GeoPark Limited (NYSE: GPRK): Reserves update. New discovery at Llanos-34
• GeoPark has reported YE22 2P reserves of 128.4 mmboe, down from 159.2 mmboe at YE21. This reflects FY22 production of 14.1 mmboe and ~17 mmboe of net negative revisions (technical + economic factors).• Overall 3P reserves have been reduced from 248.3 mmboe at YE21 to 196.3 mmboe at YE22 including ~4 mmboe associated with the divestment of Argentina and ~34 mmboe on technical revisions + economic factors.
• In Colombia, the technical/economic factors represent a reduction of ~8 mmboe of 2P reserves and ~35 mmboe of 3P reserves. This reflects the auditor assuming (1) a lower recovery factor at Llanos-34 (38% vs 40% previously) and (2) a tighter delineation of the indico reservoir in CPO-5 field.
• The Guaco Sur exploration well at Llanos-34 has been tested at 976 bbl/d of 22 degrees API oil with 11% water cut from the Guadalupe formation.
• We have reduced our target price from US$31 to US$28 per share to reflect the reserves update.
New reserves estimates too conservative?
• The Oil Initially In Place estimate at Llanos-34 has not changed but we note that YE22 2P reserves at Llanos-34 reported by Parex (GeoPark’s partner at Llanos-34) adjusted for respective WI would suggest 2P reserves of 93 mmboe net to GeoPark which is higher than the 88 mmboe 2P reserves attributed to GeoPark by the auditor. This suggests some upside to GeoPark’s 2P reserves for the field.
• The Net 2P and 3P reserves at CPO-5 have been reduced from respectively ~20 mmboe and 49 mmboe to ~13 mmboe and 20 mmboe. We assume a production plateau of 25 mbbl/d, which seems a conservative assumption considering strong reservoir performance to date of the Indico field reservoir (hardly any decline and any water production). The FY23 drilling programme will include wells targeting the NW part of the field to investigate the delineation of the field.
Valuation
Our new Core NAV stands at ~US$18/sh (ReNAV of ~US$28/sh). We continue to forecast that GeoPark will distribute ~US$125 mm to shareholders in 2023 (50% of free cash flow). This represents ~15% of the current market cap or >US$2/sh. The key near term catalyst is the Halcon-1 well on CPO-5 investigating the extension of the Llanos-34 play into CPO-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.
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