Low Breakeven Production Driving Powerful Cash Flow Generation

Extraordinary & Quarterly Cash Dividend and Share Buyback Program

Re-engaged Work Program and Initiated Drilling on the CPO-5 Block

BOGOTA, Colombia--(BUSINESS WIRE)--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, Chile and Ecuador reports its consolidated financial results for the three-month period ended September 30, 2020 (“Third Quarter” or “3Q2020”). A conference call to discuss 3Q2020 financial results and the work program and investment guidelines for 2021 will be held on November 5, 2020 at 10:00 am (Eastern Standard 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 and should be read in conjunction with GeoPark’s consolidated financial statements and the notes to those statements for the period ended September 30, 2020 and 2019, available on the Company’s website.

THIRD QUARTER 2020 HIGHLIGHTS

Expanded Production and Restarted Work Program

• Consolidated oil and gas production of 38,845 boepd in 3Q2020, up 5% compared to 2Q2020
• Resumed drilling with three wells put on production in the Llanos 34 block (GeoPark operated, 45% WI)
• Reopened temporarily shut-in production and producing 40,000 boepd by the end of 3Q2020
• Currently drilling the Indico 2 appraisal well in the CPO-5 block (GeoPark non-operated, 30% WI)

Implemented Decisive Cost and Investment Reduction Plan

• Cost and investment reductions totaled over $290 million across regional platform
• Further improving GeoPark’s cost efficiencies with ongoing cost-cutting initiatives at all levels
• Production and operating costs reduced by 32% to $28.4 million
• Operating costs per boe¹ reduced by 22% to $6.3 per boe
• G&A/G&G costs reduced by 30% to $13.1 million

Generated Substantial Free Cash Flow

• Revenue of $98.1 million
• Adjusted EBITDA of $56.1 million (or $15.9 per boe), 2x Adjusted EBITDA in 2Q2020
• Operating Profit of $28.5 million / Net Loss of $4.3 million
• Capital expenditures reduced by 56% to $9.8 million
• Full-year 2020 work program of $65-75 million targeting 40,000-42,000 boepd annual average production and operating netbacks of $245-270 million assuming Brent of $35-40 per bbl²

Built Strong Financial Position and Risk Management

• $163.7 million cash ($157.5 million in 2Q2020 and after interest payments of $23.5 million in 3Q2020)
• $75 million oil prepayment facility, with $50 million committed and no amounts drawn
• $132.9 million in uncommitted credit lines
• Long-term financial debt maturity profile with no principal payments until September 2024
• Continuously adding new hedges for the next 15 months

Increased SPEED/ESG+ Response and Actions

• Protocols, preventive measures and crisis response plans in place across six-country regional platform
• Field teams sharply reduced to a minimum with back-up teams and contingencies in place to keep people working safely and production flowing
• GeoPark closely engaged with local communities implementing a significant range of measures to fight Covid-19 with efforts coordinated at local, regional and federal levels
• Appointment of Sylvia Escovar and Somit Varma as new independent members of GeoPark’s Board of Directors (filling vacancies)
• Released GeoPark's Environmental, Social and Governance ("ESG") report for 2019, available on the Company's website

Returning Value to Shareholders by Cash Dividends and Share Buyback Program

• 2020 Extraordinary Cash Dividend of $0.0206 per share ($1.25 million) payable on December 9, 2020
• 2020 Quarterly Dividend of $0.0206 per share ($1.25 million) payable on December 9, 2020
• Resuming discretionary share buyback program for up to 10% of total outstanding shares

James F. Park, Chief Executive Officer of GeoPark, said: “Thanks to and admiration for the GeoPark team for again performing through this monster storm. Because of its quick, decisive and significant moves, GeoPark today is in a position to re-engage our work program, grow production, build and set into motion an attractive work program for 2021 and begin returning cash to its shareholders in the fourth quarter. And, beyond just surviving the collapse and accommodating to the new environment, our team transformed GeoPark – from a cost, capability, and organizational perspective – into a better and stronger company ready to capture the immense opportunity ahead.”

CONSOLIDATED OPERATING PERFORMANCE

Key performance indicators:

Production: Overall oil and gas production decreased by 2% to 38,845 boepd in 3Q2020 from 39,619 boepd in 3Q2019, due to reopened shut-in production and limited drilling and maintenance activities during the quarter, partially offset by the addition of production from the recent Amerisur Resources Plc (“Amerisur”) acquisition in Colombia. Oil represented 85% of total reported production in 3Q2020 and 3Q2019.

For further details, please refer to the 3Q2020 Operational Update published on October 14, 2020.

Reference and Realized Oil Prices: Brent crude oil prices averaged $43.3 per bbl during 3Q2020, $18.6 per bbl lower than 3Q2019 levels. Consolidated realized oil sales price averaged $31.7 per bbl in 3Q2020, $17.6 per bbl lower than the $49.3 per bbl in 3Q2019, reflecting a higher local marker differential in Colombia that was partially offset by lower commercial and transportation discounts.

In Colombia, the local marker differential to Brent averaged $3.0 per bbl in 3Q2020, compared to $6.5 per bbl in 2Q2020 and $1.7 per bbl in 3Q2019. Commercial and transportation discounts improved by $2.1 per bbl and averaged $9.0 per bbl in 3Q2020, compared to $11.1 per bbl in 3Q2019, resulting from further improvements achieved for production in the Llanos 34 block plus the addition of the Platanillo (GeoPark operated, 100% WI) and CPO-5 blocks as part of the Amerisur acquisition, both of which have lower commercial and transportation discounts.

The tables below provide a breakdown of reference and net realized oil prices in Colombia, Chile and Argentina in 3Q2020 and 3Q2019:

Revenue: Consolidated revenue decreased by 35% to $98.1 million in 3Q2020, compared to $151.2 million in 3Q2019 reflecting lower oil and gas prices.

Sales of crude oil: Consolidated oil revenue decreased by 35% to $89.3 million in 3Q2020, driven by a 36% decrease in realized oil prices and flat deliveries. Oil revenue was 91% of total revenue in 3Q2020 and 3Q2019.

• Colombia: In 3Q2020, oil revenue decreased by 36% to $82.8 million reflecting lower realized oil prices and a 1% increase in oil deliveries. Realized prices decreased by 36% to $31.3 per bbl due to lower Brent oil prices and a higher Vasconia differential, partially compensated by lower commercial and transportation discounts. Oil deliveries increased by 1% to 29,962 bopd, reflecting the recent acquisition of Amerisur that was partially offset by temporary shut-ins and limited drilling and maintenance activity. Colombian earn-out payments decreased by 42% to $3.4 million in 3Q2020, compared to $6.0 million in 3Q2019, in line with lower oil revenue in the Llanos 34 block.
• Chile: In 3Q2020, oil revenue decreased by 49% to $1.2 million, due to lower oil prices and volumes sold. Realized oil prices decreased by 36% to $35.0 per bbl, in line with lower Brent prices. Oil deliveries decreased by 21% to 361 bopd due to limited maintenance works and no drilling activity, combined with the natural decline of the fields.
• Argentina: In 3Q2020, oil revenue decreased by 21% to $5.3 million due to lower oil prices and to a lesser extent, lower deliveries. Realized oil prices decreased by 17% to $40.5 per bbl due to the dissociation of local oil prices from international oil prices whereas oil deliveries decreased by 4% to 1,424 bopd due to limited maintenance works and no drilling activity, combined with the natural decline of the fields.

Sales of gas: Consolidated gas revenue decreased by 32% to $8.8 million in 3Q2020 compared to $13.0 million in 3Q2019 reflecting 43% lower gas prices, partially offset by a 19% increase in volumes delivered. Gas revenue was 9% of total revenue in both 3Q2020 and 3Q2019.

• Chile: In 3Q2020, gas revenue decreased by 28% to $4.2 million reflecting lower gas prices, partially offset by higher gas deliveries. Gas prices were 42% lower, or $2.3 per mcf ($14.1 per boe) in 3Q2020 due to lower methanol prices. The successful development of the Jauke gas field and the recent discovery of the Jauke Oeste gas field in early 2020 increased gas deliveries by 25% to 19,374 mcfpd (3,229 boepd).
• Brazil: In 3Q2020, gas revenue decreased by 42% to $3.3 million, due to lower gas deliveries and lower gas prices. Gas deliveries fell by 30% in the Manati gas field (GeoPark non-operated, 10% WI) to 8,661 mcfpd (1,443 boepd) due to lower gas demand in Brazil. Gas prices decreased by 16% to $4.1 per mcf ($24.8 per boe), due to the impact of the local currency devaluation, which was partially offset by the annual price inflation adjustment of approximately 7%, effective in January 2020.
• Argentina: In 3Q2020, gas revenue decreased by 15% to $0.8 million, resulting from lower gas prices, partially offset by higher deliveries. Gas prices decreased by 28% to $2.1 per mcf ($12.4 per boe) due to local market conditions while deliveries increased by 18% to 4,320 mcfpd (720 boepd) due to optimization activities focused on enhancing base production levels and the improved performance of the Challaco Bajo gas field.

Commodity Risk Management Contracts: Consolidated commodity risk management contracts amounted to a $2.7 million gain in 3Q2020, compared to a $4.4 million gain in 3Q2019.

Commodity risk management contracts have two different components, a realized and an unrealized portion.

The realized portion of the commodity risk management contracts registered a cash gain of $1.4 million in both 3Q2020 and 3Q2019. Realized gains in 3Q2020 resulted from hedges in place providing protection to prevailing oil prices during 3Q2020.

The unrealized portion of the commodity risk management contracts amounted to a $1.3 million gain in 3Q2020, compared to a $3.0 million gain in 3Q2019. Unrealized gains during 3Q2020 resulted from a slight decrease in the forward Brent oil price curve compared to June 2020 and the impact of new hedges added during 3Q2020 as measured at September 30, 2020.

GeoPark recently added new oil hedges further increasing its low-price risk protection over the next 15 months. Please refer to the “Commodity Risk Oil Management Contracts” section below for a description of hedges in place as of the date of this release.

Production and Operating Costs³: Consolidated production and operating costs decreased by 32% to $28.4 million from $41.7 million resulting from lower royalties and lower operating costs per boe.

The table below provides a breakdown of production and operating costs in 3Q2020 and 3Q2019:

Consolidated operating costs decreased by 25%, or $6.7 million to $19.9 million in 3Q2020 compared to $26.6 million in 3Q2019. Consolidated operating costs per boe decreased to $6.3 in 3Q2020 from $8.1 per boe in 3Q2019.The breakdown of operating costs is as follows:

• Colombia: Operating costs per boe increased by 5% to $5.9 in 3Q2020 compared to $5.6 in 3Q2019. Total operating costs remained flat and amounted to $15.2 million, due to the addition of the Platanillo block as part of the Amerisur acquisition, which has higher costs per boe than the Llanos 34 block, partially offset by ongoing cost reduction efforts and the effect of the devaluation of the local currency.
• Chile: Operating costs per boe decreased by 72% to $5.3 in 3Q2020 compared to $19.3 in 3Q2019, due to ongoing cost reduction efforts (including lower well intervention activities, efficiencies and the renegotiation of existing contracts) and to a lesser extent, to the devaluation of the local currency. Total operating costs decreased by 67% to $1.8 million in 3Q2020 from $5.4 million in 3Q2019, despite an increase of 18% in oil and gas deliveries.
• Brazil: Operating costs per boe decreased by 27% to $5.8 in 3Q2020 compared to $7.9 in 3Q2019 mainly reflecting the impact of the devaluation of the local currency. Total operating costs decreased by $0.7 million to $0.3 million in 3Q2020 compared to $1.0 million in 3Q2019, reflecting lower operating costs per boe and lower production and deliveries in Manati gas field, which decreased by 31%.
• Argentina: Operating costs per boe decreased by 45% to $14.9 in 3Q2020 compared to $27.0 in 3Q2019 due to ongoing cost reduction efforts (including lower well intervention activities, efficiencies and the renegotiation of existing contracts) and to a lesser extent, due to the devaluation of the local currency. Total operating costs decreased by 45% to $2.8 million in 3Q2020 compared to $4.9 million in 3Q2019 due to lower operating costs per boe, partially offset by a 2% increase oil and gas deliveries.

Consolidated royalties fell by 45% or $6.7 million to $8.4 million in 3Q2020 compared to $15.1 million in 3Q2019, mainly resulting from lower oil prices, partially offset by a 3% increase in oil and gas deliveries.

Selling Expenses: Consolidated selling expenses decreased by $1.1 million to $1.3 million in 3Q2020 (of which $0.8 million, or $0.3 per bbl, correspond to Colombia), compared to $2.4 million in 3Q2019.

Administrative Expenses: Consolidated G&A costs per boe decreased by 41% to $2.5⁴ in 3Q2020 compared to $4.2 in 3Q2019 due to ongoing cost reduction initiatives that even outweighed the incremental G&A costs related to the addition of Amerisur operations. Total consolidated G&A decreased by $4.1 million to $10.4 million in 3Q2020 compared to $14.5 million in 3Q2019.

Geological & Geophysical Expenses: Consolidated G&G costs per boe decreased by 56% to $0.8⁵ in 3Q2020 versus $1.8 in 3Q2019 due to ongoing cost reduction initiatives and despite incremental G&G costs related to the addition of Amerisur operations. Total consolidated G&G expenses decreased by $1.5 million to $2.8 million in 3Q2020 compared to $4.3 million in 3Q2019.

Adjusted EBITDA: Consolidated Adjusted EBITDA⁶ decreased by 35% to $56.1 million, or $15.9 per boe, in 3Q2020 compared to $86.7 million, or $25.3 per boe, in 3Q2019.

• Colombia: Adjusted EBITDA of $53.4 million in 3Q2020
• Chile: Adjusted EBITDA of $2.7 million in 3Q2020
• Brazil: Adjusted EBITDA of $1.9 million in 3Q2020
• Argentina: Adjusted EBITDA of $0.4 million in 3Q2020
• Corporate, Ecuador and Peru: Adjusted EBITDA of negative $2.2 million in 3Q2020

The table below shows production, volumes sold and the breakdown of the most significant components of Adjusted EBITDA for 3Q2020 and 3Q2019, on a per country and per boe basis:

Depreciation: Consolidated depreciation charges increased by 1% to $26.7 million in 3Q2020, compared to $26.5 million in 3Q2019, in line with a slight increase in volumes delivered.

Write-off of unsuccessful exploration efforts: The consolidated write-off of unsuccessful exploration efforts amounted to $0.6 million in 3Q2020 compared to $8.4 million in 3Q2019. Amounts recorded in 3Q2019 mainly refer to unsuccessful exploration wells and other exploration costs incurred in the CN-V (GeoPark non-operated, 50% WI) and Sierra del Nevado (GeoPark non-operated, 18% WI) blocks in Argentina.

Impairment of Non-Financial Assets: Consolidated non-cash impairment of non-financial assets amounted to $1.0 million in 3Q2020 and is related to the REC-T 128 block (GeoPark operated, 70% WI) in Brazil that was classified as an asset held for sale as of September 30, 2020. A non-cash impairment loss is recognized for the amount by which an asset’s carrying amount exceeds its recoverable amount.

Other Income (Expenses): Other operating expenses were $1.3 million in 3Q2020, compared to $1.4 million in 3Q2019.

CONSOLIDATED NON-OPERATING RESULTS AND PROFIT FOR THE PERIOD

Financial Expenses: Net financial expenses increased to $15.8 million in 3Q2020, compared to $8.6 million in 3Q2019 mainly resulting from higher interest expenses related to the issuance of $350 million notes due in 2027 (2027 Notes).

Foreign Exchange: Net foreign exchange charges added a $0.7 million loss in 3Q2020 compared to a $0.8 million gain in 3Q2019.

Income Tax: Income taxes totaled $16.3 million loss in 3Q2020 compared to $41.8 million loss in 3Q2019, mainly resulting from lower profits before income taxes and the effect of fluctuations of local currencies over deferred income taxes.

Profit: Loss of $4.3 million in 3Q2020 compared to a $6.8 million profit recorded in 3Q2019, mainly due to lower operating profits and higher financial expenses, partially offset by lower income taxes.

BALANCE SHEET

Cash and Cash Equivalents: Cash and cash equivalents totaled $163.7 million as of September 30, 2020 compared to $111.2 million as of December 31, 2019. Cash generated from operating activities equaled $91.6 million and cash generated from financing activities equaled $284.2 million, partially offset by cash used in investing activities of $321.6 million.

Cash generated from financing activities of $284.2 million mainly included net proceeds from the issuance of the 2027 Notes of $342.5 million, partially offset by interest payments of $37.5 million, lease payments of $7.3 million, $4.5 million related to the acquisition of the LG International Corp’s non-controlling interest in Colombia and Chile in 2018, short-term principal payments of $3.6 million and share repurchase payments of $3.0 million.

Cash used in investing activities of $321.6 million included the acquisition of Amerisur of $272.3 million (net of cash received), and organic capital expenditures of $49.3 million.

Financial Debt: Total financial debt net of issuance cost was $772.2 million, including the 2024 Notes, the 2027 Notes and other short-term bank loans totaling $3.5 million. Short-term financial debt was $4.8 million as of September 30, 2020.

For further details, please refer to Note 12 of GeoPark’s consolidated financial statements as of September 30, 2020, available on the Company’s website.

FINANCIAL RATIOS^a

Covenants in 2024 Notes: The 2024 Notes include incurrence test covenants that require the net debt to Adjusted EBITDA ratio to be lower than 3.25 times and the Adjusted EBITDA to interest ratio to be higher than 2.25 times until September 2021. As of the date of this release the Company is compliant with both covenants.

Issuance of 2027 Notes: In January 2020, the Company issued $350 million of 5.5% notes due in 2027 (2027 Notes) in accordance with Rule 144A under the United States Securities Act, and outside the United States to non-U.S. persons in accordance with Regulation S under the United States Securities Act.

INVESTORS:
Stacy Steimel – Shareholder Value Director
Santiago, Chile
T: +562 2242 9600
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Miguel Bello – Market Access Director
Santiago, Chile
T: +562 2242 9600
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MEDIA:
Communications Department
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