers training and education programs to improve the Boards’ performance, foster opportunities for citizen participation, and generate management and leadership skills to leverage resources to improve the community’s lifestyle.

PAREX supported the Community Board of Caño Chiquito: 94 active members received training in Leadership and Participatory Planning. As a result, the Community Board successfully drafted its Rural Settlement Development Plan.

MIGUEL ANDRÉS MARTÍNEZPHOTOGRAFY BY:

053


PAREX generates long-term relationships with its stakeholders

HERITAGE AND CULTURE


PAREX understands that every expression of the local culture strengthens collective identity and fosters a sense of belonging to the region. It also acknowledges that sports and recreation are key to instill values such as respect and tolerance in the community and to highlight the importance of rules and self-esteem for a peaceful community coexistence.

The community at Curimina, a settlement located in the municipality of Pore, Casanare, celebrated

the opening of the new bull taming (Coleo) track on May 2014. Local residents built the track while PAREX contributed COL $45 million pesos to purchase the equipment and materials necessary for the construction.

In addition to preserving the Llano grassland traditions and integrating the community, this facility represents an opportunity, as the proceeds from these events will finance community projects planned by the local Community Board.

SPECIAL ProjectsPAREX implements a number of special projects in the frame of its Social Responsibility program. These projects have a strategic meaning for the Company due to the high impact they produce in the communities.

“Learning is Growing” LibrariesThrough this project, PAREX hopes to help children develop a taste for reading and gain better access to knowledge.

“HEALTH FOR EVERYONE” BRIGADES Health in the communities neighboring PAREX’s operations is a priority. The Company implements health brigades in the rural settlements to provide medical consultation and dentistry services for the local community while encouraging healthy habits among the rural population.

“CHILDREN AT THE PARK” PLAYGROUNDS By building and improving playgrounds, PAREX encourages playtime and healthy entertainment for children.

“MY SCHOOL AND I” INFRASTRUCTURE FOR EDUCATION This project aims to improve infrastructure for education and contribute to school maintenance. PAREX believes that good physical conditions in schools dignifies students and teachers and creates opportunities for children to learn more effectively.

“Oxygen Day” Environmental Awareness The Company encourages caring for the environment as a collective task involving communities living in the areas influenced by its operations. In 2014, PAREX provided 5,675 trees and called on the communities in different municipalities to participate in gatherings to plant them, thus evidencing their commitment to the conservation of the environment.

056


Because effective communications are essential for the success of its Social Responsibility strategy, PAREX seeks to strengthen its ability to engage in dialogue with the communities. The Company engages in open two-way face-to-face frank conversations with its stakeholders. At the same time, PAREX makes every effort to inform its stakeholders on the nature of hydrocarbon exploration work as well as the scope of its operations in the region. The Company’s intent is to increase the trust among all parties and create the fluid exchange of ideas to bring forth sustainable development in the region.

DIALOGUE FOR Development

057


At PAREX, sincere, ongoing and two-way communication is paramount

Nostalgia is the makeup Ninfa Roldan wears on her face. A teacher, Ms. Roldan’s words take us back to the days when her 16-year old students sat through their lessons at small desks made for preschoolers. "I had to make them get up every half hour or so, so they wouldn’t get tired; you should see the tables that I had before," says Ninfa, while gazing up and down the classroom at Nuestra Señora de los Dolores de Manare - Alfonso Lopez headquarters, a school located in St. Helena de Upía, municipality of Villanueva, Casanare. Tired of seeing the precarious conditions in which her 35 students attended their classes, she decided to transform the ramshackle school into a decent place to study. "I wrote PAREX a simple but caring request on a notebook page, telling them what we needed. Eight days later the Company sent a the social worker, who took pictures of the building and saw the shameful conditions we were in: the bathroom was out of order, the desks were rundown and very small; the roof leaked, and snakes nested in the school.”

PAREX heard this request and took action through the Company’s "My School and I" program. Two acrylic boards, 40 desks, and two teacher’s desks with swivel chairs; three computers and kitchen utensils were delivered on April 9, 2014. The school cafeteria was refurnished with six six-seat tables, a refrigerator, and an industrial stove; a kettle was also provided.

Improvements also included Ninfa’s "mansion", as she calls the room where she sleeps every week for the five school days. "It is my mansion, because I've always said that I didn’t have much before. Now I have a four place dining set, linen for my bed, two

wardrobes, a 32-inch TV, a sandwich maker, a coffee brewing machine, new dishes, and a blender. Oh! And I have seven fans, three of which are in my house and four in the schoolhouse. Now we can escape the high temperature that made the classroom unbearable for students. Even my health has improved because I got rid of the terrible heat that made me have sleepless nights. All this is an extraordinary change, “says Ninfa

A HEART THAT KNOWS NO LIMITS

Every Sunday in the late afternoon, Ninfa gets ready to say goodbye to her family and start her 40 kilometer-long journey by bus or motorbike from her home in Villanueva to the school. But she feels it's all worth it, because she fulfilled her greatest dream: to provide her students with a decent learning space to grow as human beings and progress as successful future professionals.

Once in school, she immerses herself in the world of knowledge. She challenges herself to teach every subject, as she is not afraid to tackle any particular one. "I teach Spanish, mathematics, natural science, social studies, arts, and English: all the subjects her students must learn. I know English, not really well, but I can get by," said Ninfaconvinced of her skills as a teacher.

However, Ninfa is not just concerned about her students. She also spends time on the weekends with her 9 children and 18 grandchildren; she nurses and keeps the best company for her husband, who has suffered from lymphatic cancer for years. Without any doubt, Ninfa Roldan is the epitome of devotion, commitment, love and loyalty.

A letter that changed tHE SCHOOL AT SANTA HELENA DE UPÍA

058


059


At PAREX, creating shared benefits is the guiding principle of social responsibility

programs.During 2014, PAREX received 412 requests, 11% less than those submitted in 2013. The number of requests approved was almost identical in both years, reflecting the Company’s willingness to execute highly valued community projects within the areas impacted by its operations.

PAREX believes that when petitions, complaints and claims are filed and acted upon effectively, they

PAREX creates suitable environments in which to dialogue with its stakeholders, listen to their requests and process them whenever they serve the common good and are consistent with the Company’s policies and guidelines. Requests stem

REQUESTSPROCESSED BY PAREX

40

80

120

160

200

240

Approved or solved

Not Approved

Answer Pending

223

00

189

412

40

80

120

160

200

240

Approved or solved

Not Approved

Pending an answer

224

00

237

461

PETITIONSCOMPLAINTS AND CLAIMS

20

40

60

80

100

120

Closing Solved and f iled

In process

18 20

106

144TOTAL TOTAL

40

80

120

160

200

240

Closing Solved and f iled

In process

0003

171

174

from community initiatives as well as from the local authorities. Generally, such requests demand financial resources, which the Company may be willing to provide as part of its social investment

become a powerful tool to cultivate and maintain good relations with its stakeholders, thus preventing and mitigating the risks associated to its operations.

The Company is keen to inform the communities on the manner in which this mechanism may be used, and has developed a communications protocol to be accountable to the public concerning the effectiveness of its response.

TOTAL TOTAL

Requests, Petitions, Complaints and Claims

060


By the end of 2014 PAREX had processed 144 petitions, complaints and claims, a figure lower than that reported for 2013. Given the increase in Company activities, additional channels opened to process local queries. Hence, these results above indicate that PAREX is working with greater efficiency to reduce the economic, social, and environmental impact of its operations. It is important to highlight the fact that every case is a formally closed when the person filing the petition, complaint or claim receives notice of the Company’s decision.

BY ISSUE

29,9% Impact on property28,5%

5,6%

5,6%16,7%

13,9%

Labor related issues

Contractors

Damage to the infrastructure and roadways

Environment

Petition Rightsand other claims

Close to 60% of the complaints filed refer to the effects of Company and contractor activity on private properties and farmers’ land. An additional 20% relate to labor issues and alleged environmental impacts resulting from exploration activities.

PAREX has worked hard to reduce labor related incidents as they are mostly associated to payroll and legal benefits issues as well as employee overtime pay by contractor companies.

Further, the Company has made efforts to reduce dust and noise emissions. Nevertheless, PAREX needs to improve its planning and supervision capacity to be fully accountable to its stakeholders, thus building a trusting environment, one that is suitable for oil operations.

PETITIONSCOMPLAINTS AND CLAIMS

061


PAREX KEEPS IN MIND THE DEVELOPMENT EXPECTATIONS OF THE COMMUNITIES

062

The Economic Development category for social investment promotes new business ventures in the community to generate new sources of income, strengthen the local economies, and improve the local families’ lifestyle. The Company is well aware that its presence will eventually end; hence, it endeavors to support the community to gain access

to the knowledge and skills necessary to prosper in activities other than those associated to the oil industry. PAREX believes that social projects must be consistent with the local governments’ development goals, as they become a key factor contributing to their long-tern success.


IDEAS for Progress

063

This program was launched by the Governor of Casanare to provide access to financing and credit for all the population. The design of Comunal Banks allowed them to make loans, finance new businesses, improve community housing, and encourage savings.

To manage credit successfully, citizens needed to understand the system and learn to manage and control their finances. Community Boards became the cornerstone to provide the necessary training.

PAREX considers Communal Banks as an opportunity to fulfill its goal of sharing value. The Company is convinced of the importance of generating virtuous circles, empowering neighboring communities so they may become agents of their own development and become accountable for their well-being.

Consequently, PAREX developed alliances with its partner companies and agreed to invest in the education of the Community Boards to enable them to manage the Communal Banks.

“Communal Banks” Program


In 2014, PAREX purchased goods and services in Casanare for a total of COL $39,072,119,365 pesos. The purpose was not only for the local business sector to obtain economic gains from the oil industry, but to improve the firms’ competitive standing through the adoption of high quality standards for

PROMOTING THE REGIONAL BUSINESS PERSONS

Manager TecniporePore- Casanare

the goods and services produced, as well as for the social and environmental value generated. For example, during 2014 two companies, Palenquera and Transcurama, obtained an 80% performance score on industrial health and safety, after proper training by the Company.

“Although we area small company,we have been ableto grow becausePAREX gave us thechance to do it.”

064


AND HIS FAMILY HAVE BEEN ABLE TO CONSOLIDATE THEIR BUSINESS THANKS TO THEIR TENACITY AND THE SUPPORT THEY HAVE RECEIVED FROM COMPANIES LIKE

PAREX

JOSÉ RAMÓN SALCEDO

caño chiquitocasanare - colombia

'

GENERATING SHARED BENEFITS IS A PRINCIPLE THAT GUIDES SOCIAL RESPONSIBILITY AT PAREX

065


PAREX believes that when individuals commit to socially responsible actions, these can become a part of the corporate drive to share benefits. This is the reason why the Company developed the Sponsors Plan, one that calls on the employees and contractors to make donations for home improvements for families living in the area of influence of its operations.

THE SPONSORS PLAN

066


Solidarity Begins at Home The house was small, frail, with its zinc roof, and wooden walls. “We had two beds and two hammocks. The baby and I slept in one bed; the girls in the other. The older boy slept in the hammock in the hallway. Whenever it rained he had to come inside because he would get wet.”

This was everyday life for Yolanda Carrasco, who sells bananas in Regalito, a rural settlement in Pore, an area influenced by the Llanos 16 exploration Block. She was unaware that through the Sponsors Plan, that promotes the donations of PAREX employees and contractors, her life and her family’s life would start to change on February 2014.

As part of its Social Responsibility policy, the Sponsors Program decided to invest these funds to benefit Yolanda and her family. Within three months, Yolanda’s home was refurbished. It is now bigger and more comfortable. There are bunk beds for her children and a bed for herself. She now owns a refrigerator, kitchenware, fansn and a laundry. This machine is now her new working tool. Yolanda will leave aside her banana business and make a living doing the laundry for the PAREX contractors at the loading platform.

“When we got the house, everything was new. We even got clothes and groceries. We are really grateful for everything they did for us,” says Yolanda. Then she explains in detail how this dream became real: “The local Community Board approached the Company and told them about our situation. Then people from PAREX visited me and asked how I lived. Soon after, they said they would build a house for us.” PAREX contractors gave part of their salaries to buy the materials and the employees collected resources to pay for the work.

A Big Surprise on the Day they got the House

Yolanda waited anxiously to receive her new home, scheduled for August 20, 2014. That day, PAREX President, Leo Nicholas Di Stefano, arrived at the scheduled time. Carmen Sylvain, Canada’s Ambassador to Colombia, who kindly accepted the Company’s invitation to officially present Yolanda with her new home, accompanied him.

Yolanda could not overcome her surprise at this unexpected visit. She showed her gratitude with PAREX officials: “it is thanks to you that I have this big and beautiful house.” Ms. Sylvain and Mr. Di Stefano also received a touching letter from Oliver, Yolanda’s 16-year-old son. “Thank you all: it’s worth to keep on living.”

067


Parex generates long term actions with its stakeholderS

Jose Freddy Zamudio seems very small when he walks among the oil tanks at the Maracas field, located in the small town of San Luis de Palenque. For a moment, he gazes into the horizon as he recalls he began his working days 18 years back as a day laborer in the area’s rice and palm fields. He makes a quick gesture, as if coming back from a dream, and explains how for a long period work was unstable and kept him away from his family for long periods. At the age of 33, he began working in the oil industry in Casanare. Two years ago, when he turned 38, he

began working for PAREX. José Freddy proudly narrates that he gained hands-on knowledge of the hydrocarbon industry, but he received training for his current job as production assistant, a demanding position that requires hard work and perseverance. “PAREX gave us the chance to take a course and when I was evaluated, I got a 94%, score,” says Jose Freddy who was the best in his class.

A year after signing up for work in the Company as a SAR Energy employee, his life changed completely. “I can see the change; here, you have a contract, a

Labor Opportunity and Quality Life

068


house, and benefits,” he says.

For him the most important change is that he can spend time with his family. He is well aware that his employment contributes to his children’s wellbeing: “My daughter is in High School and she owns a laptop computer; my four year-old son has better toys and a TV set where he watches educational programs. I am surprised at how many things he knows at such an early age. He understands geometric figures; I am amazed this is happening!” For Jose Freddy, PAREX has left a distinctive mark

because the Company maintains direct contact with the community. “For example, I have learned how to care for the environment, the importance of recycling and preserving the resources we have in the region. Also, the Company’s social advisers help us a lot; they guide us and encourage us to use all the opportunities the Company gives us,” he concludes.

069


AT PAREX, HUMAN RESOURCES ARE ITS MAIN ASSET

Includes indicators from guide G4 of the gri and the oil & gas industry supplement

ECONOMIC

SOCIAL

ENVIROMENTAL

SO1

SO4 12

SO11

HR12

LA1

LA5

LA6

OG13 Number of process safety events, by business activity 43, 44

LA9 Average hours of training per year per employee by gender, and by employee category

LA10

LA11 36

LA12 34, 35, 36

LA15 44

LA16 60, 61

Percentage of operations with implemented local community engagement, impact assessments, and development programs

Communication and training on anti-corruption policies and procedures

Number of grievances about impacts on society filed, addressed, and resolved through formal grievance mechanisms

Number of grievances about human rights impacts filed, addressed, and resolved through formal grievance mechanisms

Total number and rates of new employee hires and employee turnover by age group, gender and region.

Percentage of total workforce represented in formal joint management–worker health and safety committees that help monitor and advise on occupational health and safety programs 40, 41

43, 44

36, 37

36, 37

Type of injury and rates of injury, occupational diseases, lost days, and absenteeism, and total number of work-related fatalities, by region and by gender

44, 57, 60

Number of grievances about labor practices filed, addressed, and resolved through formal grievance mechanisms

Percentage of employees receiving regular performance and career development reviews, by gender and by employee category

Significant actual and potential negative impacts for labor practices in the supply chain and actions taken

SOCIAL INDICATORSDESCRIPTION PAGE

CODGRI 4

GRI Table - Indicators

070


Programs for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings

60, 61

60, 61

34

Composition of governance bodies and breakdown of employees per employee category according to gender, age group, minority group membership, and other indicators of diversity

DESCRIPTION

DESCRIPTION

PAGE

PAGE

CODGRI 4

EC1

EC3

EC9

Direct economic value generated and distributed

Coverage of the organization’s defined benefit plan obligations

Proportion of spending on local suppliers at significant locations of operation

ECONOMIC INDICATORS

13

13

64

CODGRI 4

ENVIRONMENTAL INDICATORS

EN1

EN3 Energy consumption within the organization 22, 23

EN5 Energy intensity

22

EN9 Water sources significantly affected by withdrawal of water

EN11 19

EN13 Habitats protected or restored

EN14 19

OG5 Volume of formation or produced water.

OG7 25

EN23

Total number and volume of significant spills

23

EN24 25

19OG4

EN31 Total environmental protection expenditures and investments by type 16

EN34

EN22 Total water discharge by quality and destination 31

Materials used by weight or volume

23

30, 31

20

31

Amount of drilling waste (drill mud and cuttings) and strategies for treatment and disposal.

Number and percentage of significant operating sites in which biodiversity risk has been assessed and monitored

Operational sites owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas

Total number of iucn red list species and national conservation list species with habitats in areas affected by operations, by level of extinction risk

071


PAREX is guided by a principle of generating shared benefits

61

Total weight of waste by type and disposal method

Number of grievances about environmental impacts filed, addressed, and resolved through formal grievance mechanisms

CREDITS

CEOWayne K. Foo

President Parex Resources Colombia LTD. SucursalLee DiStefano

Corporate Vice-president Rafael Pinto

Operations Vice-presidentDaniel Ferreiro

Explorations ManagerGustavo Fortunato

Drilling ManagerErnesto Melo

Human Resource Manager/TIC/ManagementMaría Teresa Arévalo

Marketing and Transportation ManagerAna María Pinzón

Financial ManagerFederico Paz

HSEQ ManagerRubiela Beltrán

Social and Corporate Responsibility and Communications ManagerSandra Patricia Rodríguez

Purchases and Logistics ManagerCarlos Ruíz

Security and Risk Prevention ManagerCamilo Martínez

Corporate Communications CoordinatorAndrés Felipe Martínez

Direction, Research and Preparation of this ReportSIGNUM CONSULTING S.A.S

Art and Photography DirectionSAGRADO ARIOSA S.A.S

Parex Resources Colombia Ltd., Sucursal

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