Q3 2020 GeoPark Ltd Earnings Call
Good morning, and welcome to the Geopark Limited conference call. Following the results announcement for the third quarter ended September Thirtyth, Twentytwenty and the Twentytwenty, one work program and investment guidelines.
After the speakers remarks, there will be a question and answer session if.
If you would like to ask a question at this time press star one on your telephone keypad if.
If you would like to withdraw your question press the pound key.
If you do not have a copy of the press release. It is available at the Investor support section on the company's corporate website at Www Dot G.O. dashed Park Dot com.
A replay of today's call may be accessed through this webcast in the investor support section of the Geopark corporate website.
Before we continue please note that certain statements contained in the results press release and on this conference call are forward looking statements rather than historical facts and are subject to risks and uncertainties that could cause actual results to differ materially from those described.
With respect to such forward looking statements. The company seeks protections afforded by the private Securities Litigation Reform Act of 1995.
These risks include a variety of factors, including competitive developments and risk factors listed from time to time in the company's FCC reports and public releases.
Those lists are intended to identify certain principal factors that could cause actual results to differ materially from those described in the forward looking statements.
They are not intended to represent a complete list of the company's business.
All financial figures included here and were prepared in accordance with the I.S.R.S. Interstate it and U.S. dollars unless otherwise noted.
Reserves figures correspond to pure enough standards.
On the call today from Geopark is James F. Park, Chief Executive Officer.
Andre So compo Chief financial Officer.
Martin Toronto's director of operations, and Stacy Simon shareholder value director.
Now I'll turn the call over to Mr. James Park Mr. Park, you may begin.
Thank you and welcome everyone.
We are joining here this morning, with our executive team reunited in Bogota, Colombia to report on our third quarter 2020 result.
Introduce our work and investment program for 2021.
Hi, lined our steps to return more value to shareholders.
When we bought the Geopark in 2000 through we set out to build a company for the long term I wouldn't that be the Premier Latin America in the oil and gas independent.
And capture the big energy opportunity brides in this region.
And we want to always express our gratitude for the women and men of Geopark Alstom present, what made this company what it is today and created an unparallel track record a track record that incredibly Thislife. This monster storm. We are fighting is on.
Target for 18 straight year of growth.
We had a great start to this year in the first quarter with the acquisition of Ameristar, which significantly advance our quietly effect of your animal studies for the expansion effort, which has now positioned us with 1.4 million pasta makers surrounding you.
Adults 34.
Personally we resumed drilling on the 34 block and significantly began drilling CPO five o'clock to appraise the indigo oilfield.
We have high expectations of the CPL five block with its combination of development opportunities and very large multi play exploration prospects.
And see it as a key component of our continuing janow space and growth story.
Taking advantage of the downturn.
We work to transform geoponic into an even better and stronger company.
This included a major restructuring of our project portfolio from our country or regional perspective to an asset focused approach, which allowed us to capture.
Large savings through synergies and improved efficiency.
As always the.
The underlying foundation for Gfr's performance is our in house integrated value ESG plus program, we called speed.
This program was a founding element of our company and one of our practice accomplishment.
Always pushing us to be the employer of choice.
Partner of choice and neighbor of choice.
Has been especially evident during the pandemic with our success and keeping our team safe.
And healthy and assisting our neighboring communities with medical and economic aid.
So today.
From a position of strength we.
We are finishing another successful year and have been able to build an attractive work program for 2021 too.
To grow our company and returned cash to our shareholders.
Turbulence has been an opportunity zone for us throughout our history and.
And we are heading into 2021 with confidence and optimism.
Are projected work program.
Using a base case assumption of 40 to 45 dollar brand.
Provides for $100 million to $120 million.
Drill 31 to 34 well.
Approximately 65% development and 35% exploration with an average annual production of 40 to 42000 barrels per day, and generating an operating netback of $210 million to $280 million.
And there is in every program every year, we have built in our flexibility with a fully funded high case at Brent over $50.
And a fully funded located at Brent below $35.
Focusing on the lowest risk projects that can yield attractive returns.
Overall, 90% of our production is cash flow positive between 20 to $30 brand.
One year ago, and our November 2019 conference call we.
He said quote.
<unk>.
We believe that a company that can consistently execute invest find oil grow and return value you back to its shareholders. All funded by its own cash flow is the model for our industry today.
And a volatile world being able to deliver on all these fronts is the true measure of accompanies durability and value.
Unquote.
We did not know at that time that we're about to face the biggest collapse in our industry's history.
But <unk> ability to prevail continue growing provide cash back to its shareholders and maintain a strong and secure financial position. During this time.
Is a powerful test of our resilience and enduring value.
Thank you and we would be pleased to answer any questions you may have.
Thank you at this time I would like to remind everyone. If you would like to ask a question. Please press star than the number one on your telephone keypad. If your question has been answered and you wish to remove yourself from the queue press. The pound key we ask that you. Please pick up your handset to provide.
Optimal sound quality.
Our first question comes from the line of Alejandro and Mccain list and a securities.
Yes, good afternoon, gentlemen, congratulations on the quarter because returns couple of questions. Please the first one is on your production guidance for next year.
Which is effectively flat from where you are today, despite you spending hundreds of $120 million in.
Topics. So could you please give us some kind of indication so would that be more <unk> to to keep that kind of funeral.
<unk> flopped.
And then the second question.
But we are keeping the production intellectual growth.
<unk>.
But on top of that I would highlight the.
Fact that the.
The Castillo that is going to be generated by after he's going to be very significant. So if you think.
Brought in general study for allocating something like.
50, $50 million to $60 million worth of development Catholics.
On it a 40 dollar brand 40, 45, <unk> would be generating something between $200 million to $230 million of operating netbook.
Additionally, on the consolidated budget or the consolidated topics that you saw 110 to 120 million.
There is a bigger weight on exploration that it was in the last couple of years. So around 35% of these capex exploration and does no production associated guidance.
<unk> from those from the from basically 35% of the carpets, so effectively the Catholics studies associated to development.
Is roughly 65% of the total so those those a third of the topics that has no no production associated.
Half of that exploration is four welts on the other half is four three D seismic on licensing to get us ready to start.
Ah more aggressive exploration campaign in 2022.
<unk>.
I don't know if I missed anything maybe they wanted us point is.
On the.
On the rest of the assets of the portfolio you will see that we have 32 topic I'm being allocated to them.
And I'm I'm.
Leaving a set you feel fight for a second.
We are being able to keep the production fairly flat with very little investment and then C. P. O. Five we are targeting a pretty significant growth.
In 2021, our expectation with a level of activity that we are that we are estimating.
We should be able to almost double the production CPO five during 2021, we're targeting around 90% production growth.
From the seven to 8000 Barca very experienced in 2022, something around 15000 borrowers a day.
Next year.
And then with respect to your question about.
Posted efficiencies, we went through a big restructuring during 2020, we reshape.
The organization completely on the way we are going to also.
Helps.
We shouting some offices in where it used.
Some of the other offices and we also made some changes you know operations to continue reducing our costs. So uhm.
We're not seeing.
When football's on our transportation horse also has been we have been able to bring you down so all of those.
And for US an ongoing continuing simple so patient.
Megan.
To come back.
Uhm.
Okay Sir.
Uh-huh.
Alright.
Okay cause I just.
Thank you.
My next question comes from the line of Stephane <unk> of October.
Yes morning, guys. Thanks for taking my questions I've got three the first one is around a special dividend. So I understand the <unk> of the quantity dividend to return to show a return to shareholders in Dubai back, but what was the.
Do logic behind the strategy behind to one of the extra casualty Vigeant given specific these quota on top of the quantity. That's my first question. My second question he's around the tax from Columbia, the cash tax given the repayment and discussion that you had in Colombia, where would you see now the cat.
Gosh tax or a tax repayment for 2020, where would you see 2021.
And my last question is around C. P O five it's back beige building in the previous question could you come back to the prediction you would expect from C. P. O five into guidance in 2021, I think it's 15000, when he seems to be working interest, but if it's decays compared to where we are today, what's all the moving parts of 40000 bad pave at the most.
<unk>.
You'll probably five goes up then what goes down thank you.
Great. Thank.
Thank you for your questions.
On the <unk>.
The dividend question.
The.
The basic.
The basic logic behind it under one off on the.
And the the the ordinary dividend.
We paid at the beginning of so sorry, maybe I should step up to 2019, we started our dividend in late 2019, we're paying $2 $5 million a quarter.
I was hearing you more or less something like $10 million a year, if we want to continue that payment every quarter.
By then would represent something around 1% dividend yield for.
For the company as a whole.
So first covid widows prices growth in our market dropping nine.
Today, even though we paid $2 5 million number will be there in the first quarter.
You can talk.
With another.
2.5 million this quarter.
That gives $5 million for a year, which more or less respect the same 1% year for a little bit about that.
So.
<unk>.
Is because.
Re dividend.
Is is not one.
Yeah.
Quarter.
Okay.
Sanchez.
Uh-huh.
After quarters go forward.
And that will give you more or less $5 million over the course of one year. If we went to the site to maintain so that's more or less the logic.
On why we're deciding those.
Those amounts.
With respect to your your question about cash taxes.
<unk>.
Indeed into 2020, though was a combination of tax reductions tax referrals.
Jax reimbursements.
Okay, no major impact on cash for the Ducks.
The tax payments in 2020.
Going to be around $10 million.
Part of that will set refer to 2021, roughly 20 $20 million to $25 million worth referred to 2021, so that is going to restart of 2021 tax vaccine.
And then our 2021 Dutch estimation cash that's explanation is somewhere around also $20 million to $25 million. So in total with tax cash payments in 2021 should be something around 40 45, sorry.
40 to 50 million bonus more of it.
Uhm.
And then.
Your last question was about CPO five under production guidance.
Yes, so the numbers I gave the 7000 8000 last this year 215, more or less within the next year.
Gross direction that they are working.
So how that breaks down into our into our production base is more or less.
CPO five growing.
34, 30 flat to us small growth 025 percent growth.
Then the declining comes from the other assets, mainly mainly Pat unusual.
And to a lesser extent.
Some of our Argentinian Chilean Brazilian selection.
Thank you.
Great. Thank you.
Your next question comes from the lineup Ricardo or Sunday at J P. Morgan.
Her car down your line is open please state your question.
Can you hear me.
Yes. Please go ahead, you as well thank you.
Hi handle asked hygiene. Thanks, so much for for taking my question.
A couple of questions on my side the first one.
It's related to your 2021 word program and more specifically a ball toss with your five almost like a follow up to just mention.
Just curious to see how a word the discussions with your partner they're giving.
That's the first year that will be part of the of the controlling group of steep your five and how much a fee a teenager that you had read the 34 and the best breakfast ever had there. If you could already started to deploy Daddy is if you'll pardon me 2021, and then on the second question is this morning.
Pay per view, which is a part of their own when I T. There knowing that they're sending their 10% stake on that block in Brazil.
I'm just curious to see what are your plans there give me the the three partners on that block have already mentioned degradation to to show their steaks at some point you're do here.
Thank you Ricardo.
Good morning.
With respect to any of your questions. Your question about C. P O five.
I think so far.
So good you know we have a long relationship with or NGC and have been working with them in the area would have been working before.
<unk> Bye and joined you're looking at opportunities in Duck, and American, particularly magennis facing.
So they are they are open and welcoming.
Our our joining G P O five.
Have a very good partnership with them.
We are very happy that we finally.
Go to rig on site.
In in Indigo.
We are we're just finishing draining indical too well, we are expecting to perforate and test these weather in the coming days.
So that's that's great news and we are also looking to.
A good drilling campaign following for the ringing in the cartoon that has been agreed.
Between the two partners. So I would say the relationship has been excellent. They welcome all the power input.
With respect of ideas and considerations on experience we've had in a in journals 34.
And the fact that we are about drilling.
And hopefully keeping the week in the area to continue drilling.
After a vehicle to the re he's going to move to an exploration prospect call Angela.
And then after that is going to continue reading, probably coming back to indigo for more development wells.
So no answer but.
Really our our experience so far has been quite positive and we're very optimistic about these these very attractive position.
And then with respect to your question about that early on.
We read that announcement.
And we know.
No.
This initiative that is going on around maniaci, yeah. It is one of the assets monarchy is a very attractive gasfield in Brazil.
It is.
It does have limited upside so it would be part of it is.
One of the assets in our portfolio for us would be a divestiture could be considered.
We've we've.
Analyze the many times and.
<unk>.
Refinishing comes to reality, we will make the appropriate announcements and we will update the market on any of this owned upfront. So there's none of those much that I can say about that but it is it is an idea that we're happy to continue.
Right.
Thank you together.
Your next question comes from the line of Robyn Heyward, Steve Hall.
Hi, Andres.
Thanks for the question.
Right.
So just don't buy box uhm.
Issue by bank kept by free Cashway in 2021.
<unk>.
Would you consider using cash.
Cash on the balance sheet in excess of free Cashway.
Just looking at the my estimates are free cash flow and I I didn't mean to.
There's tons given you.
Spending guidance today, you say I was just wondering if you would essentially.
Essentially spent about and she'd catch on on on buying back stock.
Yeah, and then hi, how do you think about buying.
Buying backs don't trust is doing more training either.
And at 834.
C. K five and then just to find out the phone them up on C. K five production rates about 15000 barrels a day you mentioned is that makes it right you for 2021.
I think you'd be quiet good effort to make that 2021 average.
If you could.
That'd be great. Thank you.
So we're having good morning. This is mark in Toronto, a I'll start with the second question and we needed to see P. O five production and that is the exit right. So in addition to money wholesale one in indigo one that we have on passion today.
And we are adding the production for medical 212 additional development wealth in 2021, and so we expect to be in the order of a 12 to 15000 barrels scoffs at the end of the year.
On those three exploration prospect she may complain that have no production associated noting to anything that guidance correct.
Neither of those three and all of the Aggie by that word and about to start goading.
In the future future.
So on your question about using our cash for Vivax Robyn.
Yes, we we would use some of our cash.
Guidance more or less we gave these morning is is more or less cash neutral the asset.
After asset that service taxis and everything.
So we know that we have deep variance in <unk>.
<unk> and any other.
No not yet or not not inside company related.
Items for that we could we could definitely use how it gosh Ah based prices.
We believe is.
It is a great investment.
Hello.
And we also have to take into consideration or balance sheet, monostich and keeping the cash.
Also help us to maintain.
Strong balance sheet, so we will not get.
Alright from that part.
But given that we believe we have a pretty solid financial position in 2001, 21, and I'm pretty solid unhealthy cash inflow and cash position, yes, we will definitely use some a webcast willing to invest in my inbox, how much of our shows.
Great. Thank you and so you just take us to follow up on that I I, you sort of committing to use the full 10%.
Ability to buy back stock or is it more opportunistic than that.
No we're not committing to use of the full 10%.
The more importunity can.
And really on market conditions generally, but so so.
The maximum allow us stuff, we have approved but we will we will not committed to use after four demo.
Alright.
Thank you very much.
Thank you once again, if you'd like to ask a question. Please press start then the number one on your telephone keypad. Your next question comes from the line of Joanna Castro Cow.
Hi, Thank you for taking my question I had one.
<unk> that rationality.
And how you see the.
The beginning of next water because.
Because I I think that you probably one of the companies that have.
And these more guidance on our border outline what is your <unk> your capex everytime. They only changes all it is good that you need that inside but I I was thinking.
I was actually wanting to understand what you're lashing out on the market it I'm gonna negotiation with happy.
What else plenty plenty one you can details and I need a that on on how you look at that overview of the marketing Columbia.
That is the amount right now for you.
And the second question is.
An accounting issue and find any of these yet he's been resolved.
Is there anything the 19th.
And the third quarter.
Wanting to negative equity are you are you planning to avoid that is and I you know I guess orange I might ask presentation or or it doesn't really matter.
Hi, good morning Joanna.
Could you. Please repeat the first question I'm not sure I understood.
Your your your question please.
Is that M S. Yeah, seven times in the past and some anticipated.
<unk>.
And that got me.
Yeah.
Michelle and secretly tropical with that in order to be based on sale.
As I have understood that fever at work.
Oh, they need help me queasy, but I don't know if you are.
Are you part of the first quarter of 2021.
Or using that kind of a tragedy and notice until you'd think am.
Somehow that's not option.
I want to be wandering these studies as an idea for the first four days and 71.
Okay. So thank you for you won't happen this year.
We negotiated an agreement with Trafigura.
To implement annoys, please say facility.
On that.
Exchange of that.
Have enough state contract with them. So they will be taking part of our selection.
During next year on the following year.
So that I can remain the same place.
And we have the commitment from people.
To see if we would require.
Yeah.
While they double liquidity committed slot that has the.
The expenses.
$75 million.
Confirm that none of the amount has been withdrawn so the line anew.
A new.
And we expect to keep that in.
In place.
So for the for the next year.
And then Ah pharmacy.
Helpful that you would see part of our volumes being sold to fluffy grew up in in in 2000 and.
21.
That is a point that addresses the.
The question that gives you a maintenance.
Yes perfect.
Thank you and then your next point.
Yeah.
Yes.
Yes.
Your phone will see with results in the fourth quarter Barbecued happens as you said there is a chance that on Netscape equity become may.
Negative during the fourth quarter.
Oh really see that as a concern that's purely an accounting.
Accounting rules modern.
The main explanation for that is that you can see that is very important and big assets like get up for the fourth.
Okay. The balance it out a book by your $200 million and not followed simply accounting rules that we need to find out.
Okay.
Taking into consideration.
With us investment.
My appreciation following selection.
<unk>.
The book value of vehicles.
Both of those are countries accounting rules, which is really do not reflect 30.
We believe is the real underlying value of the assets I mean <unk>.
34 is going to generate that much in the next 12 months so.
We also need a.
Concerns we have a very solid cash position, we have just announced a pretty firm.
Ross work program on budget that is going to generate a lot of cash flow for our company.
So we we don't really think that it's an issue I'd also there has been a lot of.
A lot of companies. This is not an unusual event I mean, those many come by is not only on the empty sector auto sector that experienced negative.
No meal with no real neutral. So this this is not for us an issue.
Service lift anything with respect more detail.
Okay. Thank you. Thank you for that clarification.
Great. Thank you.
Our next question is a follow up from Alejandro and they came up with any securities.
Yes, guys.
Just to follow up on something that Martin said on C. P. O. Five can you confirm that you are.
Aching indical too into into production.
Because on your press release I can see no comment on any kind of early kind of syndication from you could choose so maybe you can tell us how <unk>, how you've seen the progress maybe you're writing the reservoir.
Yes, I do another 100.
So we're very excited convert head that we got every operating there and we're aligned with our partner they indical too well, what's auditing September targeting the <unk> formation is the same formation that he's been producing in both mariposa on illegal one.
As we speak.
The operator, LNG see each completing doyle and we're we're excited aren't shortly we will be communicating those results and following that indigo to completion. The reason is moving to the idea.
That is also targeting that won't information so we expect.
And to have resolved to share with you shortly.
But but surely feel complete well because you have.
Discovery Yeah.
Well.
So we are location the oil.
The the results.
They look at.
They look good and.
We will again, we will share once we have a.
Well with more information, yes, just remember to is not an exploration well just works out a D as in a brace on well inside the Indical field.
So.
It wouldn't it wouldn't qualify us discoveries development well.
Development Lash operates on well.
Hopefully we would be.
Talking to test the world in the in coming weeks, so looking forward to that.
Okay, that's very clear thank you.
What's our final question for today I would now like to return the call to Mr. James Park for any additional our closing comments.
Thank you everybody for your insurance and <unk>.
And your continued support of our company.
As the World orders begin to open again, we encourage you to please visit us at our operations in each country.
Our shareholder value team has accelerated their actions and is busier than ever with Webinars Videoconferences indirect calls and is available around the clock as as the management team to answer any questions or listen to your comments.
Thank you and please stay healthy.
Thank you that does conclude the G O Park third quarter of 2020 earnings Conference call and webcast. You may now disconnect your lines and have a wonderful day.
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