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spk01: Good morning and welcome to the GeoPark limited conference call following the results announcement for the third quarter ending September 30th, 2024. After the speakers remarks there will be a question and answer session. If you would like to ask a question at this time press star 1 on your telephone keypad. If you would like to withdraw your question you can do so by pressing star followed by 2. 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 .geopark.com. A replay of today's call may be accessed through this website in the invest with us section of the GeoPark corporate website. Before we continue please note that certain statements contained in the results press release and on this conference call are forward looking statements rather than historical facts and are subject to risks and uncertainties that could cause actual results to differ from those described. With respect to such forward looking statements the company seeks protections afforded by the Private Securities Litigation Reform Act of 1995. These risks include a variety of factors including competitive developments and risk factors listed from time to time in the company's SEC 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 statements but are not intended to represent a complete list of the company's business. All financial figures included herein were prepared in accordance with the IFRS and are stated in US dollars unless otherwise noted. Reserved figures correspond to PMRS standards. On today's call from GeoPark is Andreas Ocampo, Chief Executive Officer, Jamie Cabrero, Chief Financial Officer, Augustus Zubalaga, Chief Technical Officer, Martin Toredo, Chief Operating Officer and Maria Catalina Escobar, Shareholder Value and Capital Markets Director. And now I'll turn the call over to Mr Andreas Ocampo. Mr Ocampo, you may begin.
spk03: Good morning everyone and thank you for joining us to review together our third quarter 2024 operational and financial performance. Our net revenue for the quarter was 159 million, down 16% from the second quarter, impacted mainly by lower realized oil prices and production. Despite these factors, our financial discipline allowed us to maintain robust margins and profitability. Our adjusted EBITDA for the quarter was close to 100 million, representing a strong 63% margin. In addition, the adjusted EBITDA for the first nine months of 2024 amounted to 339 million, representing approximately a 2% increase compared to the same period of 2023. Bottom line net profits for the quarter of 25 million also exceeded the same period of last year. This quarter was also marked by a significant cash flow generation, which translated into a cash build of more than two times compared to three months before. From 66 million of cash on June 30 up to 123 million on September and 140 million in October, what reinforces a strong liquidity and solid balance sheet. Our net leverage ratio remains low at 0.8 times and we have no principal debt maturities until 2027. This position provides us with financial flexibility to manage through market volatility while continuing to invest in high value projects. We have also continued to use our cash flow to return value to shareholders and maintain our quarterly dividends of $7.5 million announced yesterday. With this, our total cash distributed to shareholders during this year will amount to $73 million, which represents approximately an 18% capital return
spk02: yield.
spk03: With respect to some of our key operational highlights, in Colombia we focused on development and abrasal activities in the Genome 34 block, which remains one of our core assets. We advanced our water flooding campaign and expanded facilities both critical steps to enhance production and improve recovery rates. In CPO5 block, we drilled two wells, further advancing our exploration and development goals. In our Genome Exploration acreage, we continued with the abrasal and delineation of the Toritos and Visvita fields. The entire complex is currently producing approximately 4,000 bars a day gross. We have currently two drilling rigs on site and expect further activity before year end and into 2025. Also in Colombia, we are looking forward to spot our first exploration well in the Putumayo basin later in November this year, when we will drill the Bienparado Norte 1 exploration well. Our recent acquisition in the Vaca Muerta and Conventional Oil Play, which became effective on July 1st, has marked a key milestone in geoparks expansion in Latin America. Vaca Muerta is today the most attractive hydrocarbon play in the entire region. During the third quarter, the PAD4, which included four horizontal wells, was drilled, completed, and was put on production in October. The block achieved a gross average production of 12,600 barrels of oil per day during the quarter and reached 15,400 barrels a day equivalent, its all-time record, in August. The operator is currently drilling the four wells in PAD9, which is expected to finish in December. In addition to the reserves development activities in Matamora, Geopark and Phoenix have also finished the drilling and completion of the first exploration pad in the Confluencia block in the province of Rio Negro. This pad includes three horizontal exploration wells. These wells are currently testing and cleaning up, expecting results in the upcoming days. It is also important to mention that production and cash flow from Geoparks working interest in the Vaca Muerta blocks belong to our company since July 1st. However, such production and cash flow will not be consolidated into our financial statements until the transaction is closed, which is expected to happen before year end. Therefore, none of these results have been included in our reported 3Q financial statements. As anticipated, and to support the capital needs of our new assets, Geopark has secured important local capital market approvals in Argentina, including a AA plus Argentinian credit rating and an authorization to issue up to $500 million in local debt securities. This provides financial optimization and flexibility to continue developing these high potential assets. Looking ahead, we're on track to release our 2025 work program and investment guidelines before year end. This framework will outline our strategic priorities for sustainable growth and capital allocation across our newly expanded and upgraded portfolio. We see particular promise in our new assets in Vaca Muerta coupled with ongoing focus on optimizing our core operations to maximize long-term value. Thank you for your continued support and confidence in our company. We're now ready to take any questions you may have.
spk01: Thank you. If you'd like to register a question, please press start followed by one on your telephone keypad, ensuring you are unmuted locally. If you'd like to withdraw your question, you can do so at any time by pressing start followed by two on your telephone keypad. Our first question comes from the line of Vincent Belanga of BBI. Your lines are open. Please go ahead.
spk02: Hi, Andres. I'm Jhielp Bartini. Thank you very much for your time and teaching my questions. I basically have two questions regarding the Phoenix GV.
spk07: You
spk02: commented that a confluencer will likely put out low results soon. Up to what you can comment, how do you see the results so far? Do you see these as encouraging? Do you think that you will be able to communicate the production results to the market before December? And my second question is on Matamoranorte. We were looking at the Secretaria de Neja website and we saw that you produced 13.7 barrels of water equivalent per day in the month of September. You also mentioned that pad 9 will start to produce at the end of December. So what should we expect for output there in Matamoranorte until the end of the year? It should stay about close to 14,000 barrels of water per day. Thank you very much.
spk07: Good morning, Vicente. This is Martin Terrado. Nice to hear from you. When we go over confluencia norte one, confluencia norte one, the results so far look encouraging. It was on track and according to the plan, the drill, the complete of the wells, this pad has three wells. Some of the pads in the Matamoranorte have four. This one has three wells. The drilling had around 3,000 meters of each horizontal section drilled according to plan. And one of the things that the operator did differently and we agreed was to be doing frags with more intensity. The numbers are basically from 2,300 to 3,000 pounds per frag. As you know and we all are sharing and learning unconventionals, it takes about 45 to 60 days for the flow back and the cleaning of the wells. It's been a little bit over two weeks. So far, the results are encouraging. We will share the results before December for sure. That's about the recent pad that has been completed. As Andres mentioned, right now we're drilling pad number nine. That's back into Matamoranorte. This pad has four wells expected to finish drilling all four wells by December. Again, we are on track as we already drilled, the operator already drilled two of the four wells. And when you ask the question around the average production for September, what was the production for October? It was similar values around 13,600 barrels of oil equivalent per day. In October, it was basically no new wells stabilizing. So that's what we had. We will see increased production as Confluencia Norte kicks in and Matamoranorte wells continue to stabilize. But overall, like we mentioned in the past, we are excited about it and we expect to be around 13,500 to 14,500 barrels of oil equivalent by the end of this year.
spk02: Great. That's very helpful. Thank you so much. Nice talking to you guys again.
spk01: Thank you. The next question comes from Haleandro Demichalis of Jeffries. Your line is now open. Please go ahead.
spk05: Yes, good morning guys. Thank you very much for taking my questions. Two questions if I may please. The first one is on our bit of a follow-up on Confluencia, Martín. When we look at Matamoranorte, we have seen a lot of variability in terms of the initial production from the different wells. So what would you expect to be like a good flow for Confluencia? And what kind of gas level can we expect from there? That's the first question. And then the second question is, how should we think about say production and CAPEX required for January 34 into next year?
spk07: Hi, Alejandro. Nice talking to you again. So when we look at Confluencia, the IPs that we have overall for Vaca Muerta are in the order of 750 barrels of oil per day to 1500 barrels of oil per day. So this is exploration. We will see where within that range they fall. But that's order of magnitude where we expect to be on IPs. And we had some wells in Matamoranorte that Rodrigo mentioned in the past that were beyond that range. We have two wells that produce 2000 and 3000 barrels of oil per day. So we have some wells that are on the top percentile of oil of Vaca Muerta in Argentina and that's in Matamoranorte. But order of magnitude, that's what we have in our business plan. And usually we are within the 350 to the P10 range. So more will come on that pretty soon. And then the question related to production and CAPEX.
spk03: The gas component in Confluencia de Gord?
spk07: And the gas component for Confluencia, for now we expect to be similar to what we have in Matamoranorte. It's usually when we go from barrels of oil per day and we take it to barrels of oil equivalent, order of magnitude add about 5%.
spk00: Does
spk07: that help Alejandro? Yeah, that's very helpful. Thank you. Okay. And I think that your second question was around channels 34, production and CAPEX. So like Andres mentioned, we will post our work program for all of GeoPark in the next weeks. But what we can share with you is where we are aligned with our partner and you have seen throughout the year that we went to one rig. We have one rig running right now in channels 34. We're in agreement that we will continue that rig all of next year, mainly drilling infill wells, some appraisal wells, follow ups to good wells that we drill recently, especially in the Curucucu field. And concerning production, we should expect slight declines as the field is getting more mature and with the level of activity of infill drilling, the focus that we have on water flooding and workovers order of magnitude around 15% decline. For the whole
spk05: of
spk07: channels
spk05: 34?
spk07: For channels 34, yes.
spk05: And as a bit of a follow up there, because your partner has been talking more about polymers into channel 34 and so on. So is that something that we can see in 2025 or is that a more medium term plan?
spk07: No, it's something that we will be seeing in 2025. So we're working the details to perform a pilot in the second half of the year. That's basically adding polymer to the water so that we get a better conformance. 2025. Thank you.
spk01: Yes. Thank you. The next question comes from Daniel Guardiola of BTG. Your lines are open. Please go ahead.
spk04: Thank you and good morning, Andrea, Jaime and the entire team. I have a couple of questions. The first one I would like to touch on costs. Looking at the quarter, we saw once again a deterioration of your OPEX per barrel to levels close to $16, $17 per barrel. And if we look at the last two years, the OPEX has almost doubled. And I wanted to know, first of all, if you can share with us what is driving this deterioration in costs and two, what is the company planning to do to basically tackle this significant increase in costs? So that would be my first question. And if you want, you can answer it and then we can follow up with the second one, if that's okay with you guys.
spk07: Absolutely, Daniel. This is Martin again. So when we look at our OPEX on a dollar per barrel, a couple of comments. One is our goal is to stay at the main assets in the order of $10 to $12 per barrel range. What has happened in the past two years and what you are referring to, if we look at 2022 in channel 34, we are producing about 350,000 barrels of fluid per day. Our consumption of energy was 50 megawatts. Right now, our total fluid has increased 40% from those 350, and our megawatt requirements has increased by 20%. So clearly, when we look at our OPEX, around 40% of the OPEX is energy cost. Since we connected to the national grid, one of the visions and the objectives that we had was to tie and lock fixed price energy cost. Unfortunately, the first couple of years and where we are today, we are with a spot price. And in Colombia, we had El Niño, so the energy prices have gone up. In addition to that, of course, we have inflation and exchange rate, but those are, you know, you want to say excuses or the things that have happened. What have we done? And I'm going to let Jaime compliment later on, but we're working and we're locking energy prices so that this volatility and paying more than 900 pesos per kilowatt hour doesn't happen. Now that we have windows and we can lock that. We have also looked and we're looking at reviewing where we have OPEX in places where we can purchase facilities. For example, in Chavez 123, you know, we had zero production about a year and a half ago. We got 4,000 barrels on production right now. All of those facilities were rented and they were purchasing those sections of the facilities that have quick payouts and they make sense to keep. And of course, we're reviewing also with our supply chain group, our contracts and looking at opportunities. So again, I want to make sure that you take it that the goal is to stay between 10 and 12 dollars per barrel range in the next year.
spk06: And to compliment on that, good morning everybody. This is Jaime Daniel on the energy side. I think it's clearly one of the biggest levers. One of the things that we're seeing is that the market is evolving, you know, following El Nino and all the kind of crisis that we had at the middle of this year, the market is stabilizing. And when you look at energy rates that can be secured for the next number of years, actually long term contracts are becoming very attractive, right? And they are significantly under what we expected. So the possibility of locking in rates that secure the clean energy for our fields, particularly for Dinos 34, is something that we're looking into and that is going to help us a lot to mitigate that, you know, increasing trend of energy costs associated to to the enhanced recovery of the field. I think the other angle that we need to take into account when you see the evolution of lifting costs is that there is a component associated to what I would call, you know, immature operations, you know, which is all the exploration fronts that we have open currently. Those exploration fronts that we have, you know, in the periphery of Dinos, in Putumayo, and in Ecuador, are operations that don't benefit from economies of scale and from the sorts of systematic supply chain approach that you can have in Dinos 34. And they are affecting the consolidated OPEC per barrel. To the extent that those operations mature into development, we should expect to capture the economies of scale associated to a mature operation, and that's going to help as well. So those are the two things to consider as we look at the long-term prognosis of OPEC per barrel. Thanks, Daniel.
spk04: Thank you, Martina, Jaime. My second question is on Brazil. I mean, this is the second consecutive quarter where you're posting zero production from Brazil, and I wanted to know if you can provide us an update on what's going on in Brazil and what are your expectations going forward?
spk07: Yes, Daniel. So, latest, we have been communicated by the operator. The day that we had to restart operations was late October, and two weeks ago, they shared with us that the firefighting and additional maintenance is required, so the new date is late February. And as you mentioned, this is 1,100 barrels of oil equivalent per day that we had in our plan for all of 2024, and it's been shutting since middle of March. So the new date that we're expecting is restart early March.
spk04: Thank you, Martina. And if I may just squeeze a last question on Argentina, and I would like to know your thoughts on the Duplicar project, which is eagerly expected or anticipated by most of the producers, and it would be great if you can share with us how do this project progressing, and when do you expect to know the project to be fully online for you guys to start shipping additional barrels of oil? And also, it would be great if you can share with us what is the total capacity that you have secured in this project, and if you foresee any potential to use additional spare capacity in 2025.
spk06: Sure, Daniel. This is Jaime. So I guess let's start from the baseline. Our evacuation efforts around Bacamurta are going well. You see that we're having production that is very much in line, if not even better than what we expected a few months ago with the sort of results that we're getting from the different wells. Currently where we are is we're in a place that around 50% of our volumes currently are being transported through our own contracted capacity with Old El Val. Currently that available capacity is around 7,500 barrels a day. The remainder, the bulk of it, we are using Old El Val as well, but through third parties capacity that make them available to us, and there's a little bit a surplus that we at times we use through trucking. And actually it's a good problem to have because it actually means that production levels are higher than what we anticipated, right? So it's good. That in total means that we have secured currently through those different mechanisms our own capacity in Old El Val, third party capacity in Old El Val, and trucking capacity, basically what is the about 15,000 barrels of evacuation available. Old El Val, the duplicate component, is expected to come online around March. And that's kind of where we are. There's been no change to that. Some, you know, we go back and forth around this, and as you say, you know, I know you have other industry sources, but there's a broad consensus that it's still around that time, March. If there are delays, eventually it could go into April, but it's in that timeframe. And we feel pretty confident that that's going to be the case. In our case, it brings an additional 9,000 barrels a day of evacuation capacity that's net, you know, net to GeoPark, to our own barrels, which puts us at, you know, 24 MVD, which is significantly more than what we expect to be producing at that time. So, all in all, our meat-stream efforts are going well and are ahead of our production volumes as they need to be. Thanks.
spk04: Thank you, guys.
spk01: Thank you. We now have a written question from Stefan Horkud of Uctus. What is the current production? How do you see 2P reserves at the LL34 at year 24 directionally? Is this about 2P reserves at year 23 minus production, or could there be technical revision impacting reserves 3. Do you see potential production growth in Ecuador in 2025? And any update on the BioPagan Norton 1 exploration well, Cantoflamenco at CPO5 and Torrezo and Coraco? Thank you.
spk07: So, thank you, Stefan, for the questions. I think I wrote them all, and if I miss any, we will make sure to come back. So, the first one for sure, we took it. So, what's the current production in Shannos 34, and where do we expect to be on reserves? For the full year for Shannos 34, net to us, we expect to be in the order of 22,000 barrels of oil per day to 23,000 barrels of oil per day. That is basically
spk05: along
spk07: what we had in mind on a field that is getting more mature. A couple of data points that are worth mentioning. This was a very successful year, 2024, on horizontal well drilling, more intense than previous years on water flooding, good results on workovers, and as many of you know, we went down from three rigs to one rig. So, what we've seen this year is a decline in the order of what we mentioned before, around 15 percent. And when we think about reserves, it's too early to tell. As you all know, we communicate reserves in the first quarter of next year. What we can say is that we already started our resource certification, and based on what we've been discussing throughout the year, we have some positives like water flooding and horizontal wells, and also some things that were getting some quicker water cuts and some things that are not as good. So, we will see outside of SHANOS 34, we have good results on the SHANOS exploration wells and encouraging results on the follow-ups appraisals that we have. So, from a resource, the fund, you can probably understand that there's not much that we can share at this point. If we move to the next question around production potential growth in Ecuador, in Ecuador, with the two blocks that we have overall, we have around 4,000 barrels of oil per day on production. We did drilling and workovers. We finished the campaign, and the production growth that we see for now in the Perico block, it's around water flooding. Some of the wells, we can see that they need some pressure support. So, that's coming as a discussion with our partner for next year. And in Espejo block, we're looking at the recent wells that we drilled, and we'll see what we propose for next year. When we move to Bien Parado, again, it's a well in Putumayo 8. Like Andres mentioned a few minutes ago, that's our initial. Civil works have been completed. The rig is right now mobilizing. We expect to spot these wells in the second half of November. So, pretty quick, we will be spotting that well, and we have a second well that we're finishing the platform. So, for sure, two wells. Bien Parado Norte is a stratigraphic slash structural play. We're targeting the end sand. I'm very excited about that. So, again, more moves to come by the end of the year, for sure, in the next hole. And I think, let me see, Cante Flamenco 2. Cante Flamenco 2 is an exploration well that we drilled and completed in the CPEO 5 block. The target for that well was Mirador. This is in the northern part of the block. As you all remember, a big block, 500,000 acres. The main target was Mirador, secondary target, Ubaque. Ubaque is the same formation that we have in Indico, producing 40 API gravity flowing wells. The results of the drilling were really encouraging in Ubaque. Ubaque found oil with a water oil contact. This is the first time that we find Ubaque on the east side of the Alto de Metica. We tested that Ubaque. It gave us around 34 API crude. Water oil contact was very close. So right now, the well is shut in, waiting on a work over. The most encouraging thing is that it opens our geologist and engineer's eyes to look at, okay, what are our opportunities are, because clearly oil was flowing through and moving there millions of years ago. The next step on Cante Flamenco 2 is a work over program is coming before the end of the year. We're going to isolate the Ubaque and test the Mirador. Mirador, again, was the primary target where order of magnitude, we found 10 feet of net pay. I think you asked us about Curucu-Cu. Curucu-Cu 2, sorry, Curucu-Cu 4. We drilled first the well number 4. It's an appraisal or follow-up well in the platform and drill another Curucu-Cu. Let me see. You asked also around Toritos Sur. Before I jump into Toritos Sur, I want to share a little bit overall where we are in Shannos 123. Andres also mentioned it. So just reinforced that Shannos 123 exploration block where we had zero production about 18 months ago. Right now we're producing in the order of 4,000 barrels of oil per day. We have two rigs running, two platforms. One is Toritos and the other one is where we have Vizvita and Saltador. This is one of the blocks where going back to previous questions, where purchasing facilities to reduce our OPEC. And the wells that we drill recently have performed really well. Toritos 2, Toritos Sur 1, and Vizvita Este. All three of them are giving us around 1,500 barrels of oil per day. So we continue appraising these discoveries. And for next year, we will continue with drilling activity. If you want to know specific how Toritos Sur 1 is doing that well right now, it's producing in the order of 450 barrels of oil per day with less than 10% water cut. And I think that we cover all the questions, but at least if we miss any of them, let us know.
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