GeoPark Limited

Good morning and welcome to the Geopark Limited conference call. Following the results announcement for the first quarter ended March 31, 2024, after the speaker's remarks, there will be a question and answer session. If you would like to ask a question at this time, press star followed by one on your telephone keypad. If you would like to redraw your question, please press star followed by two. If you do not have a copy of the press release, It is available at the Invest With Us section on the company's corporate website at www.geopark.com. A replay of today's call may be accessed through this webcast in the Invest With Us section of the Geopark corporate website. Before we continue, please note that certain statements contained in the result press release and on this conference call are forward-looking statements rather than historical facts and are subject to risk and uncertainties that could cause actual results to differ materially from those described. With respect to such forward-looking statements, the company seeks protections afforded by the Private Security Litigation Reform Act of 1995. This risk includes a variety of factors, including competitive development and risk factors listed from time to time in the company's SEC results, reports, and public releases. Those lists are intended to identify certain principal factors that could cause actual results to differ materially from those described in the forward-looking statement, but are not intended to represent a complete list of companies' business. All financial figures included here were prepared in accordance with IFRS and are stated in U.S. dollars unless otherwise noted. Reserves figures correspond to PRMS standards. On the call today from Geopark is Andres Ocampo, Chief Executive Officer, Jamie Cavalero, Chief Financial Officer, August Zubilaga, Chief Technical Officer, Martin Tejado, Chief Operational Officer, James Beckelman, Chief Operational Officer, Rodrigo Della Fiore, New Development and Portfolio Director, and Stacy Tailman, Shareholder Value Director. And now I would like to turn the call over to Mr. Andres Ocampo. Mr. Ocampo, please, you may begin.

Good morning, and thank you for joining our first quarter conference call. Today, we're proud to report progress and very important results on all key elements of our business and strategy. With solid first quarter results coming from our improved base business, new significant share repurchases, a big and very attractive transformational acquisition, and impressive sustainability and decarbonization metrics. The underlying base business performance is continuing to deliver positive results. We had a strong production in both the Janus 34 and the CPO5 blocks. In the Janus 34, our core asset, the combination of our horizontal well program and increased water flooding project took gross production to a range of 56,000 to 57,000 barrels a day in early April, the highest level in the last 12 months. With the addition of the Indigo III development well in April, the CPO5 block production reached over 30,000 barrels a day, a new record. Our first quarter financial results were strong, generating over $111 million in adjusted EBITDA with a margin of 67%. During the quarter, we invested almost $50 million, and every dollar invested in the base business yielded around $2.3 in adjusted EBITDA. The return on capital employed for the last 12 months was 35%. The balance sheet remains strong as we ended the quarter with the highest cash position in the last three years, just over $150 million. Net leverage closed at 0.8 times and remains well below our long-term target of 1 to 1.5 times. We recently added an uptake and prepayment facility with veto that further improves our commercial terms and gives us access to up to $500 million of oil prepayment facility providing immediate access to competitive and flexible financing. In the last four years, Geopark has generated more than $475 million of net free cash flow, almost one time our market cap, which was distributed to our shareholders in buybacks and dividends, as well as to our creditors in debt repayment. A proof of our commitment to maintain our capital discipline strong balance sheet while continuing to return value to our shareholders. This month, we successfully repurchased $43.7 million in Geopark stock during the Dutch tender offer, reducing shares outstanding by approximately 8%, and our board just declared a $7.5 million dividend to be paid on June 14th. We have also recently published our speed sustainability report for 2023, which highlights that we reduced our greenhouse gas emissions intensity by 18% from 2022. At 10.6 kilos of CO2 equivalent per barrel, we're extremely proud to report that we have the lowest carbon intensity among our upstream Latin American oil peers. Our Janus 34 block, which supplies close to 7% of Colombia's total oil production, had remarkably low intensity of 7 kilos of CO2 equivalent per barrel. With respect to our asset portfolio expansion, we announced on Monday a new transformational acquisition in Bacamorta in Argentina, a strategic asset in the world's fastest-growing unconventional play. The transaction includes high-quality assets with a combination of existing and fast-growing production and cash flow with a significant and tangible exploration upside. The Matamoranorte block was producing zero about three years ago and is currently over 12,000 barrels a day from 26 wells in eight paths, and with a ninth path of four wells already drilled and being completed now, expected to be put on production before the end of June. This production base is expected to grow to nearly 40,000 barrels a day within the next four years, an expected CAGR of 35% to 40% during the execution of the multiple remaining drilling locations. Upon closing of this transaction, we expect to add between 5,500 to 6,500 net working interest barrels of oil per day to our daily production, which is about 15 to 20% increase to the first quarter production. 50 million barrels of net 2P reserves of 43% versus our December 23 reserve certification, which include also over 800 millions of after-tax MPV10 at Geopark working interest equivalent to more than four and a half times the purchase price of Matamoramorte. An estimated annual net EBITDA of $90 to $100 million in full year 2024, which could grow by nearly three times to $300 million at Plateau production and at 70 Brent, or more than three and a half times at current oil prices. Approximately 240 million barrels of gross 3C certified contingent exploration resources in nearly 200 additional years drilling locations, which could provide further significant growth even beyond the Matamoranorte Plateau production. A significant part of this exploration upside is imminent, as the first pad has been built and the first exploration well was padded this month. We also have incorporated a new strategic partner, Phoenix Global Resources, which is part of the Mercuria Group, one of the world's leading energy trading companies. The technical and leadership teams at Phoenix have done an impressive job in bringing these assets to their current state, delivering significant production growth at highly competitive drilling, completion, and operating costs, with further improvements being achieved on every new weld. This team, both within Phoenix and at Prior Ventures, has more than a decade of experience in Vaca Muerta, and have also taken part of the de-risking of the entire Vaca Muerta oil and gas play in the earlier days. We're very proud and happy to be partnering with Phoenix and Mercuria in this new initiative. We have started a very busy year and have an exciting 2024 and beyond, with some high impact upcoming catalysts, both with the drilling activity underway in our existing core asset base, as well as the closing and drilling activity in our new Baca Muerta assets. We look forward to reporting our progress to you. We remain committed to consolidating our leading position among Latin American energy companies, producing sustainable hydrocarbons that guarantee energy security, reliability, and affordability in this rapidly changing world. We would now be happy to take any questions that you may have. Thank you.

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