Q4 2024 GeoPark Ltd Earnings Call
Speaker Change: Good morning and welcome to the GeoPark Limited Conference School following the results announcement for the fourth quarter ended December 31st, 2024.
Speaker Change: After the speaker's remarks, there will be a question in our session. If you would like to ask the question at this time, please press star 1 on your telephone keypad. If you would like to withdraw your question, please press star 4.2.
Speaker Change: 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
Speaker Change: Before we continue, please note that certain statements contained in the results press release and on this conference school are forward-looking statements rather than historical fact and are subject to risks and uncertainties that could cause actual results to differ materially from those described.
Speaker Change: 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.
Speaker Change: Those lists are intended to identify certain principal factors that could cause extra results to differ materially from most described in the forward-looking statements but have 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. Results figures correspond to PRMS standards.
Speaker Change: On the pool today, the two Marcus Andres Ocampo, Chief Executive Officer, Jaime Caballero, Chief Financial Officer, Martin Terrado, Chief Operating Officer, Rodrigo Dalle Fiore, Chief Exploration and Development Officer, Maria Catalina Escobar, Sherholder Value and Captain Markets Director.
Speaker Change: And now I'll turn the call over to Mr. Andres Ocampo. Mr. Ocampo you may begin. You may begin.
Good morning and welcome to the Geopark Ltd.
Speaker Change: Good morning, everyone, and thank you for joining us to review our fourth quarter and footier of 2024 Operational and Financial Results.
Speaker Change: 2024 was the year of significant achievements for GeoPark despite some operational challenges and lower oil price environment.
We were able to sustain our cast generation capacity.
Speaker Change: Made a game-changing acquisition in Bacamorta that extended our research slides significantly.
Speaker Change: Increased production in our newly acquired assets, hit a new transformation on discovery in our first exploration effort in Bacamorta. And at the same time we delivered the highest annual shareholder cash return in the company's history.
Speaker Change: GeoPark's total oil and gas production for 2024 averaged almost 34,000 bars a day equivalent, which is 7% less than 2023, as a result of temporary production disruptions and natural decline of our main fields in Colombia.
Nevertheless, our acquired unconventional hydrocarbon blocks in Baca, Morta, Delivered.
Speaker Change: An average production of over 15,000 bars a day grows in the fourth quarter of 2024.
Speaker Change: which is 19% higher than the third quarter, 2024, and almost 50% higher than when we announce the transaction, which highlights the quality of the assets and impressive operating skills of our partner Phoenix.
Speaker Change: Alvaca Moore to access delivered approximately $25 million of vivid net to GeoPark in the fourth quarter and approximately $100 million net on a full year on a pro forma basis.
Speaker Change: Importantly, during the fourth quarter of last year, we put on production our first exploration path in the confluence of log, in the province of Rio Nero, with three wells producing approximately 4,500 barrels a day.
Speaker Change: This discovery is important, not only because it's the first step towards potentially derisking the approximately 90 million barrels of networking interest certified contingent resources in the Confluence of Locks.
Speaker Change: But also, as it represents a breakthrough in the Bacamorta Basin, these are the first wells to flow from Bacamorta in Rionero Province and two out of the three wells ranked in the top eight producing wells in the entire basin over the last 90 days.
Speaker Change: This represents a new part of dying being broken by Phoenix and GeoPark in the basement.
Speaker Change: We look forward to drilling and completing our second exploration parting confluence, Yasuo Blok, which is expected in the second half of 2025.
Speaker Change: As the transaction is going through the customary regulatory approval process with the respective provincial governments.
Speaker Change: The financial impact of the timing of these approvals will be neutral, as the transaction became effective on July 1, 2024.
Speaker Change: Reserves at EARN 2024, Reflect the Upgrade and Greek Alibration of our assets based through the acquisition in Argentina, as well as the adjustments to the Colombian portfolio.
Speaker Change: Proforma 2P Reserves reached to nearly over 160 million barrels driven by the addition of 74.6 million barrels from the Vaca Marca assets.
41% year-on-year increase.
Speaker Change: These growth extended our reserve life index to 13 years on a 2P basis.
Speaker Change: While one peer research of 102 million buyers extended our one peer reserve life index to 8.2 years reinforcing our long-term value creation.
Speaker Change: Following lower production and one of financial expenses in the fourth quarter of 2024, which were associated to the offer for upstream reps or assets in Colombia and the drawdown of a pre-pay facility for the Wacamorta acquisition.
Speaker Change: We invested $191 million in capital expenditures during 2024, maintaining our strong capital efficiency ratio of 2.2 times adjusted in time.
Speaker Change: The income for the year stood at 96.4 million dollars, 13 lower than 2023, mainly due to lower production, lower revenues and higher effective tax rate.
Speaker Change: We concluded the year with $276.8 million in cash, including a $152 million withdrawal of a pre-payment facility to pay down the Vaca Mortar acquisition.
Speaker Change: We have no material debt commitments to you until 2030, enhancing our financial flexibility and reducing significantly our refinancing risk.
Speaker Change: Our financial strength allowed us to continue rewarding our shareholders with almost $74 million through dividends and buybacks in 2024, a record annual shareholder cash return of around 14% yield.
Speaker Change: Also, we have just declared a quarterly cash dividend of almost 15 cents per share, pay on March 31st, reinforcing the continuation of our long-term value return proposition.
Speaker Change: Our commitment to sustainability is deeply embedded in our speed value system, always guiding our operations and our decisions.
Speaker Change: We are proud to be included in the SNP Sustainability Yearbook for the first time and to be recognized as the industry mover in the oil and gas upstream and the integrated sector.
Speaker Change: We also maintain our AA rating in the MSCI Index for the second consecutive year, underscoring our position as Global Sustainability Leader.
Speaker Change: These achievements reflect our dedication to operating responsibly and creating value for all stakeholders.
Speaker Change: Looking ahead to 2025, our focus remains on maximizing the potential of our expanded asset base.
Speaker Change: In Colombia, we expect continued progress in a water flooding project as well as our pilot project for polymer flooding in the Janus 34 block that will enhance our recovery and field productivity.
Speaker Change: In both the Janos 34 and CP-05 blocks, we will continue optimizing production and efficiency and in the put too much evasing and other assets, we will advance our exploration program.
Speaker Change: In Vacamorta, we continue the development at the Mar-Tamora-Norte Vlog with the recent completion of the Pad 9 and the current drilling of Pad 12. Following this, the rig will move to the Confluence Assure Vlog to drill our second exploration pad as mentioned before.
Speaker Change: Our partner, Phoenix, has already initiated the works to bring the second drilling rig to the area by early 2026 as agreed in our business plan. This will be a critical element to growing our current production base to a gross plateau in Matamora of approximately 40,000 bars a day.
Speaker Change: We are committed to maintaining our strong balance sheet, executing discipline capital allocation and evaluating new growth opportunities that enhance scale and long-term value.
Speaker Change: Our goal remains simple to deliver more energy, more value, and more prosperity for all of our stakeholders.
Speaker Change: We look forward to reporting on our progress throughout the year and we will be happy to answer any questions you may have. Thank you.
Speaker Change: If you'd like to ask a question on today's call, please press Star Fuller by one on your telephone keypad, we'll submit them via the webcast.
Speaker Change: We'll start with some written questions from Daniel Guardiola from BTPactual. Can you provide details on the 152 million USD recorded as customer advanced payment in the cashless statements? And what is the expectation on this item for the upcoming water?
Jaime Caballero: Hi, good morning, everybody. Thanks, Daniel, for your question. This is Jaime, Alejandro speaking.
with regards to...
Comitted Line, Back in 4Q. Essentially what we did is…
We wanted to make sure that we were ready.
Jaime Caballero: for funding the closing of the Argentina Transaction and the agreement that we have will be told.
Jaime Caballero: Had some amounts committed to a certain time frame. We wanted to make sure that within the 2024 period we could make use of those proceeds and we do that line.
Jaime Caballero: From an accounting standpoint, it is characterized as a customer advance payment because essentially is a prepayment of oil proceeds.
Jaime Caballero: We drew 152 million. The story has developed since then, given the successful bond placement that we had.
Williams, has been reduced to about 20 million dollars.
Jaime Caballero: From a depth standpoint, obviously while we did with the refinancing substitutes the depth so that the net effect is...
He is minimal and what you should expect.
Jaime Caballero: To see going forward is a gross debt that is in the area of $670 million, which is the $550 million from the bond.
Jaime Caballero: Plus, or from a new bond, plus $100 million from the outstanding prior bond and these $20 million. So that's kind of the overall picture that you should expect. Thank you.
Speaker Change: The next question reads, Why is the closing of the acquisition in Argentina taking longer than expected? What is the pushback from the regulatory entities and is there any risk of not receiving the required clearance? And do expect to finally reach the closing?
Speaker Change: Hi, good morning, Andres here. Thank you for your question, Daniel. There's no specific pushback on the closing. There's actually no specific requirements.
Speaker Change: with more delays than this. So it's hard for us to give any additional specific guidance. I know we were expecting it by the end of the year and it didn't happen. We keep pushing and we are trying to get these to the fastest possible closing.
Speaker Change: Again, I think it would be difficult on our side to give any specific guidance on that end.
Speaker Change: Again, I think hopefully we'll get into a closing fast but it's somewhat beyond our hands and beyond our control unfortunately.
Speaker Change: Next question reads, what net transportation capacity do you have in the duplicate project, and what is the expected trajectory of the production of the Vachem Lerzer assets in 2025?
Speaker Change: Good morning, Daniel, this is Martin Terrado. So the current capacity that we have on top of gross numbers for simplicity,
As of February , it's around 6,800 barrels.
Thank you very much.
Speaker Change: So with Phoenix, we look into those, obviously Phoenix is the one doing most of that work, so we can allocate.
Speaker Change: Most of the remaining production that we have in the field through that spare capacity from others and there's around 10% that goes through trucks.
Speaker Change: And with one rig, we continue on our plan to reach 20,000 barrels will be pretty gross by middle of next year.
Speaker Change: 12 hours, our 40,000 bus will play gross. So, what we have is full coverage.
Speaker Change: of our production through all of 2025 and through the middle of 2026.
Speaker Change: Right now, from a commercial perspective, we're working with Phoenix to lock the next 20,000 barrels, which is a part of what we're working right now.
I think that's it from that question.
Speaker Change: The next question reads, at which price of Brent would you consider to revise downward the expected capex to deploy in Vachamueta.
Speaker Change: Thanks, Daniel, for your question. So, I think, you know, the way that we think about our capital location, you know, and actually beyond, beyond Bacamuerta, is following some...
Speaker Change: Some fundamental principles. Our first fundamental principle is that our capital allocation is tested at $60 per barrel.
Speaker Change: So that way we can ensure that our projects are prioritized appropriately and more importantly that we are actually...
Speaker Change: and instill uncertainty to our work programs. So, we are very intentional about avoiding that and the first way to do it.
Speaker Change: It's actually in our planning process testing projects at a much lower price than in our case it's 60 dollars per barrel where we cannot draw a strong red line in terms of ensuring profitability. .
Furthermore, a second element to this is, of course, [inaudible]
Speaker Change: We have a mature hedging program in the company that is designed particularly to underpin the continuity of the CAPEX program for at least a 12-month period.
Speaker Change: To ensure the revenues and the netbacks associated to funding are debt and particularly funding the topics that we have committed to.
Speaker Change: So that also gives us a tremendous confidence around the ability to keep the oxygen line to our topics for at least 12 months.
Speaker Change: $68, $69 per barrel for that curve, so that actually gives us a lot of forward-looking stability in terms of the revenues that we can expect for the next 12 months.
Speaker Change: That given these protections that we have in place, we would require a very sharp and prolonged drop in all prices.
For us to change our plans.
Speaker Change: Our plans are unchanged, we're not reviewing them, we're not intending to adjust them in the current price environment given these principles that I mentioned.
Thank you.
Speaker Change: The note's final question reads, how many drilling locations is the reserve's report at the Bachelor of Water Assets considering?
Speaker Change: Thank you, Daniel. This is Rodrigo. Very important question you are doing because 46% today of our 2P results are coming from Bacamorta, representing 74 million virus as 2P.
Speaker Change: So, going back to your question, at the moment we have 33 wells in Matamora and three other wells in Confluenceia.
Speaker Change: And we still remind we have 148 more wells to drill in Matamora. So that's important because that's represent the research that we have in the book.
Speaker Change: Those reserves are divided in three, as you may be know, proven and developed, we have 69 location or wealth, in probable, we have another 30, and in possible, we have 48 more wealth.
Important to Reminds
Speaker Change: At least for DCS is we have a certified contingent resources. 113 million barons are coming from confluence, Norte Ansur, Amata Mora Sur, that represents more than 250 wealth for the future of the company.
Speaker Change: So that's the answer of the question that you are doing
Speaker Change: We have a question from Joaquin Rebe from Balan's capital. The Queen, your line is open, please go ahead.
Great. Thank you.
Joaquin Robet: So I have two questions. First one is, although Baca Morco operations are still relatively new, would there be any interesting person additional M&A opportunities in Argentina, particularly if your players were to exit the market?
Joaquin Robet: Clearly M&A is an important element of our strategy. I think we have been vocal about that of course.
Joaquin Robet: We have an organic business that continues to be our priority but we believe that going forward M&A is an element of our recipe to success.
Joaquin Robet: And to that effect, we are active in that arena. We are seeking value as Andres said in his introductory comments and we are seeking long-term sustainable profits.
Joaquin Robet: I think what's particular of where we are now is that we have a very focused strategy.
Joaquin Robet: We are drilling down on big assets, big basins, big plays, we've said that before. That's the sort of things that we're looking into. It's not a disperse.
Joaquin Robet: Strategy that we're looking or opportunistic strategy that we're looking at everything that's out there so we use lenses to filter these opportunities and to ensure that our efforts are consistent with our strategy. From a geographical standpoint
Joaquin Robet: Clearly and to your question, Baca Muerta, is a place of interest for us and we are constantly monitoring and evaluating whether this opportunity makes sense for us with those lenses that I mentioned.
Joaquin Robet: There's obviously a further lens, which is the discipline financial framework that we have and that we've shared and that is also a consideration. It's a consideration.
Joaquin Robet: So all these to say that we are regularly evaluating these opportunities is part of our day to day and as these opportunities mature and to the effect that they materialize we will share news with you about it.
Thank you very much.
Great.
We have a question from Vincent Philanjera, from Bredesco, Andrs Ocampo, Andrs Ocampo,
Joaquin Robet: How can we think about output evolving in Argentina throughout 2025? Any hurdles with Wales so far?
Joaquin Robet: How are we looking at our drilling performance and well performance there? So I think Martin is going to kick that one off. Yeah, so thank you Vicente for the question. Thank you very much.
Joaquin Robet: So, our strategy on our output in Argentina, you can think it as a growing.
Joaquin Robet: Again, starting from the acquisition, like Andres mentioned, 10,000 barrels, we're at 15,000 barrels.
Joaquin Robet: with one rig in this part of the racing, and with this type of wheels we can reach 20,000 barrels of opera, which we expect to be reaching by middle of next year.
Joaquin Robet: And to go above that towards 40,000 barrels, we need the second rig, which is again like we've been mentioning, we will be bringing that second rig in the early 2026.
Joaquin Robet: Depending on the results that we get, we have locations and we will see how exploration continues to...
Joaquin Robet: to proceed in the confluence of blocks. So far, the confluence south pad with three wells is delivering good rates. Again, like Andrs mentioned.
Speaker Change: One of the things that it's important for everybody to understand is that when in invacamortals were drilling wells,
Speaker Change: This was initially flow naturally so we do have some months where the production you might see that goes down because we're shutting in the production so that we can put artificial lift. [inaudible]
Speaker Change: So those are things that it's not as continues going up. There's some months where we already know that production is going to come down. It is on our plan. There's also a parent child effect.
Speaker Change: We are aware of, we put it in our budget, we are discussing it and learning as we are drilling paths.
Speaker Change: between existing paths along with Phoenix, the operator, which we have a really good relationship from all places, but from a subsurface and operational perspective we have a condition we work together, so...
Speaker Change: Of where we are thinking and how our plan is delivering according to what we had in mind. I don't know if you want to add anything Rodrigo. Thank you, Martin.
Speaker Change: Vicente, if you are asking about the harness, of course we have certain challenges as all the industry in the basin. One of those is the world cost pressure, because even if we are increasing the density in the fracking, that's good in terms of productivity, but also we are trying to keep the well cost under control, so that's one of the challenges that we have. And Martin mentioned something about the pattern and child effect. And so that's one of the challenges that we have. And so that's one of the challenges that we have.
Speaker Change: The development in Baca Muerta, Alifuracin, Matamora is new, but we are this year in 2025 putting on production to put number 9 and button 12.
Speaker Change: Both paths are close to the other path, so we are going to be very close trying to understand the Martin Terrado effect, even so we estimate a reduction in the well-productive to do it to be the effect in our estimations.
Speaker Change: So we will learn and see how this evolves in the future, but that's the key challenges that we are seeing for the 2025.
Speaker Change: Linton's next question reads, what are the next steps in terms of possible M&A after the repsil transaction did not work out?
Speaker Change: Yes, Vincent, I think I covered that in the prior question. I would say that the only thing that I can add is something that we're just regularly monitoring.
Speaker Change: and in the space of M&A, as you probably heard Andres say many times in the past. [inaudible]
Speaker Change: It's all about discipline and it's about patience. So we look at many things and we look at them in a proactive way, in a deep way, in a profound way to make sure that it fits with the strategy, it creates value.
We need for the right opportunities to materialize.
Nothing more to add on that.
Speaker Change: As a reminder, that staff followed by one on your telephone keypad will take questions can be submitted by the webcast.
Speaker Change: The Aquem from Belance is a text question that reads, given the challenges posed by natural decline rates in Colombia's general production, the capital expenditure plan of $50 million US dollars and the addition of 20 new wells annually seems sufficient to mitigate these declines and sustain production.
Speaker Change: Yes, thanks for the question. So, you know, the way that we're thinking about about Catholics, Deployment in Colombia.
Speaker Change: It is actually in service of two priorities. I think our first priority is to arrest the client. It's arresting the client.
Speaker Change: I would characterize that as we have two significant world-class fields in Dinosaurie 4 and CBO5.
Speaker Change: that are in a declining trajectory. We've spoken about that in the past.
Speaker Change: And we believe there is a lot of value to be captured in mitigating that decline to the extent that it's possible, to the extent that it's possible.
is transitioning from a development-reeling type...
Speaker Change: A bias program to something that is gradually more around a well-work activity and a occasional development prioritized during campaigns. That's what's occurring and that's what we expect over the next number of years.
Speaker Change: The 1P research in Colombia in the order of 16 million barrels, so our capital deployment that you're seeing now underpins that.
We don't need to achieve.
Speaker Change: The sort of Capix numbers that we had in the past anymore because it's no longer intensive in development drilling and that's actually good news because it actually means that from a free cash flow standpoint and from a profitability standpoint.
Speaker Change: And that's the process that we've been through over the last year.
Speaker Change: which is looking at the totality of the expiration opportunity set that we have.
Speaker Change: and selecting the very best prospects, the prospects that we think...
Speaker Change: Can move the deal in our portfolio and that if successful, if successful while they have an important risk component to them because that's the nature of exploration. Thank you, Martin.
Speaker Change: Important prospects this year and CapEx is going to evolve as a function of the results that we see from those wells.
Obviously, if these wells are successful and they prove that we can have material plays going forward, we will be adjusting our capital program in Colombia to reflect that.
So that's that's kind of how we think about this [inaudible]
Thank you.
Speaker Change: We have no further questions, so I'll hand the call back to the management team for any closing comments.
Speaker Change: Thanks everybody for your interest and your support of GeoPark and we're always here to answer any questions so reach out, give us a call or visit our operations.
Thank you and have a good day.
Speaker Change: This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.