GeoPark 3Q2026 Results Conference Call - GEOPARK LTD

Financial Performance:

• Consolidated production averaged 27,973 Boe/d (up 3% QoQ), driven by a 51% QoQ increase in Argentina to ~2,100 Boe/d, while Colombia remained stable at ~25,900 Boe/d.
• Revenue reached $116.2 million; Adjusted EBITDA was $45.8 million, representing a 39% margin.
• Realized price fell to $56.20/Boe/d (from $67.20/Boe/d) due to widened crude differentials (Vasconia: -$6.67; Medanito: -$3.50) and a $36.4 million negative impact from commodity hedging.
• Operating costs rose to $20.70/Boe/d (from $17.90) driven by higher energy costs, increased well interventions, and currency appreciation in Colombia and Argentina.
• Capital investment totaled $72.2 million; Free cash flow remained negative due to elevated investment requirements, though operating cash flow was impacted by lower profitability and working capital.
• Cash balance stands at $253.4 million at quarter-end; Net leverage is 1.6x trailing 12-month Adjusted EBITDA.
• Completed a $550 million senior notes issuance due in 2033 to extend debt maturity and secure long-term funding.

Guidance and Future Outlook:

• Full-year production and Adjusted EBITDA guidance remain within previous ranges, supported by Argentina's growth and Q4 hedge optimization.
• Expect to complete the operational takeover of the BAE block in Venezuela before year-end 2026.
• Vaca Muerta development is transitioning to a "factory mode" drilling campaign starting in Q4 2026.
• Long-term goal is to increase fixed energy pricing coverage in Colombia from 45% to 75% by 2027.
• Management anticipates the Vasconia differential to normalize as geopolitical disruptions in the Gulf of Mexico subside.

Business Segments and Product Lines:

• Venezuela: Successfully executed the entry into the BAE (Body) block under a 25-year Production Participation Contract (PPC) with PDVSA ahead of schedule; assessed 300–400 wells for reactivation with a target to reach 10,000–15,000 Boe/d production ramp-up by 2030 (100 workovers in 2027, drilling starting 2028).
• Argentina: Awarded the Corralera Noreste block (~26,900 gross acres) adjacent to existing Vaca Muerta assets; targeting >120 wells and >120 million barrels in potential reserves with an estimated well cost of $14–15 million.
• Colombia: Janus 34 benefits from water flooding; Janus 123 shows increased production; CPO5 achieved the "Milano 1X" discovery testing at ~1,000 Boe/d; CPO5 workovers and water management initiatives are active to arrest decline.

Market and Competitive Landscape:

• BAE block adds a large-scale, long-duration redeveloping opportunity to Geopark's portfolio, diversifying beyond Colombia.
• Corralera Noreste is strategically located in a hub with existing production from Chevron, Plus Petrol, Tech Petrol, and YPF.
• Colombian heavy crude faces unprecedented headwinds in the Gulf of Mexico due to new supply from Canada/Mexico and elevated freight costs, impacting the Vasconia benchmark.
• Geopark is collaborating with other Colombian operators to aggregate supplies and optimize commercial strategies to mitigate differential impacts.

Risks and Challenges:

• Financial: Wider crude differentials and higher energy/input costs significantly compressed realized prices and margins in Q3.
• Operational: Execution risks associated with safely taking over and reactivating ~1,100 wells in Venezuela; need to manage well integrity and facility engineering.
• Commodity: Continued volatility in hedging positions (negative impact of $36.4M) and potential downside from currency fluctuations in Colombia and Argentina.
• Geopolitical: Uncertainty regarding tax conditions in Venezuela could trigger milestone share grants to Grupo Genizti if corporate income tax is revised downwards by Dec 1st.

Management Commentary and Tone:

• Tone is confident and strategic, emphasizing the company's transformation into a diversified regional platform (Conventional Colombia, Unconventional Argentina, Heavy Oil Venezuela).
• CEO Philippe Bayon highlighted the successful acceleration of the Venezuela deal and the disciplined execution in Vaca Muerta despite Q3 financial headwinds.
• CFO Ayemi Caballero and COO Martín Terrado emphasized the robustness of the liquidity position ($600–700M available financing including committed lines) and cost optimization efforts in Argentina (lifting costs reduced from $29–32 to <$10/Boe).
• Management acknowledges the challenges of the current quarter but remains focused on capital discipline and generating sustainable cash flow.

Analyst Questions and Answers:

• Venezuela Cadence: Management confirmed a 100–150 reactivation in 2027 (OPEX intensive), 25% of 100 workovers in 2027, and drilling commencement in 2028; 50% of critical service contracts awarded.
• Argentina Corralera: Asset is an unconventional complement with 2–4 landing zones; preliminary plan targets 120+ wells at $14–15M cost/well; de-risking phase is 4 years.
• Cost Structure: Q3 cost increase attributed to Colombia energy spot prices (<del>$1.5/Boe), FX rates (</del>$1.5/Boe), and well interventions; mitigation includes fixed-price energy contracts (60% to 75% by 2027) and energy hedges.
• Hedging Strategy: Hedging is essential to fund CAPEX; incremental volumes from Argentina/Venezuela will be less hedged to capture upside as production ramps; recent rollovers aim to improve 4Q pricing.
• Funding: $170M net proceeds from 2033 notes plus $253M cash and $300M+ in committed credit lines cover 2027 requirements for all projects; future funding depends on market conditions.
• Tender Offer: 90-day tender for Grupo Genizti shares to be executed pro-rata for all shareholders (excluding the controller); completed post-closing.

Other Key Points:

• The Vasconia differential widening is described as an industry-wide, non-structural issue affecting all Colombian heavy oil operators exporting to the Gulf of Mexico.
• Geopark has secured initial tie-ins to regional pipelines in Argentina, reducing trucking reliance and facilitating evacuation.
• The company recognizes a potential share issuance to Grupo Genizti contingent on Venezuelan tax law changes, a key commercial term of the BAE transaction.