(GeoPark, 14.Aug.2024) — GeoPark Limited reports its consolidated financial results for the three-month period ended 30 June 2024 (“Second Quarter” or “2Q2024”). A conference call to discuss these financial results will be held on 15 Aug. 2024, at 10:00 am (Eastern Daylight Time).
SECOND QUARTER 2024 FINANCIAL SUMMARY
In 2Q2024, GeoPark delivered $127.9mn Adjusted EBITDA1, a margin of 67%, and $25.7mn net profit. Quarterly average oil and gas production in 2Q2024 reached 35,608 boepd, down 3% compared to 2Q2023, mainly due to the divestment of the Chilean business on 18 Jan. 2024, and suspended production at the Manati gas field in Brazil (GeoPark non-operated, 10% WI) due to unscheduled maintenance.
GeoPark invested $49.2mn in capital expenditures in 2Q2024, focused on i) continuing the development of its core operations in the Llanos 34 (GeoPark operated, 45% WI) and CPO-5 (GeoPark non-operated, 30% WI) blocks in Colombia; ii) delineating the new plays opened in 2023 in the Llanos Basin in Colombia and the Oriente Basin in Ecuador and iii) preparing the new Llanos 86 and 104 blocks (GeoPark operated, 50% WI) for future exploration.
Capital efficiency was once again a key feature of the quarter. Each dollar invested in capital expenditures yielded $2.6 in Adjusted EBITDA, and the return on average capital employed reached 38%.
These financial achievements and discipline allowed GeoPark to continue rewarding its shareholders with quarterly dividends of $7.5mn ($0.147 per share) and a successful tender offer of 4.4 million shares at $10 per share that was launched in 1Q2024 and ended in Apr. 2024, reducing shares outstanding by approximately 8%. Undersubscription to the tender offer demonstrated shareholder confidence.
GeoPark’s acquisition in Vaca Muerta was effective 1 Jul. 2024, and is expected to close by the end of the third quarter. The acquisition adds to pro forma production, taking consolidated pro forma production to more than 41,000 boepd as of the effective date. Following 12,508 bopd gross average production in 2Q2024 from the unconventional development wells in the Mata Mora Norte Block (GeoPark non-operated, 45% WI), the operator is currently drilling three unconventional exploration wells in the Confluencia Norte Block (GeoPark non-operated, 50% WI) aimed at derisking the full potential of the block.
Andrés Ocampo, Chief Executive Officer of GeoPark, said: “GeoPark again delivered strong financial performance in 2Q2024, underscoring the effectiveness of our strategic initiatives and disciplined approach to capital allocation, while maintaining a robust balance sheet. In the second half of 2024, we look forward to the continued development of our core operations in Colombia and Ecuador, and the integration of our newly acquired assets in Vaca Muerta. Our strategy remains centered on delivering consistent value to our shareholders through prudent financial management and targeted growth initiatives.”
SECOND QUARTER 2024 HIGHLIGHTS
Oil and Gas Production and Operations
— 2Q2024 consolidated average oil and gas production of 35,608 boepd2
— Production increased 11% in Ecuador and 3% in Colombia, offsetting suspended production at the Manati gas field in Brazil due to unscheduled maintenance
— Llanos 34 Block average production in 2Q2024 was 3% lower than 1Q2024 due to sporadic blockades, weather-associated flooding, and base decline, partly offset by new well production
— The CPO-5 Block reached record average production in 2Q2024 after putting the Indico 3 well on production. The Lark 1 exploration well reached total depth in late July 2024 with no hydrocarbons in the targeted Ubaque and Guadalupe formations, and the well was abandoned
— 10 rigs in operation at the end of 2Q2024 (6 drilling rigs and 4 workover rigs), including one drilling rig in Argentina
Revenue, Adjusted EBITDA and Net Profit
— Revenue of $190.2mn, an increase of 14% from 1Q2024, reflecting higher realized oil prices
— Adjusted EBITDA of $127.9mn (67% Adjusted EBITDA margin), an increase of 15% from 1Q2024
— Operating profit of $90.3mn (47% Operating profit margin), an increase of 8% from 1Q2024
— Net profit of $25.7mn, a decrease of 15% from 1Q2024 mainly due to the effect of the devaluation of Colombian peso on deferred income taxes
Cost and Capital Efficiency
— Capital expenditures of $49.2mn
— 2Q2024 Adjusted EBITDA to capital expenditures ratio of 2.6x
— Last twelve-month return on average capital employed of 38%3
Balance Sheet Reflects Financial Quality
— Cash in hand of $66mn, after repurchasing outstanding shares worth $43.7mn, making a $49.1mn advanced payment for the Vaca Muerta acquisition in Argentina, and paying $52.5mn income tax (Colombia 2023 full amount)
— Net leverage remained healthy (0.9x), with no principal debt maturities until Jan. 2027
— Current cash position of $85.8mn (31 Jul. 2024)
— Fitch Ratings revised GeoPark’s rating outlook to stable (from negative), reflecting the increase in reserves and improved geographic footprint resulting from the Vaca Muerta acquisition in Argentina
Growing Shareholder Returns
— Cash dividends of $7.5mn (representing an annualized dividend of approximately $30mn, or a 6.8% dividend yield4)
— Successful tender of 4.4 million shares (8% of outstanding shares) at a purchase price of $10 per share on Apr. 2024
— Quarterly cash dividend of $0.147 per share payable on 12 Sep. 2024, to shareholders of record at the close of business on 29 Aug. 2024
Commercial Agreements Improve Price Realizations and Add Financial Flexibility
— Vitol Agreement: Commercial agreement in effect as of 1 Jul., delivering production from the Llanos 34 Block and improving price realizations by $0.60/barrel vs the average price realizations from January 2021 to Jul. 2024. Access to committed funding for up to $300mn, with an option to increase by another $200mn for a total of $500mn, in prepaid future oil sales over the period of the offtake contract. As of today, GeoPark has not drawn any amounts for prepaid sales
— Trafigura Agreement: New commercial agreement in effect as of 1 Aug., delivering production from the CPO-5 Block and improving price by $2.65/barrel vs the average price realizations from Jan. 2021. This agreement is associated with a prepayment facility for up to $100mn of financing to be repaid in future oil sales over the period of the offtake contract (12 months). Upon completion of the legal documentation, the prepayment agreement will provide GeoPark with immediate liquidity that will further strengthen its balance sheet and expand existing cash availability. As of today, GeoPark has not drawn any amounts for prepaid sales and the prepayment facility is subject to final signature of the contracts
2H2024 PRODUCTION UPDATE
During 1H2024, GeoPark averaged 35,540 boepd production, at the lower end of the 35,500-39,000 boepd organic production range indicated for 2024. During 2H2024, the main risks to production are (i) increased uncertainty around the effective restart date of the Manati field, originally planned by end of May 2024, and now expected by the operator to initiate end of Oct., (ii) new well activity and performance in the Llanos 34 Block may not offset the natural base decline of the fields, and (iii) increased frequency and duration of blockades around the operations in Colombia. The downside associated to these risks could be approximately 1,500 – 2,500 boepd.
Potential positive results from ongoing exploration drilling in the Llanos 123, Espejo, and PUT-8 Blocks (GeoPark operated, 50% WI) may offset the impact of these risks and have not been included in the 2024 guidance. GeoPark will continue the appraisal drilling campaign by adding wells in the CPO-5 and Llanos 123 blocks.
Importantly, since 1 Jul., production from the Vaca Muerta blocks in Argentina belongs to GeoPark and is already at 5,000 – 5,500 boepd net. These volumes will be consolidated on a line-by-line basis once the transaction is closed (expected by the end of Sep.). Current production levels do not include the potential result from the 2H2024 development drilling campaign in Mata Mora Norte, nor the outcome of three exploration wells to be completed in Confluencia Norte.
GeoPark’s Adjusted EBITDA guidance of $420mn – $550mn5 remains unchanged for 2024.
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