Q3 2024 GeoPark Ltd Earnings Call
Thanks for watching!
Andrs Ocampo Terrado,
Speaker Change: Good morning and welcome to the Geopark Limited conference call following the results announcement for the third quarter ending September 30th 2024. After the speaker's remarks there will be a question and answer session. If you would like to ask a question at this time press star 1 on your telephone keypad. If you would like to withdraw your question
Speaker Change: And our 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…
Speaker Change: Includes a variety of factors, including competitive development and risk factors listed from time to time in the company's SEC reports and public releases.
Speaker Change: 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.
Speaker Change: All financial figures included herein were prepared in accordance with the IFRS and are stated in US dollars unless otherwise noted. Reserved figures correspond to PMRS standards.
On today's call from Keough Park is Andres Ocampo,
Speaker Change: Jamie Cabrero, Chief Financial Officer Augustus Zubalaga, Chief Technical Officer Martin Torreso, Chief Operating Officer and Maria Catalina Escobar
Speaker Change: And now, I'll turn the call over to Mr. Andres Ocampo. Mr. Ocampo, you may begin.
Speaker Change: Good morning, everyone, and thank you for joining us to review together our third quarter 2024 operational and financial performance.
Speaker Change: Our net revenue for the quarter was $159 million, down 16% from the second quarter, impacted mainly by lower realized oil prices and production.
Speaker Change: Despite these factors, our financial discipline allowed us to maintain robust margins and profitability.
Speaker Change: Our adjusted EBITDA for the quarter was close to $100 million, representing a strong 63% margin.
Speaker Change: Bottom line net profits for the quarter of $25 million also exceeded the same period of last year.
Speaker Change: This quarter was also marked by a significant cash flow generation, which translated into a cash bill of more than two times compared to three months before.
Speaker Change: From $66 million of cash on June 30, up to $123 million on September and $140 million in October, what reinforces a strong liquidity and solid balance sheet.
Speaker Change: Our net leverage ratio remains low at 0.8 times, and we have no principal debt maturities until 2027.
Speaker Change: This position provides us with financial flexibility to manage through market volatility while continuing to invest in high-value projects.
Speaker Change: With this, our total cash distributed to shareholders during this year will amount to $73 million, which represents approximately an 18% capital return yield.
Speaker Change: With respect to some of our key operational highlights, in Colombia we focused on development and abrasion activities in the Jans 34 block, which remains one of our core assets. We advanced our water flooding campaign and expanded facilities, both critical steps to enhance production and improve recovery rates.
Speaker Change: In CP05 block, we drilled two wells, further advancing our exploration and development goals.
Speaker Change: In our Janus exploration acreage, we continued with the abrasion and delineation of the Toritos and Visbita fields.
Speaker Change: The entire complex is currently producing approximately 4,000 bars a day gross. We have currently two drilling rigs on site and expect further activity before year-end and into 2025.
Speaker Change: Also in Colombia, we are looking forward to spot our first exploration well in the Putumayo Basin later in November this year, when we will drill the Bienparado Norte 1 exploration well.
Speaker Change: Our recent acquisition in the Vaca Muerta and Convention Alloy Plate, which became effective on July 1st, has marked a key milestone in geoparks expansion in Latin America.
Speaker Change: Vaca Muerta is today the most attractive hydrocarbon plate in the entire region.
Speaker Change: During the third quarter, the Part IV, which included four horizontal wells, was drilled, completed, and was put on production in October.
Speaker Change: The block achieved a gross average production of 12,600 barrels of oil per day during the quarter and reached 15,400 barrels a day equivalent, its all-time record, in August.
Speaker Change: The operator is currently drilling the four wells in Pad 9, which is expected to finish in December.
In addition to the research development activities in Matamora,
Speaker Change: Geopark and Phoenix have also finished the drilling and completion of the first exploration pad in the Confluencia block in the province of Rio Negro. This pad includes three horizontal exploration wells. These wells are currently testing and cleaning up, expecting results in the upcoming days.
Speaker Change: It is also important to mention that production and cash flow from Geopark's working interest in the Baja Muerta blocks belong to our company since July 1st.
Speaker Change: However, such production and cash flow will not be consolidated into our financial statements until the transaction is closed, which is expected to happen before year-end. Therefore, none of these results have been included in our reported 3Q financial statements.
Speaker Change: As anticipated, and to support the capital needs of our new assets, Geopark has secured important local capital market approvals in Argentina, including a AA-plus Argentinian credit rating and an authorization to issue up to $500 million in local debt securities.
Speaker Change: This provides financial optimization and flexibility to continue developing these high-potential assets.
Speaker Change: Looking ahead, we're on track to release our 2025 Work Program and Investment Guidelines before year-end. This framework will outline our strategic priorities for sustainable growth and capital allocation across our newly expanded and upgraded portfolio.
Speaker Change: We see particular promise in our new assets in Bacamorta, coupled with ongoing focus on optimizing our core operations to maximize long-term value.
Speaker Change: Thank you for your continued support and confidence in our company. We are now ready to take any questions you may have.
Speaker Change: Thank you. If you'd like to register a question please press start followed by 1 on your telephone keypad ensuring you are unmuted locally. If you'd like to withdraw your question you can do so at any time by pressing start followed by 2 on your telephone keypad.
Speaker Change: Our first question comes from the line of Vincent Belanga of BBI. Your line is now open, please go ahead.
Vincent Belanga: You commented that Confluencia will likely put out low results soon.
Speaker Change: up to what you can comment. How do you see the results so far? Do you see these as encouraging? Do you think that you will be able to communicate the production results to the market before December? And my second question is on Matamora Norte.
Speaker Change: We were looking at the Secretaria de Energía website and we saw that
Speaker Change: You produced 13.7 barrels of war equipment per day in the month of September. You also mentioned that PAD-9 will start to produce at the end of December.
Speaker Change: What should we expect for output there in Matamoros-Norte until the end of the year should stay about close to 14,000 barrels of oil per day. Thank you very much.
Speaker Change: Good morning, Vicente. This is Martin Terrado. Nice to hear from you.
Yeah.
Speaker Change: Confluencia No. 1, the results so far look encouraging. It was on track and according to the plan, the drill, the complete of the wells.
This pod has three wells.
Thank you very much.
That's about the recent path that has been completed.
Speaker Change: As Andres mentioned, right now we're drilling pad number 9, that's back into Matamora. This pad has four wells.
Speaker Change: expected to finish drilling all four wells by December. Again, we are on track as we already drilled, the operator already drilled two of the four wells.
And when you ask the question around the...
Speaker Change: The average production for September, what was the production for October? It was similar values around 13,600 barrels of oil equivalent per day. In October, it was basically no new wells.
Speaker Change: and Matamora Wells continue to stabilize, but overall, like we mentioned in the past, we are excited about it and we expect to be around 13,500 to 14,500 barrels of oil equivalent by the end of this year.
Speaker Change: Great. That's very helpful. Thank you so much. Nice talking to you guys again. Thank you.
Thank you.
Thank you.
Speaker Change: The next question comes from Alejandro Demichalis of the Jefferies. Your line is now open, please go ahead.
Alejandro Demichalis: Yes, good morning, guys. Thank you very much for taking my questions. Two questions, if I may, please. The first one is a bit of a follow-up on Confluencia, Martin.
Alejandro Demichalis: When we look at Matamoros, we have seen a lot of variability in terms of the initial production from the different wells.
Alejandro Demichalis: What would you expect to be a good flow for Confluencia and what kind of gas levels can we expect from there?
Speaker Change: We're within that range, they fall, but that's an order of magnitude where we expect to be on IPs.
Speaker Change: We have some wells in Matamoros that Rodrigo mentioned in the past that were beyond that that range. We have two wells that produce 2,000 and 3,000 barrels of oil per day. So we have some wells that are on the top
Speaker Change: percentile of oil of Vaca Muerta in Argentina and that's in Matamora, but order of magnitude that's what we have in our business plan and usually we are within the P50 to the P10 range.
Speaker Change: So, more to come on that pretty soon. And then the question related to production and CAPEX.
and we take it to barrels of oil equivalent.
Okay, moving here.
How are you, Alejandro?
Yeah, that's very helpful, thank you.
Speaker Change: Okay, and I think that your second question was around Channels 34, production and CAPEX. So, like Andres mentioned, we will post our work program for all of Geopark in the next weeks.
Speaker Change: But what we can share with you is where we are aligned with our partner and you have seen throughout the year that we went to one rig.
Speaker Change: We have one rig running right now in Channels 34. We're in agreement that we will continue that rig.
Speaker Change: all of next year, mainly drilling infill wells, some appraisal wells, follow-ups to good wells that we drilled recently, especially in the Curucucu field.
decline
for the whole of January 24th.
Okay.
Speaker Change: That's a bit of a follow-up there, because your partner has been talking more about polymers into Jan-34 and so on. So is that something that we can see in 2025 or is that a more medium term plan?
Speaker Change: No, it's something that we will be seeing in 2025, so we're working the details to perform a pilot in the second half of the year. That's basically adding polymer to the water so that we get better conformance.
Thank you.
Speaker Change: The next question comes from Daniel Guardiola of BTG. Your line is open, please go ahead.
Daniel Guardiola: Thank you and good morning Andres, Jaime and our entire team. I have a couple of questions. The first one I would like to touch on costs.
Speaker Change: Looking at the quarter, we saw once again a deterioration of your OPEX per barrel to levels close to $16-$17 per barrel, and if we look at the last two years,
Speaker Change: And two, what is the company planning to do to basically tackle this significant increase in costs? So that would be my first question. And if you want, you can answer it, and then I can follow up with the second one, if that's okay with you guys.
Speaker Change: Absolutely Daniel, this is Martin again. So when we look at our OPEX on a dollar per barrel, a couple of comments. One is our goal is to stay at the main assets in the order of 10 to 12 dollar per barrel range.
Speaker Change: What has happened in the past two years and what you are referring to, if we look at 2022 in channels 34, we are producing about 350,000 barrels of fluid per day. Our consumption of energy was 50 megawatts.
Speaker Change: from those 350, and our megawatt requirements has increased by 20%. So clearly, when we look at our OPEX, around 40% of the OPEX is energy cost.
Since we connected to the National Grid, one of the...
Speaker Change: In addition to that, of course, we have inflation and exchange rates, but those are, you know, you want to say excuses or the things that have happened. What have we done? And I'm going to let Jaime compliment later on, but we're working and we're...
Locking energy prices.
So that this volatility and paying more than $900.
Now that we have Windows and we can log that.
Speaker Change: We have also looked and we're looking at reviewing where we have OPEX in places where we can purchase facilities. For example, in Nishanos 123, you know, we had zero production about a year and a half ago. We got 4,000 barrels on production right now. All of those facilities were rented and they were purchasing.
Speaker Change: those sections of the facilities that have quick payouts and they make sense to keep.
Speaker Change: And of course, we're reviewing also with our supply chain group, our contracts and looking at opportunities. So.
Speaker Change: Again, I want to make sure that you take it that the goal is to stay between ten and twelve dollars per barrel range in the next years.
Speaker Change: And to compliment on that, good morning everybody, this is Jaime. Daniel, on the energy side, I think it's clearly one of the biggest levers.
One of the things that we're seeing is that
a number of years, actually long-term contracts.
Speaker Change: are becoming very attractive, right? And they are significantly under what we expected.
Speaker Change: It's something that we're looking into and that is going to help us a lot to mitigate that increasing trend of energy costs associated to climate change.
Speaker Change: to the enhanced recovery of the field. I think the other angle...
Speaker Change: to what I would call, you know, immature operations, you know, which is all the exploration fronts that we have open currently.
you know, in the periphery of Llanos.
Daniel Guardiola: to capture the economies of scale associated to a mature operation, and that's going to help as well. So those are the two things to consider as we look at the long-term prognosis of OPEX per barrel. Thanks, Daniel.
Speaker Change: Thank you Martina, Jaime. My second question is on Brazil. I mean this is the second consecutive quarter where you're posting zero production from Brazil and I wanted to know if you can provide us an update on what's going on in Brazil and what are your expectations going forward?
Speaker Change: Yes, Daniel. So, latest we have been communicated by the operator.
is late February.
Speaker Change: And as you mentioned, this is 1,100 barrels of oil equivalent per day that we had in our plan for all of 2024, and it's been shutting since middle of March. So the new date that we're expecting is restart early March.
Thank you, Martin. And if I may just quiz...
Our last question on Argentina.
Speaker Change: And I would like to know your thoughts on the Duplicar project.
Speaker Change: the project to be fully online for you guys to start shipping additional barrels of oil. And also be great if you can share with us what is the total capacity that you have secured in this project. And if you foresee any potential to use additional spare capacity in 2025.
Speaker Change: So, I guess let's start from the baseline. Our evacuation efforts around Bacamuerza are going well. You know, you see that we're having production that is...
Speaker Change: that is very much in line, if not even better than what we expected a few months ago, you know, with the sort of results that we're getting from the different wells.
Currently where we are is
Speaker Change: We're in a place that around 50% of our volumes currently.
Speaker Change: are being transported through our own contracted capacity with Old El Val. That's around, currently that available capacity is at around 7,000, 7,500 miles a day.
Speaker Change: The remainder, the bulk of it, we are using all the LVAL as well, but through third parties' capacity that make them available to us. And there's a little bit, a surplus, that at times we use through trucking.
Speaker Change: And actually, it's a good problem to have because it actually means that production levels are higher than what we anticipated, right?
Speaker Change: Olderval, the Duplicar component, is expected to come online around March.
Speaker Change: That's kind of where we are, there's been no change to that.
Speaker Change: Some, you know, we go back and forth around this, and as you say, you know, I know you have other industry sources, but there's a broad consensus that it's still around that time, March. If there are delays, eventually it could go into April.
Speaker Change: But but it's in that time frame and we feel pretty confident that that's going to be the case
Speaker Change: which puts us at 24 MVD, which is significantly more than what we expect to be producing at that time.
Speaker Change: So, all in all, our midstream efforts are going well and are ahead of our production volumes as they need to be.
Thanks.
Thank you guys.
Speaker Change: Thank you. We now have a written question from Stefan Hockhut of Uptus. What is the current production? How do you see 2P reserved at LL34 at year 24 directionally?
Speaker Change: Is this about 2P reserves at year 23 minus production, or could there be technical revision impacting reserves 3?
Speaker Change: Do you see potential production growth in Ecuador in 2025 and any update on the biopagan
Norton One Exploration Well
CantoFlamenco.co.uk
CPO5 and Triton
and Cora Coe. Thank you.
Thank you, Stephan, for the questions.
Speaker Change: I think I wrote them all, and if I miss any, we'll make sure to come back.
Speaker Change: The first one, for sure, we took it. So what's the current production in Chanos 34? And where do we expect to be on reserves? For the full year for Chanos 34, net to us, we expect to be in the order of 22,000 barrels.
Speaker Change: of oil per day to 23,000 barrels of oil per day.
Speaker Change: Basically, along what we had in mind on a field that is getting more mature,
Speaker Change: A couple of data points that are worth mentioning, this was a very successful year, 2024, on horizontal well drilling, more intense than previous years on water flooding.
Thank you very much.
and the
When we think about reserves
Speaker Change: It's too early to tell. As you all know, we communicate reserves in the first quarter of next year. What we can say is that we already started our reserves certification.
Speaker Change: And based on what we've been discussing throughout the year, we have some positives, like water flooding and horizontal wells, and also some things that we're getting some quicker water cuts and some things that are.
Speaker Change: not as good. So we will see. Outside of channels 34, we have
Speaker Change: If we move to the next question around production potential growth in Ecuador.
Speaker Change: In Ecuador, with the two blocks that we have overall, we have around 4,000 barrels of oil per day on production. We did drilling and workovers.
Speaker Change: We finished the campaign, and the production growth that we see for now in the Perico block, it's around water flooding. Some of the wells, we can see that they need some pressure support.
Speaker Change: So, that's coming as a discussion with our partner for next year, and in Espejo block, we're looking at the recent wells that we drilled, and we'll see what we propose for next year.
Speaker Change: When we move to Bienparado, Bienparado Norte, again it's a well in Putumayo 8, like Andres mentioned a few minutes ago, that's our...
Speaker Change: to Platanillo, to the west of Platanillo. Civil works have been completed. The rig is right now mobilizing and we expect to spot this well in the second half of November. So pretty quick we will be spotting that well and we have a second well that we're finishing the platform. So for sure two wells.
Speaker Change: Bien Parado Norte is a stratigraphic-slash-structural clay. We're targeting the end sand. I'm very excited about that. So, again, more moves to come by the end of the year, for sure, and the next call.
Speaker Change: And I think, let me see, Canteflamenco 2. Canteflamenco 2 is an exploration well that we drilled and completed in the CPO5 lock.
Speaker Change: The main target was Mirador. Secondary target, Uvaque. Uvaque is the same formation that we have in Indico producing 40 API gravity flowing wells.
and moving there millions of years ago.
Speaker Change: The next step on Cante Flamenco 2 is a workover program is coming before the end of the year. We're going to isolate the Uvaque and test the Mirador. Mirador, again, was the primary target where, in order of magnitude, we found 10 feet of net pay.
Speaker Change: I think you asked us about Curu Cucu, Curu Cucu 2, sorry, Curu Cucu 4.
We'll drill first the well number four.
Speaker Change: It's an appraisal or follow-up well in the Channels 34 to Curucucu. The well is producing with very good rates.
Speaker Change: and we are aligned with our partner and working so that before the end of the year we go back to this platform and drill another curucucu.
And let me see, U.S. Catholic, also around Toritos Sur.
Speaker Change: Before I jump into Toritosura, I want to share a little bit overall where we are in Channels 123. Andres also mentioned it, so just to reinforce that Channels 123 Exploration Blog, where we had...
with us.
Speaker Change: The blogs were, going back to previous questions, were purchasing farm facilities to reduce our OPEX.
Speaker Change: And the ones that we drilled recently have performed really well. Toritos 2, Toritos Sur 1, and Visvita Este. All three of them are giving us around 1,500 barrels of oil per day.
Speaker Change: So we continue appraising these discoveries and for next year we will continue with drilling activity.
Speaker Change: If you want to know specific how Torito Sur 1 is doing that well right now, it's producing in the order of 450 barrels of oil per day with less than 10% water cut.
Speaker Change: And I think that we covered all the questions, but at least if we missed any of them, let us know.
Operator, are you there? Are there any more questions?
Speaker Change: If you'd like to register a question, please press start followed by one on your telephone keypad.
Sorry, can you repeat the question please?
Speaker Change: If you would like to register a question, please press star followed by 1 on your telephone keypad.
Speaker Change: There seems to be a problem with the operator. She cannot hear us, but apparently investors can hear us. We received messages from people confirming they can hear us, so we'll try to answer. The last question we understand was about the surcharge.
Speaker Change: In Colombia, Miguel, do you have any writing? Yeah, nothing. Nothing on the search engine.
Great, so on the tax front, the surcharge
estimate that we're having for this year is of
10%. Remember the context around this is...
Speaker Change: With the tax reform, there is a scale, depending on the oil price average for the year, you end up classifying under a different kind of surcharge bracket.
Speaker Change: And that's kind of unchanged versus where we were a few months ago.
Speaker Change: I understand that part of the question is also around the treatment of royalties and
Speaker Change: As we've said before, the courts in Colombia have pronounced themselves on that and the project that the tax reform included didn't pass through the courts.
Speaker Change: The only component of the tax reform that applies to us is a surcharge, and it's at 10%. Thanks.
Speaker Change: We have no further questions, so I'll pass back to the management team for any closing remarks.
Speaker Change: Thanks everybody and we apologize for the technical difficulties. Hopefully all of the questions were answered. If anybody had any pending questions that were not completed, please feel free to reach out to us directly. So thanks very much for joining and your support of our company and have a good day.
Speaker Change: Thank you all for joining, that concludes the Geoparks conference call, you may now disconnect your lines.