Base Case: 10-15% Production Growth from Self-Funded $45-55 Million
Adjustable Capital Program
GeoPark Limited (“GeoPark” or the “Company”) (NYSE: “GPRK”), a leading
independent Latin American oil and gas explorer, operator and
consolidator with operations and growth platforms in Colombia, Chile,
Brazil, Argentina, and Peru1, today announced its work and
investment program for 2016. (All figures are expressed in US Dollars).
Security and Growth amid Volatility
During 2015, GeoPark took decisive steps to adapt to the new oil price
environment. The Company reduced its 2015 capital expenditure program by
75% year-over-year and implemented a significant cost-restructuring plan
by decreasing production costs by more than 55%, drilling costs by more
than 30%, and cash costs (OPEX, G&A, Selling and Other) per boe by more
than 45%. This results in more than 85% of GeoPark’s production staying
cash flow positive if prices declined to $25-30 per barrel.
These cost reduction initiatives were implemented while preserving
GeoPark’s long-term growth strategy. After a successful drilling
campaign that resulted in the discovery of three new oil fields,
production reached record levels in the fourth quarter of 2015 with an
exit production rate of approximately 24,000 boepd. The Company’s new
project acquisition efforts across the region continued producing
results with the successful acquisition of a new block in Argentina and
three new blocks in Brazil. GeoPark’s balance sheet and cash position
were also further strengthened by a new offtake and $100 million funding
agreement with Trafigura.
In building its 2016 work program, GeoPark’s capital allocation
methodology allows it to rank and select, from its expansive inventory
across five countries, the most attractive projects based on economic,
technical and strategic criteria. This results in a modular-type work
program that can be expanded or reduced depending on oil price or
project performance and can be continuously monitored to balance
investment with operating funds. This foundation allows GeoPark to
continue to protect and grow its base performance, maintain flexibility
and pursue new project opportunities in a volatile environment.
James F. Park, Chief Executive Officer of GeoPark, said: “Despite the
headwinds in our industry, GeoPark’s ten year steady track-record of
growth continues. Our performance again demonstrates: 1. the quality and
depth of our asset base; 2. our financial resilience and strength; and
3. the experience and capabilities of our team. We have built our 2016
program from a rich project inventory, with a balance between cash
preservation and cash generation, and consequently are well-positioned
to quickly react to changing oil price scenarios and for continued
secure growth. We are ready for 2016 and eager to begin working on the
attractive opportunities – both organic and new project acquisitions –
ahead.”
2016 Strategy and Outlook
Balance: Cash Preservation and Cash Generation
GeoPark’s strategic approach to 2016 is guided by the following
principles:
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Secure Base: Secure a strong base program for any pricing
environment – prioritizing lower risk, higher netback, and fastest
cash flow producing projects
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Capital Allocation Discipline: Select the best projects out of
a large number of projects presented by each country, based on
technical, economic and strategic criteria
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Work Program Flexibility: Maximize optionality and flexibility
to add or reduce projects based on oil price and project performance
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Protect Long Term: Protect key assets, tools and capabilities
necessary for long-term plan and success
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Build Scale: Acquire attractive new assets, taking advantage of
unique market opportunity
In preparation for continued volatility, GeoPark has developed multiple
scenarios for its 2016 Work and Investment Program:
Base Case Work Program ($35-40/bbl Oil Price):
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Production: Consolidated 2016 average production of
approximately 22,400-23,400 boepd representing a 10-15% increase over
the 2015 average production level of approximately 20,400 boepd
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Capital Expenditure: 2016 base capital expenditure program of
$45-55 million entirely funded by cash flow from operations.
(Approximately $20-25 million of this amount represent maintenance
capital expenditures, thereby providing flexibility in making any work
program adjustments.)
Break-down of capital expenditure program by each business
unit:
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Colombia: $30-35 million: Focus on Llanos 34 Block (GeoPark
operated with a 45% working interest (WI)). Work plan includes
drilling of 6-8 gross wells (5-7 development wells, 1 exploratory
well) and facilities construction
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Chile: $10-13 million: Resume drilling activities on Fell Block
(GeoPark operated with a 100% WI) with focus on gas projects. Work
plan includes drilling 2 wells (1 development well, 1 exploratory
well) plus workovers and expansion of existing Ache gas treatment
facilities
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Brazil: $4-5 million: Initiating drilling activity with 2-3
exploration wells in the Round 11 Reconcavo and Potiguar onshore
exploratory blocks (GeoPark operated with a 100% WI) plus seismic
acquisition in Round 12 Sergipe Alagoas Block (GeoPark operated with a
100% WI)
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Argentina: $1-2 million: Seismic acquisition, geoscience and
environmental studies in Sierra del Nevado Block and Puelen Block
(non-operated with a 18% WI)
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Peru: $0.5-1 million: Facility improvements upon final closing
of the transaction1
In addition, GeoPark has developed upside and downside work program
scenarios based on oil price and project performance:
Upside Case Work Program ($50+/bbl Oil Price):
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Production: Consolidated 2016 average production of
approximately 25,500-26,500 boepd representing a 25-30% increase over
the 2015 average production level of approximately 20,400 boepd
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Capital Expenditure: Alternative capital expenditure program of
approximately $75-90 million to be selected from 30 identified
projects designed to increase reserves and production
Downside Case Work Program ($25-30/bbl Oil Price):
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Production: Consolidated 2016 average production of
approximately 20,400-21,400 boepd representing a 0-5% increase over
the 2015 average production level of approximately 20,400 boepd
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Capital Expenditure: Alternative capital expenditure program of
approximately $20-25 million consisting mainly of certain low risk and
quick cash flow generating projects in Colombia
Glossary
Adjusted EBITDA
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Adjusted EBITDA is defined as profit for the period before net
finance cost, income tax, depreciation, amortization, certain
non-cash items such as impairments and write-offs of unsuccessful
efforts, accrual of share-based payment and other non-recurring
events
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Adjusted EBITDA per boe
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Adjusted EBITDA divided by total boe deliveries
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Operating Netback per boe
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Net revenues, less production costs (net of depreciation charges
and accrual of stock options and stock awards) and selling
expenses, divided by total boe deliveries. Operating Netback is
equivalent to Adjusted EBITDA net of cash expenses included in
Administrative, Geological and Geophysical and Other operating
costs
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ANP
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Agência Nacional do Petróleo, Brazil’s National Agency of Petroleum
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ANH
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Agencia Nacional de Hidrocarburos de Colombia
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boe
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Barrels of oil equivalent
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boepd
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Barrels of oil equivalent per day
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bopd
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Barrels of oil per day
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CEOP
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Contrato Especial de Operacion Petrolera (Special Petroleum
Operations Contract)
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D&M
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DeGolyer and MacNaughton
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EPS
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Earnings per share
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IPO
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Initial Public Offering
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mbbl
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Thousand barrels of oil
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mmbo
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Million barrels of oil
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mmboe
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Million barrels of oil equivalent
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mcfpd
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Thousand cubic feet per day
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mmcfpd
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Million cubic feet per day
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Mm3/day
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Thousand cubic meters per day
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PRMS
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Petroleum Resources Management System
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SPE
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Society of Petroleum Engineers
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WI
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Working interest
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NPV10
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Present value of estimated future oil and gas revenues, net of
estimated direct expenses, discounted at an annual rate of 10%
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Sqkm
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Square kilometers
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Notice
Additional information about GeoPark can be found in the “Investor
Support” section on the website at www.geo-park.com.
Rounding amounts and percentages: Certain amounts and percentages
included in this press release have been rounded for ease of
presentation. Percentage figures included in this press release have not
in all cases been calculated on the basis of such rounded figures, but
on the basis of such amounts prior to rounding. For this reason, certain
percentage amounts in this press release may vary from those obtained by
performing the same calculations using the figures in the financial
statements. In addition, certain other amounts that appear in this press
release may not sum due to rounding.
Cautionary Statements Relevant to Forward-Looking Information
This press release contains statements that constitute forward-looking
statements. Many of the forward looking statements contained in this
press release can be identified by the use of forward-looking words such
as ‘‘anticipate,’’ ‘‘believe,’’ ‘‘could,’’ ‘‘expect,’’ ‘‘should,’’
‘‘plan,’’ ‘‘intend,’’ ‘‘will,’’ ‘‘estimate’’ and ‘‘potential,’’ among
others.
Forward-looking statements that appear in a number of places in this
press release include, but are not limited to, statements regarding the
intent, belief or current expectations, regarding various matters,
including expected 2015 and/or 2016 production growth and capital
expenditures plan. Forward-looking statements are based on management’s
beliefs and assumptions, and on information currently available to the
management. Such statements are subject to risks and uncertainties, and
actual results may differ materially from those expressed or implied in
the forward-looking statements due to various factors.
Forward-looking statements speak only as of the date they are made, and
the Company does not undertake any obligation to update them in light of
new information or future developments or to release publicly any
revisions to these statements in order to reflect later events or
circumstances, or to reflect the occurrence of unanticipated events. For
a discussion of the risks facing the Company which could affect whether
these forward-looking statements are realized, see filings with the U.S.
Securities and Exchange Commission.
Oil and gas production figures included in this release are stated
before the effect of royalties paid in kind, consumption and losses.
GeoPark can be visited online at www.geo-park.com
1 Transaction executed with Petroperu on October 1, 2014 with
final closing subject to Peru Government approval
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