GeoPark Limited, a leading independent Latin American oil and gas explorer, operator and consolidator with operations and growth platforms in Colombia, Peru, Argentina, Brazil, Chile and Ecuador, announced its operational update for the three-month period ended June 30, 2020 (“2Q2020”).
Health and Safety Actions and Results
- Protocols, preventive measures and crisis response plans in place across 6-country regional platform
- Field teams reduced to a minimum with back-up teams and contingencies in place
- Supporting local communities with safety, medical and food supplies
- Office teams moved to work remotely from home
Operational and Cost Savings Actions and Results
- Consolidated oil and gas production of 36,912 boepd in 2Q2020 due to temporary shut-ins, no drilling
activity and limited maintenance works during the quarter
- Over $290 million in ongoing cost savings and capital investment reductions across regional platform –
including voluntary salary reductions
- Received regulatory approvals to reclassify the flowline connecting the Llanos 34 block to regional
infrastructure into a pipeline, contributing to reduced operational risk, further cost savings and reduced
Capital Strength and Risk Management Levers
- $157.7 million of cash and cash equivalents as of June 30, 20201
- $75 million oil prepayment facility, with $50 million committed and no amounts drawn
- $130.7 million in uncommitted credit lines
- Long-term financial debt maturity profile with no principal payments until September 2024
- S&P and Fitch reaffirmed GeoPark’s long-term corporate credit rating at B+
- Added new hedges for the next 12 months, now reaching 27,500 bopd in 3Q2020, 25,500 bopd in 4Q2020, 9,000 bopd in 1Q2021 and 6,500 bopd in 2Q2021. New hedges include a portion providing protection to Vasconia local marker in Colombia
Opening Up Production and Reengaging Work Program
- Reopened 70-80% of temporary production shut-ins totaling 6,500-7,500 boepd
- Resuming drilling campaign in 2H2020 with 6-8 gross wells in the Llanos 34 block (GeoPark operated, 45% WI) and 1-2 gross wells in the CPO-5 block (GeoPark non-operated, 30% WI)
- Expanding full-year 2020 work program to $65-75 million (from prior $45-50 million) targeting 40,000- 42,000 boepd average production and operating netbacks of $220-240 million assuming Brent of $35 per bbl3
- Fully funded and flexible work programs, quickly adaptable to any oil price scenario
Improving Overall Business
- Streamlining and improving business across portfolio and top to bottom review in all departments and
- Initiating formal process to irrevocably retire from the non-producing Morona block4 in Peru due to extended force majeure which allows for the termination of the license contract
James F. Park, Chief Executive Officer of GeoPark, said: “Enormous gratitude to the GeoPark team, which
despite the obvious hardships and uncertainties, provided a rapid-fire and effective response to this unique
health, operational and economic crisis. And then, as soon as the situation became clearer, and without
skipping a beat, our team has got the drill bit turning to the right and the production valves opening to the
left – allowing us to start to catch up and get back to business. All the while with our creative juices flowing
and bold ideas to take advantage of this upheaval and turn GeoPark into an even better value generator on
the other side of this downturn.”
Oil and Gas Production Update
Overall oil and gas production decreased by 6% to 36,912 boepd in 2Q2020 from 39,201 boepd in 2Q2019,
due to temporary production shut-ins to preserve shareholder value and to minimize contractor and employee activity in the fields. There were no new wells drilled and limited maintenance activities during the quarter, partially offset by the addition of 4,651 bopd from the recent Amerisur Resources Plc (“Amerisur”) acquisition in Colombia. Oil represented 88% of total reported production in 2Q2020 compared to 87% in 2Q2019.
Average net oil and gas production in Colombia decreased by 3% to 31,072 boepd in 2Q2020 compared to
32,191 boepd in 2Q2019, reflecting temporary shut-ins, and limited maintenance activities, partially offset by the recent acquisition of Amerisur. The Llanos 34 block averaged 26,090 bopd in 2Q2020, 84% of GeoPark’s production in Colombia. Production from Amerisur averaged 4,651 bopd of light oil (30-41 degrees API) in 2Q2020, representing 15% of GeoPark’s production in Colombia.
Received approval from local authorities to reclassify GeoPark’s existing 32 km flowline into a pipeline, named Oleoducto de Casanare (“ODCA”), connecting the Llanos 34 block to the ODL regional infrastructure. The ODCA has a potential capacity of 100,000 bopd, and following its conversion into a pipeline, allows the transportation of barrels from any field in the Llanos 34 block or from neighboring acreage (including owned or third-party barrels), contributing to reduced overall operational risk, further savings from overall transportation and operating costs, and a reduced carbon footprint.
Average net production in Chile increased by 5% to 3,101 boepd. Higher production in 2Q2020 resulted from the successful development of the Jauke gas field and the recent discovery of the Jauke Oeste gas field in the Fell block in early 2020, partially offset by temporary shut-ins affecting oil production. The production mix during 2Q2020 was 92% gas and 8% light oil (compared to 79% gas and 21% light oil in 2Q2019).
Average net production in Brazil decreased by 60% to 679 boepd in 2Q2020 compared to 1,693 boepd in
2Q2019 mainly due to lower gas demand in Brazil affecting production from the Manati gas field (GeoPark
non-operated, 10% WI) and shut-ins affecting oil production in the Praia dos Castelhanos oil field in the RECT-128 block (GeoPark operated, 70% WI). The production mix during 2Q2020 was 88% natural gas and 12% oil and condensate (compared to 98% natural gas and 2% condensate in 2Q2019).
Average 2Q2020 production levels include no gas production from the Manati gas field during April 2020, with production resumed in late May 2020 and maintained until the end of June 2020. The Manati gas field is currently producing approximately 1,400 boepd, above monthly take or pay levels.
Average net production in Argentina decreased by 13% to 2,060 boepd in 2Q2020 (61% oil, 39% gas)
compared to 2,365 boepd in 2Q2019 (67% oil, 33% gas), due to temporary shut-ins affecting oil production
in the El Porvenir block (GeoPark operated, 100% WI) and stable oil and gas production levels in the Aguada Baguales and Puesto Touquet blocks (GeoPark operated, 100% WI).
OTHER NEWS / RECENT EVENTS
INITIATION OF FORMAL PROCESS TO RETIRE FROM THE MORONA BLOCK IN PERU
On July 15, 2020, GeoPark notified Petroperu and Perupetro of its irrevocable decision to retire from the nonproducing Morona block (Block 64) in Peru, due to extended force majeure which allows for the termination of the license contract.
On January 10, 2020, Perupetro declared the project in force majeure effective retroactively to June 15, 2019. This force majeure has remained for a period exceeding the contract’s terms, entitling GeoPark to legally initiate the formal process to retire from the license contract as well as from the agreement executed with Petroperu.
In 1Q2020, GeoPark recorded non-cash impairment losses of $31.0 million in Peru. As of March 31, 2020, the carrying amount of Peru-related assets amount to $21 million, mainly representing tax credits and equipment located in the field.