GeoPark Limited (NYSE: GPRK): Dividend distribution boosted by share buyback. Additional details on Argentina
• 1Q24 production had been reported previously. GeoPark held US$151 mm in cash at the end of March. Adjusting for a negative working capital movement of ~US$20 mm in 1Q24, this would have been in line with our forecast.• Gross production at CPO-5 of ~30 mbbl/d continues to be very high. The Cisne 1 exploration well is expected to reach TD by the end of May. GeoPark will then drill another exploration well on the block.
• Given the reduced share count following the share buyback resulting from the Dutch auction, the dividend per share has increased to US$0.147 per share (the quarterly dividend distribution of US$7.5 mm is unchanged). The current dividend yield is ~6%.
• GeoPark has reiterated its commitment to the current dividend distribution, even in the context of higher capex in Argentina as the incremental cash flow will cover a large proportion of the additional spending.
• We re-iterate our target price of US$30 per share.
More details on the Vaca Muerta acquisition
There are 28 producing wells at Mata Mora. There will be additional wells on stream by the time the acquisition completes in 3Q24. IP rates have averaged 1.0-1.5 mboe/d. However, recent wells have delivered IP rates greater than 2 mboe/d, suggesting improving economics. The Internal Rate of Returns for the Mata Mora wells are estimated at 30-70%. The drilling programme is adjustable. Including exploration, net capex in Argentina in 2025 and 2026 could reach US$170 mm and US$280 mm, respectively. The US$280 mm capex in 2026 reflects additional rigs and facilities. The capex programme is expected to be funded by the cashflow from Argentina. While the Vaca Muerta exploration blocks could hold heavier oil than at Mata Mora Norte, recent well results in adjacent blocks have highlighted very good well performance in the area.
Valuation
Our Core NAV and ReNAV are ~US$24 per share and US$29 per share, respectively. Including Argentina, we forecast FY25 production of 45.6 mboe/d. This represents an increase of 25% compared to 2023, which included ~1.7 mboe/d of low-value production in Chile (FY25 production does not).
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.
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