Q3 2023 GeoPark Ltd Earnings Call
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If you do not have a copy of the press release. It is available at the Investor section on the company's corporate website at Www Dot Dash pod Dot com a replay of today's call may be accessed through this webcast in the investors section of the <unk> corporate website.
Good morning, and welcome to the <unk> Limited conference call. Following the results announcement for the third quarter ended September 32023, and the 2020 for work program and investment guidelines.
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 1095.
The Speakers' remarks, there will be a question and answer session. If you would like to ask a question at this time. Please press star one on your telephone keypad. If you would like to withdraw your question. Please press star two.
If you do not have a copy of the press release. It is available at the investors section on the company's corporate website at Www Dot tier dash pod dotcom.
These risks include a variety of factors, including competitive developments and risk factors listed from time to time in the Companys SEC reports and public releases.
Replay of today's call maybe accessed through this webcast in the investors section of the <unk> corporate website.
Let's turn intended to identify certain principal factors that could cause actual results to differ materially from those described in the forward looking statements, but are not intended to represent a complete list of the company's business.
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 1095.
Financial figures included herein were prepared in accordance with the only FRS understated in U S dollars unless otherwise noted results figures correspond to <unk> standards on.
On the call today from <unk> Park, as Andres Ocampo, Chief Executive Officer, Veronica Deavila, Chief Financial Officer will go studies to blogger Chief Technical Officer, Martin <unk>, Chief Operating Officer, James Deckman, Chief Exploration Officer, and Stacy Steimel shareholder value director.
These risks include a variety of factors, including competitive developments and risk factors listed from time to time in the Companys SEC 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, but are not intended to represent a complete list of the company's business.
Now I'll turn the call to Mr. Andres Ocampo, Mr Company, you may begin.
Good morning, everyone and thank you for joining our call. We are here today with our team to report our third quarter results and next year's work program and budget guidelines.
All financial figures included herein are prepared in accordance with the only FRS understated in U S dollars unless otherwise noted as those figures correspond to <unk> standards.
On the call today from Chile pockets, Andres Ocampo, Chief Executive Officer, Veronica Deavila, Chief Financial Officer Zubillaga.
During the third quarter Geo Park invested $44 million drilled 14 wells and produced approximately 35000 barrels a day equivalents impacted by temporary production shut ins in CPO, five which were restored in late September.
The Beluga Chief Technical Officer, Martin Tarata, Chief operating Officer, James Deckman, Chief Exploration Officer, and Stacy Steimel shareholder value director and now I'll turn the call to Mr. Andres Ocampo, Mr. Kimzey, you may begin.
Production is today at approximately 39000 barrels a day equivalent.
Good morning, everyone and thank you for joining our call. We are here to stay involved with that with our team to report our third quarter results and next year's work program and budget guidelines.
The company recorded revenues of $192 million.
And adjusted EBITDA of 115 million a margin of 60%, which means that for every dollar invested geoponic generated approximately $2 60.
During the third quarter Geoponic invested $44 million drilled 14 wells and produced approximately 35000 barrels a day equivalent impacted by temporary production shut ins in CPO, five which were restored in late September.
As a result, net profit reached $25 million or <unk> 44 per share.
Over the last 12 months, our return on capital employed was 42%.
In 2023, GOP continues to return value to its shareholders.
Production is today at approximately 39000 barrels a day equivalent.
Between share buybacks and dividends and expect to exceed 50 million, including the announced dividend of $7 5 million to be paid in December.
The company recorded revenues of $192 million.
And adjusted EBITDA of 115 million a margin of 60%, which means that for every dollar invested geoponic generated approximately $2 60.
This should be above the target of 40% to 50% of free cash flow for the year.
After investing in our assets servicing our debt and taxes as well as distributing cash back to shareholders Geoponic ended the quarter with $106 million in cash on the balance sheet and a net leverage ratio of less than one time.
As a result, net profit reached 25 million or <unk> 44 per share.
Over the last 12 months, our return on capital employed was 42%.
And just 123 Geo Park continues to return value to its shareholders between share buybacks and dividends, we expect to exceed 50 million, including the announced dividend of $7 5 million to be paid in December.
Our 2023 drilling campaign continues to deliver positive results, particularly from our accelerated activity during the second half of the year with 12 rigs working.
These should be above the target of 40% to 50% of free cash flow for the year.
People new plays are being opened by our team on portfolio, which are adding new exciting appraisal and delineation activity for the remainder of this year and next.
After investing in our assets servicing our debt and taxes as well as distributing cash back to shareholders. Geo Park ended the quarter with $106 million in cash on the balance sheet and a net leverage ratio of less than one time.
Horizontal well campaigning general's 34, with the most recent well producing over 3400 barrels a day currently has two full time rigs executing back to back wells and is expected to continue.
Our 2023 drilling campaign continues to deliver positive results, particularly from our accelerated activity during the second half of the year with 12 rigs working.
The Dorado discovery in the journal of Basin is flowing 1800 barrels of oil per day and represent a new exciting stratigraphic play in the <unk>, which we will continue to operate and delineate so.
Multiple new plays are being opened by our team and portfolio, which are adding new and exciting appraisal and delineation activity.
So, let's say another polyethylene prospect is showing positive preliminary information and will be tested in the next couple of weeks May also open more drilling opportunities.
The <unk>, one well in CPO, five which is showing positive preliminary logging information will be tested in the next couple of weeks and will be followed by vehicle one well in the same buyers in place and trained.
They use on new play in Ecuador developed by our exploration team with three successful wells already flowing 2700 barrels of oil per day and more to come.
Our 2024 drilling campaign will be focused on continuing the development in general 34 with water flooding project in horizontal wells campaign as well as on operating and delineating the new players being opened by the 2023 program.
As always the work program and guidelines are flexible and can be adapted based on changes in oil prices or other conditions as well as drilling results.
We expect to invest $150 million to $200 million.
To drill 35 to 45 wells and produce between 37% and 40000 barrels per day with production growth expected to come from Colombia, and Ecuador, partially offset by Brazil, and Chile, which have no capital allocated.
We expect to generate between $420 $550 million and adjusted EBITDA at $80 to $90 Brent.
Approximately 20% to 30% of our Capex will be allocated to exploration and the rest will be allocated to appraisal delineation and development activities as well as facilities.
We're also executing the third largest <unk> seismic acquisition program in Colombia across two blocks adjacent to CPO five complemented also by an additional seismic program within the CPO five block. We expect these large new seismic information will allow our subsurface team to define an mob new potential perspective.
The various in place.
As always after fully funding our Capex program, we will continue to allocate our cash flow to return value to shareholders and continue to strengthen our balance sheet.
We expect to return approximately 40% to 50% of our free cash flow after taxes and debt service back to shareholders through a combination of our base dividend share buybacks on or extraordinary dividends. We're.
Finishing the year with great results, which are positioning <unk> for an even better 2024, we look forward to continue delivering on reporting on our progress in the coming quarters. Thank you and we will now take your questions.
As a reminder, if you'd like to ask a question today that star followed by one on your telephone keypad now.
Last question comes from Alejandro Demichelis from Jefferies. Alejandro Your line is open. Please go ahead.
Yes. Good morning. Thank you very much for taking my questions a couple of questions.
The first one is on production quickly some of them.
How you see that production into next year evolving because.
We have given.
Quite a wide range of production.
The second one is your collateral calls have been I would tie this quarter, maybe you can give us some kind of indication of how you see the production evolving over time say over the next 12 months and then on the exploration side.
You have made some.
Good progress maybe you can give us some more detail how you're seeing for salt.
Alcohol.
What excites you.
In the program that would be helpful.
The next 12 months please.
Hi, Good morning, Alejandro Thanks for the question. This is Martin I'll start.
With the first question that you asked around production for 2020 for a more granularity and then I'll pass it onto and there is some embryonic so far for 2024, our average for the year will be between 37048.
<unk> thousand barrels of oil equivalent per day, thats around 1%, 10% increase from 2023 and when we look at each of the assets <unk> they will be declining around 10% to 30% as Andres mentioned, there is no development capital allocator.
To these two assets.
If we move to Brazil in Brazil, we expect flat production.
34, it will be flat to slightly decline and then in CPO five on China's exploration blocks, we expect growing so overall, Colombia, and Ecuador production, we expect an increase of 3% to 11%.
Thank you. Thank you Alejandro good morning.
How are you moving.
Moving on to your question on production cost.
We've seen an increase in.
Production cost over the past quarters.
A few significant drivers of this on the one side energy cost in Colombia.
Have risen given.
Nino weather pattern, we saw.
As independent increased in the third quarter. It has since receded, a bit understated to stabilize but that accounted for about 50% of the increase that we saw in the third quarter 'twenty three alone.
Additionally, the peso has depreciated the Colombian peso has depreciated there was about 10% in this in the third quarter.
So effective local currency denominated costs, which are about 70% of production cost.
One factor that is particular to the third quarter.
It has to do with the composition of sales that will have a drop in inventories for putumayo, one ODM to assets those have higher overall production costs and our Jonathan assets until they.
<unk>.
Move that averages, but those are factors that tend to even over time all in all for 2023, we still expect consolidated <unk>.
<unk> cost to be about 10 to $11 per Boe.
In line with the guidance that we previously provided.
Provided.
If we look to 2024.
We still expect to see pressure both from energy cost.
Colombia and from inflation the guidance that we provided yesterday within our work program includes $160 million to $170 million worth of Opex that equates to about $12 per Boe considering volumes produced.
But to say our team will continue to focus on implementing cost efficiency initiatives and we and we look forward to doing that over the next year.
Okay. Thank you Alejandro.
Good morning, and the last year.
So to comment on your question about which which excites us from from these new activities or this new place.
We really believe these are.
More or less the four or five we mentioned in the introduction or in the release are really exciting.
New opportunities.
I'll start with a horizontal well campaign and Jennifer before that is really delivering.
Great results.
With the last horizontal well.
Being drilled uncompleted at more than 35% cost saving to the first one.
And it was put on production faster.
Is also flowing 3500 barrels a day, that's that's really exciting and having two rigs working on that play back to work also makes us.
I'm really excited about that.
In terms of the things that exploration opportunities have been opened up this year.
All of them are slightly different and exciting from four.
For different reasons.
The <unk> oil play is a.
While a lupe palaeocene formation stratigraphic type of drop so.
You know like you'd happening Dion <unk>, which are mostly stratigraphic plays in that same formation.
Stratigraphic traps tend to be more risky or difficult to find but once you find them usually are associated with bigger volumes. So we expect to add more wells before the end of the year on the campaign for next year also has some significant appraisal and development drilling in that in that new opportunity.
All of these place we're getting results as we speak some of them have been testing for a couple of weeks some of them are going to be testing for the next few weeks. So obviously.
Very preliminary everything we can say now, but we look forward over the course over the next few months as we add more activity to lease and have more information to them hopefully we can be more precise and give more details on what does it mean in terms of volumes.
Activity.
So it.
As an update well from the discovery earlier this year in the Soc.
Yes.
<unk> well, so we just really saw celesta, one well in <unk>.
Countered about 40 feet of net pay net oil pay in the one I looper formation is a down strong structural drop if you remember back.
Back in 2012, when we discovered the tua fields in the Llanos basin.
It was the first that field was the first downtown.
Fielding in the basin that was discovered that opened a new play and following that we had a number of discoveries in the basin. So.
<unk> is exciting because it is another downturn.
Structural drug that we discovered.
So right now as I said, the Logan informational showing more or less 40 feet of pay.
With no upfront oil water contact in that in that formation.
So looking forward to that as well I mean, so far the result looks encouraging but obviously as always we need to put the barrels on the tank before we celebrate.
The testing is successful we see a lot more activity coming from from that field.
Alcon is very important for us because it's in CPO five is in the northern part of the block and if you remember when we purchased <unk> some years ago.
We had multiple reasons for that acquisition, but one of those resource was because we saw there was a lot of potential in Guadalupe formation up in the northern part of the block Alcon, one was the well to.
While we were drilling two hopefully prove that thesis.
So again this is a way that we're going to be testing in the neck up next couple of weeks, but the Logan information today is showing that there is an oil pay with no no oil water contact in that in that area oils.
So given these results we have already agreed with the operator that theres going to be a second well drilled back to back two weeks of one alcon is tested and completed.
We're going to move to equal one.
To continue delineating. This these new play that is opening in northern part of the globe. So also very excited about that.
And the last one is <unk> and <unk>.
Our geoscience team.
<unk> developed a new new geological model to truck.
The trapping mechanism of the use on.
Inside inside of some of our blocks, we've drilled already three wells three successful wells. Following this model producing 2700.
Barrels a day of gross oil today the production in Ecuador is three times, what it was last quarter. So we also think this opens up a lot of activity and opportunities for us to continue resonating in operating this new play so again I'm, sorry, I didn't give you.
Short answer or which ones. We're excited most but I think these are the biggest highlights from what we can say.
And also I would like to take the opportunity that we're talking about exploration I would like to introduce James Decker Man Who's our new CFO, who recently joined the management team is with us on the call.
Probably in the future be taking these questions, but James if you want to add anything that I may have missed excellent. Thanks Andres. Thank you so much for the introduction I'll add my thanks to you for a question. We appreciate that they are very very much.
Like to begin by by first thing that I am very pleased to be a part of this leadership team on a very very high caliber.
Working assets of such high quality and based on those that are so so very prolific. These are patients that I worked earlier in my career and is very pleased to now be levering that experience and success here at Deer Park, principally in three areas. One is organic and inorganic growth secondly to expand our organizational capabilities and a third.
Thats developed some differential technologies, so again very very pleased to be here.
Since I joined the company quite recently with respect to your question regarding what we're very excited about I would.
Reinforce some of the comments that were made by.
By Andres and was really of interest to me are the high volume stratigraphic concepts that we're now developing both in Colombia.
And in Ecuador.
Was germane here are two key points one is the volume potential of these trials and also the play repeat ability and what we're seeing in <unk>.
Arenas play for example is as clear repeatability within block 123, therefore significant scope for additional volume potential as well as a possible extension into CPO four.
Okay.
Also a small follow up because of that.
You mentioned that pay a profile of Ian mentioned that alcohol could you give us some kind of range on the payoff of alcohol.
Yes, it's more or less $25 30 feet, which is similar to what we've seen in other parts of that formation in other parts of that area.
So if there is more or less within what we expected.
Just adding to that that will also intersected no water contact which is very very important as well.
That's great. Thank you everyone.
Thank God Henriksen comes from Stefan <unk>.
The next question comes from Stefan <unk> from <unk> Advisors. Stefan Your line is open. Please go ahead.
Yes, hi, guys. Thanks for taking my questions.
Of course, if you're looking at 2024 production guidance.
Given the level of activities and the new seat entering production it looks a bit conservative. So I was wondering whether you could give us a sense of why you would expect.
Production to be at the end of 2020 full when Dan was one to 387 and <unk> in full production that would help us I think it needs to have a view on it.
<unk> and 'twenty five could be in production. So that's my first question.
Second on the 123 and 87.
What do you think from what you see so far.
Yes.
Development program, what do you see being deported Chen capacity officials at each of these fifth spot.
At this stage, but your memories.
Sense of that and lastly.
What do you expect to pay in cash taxes in Colombia in Q4, 'twenty three and yes, how much. Thank you.
Hello, Stefan disease, Martine and thanks for your question I'll cover the first one around product.
Production exit for 2024, and then I'll pass it on to Andreas and Veronica again so.
So.
For 2020 for us and the recognition in the in the initial remarks, the average will be 37% to 40000 barrels of oil equivalent per day and as you can imagine in next year is going to have significant appraisal activity and discover field. So the exit will depend on on the learner.
<unk> and the results of these fairways that we will be a pricing.
In a quarter, we're going to be drilling between $2 seven appraisal wells in China's exploration three to nine wells. So at this point.
That's as much as we can share.
Okay.
So I think the fund both the first and second question.
Speaker 1: Investment guidelines. After the speaker's remarks, there will be a question and answer session. You would like to ask a question at this time? Please press star one on the telephone key. Bad, he would like to withdraw your question. Please press star.
What is different about next year's program is that it has.
Hello, Stefan disease Martijn. Thanks.
Maybe a more significant component of delineation and appraisal then maybe in the past couple of years I think in the gap.
Thanks for your question I'll cover the first one around production.
Production exit for 2024, and then I'll pass it on to Andreas I'm Veroni Guy again.
Speaker 1: If you do not have a copy of the press release, it is available at the Invest With Us section on the company's corporate website at www.geo-park.com. A replay of today's call may be accessed through this webcast and the Invest With Us section of the Geopark corporate website.
But.
Couple of years, it was either development or new exploration on and he was very easy development. We were associated production and exploration. We don't in designation on <unk>, there's some risking associated with it.
So.
Speaker 1: 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
And you can see that the range of activity on each one of these that in Asia places pretty wide I mean, some of it goes to I think in <unk> we were.
We're going to do something like two to seven wells.
Speaker 1: With respect to such forward-looking statements, the company seeks protections afforded by the Private Securities Litigation Reform Act of 1995.
And I think gaming Genesis exploration goes from three to nine wells.
Speaker 1: These risks include a variety of factors, including competitive developments and risk factors listed from time to time in the company's SEC 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, but are not intended to represent a complete list of the company's business.
So that's a pretty wide range and the reason for that is because we are in early stages.
We're seeing what we're seeing is encouraging we hope we can be on the upper side of the range and if we are there then.
Yes.
We would be on the Derisking side of the play and hopefully that will that brings us a lot more upside on the production side than what we're showing in our guidance. So probably that is the main reason why it sounds a little.
Speaker 1: All financial figures included herein were prepared in accordance with the IFRS and are stated in US dollars and as otherwise noted. All financial figures correspond to PRMS standards.
Speaker 1: On the call today from Geo Park is Andres Ocampo, Chief Executive Officer, Veronica de Villa, Chief Financial Officer, Augusto Zubilaga, Chief Technical Officer, Martin Tirado, Chief Operating Officer, James Deckelman, Chief Exploration Officer and Stacey Stymell, Shareholder Value Director. And now I'll turn the call to Mr. Andres Ocampo. Mr. Ocampo, you may begin.
All the level of activity compared with the level of production that we're showing also part of the production is us as.
As it was mentioned by Martin.
It is offset by three assets that we have that are producing today collectively something around 4000 barrels a day.
There are not getting any capital associated that are going to be declining so that helps us offset a little bit the corporate production growth.
Speaker 2: Good morning everyone and thank you for joining our call. We are here today in Bogota with our team to report our third quarter results and next year's work program and budget guidelines.
Okay.
Sorry on the gas taxes that helped you on them.
Speaker 2: During the third quarter, Geopark invested $44 million, drilled 14 wells and produced approximately 35,000 barrels a day equivalents impacted by temporary production of chareens in CP05, which were restored in late September .
Good morning, and thank you for your question.
As you as you well know income taxes in Colombia are paid primarily in the second quarter. So the bulk of our cash taxes, we have already paid for this year now on every quarter, we do have withholding taxes that are alright.
Speaker 2: Production is today at approximately 39,000 bars a day equivalent.
Part of that cash tax payments and so we look at the fourth quarter, we would expect on an about.
Speaker 2: The company recorded revenues of $192 million and adjusted a dividend of $115 million, a margin of 60%, which means that for every dollar invested, Geopark generated approximately $2.60.
$10 million to $20 million of those.
To be paid for during the quarter and that is included and in line with the guidance we provided previously.
Speaker 2: As a result, net profits reached $25 million or $0.44 per share.
Great.
Thank you very much.
Yeah.
Speaker 2: Over the last 12 months, our return on capital employed was 42%.
As a reminder, that star followed by one on the telephone keypad turn to the Q today.
Speaker 2: In 2023, Geopark continues to return value to its shareholders, between share buybacks and dividends, expects to exceed $50 million, including the announced dividend of $7.5 million to be paid in December .
I'll now hand, the call back to Mr. Andre as the company for any concluding remarks.
Okay.
Thank you everybody for your interest and your support and we're always here to answer any questions. You may have please reach out and we encourage you to visit.
Speaker 2: This should be above the target of 40 to 50% of free cash flow for the year.
Our fields and our operations or call us anytime for further information.
Speaker 2: After investing in our assets, servicing our debt and taxes as well as distributing cash back to shareholders, Geopark ended the quarter with $160 million in cash on the balance sheet and a net leverage ratio of less than one time.
So thank you and have a good day.
Speaker 2: Our 2023 drilling campaign continues to deliver positive results, particularly from our accelerated activity during the second half of the year with 12 rigs working.
Speaker 2: Multiple new plays are being opened by our team and portfolio, which are adding new exciting appraisal and delineation activity for the remainder of this year and next.
Speaker 2: horizontal well campaign in January 1934, with the most recent well producing over 3,400 barrels a day, currently has two full-time rigs executing back-to-back wells and is expected to continue.
Speaker 2: The Torritos discovery in the Janos basins is flowing 1300 barrels of oil per day and represents a new exciting stratigraphic play in the paleocene, which we will continue to operate until in the end.
Speaker 2: Sorsaleste, another Paleocene prospect, is showing positive preliminary logging information and will be tested in the next couple of weeks, may also open more drilling opportunities.
Speaker 2: The Halcon OneWell in CPO5, which is showing positive preliminary login information, will be tested in the next couple of weeks and will be followed by Perico OneWell in the same Paleocene plane and trend.
Speaker 2: They use a new play in Ecuador developed by our exploration team with three successful wells already flowing 2,700 barrels of oil per day and more to come.
Speaker 2: Our 2024 drilling campaign will be focused on continuing the development in January of 1934 with water flooding projects and horizontal wells campaigns, as well as on abrasion and delineating the new place being opened by the 2023 program.
Speaker 2: As always, the work program and guidelines are flexible and can be adapted based on changes in oil prices or other conditions as well as reading results.
Speaker 2: We expect to invest 150 to 200 million dollars to drill 35 to 45 wells and produce between 37 and 40 thousand barrels per day with production growth expected to come from Colombia and Ecuador partially upset by Brazil and Chile which have no capital allocation.
Speaker 2: We expect to generate between $420 and $550 million in adjusted EBITDA at $80-90 per annum.
Speaker 2: Approximately 20-30% of our CAPEX will be allocated to exploration and the rest will be allocated to abrasion, delineation and development activities as well as facilities.
Speaker 2: We are also executing the third largest 3D seismic acquisition program in Colombia across two blocks adjacent to CPO5, complemented also by an additional seismic program within the CPO5 block. We expect this large new seismic information will allow our subsurface team to define and map new potential prospective areas and places.
Speaker 2: As always, after fully funding our CAPEX program, we will continue to allocate our cash flow to return value to shareholders and continue to strengthen our balance sheet.
Speaker 2: We expect to return approximately 40-50% of our pre-cash flow after taxes and debt service back to shareholders through a combination of our base dividends, share buybacks and our extraordinary dividends.
Speaker 2: We're finishing the year with great results, which are positioning Geopark for an even better 2024. We look forward to continue delivering and reporting on our progress in the incoming quarters. Thank you, and we will now take your questions.
Speaker 1: As a reminder, if you'd like to ask a question today, that's star followed by one on your telephone keypad now.
Speaker 1: The first question comes from Alejandro Dimitris from Jeffreys. Alejandro, your line is open. Please go ahead.
Speaker 3: Yeah, good morning. Thank you very much for taking my questions. A couple of questions, please. The first one is on production. Could you please give us some granularity on how you see that production into next year evolving? Because you have given us quite a wide range of production.
Speaker 3: Then the second one is your production costs have been a little high before. Maybe you can give us some kind of indication of how you see that production cost evolving over time, over the next few months. And then on the exploration side...
Speaker 3: you have made some good progress, maybe you can give us some more detail on how you are seeing South, how you are seeing Alcorn and what excites you in the program that you have for the next
Speaker 4: Hi, good morning, Alejandro. Thanks for the question. This is Martin. I'll start with the first question that you asked around production for 2024 and more granularity, and then I'll pass it on to Andres and Veronica. So, for 2024, our average for the year would be between 37,000 and 40,000 barrels of oil equivalent per day. That's around 1 to 10% increase from 2023. And when we look at each of the...
Speaker 4: In Chile, they will be declining around 10 to 30 percent. As Andres mentioned, there is no development capital allocated to these two assets.
Speaker 4: If we move to Brazil, in Brazil we expect flat production.
Speaker 4: Shannos 34, it will be flat to slightly decline. And then in CPO5 and Shannos exploration blocks, we expect growing. So overall, Colombia and Ecuador production, we expect an increase of 3% to 11%.
Speaker 5: Thank you, thank you, Alejandro. Good morning.
Speaker 5: Moving on to a question on production cost, we've seen an increase in a production cost over the past quarter.
Speaker 5: A few significant drivers of this on the one side, energy costs in Colombia that have risen given El Nino weather pattern. We saw a significant increase in the third quarter. It has since receded a bit and is starting to stabilize. But that accounted for about 50% of the increase that we saw in the third quarter, 23 alone.
Speaker 5: Additionally, the peso has appreciated, the Colombian peso has appreciated about 10% in the third quarter.
Speaker 5: Also affecting our local currency denominated costs, which are about 70% of production costs.
Speaker 5: One factor that is particular to the third quarter has to do with the composition of sales. So we have a drop in inventories for Putumayo and Oriente assets. Those have higher overall production costs than our Janus Basin assets, and so they move that average, but those are factors that tend to even over time.
Speaker 5: All in all, for 2023, we still expect the consolidated production cost to be about $10 to $11 per BOE, in line with the guidance that we previously provided.
Speaker 5: If we look to 2024, we still expect to see pressure both from energy costs in Colombia and from inflation. The guidance that we provided yesterday within a work program includes $160 to $170 million worth of OPEX. That equates to about $12 per BOE, considering volumes produced.
Speaker 5: I have to say our team will continue to focus on implementing constellations to the initiatives and we look forward to doing that over the next year.
Speaker 2: Good morning, Andres here. So to comment on your question about which excites us from these new activities or this new place.
Speaker 2: We really believe these are, you know, more or less the four or five we mentioned in the introduction and in the release are really exciting new opportunities.
Speaker 2: I'll start with the horizontal well campaign in Janus 34 that is really delivering great results. With the last horizontal well having been drilled and completed at more than 35% cost saving to the first one, and it was put on production a lot faster, it's also flowing 3,500 barrels a day. That's really exciting, and having two rigs working on that play back-to-back also makes us really excited about that.
Speaker 2: in terms of the things that, you know, exploration opportunities have been opened up this year.
Speaker 2: All of them are slightly different and exciting for different reasons.
Speaker 2: The Toritos oil play is a Guadalupe-Paleocene formation stratigraphic type of trap. So, as you know, like it happened in Tigana and Hakana, which are mostly stratigraphic plays in that same formation. Stratigraphic traps tend to be more risky or difficult to find, but once you find them, usually you're associated with bigger volume.
Speaker 6: So we expect to add more wells before the end of the year and the campaign for next year also has some significant appraisal and development drilling in that new opportunity.
Speaker 6: All of these plays, you know, we're getting results as we speak. Some of them have been testing for a couple of weeks. Some of them are going to be testing for the next few weeks. So, obviously, it's very preliminary everything we can say now, but we look forward over the course of the next few months as we add more activity to these and have more information to them. Hopefully, we can be more precise and give more details on what does it mean in terms of volumes and activity.
Speaker 6: Sorsal is an active well from the discovery earlier this year in the Sorsal 1 well, so we just drilled Sorsaleste 1 well. It encountered about 40 feet of net oil paid in the Guadalupe Formation. It's a downstream structural trap. If you remember.
Speaker 6: Back in 2012, when we discovered the Tua Field in the Llanos Basin, it was the first, the Tua Field was the first down-thrown field in the basin that was discovered, and that opened a new play, and following that, we had a number of discoveries in the basin. So that is exciting because it's another down-thrown structural trap that we discovered.
Speaker 6: So, right now, as I said, the log-in information is showing more or less 40 feet of oil pail with no upper and oil water contact in that formation. So, looking forward to test this well. I mean, so far, the result looks encouraging, but obviously, as always, we need to put the barrels on the tank before we celebrate. But if the testing is successful, we see a lot more activity coming from that field.
Speaker 6: Alcon is very important for us because it's in CPO5, it's in the northern part of the block. And if you remember, when we purchased Amerisource some years ago, we had multiple reasons for that acquisition. But one of those reasons was because we saw there was a lot of potential in the Guadalupe Formation up in the northern part of the block. Alcon 1 was the well to, that we were drilling to hopefully.
Speaker 6: So, again, this is a well that we're going to be testing in the next couple of weeks, but the login information today is showing that there's an oil pay with no oil water contact in that area.
Speaker 6: Also, given these results, we have already agreed with the operator that there's going to be a second well drilled back-to-back to it. So once Alcon is tested and completed, we're going to move to Perico 1 to continue delineating this new plate that is open in the northern part of the block. So also very excited about that.
Speaker 6: And the last one is Ecuador, and in Ecuador, our geoscience team developed a new geological model to track the trapping mechanism of the USAN inside of some of our blocks, and we've drilled already three wells, three successful wells following this model, producing 2,700
Speaker 6: barrels a day of gross oil. Today, the production in Ecuador is three times what it was last quarter, so we also think this opens up a lot of activity and opportunities for us to continue delineating and appraising this new play. So, again, I'm sorry I didn't give you a short answer or which ones we are excited most, but I think these five are the biggest highlights from what we can say.
Speaker 6: And also, I would like to take the opportunity, we're talking about exploration, I would like to introduce.
Speaker 7: James Deckelman, who's our new CXO, who recently joined the management team. He's with us on the call, and will probably in the future be taking these questions. But, James, if you want to add anything I may have missed. Excellent. Thanks, Andres. Thank you so much for the introduction. Alejandro, my thanks to you for the question. We appreciate that very, very much.
Speaker 7: I'd like to begin by first saying that I'm very pleased to be a part of this leadership team, one of very, very high caliber.
Speaker 7: working assets of such high quality in basins that are so very prolific.
Speaker 7: These are patients that I worked earlier in my career and is very pleased to now be levering that experience and success.
Speaker 7: here at GeoPark, principally in three areas. One is organic and inorganic growth. Secondly, to expand our organizational capabilities. And the third thing is to develop some differential technologies. So again, very, very pleased to be here.
Speaker 7: You know, since I joined the company quite recently, with respect to your question regarding, you know, what we're very excited about...
Speaker 7: I would reinforce some of the comments that were made by Andres. And what's really of interest to me are the high-volume stratigraphic concepts that we're now developing both in Colombia and in Ecuador. What's germane here are two key points. One is the volume potential of these traps.
Speaker 7: and also the play repeatability. And what we're seeing in the Torito's play, for example, is clear repeatability within block 123, you know, therefore significant scope for additional volume potential, as well as possible extension into CPO4.
Speaker 3: That's great. As a small follow-up, because, Andres, you mentioned the payout so far, but you didn't mention the payout at Alcorn. Could you give us some kind of range on the payout on Alcorn?
Speaker 6: Yes, it's more or less 25, 30 feet, which is similar to what we've seen in other parts of, in that formation in other parts of that area.
Speaker 7: And just adding to that, that well also intersected no water contact, which is very, very important as well.
Speaker 8: The next question comes from Stéphane Foucault from Auctus Advisors. Stéphane, your line is open, please go ahead.
Speaker 8: I've got a few first looking at 2024 production guidance.
Speaker 8: Given the level of activities and the new field entering production, it looks a bit conservative. So I was wondering whether you could give us a sense of where you would expect
Speaker 8: production to be at the end of 2024 when the Anos 1, 2, 3, 87 and Ecuador are in full production? That would help us, I think, me to have a view on where 2025 could be in production. So that's my first question. Second, on 1, 2, 3 and 87.
Speaker 8: What do you think from what you see so far and the development program, what do you see being the production capacity at each of these fields? I'm pretty a bit early stage but you have some sense of that.
Speaker 8: What do you expect to pay any cash tax in Colombia in Q4 23 and if yes how much?
Speaker 4: Hello, Estefan. This is Martin Terrado. Thanks for your question. I'll cover the first one around production exit for 2024, and then I'll pass it on to Andres and Veronica again.
Speaker 4: So for 2024, as Andres mentioned in the in the initial remarks.
Speaker 4: The average will be 37,000 to 40,000 barrels of oil per day and as you can imagine, next year is going to have significant appraisal activity in this cover field, so the exit
Speaker 4: will depend on the learnings and the results of these.
Speaker 4: per waste that we will be appraising. In Ecuador, we're going to be drilling between two and seven appraiser wells. In Chanos Exploration, three to nine wells. So at this point, that's as much as we can share.
Speaker 6: This, what is different about next year's program is that it has maybe a more significant component of delineation and abrasion than maybe in the past couple of years. I think in the past...
Speaker 6: couple of years it was either development or new exploration, and it was very easy development. We associate production and exploration. We don't. In delineation and abrasion, there's some risking associated with it, and you can see that the range of activity on each one of these delineation plates is pretty wide. I mean, some of it goes to, I think in Ecuador we're going to do something like two to seven
Speaker 6: And I think in Janus exploration goes from three to nine whales.
Speaker 6: So, that's a pretty wide range. The reason for that is because we're in early stages. We're seeing what we're seeing. It's encouraging. We hope we can be on the upper side of the range, and if we are there, then, yes, we would be on the de-risking side of the play, and hopefully what that brings is a lot more upside on the production side than what we're showing in our guidance.
Speaker 6: So probably that is the main reason why it sounds a little odd, the level of activity compared with the level of production that we're showing. Also part of the production, as it was mentioned by Martin, it is offset by three assets that we have that are producing today collectively something around $4,000.
Speaker 6: that are not getting any capital associated, that are going to be declining. So that offsets a little bit the corporate production growth.
Speaker 5: Sorry, on the cash taxes, Beto, you want to make a comment? Hi, Estefan. Good morning, and thank you for your question. So, as you well know, income taxes in Colombia are paid primarily in the second quarter. So, the bulk of our cash taxes we have already paid for this year. Now, on every quarter, we do have withholding taxes that are paid.
Speaker 9: part of that cash tax payments. And so if we look at the fourth quarter, we would expect on and about 10 to $20 million of those to be paid for during the quarter. And that is included and in line with the guidance provided previously.
Speaker 10: As a reminder, that's star followed by 1 and your telephone keypad is in the queue today.
Speaker 6: Thank you, everybody, for your interest and your support, and we're always here to answer any questions you may have. Please reach out, and we encourage you to visit in our fields and our operations or call at any time for further information. So, thank you.