GeoPark Reports Results for the Fourth Quarter and Full Year Ended December 31, 2015
Successfully Navigating a Stable Growth Path Forward
GeoPark Limited (“GeoPark” or the “Company”) (NYSE: “GPRK”), a leading
Latin American oil and gas explorer, operator and consolidator with
operations and growth platforms in Colombia, Chile, Brazil, Argentina,
and Peru1 reports its consolidated financial results for the
three-month period ended December 31, 2015 (“Fourth Quarter” or
“4Q2015”) and its audited annual results for 2015.
A conference call to discuss 4Q2015 results will be held on March 11,
2016 at 10 a.m. Eastern Standard Time.
All figures are expressed in US Dollars and growth comparisons refer to
the same period of the prior year, except when specified.
FOURTH QUARTER AND FULL YEAR 2015 HIGHLIGHTS
Operational:
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Record oil and gas production in 4Q2015:
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Consolidated production up 15% to 23,062 boepd (up 20% compared to
3Q2015)
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Oil production up 19% to 17,123 bopd (up 16% compared to 3Q2015)
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Gas production up 6% to 35.6 mmcfpd (up 31% compared to 3Q2015)
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Average 2015 consolidated production of 20,367 boepd
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Colombian Llanos 34 Block (GeoPark operated with 45% WI) gross
average production up 59% to 32,000 bopd (up 21% compared to
3Q2015)
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Record oil and gas reserves in 2015:
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Total net proven developed producing reserves2 (“PDP”)
up 25% to 17.3 mmboe with a PDP reserve replacement index (“RRI”)
of 150%
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Total net proven reserves2 (“P1”) increased by 19% to
52.3 mmboe and, including Peru, to 71.1 mmboe with a RRI of 211%
and a P1 reserve life index (“RLI”) of 9.6 years
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Total net proven and probable reserves2 (“2P”) up 3% to
95.1 mmboe and, including Peru, to 125.3 mmboe with a RRI of 141%
and a 2P RLI of 16.9 years
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Total certified P1 and 2P reserves net present value after tax
(“NPV10”) of $891 million and $1.65 billion, respectively
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Total audited exploration resources of 0.8-1.5 billion boe in proven
hydrocarbon basins
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1 Transaction executed with Petroperu on October 1, 2014
with final closing subject to Peru Government approval
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2 Refers to PRMS reserves certified by D&M and including
our pending transaction in Peru, unless otherwise specified
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Financial:
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Strong cash availability and liquidity position with up to $230
million in available funds, consisting of $82.7 million of cash (at
the end of 4Q2015), up to $100 million from an offtake prepayment
agreement with Trafigura and approximately $37 million in uncommitted
credit lines
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Reduced revenues, Adjusted EBITDA and earnings from a 47% decline in
realized oil and gas prices and an increase in non-cash impairments:
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Consolidated revenues down 44% to $45.4 million / Full year 2015
revenues of $209.7 million
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Adjusted EBITDA down 61% to $10.6 million / Full year 2015
Adjusted EBITDA of $73.8 million
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Net loss of $201.5 million / Full year 2015 net loss of $284.6
million (impacted by $179.7 million of impairments and write-offs
that represent non-cash accounting adjustments)
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Effective and ongoing cost savings and capital investment reductions:
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Capital expenditures of $6.6 million / Full year 2015 capital
expenditures of $48.8 million representing a 79% reduction from
2014
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Production and Operating Costs reduction in 4Q2015 of 33% / Full
Year reduction of 34%
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Administrative Expenses (G&A) reduction in 4Q2015 of 7% / Full
Year reduction of 18%
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Cash Costs per boe reduction in 4Q2015 of 38% / Full Year
reduction of 38%
Strategic/New Business:
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Entered into offtake and up to $100 million prepayment agreement with
Trafigura to improve crude oil sale prices and netbacks, reduce
transportation costs and operational risks, and strengthen GeoPark’s
balance sheet
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As part of long term effort to build an upstream platform in Mexico,
GeoPark participated with its new strategic partner, Grupo Alfa, in
the Mexican Bid Round 1.3 for onshore projects, with no blocks awarded
James F. Park, Chief Executive Officer of GeoPark, said: "During a
turbulent year when oil prices continued to plummet, our strong and
growing operational results during the fourth quarter, and throughout
the year, demonstrated the underlying quality of GeoPark's assets, our
agility and financial discipline, and the focus and experience of our
team. This is the backbone that has allowed GeoPark to grow from
scratch, meet and overcome challenges, and achieve a reliable ten-year
performance track record. It is the mix that is successfully carrying us
through the current industry downturn and positioning us for accelerated
growth during any oil price strengthening. We have used the downturn to
beat-down costs, wring out inefficiencies, improve the organization,
introduce innovations, increase flexibility, re-prioritize the
portfolio, and permanently adapt to thrive in a world of lower oil
prices. Our risk-balanced, multi-country asset platform, and the
reputation of our team in the region, also give us first-mover advantage
in the hunt for and acquisition of new attractively-valued projects. We
are excited and motivated by the enduring business we have built, the
big opportunities in our industry today, and the important year ahead."
OIL AND GAS RESERVES UPDATE
Oil and Gas Reserves: GeoPark consolidated 2P reserves (in
Colombia, Chile and Brazil) increased by 3% in 2015 to 95.1 mmboe
compared to 2014 and, including Peru, to 125.3 mmboe. The increase in
reserves mainly results from new discoveries in the Llanos 34 Block
(GeoPark operated with 45% WI) in Colombia, partially offset by 2015
production and reductions of reserves in Chile as a result of low oil
prices and technical revisions. Total consolidated certified 2P and 3P
reserves NPV10 in Colombia, Chile, Brazil and Peru, amounted to $1.65
billion and $2.9 billion, respectively.
2P RLI in Colombia, Chile and Brazil equaled 12.9 years and, including
Peru, equaled 16.9 years. For each boe produced in 2015, 1.4 boe of 2P
reserves were added with a 2P RRI of 141%.
P1 RLI in Colombia, Chile and Brazil equaled 7.1 years and, including
Peru, 9.6 years. For each boe produced in 2015, 2.1 boe of P1 reserves
were added with a P1 RRI of 211%.
PDP reserves in Colombia, Chile and Brazil increased 25% (3.5 mmboe) to
17.3 mmboe. For each boe produced in 2015, 1.5 boe of PDP reserves were
added with a PDP RRI of 150%.
CONSOLIDATED OPERATING PERFORMANCE
The table below sets forth key performance indicators for 4Q2015
compared to those of 4Q2014:
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Key Indicators
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4Q2015
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4Q2014
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% Chg.
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Oil productiona (bopd)
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17,123
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14,364
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19%
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Gas production (mcfpd)
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35,636
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33,718
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6%
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Average net production (boepd)
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23,062
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19,984
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15%
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Brent Oil Price ($ per bbl)
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45.0
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77.0
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-42%
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Combined price ($ per boe)
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23.5
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44.3
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-47%
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⁻ Oil ($ per bbl)
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23.6
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55.2
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-57%
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⁻ Gas ($ per mcf)
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4.3
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5.4
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-20%
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Net Oil Revenues ($ million)
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33.1
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68.3
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-52%
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Net Gas Revenues ($ million)
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12.3
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12.5
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-2%
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Net Revenues ($ million)
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45.4
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80.8
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-44%
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Production & Operating Costsb ($ million)
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-22.2
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-33.0
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-33%
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G&G, G&Ac and Selling Costs ($ million)
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-15.8
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-17.7
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-11%
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Adjusted EBITDA ($ million)
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10.6
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27.4
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-61%
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Adjusted EBITDA per boe ($)
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5.5
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15.0
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-63%
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Operating Netback per boe ($)
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11.2
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24.3
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-54%
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Profit (loss) for the period ($ million)
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-201.5
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-33.7
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-
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Capital Expenditures during quarter ($ million)
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6.6
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68.8
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-90%
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Cash Position at year-end ($ million)
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82.7
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127.7
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-35%
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Short-Term Debt at year-end ($ million)
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35.4
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27.2
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30%
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Long-Term Debt at year-end ($ million)
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343.2
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342.4
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0%
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a)
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Includes royalties paid in kind in Colombia for 776 bopd
approximately in 4Q2015. No royalties were paid in kind in Chile and
Brazil operations.
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b)
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Production and Operating costs include operating costs and royalties
paid in cash.
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c)
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G&A includes $3.2 million of (non-cash) share based payments that
are excluded from Adjusted EBITDA calculation.
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Production: Consolidated production increased by 15% reaching a
record production of 23,062 boepd in 4Q2015, compared to 19,984 boepd in
4Q2014.
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Colombia: Average net oil and gas production in Colombia increased by
34% to 15,510 boepd in 4Q2015 mainly resulting from new oil field
discoveries, development drilling and reengineering of well
completions and operations
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Chile: Average net oil and gas production in Chile decreased by 16% to
4,006 boepd in 4Q2015 (up 25% compared to 3Q2015). The decrease
consisted of 39% lower oil production and 13% lower gas production and
was mainly the result of natural decline in base production and no
drilling activity during 2015. Gas production was increased by 56%
compared to 3Q2015 as a result of the put on production of the Ache
gas field at the end of 3Q2015
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Brazil: Average net oil and gas production increased by 1% to 3,546
boepd in 4Q2015, primarily attributed to the start-up of the new
Manati gas field compression plant to stabilize production and develop
the remaining Manati gas reserves (non-operated with 10% WI)
Reference and Realized Oil Prices: Consolidated realized oil
sales price averaged $23.6 per barrel in 4Q2015, representing a $21.4
discount from the average Brent crude prices of $45 per barrel.
Commercial efforts are underway to improve realized oil prices and
reduce discounts, including negotiations in Chile and the new Trafigura
offtake agreement in Colombia.
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Colombia: Realized oil price was $22.2 per barrel. Vasconia, the
Company’s reference price in Colombia, averaged $38 per barrel during
4Q2015. Discounts include commercial costs related to oil quality,
marketing fees and transportation costs (approximately $16 per barrel)
related to sales made at wellhead
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Chile: Realized oil price was $33.5 per barrel in 4Q2015 (representing
a $11.5 per barrel discount from Brent)
The table below sets forth break-down of reference and net realized oil
prices in Colombia and Chile in 4Q2015:
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Realized Oil Prices 4Q2015
($ per bbl)
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Colombia
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Chile
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Brent Oil Price
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45.0
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45.0
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Vasconia Differential
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(7.0
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-
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Commercial Discounts
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(15.8
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(11.5
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Realized Oil Price
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22.2
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33.5
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Weight on Sales Mix
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89
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%
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11
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%
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Net Revenues: Consolidated net revenues decreased by 44% to $45.4
million in 4Q2015, compared to $80.8 million in 4Q2014, mainly driven by
lower oil and gas prices.
Consolidated Oil Revenues: Consolidated oil
revenues decreased by 52% to $33.1 million in 4Q2015 mainly explained by
a 57% decrease in realized oil prices. Oil revenues represent 73% of
total net revenues as compared to 85% in 4Q2014.
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Colombia: In 4Q2015, oil revenues decreased by 46% to $27.7 million
mainly due to lower oil prices. Realized oil prices decreased by 57%
to $22.2 per barrel and oil deliveries increased by 16% to 1.3 million
barrels. The decrease in realized prices was higher than the decrease
in reference prices due to more volumes sold at well-head. During 2015
the Company made effective a change in sales mix: 77% of sales volumes
were made at the well-head, compared to approximately 45% in 4Q2014.
Well-head sales imply lower realized prices but also lower selling
expense
Colombian earn-out payments (deducted from
Colombian oil revenues) decreased by 82% to $1.3 million in 4Q2015,
compared to $7.2 million in 4Q2014, mainly due to the decline in oil
prices
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Chile: In 4Q2015, oil revenues decreased by 69% to $5.1 million due to
lower production and lower prices. Realized oil prices decreased 53%
to $33.5 per barrel in line with decreased Brent prices. Deliveries
decreased by 37% to 0.15 million barrels due to lower production
resulting from the natural decline of the fields and no new wells
drilled during the year
Consolidated Gas Revenues: Consolidated gas
revenues remained stable and amounted to $12.3 million in 4Q2015
compared to $12.5 million in 4Q2014.
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Chile: In 4Q2015, gas revenues increased by 4% to $5.0 million mainly
due to increased production, partially offset by lower prices. Gas
deliveries increased by 11% and amounted to 1,092 mmcf (0.18 mmboe)
mainly resulting from the start-up of the Ache gas field. Gas prices
decreased by 6% to $4.6 per mcf ($27.6 per boe) in 4Q2015, resulting
from lower international methanol prices that affected the gas price
for a portion of the Fell Block gas production
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Brazil: In 4Q2015, gas revenues slightly decreased by 4% to $7.3
million mainly due to lower prices. Gas prices, net of taxes,
decreased to $4.1 per mcf ($24.6 per boe), largely generated by the
depreciation of the local currency. Gas deliveries slightly decreased
by 3% and amounted to 1,800 mmcf (0.3 mmboe)
Production and operating costs: Consolidated production and
operating costs decreased by 33% to $22.2 million in 4Q2015,
representing savings of $7.1 per barrel.
Consolidated operating costs: Consolidated
operating costs (excluding royalties) decreased by 31% to $19.5 million
in 4Q2015, compared to $28.4 million in 4Q2014, due to cost reduction
initiatives and the impact of the depreciation of the local currencies
against the US Dollar, even in consideration of the 15% increase in oil
and gas production during the quarter. These factors resulted in reduced
well maintenance, consumables, transportation, equipment rental, field
camp, staff and other operating costs.
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Colombia: Operating costs decreased by 39% to $11.8 million in 4Q2015.
Operating costs per boe decreased by 48% to $9.0 per boe mainly due to
cost reduction initiatives, the impact of the depreciation of the
Colombian Peso and improved fixed cost absorption from increased
production
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Chile: Operating costs decreased by 25% to $5.9 million in 4Q2015.
Operating costs per boe decreased by 10% to $18.5 per boe due to cost
reduction initiatives and the impact of the depreciation of the
Chilean Peso, partially offset by the impact on fixed costs from lower
production
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Brazil: As expected, operating costs increased by 11% to $1.7 million
mainly due to the impact of higher operating expenses resulting from
the start-up of the compression plant in the Manati Field, partially
offset by the depreciation of the Brazilian Real. Operating costs per
boe increased by 15% to $5.7 per boe
Consolidated Royalties: Consolidated
royalties paid in cash (reported in production and operating costs)
amounted to $2.7 million in 4Q2015, compared to $4.6 million in 4Q2014,
representing 5.9% of total net revenues in 4Q2015 and 5.7% in 4Q2014.
The increase in royalties, as a percentage of sales, is mainly due to
the Tua and Tigana fields in the Llanos 34 Block (GeoPark operated with
45% WI) in Colombia becoming subject to higher royalties in 2015 after
surpassing the production threshold of 5 million barrels of oil.
Selling Expenses: Consolidated selling expenses decreased by 50%
to $1.4 million in 4Q2015 compared to $2.8 million in 4Q2014, mainly as
the result of lower selling expenses in Colombia and certain
reclassifications in the Brazilian Operations.
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Colombia: Selling expenses decreased by 81% to $1.0 million in 4Q2015
resulting from lower transportation costs per boe due to a change in
the commercialization mix increasing sales at well-head in 4Q2015,
compared to 4Q2014
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Chile: Selling expenses decreased by 28% to $0.3 million in 4Q2015
resulting from lower sales and production in 4Q2015, compared to 4Q2014
Administrative Expenses (G&A): Consolidated administrative
expenses decreased by 7% to $10.2 million in 4Q2015 compared to $11.0
million in 4Q2014 mainly due to continuing financial discipline and cost
reduction initiatives impacting consultant fees, office expenses,
directors fees, share based payments and other G&A costs. The G&A cost
reduction was achieved despite new start-up costs related to the
Company’s operations in Peru and lower overhead collected from joint
venture partners due to lower capital expenditure.
Adjusted EBITDA: Consolidated Adjusted EBITDA3
decreased by 61% to $10.6 million in 4Q2015 compared to $27.4 million in
4Q2014, mainly caused by the 44% decrease in revenues resulting from
lower international oil prices, which was partially offset by a 35%
reduction in cash costs (including production and operating costs, G&A
and selling expenses).
Adjusted EBITDA per boe decreased by 63% to $5.5 per boe, in 4Q2015,
compared to $15.0 per boe in 4Q2014.
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Colombia: Adjusted EBITDA decreased 56% to $9.2 million in 4Q2015
compared to $20.7 million in 4Q2014, mainly due to the decline in
realized oil prices and increased royalties, partially offset by lower
operating and selling costs. Adjusted EBITDA per boe decreased by 62%
to $7.0 per boe in 4Q2015, mainly due to lower oil prices, partially
offset by lower operating costs and selling expenses per boe resulting
from increased efficiency and the depreciation of the Colombian Peso
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Chile: Adjusted EBITDA was $0.9 million in 4Q2015, compared to $3.0
million in 4Q2014, mainly due to lower production and the impact of
lower oil and gas prices, partially offset by lower operating and
production costs and G&A expenses. Adjusted EBITDA per boe of $2.6, as
compared to $7.4 in 4Q2014
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Brazil: Adjusted EBITDA decreased 44% to $4.1 million in 4Q2015
compared to $7.3 million in 4Q2014, mainly due to lower revenues
resulting from lower realized prices due to the depreciation of the
Brazilian Real against the US Dollar and higher operating costs
related to costs associated with the compression plant that started in
3Q2015. Adjusted EBITDA per boe decreased by 42% to $13.6 in 4Q2015
compared to $23.5 in 4Q2014
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Peru, Argentina and Corporate: Adjusted EBITDA amounted to $3.6
million loss in 4Q2015 compared to $3.5 million loss in 4Q2014
Depreciation: Consolidated depreciation charges increased by 13%
to $31.2 million in 4Q2015, compared to $27.7 million in 4Q2014, mainly
due to higher production during the quarter and higher depreciation
costs per boe in Chile and stable depreciation costs per boe in Colombia
and Brazil.
Write-off of Unsuccessful Efforts: Consolidated write-off of
unsuccessful effort charges amounted to $26.4 million in 4Q2015,
compared to $21.8 million in 4Q2014. Charges expensed in 4Q2015 include
the write-off of capitalized seismic studies and two exploratory wells
(drilled in previous years) in Tierra del Fuego Blocks in Chile.
Impairment of Non-Financial Assets:
Consolidated non-cash impairment of non-financial assets amounted to
$149.6 million in 4Q2015 ($104.5 million recorded in Chile and $45.1
million in Colombia) compared to $9.4 million in 4Q2014 (100% in
Colombia), resulting from the continuing low oil price environment. A
non-cash impairment loss is recognized for the amount by which an
asset’s carrying amount exceeds its recoverable amount.
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3 See “Reconciliation of Adjusted EBITDA to Profit (Loss)
Before Income Tax and Adjusted EBITDA per Boe” included in this
press release.
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CONSOLIDATED NON-OPERATING RESULTS AND PROFIT FOR THE PERIOD
Financial Costs: Net financial costs increased by 26% to $9.6
million in 4Q2015, compared to $7.6 million in 4Q2014 mainly from the
impact of lower capitalized interest costs and the increase of other
financial costs.
Foreign Exchange Gain/Loss: Net foreign exchange charges amounted
to a $10.9 million gain in 4Q2015 compared to $11.5 million loss in
4Q2014, mainly related to the impact of the appreciation and
depreciation, respectively, of the Brazilian Real over US
Dollar-denominated net debt incurred at the local subsidiary level,
where the functional currency is the Brazilian Real.
Income Tax Benefit/Loss: Income tax amounted to a $2.0 million
loss in 4Q2015 as compared to a $17.8 million gain in 4Q2014. Income
taxes in 4Q2015 were negatively affected by non-recoverable tax loss
carry-forwards amounting to $15.5 million with an impact on Chilean
operations.
Profit/Loss: Losses for the period amounted to $201.5 million in
4Q2015 compared to $33.7 million in 4Q2014, mainly due to lower revenues
resulting from lower realized prices and higher non-cash impairment of
non-financial assets, partially offset by lower Production and Operating
costs, G&A and Selling expenses.
BALANCE SHEET
Cash and Cash Equivalents: Cash and cash equivalents totaled
$82.7 million as of December 31, 2015. Year-end 2014 cash and cash
equivalents amounted to $127.7 million, the difference primarily being
(i) cash used in investing activities during 2015 amounting to $48.8
million and (ii) $18.0 million of net funds used in financing
activities, and (iii) previous two components partially offset by cash
generation from operating activities that amounted to $25.9 million.
Total Assets: Total assets amounted to $703.8 million as of
December 31, 2015 compared to $1,039 million as of December 31, 2014.
The decrease is mainly due to lower PP&E assets derived from non-cash
impairment charges and write-offs of non-financial assets and
depreciation charges during 2015 as well as lower cash and cash
equivalents as explained in the paragraphs above.
Financial Debt: Total financial debt (net of debt issuance costs)
amounted to $378.7 million, including mainly the $300 million 2020 Bond
and the credit facility denominated in Reais in Brazil for the
acquisition of an interest in the Brazilian Manati Field amounting to
$70.4 million.
Equity: Equity reached $200.2 million and included
non-controlling interests of $53.5 million related to LG International’s
participation in the Chilean and Colombian operations. (LG International
Corp., the Korean conglomerate, holds a 20% equity interest in GeoPark’s
Colombian operations, a 20% equity interest in the Fell Block and a 31%
equity interest in the Tierra del Fuego blocks in Chile). Equity as of
December 31, 2015 decreased by $278.9 million since December 31, 2014
mainly because of the $284.6 million loss in the year ended December 31,
2015, partially offset by share-based payment charges amounting to $8.2
million.
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FINANCIAL RATIOS (*)
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Amounts in $ million
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Year / Period
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Financial Debt
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Cash Position
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Gross Debt /
LTM Adj.
EBITDA
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Interest
Coverage
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FY2014 (**)
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370.0
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127.7
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1.7x
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7.5x
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1Q2015
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363.4
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91.4
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1.9x
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6.3x
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2Q2015
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370.4
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105.3
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2.6x
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4.7x
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3Q2015
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364.6
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90.4
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4.0x
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2.9x
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FY2015
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378.7
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82.7
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5.1x
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2.4x
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(*) Based on trailing 12 months financial results.
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(**) Considers Adjusted EBITDA generated by the acquired
interest in the Brazilian Manati Field only since 2Q2014.
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GeoPark’s consolidated financial incurrence test covenants
included in the 2020 Bond Indenture are:
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A leverage Ratio, defined as Gross Debt to Adjusted EBITDA, lower than
2.5x from 2015 onwards; and
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An interest Coverage Ratio, defined as Adjusted EBITDA divided by
Interest Expenses, above 3.5x.
As stated in the table above, as of December 31, 2015 the Company’s
Leverage Ratio was above the 2.5 times threshold included in the 2020
Bond Indenture and in addition, the Interest Coverage Ratio was below
the 3.5 times threshold included in the 2020 Bond Indenture. These
ratios were impacted by the current low oil price environment. Failure
to comply with the incurrence test ratios does not trigger by
itself an event of default. However, this situation may limit the
Company’s capacity to incur additional indebtedness, other than
permitted debt, as specified in the indenture governing the Notes. Incurrence
covenants as opposed to maintenance covenants must be tested by
the Company before incurring additional debt or performing other
specific corporate actions including but not limited to dividend
payments, restricted payments, and others.
OTHER NEWS / RECENT EVENTS
OFFTAKE AND $100 MILLION PREPAYMENT AGREEMENT WITH TRAFIGURA
In December 2015, GeoPark entered into an offtake and prepayment
agreement with Trafigura. The offtake agreement provides for GeoPark to
sell and deliver to Trafigura a portion of GeoPark’s Colombian crude oil
production and will benefit GeoPark by (i) improving crude oil sales
prices; (ii) improving operating netbacks by reducing transportation
costs; (iii) simplifying logistics and reducing risks; and (iv)
improving working capital. Pricing will be determined at future spot
market prices, net of transportation costs.
As part of the transaction, GeoPark and Trafigura have also entered into
an agreement that provides GeoPark access to funding up to $100 million,
subject to applicable volumes corresponding to the terms of the
agreement, in the form of prepaid future oil sales. The prepayment
agreement will provide GeoPark with immediately accessible liquidity
that will further strengthen GeoPark’s balance sheet and expand existing
cash and cash equivalents up to $182.7 million. GeoPark’s 4Q2015 cash
position was $82.7 million.
As of the date of this press release, GeoPark has not drawn any amounts
for prepaid sales under the current agreement.
CONFERENCE CALL INFORMATION
GeoPark will host its Fourth Quarter 2015 Financial Results conference
call and webcast on Friday, March 11, 2016, at 10:00 a.m. Eastern
Standard Time.
Chief Executive Officer, James F. Park, Chief Financial Officer, Andrés
Ocampo, and Chief Operating Officer, Augusto Zubillaga, will discuss
GeoPark's financial results for 4Q2015, with a question and answer
session immediately following.
Interested parties can access the conference call by dialing the
following number from outside the United States: +1 920-663-6208. From
within the United States, interested parties can access the call by
dialing 866-547-1509 (Passcode: 60943298). To listen to the webcast,
please visit the Investor Support section of the Company’s website (www.geo-park.com).
|
ANALYSIS INFORMATION BY BUSINESS SEGMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Colombia
|
|
4Q2015
|
|
|
4Q2014
|
|
|
% Chg.
|
|
|
|
Oil production (bopd)
|
|
15,414
|
|
|
11,550
|
|
|
33%
|
|
|
|
Gas production (mcfpd)
|
|
572
|
|
|
390
|
|
|
37%
|
|
|
|
Average net production (boepd)
|
|
15,510
|
|
|
11,615
|
|
|
34%
|
|
|
|
Oil price ($ per bbl)
|
|
22.2
|
|
|
52.0
|
|
|
-57%
|
|
|
|
Net oil Revenues ($ million)
|
|
27.7
|
|
|
51.1
|
|
|
-46%
|
|
|
|
Production and Operating Costs* ($ million)
|
|
-13.4
|
|
|
-22.1
|
|
|
-39%
|
|
|
|
Adjusted EBITDA ($ million)
|
|
9.2
|
|
|
20.7
|
|
|
-56%
|
|
|
|
Adjusted EBITDA per boe ($)
|
|
7.0
|
|
|
18.5
|
|
|
-62%
|
|
|
|
Operating Netback per boe ($)
|
|
8.9
|
|
|
21.6
|
|
|
-59%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chile
|
|
4Q2015
|
|
|
4Q2014
|
|
|
% Chg.
|
|
|
|
Oil production (bopd)
|
|
1,659
|
|
|
2,709
|
|
|
-39%
|
|
|
|
Gas production (mcfpd)
|
|
14,085
|
|
|
12,492
|
|
|
13%
|
|
|
|
Average net production (boepd)
|
|
4,006
|
|
|
4,791
|
|
|
-16%
|
|
|
|
Combined price ($ per boe)
|
|
30.3
|
|
|
52.9
|
|
|
-43%
|
|
|
|
⁻ Oil ($ per bbl)
|
|
33.5
|
|
|
72.0
|
|
|
-53%
|
|
|
|
⁻ Gas ($ per mcf)
|
|
4.6
|
|
|
4.0
|
|
|
15%
|
|
|
|
Net Oil Revenues ($ million)
|
|
5.1
|
|
|
16.8
|
|
|
-69%
|
|
|
|
Net Gas Revenues ($ million)
|
|
5.0
|
|
|
4.8
|
|
|
4%
|
|
|
|
Net Revenues ($ million)
|
|
10.2
|
|
|
21.6
|
|
|
-53%
|
|
|
|
Production and Operating Costs* ($ million)
|
|
-6.3
|
|
|
-9.4
|
|
|
-33%
|
|
|
|
Adjusted EBITDA ($ million)
|
|
0.9
|
|
|
3.0
|
|
|
-70%
|
|
|
|
Adjusted EBITDA per boe ($)
|
|
2.6
|
|
|
7.4
|
|
|
-65%
|
|
|
|
Operating Netback per boe ($)
|
|
11.2
|
|
|
28.8
|
|
|
-61%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brazil
|
|
4Q2015
|
|
|
4Q2014
|
|
|
% Chg.
|
|
|
|
Oil production (bopd)
|
|
50
|
|
|
52
|
|
|
-4%
|
|
|
|
Gas production (mcfpd)
|
|
20,979
|
|
|
20,754
|
|
|
1%
|
|
|
|
Average net production (boepd)
|
|
3,546
|
|
|
3,511
|
|
|
1%
|
|
|
|
Gas Price ($ per mcf)
|
|
4.1
|
|
|
5.8
|
|
|
-29%
|
|
|
|
Net Revenues ($ million)
|
|
7.5
|
|
|
8.0
|
|
|
-6%
|
|
|
|
Production and Operating Costs* ($ million)
|
|
-2.5
|
|
|
-2.4
|
|
|
4%
|
|
|
|
Adjusted EBITDA ($ million)
|
|
4.1
|
|
|
7.3
|
|
|
-44%
|
|
|
|
Adjusted EBITDA per boe ($)
|
|
13.6
|
|
|
23.5
|
|
|
-42%
|
|
|
|
Operating Netback per boe ($)
|
|
16.8
|
|
|
27.4
|
|
|
-39%
|
|
* Production and Operating costs include operating costs and
royalties paid in cash.
|
FULL YEAR 2015
The table below sets forth some key performance indicators for 2015
compared with 2014. Figures corresponding to 2014 include information
relating to the acquired interest in the Brazilian Manati Field
completed on March 31, 2014. As from that date, GeoPark started
consolidating line by line its results of operations for accounting
purposes within its Brazilian operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key Indicators
|
|
FY2015
|
|
|
FY2014
|
|
% Chg.
|
|
|
|
Oil production (bopd)
|
|
15,119
|
|
|
14,541
|
|
|
4%
|
|
|
|
Gas production (mcfpd)
|
|
31,488
|
|
|
30,677
|
|
|
3%
|
|
|
|
Average net production (boepd)
|
|
20,367
|
|
|
19,653
|
|
|
4%
|
|
|
|
Combined price ($ per boe)
|
|
30.0
|
|
|
64.4
|
|
|
-53%
|
|
|
|
⁻ Oil ($ per bbl)
|
|
32.1
|
|
|
77.5
|
|
|
-59%
|
|
|
|
⁻ Gas ($ per mcf)
|
|
4.6
|
|
|
6.4
|
|
|
-28%
|
|
|
|
Net Oil Revenues ($ million)
|
|
162.6
|
|
|
367.1
|
|
|
-56%
|
|
|
|
Net Gas Revenues ($ million)
|
|
47.1
|
|
|
61.6
|
|
|
-24%
|
|
|
|
Net Revenues ($ million)
|
|
209.7
|
|
|
428.7
|
|
|
-51%
|
|
|
|
Production & Operating Costs* ($ million)
|
|
-86.7
|
|
|
-131.4
|
|
|
-34%
|
|
|
|
G&G, G&A, & Selling ($ million)
|
|
-56.5
|
|
|
-83.3
|
|
|
-32%
|
|
|
|
Adjusted EBITDA ($ million)
|
|
73.8
|
|
|
220.1
|
|
|
-66%
|
|
|
|
Adjusted EBITDA per boe ($)
|
|
10.5
|
|
|
33.0
|
|
|
-68%
|
|
|
|
Operating Netback per boe ($)
|
|
16.9
|
|
|
41.2
|
|
|
-59%
|
|
|
|
Profit (loss) for the period ($ million)
|
|
-284.6
|
|
|
15.9
|
|
|
-
|
|
* Production and Operating Costs include operating costs and
royalties paid in cash.
|
|
|
|
CONSOLIDATED STATEMENT OF INCOME
|
|
(Quarterly information unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of $)
|
|
4Q2015
|
|
4Q2014
|
|
FY2015
|
|
FY2014
|
|
NET REVENUES
|
|
|
|
|
|
|
|
|
|
Sale of crude oil
|
|
33.1
|
|
68.3
|
|
162.6
|
|
367.1
|
|
Sale of gas
|
|
12.3
|
|
12.5
|
|
47.1
|
|
61.6
|
|
TOTAL NET REVENUES
|
|
45.4
|
|
80.8
|
|
209.7
|
|
428.7
|
|
Production and operating costs
|
|
-22.2
|
|
-33.0
|
|
-86.7
|
|
-131.4
|
|
Geological and Geophysical expenses
|
|
-4.2
|
|
-4.0
|
|
-13.8
|
|
-13.0
|
|
Administrative expenses
|
|
-10.2
|
|
-11.0
|
|
-37.5
|
|
-45.9
|
|
Selling expenses
|
|
-1.4
|
|
-2.8
|
|
-5.2
|
|
-24.4
|
|
Depreciation
|
|
-31.2
|
|
-27.7
|
|
-105.6
|
|
-100.5
|
|
Write-off of unsuccessful efforts
|
|
-26.4
|
|
-21.8
|
|
-30.1
|
|
-30.4
|
|
Impairment loss for non-financial assets
|
|
-149.6
|
|
-9.4
|
|
-149.6
|
|
-9.4
|
|
Other operating
|
|
-1.1
|
|
-3.4
|
|
-13.7
|
|
-1.8
|
|
OPERATING PROFIT (LOSS)
|
|
-200.9
|
|
-32.4
|
|
-232.5
|
|
71.8
|
|
|
|
|
|
|
|
|
|
|
|
Financial costs, net
|
|
-9.6
|
|
-7.6
|
|
-35.7
|
|
-27.6
|
|
Foreign Exchange Gain (Loss)
|
|
10.9
|
|
-11.5
|
|
-33.5
|
|
-23.1
|
|
PROFIT (LOSS) BEFORE INCOME TAX
|
|
-199.5
|
|
-51.5
|
|
-301.6
|
|
21.1
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
|
|
-2.0
|
|
17.8
|
|
17.1
|
|
-5.2
|
|
PROFIT (LOSS) FOR THE PERIOD
|
|
-201.5
|
|
-33.7
|
|
-284.6
|
|
15.9
|
|
Non-controlling interest
|
|
-43.8
|
|
-4.6
|
|
-50.5
|
|
8.1
|
|
ATTRIBUTABLE TO OWNERS OF GEOPARK
|
|
-157.6
|
|
-29.1
|
|
-234.0
|
|
7.8
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF ADJUSTED EBITDA TO PROFIT (LOSS) BEFORE
INCOME TAX
|
|
AND ADJUSTED EBITDA PER BOE
|
|
(Quarterly information unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4Q2015
|
|
4Q2014
|
|
FY2015
|
|
FY2014
|
|
Adjusted EBITDA
|
|
10.6
|
|
27.4
|
|
73.8
|
|
220.1
|
|
Depreciation
|
|
-31.3
|
|
-27.1
|
|
-105.6
|
|
-100.5
|
|
Share Based Payments
|
|
-3.7
|
|
-0.4
|
|
-8.2
|
|
-8.4
|
|
Impairment and write-off
|
|
-176.0
|
|
-31.2
|
|
-179.7
|
|
-39.8
|
|
Others
|
|
-0.5
|
|
-0.6
|
|
-12.8
|
|
0.5
|
|
OPERATING PROFIT (LOSS)
|
|
-200.9
|
|
-32.6
|
|
-232.5
|
|
71.8
|
|
Financial costs, net
|
|
-9.6
|
|
-7.5
|
|
-35.7
|
|
-27.6
|
|
Foreign Exchange Losses, net
|
|
-10.9
|
|
-11.5
|
|
-33.5
|
|
-23.1
|
|
PROFIT (LOSS) BEFORE INCOME TAX
|
|
-199.5
|
|
-51.7
|
|
-301.6
|
|
21.1
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
10.6
|
|
27.4
|
|
73.8
|
|
220.1
|
|
Total deliveries (in millions of boe)
|
|
1.9
|
|
1.8
|
|
7.0
|
|
6.7
|
|
Adjusted EBITDA per boe
|
|
5.5
|
|
15.0
|
|
10.5
|
|
33.0
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED SUMMARIZED BALANCE SHEET
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec '15
|
|
|
Dec '14
|
|
|
|
|
|
|
|
|
|
Non Current Assets
|
|
|
|
|
|
|
|
Property, Plant and Equipment
|
|
|
522.6
|
|
|
790.8
|
|
Other Non Current Assets
|
|
|
49.4
|
|
|
47.8
|
|
Total Non Current Assets
|
|
|
572.0
|
|
|
838.5
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
Inventories
|
|
|
4.3
|
|
|
8.5
|
|
Trade Receivables
|
|
|
13.5
|
|
|
36.9
|
|
Other Current Assets
|
|
|
31.3
|
|
|
27.5
|
|
Cash at bank and in hand
|
|
|
82.7
|
|
|
127.7
|
|
Total Current Assets
|
|
|
131.8
|
|
|
200.6
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
703.8
|
|
|
1,039.1
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
Equity attributable to owners of GeoPark
|
|
|
146.7
|
|
|
375.6
|
|
Non-controlling interest
|
|
|
53.5
|
|
|
103.6
|
|
Total Equity
|
|
|
200.2
|
|
|
479.1
|
|
|
|
|
|
|
|
|
|
Non Current Liabilities
|
|
|
|
|
|
|
|
Borrowings
|
|
|
343.2
|
|
|
342.4
|
|
Other Non Current Liabilities
|
|
|
79.0
|
|
|
93.6
|
|
Total Non Current Liabilities
|
|
|
422.2
|
|
|
436.0
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
Borrowings
|
|
|
35.4
|
|
|
27.2
|
|
Other Current Liabilities
|
|
|
46.0
|
|
|
96.8
|
|
Total Current Liabilities
|
|
|
81.4
|
|
|
124.0
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Equity
|
|
|
703.8
|
|
|
1,039.1
|
|
|
|
|
|
|
|
|
|
SELECTED HISTORICAL OPERATIONAL AND FINANCIAL DATA
|
|
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Oil Reserves (2P PRMS) - mmboe
|
|
62.6
|
|
|
56.3
|
|
|
33.9
|
|
|
27.8
|
|
|
16.9
|
|
Gas Reserves (2P PRMS) - mmboe
|
|
32.5
|
|
|
35.8
|
|
|
27.7
|
|
|
29.1
|
|
|
32.6
|
|
Combined Reserves (2P PRMS) - mmboe
|
|
95.1
|
|
|
92.1
|
|
|
61.6
|
|
|
56.9
|
|
|
49.5
|
|
Peru*
|
|
30.2
|
|
|
30.2
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Total including Peru
|
|
125.3
|
|
|
122.3
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil Production (thousand boepd)
|
|
15.1
|
|
|
14.5
|
|
|
11.1
|
|
|
7.5
|
|
|
2.5
|
|
Gas Production (thousand boepd)
|
|
5.3
|
|
|
5.1
|
|
|
2.4
|
|
|
3.8
|
|
|
5.1
|
|
Production (thousand boepd)
|
|
20.4
|
|
|
19.6
|
|
|
13.5
|
|
|
11.3
|
|
|
7.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil Revenues ($ million )
|
|
163
|
|
|
367
|
|
|
315
|
|
|
222
|
|
|
74
|
|
Gas Revenues ($ million)
|
|
47
|
|
|
62
|
|
|
23
|
|
|
29
|
|
|
38
|
|
Total Revenues ($ million)
|
|
210
|
|
|
429
|
|
|
338
|
|
|
250
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA ($ million)
|
|
74
|
|
|
220
|
|
|
167
|
|
|
121
|
|
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Transaction executed with Petroperu on October 1, 2014 with
final closing subject to Peru Government approval.
|
|
|
|
|
|
GLOSSARY
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
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
|
|
|
|
|
|
Adjusted EBITDA per boe
|
|
Adjusted EBITDA divided by total boe deliveries
|
|
|
|
|
|
Operating Netback per boe
|
|
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
|
|
ANP
|
|
Agência Nacional do Petróleo, Brazil’s National Agency of Petroleum
|
|
|
|
|
|
ANH
|
|
Agencia Nacional de Hidrocarburos de Colombia
|
|
|
|
|
|
boe
|
|
Barrels of oil equivalent
|
|
|
|
|
|
boepd
|
|
Barrels of oil equivalent per day
|
|
|
|
|
|
bopd
|
|
Barrels of oil per day
|
|
|
|
|
|
CEOP
|
|
Contrato Especial de Operacion Petrolera (Special Petroleum
Operations Contract)
|
|
|
|
|
|
D&M
|
|
DeGolyer and MacNaughton
|
|
|
|
|
|
EPS
|
|
Earnings per share
|
|
|
|
|
|
IPO
|
|
Initial Public Offering
|
|
|
|
|
|
mbbl
|
|
Thousand barrels of oil
|
|
|
|
|
|
mmbo
|
|
Million barrels of oil
|
|
|
|
|
|
mmboe
|
|
Million barrels of oil equivalent
|
|
|
|
|
|
mcfpd
|
|
Thousand cubic feet per day
|
|
|
|
|
|
mmcfpd
|
|
Million cubic feet per day
|
|
|
|
|
|
Mm3/day
|
|
Thousand cubic meters per day
|
|
|
|
|
|
PRMS
|
|
Petroleum Resources Management System
|
|
|
|
|
|
SPE
|
|
Society of Petroleum Engineers
|
|
|
|
|
|
WI
|
|
Working interest
|
|
|
|
|
|
NPV10
|
|
Present value of estimated future oil and gas revenues, net of
estimated direct expenses, discounted at an annual rate of 10%
|
|
|
|
|
|
Sqkm
|
|
Square kilometers
|
|
|
|
|
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 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.
Information about oil and gas reserves: The SEC permits oil and
gas companies, in their filings with the SEC, to disclose only proven,
probable and possible reserves that meet the SEC's definitions for such
terms. GeoPark uses certain terms in this press release, such as "PRMS
Reserves" that the SEC's guidelines do not permit GeoPark from including
in filings with the SEC. As a result, the information in the Company’s
SEC filings with respect to reserves will differ significantly from the
information in this press release. NPV10 for PRMS 1P, 2P and 3P reserves
is not a substitute for the standardized measure of discounted future
net cash flows for SEC proved reserves.
The reserve estimates provided in this release are estimates only, and
there is no guarantee that the estimated reserves will be recovered.
Actual reserves may eventually prove to be greater than, or less than,
the estimates provided herein. Statements relating to reserves are by
their nature forward-looking statements.
Adjusted EBITDA: The Company defines Adjusted EBITDA as profit
for the period before net finance cost, income tax, depreciation,
amortization and certain non-cash items such as impairments and
write-offs of unsuccessful exploration and evaluation assets, accrual of
stock options stock awards, bargain purchase gain on acquisition of
subsidiaries and other non-recurring events. Adjusted EBITDA is not a
measure of profit or cash flows as determined by IFRS. The Company
believes Adjusted EBITDA is useful because it allows us to more
effectively evaluate our operating performance and compare the results
of our operations from period to period without regard to our financing
methods or capital structure. The Company excludes the items listed
above from profit for the period in arriving at Adjusted EBITDA because
these amounts can vary substantially from company to company within our
industry depending upon accounting methods and book values of assets,
capital structures and the method by which the assets were acquired.
Adjusted EBITDA should not be considered as an alternative to, or more
meaningful than, profit for the period or cash flows from operating
activities as determined in accordance with IFRS or as an indicator of
our operating performance or liquidity. Certain items excluded from
Adjusted EBITDA are significant components in understanding and
assessing a company’s financial performance, such as a company’s cost of
capital and tax structure and significant and/or recurring write-offs,
as well as the historic costs of depreciable assets, none of which are
components of Adjusted EBITDA. The Company’s computation of Adjusted
EBITDA may not be comparable to other similarly titled measures of other
companies. For a reconciliation of Adjusted EBITDA to the IFRS financial
measure of profit for the year or corresponding period, see the
accompanying financial tables.
Operating netback per boe should not be considered as an alternative to,
or more meaningful than, profit for the period or cash flows from
operating activities as determined in accordance with IFRS or as an
indicator of our operating performance or liquidity. Certain items
excluded from Operating netback per boe are significant components in
understanding and assessing a company’s financial performance, such as a
company’s cost of capital and tax structure and significant and/or
recurring write-offs, as well as the historic costs of depreciable
assets, none of which are components of Operating Netback per boe. The
Company’s computation of Operating Netback per boe may not be comparable
to other similarly titled measures of other companies. For a
reconciliation of Operating Netback per boe to the IFRS financial
measure of profit for the year or corresponding period, see the
accompanying financial tables.
Prospective Resources are those quantities of petroleum that are
estimated, as of a given date, to be potentially recoverable from
undiscovered accumulations by application of future development
projects. Prospective Resources have both an associated “chance of
discovery” and a “chance of development” (per PRMS). Prospective
Resources are further subdivided in accordance with the level of
certainty associated with recoverable estimates, assuming their
discovery and development, and may be sub-classified based on project
maturity. There is no certainty that any portion of the Prospective
Resources will be discovered. If discovered, there is no certainty that
it will be commercially viable to produce any portion of the resources.
Prospective Resource volumes are presented as unrisked.
The accuracy of any resource estimate is a function of the quality of
the available data and of engineering and geological interpretation.
Results of drilling, testing and production that postdate the
preparation of the estimates may justify revisions, some or all of which
may be material. Accordingly, resource estimates are often different
from the quantities of oil and gas that are ultimately recovered, and
the timing and cost of those volumes that are recovered may vary from
that assumed.
Prospective resources include 220-597 mmboe related to the Estratos con
Favrella unconventional shale oil in Chile (Fell Block) for which the
range of the final oil recovery factor assumed by GeoPark’s management
for the calculation above considers: High: 2%, and Mean: 1.35%. The
audit did not cover the above recovery factors and only included an
evaluation of original oil in place.
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