GeoPark Limited (NYSE:GPRK) Q3 2023 Earnings Call Transcript
GeoPark Limited (NYSE:GPRK) Q3 2023 Earnings Call Transcript November 9, 2023
Operator: Good morning. And welcome to the GeoPark Limited Conference Call following the Results Announcement for the Third Quarter Ended September 30th, 2023 and 2024 work program and investment guidelines. After the speaker's remarks, there will be a question-and-answer session [Operator Instructions]. 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 Web site at www.geo-park.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 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 materially from those described.
With respect to such forward-looking statements, the company seeks protections afforded by the Private Securities Litigation Reforms 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. Reserves figures correspond to PRMS standards. On the call today from GeoPark is Andrés Ocampo, Chief Executive Officer; Veronica Davila, Chief Financial Officer; Augusto Zubillaga, Chief Technical Officer; Martin Terrado, Chief Operating Officer; James Deckelman, Chief Exploration Officer; and Stacy Steimel, Shareholder Value Director.
And now I will turn the call over to Mr. Andrés Ocampo. Mr. Ocampo, you may begin.
Andrés Ocampo: Good morning, everyone, and thank you for joining our call. We are here today in Bogota with our team to report our third quarter results and next year's work program and budget guidelines. During the third quarter, GeoPark invested $44 million, drilled 14 wells and produced approximately 35,000 barrels a day equivalents, impacted by temporary production shut-ins in CPO-5, which were restored in late September. Production today is at approximately 39,000 barrels a day equivalent. The company recorded revenues of $192 million and adjusted EBITDA of $115 million, a margin of 60%, which means that, for every dollar invested, GeoPark generated approximately $2.60. As a result, net profits reached $25 million or $0.44 per share.
Over the last 12 months, our return on capital employed was 42%. In 2023, GeoPark continues to return value to its shareholders, which ensure buybacks and dividends expects to exceed $50 million, including the announced dividend of $7.5 million to be paid in December. This should be above the target of 40% to 50% of free cash flow for the year. After investing in our assets, servicing our debt and taxes, as well as distributing cash back to shareholders, GeoPark ended the quarter with $160 million in cash on the balance sheet and a net leverage ratio of less than 1 times. Our 2023 drilling campaign continues to deliver positive results, particularly from our accelerated activity during the second half of the year with 12 rigs working. Multiple new plays are being opened by our team and portfolio, which are adding new exciting operational and delineation activity for the remainder of this year and next.
The horizontal well campaign in Llanos 34 with the most recent well producing over 3,400 barrels a day currently has two full time rigs executing back-to-back wells and is expected to continue. The Toritos discovery in the general basins is flowing 1,300 barrels of oil per day and represents a new exciting stratigraphic play in the Paleocene, which we will continue to appraise and delineate. Zorzal Este, another Paleocene prospect, is showing positive preliminary loggin information and will be tested in the next couple of weeks, may also open more drilling opportunities. The Halcon 1 well in CPO-5, which is showing positive preliminary logging information will be tested in the next couple of weeks and will be followed by Perico 1 well in the same Paleocene [plain and terrain].
The Houston new play in Ecuador developed by our exploration team with three successful wells already plowing 2,700 barrels of oil per day and more to come. Our 2024 drilling campaign will be focused on continuing the development in Llanos 34 with water flooding project and horizontal wells campaign, as well as on embracing and delineating the new place being opened by the 2023 program. As always, the work program and guidelines are flexible and can be adopted based on changes in oil prices or other conditions as well as drilling results. We expect to invest $150 million to $200 million to drill 35 to 45 wells and produce between 37,000 and 40,000 barrels per day with production growth expected to come from Colombia and Ecuador, partially offset by Brazil and Chile, which have no capital allocated.
We expect to generate between $420 million and $550 million in adjusted EBITDA at $80 to $90 Brent. Approximately 20% to 30% of our CapEx will be allocated to exploration and the rest will be allocated to appraisal, delineation and development activities as well as facilities. We are also executing the third largest 3D seismic acquisition program in Colombia across two Blocks adjacent to CPO-5 complemented also by an additional seismic program within the CPO-5 block. We expect this large new seismic information will allow our subsurface team to define and map new potential prospective areas in place. As always, after fully funding our CapEx program, we will continue to allocate our cash flow to return value to shareholders and continue to strengthen our balance sheet.
We expect to return approximately 40% to 50% of our free cash flow after taxes and debt service back to shareholders through a combination of our base dividends, share buybacks and/or extraordinary dividends. We are finishing the year with great results, which are positioning GeoPark for an even better 2024. We look forward to continue delivering and reporting on our progress the incoming quarters. Thank you. And we will now take your questions.
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