Introduction > Our bussines>  Economic performance

OUR GENERATION OF VALUE

GeoPark’s objective is to create value through a company with persistent, conscious and supportive action, with the best oil and gas assets, and which generates “added value for shareholders”. Only a financially sound company can grow, attract resources and create long-term benefits.

40,046boepd

32,304boepd

Consolidated productionProduction in Colombia

US$ 2.8billion

US$ 42.5

2P reserves net present valueNet asset value per share, debt adjusted

130.6mmboe

197.3mmboe

1P Reserves2P Reserves

351.3mmboe
3P Reserves
US$ 57.8millionUS$ 363.3million

Net incomeAdjusted EBITDA
US$ 0.96US$ 109.0million
Earnings per shareCash flow

US$ 628.9million

Sales revenue

FINANCIAL PERFORMANCE

The following table summarizes the most important data and facts related to financial indicators, income, operating costs, and reserves and production, demonstrating the ability of our Company to give back to its different stakeholders.

For the year ended December 31

20192018Change from
previous year
(in thousands of US$, except for percentages)
Income
Net oil sales579,030545,4906 %
Net gas sales49,87755,671(10) %
Revenue628,907601,1615 %
Commodity risk management contracts(22,523)16,173(239) %
Production and operating costs(168,964)(174,260)(3) %
Exploration expenses(18,593)(13,951)33 %
Administration expenses(60,818)(52,074)17 %
Sales expenses(14,113)(4,023)251 %
Depreciation(105,532)(92,240)14 %
Write-off of exploration assets(18,290)(26,389)(31) %
Impairment loss reversed for non-financial assets(7,559)4,982(252) %
Other operating expenses(1,840)(2,887)(36) %
Operating profit210,675256,492(18) %
Financial expenses(41,070)(39,321)4 %
Financial revenue2,3603,059(23) %
Foreign exchange loss(2,446)(11,323)(78) %
Profit before income tax169,519208,907(19) %
Income tax expense(111,762)(106,240)5 %
Profit for the year57,757102,667(44) %
Non-controlling interest30,252(100) %
Profit (loss) for the year attributable to owners of the Company57,75772,415(20) %

20192018Change from
previous year
(in thousands of US$, except for percentages)
Net production volumes
Oil (mbbl)**12,57111,11313 %
Gas (mcf)***12,27112,2190 %
Total net production (mboe)14,61713,15011 %
Average net production (boepd)40,04636,02711 %

20192018Change from
previous year
(in thousands of US$, except for percentages)
Average realized sales price
Oil (US$ per bbl)50.753.0(4) %
Gas (US$ por mmcf)4.55.1(12) %

20192018Change from
previous year
(in thousands of US$, except for percentages)
Average unit cost per boe (US$)
Operating cost7.68,2(7) %
Royalties and other4.75.8(19) %
Production costs*12.314.0(12) %
Exploration expenses1.51.136 %
Administrative expenses4.94.217 %
sales expenses1.10.3267 %

*Calculated pursuant to FASB ASC 932.

**Corresponds to production figures before deduction of royalties, as we believe that net production before royalties is more appropriate in light of our foreign operations and the attendant royalty regimes. Oil production figures on page F‑70 of the 20-F are before deduction of royalties.

***Corresponds to production measured after separation but prior to compression, which is the measure we use to monitor business performance. Gas production detailed on page F-71 of the 20-F is gas measured at the delivery point.

PRODUCTION

Levels of oil and gas production are influenced by drilling results, acquisitions, and the prices of oil and natural gas. Our production grew to 40.0 mboepd in 2019 from 36.0 mboepd in 2018.

Production

40.0mmboe
2019
36.0mboepd
2018

Oil and natural gas production in Colombia, Chile, Brazil and Argentina in 2017, 2018 y 2019*

ColombiaChileBrazilArgentina
Oil production
Average crude oil production (bopd)32,127656571,603
Average sales price of crude oil (US$/bbl)50.456.270.353.1
Natural gas production
Average natural gas production (mcfpd)1,06314,91712,8064,834
Average sales price of natural gas (US$/ mcf)5.74.25.13.4
Oil and gas production costs
Average operating cost (US$/boe)5.417.75.626.7
Average royalties and other (US$/boe)5.01.12.56.5
Average production cost (US$/boe)**10.418.98.133.2

ColombiaChileBrazilArgentina
Oil production
Average crude oil production (bopd)28,421782421,202
Average sales price of crude oil (US$/bbl)52.662.379.165
Natural gas production
Average natural gas production (mcfpd)74011,64017,3003,796
Average sales price of natural gas (US$/ mcf))2.65.455
Oil and gas production costs
Average operating cost (US$/boe)5.622.86.131.2
Average royalties and other (US$/boe)6.31.62.97.5
Average production cost (US$/boe)**11.924.4938.7

ColombiaChileBrazilArgentina
Oil production
Average crude oil production (bopd)21,7181,000424
Average sales price of crude oil (US$/bbl)36.145.760.152.3
Natural gas production
Average natural gas production (mcfpd)41411,31717,209-
Average sales price of natural gas (US$/ mcf)5.94.55.8-
Oil and gas production costs
Average operating cost (US$/boe)5.620.37.8242.6
Average royalties and other (US$/boe)3.21.43.210
Average production cost (US$/boe)**8.821.711252.6

*We present production figures net of interests due to others, but before deduction of royalties, as we believe that net production before royalties is more appropriate in light of our foreign operations and the attendant royalty regimes.

**Calculated pursuant to FASB ASC 932.

***We acquired the Neuquen blocks in March 2018. Production figures do not include production prior to their acquisition.

OIL AND GAS RESERVES

Our independent evaluation of oil and gas reserves was certified by DeGolyer and MacNaughton (D&M), in accordance with PRMS methodology [Petroleum Reserves Management System] to December 31, 2019 and covers 100% of our assets in Colombia, Peru, Chile, Argentina and Brazil. The D&M evaluation does not include reserves information or any other information relevant to the acquisition of Amerisur Resources PLC (“Amerisur”). All the included reserves correspond to the GeoPark share before royalties paid in kind.

At December 31, 2019, we achieved record certified 2P Reserves of 197.3 mmboe (88% oil and 12% gas), divided by country as 65% Colombia, 16% Peru, 13% Chile, 4% Argentina and 2% Brazil. In Colombia, the increase in 2P Reserves was 10% for a total of 129 mmboe.

Consolidated reserves numbers

52.4mmboe

US$ 2.8billion

PD Reserves2P Reserves value
US$ 42.5per share

US$ 2billion

2P value per share (adjusted for net debt)1P Reserves value
155%
2P Reserves replacement

Reserves by country and category

CountryReserves
category
December
2019 (mmboe)
% oilDecember
2018 (mmboe)
% change
ColombiaPD42.499 %36.317 %
1P95.9100 %83.415 %
2P129.0100 %116.810 %
3P168.9100 %152.610 %

CountryReserves
category
December
2019 (mmboe)
% oilDecember
2018 (mmboe)
% change
PeruPD100 %N/D
1P19.2100 %18.54 %
2P31.4100 %30.34 %
3P121.4100 %131.2-7 %

CountryReserves
category
December
2019 (mmboe)
% oilDecember
2018 (mmboe)
% change
ChilePDP3.426 %2.821 %
1P7.450 %7.23 %
2P24.638 %24.70 %
3P41.137 %37.98 %

CountryReserves
category
December
2019 (mmboe)
% oilDecember
2018 (mmboe)
% change
ArgentinaPDP3.359 %3.5-6 %
1P4.967 %5.7-14 %
2P8.552 % 14.2-40 %
3P14.242 %28.9-51 %

CountryReserves
category
December
2019 (mmboe)
% oilDecember
2018 (mmboe)
% change
BrazilPDP3.25 %3.13 %
1P3.25 %3.13 %
2P3.813 %3.219 %
3P5.640 %3.465 %

Reserves
category
December
2019 (mmboe)
% oilDecember
2018 (mmboe)
% change
PDP52.486 %45.814 %
1P130.693 %117.811 %
2P197.388 %189.34 %
3P351.389 %354.0-1 %

REVENUE

Crude oil sales were our main source of revenue at end-2019 and accounted for 92% of our total revenue, with the remaining 8% coming from gas sales.

Revenue for the year ended December 31
20192018% change from previous year
(in US$ thousand, except percentages)
Consolidated revenue
Net oil sales579,030545,4906 %
Net gas sales49,87755,671(10) %
Total628,907601,1615 %

Our revenue increased 5%, from US$ 601.2 million in 2018 to US$ 628.9 million at end-December 2019, mainly because of higher volumes sold. Oil sales increased because of higher volumes sold, from 10.7 mmbbl in 2018 to 11.9 mmbbl sold in 2019, which meant that net revenue increased from US$ 545.5 million in 2018 to US$ 579.0 million in 2019. Gas sales decreased from US$ 55.7 million in 2018 to US$ 49.9 million in 2019, mainly due to lower prices.

Revenue by country

Year ended December 31Change from previous year
20192018% change from
previous year
(in US$ thousand, except percentages)
Sales revenue by country
Colombia538,917497,87041,0478 %
Chile32,33637,359(5,023)(13) %
Brazil23,04930,053(7,004)(23) %
Argentina34,60535,879(1,274)(4) %
Total628,907601,16127,7465 %

Colombia accounts for 85.7% of all our sales. Its variation against 2018 was due to the increase in sales volumes from 10.0 mmbbl to 11.1 mmbbl and a fall in the average price per barrel of crude oil from US$ 52.6 (2018) to 50.4 (2019).

Argentina accounts for 5.5% of our sales, and the variation in revenue was due to the fall in oil sales because of the decrease in the average price per barrel of crude oil from US$ 65.0 per barrel (2018) to US$ 53.1 (2019), partially offset by an increase in the volume of oil sales from 0.5 mmbbl to 0.6 mmbbl. Gas sales also decreased by US$ 0.8 million, reflecting lower gas prices that were partially offset by higher deliveries.

Chile represents 5.1% of our total sales and the variation in revenue was due to a decrease in oil sales volumes, from 0.3 mmbbl to 0.2 mmbbl, at lower average prices per barrel of oil, from US$ 62.3 (2018) to US$ 56.2 (2019), and an increase in the volume of gas sales.

Brazil represents 3.7% of our sales, and the variation in revenue was mainly due to a decrease in gas sales volumes, from 1.0 mmboe to 0.7 mmboe.

We became one of the 100 largest companies in Colombia

In the financial information report of the companies supervised by the Superintendency of Corporations in Colombia, published in May 2019, GeoPark Colombia was ranked number 81 of the 1,000 largest companies in the country, rising 77 positions from the position obtained in 2017.

PRODUCTION AND OPERATING COSTS

Our production and operating costs correspond mainly to expenses associated with the production of oil and gas.

For the year ended December 31
20192018% change from previous year
(in US$ thousand, except percentages)
Consolidated (including Colombia,
Chile, Argentina, Peru and Brazil)
Royalties(64,576)(71,836)(10) %
Staff costs(14,542)(18,603)(22) %
Operations and maintenance(7,743)(7,756)(0) %
Transportation costs(2,941)(2,628)12 %
Well and facilities maintenance(27,660)(20,262)37 %
Consumables(17,625)(17,444)1 %
Equipment rental(10,476)(9,317)12 %
Other costs(23,401)(26,414)(11) %
Total(168,964)(174,260)(3) %

Our consolidated production and operating costs decreased 3%, from US$ 174.3 million (2018) to US$ 169.0 million (2019), mainly due to lower royalties and lower maintenance costs of the gas plant, which was partially offset by an increase in maintenance costs of the facilities, focused on improving production levels and personnel costs.

production and operating costs by country

For the year ended December 31
ColombiaChileArgentinaBrazil
(en US$ ‘000)
Royalties(56,399)(1,181)(5,141)(1,855)
Staff costs(7,439)(4,822)(1,833)(448)
Operations and maintenance(4,280)(3,454)(9)
Transportation costs(1,030)(1,285)(626)
Well and facilities maintenance(13,868)(4,823)(7,742)(1,227)
Consumables(14,777)(1,492)(1,312)(44)
Equipment rental(7,684)(940)(1,502)(350)
Other costs(11,467)(5,246)(4,668)(2,020)
Total(116,944)(19,789)(26,278)(5,953)

For the year ended December 31
ColombiaChileArgentinaBrazil
(en US$ ‘000)
Royalties(62,710)(1,473)(4,833)(2,820)
Staff costs(8,529)(6,521)(3,167)(386)
Operations and maintenance(4,879)(2,877)
Transportation costs(1,258)(1,250)(120)
Well and facilities maintenance(8,837)(4,095)(6,044)(1,286)
Consumibles(14,714)(1,712)(1,018)
Equipment rental(7,761)(287)(1,269)
Other costs(9,845)(6,561)(5,715)(4,293)
Total(118,533)(21,899)(25,043)(8,785)

Production and operating costs in Colombia decreased 1%, from US$ 118.5 million (2018) to US$ 116.9 million (2019), mainly due to lower royalties, in line with lower oil prices. Operating costs in Colombia decreased to US$ 5.4 per boe (2019) from US$ 5.6 per boe (2018). Production and operating costs in Chile decreased by 10% to US$ 19.8 million due to lower personnel expenses that resulted from cost reduction initiatives, considering the lower level of activity. Costs per boe decreased from US$ 22.8 (2018) to US$ 17.7 (2019).

Production and operating costs in Brazil decreased 32% to US$ 6.0 million (2019), mainly as a result of the adoption of IFRS 16, which changes the treatment and presentation of operating lease expenses. Operating costs per boe decreased from US$ 6.1 (2018) to US$ 5.6 (2019). Production and operating costs in Argentina increased by 5% from 2018, to US$ 26.3 million in 2019, mainly due to higher maintenance costs of facilities. Operating costs per boe decreased from US$ 31.2 (2018) to US$ 26.7 (2019).

TAXES AND ROYALTIES

We are strict in ensuring the correct payment of taxes and royalties in the countries where we operate, and we do not receive financial assistance from governments, nor do we contribute to parties and/or political representatives.

Income tax

The calculation of our income tax expense implies the interpretation of applicable tax laws and regulations in many jurisdictions. The resolution of the fiscal positions we take through negotiations with the relevant authorities or through litigation may take several years to complete and, in some cases, it is difficult to predict the final result.

Income tax expenses
(in US$ thousand)

2019

2018

2017

88,638

67,704

6,925

Royalties

In Colombia, royalties on production are payable to the Colombian Government and are determined on a field-by-field basis using a sliding scale level of production at a rate ranging between 6%-8%. The Colombian National Hydrocarbons Agency (ANH) also has an additional economic right equivalent to 1% of production, net of royalties. In Chile, royalties are payable to the Chilean Government. In the Fell block, royalties are calculated at 5% of crude oil production and 3% of gas production. In the Flamenco, Campanario and Isla Norte blocks, royalties are calculated at 5% of oil and gas production.

In Brazil, the Brazilian National Petroleum, Natural Gas and Biofuels Agency (ANP) is responsible for determining monthly minimum prices for petroleum produced in concessions. Royalties generally correspond to a percentage ranging between 5% and 10% applied to reference prices for oil or natural gas, as established in the relevant bidding guidelines and the concession agreement. In the Manati block, royalties are calculated at 7.5% of gas production. In Argentina, crude oil and gas production accrues royalties payable to the Provinces of Mendoza and Neuquen equivalent to 15% of the estimated value of those products. This value is equivalent to the final sales price less transport, storage and treatment costs.

Royalties by country

(in US$ thousand)

ColombiaArgentina

56,3992019

5,1412019
62,71020184,8332018
ChileBrazil

1,1812019

1,8552019
1,47320182,8202018

Consolidated royalties
(in US$ thousand)

(includes Colombia, Chile, Argentina, Peru y Brazil)

64,576

71,836

28,684

2019

2018

2017

Operational efficiency –Casanare pipeline (Colombia)

In May 2019 we completed the construction of the flowline connecting the Llanos 34 block to the Llanos Pipeline (ODL by its Spanish acronym), one of the main pieces of crude oil transport infrastructure in Colombia. This engineering work was carried out with a team of 327 workers (91% of which were local), 286,770 person/hours worked, 209,129 kilometers travelled by vehicles and, most importantly, with zero lost-time incidents and without any social disturbances during its construction. Crude started to be pumped from Jacana in May, and on 4th June the first barrel passed through the LACT* crude oil measurement unit at Jaguey.

Barrels of oil transported:

5,380,448 by 31st December 2019

Impact on road transport:

11,500 tanker loads

(Figures correspond to the impact of the participation percentage operated by GeoPark).

* The LACT unit is a measuring system used to precisely measure flows of liquid hydrocarbons or natural gas for the sale or delivery to third parties.

VALUE CHAIN AND SUPPLY CHAIN MANAGEMENT

To successfully carry out our operations, we need a myriad of goods and services that are supplied by a significant number of strategic partners, whom we call suppliers and contractors. With their support, we develop activities that ensure responsible operation of the value chain and promote joint growth. Our management guidelines are clearly defined in our Corporate Supply Commitment (Policy), which establishes principles and standards for our activities for the acquisition of goods and services.

During 2019, we developed business relationships with 1,925 suppliers, of which 723 were local companies, making a significant impact on regional and local economies. The approximate value of our budget for payments to suppliers was US$ 371,420,092.

Supply commitment

In 2019 we defined a new supply commitment aligned with the type of company we are today, to establish the rigid and controlled contracting rules without losing sight of the flexibility that the industry demands. The objective of the commitment is to clearly establish the procedure to obtain an efficient and effective chain that maximizes the value for the Company through the best planning, contracting, purchasing and logistics.

N° local suppliersN° national suppliersN° international
suppliers
Total
suppliers
Operations (drilling & completion, engineering,
production, works and maintenance)
21331239564
Administration, transport, support equipment and logistics23436820622
Various others (IT, health, safety, consultancy, etc.)27643330739
Total7231,113891,925

CERTIFICATES
AND AWARDS
VALUE
GENERATION