GeoPark Limited (NYSE: GPRK): Strong financials on low cash tax. FY24 production impacted by blockades and decline.
• 2Q24 production of 35,608 boe/d had been already reported.• Production in Brazil has not been restored yet and is expected to restart only at the end of October. In light of (1) the longer than expected shutdown and uncertain restart date in Brazil (FY23 production was ~1 mboe/d) and (2) increased frequency and duration of blockades around the operations in Colombia, there is a downside risk of 1.5-2.5 mboe/d to the FY24 production guidance of 35.5-39 mboe/d (excluding Argentina and the contribution of any exploration success). New well activity and performance in the Llanos 34 Block may not offset the natural base decline of the fields.
• The downtime at CPO-5 and Llanos-34 due to blockades was respectively 12% and 3%, 4x and 2x expectations.
• Cash tax in Colombia was much lower than expected (~US$95 mm expected in 2024 versus our forecast of ~US$150 mm). GeoPark’s cash position at the end of June was US$40 mm above our expectations.
• GeoPark has signed a new 12 month offtake contract with Trafigura for CPO-5 with lower differentials leading to increased netbacks at the field by ~US$2.65/bbl. Given the increasing shortages of light crude in Colombia, we anticipate that CPO-5 crude will continue to benefit from higher netbacks.
• The Lark exploration well at CPO-5 was dry.
• As we incorporate the higher cash position and lower cash tax in Colombia, lower production at Llanos-34 and CPO-5 and exclude Lark from our valuation, we have changed our target price to US$28/sh that has been set in line with our new ReNAV. The current dividend yield is ~6%.
Strong performance in Argentina
The acquisition in Argentina is expected to complete by the end of September. The asset continues to perform very well with Mata Mora Norte delivering production ahead of the P10 case after six months of production. The exploration wells at Confluencia Norte have now been drilled. They are expected to be tested by YE24. A positive result would increase the company’s reserves and open-up further drilling opportunities in the area. We continue to forecast 6 mboe/d net production in 4Q24.
Valuation
Our Core NAV and ReNAV stand at ~US$24 per share and US$28 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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