GeoPark Limited (NYSE: GPRK): Entering the Vaca Muerta
• GeoPark is acquiring 49.5 mmboe 2P reserves (>90% light oil), 118 mmboe 3C contingent resources and ~5 mmboe unconventional production across four blocks in the oil window of the Vaca Muerta in Argentina from a subsidiary of Mercuria.• The Vaca Muerta in Argentina is a hot spot for unconventional development and a strategic area for most supermajors and YPF. The formation is estimated to hold 16 bn bbl of oil and 300 tcf of natural gas and produces >350 mbbl/d (x4 since 2019).
• The asset package being acquired by GeoPark includes 45% of Mata Mora Norte (including all the reserves and production and 140-160 well locations), 45% of Mata Mora Sur (23 mmboe net 3C resources), and 50% of Confluencia Norte and Confluencia Sur (95 mmboe net 3C resources) over 79,000 gross acres. There are 152-220 potential locations on the exploration blocks.
• GeoPark will pay US$190 mm in cash and provide a gross exploration carry of up to US$113 mm over two years. In addition, US$11 mm is being paid for midstream capacity according to the WI and a potential US$10 mm bonus payment contingent is due on exploration success at Confluencia Norte.
• The acquisition provides a new area of growth in a very attractive location. We are increasing our target price from US$26/sh to US$30/sh.
Economics, production profile and capex
70% of production from Mata Mora is exported (@ Brent minus 8% export tax). Royalty and Corporate Tax are respectively 12% and 35%. A well costs ~ US$14 mm on average and recovers 0.8-1.0 mmbbl with typical IP rate of 1-1.2 mbbl/d. Opex and transport costs are ~US$5-6/bbl and US$3-4/bbl respectively, resulting in netbacks of ~US$45/bbl. GeoPark expects to spend ~US$100 mm in 2024, ~US$150 mm in 2025 (including the carry) and US$200 mm per year from 2026 to 2033 with two rigs in operation to increase net production to 19 mboe/d by YE28. An important exploration well being drilled at Confluencia Norte could start to unlock additional resources.
Valuation
Our Core NAV and ReNAV increase from ~US$21/sh and ~US$26/sh to ~US$25/sh and ~US$30/sh respectively. We note that Vista Energy, a (quasi) pure play on the Vaca Muerta with ~55 mboe/d production has an EV of ~US$4.9 bn. The readthrough value for GeoPark’s ~5 mboe/d production in the Vaca Muerta is ~ US$450 mm, which compares favourably to the price paid by GeoPark. The current dividend yield is ~5.5%.
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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