ANNUAl REPORT 2012
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EXECUTION RISK MANAGEMENT CREATING OPPORTUNITIES COMMITMENT
CONTENTS
BOTTOM LINE
Oil and Gas Production
Oil and Gas Reserves
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Oil and Condensate
Gas
2P Gas
2P Oil
Oil Production
Gas Production
Total Revenues
EBITDA
2
Letter to Shareholders
6 Year in Review
56 Company Overview
58 Corporate Governance
60 Directors’ Remuneration Report
62
Summary Financial Statements
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
63 Consolidated Statement of Financial Position
64 Consolidated Statement of Changes in Equity
65 Consolidated Statement of Cash Flow
66 Notes to the Consolidated Financial Statements
78 Appendix - Independent Auditors’ Statement
81 Directors, Secretary & Advisors
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Gas
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2012
LETTER TO ShAREhOLDERS
Dear Shareholders,
GeoPark’s performance in 2012 proved to be consequential in terms
114.4 million boe of 3P reserves discovered and certified.
of growth and continued a string of seven consecutive years of
operational expansion and financial improvement. This tangible
track record is reflective of many intangible factors within a
strong performance-driven culture which supports our long-term
business plan.
During 2012, oil and gas production grew by 49% (with oil
production increasing by nearly two times), cash flow increased
more than 90% (with a 35% increase in netbacks per boe produced)
and proved and probable reserves increased by 15%. GeoPark
expanded its operations in Chile with new attractive acreage in
Tierra del Fuego and entered into a new country, Colombia, where
we hit the ground running and achieved immediate success with the
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Oil and gas production of 13,500 boepd (1Q 13).
Capital expenditures in 2012 in excess of US$ 195 million
consisting of 44 new wells. (GeoPark has drilled and completed
over 120 wells since 2007 with a success rate of 66%).
Licensed operator now in four countries with a record of safe and
clean operations and continuous annual growth in production,
reserves and cash flow.
EBITDA over US$ 120 million in 2012 with US$ 31/boe netbacks.
An attractive high potential asset portfolio consisting of 27 blocks
(over 3 million acres) in four countries with a risk-balanced mix
of production, development, exploration and unconventional
resource opportunities.
Strategic long-term partner network including the IFC (of the
drill bit. In addition, our team and management were strengthened
World Bank) and LG International (LG) from Korea.
and deepened and new capital acquired to support further expansion.
Asset Platforms
Building on these 2012 achievements, GeoPark, in early 2013,
successfully raised a US$ 300 million international bond (which was
In 2012, our Chile asset base (6 blocks) continued to be a solid
substantially over-subscribed) and made a strategic entry into Brazil
platform for growth with new oil discoveries made in the Tobífera
with a significant production acquisition and the award of seven
formation that underlies the more traditional Springhill hydrocarbon
new exploration blocks in the highly competitive Brazil Round 11
reservoirs. We also contracted with the State of Chile for three new
auction. This production acquisition, which is subject to the approval
high potential blocks in Tierra del Fuego, across the Magellan
of the Brazilian regulatory agencies, is expected to increase
Straits from our current operations, and initiated a 1,500 sq km 3D
GeoPark’s 2012 cash flow by 30%.
seismic survey. Drilling in Tierra del Fuego began during the first
Business Approach
half of 2013 and management is optimistic about this programme.
Our new Colombian asset base (10 blocks) – resulting from two
GeoPark’s record of delivery is attributable to the continuous
corporate acquisitions in the first half of 2012 – represents an
development of three core and complimentary capacities that we
exciting new production, development and exploration portfolio.
believe are necessary for long-term success in the upstream oil and
GeoPark was able to efficiently merge and take over operations
gas business. These represent our team’s capabilities as:
from the acquired companies and to immediately have exploration
success. This included two new field discoveries – the Max and
1. Explorers – with the know-how to take managed risks to discover
Tua oil fields – on the Llanos 34 Block operated by GeoPark. Our
and develop oil and gas reserves in the subsurface.
team’s achievements in Colombia are evident by a doubling of
2. Operators – with the ability to execute in a timely manner and
crude oil production (approximately 5,000 bpd in 1Q 13) in less than
economically drill for, produce, process, transport and market oil
a year since acquiring these new assets. We have a strong team
and gas.
in place and view Colombia as an important platform for future
3. Consolidators – with the experience to assemble the right asset
expansion for GeoPark.
mix in the right hydrocarbon basins with the right partners at the
right price.
Our strategic growth partner, LG International, is continuing to work
with us to build a portfolio of upstream assets throughout Latin
These capabilities are evidenced by our track record of:
America. Following their entry into Chile in 2011, LG joined us in our
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56.9 million barrels of oil equivalent (boe) in 2P reserves and
Colombian project with the acquisition of a 20% interest in 2012.
2 Letter to Shareholders
Letter to Shareholders 3
LETTER TO ShAREhOLDERS
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Thank You
In the first half of 2013, GeoPark moved into Brazil – one of the
As we embark on another new important year, we wish to recognise
world’s most attractive hydrocarbon regions – with the strategic
and thank the GeoPark team which has successfully continued to
acquisition of a 10% interest in the Manati gas field (the largest
grow, meet new challenges, and improve daily – while unfailingly
gas-producing field in Brazil) for US$ 140 million and the award of
maintaining a unique spirit of teamwork, professionalism, trust and
seven new onshore Brazilian exploration blocks. We also
fight that has led to an impressive record of achievement. We also
established an experienced technical team in Brazil to develop
wish to thank all the talented men and women who have newly
these properties and pursue new opportunities.
joined us this year for their important contributions, confidence and
2013 Outlook
commitment. Our team clearly recognises the great opportunities
ahead and is working relentlessly to build GeoPark into the leading
independent Latin American exploration and production company.
With our underlying asset base, ambitious and balanced work
programme, supporting cash flow, strong balance sheet, and
During early 2013, we were deeply saddened by the passing and
partnership backing, GeoPark has never been stronger and better
loss of Sir Michael Jenkins (77) who was a valued Board member,
positioned for further growth. Our platforms in Chile, Colombia
an accomplished man and a good friend. We also reluctantly
and Brazil will continue to provide steady organic growth – with
acknowledged the decision of Christian Weyer (88) – one of
the opportunity for additional inorganic expansion. Our business
GeoPark’s founding Board members and early investors – to retire
development efforts are also underway to position us, with our
from the Board. We are immensely grateful for the contribution,
partner, LG, in other key Latin American countries.
wisdom and leadership of both of these gentlemen.
For 2013, GeoPark will undertake a US$ 200-230 million capital
We also express our gratitude to you – our shareholders, investors
investment programme (approximately US$ 350 million including
and partners – for your strong support during 2012 and look
new acquisitions) with the following priorities:
forward with confidence to continuing to deliver and grow value
Execute to Grow: Drill 35-45 new wells to increase oil and gas
production by 20% and grow oil and gas reserves. Continuously
Sincerely,
increase operating and investment efficiency to improve
economic performance.
in 2013 and beyond.
Manage Risk: Continue to balance production profile between
oil and gas; spread work programme exposure between production,
development and high-impact exploration projects; expand
Gerald E. O’Shaughnessy,
funding exposure and capital sources; strengthen management
Chairman
and technical team; expand country footprint; and farm-out
higher risk / non-core areas.
Expand Business: Increase our portfolio of organic growth
opportunities on existing properties and acquire new projects in
Latin America – targeting assets with proven reserves and
production and with development and exploration upside.
Strengthen Commitment: Continue to build the right kind of
company that values and protects our shareholders, employees,
environment and communities to enhance our long-term
business plan.
James F. Park,
Chief Executive Officer
4 Letter to Shareholders
Letter to Shareholders 5
Oil
Gas
2012 PERFORMANCE
Key Operational Results
Key Financial Results
Key Strategic Results
Colombian Acquisitions:
During 1Q 2012, GeoPark acquired three
privately-held companies, Winchester Oil and
Gas S.A. and La Luna Oil Company Limited S.A.
and hupecol Cuerva LLC. GeoPark acquired
ten exploration and production blocks for a
total consideration of US$ 105 million.
Entry by LGI into the Colombian Business:
In December 2012, LGI joined GeoPark’s
operations in Colombia through the
acquisition of a 20% interest in GeoPark
Colombia S.A. A capital contribution
in GeoPark Colombia S.A. for an amount of
US$ 14.9 million and assumption of
US$ 5 million in debt.
LGI Strategic Alliance Extension:
GeoPark and LGI announced their agreement
to extend their strategic alliance to build a
portfolio of upstream oil and gas assets
throughout Latin America through 2015.
Revenues Up 124%: Total revenues
increased to US$ 250 million, led by 201%
increase in oil revenues to US$ 222 million.
EBITDA Up 92%: Adjusted EBITDA increased
to US$ 121 million. Cash flow from operating
activities increased 91% year-on-year to
US$ 132 million.
Netbacks Up 35%: Netbacks increased to
US$ 30.8 per boe produced.
Net Income Up 264%: Net Income increased
to US$ 18 million.
Capital Expenditures Up 70%: Capital
expenditures increased to US$ 198 million
due to increased drilling activity on the Fell
and Tranquilo Blocks in Chile and the
operations in Colombia. In addition, US$ 105
million was invested for the acquisition of
the Colombian operations.
Total Equity Up 25%: Equity increased to
US$ 312 million as a result of the transaction
with LGI and improved financial
performance.
Available Cash Resources: GeoPark had
US$ 48 million in cash and cash equivalents
at the end of 2012 (US$ 38 million net of
overdrafts), with a liquidity ratio of 1.28x
(current assets divided by current liabilities),
and total financial debt of US$ 193 million.
As of 31 March 2013, after the issuance of the
US$ 300 million Notes, total cash amounted
to US$ 179 million.
Oil Production Up 198%: Average oil
production increased 198% to 7,480 bopd;
total average oil and gas production
increased 49% to 11,276 boepd in 2012.
57% Drilling Success: GeoPark’s 44 wells
drilling programme during 2012 represented
a balance between exploration, appraisal
and development. 36 wells (operated by
GeoPark) were drilled achieving a success
rate of 57%.
2P Reserves Up 15%: DeGolyer and
McNaughton certified 2P reserves increase of
15% to 56.9 mmboe and 3P reserves of 114.4
mmboe. Net Present Value of 2P reserves
was assessed to be US$ 1,005 million and 3P
reserves to be US$ 1,758 million.
Tranquilo Block: First gas discovery
in Tranquilo Block (Chile) in 40 years, Palos
Quemados (with a production test of
4.6 mmcf/day).
Seismic Operations: In Chile, GeoPark
carried out 67 km of 2D seismic in the Otway
and Tranquilo Blocks, 289 km2 of 3D seismic
in the Flamenco Block in Tierra del Fuego and
244 km2 of 3D seismic in Fell Block.
In Colombia, GeoPark carried out 111 km2 of
3D seismic work in the Llanos 62 Block.
Unconventional Resource Potential:
GeoPark's acreage in the Magallanes Basin in
Chile contains the Estratos con Favrella shale
formation which has previously been tested
and produced oil. GeoPark has initiated
studies of diagnostic fracture injection tests
("DFIT") on a selection of six to eight wells
on the Fell Block to determine fracturability
and reservoir properties of the shale.
Operations commenced in Tierra del
Fuego, Chile: Final approval to start
operations on Flamenco (GeoPark 50%
working interest) and Isla Norte Blocks
(GeoPark 60% working interest) in Tierra del
Fuego, Chile. The Company has started its
drilling campaign in 2Q 2013.
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6 Performance • Year in Review
Year in Review • Performance 7
VALUE DRIVER.
Proven technical exPerience
and excellence in finding
and Producing oil and gas
reserves – and the ability
to Plan, execute, overcome
obstacles, adaPt, seize
oPPortunities and achieve
results.
Execution
8 Execution • Year in Review
Year in Review • Execution 9
YEAR IN REVIEW
DRILLING
GeoPark’s growth continues to be led by the drill bit. In Chile,
twenty two wells were drilled with eleven wells put on production.
Six wells were unsuccessful and five wells are waiting for completion
or are under evaluation. In Colombia twenty two wells were drilled
and fifteen wells were successfully put on production. Five wells
were unsuccessful and two wells are waiting for completion or are
under evaluation.
The chart below summarises GeoPark’s drilling results during 2012:
Working
Interest
Block
ChILE
Well Name
Well Type
Status
Fell
Fell
Fell
Fell
Fell
Fell
Fell
Fell
Fell
Fell
Fell
Fell
Fell
Fell
Fell
Fell
Fell
Otway
Otway
Tranquilo
Tranquilo
Tranquilo
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Dicky Oeste 4 D
Development
Dry / Abandoned
Martín 2 D
Exploration
On Production
Guanaco 16
Development
On Production
Konawentru 2 D
Development
On Production
Tiuque 1
Exploration
Dry / Abandoned
Munición Oeste 3
Appraisal
Dry / Abandoned
Kosten 1 D
Exploration
On Production
Pampa Larga 14 D
Appraisal
Under Evaluation
Kiuaku 1 D
Exploration
On Production
Maku 1 D
Exploration
On Production
100%
Cerro Iturbe Oeste 1
Exploration
100%
Nika Oeste 4 D
Development
Waiting to be
fractured
Waiting to be
fractured
100%
100%
100%
100%
100%
25%
25%
29%
29%
29%
Yagán 2 D
Appraisal
On Production
Konawentru 4
Appraisal
On Production
Yagán Norte 4
Development
On Production
Manekenk 2
Development
On Production
Konawentru 3
Development
Waiting for W/O
Tatiana 1
Exploration
Dry / Abandoned
Cabo Negro 1
Exploration
Dry / Abandoned
Marcou Sur 1
Exploration
Waiting for
completion
Palos Quemados 1
Exploration
On Production
María Antonieta 1
Exploration
Dry / Abandoned
EXECUTION
Block
Working
Interest
Well Name
Well Type
Status
COLOMBIA
Arrendajo
Arrendajo
Arrendajo
Cuerva
Cuerva
Cuerva
Cuerva
Cuerva
Cuerva
Cuerva
Cuerva
Cuerva
Cuerva
10%
Arrendajo Norte 1
Exploration
Dry / Abandoned
10%
10%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Azor 2
Azor 3
Development
On Production
Development
On Production
Cuerva 5B
Development
On Production
Cuerva 5C
Development
On Production
Cuerva 5D
Development
Converted into
water injector
Cuerva 6
Development
On Production
Cuerva 10C
Development
On Production
Cuerva 5K
Cuerva 8A
Cuerva 5G
Appraisal
Dry / Abandoned
Appraisal
On Production
Appraisal
Dry / Abandoned
Cuerva 5E
Development
Dry / Abandoned
Cuerva 10D
Development
On Production
Llanos 17
36.8%
Celeus 1
Exploration
Temporary
shut down
Llanos 17
Llanos 32
Llanos 32
Llanos 32
Llanos 34
Llanos 34
Llanos 34
Llanos 34
36.8%
Mapora 1
Exploration
Dry / Abandoned
10%
10%
10%
45%
45%
45%
45%
Maniceño 1
Injector
Water Injector
Samaria 1
Exploration
Temporary
shut down
Maniceño 1 D
Exploration
On Production
Agami 1
Exploration
Water Injector
Tua 1
Tua 2
Tua 3
Exploration
On Production
Appraisal
On Production
Development
On Production
10 Execution • Year in Review
Year in Review • Execution 11
YEAR IN REVIEW
EXECUTION
OIL AND GAS RESERVES
OIL AND GAS PRODUCTION
GeoPark has achieved consistent growth in oil and gas reserves from
its investment activities since 2005. DeGolyer & MacNaughton,
independent petroleum engineers, appraised a 15% increase in 2P
reserves to a total of 56.9 million barrels oil equivalent (mmboe) in its
Country
Chile
report dated 31 December 2012.
DeGolyer & MacNaughton’s report estimated, on eight GeoPark
blocks, a total of 18.7 mmboe of proved reserves, a total of 38.2
Colombia
mmboe of probable reserves, and a total of 57.5 mmboe of possible
reserves as shown in the chart below. From the 2P oil and gas
reserves approximately 80% are in Chile and 20% are in Colombia
and approximately 49% are oil and 51% gas. The 2012 figures
consider a write-off of the Argentinian reserves due to lack of activity
and proximity of the end of concession. The net Present Value
(unrisked) of the Company reserves was estimated by DeGolyer &
MacNaughton’s at 31 December 2012 to be US$ 1,005 million for 2P
reserves and US$ 1,758 million for 3P reserves.
Total
Reserve
Type
Oil
(MMBO)
Gas
BOE
(BCF) (MMBOE)
P1
P2
P3
P1+P2
P1+P2+P3
P1
P2
P3
P1+P2
P1+P2+P3
P1
P2
P3
P1+P2
P1+P2+P3
5.5
10.9
10.8
16.3
27.2
6.7
4.8
4.5
11.4
15.9
12.1
15.7
15.3
27.8
43.1
39.4
135.0
253.5
174.4
427.9
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39.4
135.0
253.5
174.4
427.9
12.0
33.4
53.1
45.4
98.5
6.7
4.8
4.5
11.4
15.9
18.7
38.2
57.5
56.9
114.4
12 Execution • Year in Review
In 2012, GeoPark’s average oil production increased 198% to
7,480 bopd and total average oil and gas production increased 49%
to 11,276 boepd.
Currently, GeoPark’s oil and gas production is generated from the
Fell Block in Chile, La Cuerva, Llanos 34, Yamú, Llanos 32, Arrendajo,
Abanico and Cerrito Blocks in Colombia and the Del Mosquito Block
in Argentina. During 2012, approximately 69% of the Company’s
total oil and gas production was produced in Chile, 30% in Colombia
and approximately 1% in Argentina. During 2012, gas represented
approximately 34% of the total production (67% in 2011) and
oil represented approximately 66% of the total production volume
(33% in 2011). Gas sales represented approximately 12% and oil
represented approximately 88% of total 2012 revenues.
Oil and gas production is shown in the chart on the right:
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Oil and Condensate
Gas
Year in Review • Execution 13
Year in Review • Execution 13
Argentina
Chile
DEL MOSQUITO
FELL
Strait of Magellan
ISLA NORTE
CAMPANARIO
TRANQUILO
OTWAY
ASSETS
GeoPark’s portfolio of oil and gas
assets in 2012 consists of nineteen
hydrocarbon blocks totalling
approximately 4.1 million gross acres
– with oil and gas production, proven
oil and gas reserves, operating
licences, associated infrastructure and
production facilities, an extensive
technical database – and managed by
a team with a track record of success
in the region. The properties
represent high potential blocks (with
multiple play types and objectives
that are offset by major oil and gas
fields) with a large risk-balanced
portfolio of opportunities including
well reactivation, by-passed
reservoirs, stranded and producing
field development, medium to high
impact exploration projects and
unconventional resource plays.
FLAMENCO
Atlantic Ocean
14 Execution • Year in Review
Year in Review • Execution 15
YEAR IN REVIEW
ChILE LICENCES
GeoPark became the first private-sector oil and gas producer in
Chile when it began production on the Fell Block in May 2006 and
is currently producing approximately 62% of Chile’s crude oil
production and 18% of Chile’s natural gas production. Its
substantial acreage position represents an important platform for
continued growth and expansion. GeoPark’s blocks in Chile are:
ChILE LICENCES • ASSETS
Block
Area (sq km)
Operator
Working
Basin
Interest (%)
Fell
Tranquilo
Otway
Isla Norte
Campanario
Flamenco
1,488
* 4,986
5,965
527
778
572
GeoPark
GeoPark
GeoPark
GeoPark
GeoPark
GeoPark
100
Magellan / Austral
29
25
60
50
50
Magellan / Austral
Magellan / Austral
Magellan / Austral
Magellan / Austral
Magellan / Austral
the Marcou Sur, María Antonieta and Palos Quemados prospects.
Nacional del Petróleo ("ENAP"), the Chilean State Oil Company,
provides an excellent base for new hydrocarbon exploration and
The blocks are located in the continental and Tierra del Fuego
development. Log interpretations by engineers experienced in the
Magallanes region in a proven oil and gas producing basin (Magellan
region indicate by-passed oil and gas production zones in certain
or Austral Basin) and on trend with recent discoveries to the north
existing wells. Shut-in and abandoned fields also have the potential
in Argentina and to the south in Tierra del Fuego. The Magallanes
to be put back on production by constructing new pipelines and
region currently produces all of Chile’s oil and gas production.
plants. Geophysical interpretations by GeoPark suggest additional
Although it has been producing for over 60 years, the basin remains
development potential in known fields and exploration potential in
(*) In January 2013, GeoPark formally advised the Ministry of Energy
relatively underdeveloped with new exploration frontiers being
new undrilled prospects and plays – including opportunities in the
of a decision by the Tranquilo Block JV partners to not proceed with
opened in recent years.
the Second Exploratory Period on the Tranquilo Block CEOP. GeoPark
Springhill, Tertiary, Tobífera, and Estratos con Favrella formations.
The Estratos con Favrella shale formation is a main source
and its partners relinquished the Tranquilo Block, except for an
Substantial technical data (seismic, geological, drilling and
rock of the Magellan/Austral Basin and represents a high potential
area of 92,417 acres consisting of protected exploitation zones for
production information), both developed by GeoPark and Empresa
unconventional resource play.
16 Execution • Year in Review
Year in Review • Execution 17
ChILE LICENCES • ASSETS
YEAR IN REVIEW
FELL BLOCK
The Fell Block has an area of approximately 368,000 acres (1,488 sq km)
GeoPark’s geoscience team continues to identify and expand an
and its centre is located approximately 140 km northeast from the
attractive inventory of prospects and drilling opportunities on the Fell
city of Punta Arenas. The Fell Block’s northern border coincides with
Block – both exploration and development projects – and the Company
the international border between Argentina and Chile and its southern
expect to continue its comprehensive drilling programme in the coming
limit is bordered by the Magellan Straits.
years. The recent oil discoveries in the Konawentru, Yagan, Yagan Norte,
Copihue and Munición Oeste fields have opened up new oil and gas
The first exploration efforts began on the Fell Block in the 1950’s and
potential in the block. During 2012, important drilling and production
since then until 2005, ENAP carried out 2,400 km of 2D seismic and 256
results were obtained from the Tobífera formation (a non-conventional
sq km of 3D seismic and drilled 146 wells. In 2006, GeoPark became
volcanic-clastic reservoir underlying the Springhill formation) and
Operator and 100% interest owner of the Fell Block. At the time GeoPark
which has opened up additional potentially attractive opportunities
acquired the Fell Block, the Fell Block had no oil nor gas production.
(workovers, well-deepenings and new exploration and development
Since then, GeoPark acquired more than 1,000 sq km of 3D seismic and
wells) in the Tobífera formation throughout the Fell Block. The
drilled over 90 exploration, appraisal and development wells resulting
successful Tobífera drilling campaign in 2012 has resulted in the
in current average production (1Q 2013) of approximately 18 million
Tobífera formation currently contributing over 80% of the oil production
cubic feet per day of gas and 5,500 barrels of oil per day.
in the Fell Block.
Since 2006, when GeoPark became operator of Fell Block through
GeoPark also initiated an evaluation of the Estratos con Favrella shale
August 2011, more than US$ 210 million have been invested in
reservoir that represents a high potential unconventional resource
exploring and developing the Fell Block, which allowed the transition of
play. A broad area of the Fell Block (1,000 sq km) appears to be in the oil
approximately 84% of the Fell Block’s original area into an exploitation
window for this play and GeoPark has begun work to reinterpret
licence valid until 2032. GeoPark exceeded the minimum work and
core data, logs and well test information, evaluate cores and fluids and
investment commitment required by the CEOP on the Fell Block during
determine reservoir brittleness (for fracturing) through diagnostic
the exploration period by over 75 times.
field tests.
Geologically, the block is located in the Magellan Basin, comprising a
structural platform (developing to the east) and a slope (developing to
the west). The source rocks relate basically to the Estratos con Favrella
lower Cretaceous platform deposits. The principal producing reservoir is
the Springhill formation sandstone (Lower Cretaceous) at depths of
2,200-3,500 metres. Additional reservoirs have been discovered and put
into production on the Fell Block – namely Tobífera volcanic-clastic
rocks (Jurassic) at depths of 2,200-3,600 metres and the Upper Tertiary
and Upper Cretaceous sandstones at depths of 700-2,000 metres.
Trap types in the Fell Block are mainly structural traps defined by
anticlines developed in the basement and involving the Cretaceous
and Tertiary sequences. Stratigraphic and combined traps are
developed in the southern and northern sector of the block.
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ChILE LICENCES • ASSETS
TIERRA DEL FUEGO BLOCKS
In September 2011, GeoPark signed three participation agreements
Exploration in Tierra del Fuego of the Magellan Basin dates back to
(Series Tobífera) constitute the main reservoirs for the accumulation
•
Tertiary Play: stratigraphic and/or structural traps related to deltaic
with ENAP, the State Oil Company of Chile, to acquire the Campanario,
the 1940´s when the first surface exploration focused on obtaining
of oil and gas in the Magellan Basin and have been the main targets
and transgressive sandstones of the Late Cretaceous-Tertiary,
Flamenco and Isla Norte Blocks located in the centre-north of Tierra
stratigraphic and structural information. Anticlinal structural
of exploration in recent decades. A secondary target is defined by the
with reservoirs located at an estimated maximum depth of around
del Fuego, Chile. The three blocks, which cover 1,877 sq km (463,782
traps with transgressive sandstone reservoirs (Springhill Formation)
Tertiary sandstones (Paleocene – Miocene) deposited during the
1,000 to 1,500 m.
acres), are similar and geologically contiguous to the Fell Block and
were outlined with refraction seismic lines and in 1945 oil was
Foreland Stage.
represent high potential and strategic acreage. Following the
discovered on the flank of an anticline.
During the first six months of 2012, GeoPark executed Special
successful methodology employed on the Fell Block, the Company
Source rocks are represented by continental lacustrine shales (Type I
Operations Contracts for the Exploration and Exploitation of
will also evaluate early production opportunities from existing
In the specific area of the acquired blocks, the first wells were drilled in
and Type II Kerogen) deposited in Late Jurassic continental basins that
hydrocarbons (“CEOPs”) with the Republic of Chile for the three new
non-producing wells in Tierra del Fuego. GeoPark has committed
1951 resulting in the discovery of the Sombrero oil field (a structural-
were developed as isolated depocenters (Manantiales, Oriental and
blocks in Tierra del Fuego and 3D seismic operations were initiated
to pay 100% of the required minimum investment of US$ 101.4
stratigraphic trap). At the end of the 1950´s and early 1960´s, new
Gaviota Grabens) and by the marine shales of the Estratos con Favrella
on the Flamenco Block in the first quarter of 2012 as part of its full
million in these blocks over the next three years. The minimum work
fields were discovered to the east (Catalina and Cuarto Chorrillo
Formation (Type II and Type III Kerogen), deposited during the Early
1,500 sq km 3D seismic programme.
commitment comprises 1,500 sq km of 3D seismic and the drilling
Fields) and, following seismic reflection data acquisition, new fields
Cretaceous marine transgression.
of 21 wells.
were discovered and existing fields were further developed.
•
•
•
The three blocks include:
During the past decade, geological studies in the Magallanes Basin
been defined:
Isla Norte Block (527 sq km): GeoPark is the Operator with a 60%
have focused on stratigraphic analysis, based on 3D and 2D seismic
working interest and ENAP owns a 40% working interest (with a carry
information, on the definition and distribution of facies of the deltaic
•
Springhill Play: combination of stratigraphic-structural traps of
for the first three year investment commitment).
and/or turbiditic depositional systems of the Late Cretaceous-Tertiary
shallow marine sands of the Springhill Formation generated by the
period, and the evolution of the oil system in terms of generation/
reactivation of old faults.
Campanario Block (778 sq km): GeoPark is the Operator with a 50%
timing/expulsion and trapping.
working interest and ENAP owns a 50% working interest (with a carry
for the first three year investment commitment).
Geologically, the blocks are located on the eastern margin of the
Magellan Basin that remained relatively stable during its tectonic
Flamenco Block (582 sq km): GeoPark is the Operator with a 50%
evolution, except for the minor reactivation of normal Jurassic faults,
•
•
Tobífera Clastic Play: fluvial to deltaic sandstones in structural and
stratigraphic traps present in deeper part of the grabens.
Fractured Tobífera Play: volcanic reservoirs present in the margins
working interest and ENAP owns a 50% working interest (with a carry
and with a sedimentary column of Cretaceous and Tertiary rocks with
of the late Jurassic rift basins, where intense secondary fracturing is
for the first three year investment commitment).
a thickness of up to 2,000 metres. The basal sandstones of the
superimposed on the primary reservoir porosity.
Four main exploration plays of the Tierra del Fuego Blocks have
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Neocomian (Springhill Formation) and the volcanic-clastic rocks
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Otway
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ChILE LICENCES • ASSETS
TRANQUILO AND OTWAY BLOCKS
The Tranquilo Block extends over an area of approximately 1,232,067
acres (4,986 sq km) and the Otway Block extends over an area of
approximately 1,473,984 acres (5,965 sq km). The blocks are located
approximately 100-120 km from Punta Arenas. The first hydrocarbon
exploration activities began in the 1920’s and during the 1930’s and
1940’s several wells were drilled with gas manifestations. historically,
52 wells have been drilled and approximately 2,303 km of 2D
seismic have been carried out on the blocks. The Tranquilo gas field
was discovered in 1958. The blocks have tested and produced oil
and gas.
In January 2013, GeoPark formally advised the Ministry of Energy of a
decision by the Tranquilo Block JV partners to not proceed within
the Second Exploratory Period of the Tranquilo Block CEOP. GeoPark
and its partners will relinquish the Tranquilo Block, except for an
area of 92,417 acres consisting of Provisionally Protected Areas for
the Marcou Sur, María Antonieta and Palos Quemados prospects.
GeoPark is the Operator of the Tranquilo and Otway Blocks. The
partners in the Tranquilo Block consist of GeoPark (29%), Pluspetrol
(29%), Wintershall (25%) and Methanex (17%). The partners in
the Otway Block consist of GeoPark (25%), Pluspetrol (25%),
Wintershall (25%), International Finance Corporation (12.5%), and
Methanex (12.5%).
Geologically, the Tranquilo and Otway Blocks are located in the
Magellan Basin’s northwest area within Chilean territory, comprising
the frontal part of the folded and thrusted belt of the Tertiary
foreland basin. The source rock is related to the deep marine basin
Cretaceous deposits. The proven reservoirs with production
history in Tranquilo Block are related to the Loreto Formation
deltaic sandstones at depths of 700 to 1,000 metres. Other potential
reservoirs include the Morro Chico Formation (Basal Tertiary
sandstones) and the Rocallosa Formation (Upper Cretaceous
sandstones). The proven reservoirs with production history in Otway
Block relate to the Agua Fresca formations marine and/or deltaic
sandstones at depths of 1,500-2,000 metres. Other potential
reservoirs include the sandstones of the Loreto (Upper Tertiary),
Chorillo Chico (Lower Tertiary) and Rocallosa and Rosa Formations
(Upper Cretaceous).
22 Execution • Year in Review
Year in Review • Execution 23
ChILE LICENCES • ASSETS
YEAR IN REVIEW
Trap types are fundamentally structurally defined anticlines
developed in the folded belt, which involves the Cretaceous and the
Tertiary sequences. Stratigraphic traps are developed toward the
Foreland Basin including Upper Tertiary sandstones (deltaic
and turbiditic deposits of the Loreto and Agua Fresca Formations).
GeoPark’s current exploration focus in Tranquilo Block is in the
folded belt and the transition zone to the foreland basin (Esperanza,
Gales and Kerber structures) in which the main reservoirs are the
During 2012, two prospects were drilled on the Otway Block by the
basal Tertiary sandstones (Morro Chico Formation). In the southeast
Tatiana well in the eastern part of Riesco Island and the Cabo Negro
sector, Marcou area, there is a potential for gas accumulations in
Norte 1 well in the southern part of the block. Both wells were
stratigraphic traps that includes the Loreto Formation sandstones
plugged and abandoned.
(fluvial-deltaic to marine marginal facies). In 2011, GeoPark
completed a seismic programme consisting of 163 sq km of 3D
seismic and 303 km of 2D seismic.
GeoPark’s current exploration focus in Otway Block is in the folded
belt in Isla Riesco where big structures were defined by the 2D
seismic survey. Otway Block’ seismic commitment programme was
completed in 2011 and included 270 sq km of 3D seismic and
127 km of 2D seismic.
A large gas prospect (unrisked mean resources of 715 BCF) in the
Esperanza-Gales region in Tranquilo Block was drilled by the Renoval
1 exploratory well during 2011. The well was stimulated with three
hydraulic fractures in three intervals in early 2012. During production
testing, gas flowed at non-commercial rates, but the test was not
conclusive due to mechanical problems which lead to the decision
to abandon the well.
During 2012, three exploratory prospects, Marcou Sur, Palos
Quemados and Estancia María Antonieta, were drilled on
the Tranquilo Block with one successful well on Palos Quemados.
A test conducted in Palos Quemados well in El Salto formation,
resulted in a production rate of 4.0 million cubic feet per day of gas,
through a choke of 10 millimetres, with a well-head pressure of 1,050
pounds per square inch. Further production history will be required
to determine stabilised flow rates and the extent of the reservoir.
The Palos Quemados field is the first gas discovery in the Tranquilo
Block by GeoPark and the first hydrocarbon discovery in the
Magallanes fold and thrust belt in more than 40 years. This well
completed GeoPark’s work commitment in the Tranquilo Block.
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COLOMBIA LICENCES • ASSETS
COLOMBIA LICENCES
In the First Quarter 2012, GeoPark acquired Winchester Oil and Gas
The Blocks acquired in Colombia include the following:
Geological basins and settings of the Colombian blocks include:
S.A. and La Luna Oil Company Limited S.A. (”Winchester Luna”) –
privately held exploration and production companies operating in
Block
Area (sq km)
Operator
Working
Basin
•
Eastern Llanos Basin (La Cuerva, Llanos 62, Llanos 34, Llanos 17,
Colombia – and hupecol Caracara LLC (“hupecol”) – a privately-held
company with exploration and production blocks in Colombia.
The combined hupecol and Winchester Luna purchases (acquired
La Cuerva
Llanos 34
Llanos 62 *
for a total consideration of US$ 105 million, adjusted for working
Yamu
capital) provide GeoPark with the following in Colombia:
•
Working interest and/or economic interests in 10 blocks (ranging
Llanos 17 *
Llanos 32 *
Arrendajo *
Abanico *
from 5% to 100%), located in the Llanos, Magdalena and Catatumbo
Cerrito *
basins, covering an area of approximately 575,000 gross acres.
Jagüeyes *
190
333
178
45
440
406
316
130
41
247
GeoPark
GeoPark
GeoPark
GeoPark
Ramshorn
P1 Energy
Pacific
Pacific
Pacific
Columbus
Interest (%)
100
45
100
54.5-75
36.8
10
10
10
10
5
Llanos
Llanos
Llanos
Llanos
Llanos
Llanos
Llanos
Magdalena
Catatumbo
Llanos
(*) Subject to approval by ANh
•
Risk-balanced asset portfolio of existing reserves, low
risk development potential and attractive exploration upside.
•
Experienced Colombian operating and administrative team to
support a smooth transition and start-up by GeoPark in Colombia.
26 Execution • Year in Review
Llanos 32, Yamu, Jagüeyes and Arrendajo Blocks)
The Eastern Llanos Basin is a Cenozoic Foreland basin covering
153,000 sq km in the eastern region of Colombia and is the most
prolific hydrocarbon basin in continental Colombia, with more than
1.5 billion barrels of recoverable oil. Two giant fields (Caño Limón
and Castilla), three major fields (Rubiales, Apiay and Tame Complex),
and approximately seventy minor fields have been discovered.
The source rock for the basin is located beneath the east flank of the
Eastern Cordillera, as a mixed marine – continental shaly basinal
facies of the Gachetá Formation. The main reservoirs of the basin are
represented by the Paleogene Carbonera (C-3, C-5 and C-7)
and Mirador sandstones. Within the Cretaceous sequence, several
sandstones have also excellent reservoirs.
Year in Review • Execution 27
YEAR IN REVIEW
COLOMBIA LICENCES • ASSETS
Exploration drilling has been concentrated in normal, up-to-the
sandstones of the Uribante Group, Capacho and La Luna Formations.
basin (antithetic) faults. hanging wall anticlines related to reversal
Deltaic sandstones of Paleogene age are also good reservoirs, such
faults, low-relief 4-way dip closures and stratigraphic traps are all
as the Catatumbo, Barco, Mirador and Carbonera Formations. The
high potential exploration targets. high potential areas for
main seals are thick marine and non-marine shales in the Cretaceous
hydrocarbon accumulation are located in the southern and eastern
and Cenozoic sequences.
part of the basin where pinch-outs of reservoir sandstones are
affected by fresh water (meteoric) forming hydrodynamic traps.
The basin shows a wide variety of traps: normal faults partially
inverted, subthrust structures, triangle zones and structures
GeoPark operates and has a 45% working interest in the Llanos 34
associated to inversion system are important structural traps.
Block. The Tua oil field was discovered in July 2012 with the Tua 1
The western zone of the Catatumbo Basin is a fold belt and recent
well, which is currently producing at a rate of approximately
studies indicate potential exploration plays along thrust zones.
927 bopd. The Tua 3 well, drilled in November 2012, is currently
The basin has been moderately explored and has an attractive
producing at a rate of approximately 982 bopd. Both Tua 1 and Tua 3
potential which has been delayed due to security issues in the area.
wells are being produced from the Mirador formation. GeoPark
drilled the Tua 2 well in January 2013 which is currently producing
•
Middle Magdalena Basin (Abanico Block)
at a rate of approximately 1,800 bopd.
Preliminary interpretations of available seismic data provide
along the central reaches of the Magdalena River Valley between
evidence that the Tua structure contains multiple drilling
the Central and Eastern Cordilleras of the Colombian Andes.
opportunities and further development of the field will include the
The basin areas covers 34,000 sq km with a history of approximately
drilling of the Tua 4 and Tua 5.
296 wildcat wells and 41 discoveries, including the first giant in
The Middle Magdalena Basin is a rift to broken foreland, located
The Max oil field was discovered in March 2012 with the Max 1 well,
which is currently producing at a rate of approximately 1,031 bopd.
The source rocks in the basin are defined by the Cretaceous
GeoPark drilled the Max 2 well in March 2013 which is currently
limestones and shales of the La Luna and the Simiti-Tablazo
Colombia: La Cira-Infantas Fields.
producing at a rate of 1,400 bopd. Preliminary interpretations of
Formations.
available seismic data provide evidence that the Max structure
contains multiple drilling opportunities and further development of
Most of the proven oil in the basin comes from continental
the field will include the drilling of the Max 3 and Max 4.
Paleogene sandstones (Paleocene-Miocene), Lisama, Esmeraldas -
•
Catatumbo Basin (Cerrito Block)
reservoirs are fractured systems of the Cretaceous limestones (Basal
La Paz, and Colorado-Mugrosa Formations. Lightly explored
Limestone Group) and La Luna Formation.
The Catatumbo Basin is a Cenozoic Foreland basin covering
7,350 sq km that is the Colombian portion of the Maracaibo Basin
The main traps identified are structural closures form by major
(Venezuelan giant basin with 2% of the world’s hydrocarbon reserves.
asymmetric anticlines, including: 1. Contractional fault-related folds
hidden beneath surface thrusts; 2. 4-way dip closures related to
The main source rocks are defined by Cretaceous-pelitic deposits
duplex systems; 3. Fault-dependent closures; and 4. Traps on the low
(La Luna, Capacho, Tibú and Mercedes Formations) which are widely
side of sealing faults. Despite being one of the most explored basins
present throughout the Basin. The La Luna Formation is the principal
in Colombia, the Cretaceous carbonate plays remains a high
source rock. The main reservoirs are the Cretaceous limestones and
potential under-explored target.
28 Execution • Year in Review
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YEAR IN REVIEW
ARGENTINA LICENCES
GeoPark has interests in the following blocks in Argentina:
Block
Area (sq km)
Operator
Working
Basin
Del Mosquito
Cerro Doña Juana
Loma Cortaderal
70
115
80
GeoPark
GeoPark
GeoPark
Interest (%)
100
100
100
Austral
Neuquén
Neuquén
DEL MOSQUITO BLOCK
The Del Mosquito Block has an area of approximately 17,300 acres
(70 sq km) and is located in the Austral basin in southern Argentina.
In November 2012, GeoPark voluntary relinquished approximately
102,500 non-producing acres in the Del Mosquito Block to the
Argentine authorities. The Austral Basin produces nearly five per
cent of Argentina’s total oil production and nearly twenty five per
cent of its total gas production. Although the Fell and the Del
Mosquito Blocks are located in different countries, they are situated
in the same geological basin and, at their closest point, are less
than 50 kilometres apart.
The Del Mosquito Block is surrounded by producing oil and gas
fields to the north, south, east and west. There is oil production
currently from one field and there is good infrastructure, nearby gas
plants and pipelines and an easily accessible crude oil market
(40 kilometres by truck). The potential of the Lower Magallanes and
Tobífera geological formations has been underexplored.
GeoPark is the operator of the Del Mosquito Block and has a 100 per
cent working interest. GeoPark established oil production on the
block in 2002 by rehabilitating the abandoned Del Mosquito field. In
2004, GeoPark discovered a new field – Del Mosquito Norte – which
currently is shut-in. The discovery well on Del Mosquito Norte
was the first well drilled on the block since the 1980’s. GeoPark is
evaluating potential drilling opportunities on Del Mosquito
and the option of bringing a partner into the project to increase
investment activity.
30 Execution • Year in Review
ARGENTINA LICENCES • ASSETS
CERRO DOÑA JUANA &
LOMA CORTADERAL BLOCKS
The Cerro Doña Juana and Loma Cortaderal Blocks cover an area of
approximately 47,959 acres (195 sq km) and are located in the
Neuquén Basin (west-central Argentina) which represents the most
prolific hydrocarbon producing basin in Argentina, accounting for
over forty per cent of its total oil production and over fifty per cent of
its total gas production.
The blocks are located in the Andean fold and thrust belt, along a
proven producing fairway, where large hydrocarbon accumulations
exist. There are excellent source rocks, multiple reservoir objectives
and large structural traps. The oil potential on the blocks can
be characterised as high risk with potentially high associated costs.
GeoPark is the operator of the Cerro Doña Juana and Loma
Cortaderal Blocks and has a 100 per cent working interest in each
block. In 2006, GeoPark established oil production on the Loma
Cortaderal Block after repairing an existing well. This well
was shut-in pending for a workover, and the blocks are not currently
in production.
The blocks contain the prolific unconventional Vaca Muerta shale
formation and the Company is currently assessing its potential
and required investment. GeoPark may consider inviting a partner
to join this project.
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Argentina
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(cid:47)(cid:67)(cid:69)(cid:65)(cid:78)
Chile
(cid:33)(cid:82)(cid:71)(cid:69)(cid:78)(cid:84)(cid:73)(cid:78)(cid:65)
(cid:36)(cid:69)(cid:76)
(cid:45)(cid:79)(cid:83)(cid:81)(cid:85)(cid:73)(cid:84)(cid:79)
(cid:35)(cid:72)(cid:73)(cid:76)(cid:69)
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Value DriVer.
Understanding and continUally
bUilding to accommodate risk
among the sUbsUrface, fUnding,
organisational, partner/
shareholder, oil and gas market,
and regUlatory/political
environments.
Risk Management
32 Risk Management • Year in Review
Year in Review • Risk Management 33
YEAR IN REVIEW
RISK MANAGEMENT
BUSINESS PLAN
Since its founding, GeoPark has approached building its business
GeoPark’s management believes shareholder value is increased most
with a long-term view and a keen appreciation of the inherent
economically by consistently pursuing a strategy of discovery and
uncertainties associated with the oil and gas industry – both above
development of oil and gas deposits in areas in or nearby known
and below ground. Its business model is to build a large diversified
reserves. GeoPark implements this strategy through a business plan
portfolio that will allow the Company to sustain continuous and
which emphasises:
profitable growth – and to also participate in higher risk step-change
growth opportunities. Efforts are consistently made to balance
1. Technical strength in economically finding, developing and
asset types, geographic locations, work programmes and capital
producing new and bypassed oil and gas reserves;
support. GeoPark’s consistent and strong record of growth over
2. Commercial capabilities in acquiring high potential assets at
the last seven years reflects the Company’s success in balancing
attractive prices;
uncertainties and seizing opportunities it has encountered
3. Risk-management in expanding the portfolio, increasing options
during its history.
and protecting against uncertainties; and
4. Strategic mix of partners and allies to facilitate organic and
Examples of key risk management elements and mitigants
inorganic growth.
addressed by GeoPark include:
GeoPark’s opportunity portfolio includes multiple in-house projects
Subsurface / Geological: Invest in best people and balanced
and an asset foundation from which to pursue a targeted acquisition
projects (proven production plus development and exploration
plan, which is expected to include both asset and corporate targets.
upside).
Its full-cycle exploration and production work programme allows the
Regulatory / Political: Multi-country footprint; local knowledge
Company to move forward along different lines simultaneously and
and ownership; IFC shareholding; SPEED initiative.
independently. This available mix of rehabilitation, development,
Capital / Balance Sheet: Multiple capital sources (funders and
exploration and acquisition opportunities allows GeoPark to balance
regions); creative and inexpensive financing.
its risk exposure and ensure continuous growth.
Partners: Associating with long-term strategic partners which
understand the business.
Market / Infrastructure: Areas with high market demand and
infrastructure in place; financially strong market clients.
Project Economics: Balanced work programme of production,
development and exploration; invest in technology and
operational efficiency.
Organisation / Management: Build good demographics
(seasoned professionals with new recruits); local organisations;
all employees are shareholders.
•
•
•
•
•
•
•
34 Risk Management • Year in Review
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OIL AND GAS MARKET
Crude Oil
RISK MANAGEMENT
Crude oil markets in the region are both accessible and secure. In
Crude oil prices in Colombia during 2012 averaged US$ 105.40 per
Located approximately 140 kilometres from GeoPark’s Fell Block,
During 2012, the natural gas prices for GeoPark in Chile increased by
Chile, GeoPark’s crude oil and condensate production are sold to
barrel (after discounts).
Methanex operates a major plant in Chile which has the capacity to
2%, to average US$ 4.04 per Mcf.
ENAP (the Chilean State Oil Company) and delivered by truck from
consume 350 million cubic feet per day of gas and produce over 10
the GeoPark wells to ENAP’s refining facilities or pipeline access.
In Argentina, GeoPark’s oil production is sold to Oil M&S at WTI less
per cent of the world’s methanol supply. Over sixty percent of the
Methanex idled its Chile plant in April 2013 and expects to restart it
The sales price is equivalent to WTI less quality adjustments (based
quality and retention tax adjustments. GeoPark’s crude oil is trucked
Methanex gas supply, which historically has originated in Argentina,
later in the present year due to anticipated insufficient natural gas
on degrees API and mercury content). To accommodate increased
to a local facility located 40 km from the Del Mosquito field.
was cut-off by Argentina export duties and restrictions in 2007,
supply. Gas supply for the plant is expected to decrease during the
oil deliveries, GeoPark has also built truck reception, metering
Argentina prices fluctuate in relatively minor amounts as a result of
thereby creating an important market opportunity. GeoPark
winter months of 2013 given the seasonal gas demand increase from
and storage facilities at the ENAP San Gregorio refinery.
prevailing retention taxes which cap crude oil prices. During 2012,
captured this opportunity by entering into a strategic alliance with
the city of Punta Arenas, which is 100% supplied by the Chilean
crude oil prices in Argentina averaged US$ 69 per barrel.
Methanex providing for a ten year gas purchase and supply contract
State Oil Company ENAP, and whose gas production is supplemental
Crude oil prices in Chile increased 2% during 2012 to average
US$ 85.40 per barrel (after discounts).
Natural Gas
at an improved gas price (linked to the international price of
to GeoPark's gas supply to the Methanex plant.
methanol) and with the opportunity to pre-sell gas to generate
future work programme funding and to jointly acquire new
Despite this temporary stoppage, Methanex has agreed to continue
In Colombia, the oil sales price is based on Brent adjusted for certain
GeoPark’s revenues from gas currently represent approximately
hydrocarbon blocks in Chile. This marketing alliance has
to purchase gas from GeoPark in 2013 in accordance with the
marketing and quality discounts including API, viscosity, sulphur and
7% of total revenues (1Q 2013). In Chile, GeoPark has continued to
substantially de-risked GeoPark’s Chile gas investment activities.
minimum committed gas volumes per the Gas Sales Agreement.
water content. Crude oil transport infrastructure in Colombia is
benefit from the major changes undergoing the regional gas
however, taking in account that ENAP supply might probably not be
currently limited, which impacts transportation costs. Sales contracts
markets. In particular, the supply of gas from Argentina to Chile has
In March 2011, a new commercial agreement was signed with
enough to satisfy the demand from the cities, additional volumes
are one-year agreements which do not commit parties to a minimum
been severely limited and, as the only private-sector gas producer
Methanex designed to increase gas production volumes
may likely being produced to as a complement to ENAP’s
volume and are subject to availability of either party to receive or
currently in Chile, this market shift has substantially increased the
by improving the relative economics of gas exploration and
production. Furthermore, a new deal is being negotiated with
deliver the production. During 2012, most of the Colombian
value of GeoPark’s Chilean gas reserves.
development for 2011. In First Quarter 2012, GeoPark further
Methanex in order to receive a premium price for the gas delivered
production was sold to hocol, an Ecopetrol-affiliated company.
improved this arrangement by agreeing with Methanex for
above the minimum committed gas once the plant restart
additional incentives to explore and produce gas on the Fell Block.
operations after the winter season. GeoPark's total gas revenues for
2013 are expected to represent less than 5% of total revenues.
36 Risk Management • Year in Review
Year in Review • Risk Management 37
YeaR iN ReVieW
Capabilities
Geopark deems it critical to continuously develop creative and long-term
solutions to build its capabilities and acquire the capital, tools, and
people necessary to achieve its growth plans. the Company’s record of
performance demonstrates that its attention to and investment in these
basics are creating an important differentiating factor and a competitive
advantage over the longer term.
tools and infrastructure
in new regions such as Chile where oilfield services are scarce or in
tight oilfield equipment supply markets (as recently experienced),
Geopark works to develop solutions to ensure the availability of
needed services and equipment – including drilling and workover
rigs. in order to quickly commercialise its oil and gas reserves,
Geopark also invests in and builds the infrastructure (plants
and pipelines) necessary to produce, process, store and transport
its hydrocarbon reserves to market.
examples of these projects in 2012 include:
•
•
•
Operated a drilling rig with a new state-of-art hydraulic rig of
petreven from italy – which began drilling March 2011. the petreven
rig was used to drill twelve wells in 2012.
Operated a drilling rig with a depth capacity of 10,000 feet
contracted from san antonio international under a one year contract
– and which was used to drill three wells in 2012.
Operated a drilling rig with a depth capacity of 10,500 feet
contracted from Quintana Wellpro (Us/argentine drilling contractor)
under a three year contract. this rig, which was imported from China
as a result of the tight local rig market in 2006/7, was used to drill
seven wells in 2012.
RisK MaNaGeMeNt
•
Operated two workover rigs managed by petreven and san antonio.
•
the Kimiri aike production facility, which originated in bolivia and is
being leased from the exterran Compression Company under a
long-term contract, was put into operation during 2007 after an
investment (including the construction of associated tank batteries)
of Us$ 8 million. the plant provides direct access to the main
regional gas pipeline and allows rapid commercialisation of new
wells. Current plant capacity is 47 million cubic feet per day.
•
an additional gas delivery point at Munición, with a capacity
of 30 million cubic feet per day, was opened in 2010 allowing gas
production from the north eastern area of the Fell block to be
transported and sold through an alternative pipeline system. this
increased total Fell block gas production delivery capacity to
77 million cubic feet per day.
•
Over 120 kilometres of gas pipelines have been built on the block
since 2006.
•
built a new storage tank at the eNap san Gregorio refinery to receive
and market new crude oil deliveries. Rehabilitated and leased an
existing eNap oil treatment and storage facility at Faro este to
handle the increased crude oil production until a new facility will be
constructed on the Fell block in 2013.
•
During 2012 the construction of the following projects begun:
- an oil treatment plant (adjacent to Kimiri aike plant) with a capacity
of approximately 10,000 bpd;
- two water treatment plants (located in alakaluf and Guanaco
fields) for water flooding projects in the Guanaco and alakaluf fields
in Chile, aimed to increase oil recovery.
38 Risk Management • Year in Review
Year in Review • Risk Management 39
Value DriVer.
InItIatIng and creatIvely buIldIng
an attractIve hIgh-Impact portfolIo
of organIc and new project
opportunItIes – coupled wIth the
commercIal skIlls to buy rIght and
to close.
Creating Opportunities
40 Creating Opportunities • Year in Review
Year in Review • Creating Opportunities 41
YeaR iN ReVieW
CReatiNG OppORtUNities
a strategic pillar of Geopark’s long-term business plan is based on
latin america is the focus of Geopark’s growth and represents an
•
Human Resources – availability of qualified and experienced
latin america’s economic future is dependent on the development
creatively initiating and developing growth opportunities - both
attractive region for Geopark because of the following fundamentals:
personnel
of secure energy supplies – and oil and gas will be the chief
organically on existing assets and by acquiring new economically-
attractive projects. there is a strong competitive environment
for new project acquisitions and Geopark is working to
differentiate itself by insuring it has the foundation, capabilities
and capital necessary to successfully acquire new economically-
attractive projects.
•
•
•
Resource base – vast under-explored areas and opportunity for
expansion
Regulatory environment – competitive regulatory and fiscal
•
•
•
•
security – negligible and/or improving security concerns
contributor to this mix. With its experience in the region, strong
economics – easy access and low cost operating environment
technical team and committed financial resources from
Hedge – multi-country position provides political balance
strategic partners, Geopark is well positioned to participate in this
Market – substantial immediate and long-term regional energy
growing opportunity.
framework
requirements
infrastructure – existing oil and gas services, transportation and
•
trends – regional industry reorientation favours smaller
markets
technically-proficient companies
42 Creating Opportunities • Year in Review
Year in Review • Creating Opportunities 43
YeaR iN ReVieW
CREATING OPPORTUNITIES
NeW pROjeCts
after proving the business model and team’s ability to convert
under-performing assets into productive and economically attractive
oil and gas projects, Geopark is now working to expand its asset base
and project portfolio into new areas where suitable opportunities
arise. acquisition initiatives are now underway in brazil, Colombia,
ORGaNiC GROWtH
Chile, perú, argentina, and ecuador.
With a large and balanced prospect inventory on its nineteen
in March 2010, Geopark entered into a strategic partnership with lG
hydrocarbon blocks in Chile, argentina, and Colombia, Geopark has
international to jointly acquire and develop upstream oil and gas
an attractive land position and high growth potential from its
projects throughout latin america. this alliance provides Geopark
existing properties. this portfolio has been expanded to twenty
with a long-term financially strong partner to facilitate and expand
seven blocks by the new acquisitions in brazil during 2013.
its access to acquisition opportunities. During 2011, the Company
aided by its successes in 2012, Geopark is well positioned for 2013
interest in Geopark’s Chilean business for a total consideration of
and beyond. the Company has a secure production base and
Us$ 148 million plus certain funding obligations. these agreements
positive cash flow stream capable of supporting continued growth
further cement the strategic relationship and demonstrate the value
on the Company’s assets. in addition, Geopark has substantial
of the business that Geopark has built in Chile.
and lGi executed two agreements by which lGi acquired a 20%
cash reserves to accelerate capital investment and to acquire
new projects.
in the First Quarter 2012, Geopark completed two upstream oil and
gas acquisitions in Colombia consisting of Winchester luna – with
the Company is targeting important performance gains throughout
interests in eight exploration and production blocks – and Hupecol
2013 and following an ambitious investment plan which will include:
– with interests in two exploration and production blocks. the
combined acquisitions provide Geopark with an attractive platform
Risk-balanced production, development and exploration work
in Colombia of ten hydrocarbon blocks with production,
programmes.
development and exploration opportunities and new acquisition
Capital expenditures of Us$ 200-230 million.
opportunities.
Drilling of 35-45 new wells – with approximately 40% representing
-
-
-
exploration wells.
in December 2012, lGi acquired a 20% equity interest in Geopark
Colombia on a ground floor basis. in addition, the agreement with
lGi provides Geopark to earn back additional equity depending on
the success of the project.
in December 2012, Geopark and lGi also agreed to extend our
strategic partnership to build a portfolio of upstream oil and gas
assets throughout latin america through 2015.
44 Creating Opportunities • Year in Review
Year in Review • Creating Opportunities 45
Capital
CReatiNG OppORtUNities
2009
to successfully participate in the capital-intensive oil and gas
•
New equity funding of approximately Us$ 11.8 million (3,437,000
business, Geopark is continuously developing potential funding
shares at Gbp 2.25) in May 2009 from a block of Geopark’s founders,
sources to ensure the efficient development of its assets.
directors and shareholders and including the iFC and certain london
to date, more than Us$ 795 million has been raised by Geopark –
and Chilean institutional investors. the placing, which was limited
demonstrating its ability to attract the capital and strong
to 10% of the current issued share capital of the Company, was
shareholders needed to facilitate its future growth.
significantly oversubscribed.
every year, Geopark has made progress in strengthening its
•
New equity funding of approximately Us$ 20.5 million (3,784,000
balance sheet through new funding, increased revenues and debt
shares at Gbp 3.23) in November 2009 from a new strategic investor
repayments. Key financings include:
in the Usa, a UK institutional investor, the iFC and a director of the
2006
•
international Finance Corporation of the World bank (“iFC”) equity
Company. the placing was limited to 10% of the current issued share
capital of the Company and was oversubscribed.
investment in February 2006 for Us$ 10 million following a thorough
•
Methanex Gas pre-sale loan Facility for Us$ 15.0 million. this facility
technical, financial and environmental review of the Group.
provided Us$ 15.0 million from Methanex in order to increase
•
•
-
-
-
-
-
•
•
-
-
•
admission to the london stock exchange alternative investment
gas with an interest rate adjustable to the gas deliveries, was repaid
completed the private placement of a Us$ 133 million Reg s Note
bond required for the new tierra del Fuego blocks (equal to
development of the Fell block. the facility, which was repayable in
•
Us$ 133 million Reg s Note. in December 2010, Geopark successfully
for approximately Us$ 84 million to guarantee the performance
Market (aiM) in May 2006 which resulted in:
Us$ 35 million for new capital investment
access to the capital markets
a base of strong institutional shareholders
improvement in Geopark’s ability to attract, recruit and retain
key employees
potential acquisition currency
iFC loan in December 2006 for Us$ 20 million to accelerate
the development programme and which reconfirmed the iFC’s
long-term support for Geopark.
2007
•
•
•
in full with the proceeds from the 2010 Notes (see below).
with a coupon of 7.75% per annum and maturity on 15 December
approximately 83% of the total committed three year investment).
Methanex loan for Us$ 3.3 million. this facility provides Us$ 3.3
pledge of 51% of the shares of Geopark Chile. in addition, the Note
2012
2015. the Notes are guaranteed by Geopark and secured with the
million, interest-free, from Methanex in order to finance the
agreement allows for the placement of up to an additional
exploration, development and production of natural gas from the
Us$ 27 million of Notes under the same indenture subject to the
Otway block.
maintenance of certain financial ratios.
iFC loan Rescheduling of Us$ 14.0 million. in November 2009, the
2011
iFC agreed to reschedule until 2015 the outstanding Us$ 14.0 million
•
Us$ 70 million from lGi. as a step towards cementing the long-term
•
•
Us$ 37.5 million term loan from banco itaú bba. to finance the
acquisition and development of the la Cuerva and llanos 62 blocks
from Hupecol. the loan was fully prepaid with the proceeds of the
Notes issued in early 2013.
Us$ 20 million from lGi. as a step towards cementing the long-term
from its 2006 loan to Geopark. Following proceeds received from the
growth partnership with lGi, Geopark agreed in May 2011 for
growth partnership with lGi, Geopark agreed in December 2012 for lGi
2010 Notes (see below), this facility was repaid in full.
lGi to acquire a 10% interest in the Chilean business (participation
to acquire a 20% interest in the Colombian business for a capital
in Fell, Otway and tranquilo blocks) for Us$ 70 million.
contribution of Us$ 14.9 million plus assumption of Us$ 5 million in debt.
Chile stock exchange listing. Following the approval of the Chilean
Methanex Gas pre-sale loan Facility for Us$ 40 million. this
superintendencia de Valores y seguros (sVs), Geopark’s stock
•
Us$ 78 million from lGi. in October 2011, Geopark and lGi signed a
2013
agreement provided Us$ 40 million from Methanex in order to
was admitted to trade on the santiago Offshore stock exchange in
second agreement by which lGi acquired an additional 10% in the
•
Us$ 300 million notes under Rule 144a and Regulation s exemptions
increase development of the Fell block. Conditions include:
Chile in October 2009. this development strengthens Geopark’s
Chilean business for a total consideration of Us$ 78 million. in
of the U.s. securities laws. the Notes, issued by the Company's
pay back in gas production over six years in variable instalments
foundations in the region and ties to the Chilean financial
addition, lGi committed to provide additional equity funding of
wholly-owned subsidiary Geopark latin america limited agencia en
an interest rate paid on borrowed funds of libOR flat
community which is becoming an increasingly active supporter of
Us$ 31.6 million over the next three years for its share of the
Chile ("the issuer"), were priced at 99.332% and will carry a coupon of
2008
notes will be 11 February 2020. Notes were rated single b by both
New equity funding of approximately Us$ 24 million (3,080,000
2010
•
performance bond Contribution. as part of the October 2011
standard & poor's and Fitch Ratings. j.p. Morgan, banco itaú and btG
shares at Gbp 3.94) in May 2008 from a strategic block of Chilean
•
strategic partnership with lG international (lGi). in March 2010,
transaction, lGi agreed to provide stand-by letters of Credit (sblC)
pactual participated as joint bookrunners.
the Company’s efforts.
minimum work programme of the three tierra del Fuego licences.
7.50% per annum to yield 7.625% per annum. Final maturity of the
investors and pension funds, the iFC and certain london
Geopark and lGi agreed to jointly acquire upstream oil and gas
institutional investors. the placing, which was limited to 10% of the
assets throughout latin america in side-by-side acquisitions. this
current issued share capital of the Company, was significantly
partnership enables Geopark to both accelerate and expand its
oversubscribed.
current efforts to acquire new projects with initial projects targeted
in the Us$ 100-500 million range.
International
Finance
Corporation
World Bank Group
46 Creating Opportunities • Year in Review
Year in Review • Creating Opportunities 47
Value DriVer.
an In-house performance-
drIven culture whIch values
and protects our shareholders,
employees, envIronment and
communItIes and supports our
long-term busIness plan.
Commitment
48 Commitment • Year in Review
Year in Review • Commitment 49
YeaR iN ReVieW
peOple
the underlying principle of Geopark’s
long-term strategy is to attract and invest in
the best people and support those people
with the proper tools and financial resources
necessary to achieve success.
Geopark’s management, professional and field
operation teams provide an unusual mix of
experience and depth for a company of its size
– bringing with them the diverse range of
tools and technical know-how necessary to
create success and endure in an international
oil and gas venture. Geopark’s team has a
history of proven technical and commercial
performance in frontier and complex projects
in latin america and around the world, as
well as in the specific geological basins where
the Company operates. Most of Geopark’s
employees joined from other larger
companies with the ambition to help build
Geopark into a successful and unique
company – incorporating the best they had
learned over their careers. all of Geopark’s
employees are shareholders of the Company.
the continuing successful results of the
Company reflect the commitment,
persistence, unique spirit and performance-
driven nature of the Geopark team.
50 Commitment • Year in Review
Year in Review • Commitment 51
YeaR iN ReVieW
s.p.e.e.D. (safety, prosperity, employees,
environment, Community Development)
long-term success for international resource companies depends
Our long-term well-being requires us to properly fit within our
upon solving complex logistical and operational challenges,
natural surroundings.
overcoming competition for new opportunities and good people,
and meeting a broadening set of demands and standards from local
•
Geopark is committed to being the preferred neighbour and partner
governments and core constituencies. Meeting these challenges
by creating a mutually beneficial exchange with the local
and performing to these new standards are what differentiate a
communities where we work. Unlocking local knowledge creates
successful company from the rest of the pack.
and supports long-term sustainable value in our projects. simply put,
if our efforts enhance local goals and customs, we will be invited to
“Creating Value and Giving Back” represents Geopark’s integrated
do more.
and market-based approach for meeting these challenges by
aligning our business objectives with our core values and
Geopark’s specific methodology is focused on undertaking realistic
responsibilities. Geopark’s overall business plan is to create long-
and practical programmes based on best world practices. Our
term value by finding and producing energy, based on good science
emphasis is on building key principles and company-wide ownership
and efficient operations, and to return that value to our core
and then expanding programmes from within as we continue to
constituencies, which we define as our shareholders, employees,
grow. Our comprehensive in-house designed eHss management
Communities and environment.
programme, entitled s.p.e.e.D. is being developed in accordance
•
Geopark is committed to delivering significant bottom-line
18001 for occupational health and safety management issues;
financial value to our shareholders. Only a financially healthy and
sa 8000 for social accountability and worker rights issues;
transparent company can continue to grow, attract needed
the Development standards of the World bank; and the Quoted
resources and create real long-term benefits.
Companies alliance standards for good corporate governance.
with: isO 14001 for environmental management issues; OsHas
•
Geopark is committed to creating a safe and motivating workplace
“Creating Value and Giving Back” represents Geopark’s underlying
for employees. With today’s shortage of capable energy
value system which provides us the leadership, confidence and
professionals, the company which is able to attract, protect, retain
foundation required for long-term success. it is our competitive
above: participants in bMX championship in punta arenas in august 2012 which was organised and sponsored by Geopark and which included local and international
competitors. in 2010 in Chile, Geopark created the “Club Deportivo Geopark” [Geopark sport Club] to provide a supporting environment to young people as a way
to improve their life quality and personal skills through sports and teamwork. sports offered include volleyball, basketball, badminton, athletics, rugby, table tennis and
bMX and currently more than 450 people between ages of 6 and 65 are members of Club Deportivo Geopark.
"GeoPark’s Presence in Magallanes"
It has been ten years since GeoPark, the Latin American company whose shares
employs 158 people, while indirectly it has created jobs for another 900 people.
are listed in London, started operating in the Fell Block in cooperation with ENAP.
This year, GeoPark targets an investment of US$ 240 million in Chile, Colombia and
The assignment by ENAP of its interest in the Block in 2006 gave rise to objections
Argentina, its goal being to double the Company’s oil and gas production.
from a number of ENAP workers and professional who considered this assignment
unjustifiable, particularly in view of the successes subsequently obtained by
In Magallanes, this year will conclude with more that 20 drilled wells, and an
GeoPark in the area.
investment of around US$ 110 million. After the latest award of prospecting areas,
the Company will be operating six blocks by next December.
and train the best team with the best attitude will always prevail.
advantage. and, it reflects our pride in achieving an important
Regardless of whether or not the transaction was convenient in terms of ENAP’s
•
Geopark is committed to minimising the impact of our projects on
to work, the preferred partner and the cleanest operator – our future
mission in the right way. if we are the true performer, the best place
the environment. as our footprint becomes cleaner and smaller
is bigger, better and more secure.
– more areas and opportunities will be opened up for us to work in.
capabilities and interests, the private company demonstrated what can be done
From 2009 to this year, GeoPark has paid about US$ 300 million in services, labor
with the right technology and plans. When GeoPark received the Fell Block,
and supplies in the area.
production here was zero, while over the 40-year period ENAP had operated the
Block, total production amounted to 10 million barrels of oil equivalent, extracted
The Company has also played a proactive role in promoting sports by fostering a
from 147 drilled wells. Since 2006, the private company has drilled 80 wells,
number of activities practiced at Club Deportivo GeoPark (GeoPark Sports Club).
extracting 12 million BOE from the area.
One of its main merits in this area has been, in addition to directly providing
The initial objections overcome, today GeoPark’ presence has an undeniable
to bid for funding from the National Sports Institute.
impact on the economy of the region as the Company has become a major
player in terms of job creation, particularly for the more skilled technical personnel
On the balance, GeoPark’s presence can be positively evaluated and, in general, its
and professionals, who receive a remuneration that is in accordance with
demeanour can be regarded as worthy of being imitated by other companies.
financial support to the Club, to help the Club attain self management, enabling it
the level of expertise required in the hydrocarbon industry. The Company directly
52 Commitment • Year in Review
Year in Review • Commitment 53
2012
Full Year results
54 2012 Full Year Results
2012 Full Year Results 55
Company Overview
The information included under this section “2012 Full Year Results” including the summary
financial statements is a summary of the information disclosed in the 2012 Report Consolidated
Financial Statements and approved by the Board of Directors on 9 April 2013.
The independent auditor’s report issued on 9 April 2013 in respect of the 2012 consolidated
financial statements was unqualified. The independent auditors statement on the
summary financial statements is included on page 78.
A copy of the 2012 consolidated financial statements and report is available on the GeoPark
web-site: www.geo-park.com
GeoPark Holdings Limited (“GeoPark” or “the Company”) and its subsidiaries
together are referred to herein as the Group.
LGI partnership
During 2011, the Company transferred 20% of its Chilean business to LGI
Directors’ Interests
The Directors who served the Company during the year and subsequently,
(see Note 29). Therefore the non-controlling interest on the profit of that year
together with their (and their families’) beneficial interests in shares in the
Addresses
The Registered office address is Cumberland House, 9th Floor, 1 Victoria
corresponds to the profit generated by the Chilean operations. The profits
Company, were as follows:
of the Chilean operations that are attributable to the owners of the Company
Street, Hamilton HM 11, Bermuda. The Company has a representative office
were offset by losses incurred by the Company in its Corporate and Argentine
at 35 Piccadilly, London, United Kingdom.
operations.
Committees
Ordinary shares of
US$ 0.001 each at
Name
Re-Appointment
Audit
Nomination
Remuneration
31 December 2012
Principal Activity
The principal activity of the Group in the period under review was to explore,
During 2012, the Company transferred 20% of its Colombian business to LGI
(see Note 29). As the transaction occurred at the end of the year, there was
develop and produce for oil and gas reserves in Chile, Colombia and
no profit attributable to a non-controlling interest.
Argentina. The Group owns a solid and well-balanced portfolio of assets that
includes 19 hydrocarbon blocks in which we have working interests and/or
In addition, in March 2013, GeoPark and LGI announced their agreement to
economic interests.
Business transactions
extend their strategic alliance to build a portfolio of upstream oil and gas
assets throughout Latin America through 2015.
Acquisitions in Colombia
In February 2012, GeoPark acquired two privately-held exploration and
Dividends
The Directors do not recommend the payment of any dividend for the year
production companies operating in Colombia, Winchester Oil and Gas S.A.
ended 31 December 2012 (2011: nil). The Group is currently re-investing
and La Luna Oil Company Limited S.A. (“Winchester Luna”).
all cash generated by its operations and intends to continue to re-invest these
In March 2012, a second acquisition occurred with the purchase of Hupecol
Net free available equity reserves, defined as Other Reserve plus Accumulated
Cuerva LLC (“Hupecol”), a privately-held company with two exploration and
Losses, amount to US$ 121.7 million.
funds for the near future. Cumulative losses for the Group are US$ 5.9 million.
production blocks in Colombia.
The combined Hupecol and Winchester Luna purchases were acquired for
a total consideration of US$ 105 million, adjusted for working capital.
Under the terms of the sale and purchase agreement entered into in 2012 in
respect of the acquisition of Winchester Luna, the Company has to make
certain payments to the former owners arising from the production and sale
of hydrocarbons discovered by exploration wells drilled after 25 October 2011
on the working interests of the companies at that date. These payments
which involve both, an earnings based measure and an overriding revenue
royalty, equate to an estimated 4% carried interest on the part of the vendor.
Gerry O’Shaughnessy
Executive Chairman
James F. Park
Chief Executive Officer
6 August 2012 (*)
6 August 2012 (*)
Sir Michael R. Jenkins
Non-Executive Director 6 August 2012 (*)
Christian M. Weyer
Non-Executive Director 6 August 2012 (*)
Peter Ryalls
Non-Executive Director 6 August 2012 (*)
Juan Cristóbal Pavez
Non-Executive Director 6 August 2012 (*)
Carlos Gulisano
Non-Executive Director 6 August 2012 (*)
Steven J. Quamme
Non-Executive Director 6 August 2012 (*)
8,172,793
6,983,068
40,364
219,844
39,778
Committee Member
Committee Chairman
2,168,457
(*) Most recent
reappointment date.
(1) 1,469
(1) Carlos Gulisano holds
50,000 IPO stock options
4,906,488
and 100,000 stock awards.
Auditors
PricewaterhouseCoopers LLP has completed the audit of the 2012 Financial
Going Concern
The Directors regularly monitor the Group’s cash position and liquidity risks
Statements, as appointed in the Annual General Meeting held in August 2012
throughout the year to ensure that it has sufficient funds to meet forecast
and offer themselves for Re-Appointment.
NOMAD
Oriel Securities Limited is the Company’s Nominated Advisor under the AIM
rules of the London Stock Exchange.
operational and investment funding requirements. Sensitivities are run
to reflect latest expectations of expenditures, oil and gas prices and other
factors to enable the Group to manage the risk of any funding short falls
and/or potential loan covenant breaches.
Annual General Meeting
At the Annual General Meeting of the Company, resolutions will be proposed
Considering macroeconomic environment conditions, the performance of the
operations, the US$ 300 million debt fund raising completed in February 2013
and the Group’s cash position, the Directors have formed a judgement,
to re-elect the Directors, according to the Company’s Bye Laws. Other
at the time of approving the financial statements, that there is a reasonable
resolutions may be proposed in accordance with the circular to be sent out.
expectation that the Group has adequate resources to continue with its
Further details will be set forth in the formal Notice of Meeting.
investment programme in order to increase oil and gas reserves, production
and revenues and meet all its obligations for the foreseeable future. For this
reason, the Directors have continued to adopt the going concern basis in
preparing the consolidated financial statements.
56
Company Overview
Company Overview 57
Corporate Governance
GeoPark is committed to maintaining high standards of corporate
governance which it defines as managing the Group in an efficient, effective
Independence
The Board reviews annually the independence of all Non-Executive Directors
Audit Committee
The Audit Committee is comprised of three independent Non-Executive
Remuneration Committee
The Remuneration Committee is comprised of three independent
and entrepreneurial manner for the benefit of all shareholders over the
and has determined that, with the exception of Carlos Gulisano, all current
Directors (being Sir Michael Jenkins (up until his death on 31 March 2013),
Non-Executive Directors, who currently are Mr. Juan Cristóbal Pavez,
longer term. The Directors strongly intend, as is feasible given the Group’s
Non-Executive Directors are independent and have no cross-directorships or
Mr. Peter Ryalls and Mr. Juan Cristóbal Pavez). During the year the
Mr. Steven J. Quamme and Mr. Peter Ryalls. The Committee is chaired by
size and the constitution of the Board, to comply with the guidelines on
significant links which could materially interfere with the exercise of their
Committee was chaired by Sir Michael Jenkins and met to approve the
Mr. Juan Cristóbal Pavez and meets as required during the year.
corporate governance of the Quoted Companies Alliance for AIM companies.
independent judgment.
Financial Statements, as required during the year.
The Committee’s specific responsibilities are:
GeoPark’s corporate governance goals include:
Board Support
Mr. Pedro Aylwin Chiorrini is currently the Company Secretary and is available
The Committee’s specific responsibilities to the Board are:
• Determining and agreeing with the Board the remuneration policy for the
• Reviewing Financial Statements and formal announcements relating to the
Chief Executive Officer, Chairman, Executive Directors and other members
• Efficiency: Creating a governing body of an appropriate size to permit
to advise all Directors and ensure compliance with Board procedures.
Group’s performance;
of the Executive Management;
efficient decision-making with transparency for major decisions, clear
The Board has the power to appoint and remove the Company Secretary.
• Assessing the independence, objectivity and effectiveness of the external
• Reviewing the performance of the Executive Directors and other members
definition of responsibilities and performance targets, and procedures in
place to protect and ensure the protection of the Company’s assets.
• Effectiveness: Assembling a governing body with the required skills,
Internal Control Review
Directors review on an ongoing basis, inter alia, financial, operational,
compliance matters and risk management, and approve the annual budget
auditors;
of the Executive Management;
• Making recommendations for the appointment, re-appointment and
• Reviewing the design of the share incentive plans for approval by the Board
removal of the external auditors and approving their remuneration and terms
and shareholders.
of engagement; and
provided with the proper information and collectively involved to make the
and monitor performance. The Board has the responsibility to establish and
• Implementing and monitoring policy on the engagement of the external
best decisions for the Company.
maintain the Group’s system of internal controls and review its effectiveness.
auditor to supply non-audit services to the Group.
The procedures are reviewed on an ongoing basis.
• Entrepreneurial: Defining a vision for the Company with an understanding
of goals, timing and necessary resources.
The Group maintains an approval procedure for capital expenditures and
Nomination Committee
The Nomination Committee is comprised of three Directors (being Mr.
• Shareholder Common Good: Taking decisions which consider the good of
position of individuals. The Board has approved the annual budget and
and Mr. Gerald O’Shaughnessy), the majority of whom are independent
all shareholders and which, if they involve management, major shareholders
performance against the budget is monitored and reported.
Non-Executive Directors. The Committee is chaired by Mr. Christian M. Weyer
and other related parties, are reported in a transparent manner.
and meets as required.
expenses. It includes different levels of authorisation based on functions and
Christian M. Weyer, Sir Michael Jenkins (up until his death on 31 March 2013)
The internal control system can only provide reasonable and not absolute
Board Members
assurance against material misstatement or loss. The Board has considered
The Committee’s specific responsibilities to the Board are:
the need for an internal audit function but does not consider it necessary
• Reviewing the structure, size and composition of the Board and making
Executive Directors:
Gerald E. O’Shaughnessy - Chairman
James F. Park - Chief Executive Officer
at the current time.
recommendations to the Board with regard to any changes required;
• Identifying and nominating, for Board approval, candidates to fill Board
During 2012, the company implemented an Ethics Line in order to provide
vacancies as and when they arise;
employees a channel to report any irregularity or concerns on working
• Making recommendations to the Board with regard to membership of the
Non-Executive Directors:
environment, through an anonymous and independent service held
Audit and Remuneration Committees in consultation with the Chairman
Sir Michael R. Jenkins (up until his death on 31 March 2013)
by a subcontracted company. An internal ethics committee is in charge of
of each Committee;
Christian M. Weyer
Peter Ryalls
Juan Cristóbal Pavez
Carlos Gulisano
Steven J. Quamme
Together, the Executive and Non-Executive Directors bring a broad range
of business, commercial and other relevant experience to the Board, which is
vital to the management of an expanding company.
reviewing any allegations received and to provide advice and
• Reviewing the outside directorship/commitments of the Non-Executive
recommendations if applicable.
Directors;
• Succession planning for Directors and other senior executives.
58
Corporate Governance
Corporate Governance
59
Directors’ Remuneration Report
The following information is not subject to audit.
In accordance with the programme, 601,235 common shares were issued to
Stock Awards to Executive Directors
Remuneration Committee
The Company has a Remuneration Committee. The members of the
Committee during 2012 were Juan Cristóbal Pavez, Chairman, Peter Ryalls
and Steven J. Quamme, who are Non-Executive Directors.
the GeoPark Employee Benefit Trust for use in the settlement of the exercise
of stock options granted to certain Executive Directors and employees at
the time of the Company’s IPO.
Stock Awards to Management, Employees and Executive Directors
In order to align the interests of its Management, employees and key
The Remuneration Committee agrees with the Board the framework for the
advisors with those of the Company and its Shareholders, the Directors have
remuneration of the Chief Executive, the Chairman of the Company and such
established a Performance-based Employee Long-Term Incentive Programme
other members of the Executive Management as it is designated to consider.
(“the Plan”). At the Annual General Meeting held on 19 November 2007,
N° of % of issued
Underlying
Common
Common
Shares
Share
Capital
Approxi-
Name
Gerald
O’Shaughnessy 270,000 mately 0.6%
James F.
Park
Approxi-
450,000 mately 1.0%
Non-Executive Directors Contracts
In August 2012 at the Annual General Meeting, the Shareholders re-elected
Earliest
the Non-Executive Directors. The remuneration package approved for
Grant
Exercise
Exercise
Non-Executive Directors, which is detailed in the corresponding service
Date
Price (US$)
Date
contracts, contains the following components:
23 Nov
2012
23 Nov
2012
23 Nov
0.001
2015
a) Annual salary of £ 35,000; the fees payable shall be made up, at the
23 Nov
option of the Company, of an issue of new shares in the Company on the
0.001
2015
basis determined by the Board and/or cash consideration payable quarterly
in arrears. The share price to determine the quantity of share is the simple
Shareholders voted to authorise the Board to use up to 12% of the issued
Considering the previously issued IPO Awards, plus the 12% limit established
average to the daily closing price of the stock in the quarter prior to the
No Director plays a part in any discussion about his own remuneration.
share capital of the Company at the relevant time for the purposes of the
for the Plan, the total share capital awarded and to be awarded to employees,
payment date.
Executive remuneration packages are designed to attract, motivate and
Board of Directors to implement this plan and determine the specific
the shares issued.
retain Directors of the calibre required to grow the business and enhance
conditions for each programme within some broadly-defined guidelines.
quarterly in arrears in cash.
c) Notice for contract termination: 2 months.
value to Shareholders. The performance measurement of the Executive
Directors and the determination of their annual remuneration package are
During 2012, the Remuneration Committee and the Board of Directors
Executive Directors’ Contracts
It is the Group’s policy that Executive Directors should have contracts of an
The following chart summarises the detail of payments made to
undertaken by the Committee.
approved the granting of 500,000 performance share awards to employees
indefinite term providing for a maximum of one year’s notice. The details
Non-Executive Directors:
Employee Long-Term Incentive Plan. GeoPark’s Shareholders authorised the
Management and Executive Directors represents approximately 13.4% of
b) Committee Chairman fee: annual remuneration of £ 5,750 payable
and Management under the Plan. The 2012 awards also encompass new
of the Director’s contracts are summarised below:
The Company’s policy is that a substantial proportion of the remuneration of
employees that have joined the Company since the 2011 awards. The awards
the Executive Directors should be performance related.
will vest on the fourth anniversary of the grant date and will be subject to
the award holder remaining in employment during that period (following
Performance-based Employee Long-Term Incentive Programme - Key Terms
the rules set out in the Plan).
IPO Award Programme and Executive Stock Option plan
On admission to AIM, the Executive Directors, the Management and key
Stock Awards to Management and Employees
employees of the Company received the following options over common
N° of
% of
issued
shares of the Company granted under the Executive Stock Options Plan.
Underlying
Common
IPO Stock Options to Management and key employees
N° of
% of
issued
Underlying Common
Common
Share
Shares
Capital
Approxi-
545,000 mately 1.3%
Grant
Date
15 May
2006
Exercise
Price (£)
4.00
Earliest
Exercise
Date
15 May
2008
Expiry
Date
15 May
2013
Dr. Carlos Gulisano holds 50,000 of these IPO Stock Options.
Common
Shares
(1)
Share
Capital
Approxi-
976,211 mately 2.2%
Approxi-
852,100 mately 2.0%
Approxi-
500,000 mately 1.1%
Approxi-
500,000 mately 1.1%
Grant
Date
15 Dec
2008
15 Dec
2010
15 Dec
2011
15 Dec
2012
Exercise
Price
(US$)
0.001
0.001
0.001
0.001
Earliest
Exercise
Date
15 Dec
2012
15 Dec
2014
15 Dec
2015
15 Dec
2016
Expiry
Date
15 Dec
2018
15 Dec
2020
15 Dec
2021
15 Dec
2022
Gerald O’Shaughnessy
Gerald O’Shaughnessy has a service contract with the Company which
provides for him to act as Executive Chairman of the Company at a salary
of US$ 250,000 per annum. The agreement is stated to continue indefinitely,
subject to it being terminable by either party by giving not less than 12
months’ notice in writing at any time. The payment of any bonus to
Mr. O’Shaughnessy is at the Company’s discretion. Mr. O’Shaughnessy’s
Sir Michael Jenkins (1)
Peter Ryalls (2)
Christian Weyer (3)
Juan Cristóbal Pavez
service agreement contains restrictive covenants which restrict him,
Carlos Gulisano
for a period of 12 months following the termination of employment, from
Steven J. Quamme
soliciting senior employees of the Company and, for a period of 6 months
2012 Cash Payment
Stock Payment
Director Fees
Non-Executive
Committee
Paid in Shares
Directors’ Fees
Chairman Fees
No. of Shares
£ 17,500
£ 17,500
£ 17,500
£ 17,500
£ 35,000
£ 17,500
£ 5,750
£ 5,750
£ 5,750
-
-
-
3,020
3,020
3,020
3,020
-
3,020
following the termination of employment, from being involved in any
Additionally Dr. Carlos Gulisano received US$ 250,000 for technical
competing undertaking.
consultancy during 2012 (US$ 138,000 in 2011).
During 2012 a bonus for a total amount of US$ 150,000 was awarded to
(1) Audit Committee Chairman
Gerald O’Shaughnessy (no bonus in 2011).
James F. Park
James F. Park has a service contract with the Company which provides for
him to act as Chief Executive Officer of the Company at a salary of
(2) Remuneration Committee Chairman before the 2012 AGM designated
Juan Cristóbal Pavez.
(3) Nominations Committee Chairman
Approval
This report was approved by the Board of Directors on 9 April 2013.
IPO Stock Options to Executive Directors
with the programme, 976,211 common shares were issued to the
subject to it being terminable by either party by giving not less than
(1) Dr. Carlos Gulisano holds 100,000 of these Stock awards. In accordance
US$ 500,000 per annum. The agreement is stated to continue indefinitely,
N° of
Underlying
Common
Shares
153,345
306,690
153,345
306,690
Exercise
Price (£)
Earliest
Exercise
Date
Expiry
Date
3.20
4.00
3.20
4.00
15 May 2008
15 May 2013
15 May 2008
15 May 2013
15 May 2008
15 May 2013
15 May 2008
15 May 2013
Name
Gerald
O’Shaughnessy
James F. Park
GeoPark Employee Benefit Trust for use in the settlement of the exercise
12 months’ notice in writing at any time. The payment of any bonus to
of stock awards.
Mr. Park is at the Company’s discretion. Mr. Park’s service agreement contains
restrictive covenants which restrict him, for a period of 12 months
following the termination of employment, from soliciting senior employees
of the Company and, for a period of 6 months following the termination
of employment, from being involved in any competing undertaking.
During 2012 a bonus for a total amount of US$ 300,000 was awarded to
James F. Park (no bonus in 2011).
60
Directors’ Remuneration Report
Directors’ Remuneration Report
61
Summary Financial Statements
Consolidated Statement of Income
Consolidated Statement of Financial Position
Amounts in US$ ’000
Note
2012
2011
Amounts in US$ ’000
Note
2012
2011
5
6
9
10
11
12
13
29
14
Net Revenue
Production costs
Gross Profit
Exploration costs
Administrative costs
Selling expenses
Other operating income (expenses)
Operating Profit
Financial income
Financial expenses
Bargain purchase gain on acquisition of subsidiaries
Profit before Income Tax
Income tax
Profit for the Year
Attributable to:
Owners of the Company
Non-controlling interest
Earnings per share (in US$) for
profit attributable to owners of the Company. Basic
16
Earnings per share (in US$) for
profit attributable to owners of the Company. Diluted
16
Consolidated Statement of Comprehensive Income
Amounts in US$ ’000
Income for the year
Other comprehensive income:
Total comprehensive Income for year
Attributable to:
Owners of the Company
Non-controlling interest
250,478
(129,235)
121,243
(27,890)
(28,798)
(24,631)
823
40,747
892
(17,200)
8,401
32,840
(14,394)
18,446
11,879
6,567
0.2784
0.2693
2012
18,446
-
18,446
11,879
6,567
The notes on pages 66 to 78 are an integral part of these summarised consolidated financial statements.
111,580
(54,513)
57,067
(10,066)
(18,169)
(2,546)
(502)
25,784
162
(13,678)
-
12,268
(7,206)
5,062
54
5,008
0.0013
0.0012
2011
5,062
-
5,062
54
5,008
Assets
Non Current Assets
Property, plant and equipment
Prepaid taxes
Other financial assets
Deferred income tax asset
Prepayments and other receivables
Total Non Current Assets
Current Assets
Other financial assets
Inventories
Trade receivables
Prepayments and other receivables
Prepaid taxes
Cash at bank and in hand
Total Current Assets
Total Assets
Total Equity
Equity attributable to owners of the Company
Share capital
Share premium
Reserves
Accumulated losses
Attributable to owners of the Company
Non-controlling interest
Total Equity
Liabilities
Non Current Liabilities
Borrowings
Provisions and other long-term liabilities
Deferred income tax liability
Total Non Current Liabilities
Current Liabilities
Borrowings
Current income tax liabilities
Trade and other payable
Provisions for other liabilities
Total Current Liabilities
Total Liabilities
17
18
15
20
19
20
20
18
21
22
23
15
22
24
25
457,837
10,707
7,791
13,591
510
490,436
-
3,955
32,271
49,620
3,443
48,292
137,581
628,017
43
116,817
128,421
(5,860)
239,421
72,665
312,086
165,046
25,991
17,502
208,539
27,986
7,315
54,890
17,201
107,392
315,931
224,635
2,957
5,226
450
707
233,975
3,000
584
15,929
24,984
147
193,650
238,294
472,269
43
112,231
115,164
(18,549)
208,889
41,763
250,652
134,643
9,412
13,109
157,164
30,613
187
28,535
5,118
64,453
221,617
62
Consolidated Statement of Income
Consolidated Statement of Financial Position
63
Total Equity and Liabilities
628,017
472,269
The notes on pages 66 to 78 are an integral part of these summarised consolidated financial statements.
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flow
Amount in US$ ’000
Capital
Premium
Reserve
Reserve
Losses
Interest
Total
Attributable to owners of the Company
Non-
Share
Share
Other Translation Accumulated controlling
Equity at 1 January 2011
Comprehensive income:
Profit for the year
Total Comprehensive Income
for the Year 2011
Transactions with owners:
Proceeds from transaction
with Non-controlling interest
(Notes 21 and 29)
Share-based payment (Note 26)
Total 2011
42
107,858
3,025
894
(19,527)
-
92,292
-
-
-
1
1
-
-
-
-
-
111,245
4,373
-
4,373
111,245
-
-
-
-
-
54
54
5,008
5,062
5,008
5,062
-
924
924
36,755
148,000
-
5,298
36,755
153,298
Balances at 31 December 2011
43
112,231
114,270
894
(18,549)
41,763
250,652
Comprehensive income:
Profit for the year
Total Comprehensive Income
for the Year 2012
Transactions with owners:
Proceeds from transaction
with Non-controlling interest
(Notes 21 and 29)
Share-based payment (Note 26)
Total 2012
-
-
-
-
-
-
-
-
-
13,257
-
13,257
4,586
4,586
-
-
-
-
-
11,879
6,567
18,446
11,879
6,567
18,446
-
810
810
24,335
-
37,592
5,396
24,335
42,988
Amounts in US$ ’000
Note
2012
2011
Cash flows from operating activities
Income for the year
Adjustments for:
Income tax for the year
Depreciation of the year
Loss on disposal of property, plant and equipment
Write-off of unsuccessful efforts
Impairment loss
Accrual of interest on borrowings
Amortisation of other long-term liabilities
Unwinding of long-term liabilities
Accrual of share-based payment
Exchange difference generated by borrowings
Gain on acquisition of subsidiaries
Deferred income
Income tax paid
Changes in working capital
14
7
9
9
23
23
8
23
3
18,446
14,394
53,317
546
25,552
-
12,478
(2,143)
1,262
5,396
35
(8,401)
5,550
(408)
5,778
5,062
7,206
26,408
2,010
5,919
1,344
11,130
(1,038)
350
5,298
(15)
-
5,000
-
89
Cash flows from operating activities - net
131,802
68,763
Cash flows from investing activities
Purchase of property, plant and equipment
Acquisitions of companies, net of cash acquired
29
Purchase of financial assets
Cash flows used in investing activities - net
Cash flows from financing activities
Proceeds from borrowings
(198,204)
(105,303)
-
(303,507)
37,200
12,452
(12,382)
(10,895)
26,375
(98,651)
-
(2,625)
(101,276)
9,668
142,000
(9,150)
(10,779)
131,739
Balances at 31 December 2012
43
116,817
127,527
894
(5,860)
72,665
312,086
Proceeds from transaction with non-controlling interest
The notes on pages 66 to 78 are an integral part of these summarised consolidated financial statements.
Principal paid
Interest paid
Cash flows from financing activities - net
Net (decrease) increase in cash and cash equivalents
(145,330)
99,226
Cash and cash equivalents at 1 January
Cash and cash equivalents at the end of the year
Ending Cash and cash equivalents are specified as follows:
Cash in bank
Cash in hand
Bank overdrafts
Cash and cash equivalents
183,622
38,292
48,268
24
(10,000)
38,292
84,396
183,622
193,642
8
(10,028)
183,622
The notes on pages 66 to 78 are an integral part of these summarised consolidated financial statements.
64
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flow 65
Notes
Note 1
General Information
Note 4
Segment information
Amounts
Note 5
in US$ ’000 Argentina
Colombia
Chile
Corporate
Total
Net Revenue
GeoPark Holdings Limited (the Company) is a company incorporated under
Management has determined the operating segments based on the reports
the laws of Bermuda. The addresses of its registered office and principal
reviewed by the strategic steering committee that are used to make strategic
places of business are disclosed in the introduction to the Directors’ Report.
decisions. The committee considers the business from a geographic
The principal activities of the Company and its subsidiaries (the Group) are
perspective.
described in the Directors’ Report.
The Company is quoted on the AIM London Stock Exchange. Also its shares
segments based on a measure of adjusted earnings before interest, tax,
are authorised for trading on the Santiago Off-Shore Stock Exchange, in
depreciation, amortisation and certain non-cash items such as write-offs,
US$ under the trading symbol “GPK”.
impairments and share-based payments (Adjusted EBITDA). This
The strategic steering committee assesses the performance of the operating
Note 2
Accounting policies
measurement basis excludes the effects of non-recurring expenditure from
the operating segments, such as impairments when it is the result of an
isolated, non-recurring event. Interest income and expenses are not included
in the result for each operating segment that is reviewed by the strategic
2011
Net revenue
Gross profit
Adjusted
EBITDA
1,477
179
(1,081)
Depreciation
(1,083)
Impairment
and write-off
Total assets
(1,344)
10,895
Employees
(average)
83
-
-
-
-
-
-
-
110,103
56,888
-
-
111,580
Amounts in US$ ’000
57,067
Sale of crude oil
70,421
(5,949)
63,391
(25,297)
(28)
(26,408)
Sale of gas
Note 6
(5,919)
(1) 453,384
-
(7,263)
Production costs
7,990
472,269
Amounts in US$ ’000
Depreciation
98
1
182
Royalties
Staff costs (Note 8)
steering committee. Other information provided, except as noted below, to
(1) Includes cash received from disposal of 20% of the Chilean business
Gas plant costs
The summarised consolidated financial statements of GeoPark Holdings
the strategic steering committee is measured in a manner consistent with
in 2011.
Limited have been prepared in accordance with International Financial
that in the financial statements.
Reporting Standards as adopted by the European Union (IFRS).
Segment areas (geographical segments):
The summarised consolidated financial statements are presented in
thousands (US$ ’000) of United States Dollars and all values are rounded to
Amounts
Approximately 70% of capital expenditure was allocated to Chile (95%
Well maintenance
in 2011) and 30% was allocated to Colombia (0% in 2011).
Consumables
A reconciliation of total Adjusted EBITDA to total profit before income tax
Vehicle rental and personnel transportation
Share-based payments (Notes 8 and 26)
Transportation costs
Facilities maintenance
the nearest thousand (US$ ’000), except where otherwise indicated.
in US$ ’000 Argentina
Colombia
Chile
Corporate
Total
is provided as follows:
The summarised consolidated financial statements have been prepared on a
historical cost basis.
2012
Net revenue
Gross
1,050
99,501
149,927
(loss) / profit
(2,194)
39,304
84,133
-
-
250,478
121,243
A full listing of the accounting policies and estimates applied by the Company
Adjusted
are available in the report on our web site www.geo-park.com.
EBITDA
2,051
34,474
93,908
(9,029)
121,404
Note 3
Consolidated Statement of Cash Flow
Changes in working capital shown in the Consolidated Statement of Cash
Depreciation
(3,408)
(21,050)
(28,734)
(125)
(53,317)
Impairment
and write-off
(1,915)
Total assets
6,108
(5,147)
213,202
(18,490)
405,674
-
3,033
(25,552)
628,017
Amounts in US$ ’000
Adjusted EBITDA for reportable segments
Depreciation
Share-based payment
Impairment and write-off of unsuccessful efforts
Others (a)
Operating profit
Financial results
Gain on acquisition of subsidiaries
Profit before tax
2012
121,404
(53,317)
(5,396)
(25,552)
3,608
40,747
(16,308)
8,401
32,840
Pulling costs
Field camp
2011
Landowners
63,391
(26,408)
(5,298)
(7,263)
Safety and insurance costs
Non-operated blocks costs
Equipment rental
Cost of crude oil sold from acquired business
1,362
Other costs
25,784
(13,516)
-
12,268
Note 7
Depreciation
2012
221,564
28,914
2011
73,508
38,072
250,478
111,580
2012
52,307
11,424
12,384
3,371
7,211
3,277
3,803
9,884
1,787
1,680
2,305
2,407
845
1,428
1,030
5,936
3,826
4,330
129,235
2011
25,844
4,843
4,568
3,242
2,541
2,302
1,692
1,687
1,447
1,404
1,086
1,009
344
316
-
-
-
2,188
54,513
Employees
(average)
100
80
144
-
324
(a) Includes internally capitalised costs.
Flow are disclosed as follows:
Amounts in US$ ’000
Change in Prepaid taxes
Change in Inventories
Change in Trade receivables
Change in Prepayments and
other receivables and Other assets
Change in liabilities
2012
(11,046)
8,837
(7,842)
2011
892
(332)
(2,858)
9,759
6,070
5,778
(16,350)
18,737
89
Amounts in US$ ’000
Oil and gas properties
Production facilities and machinery
Furniture, equipment and vehicles
Buildings and improvements
Depreciation of property, plant and equipment
Recognised as follows:
Production costs
Administrative costs
Other operating costs
Depreciation total
2012
44,552
7,708
713
344
2011
20,096
5,767
343
202
53,317
26,408
52,307
1,010
-
25,844
501
63
53,317
26,408
66
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
67
Note 8
Staff costs
Average number of employees
Amounts in US$ ’000
Wages and salaries
Shared-based payment
Social security charges
Note 9
Exploration costs
Amounts in US$ ’000
Staff costs (Note 8)
Allocation to capitalised project
Share-based payments (Notes 8 and 26)
Write-off of unsuccessful efforts (a)
Impairment loss (b)
Amortisation of other long-term liabilities
related to unsuccessful efforts
Other services
Note 10
Administrative costs
2012
324
19,132
5,396
3,636
2011
Amounts in US$ ’000
182
Staff costs (Note 8)
Share-based payments (Notes 8 and 26)
9,914
5,298
2,228
Consultant fees
New projects
Office expenses
28,164
17,440
Director fees and allowance
Travel expenses
Communication and IT costs
Depreciation
Public relations
Other administrative expenses
2012
3,089
(1,849)
1,329
25,552
-
(1,500)
1,269
27,890
2011
2,292
(1,471)
985
Note 11
5,919
1,344
(600)
1,597
Selling expenses
Amounts in US$ ’000
Transportation
Delivery or pay penalty
10,066
Storage
Selling taxes
(a) The 2012 charge corresponds to the cost of eight unsuccessful
exploratory wells: five of them in Chile (two in Fell Block, two in Otway Block
and the remaining in Tranquilo Block) and three of them in Colombia (one in
Cuerva Block, one in Arrendajo Block and the remaining in Llanos 17 Block).
Note 12
The 2012 charge also includes the loss generated by the relinquishment of an
Financial income
area in the Del Mosquito Block in Argentina.
The 2011 charge corresponds to the write-off of exploration and evaluation
Exchange difference
assets in the Fell Block. The charge includes the cost of an unsuccessful
exploratory well amounting to US$ 2,331,000 and also in accordance with the
Interest received
Amounts in US$ ’000
Group’s accounting policy and considering that no additional work would
be performed, wells from previous years were written-off for an amount of
US$ 3,588,000.
Note 13
Financial expenses
(b) The impairment charge relates to assets located in Del Mosquito Block
based on the impairment test performed in 2011.
Amounts in US$ ’000
Bank charges and other financial costs
Exchange difference
Unwinding of long-term liabilities
Interest and amortisation of debt issue costs
Less: amounts capitalised on qualifying assets
2012
7,295
2,280
5,122
2,927
3,293
1,516
1,563
889
1,010
919
1,984
2011
5,282
2,866
1,896
1,726
1,172
903
686
539
501
1,289
1,309
Note 14
Income tax
Amounts in US$ ’000
Current tax
Deferred income tax (Note 15)
The breakdown and movement of deferred tax assets and liabilities as of
31 December 2012 and 2011 are as follows:
2012
7,536
6,858
14,394
2011
187
7,019
7,206
At the Acquisition
credited/
(Charged)
Amounts in US$ ’000
of year subsidiaries
beginning
of
to net
profit
At end
of year
The tax on the Group’s profit before tax differs from the theoretical amount
Deferred tax assets
Difference in depreciation
that would arise using the weighted average tax rate applicable to profits
rates and other
of the consolidated entities as follows:
Amounts in US$ ’000
Profit before tax
Tax losses from non-taxable jurisdictions
Taxable losses (*)
Total 2012
2011
Total 2011
12,268
8,565
20,833
2012
32,840
8,373
41,213
28,798
18,169
Taxable profit
Income tax calculated at statutory tax rate
6,290
5,473
Tax losses where no deferred
income tax is recognised
Difference between functional
currency and tax currency
Expenses not deductible for tax purposes
Non-taxable profit
Income tax
2,864
2,560
Amounts in US$ ’000
Deferred tax liabilities
Difference in depreciation
3,784
1,903
(447)
(761)
rates and other
-
Borrowings
(66)
Total 2012
14,394
7,206
Total 2011
2012
22,066
1,718
645
202
2011
1,886
-
508
152
(1,426)
1,876
450
374
11,313
4,293
15,606
-
(676)
(1,789)
(2,465)
76
9,211
4,380
13,591
450
(Charged) /
At the
credited
beginning
of year
to net
profit
At end
of year
(12,338)
(4,564)
(16,902)
(771)
(13,109)
(6,014)
171
(4,393)
(7,095)
(600)
(17,502)
(13,109)
24,631
2,546
Under current Bermuda law, the Company is not required to pay any taxes
(*) In Chile, taxable losses have no expiration date.
2012
348
544
892
2011
32
130
162
2012
1,764
2,429
1,262
13,114
(1,369)
17,200
2011
1,856
496
350
11,573
(597)
13,678
in Bermuda on income or capital gains. The Company has received an
undertaking from the Minister of Finance in Bermuda that, in the event of
any taxes being imposed, they will be exempt from taxation in Bermuda until
Note 16
March 2016. Income tax rates in those countries where the Group operates
Earnings per share
(Argentina, Colombia and Chile) ranges from 15% to 35%.
Note 15
Deferred income tax
Amounts in US$ ’000
Numerator:
Profit for the year
Denominator:
Weighted average number of
2012
2011
11,879
54
The gross movement on the deferred income tax account is as follows:
shares used in basic EPS
42,673,981
41,912,685
Earnings after tax per share (US$) - basic
0.2784
0.0013
Amounts in US$ ’000
Deferred tax at 1 January
Acquisition of subsidiaries
Income statement charge
2012
(12,659)
15,606
(6,858)
2011
(5,640)
-
Amounts in US$ ’000
(7,019)
Weighted average number of
2012
2011
Deferred tax at 31 December
(3,911)
(12,659)
shares used in basic EPS
42,673,981
41,912,685
Effect of dilutive potential common shares
Stock award at US$ 0.001
Weighted average number of
shares used in diluted EPS
1,435,324
2,004,482
44,109,305
43,917,167
Earnings after tax per share (US$) - diluted
0.2693
0.0012
68
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
69
Note 17
Property, plant and equipment
Amounts in US$ ’000
Cost at 1 January 2011
Additions
Disposals
Write-off / Impairment
Transfers
Cost at 31 December 2011
Additions
Disposals
Write-off / Impairment
Acquisition of subsidiaries
Transfers
Cost at 31 December 2012
Depreciation and write-down
at 1 January 2011
Depreciation
Disposals
Depreciation and write-down
at 31 December 2011
Depreciation
Depreciation and write-down
Furniture,
Production
Buildings
Exploration
Oil & gas
equipment
facilities and
and
Construction
and evaluation
properties
and vehicles
machinery
improvements
in progress
126,626
2,318
(227)
-
43,239
171,956
4,071
(416)
-
62,449
106,311
344,371
(33,508)
(20,096)
-
(53,604)
(44,552)
1,445
825
(177)
-
82
2,175
637
-
-
389
375
3,576
(851)
(343)
71
(1,123)
(713)
38,142
1,261
(1,852)
-
9,551
47,102
32,335
(130)
-
10,865
(3,223)
86,949
(13,308)
(5,767)
447
(18,628)
(7,708)
2,076
156
-
-
205
2,437
-
-
-
-
761
3,198
(514)
(202)
-
(716)
(344)
16,197
56,570
(272)
-
(39,599)
32,896
81,241
-
-
9,452
(69,564)
54,025
-
-
-
-
-
-
assets
23,412
39,469
-
(7,263)
(13,478)
42,140
83,360
-
(25,552)
27,818
(34,660)
93,106
-
-
-
-
-
-
Total
207,898
100,599
(2,528)
(7,263)
-
298,706
201,644
(546)
(25,552)
110,973
-
585,225
(48,181)
(26,408)
518
(74,071)
(53,317)
(127,388)
at 31 December 2012
(98,156)
(1,836)
(26,336)
(1,060)
Carrying amount
at 31 December 2011
Carrying amount
at 31 December 2012
118,352
1,052
28,474
1,721
32,896
42,140
224,635
246,215
1,740
60,613
2,138
54,025
93,106
457,837
Note 18
Prepaid taxes
Amounts in US$ ’000
V.A.T.
Withholding tax
Income tax credits
Other prepaid taxes
Total prepaid taxes
Classified as follows:
Current
Non current
Total prepaid taxes
Note 19
Inventories
Amounts in US$ ’000
Crude oil
Materials and spares
Note 21
Share capital
2012
5,962
3,347
4,692
149
2011
2,669
-
-
Issued share capital
Common stock (amounts in US$ ’000)
The share capital is distributed as follows:
Common shares, of nominal US$ 0.001
435
Total common shares in issue
2012
43
2011
43
43,495,585
43,495,585
42,474,274
42,474,274
14,150
3,104
3,443
10,707
14,150
147
2,957
3,104
Authorised share capital
US$ per share
Number of common shares
(US$ 0.001 each)
Amount in US$
0.001
0.001
5,171,969,000
5,171,969,000
5,171,969
5,171,969
Details regarding the share capital of the Company are set out below:
2012
3,838
117
3,955
2011
499
85
584
Common shares
As of 31 December 2012 the outstanding common shares confer the
following rights on the holder:
Note 20
Trade receivables and Prepayments and other receivables
• the right to one vote per share;
• ranking pari-passu, the right to any dividend declared and payable on
common shares;
Amounts in US$ ’000
Trade accounts receivable
To be recovered from co-venturers
Related parties receivables
Prepayments and other receivables
Total
Classified as follows:
Current
Non current
Total
2012
32,271
32,271
8,773
31,138
10,219
50,130
82,401
Other Reserve
During 2011, LGI acquired a 20% interest in GeoPark Chile S.A., the subsidiary
2011
15,929
that owns the Chilean assets, for a total consideration of US$ 148,000,000.
15,929
537
During 2012, LGI also acquired a 20% interest in GeoPark Colombia S.A., the
6,000
subsidiary that owns the Colombian assets, by making a capital contribution
19,154
in GeoPark Colombia S.A. for an amount of US$ 14,920,000. In addition,
25,691
41,620
as part of the transaction, US$ 5,000,000 was transferred directly to the
Colombian subsidiary as a loan. The differences between total consideration
and the net equity of the Companies as per the book value, were recorded
as Other Reserve in the Consolidated Statement of Changes in Equity.
81,891
510
40,913
707
82,401
41,620
70
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
71
Note 22
Borrowings
Note 24
Trade and other payable
IPO Executive Stock Option Programme
On admission to AIM the Company granted:
was determined by comparison to a sample of AIM listed oil and gas
companies with a similar market capitalisation to the Group but a longer
-
The average credit period (expressed as creditor days) during the year ended
129,452
128,315
31 December 2012 was 69 days (2011: 74 days).
193,032
165,256
The fair value of these short-term financial instruments is not individually
£ 3.20 and 613,380 at an exercise price of £ 4.00. The vesting conditions of
• Exercise price is equal to the nominal value of shares.
134,643
determined as the carrying amount is a reasonable approximation of fair
these options are equal to those described in i.
• Vesting period is four years.
Amounts in US$ ’000
2012
2011
Amounts in US$ ’000
Outstanding amounts as of 31 December
Methanex Corporation
Banco de Crédito e Inversiones
Overdrafts
Banco Itaú
Bond
Classified as follows:
Non current
Current
V.A.T.
18,068
Trade payables
8,845
10,028
8,036
7,859
10,000
37,685
165,046
27,986
30,613
value.
The fair value of these financial instruments at 31 December 2012 amounts to
US$ 190,188,000 (US$ 159,602,000 in 2011).
Note 25
Note 23
Provisions and other long-term liabilities
Asset
Provisions for other liabilities
Amounts in US$ ’000
Staff costs to be paid
Royalties to be paid
Other taxes to be paid
Amounts in US$ ’000
obligation
income
Other
Total
Other
retirement
Deferred
To be paid to co-venturers
2012
4,300
50,590
54,890
2011
955
27,580
28,535
2012
5,867
3,909
5,418
2,007
-
2011
3,859
458
155
-
646
17,201
5,118
3,153
6,947
(1,038)
Note 26
350
Share-based payments
At 1 January 2011
Addition to provision /
Contributions received
Amortisation
Unwinding of discount
At 31 December 2011
Addition to provision /
Contributions received
Acquisition of subsidiaries
Amortisation
Unwinding of discount
3,153
1,947
-
350
5,450
3,440
6,061
-
1,262
At 31 December 2012
16,213
-
5,000
(1,038)
-
3,962
5,550
-
(2,143)
-
7,369
-
-
-
-
-
100
2,309
-
-
9,412
9,090
8,370
(2,143)
1,262
IPO Award Programme and Executive Stock Option plan
The Group has established IPO Award Programme, an Executive Stock Option
Programme and Stock Award Programmes plans. These schemes were
established to incentivise the Directors, senior management and employees,
enabling them to benefit from the increased market capitalisation of the
2,409
25,991
Company.
i. 605,000 stock options to the senior management and some eligible
trading history.
employees, from which 60,000 have expired. The exercise price of these
stock options is £ 4.00 (125% of placing price). The vesting date of these
Stock Award Programmes and Other Share Based Payments
During 2008, GeoPark Shareholders voted to authorise the Board to use up
stock options was 15 May 2008 and they expire in five years from that date,
to 12% of the issued share capital of the Company at the relevant time for the
on 15 May 2013. The stock options give no voting rights to the holders
purposes of the Performance-based Employee Long-Term Incentive Plan.
until they are exercised and converted into common shares when they will
rank pari-passu with all existing common shares.
ii. 306,690 stock options to the Executive Directors at an exercise price of
Main characteristics of the Stock Awards Programmes are:
• All employees are eligible.
The fair value of the options granted was calculated using the Black-Scholes
Directors and the Remuneration Committee of the Board of Directors.
model. Due to the short trading history of the Company, expected volatility
• Specific Award amounts are reviewed and approved by the Executive
Details of these costs and the characteristics of the different stock awards
programmes and other share based payments are described in the following
table and explanations:
Awards
at the
Awards
granted
Awards
Awards
Awards at
Charged to net profit
beginning
in the year
forfeited
exercised
year end
Year
2012
2011
2010
2008
Subtotal
Stock awards for
service contracts
Stock options to
Executive Directors
Shares granted to
Non-Executive Directors
-
500,000
500,000
863,100
976,211
90,000
-
-
-
-
-
-
720,000
3,020
-
-
11,000
-
-
-
-
-
-
-
976,211
500,000
500,000
852,100
-
2012
55
926
2,929
1,087
4,997
2011
-
37
2,776
925
3,738
30,000
60,000
-
1,429
-
720,000
257
-
3,020
-
142
5,396
131
5,298
The provision for asset retirement obligation relates to the estimation of
future disbursements related to the abandonment and decommissioning
IPO Award Programme
A total of 613,380 IPO Awards were granted to all of the Group’s employees
of oil and gas wells.
and certain consultants at the IPO date (May 2006). The Awards vested on
15 May 2008, the second anniversary of admission to IPO. On 3 July 2008,
Deferred income and other mainly relates to contributions received to
the Company issued 602,000 shares for nominal value of $ 0.001 each,
improve the project economics of the gas wells. The amortisation is in line
corresponding to the total IPO awards vested which are held in a Beneficiary
with the related asset.
Trust. There are 11,380 awards that did not vest and were cancelled since
they involved employees that had left the Group before the vesting date.
72
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
73
The awards that are forfeited correspond to employees that had left the
Note 27
Group before vesting date.
Commitments
In addition, a simplified procedure for the exercise of the Options was
approved by the Board. It is a payment mechanism available to option
(a) Royalty commitments
In Argentina, crude oil production accrues royalties payable to the Provinces
holders that enables a cash-free exercise of their Options. The mechanism
of Santa Cruz and Mendoza equivalent to 12% on estimated value at
exploratory phase, and after fulfilling the commitment previously mentioned,
The Llanos 17 Block Consortium has committed to drill either two exploratory
it had been decided not to continue to the second exploratory period.
wells or one exploratory well and perform 3D seismic between 2013
GeoPark and its partners relinquished the Tranquilo Block, except for an
and 2014. The joint operation estimates that the remaining commitment
area of 92,417 acres consisting of protected exploitation zones for the Cabo
amounts to US$ 2,450,000 at GeoPark’s working interest (36.84%).
Negro, Marcou Sur, Maria Antonieta and Palos Quemados prospects.
The Llanos 62 Block (100% working interest) has committed to drill two
allows participating option holders to exercise their options utilising fully
well head of those products. This value is equivalent to final sales price
The Otway Block Consortium has committed to drill two exploratory wells
exploratory wells between 2013 and 2014. The remaining commitment
issued shares made available by the EBT (Employee Beneficiary Trust)
less transport, storage and treatment costs.
and to perform 3D seismic until May 2013. The joint operation estimates that
amounts to US$ 3,000,000.
according to a formula (the “Stock Option cash-free payment option”).
the remaining commitment amounts to US$ 2,400,000 at GeoPark’s working
This allows participating option holders to exercise options to buy shares
In Argentina crude oil sales accrue private royalties payable to EPP Petróleo
interest (25%).
for the same number of shares they would have obtained with borrowed
S.A. (2.5% on invoiced amount of crude oil obtained from wells at “Del
The Cuerva Block (100% working interest) has committed to drill two
exploratory wells between 2013 and 2014. This represents an approximately
cash and then sell sufficient shares to repay the borrowed sums.
Mosquito”, Province of Santa Cruz, Argentina) and to Occidental Petroleum
After participating in a farm-in process organised by ENAP, GeoPark was
amount of US$ 4,800,000.
On 6 October 2011, 601,235 common shares each credited as fully paid,
of crude oil obtained from wells at “Loma Cortaderal” and “Cerro Doña
and Campanario Block).
Argentina INC, formerly Vintage Argentina Ltd. (8% on invoiced amount
awarded three blocks in Tierra del Fuego (Isla Norte Block, Flamenco Block
On 6 November 2012, the Chilean Government signed the CEOPs related to
operating lease agreements.
(c) Operating lease commitments - Group company as lessee
The Group leases various plant and machinery under non-cancellable
were allotted to the trustee of the EBT in anticipation of the exercise
Juana”, Province of Mendoza, Argentina).
of the Options. This number of shares issued was estimated assuming
that all beneficiaries will adopt the cash-less exercise mechanism at market
In Chile, royalties are payable to the Chilean Government, which is calculated
Flamenco and Isla Norte Blocks. Subsequently, on 9 January 2013, the Chilean
price £ 6.5.
at 5% of crude oil production and 3% of gas production.
Government also signed the CEOP for Campanario Block.
The Group also leases offices under non-cancellable operating lease
On 22 October 2012, a total of 976,211 common shares were allotted to the
In Colombia, royalties on production are payable to the Colombian
trustee of the EBT in anticipation of the exercise of the 2008 Stock Awards
Government and are determined at a rate of 8%. Additionally, under the
Plan generating a shared premium of US$ 4,191,000.
terms of the Winchester Stock Purchase Agreement, we are obligated
During 2012, 21,000 (15,000 in 2011) of these shares were sold by the
production and sale of hydrocarbons discovered by exploration wells drilled
employees at a weighted average price of £ 6.61 (£ 7.45 in 2011) per share.
The shares held in the employee Beneficiary Trust rank pari-passu with
GeoPark’s ordinary shares.
after October 25, 2011. These payments involve both an earnings based
measure and an overriding royalty equal to an estimated 4% carried interest
on the part of the vendor. As at the balance sheet date and based on
to make certain payments to the previous owners of Winchester based on the
Future investment commitments assumed by GeoPark were:
• 3 exploratory wells and 350 km2 of seismic surveys on Isla Norte Block
(US$ 16,330,000)
• 8 exploratory wells and 578 km2 of seismic surveys on Campanario Block
(US$ 41,530,000)
• 10 exploratory wells and 570 km2 of seismic surveys on Flamenco Block
(US$ 43,570,000)
agreements. The lease terms are between 2 and 3 years, and the majority of
lease agreements are renewable at the end of the lease period at market rate.
During 2012 a total amount of US$ 4,531,000 (US$ 3,313,000 in 2011) was
charged to the income statement and US$ 32,706,000 of operating leases
were capitalised as Property, plant and equipment (US$ 28,132,000 in 2011).
The future aggregate minimum lease payments under non-cancellable
On 23 November 2012, the Remuneration Committee and the board
the Company’s best estimate of the total commitment over the remaining life
period will be assumed 100% by GeoPark.
of directors approved granting 720,000 options over ordinary shares of
of the concession is a range of US$ 35 million - US$ 42 million (assuming a
US$ 0.001 each to the Executive Directors. Options granted vest on
discount rate of 9.7% and oil price of US$ 94 per barrel).
Colombia
preliminary internal estimates of additions of 2P reserves since acquisition,
As part of the agreement, the investments made in the first exploratory
the third anniversary of the date on which they are granted and have
an exercise price of US$ 0.001.
(b) Capital commitments
The Yamu Block Consortium has committed to drill one exploratory well
Falling due within 3 - 5 years
during 2013.
Falling due over 5 years
operating leases are as follows:
Amounts in US$ ’000
Operating lease commitments
Falling due within 1 year
Falling due within 1 - 3 years
2012
2011
26,464
3,709
443
895
34,126
24,797
222
-
Other share-based payments
As it is mentioned in Note 25, the Company granted 15,100 (12,028 in 2011)
Chile
The Llanos 34 Block Consortium has committed to drill one exploratory well
Total minimum lease payments
31,511
59,145
shares at average price for each three month period for services rendered
The Tranquilo Block Consortium has committed to drill four exploratory
between 2013 and 2014. The joint operation estimates that the remaining
by the Non-Executive Directors of the Company. Fees paid in shares were
wells, to perform 2D and 3D seismic in the period to January 2013.
commitment amounts to US$ 3,555,000 at GeoPark’s working interest (45%).
directly expensed in the Administrative costs line in the amount of
The joint operation estimates that the remaining commitment amounts to
The Arrendajo Block (10% working interest) Consortium has committed to
US$ 142,492 (US$ 130,745 in 2011).
US$ 5,500,000 at GeoPark’s working interest (29%), related to the first
drill one exploratory well during 2013.
exploratory phase. In January 2013, the Energy Ministry were informed that,
In October 2010 and August 2011 the company issued a total of 180,000
in accordance with the article 3.3 of the Special Operations Contract for the
The Llanos 32 Block Consortium has committed to drill two exploratory wells
options over US$ 0.001 shares with an exercise price equal to their nominal
Exploration and Exploitation (CEOP) that after the termination of the first
between 2013 and 2014. The joint operation estimates that the remaining
value in consideration for certain consultancy services.
commitment amounts to US$ 750,000 at GeoPark’s working interest (10%).
74
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
75
Note 28
Related parties
Under the terms of the sale and purchase agreement entered into in 2012
Acquisition-related costs have been charged to administrative expenses in
In December 2012, LGI has also joined GeoPark’s operations in Colombia
in respect of the acquisition of Winchester Luna, the Company has to make
the consolidated income statement for the year ended 31 December 2012.
through the acquisition of a 20% interest in GeoPark Colombia S.A., a
certain payments to the former owners arising from the production and sale
company that holds GeoPark’s Colombian assets and which includes interests
Controlling interest
The main shareholders of GeoPark Holdings Limited, a company registered in
of hydrocarbons discovered by exploration wells drilled after 25 October
In accordance with disclosure requirements for business combinations, the
in 10 hydrocarbon blocks. A capital contribution in GeoPark Colombia S.A.
2011 on the working interests of the companies at that date. These payments
Company has calculated its net revenue and profit, considering as if the
for an amount of US$ 14,920,000 was made in 2013. In addition, as part
Bermuda, as of 31 December 2012, are:
which involve both, an earnings based measure and an overriding revenue
mentioned acquisitions had occurred at the beginning of the reporting
of the transaction, US$ 5,000,000 was transferred directly to the Colombian
royalty, equate to an estimated 4% carried interest on the part of the vendor.
period. The following table summarises both results:
subsidiary as a loan.
a) 18.79% of share capital, by Gerald O’Shaughnessy (founder).
b) 16.05% of share capital, by Energy Holdings, LLC controlled by James F.
In Colombia, royalties on production are payable to the Colombian
Park (founder).
Government and are determined at a rate of 8%.
c) 11.44% of share capital, by Cartica Corporate Governance Fund, L.P.
d) 7.95% of share capital, by IFC (International Finance Corporation).
In accordance with the acquisition method of accounting, the acquisition cost
Amounts in US$ ’000
Net revenue
Profit for the year
Total
In addition, in March 2013 GeoPark and LGI announced their agreement to
275,051
extend their strategic alliance to build a portfolio of upstream oil and gas
22,087
assets throughout Latin America through 2015.
e) 4.99% of share capital, by Socoservin Overseas Ltd controlled by Juan
was allocated to the underlying assets acquired and liabilities assumed
The revenue included in the consolidated statement of comprehensive
Cristóbal Pavez (Non- Executive Director).
f) 5.21% of share capital, by MONEDA A.F.I.
based primarily upon their estimated fair values at the date of acquisition. An
income since acquisition date contributed by the acquired companies was
income approach (being the net present value of expected future cash flows)
US$ 99,501,000. The acquired companies also contributed profit of
Note 30
Subsequent Events
g) 7.60% of share capital, by Pershing Keen, New Jersey (ND).
was adopted to determine the fair values of the mineral interest. Estimates
US$ 1,152,000 over the same period.
Note 29
Business transactions
of expected future cash flows reflect estimates of projected future revenues,
production costs and capital expenditures based on our business model.
LGI partnership
On 12 March 2010, LGI and the Company agreed to form a new strategic
Notes issuance
During February 2013, the Company successfully placed US$ 300 million
notes which were offered under Rule 144A and Regulation S exemptions of
The following table summarises the combined consideration paid for
partnership to jointly acquire and develop upstream oil and gas projects in
the United States Securities laws.
Winchester Luna and Hupecol, the fair value of assets acquired and liabilities
Latin America.
Acquisitions in Colombia
In February 2012, GeoPark acquired two privately-held exploration and
production companies operating in Colombia, Winchester Oil and Gas S.A.
and La Luna Oil Company Limited S.A. (“Winchester Luna”).
assumed for these transactions:
Amounts in US$ ’000
Cash (including working
In March 2012, a second acquisition occurred with the purchase of Hupecol
capital adjustments)
Cuerva LLC (“Hupecol”), a privately-held company with two exploration and
Total consideration
production blocks in Colombia.
Cash and cash equivalents
Property, plant and equipment
The combined Hupecol and Winchester Luna purchases (acquired for a total
(including mineral interest)
consideration of US$ 105 million, adjusted for working capital) provide
Trade receivables
GeoPark with the following in Colombia:
Prepayments and other receivables
Deferred income tax assets
• Interests in 10 blocks (ranging from 5% to 100%), with licence operationship
in four of them, located in the Llanos, Magdalena and Catatumbo Basins,
Inventories
Trade payables and other debt
covering an area of approximately 220,000 gross acres.
Borrowings
• Risk-balanced asset portfolio of existing reserves, low risk development
Provision for other long-term liabilities
potential and attractive exploration upside.
Total identifiable net assets
• Successful Colombian operating and administrative team to support a
Gain on acquisition of subsidiaries
smooth transition and start-up in Colombia together with Associations and
79,630
79,630
976
73,791
4,402
5,640
10,344
10,596
(20,487)
-
(5,632)
79,630
-
JVs with principal Colombian operators.
The purchase price allocation above mentioned is final.
Winchester
through which LGI acquires an equity interest in the Chilean Business of
will carry a coupon of 7.50% per annum to yield 7.625% per annum. Final
During 2011, GeoPark and LGI entered into the following agreements
America Limited Agencia en Chile (“the Issuer”), were priced at 99.332% and
The Notes, issued by the Company’s wholly-owned subsidiary GeoPark Latin
Hupecol
Luna
Total
the Group:
maturity of the notes will be 11 February 2020. The Notes are guaranteed by
GeoPark Holdings and GeoPark Latin America Limited Chilean Branch and
32,243
32,243
5,594
111,873
111,873
6,570
• On 20 May 2011, the Company (through its wholly owned subsidiaries
are secured with a pledge of all of the equity interests of the Issuer in GeoPark
GeoPark Latin America Limited Chilean Branch and GeoPark Chile S.A.)
Chile S.A. and GeoPark Colombia S.A. and a pledge of certain intercompany
and LGI signed a subscription agreement in which LGI subscribed 10 million
loans. Notes were rated single B by both Standard & Poor’s and Fitch Ratings.
37,182
110,973
the Company owner of the Chilean assets, for a total consideration of
The net proceeds of the notes will be used to finance the Company’s
of ordinary shares representing 10% equity interest in GeoPark Chile S.A.,
4,098
2,983
5,262
1,612
(11,981)
(1,368)
(2,738)
40,644
8,401
8,500
8,623
15,606
12,208
(32,468)
(1,368)
(8,370)
120,274
8,401
US$ 70,000,000.
expansion plans in the region and also to repay existing debt of
• On 4 October 2011, an addendum to the agreement dated 20 May 2011 was
approximately US$170 million, including the existing Reg S Notes due
signed whereby 12.5 million of ordinary shares in GeoPark Chile S.A. were
2015 and the Itaú loan. The transaction extends GeoPark’s debt maturity
subscribed by LGI, for a consideration of US$ 78,000,000, representing an
additional 10%.
significantly, allowing the Company to allocate more resources to its
investment and inorganic growth programmes in the coming years.
The transactions mentioned above have been considered to be a deemed
disposal and in accordance with IAS 27 it has been accounted for as a
transaction with Non-controlling interest. Consequently, the gain of
US$ 111,245,000 has been recognised through equity rather than in the
income statement for the year. Under the terms of this agreement LGI also
committed to provide additional equity funding of US$ 18 million to
GeoPark Chile S.A. over the next three years, being LGI’s share of GeoPark
Chile S.A.’s commitments under the minimum work programme of the three
Tierra del Fuego licences (see Note 27).
76
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
77
appendix
independent auditors statement to the
shareholders of Geopark Holdings limited
We have examined the summary financial statements for the year ended
31 December 2012 set out on pages 62 to 77.
respective responsibilities of the directors and the auditor
the directors are responsible for preparing the summarised annual report.
Our responsibility is to report to you our opinion on the consistency of the
summary financial statements within the summarised annual report with
the full annual financial statements, the Directors Remuneration Report and
the Directors Report.
We also read the other information contained in the summarised annual
report and consider the implications for our report if we become aware
of any apparent misstatements or material inconsistencies with the summary
financial statement. the other information comprises only the letter to
shareholders and the Year in Review.
We conducted our work in accordance with bulletin 2008/3 issued by the
auditing practices board. Our report on the company s full annual financial
statements describes the basis of our opinion on those financial statements,
the Directors Remuneration Report, and the Directors Report.
Opinion
in our opinion the summary financial statement is consistent with the full
annual financial statements, the Directors Report and the Directors
Remuneration Report of Geopark Holdings limited for the year ended
31 December 2012.
We have not considered the effects of any events between the date on which
we signed our report on the full annual financial statements (9 april 2013)
and the date of this statement.
pricewaterhouseCoopers llp
Chartered accountants
london, United Kingdom
30 july 2013
78
independent auditors statement
independent auditors’ statement 79
board of Directors
Gerald e. O Shaughnessy | executive Chairman
Mr. O shaughnessy graduated from the University of Notre
Dame with degrees in government and law, and thereafter
practiced law until joining lario Oil and Gas (his family
company and one of the oldest independent oil and gas
companies in the Usa) as senior Vice president. From 1986
to date, Mr. O shaughnessy has focused on private venture
capital investment activities, including international oil
and gas exploration and development through the Globe
Resources Group. in 1992, Mr. O shaughnessy acquired a
geophysical service company which co-founded the first
energy sector joint venture in Russia during perestroika and
from 1992 to 1995 he initiated and managed the largest
well servicing and rehabilitation project in Western siberia,
involving sophisticated logistical operations and the
rehabilitation of 700 wells (increasing production from
0 to 100,000 bpd). Mr. O shaughnessy s participation in this
project made him the first western partner of OaO lukoil,
and he subsequently entered into other partnerships
with OaO lukoil including building and managing one of
the world s largest oilfield pump repair facilities.
Mr. O shaughnessy co-founded Geopark in 2002.
Sir Michael romilly Heald Jenkins | Non-executive Director
after graduating from Cambridge University in 1959,
sir Michael joined the british Diplomatic service and served
in several european capitals, including ten years in the
european Commission in brussels with terms as Chef de
Cabinet to the Commissioner for Regional policy, principal
adviser to the eC president Roy jenkins and Deputy
secretary-General of the Commission. sir Michael was
assistant Under-secretary of state at the Foreign &
Commonwealth Office responsible for european affairs
and east/West relations before becoming Minister and
deputy head of mission at the british embassy in Washington
D.C. from 1986 to 1988. From 1988 to 1992, he was british
ambassador to the Netherlands. sir Michael joined the board
of investment bank Kleinwort benson in 1993 as an
executive director and became Vice-Chairman of Dresdner
Kleinwort Wasserstein in 1996 with particular focus on the
investment bank s continental european activities.
sir Michael was a Non-executive director of the Dutch
insurance group aeGON from 1995 to 2001; Chairman of the
british Group of the trilateral Commission from 1996 to 1998;
and president of boeing UK from 2003 to 2005. sir Michael
joined Geopark in april 2006
Peter ryalls | Non-executive Director
Mr. Ryalls, who joined Geopark in april 2006, obtained a
Master s Degree in petroleum engineering from imperial
College in london and began working in the oil industry in
1972 with oil service company schlumberger in angola,
Gabon and Nigeria. Mr. Ryalls then joined Mobil North sea
and later Unocal where he worked in increasingly senior
positions, including Managing Director in aberdeen, and
where he developed extensive experience in offshore
production and drilling operations in the North sea and
internationally. in 1994, Mr. Ryalls represented Unocal in the
azerbaijan international Operating Company (aiOC) as Vice
president of Operations based in baku and was responsible
for production, drilling, reservoir engineering and logistics.
in 1998, Mr. Ryalls moved to buenos aires, argentina as
General Manager for Unocal in argentina. He subsequently
moved to louisiana as Vice president of Unocal s onshore
Gulf of Mexico oil and gas business and then Vice president
Global engineering & Construction of Unocal, responsible
for the implementation of all major capital projects ranging
from deepwater developments in indonesia and the Gulf
of Mexico to conventional oil and gas projects in thailand.
Mr. Ryalls strengths are in risk management across the
project development cycle with a strong focus on health,
safety and environment.
Christian Maurice Weyer | Non-executive Director
Christian Weyer is an international banker and financier with
over 50 years of experience. Mr. Weyer began his banking
career with Chase Manhattan bank as a senior credit officer in
paris and Geneva and subsequently worked as an executive
at banque paribas until becoming president of banque
paribas (suisse) in 1984-5. During his career, Mr. Weyer has
been credited with innovating new forms of trade finance
and lines of credit as one of the leaders of the Geneva
banking industry. Mr. Weyer also was instrumental in the
growth of several large oil trading firms; as well as supporting
the development of oil and gas exploration companies.
From 1988 to 1992, Mr. Weyer was special adviser to banque
indosuez for energy matters. since 1992, he has been
president of eNeRFiN in Geneva, switzerland, an advisory firm
providing investment banking services to junior oil and gas
companies. Mr. Weyer joined Geopark in 2002 as an
advisory board member and in 2003 as a Director. in april
2006, he was appointed as a Non-executive Director.
Juan Crist bal Pavez | Non-executive Director
Mr. pavez graduated from the Universidad Cat lica de Chile
(Catholic University of Chile) in 1992 with a degree in
Commercial engineering, and then joined Grupo Cb (Cb
Group) as a research analyst. thereafter, he obtained an Mba
from the Massachusetts institute of technology. He was then
portfolio analyst at Moneda asset Management until 1998,
when he joined santana, an investment company, as CeO.
at santana he focused mainly on investments in capital
markets and real estate. While at santana, he was appointed
interim CeO of laboratorios andr maco (andr maco
laboratories), one of santana s principal assets. in 1999,
Mr. pavez co-founded eventures, an internet company with
subsidiaries in argentina and brazil. since 2001 he has been
CeO at Centinela, a company with diversified global
investments, with a special focus in the energy industry,
through the development of wind parks and run-of-the-river
hydropower plants. Mr. pavez is also a board member of
Grupo security, Vida security, and Chairman of Hidroel ctrica
totoral. Mr. pavez became a Non-executive Director of
Geopark in august 2008.
Carlos Gulisano | Non-executive Director
Dr. Gulisano is a respected leader in the fields of petroleum
geology and geophysics in latin america and has
over 30 years of successful exploration, development and
management experience in the oil and gas industry.
Dr. Gulisano has worked with YpF, petrolera argentina san
jorge, Chevron and Geopark and has been a leader on teams
credited with significant oil and gas discoveries (including
the giant trapial Field in argentina). He has worked in argentina,
bolivia, peru, ecuador, Colombia, Venezuela, brazil, Chile,
and Usa. Dr. Gulisano holds a b.sc in Geology, a postgraduate
degree in petroleum engineering and a phD in Geology
from the University of buenos aires and has authored and
co-authored over 40 technical papers. He is a former adjunct
professor at the Universidad del sur, a former thesis director
at the University of la plata, and a former scholarship director
at CONiCet (the national technology research council) in
argentina. Dr. Gulisano has been a key element of Geopark s
growth — as an adviser since 2002 and as the Managing
Director from February 2008 until june 2010.
Steven J. Quamme | Non-executive Director
Mr. Quamme has 25 years of successful experience as a
securities lawyer, private equity investor and investment
banker. He is a recognised expert in corporate governance and
has been a member of over fifteen boards of Directors
including public companies, private companies and non-profit
organisations. Mr. Quamme is the co-founder and president
of Cartica Management, a registered investment advisor
focused exclusively on emerging markets. Cartica manages
a series of private investment funds investing in listed equities
in 24 countries. From 2005-2007, Mr. Quamme was the
co-founder and COO of breeden partners, a Us$ 1.5 billion
corporate governance fund. in addition, from 2002-2007,
Mr. Quamme was a senior Managing Director of Richard C.
breeden & Co., the leading professional services firm focused
exclusively on corporate governance and crisis management.
From 2000-2005, Mr. Quamme was the founder and CeO
of Milestone Merchant partners -- a full service merchant bank
based in Washington D.C. and the parent of international
equity partners, a sponsor of emerging markets private equity
funds for many of the world s largest institutional investors.
Mr. Quamme received a ba in economics from Northwestern
University and a juris Doctor degree from the Northwestern
University school of law where he is a member of the
law school board. He began his career as a securities and
M&a attorney at baker botts.
James F. Park | Chief executive Officer and Deputy Chairman
Mr. park has over 35 years of experience in all phases of the
upstream oil and gas business — with a strong background
in the acquisition, implementation and management of
international joint ventures, including assignments in North
america, latin america, asia, europe and the Middle east.
He graduated from the University of California at berkeley
with a degree in geophysics, following which he worked as a
research scientist in earthquake and tectonic studies.
in 1978, Mr. park joined an oil and gas exploration project in
Guatemala which pioneered the development of commercial
oil and gas production in Central america and, as a senior
executive, and board member, was closely involved in the
development of the company (including grass-roots
exploration activities, drilling and production operations,
surface and pipeline construction, legal and regulatory
issues, crude oil marketing and transportation, and raising
substantial investment funds) until its sale in 1997. Mr. park
has also participated in projects in California, louisiana,
argentina, Yemen, and China. Mr. park has lived in argentina
and Chile since co-founding Geopark in 2002 and has been
the Chief executive Officer since its founding.
Directors, secretary & advisors
Directors
registered Office
Corporate Offices
Gerald eugene O’shaughnessy (executive Chairman)
james Franklin park (Chief executive Officer and Deputy Chairman)
sir Michael Romily Heald jenkins (Non-executive Director)
peter Ryalls (Non-executive Director)
Christian Maurice Weyer (Non-executive Director)
juan Cristóbal pavez (Non-executive Director)
Carlos Gulisano (Non-executive Director)
steven j. Quamme (Non-executive Director)
Cumberland House 9th Floor,
1 Victoria street
Hamilton HM11 - bermuda
Buenos aires Office
Florida 981 - 2th Floor
C1005aas buenos aires
argentina | + 54 11 4312 9400
Santiago Office
Nuestra señora de los angeles 176
las Condes, santiago
Chile | + 56 2 242 9600
Secretary
pedro aylwin Chiorrini
Nominated advisor
and Broker
Solicitors to the Company
as to english law
Solicitors to the Company
as to Bermuda law
independent auditors
Petroleum Consultant
registrar
registrar to the
Depositary
Oriel securities
150 Cheapside
london eC2V 6et
United Kingdom
Norton Rose
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london se1 2aQ
United Kingdom
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pricewaterhouseCoopers llp
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Usa
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photographer:
Diego Dicarlo, geologist
80
board of Directors
Directors, secretary & advisors 81
AnnuAl report 2012
www.geo-pArk.com