GeoPark Reports Second Quarter 2018 Results
Aug. 08, 2018
BOGOTA, Colombia--(BUSINESS WIRE)--Aug 8, 2018--GeoPark Limited (“GeoPark” or the “Company”) (NYSE: GPRK), a leading independent Latin American oil and gas explorer, operator and consolidator with operations and growth platforms in Colombia, Peru, Argentina, Brazil, and Chile reports its consolidated financial results for the three-month period ended June 30, 2018 (“Second Quarter” or “2Q2018”).
A conference call to discuss 2Q2018 Financial Results will be held on Thursday August 9, 2018 at 10:00 am Eastern Daylight Time.
All figures are expressed in US Dollars and growth comparisons refer to the same period of the prior year, except when specified. Definitions and terms used herein are provided in the Glossary at the end of this document. This release does not contain all of the Company’s financial information. As a result, this release should be read in conjunction with consolidated financial statements and the notes to those statements for the period ended June 30, 2018, available on the Company’s website.
SECOND QUARTER 2018 HIGHLIGHTS
Record Oil and Gas ProductionConsolidated oil and gas production up 37% to 35,870 boepd (up 11% compared to 1Q2018) Oil production increased by 38% to 30,249 bopd (up 11% compared to 1Q2018) Colombian production increased by 33% to 27,940 boepd (up 6% compared to 1Q2018) Gas production increased by 34% to 33.7 mmcfpd (up 16% compared to 1Q2018) Five drilling rigs currently being operated by GeoPark (three in Colombia, one in Argentina and one in Chile)
Growing Cash GenerationRevenues more than doubled to $159.3 million Adjusted EBITDA increased by 125% to $83.3 million, a new record high Operating profit increased more than three times to $52.0 million Net Income increased to $5.5 million gain from $1.1 million loss
Continuing Cost AdvantagesOperating costs in the Llanos 34 block (GeoPark operated, 45% WI) of $3.9 per barrel Consolidated operating costs of $8.5 per boe and Colombia $5.9 per boe
Stronger Balance SheetNet debt to Adjusted EBITDA ratio improved to 1.3x from 2.2x Cash position of $105.2 million
Improving Market LiquidityAverage daily stock trading volume climbed to $8.7 million in June, $6.5 million in the past three months
Community AwardGeoPark Colombia team received the “Good Neighbor” award from the ANH for its excellent social practices in Colombia. GeoPark was selected from among 107 different initiatives by a panel consisting of the United Nations, Ministry of Mines and Energy and the ANH
James F. Park, Chief Executive Officer of GeoPark said: “Half way into the year - and our better-than-expected performance again is fueling an acceleration and expansion of our original work program. This means we can invest more in the second half of the year to produce more oil and gas and to make more money and build a better company for our shareholders.
All the work GeoPark has done over the last fifteen years to build the strongest platform across Latin America continues to pay off. Our deep foundation keeps us going and growing - both in tough times and now with stronger prices providing a wind-at-our-back. And all begins with our committed team that knows how to find oil and get it out of the ground and to market safely and profitably. The same team that discovered and operates the Tigana-Jacana oil fields in Colombia - one of the most attractive onshore plays in Latin America today.”
CONSOLIDATED OPERATING PERFORMANCE
Key performance indicators:
Production: Overall oil and gas production grew by 37% to 35,870 boepd in 2Q2018 from 26,123 boepd in 2Q2017, due to increased Colombian production, new production from the recent Argentina acquisition and increased production in Brazil and Chile. Oil represented 85% of total reported production compared to 84% in 2Q2017.
For further details, please refer to the 2Q2018 Operational Update published on July 11, 2018.
Reference and Realized Oil Prices: Brent crude oil price averaged $74.9 per bbl during 2Q2018, and the consolidated realized oil sales price averaged $57.2 per bbl in 2Q2018, an 18% increase from $48.6 per bbl in 1Q2018 and a 71% increase from $33.4 per bbl in 2Q2017. Differences between reference and realized prices reflect commercial and transportation discounts as well as the Vasconia price differential in Colombia, which averaged $4.1 per bbl in both 2Q2018 and 1Q2018, compared to a $3.6 per bbl discount in 2Q2017. Commercial and transportation discounts in Colombia were reduced by 50 cents per bbl to $14.5 in 2Q2018, compared to $15.0 per bbl in 1Q2018 and $15.1 per bbl in 2Q2017.
In Colombia, construction is underway of a flowline in the Llanos 34 block targeted for completion in January 2019 and is expected to improve current commercial and transportation discounts even further.
The table below provides a breakdown of reference and net realized oil prices in Colombia, Chile and Argentina in 2Q2018:
Revenue: Consolidated revenues increased by 112% to $159.3 million in 2Q2018, compared to $75.2 million in 2Q2017. Higher realized prices and higher deliveries pushed revenues higher.
Sale of crude oil: Consolidated oil revenues increased by 127% to $145.7 million in 2Q2018, driven by a 71% increase in realized oil prices and a 32% increase in oil deliveries (compared to 2Q2017). Oil revenues were 91% of total revenues compared to 85% in 2Q2017.Colombia: In 2Q2018, oil revenues increased by 130% to $129.4 million as realized prices increased by 74% to $56.3 per bbl and oil deliveries increased by 32% to 26,289 bopd. Colombian earn-out payments (deducted from Colombian oil revenues) increased to $5.2 million in 2Q2018, compared to $2.5 million in 2Q2017, in line with higher oil revenues and increased production. Chile: In 2Q2018, oil revenues decreased by 36% to $4.9 million, due to lower volumes sold which were partially offset by higher oil prices. Oil deliveries were compared against 2Q2017 which included oil deliveries for the first and second quarters given negotiations with ENAP. Realized oil prices increased by 51% to $65.0 per bbl, in line with higher Brent prices. Oil revenues increased by 15% compared to 1Q2018. Argentina: In 2Q2018, oil revenues were $11.1 million, resulting from $66.7 realized oil prices and deliveries of 1,824 bopd, all from the recently acquired Aguada Baguales, El Porvenir and Puesto Touquet blocks (GeoPark operated, 100% WI).
Sale of gas: Consolidated gas revenues increased by 22% to $13.7 million in 2Q2018 compared to $11.1 million in 2Q2017, driven by a 30% increase in gas deliveries even though gas prices declined by 6%.Chile: In 2Q2018, gas revenues increased by 28% to $4.4 million reflecting higher gas prices and deliveries. Gas prices were 6% higher, or $5.3 per mcf ($31.6 per boe) in 2Q2018, in line with increased methanol prices. Gas deliveries increased by 20% to 9,200 mcfpd (1,533 boepd). Brazil: In 2Q2018, gas revenues decreased by 7% to $7.0 million, mainly due to lower gas prices, partially offset by increased deliveries. Gas prices decreased by 15% to $4.9 per mcf ($29.3 per boe), in line with a 16% devaluation of the local currency. Gas deliveries increased by 9% to 15,808 mcfpd (2,635 boepd), resulting from increased industrial consumption and decreased hydroelectric power availability. Argentina: In 2Q2018, gas revenues were $1.8 million, resulting from $5.2 per mcf ($31.5 per boe) realized gas prices and deliveries of 3,876 mcfpd (646 boepd), all corresponding to the recently acquired blocks in Argentina.
Commodity Risk Management Contracts: GeoPark uses hedge contracts to manage risks and limit the impact of oil price volatility on the work program.
For the three-month period ending June 30, 2018, GeoPark realized $13.3 million in lower net revenues from certain hedge contracts in place that had a floor of $52-55/bbl and a ceiling of $58-78/bbl Brent. In accordance with accounting rules, these reduced revenues are adjusted by the change in the value of future contracts and recorded as a $1.9 million gain.
For details regarding current contracts in place, please refer to commodity risk management contracts below, or see Note 4 of GeoPark’s consolidated financial statements for the period ended June 30, 2018, available on the Company’s website.
Production and Operating Costs 1 : Consolidated operating costs per boe were $8.5 in 2Q2018, slightly higher than the $8.3 per boe in 2Q2017 due to the recently acquired blocks in Argentina, which have higher costs per boe.
Consolidated operating costs increased by $6.8 million to $26.3 million in 2Q2018 compared to 2Q2017, as follows:Colombia: Operating costs per boe decreased by 3% to $5.7 per boe in 2Q2018 compared to $5.9 per boe in 2Q2017. Total operating costs increased by 28% to $13.6 million, in line with a 32% increase in volumes delivered. Operating costs per boe in the Llanos 34 block continue to be among the very lowest in the industry at $3.9 per bbl. Chile: Operating costs decreased by 24% to $4.9 million in 2Q2018 from $6.4 million in 2Q2017. Operating costs in 2Q2017 were temporarily affected by a higher share of oil in the sales mix, which had been deferred from 1Q2017. Compared to 1Q2018, operating costs decreased by 10% or by $0.5 million to $4.9 million. Operating costs per boe were $22.7. Brazil: Operating costs decreased by 30% to $1.6 million in 2Q2018 from $2.3 million in 2Q2017, because of one-time maintenance costs in the Manati block (GeoPark non-operated, 10% WI) in 2Q2017, which was offset by 9% higher volumes delivered. Operating costs per boe decreased by 36% to $6.5 per boe from $10.1 in 2Q2017. Argentina: Operating costs were $6.0 million in 2Q2018, related to production from Aguada Baguales, El Porvenir and Puesto Touquet blocks. Operating costs per boe were $26.9.
In 2Q2018 the Company carried out the takeover of the Aguada Baguales, El Porvenir and Puesto Touquet blocks and immediately began evaluating and implementing operational efficiencies and synergies, which together with ongoing renegotiations of existing contracts and a low-cost well intervention campaign initiated in early August 2018, are expected to improve overall profitability of the project. In addition, the Company is currently evaluating different alternatives to initiate drilling activity in these blocks, which is expected to start before year-end.
Increased volumes and prices increased consolidated royalties by $12.6 million to $18.5 million in 2Q2018.
Selling Expenses: Consolidated selling expenses increased by $1.1 million to $1.2 million in 2Q2018 compared to $0.1 million in 2Q2017. The increase of $0.9 million in 2Q2018 represented transportation costs in the Aguada Baguales, El Porvenir and Puesto Touquet blocks in Argentina.
Administrative Expenses: Consolidated G&A costs per boe decreased by 21% to $4.0 per boe in 2Q2018 (vs $5.1 per boe in 2Q2017). Total consolidated G&A slightly increased to $12.5 million in 2Q2018, compared to $12.0 million in 2Q2017.
Geological & Geophysical Expenses: Consolidated G&G costs per boe increased to $1.3 per boe in 2Q2018 (vs $0.8 per boe in 2Q2017). Total consolidated G&G expenses increased to $3.9 million in 2Q2018, compared to $1.9 million in 2Q2017, due to an increased scale of operations.
Adjusted EBITDA: Consolidated Adjusted EBITDA 2 surged by 125% to $83.3 million, or $27.0 per boe, in 2Q2018 compared to $37.1 million, or $15.9 per boe, in 2Q2017.Colombia: Adjusted EBITDA of $79.6 million in 2Q2018 Chile: Adjusted EBITDA of $2.0 million in 2Q2018 Brazil: Adjusted EBITDA of $4.0 million in 2Q2018 Argentina: Adjusted EBITDA of $2.6 million in 2Q2018 Corporate and Peru: Adjusted EBITDA of negative $4.9 million in 2Q2018
The table below shows production, volumes sold and the breakdown of the most significant components of Adjusted EBITDA for 2Q2018 and 2Q2017, on a per country and per boe basis:
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