GeoPark Limited (NYSE: GPRK): Strong 3Q24 financials. Flow rates at Confluencia Norte expected imminently
• 3Q24 production of 33,215 boe/d had already been reported.• 3Q24 operating cash flow of ~US$126 mm was particularly high. Netting off a positive working capital movement of US$32 mm, the adjusted operating cash flow of US$94 mm is well above our forecast of US$65 mm.
• In Argentina, the IP rates of the three exploration wells at Confluencia Norte are expected in the coming days. This is very material news and this could allow GeoPark to start converting some of the 39 mmbbl net 3C resources associated with the area into reserves. Typical IP rates at Mata Mora Norte are 750-1,500 bbl/d with 5% gas. Two wells in the area have produced 2-3 mboe/d. Our unrisked NAV for this block is US$4.60 per share.
• Gross production in Argentina was ~13.6 mboe/d in September. With additional wells in 4Q24, the gross YE24 production is estimated at 13.5-14.5 mboe/d (6.1-6.5 mboe/d net to GeoPark).
• The current dividend yield is >7%. As we incorporate the higher 3Q24 cashflow offset by higher future opex in Colombia (we now assume US$12/boe vs US$10-11/boe previously), we have changed our target price to US$25 per share.
Other thoughts on operations
Production in Brazil is now expected to restart in March (we assumed YE24 previously). Only one rig (3 rigs previously) will be in operation at Llanos-34 in 2025. Production at Llanos-34 is expected to decline by ~15% next year. Block 123 is performing very well with gross production of 4 mbbl/d. Two rigs are in operation on the licence. This will remain a key area of focus in 2025. The Cante Flamenco-2 exploration well at CPO-5 encountered 34 deg API oil in the Ubaque formation (secondary target). This is a first for this area and GeoPark will look for further Ubaque opportunities. The company will now test the Mirador formation (the primary target). The Curucucu-4 appraisal well at Llanos-34 is producing 800 bbl/d (oil) with 40% water cut. One well will be drilled at Putamayo-8 in 4Q24.
Valuation
Our Core NAV and ReNAV stand at ~US$21.7 per share and US$24.8 per share, respectively.
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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