GeoPark Limited — FY2019 Form 20-F
Reporting period: Fiscal year ended December 31, 2019; audited consolidated statements are prepared under IFRS in U.S. dollars. This is an annual report, not a standalone fourth-quarter filing, and the supplied text does not provide clear Q4-only financial results. Filed March 31, 2020.
Business context and key financial metrics
GeoPark is an independent oil and gas exploration and production company operating in Colombia, Chile, Brazil, Argentina, Peru and Ecuador. Average net production was 40.0 thousand boe per day, up 11% year over year; 86% was oil. Colombia generated approximately 86% of revenue.
| Metric | FY2019 | FY2018 |
|---|---|---|
| Revenue | $628.9 million | $601.2 million |
| Operating profit | $210.7 million | $256.5 million |
| Profit for the year | $57.8 million | $102.7 million |
| Profit attributable to owners | $57.8 million | $72.4 million |
| Adjusted EBITDA (non-IFRS) | $363.3 million | $330.6 million |
| Adjusted EBITDA margin (non-IFRS) | 57.8% | 55.0% |
| Cash from operating activities | $235.4 million | $256.2 million |
| Capital expenditures | $126.3 million | $124.7 million |
| Cash and cash equivalents at year-end | $111.2 million | $127.7 million |
| Total borrowings at year-end | $437.4 million | $447.0 million |
| Total equity at year-end | $132.9 million | $143.0 million |
Year-end current assets were $225.9 million and current liabilities were $214.9 million. Borrowings were primarily the 6.50% senior notes due 2024; over 96% of total indebtedness at year-end was scheduled to mature in 2024. The separate $350 million, 5.50% notes due 2027 were issued in January 2020 and are not included in year-end 2019 borrowings.
Net proved reserves were 124.0 million boe at year-end, up 14% from 108.4 million boe in 2018, excluding the year’s production. The reserve life estimate was 8.5 years. Proved undeveloped reserves were 75.8 million boe; the company planned to bring 87% of reported 2019 proved undeveloped reserves into production within five years of initial disclosure.
Material changes versus FY2018
- Revenue rose 5%, principally on higher oil volumes, partly offset by lower realized prices. Oil sales increased to $579.0 million; gas sales fell 10% to $49.9 million.
- Average net production increased 11% to 40.0 thousand boe per day. Oil production volume rose 13%; average realized oil price declined 4% to $50.7 per barrel.
- Operating profit declined 18% and profit for the year fell 44%. Results included a $22.5 million commodity-hedging loss, versus a $16.2 million gain in 2018; impairment losses of $7.6 million, versus a $5.0 million net reversal; and $18.3 million of unsuccessful exploration write-offs.
- Operating cash flow decreased 8%, reflecting tax payments and higher receivables after the Trafigura long-term contract expired in December 2018. Investing cash outflow narrowed to $119.3 million, while financing cash outflow increased to $132.5 million, including share repurchases and payments related to LGI’s former non-controlling interests.
- The company adopted IFRS 16 leases in 2019 without restating 2018 comparatives. It recorded $13.5 million of right-of-use assets at year-end; the accounting change affected expense classification and comparability.
- Colombian reserves grew, including revisions and discoveries in Llanos 34. Brazil’s production and proved reserves declined; Argentina’s proved reserves fell 20%, including a negative reserve revision in CN-V.
Outlook, risks and unusual items
- 2020 program and oil-price shock: The preliminary 2020 capital program of $180–200 million, based on a $60–65 per barrel reference price and including Amerisur, was reduced to $70–80 million after Brent fell more than 55% between December 2019 and March 2020. Management described further cost and program adjustments as possible. The company planned to prioritize lower-risk, higher-netback projects and preserve cash.
- Hedges: The filing reported 2020 oil hedges covering an average of 33% of estimated production at a minimum average price of $55 per barrel through three-way structures. These instruments limit downside exposure but can also cap some upside. FY2019 hedging produced a $22.5 million net loss, including $26.4 million of unrealized losses.
- Amerisur acquisition: Completed January 16, 2020 for approximately $314.2 million in cash, funded primarily from the January 2020 notes. Amerisur adds Colombian assets and the OBA export pipeline. Purchase-price allocation was preliminary at the filing date. The filing also describes a UK court interim freezing order over approximately £4.5 million of Amerisur assets in connection with environmental claims; Amerisur disputed the claims.
- Concentration and operating exposure: Llanos 34 accounted for 79% of total production and 71% of proved reserves. In Colombia, Trafigura and Ecopetrol together accounted for 78% of consolidated revenue in 2019. Chilean oil sales went entirely to ENAP and gas sales entirely to Methanex. Production and sales also depend on third-party pipelines, transport, permits and partners.
- Commitments and contingencies: The company disclosed $114.4 million of pending investment commitments at December 31, 2019, excluding Amerisur, and $65 million of potential liabilities under guarantees. These commitments are tied to exploration and development obligations in several countries. The Morona Block in Peru was under force majeure while environmental consultation requirements remained unresolved; its development depends on environmental approval, significant infrastructure and community engagement.
- Dividends and buybacks: The quarterly cash dividend and share repurchases were to be suspended after the April 8, 2020 distribution in response to lower oil prices. Management also reported a revised 2020 work program and cost reductions. The company had $153.4 million of accumulated losses at year-end 2019.
- Other risks: Management highlighted commodity-price volatility, COVID-19 uncertainty, foreign exchange movements, political and regulatory changes, social unrest and community consultation, environmental liabilities, reserve-estimation uncertainty, customer credit, and access to capital and infrastructure. A 2019 out-of-period tax adjustment increased tax expense by $9.9 million. The effective tax rate was 66%.
The auditor issued unqualified opinions on the IFRS financial statements and internal control over financial reporting. The audit identified proved and probable reserve estimates and their effects on property, plant and equipment, depreciation and impairment testing as a critical audit matter. Management concluded disclosure controls and internal control over financial reporting were effective. The company stated it was in compliance with debt indenture provisions and covenants at the financial-statement issuance date.
Important facts for investors to verify
- Standalone Q4 production, realized prices, revenue and earnings; the annual report text does not provide clear quarter-only values.
- The final Amerisur purchase-price allocation, integration results, acquired liabilities and status of the UK asset-freezing order and related claim.
- Actual 2020 capital spending and production versus the revised $70–80 million program, including the effects of further oil-price changes and hedges.
- Liquidity, debt maturities, covenant capacity and funding needs after the $350 million 2027 notes issuance and Amerisur acquisition.
- Reserve revisions, development timing and economics—particularly the concentration in Llanos 34 and the permitting, infrastructure and force-majeure status of Morona.
- Customer concentration, transport availability, outstanding investment commitments and guarantee exposure; and whether dividend and buyback suspensions remain in effect.