GeoPark Limited (NYSE: GPRK): 2Q23 production in line. Adding horizontal wells at Llanos-34
• 2Q23 production of 36,581 boe/d was in line with our expectations with strong performance at Llanos-34, Platanillo and CPO-5, offsetting lower production in Chile and Ecuador.• The Indico 6 and Indico 7 wells in the CPO-5 block in Colombia are now expected to return to production in August (rather than July) when the required surface facilities are completed.
• The company has re-iterated its FY23 production target of 38.0-40.0 mboe/d but the guidance is sensitive to the timing of production restart at Indico 6 and Indico 7.
• The drilling programme is accelerating with one horizontal well at Llanos-34 about to be flow tested and multiple exploration wells in the Llanos having reached target depth or about to. Three more rigs are being added in 3Q23 to the nine currently in operation. GeoPark is considering drilling 3-4 additional horizontal wells at Llanos-34 in 2H23, which is expected to have a positive impact on production. The first horizontal well at Llanos-34 is producing >3 mbbl/d.
• The cash position of US$86 mm at the end of June was in line with our expectations (after paying US$88 mm in tax – also in line). Overall GeoPark continues to expect to generate free cash flow of US$120 140 mm in 2023 at Brent of US$80-90/bbl.
• We re-iterate out target price of US$25 per share.
Drilling update
At Llanos-123, the Saltador 1 exploration well encountered hydrocarbons in the Barco and Mirador formations. Testing activities are expected to start in July/August. The Toritos 1 exploration well will also spud in August. At Llanos-124, the Cucarachero 1 exploration well is expected to reach total depth in August. At Llanos-87, a well updip of the Zorzal 1 discovery is expected to target incremental potential identified in the Barco formation. The high impact Halcon well at CPO-5 continues to be expected be drilled in 2H23. At the Llanos-86 and Llanos-104 blocks (GeoPark: 50% WI), GeoPark plans to acquire over 650 square kilometres of 3D seismic, expected to start in early 2024. This would be one of the three biggest onshore seismic acquisition projects in Colombia and is expected to add additional exploration prospects.
Valuation
Our Core NAV is ~US$16/sh (ReNAV of US$24.3/sh). Our aggregate free cash flow forecast over 2023 2024 now represents >50% of the current market cap and the current dividend represents a ~5% dividend yield.
Auctus Advisors is a specialist Equity Capital Markets and Advisory business with a focus in the Energy Sector.
The partners have complementary skill sets, with decades of experience across Equity Capital Markets, Investment Banking and the Energy industry. We have worked at Société Générale, Canaccord Capital, BMO Capital Markets and Schlumberger. Most recently we have worked together for many years at GMP FirstEnergy.
Auctus has been set up at the beginning of a new decade in which we see significant opportunities in the Energy space. Globally, demand for energy is at record levels and continues to grow. Conversely, investment in traditional energy sources has been severely constrained. We believe this imbalance creates opportunities for both companies and investors.
Auctus provides Corporate Broking, Equity Research and Investment Banking services.
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