ANNUAL REPORT 2014
EXPLORER OPERATOR CONsOLidATOR
CONTENTS
2
10
14
16
18
21
Chairman / CEO Letter
Business Guidelines
2014 Performance
Our Strengths
Our Approach
Form 20-F
244
Board of Directors
Oil and Gas Production
Oil and Gas Reserves
BOTTOM LiNE
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2009
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2011
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2013(1)
2014(1)
2009
2010
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2012
2013(1)
2014
2014(2)
Oil
Gas
Oil
Gas
Total Revenues
Adjusted EBITDA
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2009
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2013(1)
2014(1)
2009
2010
2011
2012
2013(1)
2014(1)
Oil
Gas
(1) including full year Oil and Gas Production, Revenues, Adj. EBiTdA and year-end Reserves corresponding to the Manati Field that closed in March 31, 2014.
(2) including Peru.
dear Fellow shareholders:
in 2014, our first year on the NYsE, GeoPark had a record year – with
Our total asset value also continued on its upward growth path.
more oil and gas found and produced, our strongest financial results
The net present value of our independently certified 2P reserves
to date, an increase in our underlying asset value (both on a total and
increased by 32% to $1.7 billion (with Peru), even after resetting our
per share basis), an expanded development and exploration project
reserve values at the new lower oil price scenario. (This figure does
drilling inventory, a more capable organization, and the strategic
not include any values for our sizeable exploration resource portfolio.)
move into our fifth country – giving us one of the broadest and most
Evaluating our asset values on a per share basis from year to year
attractive upstream platforms in Latin America. despite a crushing
allows us to show the relative underlying value growth for each
decline in oil prices during the latter part of the year, we are pleased
shareholder. One internal relative performance measurement (the
to report that all of our principal goals were met or exceeded.
NPV10 of our certified risked 3P reserves, adjusted by net debt and
minority interests, and divided by the number of outstanding shares)
For the ninth consecutive year, our key performance measurements
indicates our oil and gas asset value per share increased by
recorded gains. Operationally, our oil and gas production increased
approximately 28% from 2013 to 2014 (all within the context of
20% to approximately 20,500 boepd – led by our continued success
using a significantly reduced oil price forecast).
with the drill bit (75+% success rate out of 51 wells drilled). A key
discovery was the large Tigana oil field in Colombia, representing a
GeoPark continues to be uniquely positioned in Latin America with a
new Llanos Basin geological play type introduced by our geoscience
self-funding organic platform consisting of 31 hydrocarbon blocks
team, with lots of running room for further production growth.
covering 6 million acres in 12 proven hydrocarbon basins in 5
GeoPark’s total certified proved and probable oil and gas reserves in
countries (Colombia, Chile, Brasil, Argentina and Peru) consisting of a
2014 were up 31% to 92 million boe, and up 74% to 122 million boe
rich and balanced mix of production, development, exploration
including our Morona Block acquisition in Peru. The exploration
and unconventional resource projects – and the team to make it
resource potential on our blocks is estimated to be 500 million boe
work. This platform, which has underpinned our consistent growth
to 1 billion boe.
track record to date, also proved critical in the current oil price
downturn by giving us the tools and options necessary to navigate
Financially, despite the 50+% drop in oil prices, our revenues were
through the turbulence successfully.
up 27%, Adjusted EBiTdA increased 32%, and we ended the year
with approximately $130 million in cash.
2 Annual Report 2014
LETTER TO sHAREHOLdERs
Any industry / business would be impacted by a halving of its base
resulting in meaningful operating, G&A and capital costs reductions;
product price – and the new low oil price environment is the
including shut-in of marginal fields, third party contract and fee
appropriate lens through which to evaluate any oil and gas company
reductions, organizational restructuring and voluntary senior
in the short term. in GeoPark, we decided to act fast and, in late 2014,
management and Board salary reductions. (Our cash cost base in
immediately began doing all that was necessary to prepare the
1Q2015 already reflects a 33% reduction from the previous year.)
Company for a sustained low oil price environment of $45-50 per
barrel through 2015 and 2016. Our plan is both defensive and
stay Agile: Continuous monitoring and adjustment of work programs
offensive, with an emphasis on cash preservation, flexibility, and
– up or down – as necessary. The existing and ready inventory of
new opportunities. Key elements include:
organic projects provides the opportunity of expanding our program
with improving cost savings and/or oil prices.
Conservative Approach: Protect our balance sheet and preserve cash
for an extended period by significantly reducing, deferring and
Build for Long Term: Protect critical assets, tools and capabilities
renegotiating work programs – and match our work and investment
necessary for long term success and stay in hunt for potential value
programs with forecasted cash flows. (Our agility was demonstrated
dislocation opportunities. Continue moving forward with active new
by an 84% capital investment program reduction from 4Q2014
project and business opportunity portfolio and develop new third
to 1Q2015.)
party side-by-side funding.
Capital Allocation discipline: selectively allocate capital to the
GeoPark’s ability to adjust quickly to this new lower oil price
optimal projects under current conditions by prioritizing lower-risk,
environment, and stay in position for continued growth, speaks
higher netback and quicker cash flow generating projects. (GeoPark’s
loudly to the resilience, capabilities and experience of our team.
attractive asset base generated over 80 potential projects for 2015,
it also demonstrates the strength of our underlying business model
from which the work program was selected based on a ranking of
and risk-managed approach, which continuously prepares for
technical, economic and strategic considerations.)
the uncertainties in our industry.
do More for Less: Aggressively attack each and every cost throughout
our operations and organization – both internal and external –
Annual Report 2014 3
Business Platform and Outlook
GeoPark’s vision to build the leading Latin American oil and gas
representing a 134% increase from 2013. (These reserve figures
independent is led by a technical approach. We identify the proven
do not include the recent Tilo oil field discovery in 1Q2015.)
hydrocarbon basins where we want to operate – based on geological,
Estimated exploration resources for our Colombian asset base are
infrastructure and regulatory factors – and then work to establish
77-155 million boe.
a strategic position in these targeted regions.
The Llanos 34 Block, operated by GeoPark, continues to lead our
Our systematic expansion to date has resulted in building stable and
growth in Colombia with six new oil field discoveries: Max, Tarotaro,
growing businesses in five countries, managed by reputable and
Aruco, Tua, Tilo, and Tigana oil fields. The Tigana oil field contains
capable local teams, with supporting production and cash flows,
gross certified 3P oil reserves of 69 million barrels to date. in 2014,
attractive underlying reserves and resources, and inventories of
new project acquisitions, both operated by GeoPark, included
new project opportunities. Our independent country businesses are
the CPO-4 Block (50% Wi) in the Llanos Basin and on trend with the
further enhanced by being tied together by an overall corporate
prolific Llanos 34 Block; and the ViM-3 Block (100% Wi) in
organization, which improves efficiencies, reduces costs
the Lower Magdalena Valley, a lightly explored high potential oil
with operational and financial synergies, controls quality, pushes
and gas block.
performance, and can more effectively allocate capital to the
best shareholder value-adding projects.
in 2015, we currently plan to drill 5-6 wells – primarily in the Llanos 34
in 2014, we carried out a $240 million investment program – funded
explore 1-2 new identified prospects, including one exploration well
Block to further develop the Tigana, Tilo and Tua oil fields and to
by our own cash flows – to continue growing our businesses. For
on our new CPO-4 Block.
2015, and in consideration of the new lower oil price environment
and our cash preservation objective, we are planning a self-funded
Chile Business
$60-70 million work program (a 75% reduction from 2014). This
program consists of drilling of 5-6 new wells, new seismic surveys and
GeoPark first proved our business model in Chile where we became
new facility construction; and is balanced between exploration (25%)
Chile’s first private oil and gas producer. From a ‘flat-footed’ start-up
and development (75%) and spread approximately between
in 2006, we built a solid business with current production of
Colombia (60%), Chile (10%), Peru (14%), Argentina (6%) and Brazil
approximately 4,500 boepd, 2P (PRMs) reserves of approximately 46
(10%). As a result of realized benefits from our rapid adjustments
million boe and 6 blocks with approximately 1.0 million prospective
to the lower oil price, we are now in a position to reevaluate this
acres – which include 220-330 million boe of exploration and
work program and look for new growth opportunities.
unconventional resources.
Briefly looking at each of our businesses:
Our Tierra del Fuego 2014 drilling program resulted in the discovery
Colombia Business
of 6 oil and gas fields, but, we were unable to convert those finds
into meaningful production gains and consequently total production
declined in Chile. Our Fell Block drilling program resulted in
GeoPark continues to create excellent success in Colombia where
the discovery of the Ache gas field, which is targeted to be put on
we have discovered eight new oil fields – including pioneering a new
production during the last quarter of 2015.
geological play-type for the Llanos Basin – and have increased
production in two years from approximately 2,500 bopd to nearly
during 2015, we will continue to operate and produce from
26,000 bopd gross (12,000 bopd net to GeoPark) today. Our 2P
our extensive land base in Chile, with new drilling expected to
reserves in Colombia increased to 39 million boe at year-end 2014,
re-start in 2016.
4 Annual Report 2014
LETTER TO sHAREHOLdERs
Annual Report 2014 5
Brazil Business
Argentina Business
Our Brazil business represents a strategic risk-balanced base with a
Our team has strong technical and operational experience in
fully developed secure cash flow producing asset (a 10% non-
Argentina and we believe the country has an attractive subsurface
operated interest in Brazil’s largest producing gas field: the Manati
potential. Historically, our investment activities have been minimal;
field) and nine exploration blocks (100% operated interests) in
although we continue looking for the right assets under the
onshore mature proven hydrocarbon basins (Potiguar, Reconcavo,
right conditions.
Parnaiba and sergipe Alagoas). Estimated exploration resources
for our Brazilian asset base are 40-80 million boe.
in 2014, we relinquished two non-productive blocks in the
in 2014, GeoPark carried out seismic surveys on our blocks in the
round to acquire a non-operated 18% interest in two blocks with
Reconcavo and Potiguar Basins. Following seismic interpretation,
our partner Pluspetrol. in 2015, we will carry out a seismic
we have delineated and defined oil prospects, which we are targeting
survey in an effort to delineate an attractive new shallow oil play
to drill in 2016. in 2015, we are completing the construction of the
(20-30 million barrel potential) in the Neuquén Basin.
Mendoza Province and also participated in the Mendoza bidding
compression plant for the Manati field.
6 Annual Report 2014
Peru Business
LETTER TO sHAREHOLdERs
The Marañón Basin in Peru, one of the most prolific hydrocarbon
reserves and exploration resources. GeoPark has designed a phased
basins in Latin America (with over a billion barrels of oil produced),
work program that permits a step-by-step development to put the
has been a target region for GeoPark and, in 2014, we succeeded in
situche Central field into production initially through a long-term test
positioning ourselves through the acquisition of an operating 75%
to begin generating cash flow. The transaction is subject to Peruvian
interest in the Morona Block from Petroperu. Morona is a large block,
regulatory approval, which is targeted for 2H2015. Our work program
which contains both the discovered situche Central oil field (two
in 2015 is expected to consist of certain field base improvements
tested wells and certified gross 3P of 83 million barrels), with the
and continuation of environmental assessments.
opportunity for near term cash flow, and a big exploration potential
(200-500 million barrels) with several high impact plays
and prospects.
This is a potentially transformational acquisition for GeoPark and a
great strategic fit that significantly increases our overall inventory of
Annual Report 2014 7
New Projects
in parallel with our conservative operating approach through the
And, our thanks and appreciation to our shareholders – long term
lower oil price environment, we remain on the offensive to acquire
and new – who have joined us and believed in and supported our
attractively-valued new oil and gas upstream opportunities in Latin
project. since joining the NYsE, we are increasing our efforts to talk
America and are actively pursuing projects in the countries where
with you, as well as, share our story with a wider investor base.
we currently have operations, that is, Colombia, Chile, Brasil,
As always, your comments and recommendations are welcome
Argentina and Peru. The new oil price environment is forcing all
and appreciated. We invite you to visit us in the field or at any of our
companies to reevaluate their portfolios and pushing the larger
offices to know us better and learn first-hand how we work.
groups to accelerate their divestment programs.
We look forward to delivering and reporting to you on our results
We are also making efforts to establish a new platform in Mexico,
in 2015.
which has always represented a big prize, and where current rapidly
advancing regulatory reforms are now opening the door for private
sincerely,
companies to access some of Mexico’s highly attractive hydrocarbon
assets – many of which would be an excellent fit for GeoPark’s
approach and skillset.
Thank You
Our sincere thanks to all the men and women in GeoPark for the
Company you are building, for your trust of each other and for the
unique spirit that continuously propels us forward. Your heart and
professionalism were again put to the test and on display by the
Gerald E. O’Shaughnessy
quick actions undertaken to adjust to the rapid changes in world oil
Chairman
prices. Our team has created an enduring culture in GeoPark, which
has become our ‘secret weapon’ and the catalyst behind our proud
record of safe, clean, neighborly, transparent and successful
operations.
Our gratitude especially extends to our relentlessly supportive
families who have all contributed immensely to who we have
become and what we will do next.
James F. Park
Chief Executive Officer
Our thanks to our Board of directors for your continuous efforts in
helping GeoPark improve and grow. in addition to significant
corporate governance responsibilities, GeoPark’s Board members
spend substantial time working directly with our teams, sharing their
experience, and traveling to our different operations. We express
many thanks to steve Quamme for his service on our Board and
strong continuing support as a shareholder. We also are very pleased
to welcome Bob Bedingfield to our Board and as our Audit
Committee Chairman with his extensive financial and business
experience.
8 Annual Report 2014
LETTER TO sHAREHOLdERs
Annual Report 2014 9
Business Guidelines
strategic Context
GeoPark’s objective is to create value by building the leading Latin
in contrast to many areas of the world, the environment and
American upstream independent oil and gas company. By this, we
resources for operating and funding a business are welcoming and
mean an action-oriented, persistent, aware and caring company with
increasingly more feasible. Furthermore, numerous good oil and gas
the best ‘shareholder value-adding’ oil and gas assets.
assets in Latin America are available, undervalued and at very
attractive prices now.
We believe the energy business – specifically the upstream oil and
gas industry – is one of the most exciting, necessary, and
GeoPark has been conservatively built for the long term. We did not
economically-rewarding businesses today. No undertaking or society
start with a short term ‘exit strategy’ in mind and we have focused on
can advance without the supply of energy, and energy remains the
building a team and sustainable business. Our approach has required
critical element in allowing people to better their lives. Much of the
patience in order to create the necessary foundation, but it has
world still lacks adequate energy supplies for the most basic needs
enabled us to stay solidly ‘in the game’ and be positioned to now
and demand is continually increasing. Although new exciting
have the chance to grab the bigger prizes.
technologies and sources are being developed, oil and gas is
the most reliable energy source and will be required to support over
The founders and our management team have a substantial part of
half of our planet’s continuous and rising energy needs far into
our net worth invested in GeoPark. None of the founders have ever
this century.
sold a share of GeoPark stock. in fact, we have been stock buyers over
time (including in the NYsE iPO). The management team has no
We believe the best places for us to find and develop hydrocarbons
special class of stock or arrangements that benefit us differently from
are in areas around the world where oil and gas have already
any other shareholder other than our salaries and stock performance
been discovered, but which for economic, technical, funding or other
incentive programs. The entire GeoPark team (100% of our
reasons have been inadequately developed or prematurely
employees have received GeoPark share awards) is solidly aligned
abandoned. These projects have proven hydrocarbon systems,
with all of our shareholders to build real and enduring value for
valuable technical information, existing infrastructure, and, in many
every share of GeoPark.
cases, unexploited low-risk exploration and re-development
opportunities. By applying new technology and investment, creating
Opportunity Enhancement and Risk diversification
stable markets and better economic conditions, and/or more efficient
operations, an under-performing or bypassed asset can be converted
By its very nature, the upstream oil and gas business represents the
into an attractive economic project. Work in these proven areas
undertaking of risk in search of significant rewards. To succeed, an
also frequently opens up exciting new hydrocarbon resources in new
oil and gas company must effectively identify and manage prevailing
geological play types and formations.
risks and uncertainties to capture the available rewards. We believe
this to be one of GeoPark’s key capabilities; and our year-over-year
We are focused on Latin America because of the abundance of these
track record is evidence of our success in effectively balancing risk
types of opportunities throughout the region. Latin America ranks as
among the subsurface, geological, funding, organizational, market,
one of the highest potential hydrocarbon resource regions in the
price, partner, shareholder, regulatory and political environments.
world and its economies are thirsty for new energy. Historically, it
For example, GeoPark was able to respond constructively to the
has been dominated by larger major and national oil companies, with
2008/9 financial crisis and, now again, to the 2015 oil price volatility.
the presence of only a modest number of more-agile independent
companies. (North America is home to thousands of independent
We believe the best results in the upstream business are achieved
oil and gas operators, whereas Latin America, an area substantially
with a larger scale portfolio approach with multiple attractive projects
larger and with greater resource potential, has only a handful of
in multiple regions managed by talented oil and gas teams. This
independents taking advantage of available opportunities.)
diversification reflects both a defensive and offensive approach.
10 Annual Report 2014
BUsiNEss GUidELiNEs
Capabilities
it is protective of any downside because the collective strength of
Our experience in the oil and gas business has repeatedly
our projects limits the negative impact of any underperforming asset
demonstrated the need for good people with commitment and real
or timing delay. it also has an exciting multiplier effect on the
oil and gas know-how. We believe in and have experienced the
potential upside because of the increased number of opportunities
amazing capacity of people to excel in an environment of expanding
independently marching ahead. These represent important
opportunity and trust. GeoPark is blessed to have an incredible group
advantages given the nature of the oil exploration and production
of men and women who truly work day and night to make us better
business.
in every way. Our results speak to the daily heroics (mostly unseen) by
our team that keep us together and have moved us consistently
Our country businesses are managed by experienced local
closer to our goals.
professionals and teams with respected reputations. They know
both the specific subsurface rocks and conditions and the above-
Our record of delivery is based on three fundamental and distinct skill
ground operating and business environments in each region
sets – as Explorers, Operators and Consolidators – which we deem
and give us the characteristics of a local company. Our pride and
critical for enduring success in the oil and gas business. Our team has
care in how we act and perform in our home regions are key
consistently demonstrated the science and creativity to find
elements of our success.
hydrocarbons in the subsurface, but also the muscle and experience
to get the oil and gas out of the ground and profitably to market.
These generally independent businesses are further enhanced by
Our attractive asset portfolio is evidence of our ability to acquire good
being tied together by an overall corporate organization, which
projects in the right basins in the right countries with the right
improves efficiencies, reduces costs with operational and financial
partners and at the right price.
synergies, controls quality, and can more effectively raise capital
for our projects. it also is a source for new technologies and ideas
Today, we have an amazing team of employees from Colombia, Chile,
to spread from one region to another. For example, our team
Brasil, Argentina and Peru – each of whom joined GeoPark with
introduced a new geological play-type to the Llanos Basin in
the purpose of building a unique and special company that is
Colombia (an area that has been explored for more than 75 years)
prepared to handle challenges and seize opportunities. As a quickly
that resulted in multiple new oil field discoveries, and new oil
growing company, we have repeatedly seen individuals
technology to the Magallanes Basin in Chile.
step-upto the new responsibilities presented – and we have a deep
importantly, through effective and controlled capital allocation,
our projects within each country business can be ranked against each
The international upstream oil and gas business is not for the
other on economic, technical and strategic criteria and, therefore,
fainthearted or easily discouraged. Time-after-time, the GeoPark
ensure our capital resources flow to the highest performing and most
team has been able to push ahead to find solutions where
and powerful leadership team taking GeoPark to the next level.
attractive projects.
often others have given-up or failed. This is the engine and fire of
our growth and the true long term intangible value of our Company.
We believe this business approach makes GeoPark a more attractive
We are immensely grateful to all these men and women for their
investment vehicle for all our shareholders – with a strong foundation
professionalism, discipline, unity and heart.
to minimize any downside, a big upside through multiple growth
opportunities, and an overall organizational system to more
efficiently run and grow the individual businesses. GeoPark’s model
allows our investors to be exposed to and benefit from the results
of multiple supporting and aligned businesses across diverse
geologies and geographies.
Annual Report 2014 11
New Projects and Countries
We are excited about potential new business opportunities in Latin
a detailed discounted cash flow (dCF) valuation. We also consider the
America with its high resource potential, attractive business
option value or strategic benefits of a project when entering a new
environment, and limited competition. We are actively pursuing new
region. We do not buy assets on simplified ‘$ per barrel’ metrics which
projects in targeted proven hydrocarbon basins throughout the region
we believe do not properly account for multiple factors (including
– selected in consideration of geological, infrastructure and regulatory
technical, cost, tax, and time) that impact the economics of oil and gas
factors – with our principal efforts in Colombia, Chile, Brasil, Argentina,
projects. We also avoid markets or ‘bubbles’ when assets are over-priced.
Peru and Mexico.
With our overall growth targets and portfolio approach, new project
Culture
acquisitions are an important part of our business. Our acquisition
‘Creating Value and Giving Back’ is our motto and represents GeoPark’s
efforts begin with a technical approach to define the hydrocarbon
market-based approach to align our business objectives with our core
basins where our geological and engineering teams identify an
values and responsibilities. Our in-house designed program, titled
attractive potential. After screening for political risks, our new business
s.P.E.E.d., targets and integrates the critical elements – safety,
teams proactively ‘scratch and dig’ to locate interests or opportunities
Prosperity, Employees, Environment and Community development –
within those areas and to establish a position. it is a long term and
necessary to make our total business plan work. Only by succeeding
continuous effort and we have been building an attractive inventory of
equally in each of these interdependent areas can we realize our overall
new projects in the region over the last ten years, aided by our team’s
success and ambitions. This is important in every country where we
25+ year experience in Latin America.
operate, and we make every effort to achieve the most effective
governance, full compliance and consistent transparency with all
Our focus is always to build a larger scale balanced portfolio that
relevant authorities. Not only does this allow us to be a more successful
includes lower-risk short term cash flow generating properties, mid
business enterprise over the long term, it reflects our pride in carrying
term medium-risk development projects, and longer term higher-risk
out an important mission in the right way. The men and women of
big upside projects. This permits steady secure growth with
GeoPark care passionately about how our Company acts – both
an opportunity for accelerated high growth ‘home-runs’ from the
internally and externally – and we all consider our culture to be our core
bigger projects.
asset and the prime source of our past success and future opportunity.
Good oil and gas partners are a key element of our new business efforts
The world is continuously moving in a more regulated direction with
and we like to balance our acquisition risk by including experienced
higher expectations, and to be able to operate in this new environment
partners in our new projects. We have developed a long term strategic
is a fundamental part of business today. We believe that GeoPark’s
alliance with LG to build a portfolio of upstream assets across Latin
ability to meet these challenges and perform to or beyond these ever
America and the international Finance Corporation (iFC) of the World
increasing standards represents a competitive advantage for the future.
Bank is a long term principal shareholder of (and sometimes lender to
For example, the manner of, results from, and impact on the
and working interest partner of) GeoPark. We also have developed long
communities of our overall work in Chile provided the rationale and
term relationships with the national oil companies where we operate,
support for the government and regional community to allow us to
such as ENAP in Chile, Ecopetrol in Colombia, Petrobras in Brazil, YPF
expand our project into new areas. it can also be meaningful and fun,
in Argentina and Petroperu in Peru.
such as with our full scholarships targeting young women, in the local
communities near our field operations, for training in the sciences.
Critical to the success of any new project is to conduct a thorough
technical and economic analysis prior to acquiring any new asset. We
The iFC of the World Bank, our long time shareholder, has been a
make sure we understand the project, its risks and its value – and we buy
constructive force in helping us operate and manage our business in
right. it is difficult to turn a faulty or overpriced project into a good
consideration of the environment and communities around us. The iFC
business. Following intensive geological, geophysical, engineering,
further assists us by carrying out annual audits and physical site visits of
operational, legal and financial analyses and due diligence, we perform
both our regulatory compliance and best-practices approach.
12 Annual Report 2014
BUsiNEss GUidELiNEs
Annual Report 2014 13
2014 PERFORMANCE
Key Operational Results
Key Financial Results
Key Strategic Results
Oil and Gas
Revenues Up 27%
New York Stock Exchange
Production Up 20%
Revenues increased to $428.7 million.
iPO on NYsE in February 2014, raising
Average oil and gas production
increased to 20,557 boepd.
Adjusted EBITDA
Up 32%
approximately $100 million.
Peru Entry
2P Reserves Up 74%
Adjusted EBiTdA increased to
Established fifth country platform
Certified oil and gas P1 reserves
$220.1 million. Adjusted EBiTdA per
through the acquisition of the Morona
up 116% to 62.9 mmboe and
boe equaled $33.
Block in partnership with Petroperu
2P reserves up 74% to 122.3 mmboe
(including Peru).
75% Drilling Success
51 new wells drilled with a success
rate of over 75%.
Tigana Oil Field Discovery
Tigana oil field discovery in Llanos
Block in Colombia (69 mmbo
3P reserves).
Exploration Resources Expanded
Exploration resources portfolio
grew to 500 MM to 1.0 billion boe.
Cash Resources
(GeoPark will operate with a 75% Wi).
$127.7 million at year-end.
Expansion of Colombian Portfolio
Capital Expenditures
2014 capital expenditure program
of $238 million.
Net Profit
Addition of the CPO-4 Block (GeoPark
will operate with a 50% Wi) in Llanos
Basin in partnership with sK Group,
and the ViM-3 Block (GeoPark
will operate with a 100% Wi) in Lower
Profit for the year equaled
Magdalena Basin.
$15.9 million.
Debt Maturity
Re-Balancing Argentinean Portfolio
Addition of sierra del Nevado and
Long term debt maturity profile
Puelen Blocks (non-operated with an
with over 80% of indebtness
18% Wi) in partnership with Pluspetrol
due in 2020. Total gross debt to
in the Neuquen Basin, and
Reserve Value Increased 32%
Adjusted EBiTdA is 1.7x, and
relinquishment of the non-productive
2P reserve NPV increased to
represents 22% of consolidated
Cerro doña Juana and Loma
$1.7 billion (including Peru).
2P NPV10 (including Peru).
Cortaderal Blocks.
2009
2008
2005
2006
2007
14 Annual Report 2014
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Annual Report 2014 15
OUR sTRENGTHs
M E X I C O
KNOw-HOw
strong Team, Capabilities, Approach
and Culture.
ASSETS
diversified Risk-Balanced Asset Base with
Proven Value, scale and Upside.
TRACK RECORD
Consistent Operational and Financial Growth /
Ability to Unlock Value from Assets.
CAPITAl
supporting Cash Flow, Access to Funding
and strategic Partners.
GROwTH PlATFORM
High-impact Portfolio of Organic and
New Project Opportunities.
(*) 2P Reserves – PRMs dec. 2014.
16 Annual Report 2014
C Ol O M B I A
38.6*
MMBOE
P E R U
30.2*
MMBOE
B R A Z Il
7.3*
MMBOE
P A CiFiC
O C E A N
A T L A N TiC
O C E A N
A R G E N T I N A
C H IlE
46.2*
MMBOE
Asset Types
Production Assets
development Assets
Exploration Assets
Unconventional Resource Assets
New Project Opportunities
Annual Report 2014 17
OUR APPROACH
GeoPark has been built around five fundamental
and distinct capabilities:
Explorer:
EXPLORER
The ability, experience, methodology and creativity to find and
develop oil and gas reserves in the subsurface – based on the best
science, solid economics and ability to take the necessary
managed risks.
Operator:
The ability to execute in a timely manner and the know-how
to profitably drill for, produce, treat, transport and sell
our oil and gas – with the drive and persistence to find solutions,
overcome obstacles, seize opportunities and achieve results.
OPERATOR
Consolidator:
CONSOLIDATOR
The ability and initiative to assemble the right balance and portfolio
of upstream assets in the right hydrocarbon basins in the right
regions with the right partners and at the right price – coupled with
the vision and skills to transform and improve value above ground.
Risk Management:
The comprehensive management approach to consistently and
significantly grow and build economic value per share by effective
planning, balanced work programs, cost efficiency focus, secure
access to capital sources, reliable communication with shareholders,
and by accommodating risk among the subsurface, funding,
organizational, market, partner/shareholder, and regulatory/political
RISK MANAGEMENT
CULTURE
environments.
Culture:
The commitment to build a unique performance-driven trust-based
culture which values and protects our shareholders, employees,
environment and communities to underpin and enhance our
long term plan for success. Our s.P.E.E.d. program reflects this value
system and represents an integrated approach to align our
business objectives with our core principles and responsibilities
and provides our competitive advantage.
18 Annual Report 2014
Annual Report 2014 19
20 Annual Report 2014
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
Form 20-F
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the fiscal year ended December 31, 2014
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
to
For the transition period from
OR
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
Commission file number: 001-36298
GeoPark Limited
(Exact name of Registrant as specified in its charter)
Bermuda
(Jurisdiction of incorporation)
Nuestra Señora de los Ángeles 179 - Las Condes, Santiago, Chile
(Address of principal executive offices)
Pedro Aylwin
Director of Legal and Governance
GeoPark Limited
Nuestra Señora de los Ángeles 179 - Las Condes, Santiago, Chile
Phone: +56 (2) 2242 9600 - Fax: +56 (2) 2242 9600 ext. 201
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Copies to:
Maurice Blanco, Esq.
Davis Polk & Wardwell LLP
450 Lexington Avenue - New York, NY 10017
Phone: (212) 450 4000 - Fax: (212) 701 5800
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class
Common shares, par value US$0.001 per share
Name of each exchange on which registered
New York Stock Exchange
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital stock or common stock as of the close of business covered by the annual report.
Common shares: 57,790,533
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934. Yes x No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. x Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to
submit and post such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and
large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Non-accelerated filer
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
Large accelerated filer o
Accelerated filer x
US GAAP o
International Financial Reporting Standards as issued by
the International Accounting Standards Board x
If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow.
o
Item 17 o Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes x No
Other o
165
165
165
165
165
165
169
169
169
171
171
171
171
GeoPark Limited
Table of contents
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
FORWARD-LOOKING STATEMENTS
ENFORCEMENT OF JUDGMENTS
23
26
27
D. Selling shareholders
E. Dilution
F. Expenses of the issue
28
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS28
28
A. Directors and senior management
ITEM 10. ADDITIONAL INFORMATION
A. Share capital
B. Memorandum of association and bye-laws
B. Advisers
C. Auditors
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
A. Offer statistics
B. Method and expected timetable
ITEM 3. KEY INFORMATION
A. Selected financial data
B. Capitalization and indebtedness
C. Reasons for the offer and use of proceeds
D. Risk factors
ITEM 4. INFORMATION ON THE COMPANY
A. History and development of the company
B. Business overview
C. Organizational structure
D. Property, plant and equipment
ITEM 4A. UNRESOLVED STAFF COMMENTS
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
A. Operating results
B. Liquidity and capital resources
C. Research and development, patents and licenses, etc.
D. Trend information
E. Off-balance sheet arrangements
F. Tabular disclosure of contractual obligations
G. Safe harbor
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and senior management
B. Compensation
C. Board practices
D. Employees
E. Share ownership
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS
A. Major shareholders
B. Related party transactions
C. Interests of Experts and Counsel
ITEM 8. FINANCIAL INFORMATION
A. Consolidated statements and other financial information
B. Significant changes
ITEM 9. THE OFFER AND LISTING
A. Offering and listing details
B. Plan of distribution
C. Markets
22
GeoPark 20F
28
28
28
28
28
28
28
32
32
33
61
61
64
129
129
130
130
130
147
151
151
151
151
151
152
152
157
159
160
161
161
161
162
163
164
164
164
164
165
165
165
C. Material contracts
D. Exchange controls
E. Taxation
F. Dividends and paying agents
G. Statement by experts
H. Documents on display
I. Subsidiary information
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES
172
ABOUT MARKET RISK
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES 172
172
A. Debt securities
B. Warrants and rights
C. Other securities
D. American Depositary Shares
172
172
172
173
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES 173
173
A. Defaults
B. Arrears and delinquencies
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF
SECURITY HOLDERS AND USE OF PROCEEDS
ITEM 15. CONTROLS AND PROCEDURES
A. Disclosure Controls and Procedures
B. Management’s Annual Report on Internal Control over
Financial Reporting
C. Attestation Report of the Registered Public Accounting Firm
D. Changes in Internal Control over Financial Reporting
173
173
173
173
173
173
173
174
174
174
ITEM 16. [RESERVED]
ITEM 16A. Audit committee financial expert
ITEM 16B. Code of Conduct
ITEM 16C. Principal Accountant Fees and Services
174
ITEM 16D. Exemptions from the listing standards for audit committees 174
ITEM 16E. Purchases of equity securities by the issuer and affiliated
purchasers
ITEM 16F. Change in registrant’s certifying accountant
ITEM 16G. Corporate governance
ITEM 16H. Mine safety disclosure
PART III
ITEM 17. Financial statements
ITEM 18. Financial statements
ITEM 19. Exhibits
Glossary of oil and natural gas terms
175
175
177
177
175
180
176
177
177
Index to Consolidated Financial Statements
182
Presentation of Financial and Other Information
Certain definitions
Unless otherwise indicated or the context otherwise requires, all references
• “Petroperú” are to Petróleos de Perú S.A., a sociedad anónima, incorporated
under the laws of Peru.
in this annual report to:
• “Rio das Contas” are to Rio das Contas Produtora de Petróleo Ltda., a limited
• “GeoPark Limited,” “GeoPark,” “we,” “us,” “our,” the “Company” and words
liability company incorporated under the laws of Brazil;
of a similar effect, are to GeoPark Limited (formerly GeoPark Holdings
• our “Brazil Acquisitions” are to our Rio das Contas acquisition, which
Limited), an exempted company incorporated under the laws of Bermuda,
we completed on March 31, 2014, our award of two new concessions by the
together with its consolidated subsidiaries;
ANP, one of which is subject to the entry into the concession agreement,
• “Agencia” are to GeoPark Latin America Limited Agencia en Chile,
and our award of seven new concessions by the ANP, in Brazil;
an established branch, under the laws of Chile, of GeoPark Latin America
• “Chile” are to the Republic of Chile;
Limited, an exempted company incorporated under the laws of Bermuda;
• “GeoPark Latin America” are to our subsidiary GeoPark Latin America
Limited, an exempted company incorporated under the laws of Bermuda;
• “Colombia” are to the Republic of Colombia;
• “Brazil” are to the Federative Republic of Brazil;
• “Argentina” are to the Argentine Republic;
• “GeoPark Fell” are to our subsidiary GeoPark Fell S.p.A., a sociedad por
• “Peru” are to the Republic of Peru;
acciones incorporated under the laws of Chile;
• “US$,” “$” and “U.S. dollars” are to the official currency of the United States
• “GeoPark Chile” are to our subsidiary GeoPark Chile S.A., a sociedad
of America;
anónima cerrada incorporated under the laws of Chile;
• “Ch$” and “Chilean pesos” are to the official currency of Chile;
• “GeoPark Colombia” are prior to our internal corporate reorganization
• “Col$” and “Colombian pesos” are to the official currency of Colombia;
of our Colombian operations, to our subsidiary GeoPark Colombia S.A.,
• “GBP” are to the official currency of the United Kingdom;
a sociedad anónima cerrada incorporated under the laws of Chile and
subsequent to such reorganization, to GeoPark Colombia Coöperatie U.A.,
a cooperative duly incorporated under the laws of the Netherlands;
• “AR$” and “Argentine pesos” are to the official currency of Argentina;
• “real,” “reais” and “R$” are to the official currency of Brazil;
• “IFRS” are to International Financial Reporting Standards as adopted by
• “GeoPark Colombia S.A.S.” are to our subsidiary GeoPark Colombia S.A.S.,
the International Accounting Standards Board, or IASB;
a sociedad anónima simplificada incorporated under the laws of Colombia,
• “ANP” are to the Brazilian National Petroleum, Natural Gas and Biofuels
which absorbed Winchester, Luna and Cuerva and their Colombian branches
Agency (Agência Nacional do Petróleo, Gás Natural e Biocombustíveis);
by merger and assumed all rights and obligations of each;
• “CNPE” are to the Brazilian National Council on Energy Policy (Conselho
• “Winchester” are to our subsidiary Winchester Oil and Gas S.A., now
Nacional de Política Energética);
GeoPark Colombia PN S.A. Sucursal Colombia, a Colombian branch
• “ANH” are to the Colombian National Hydrocarbons Agency (Agencia
of a sociedad anónima incorporated under the laws of Panama, which
Nacional de Hidrocarburos);
merged into GeoPark Colombia S.A.S.;
• “ENAP” are to the Chilean National Petroleum Company (Empresa Nacional
• “Luna” are to our subsidiary La Luna Oil Company Limited S.A., a sociedad
de Petróleo)
anónima incorporated under the laws of Panama, which merged into
• “economic interest” means an indirect participation interest in the
GeoPark Colombia S.A.S.;
• “Cuerva” are to our subsidiary GeoPark Cuerva LLC, formerly known
net revenues from a given block based on bilateral agreements with the
concessionaires; and
as Hupecol Caracara LLC, a limited liability company incorporated under the
• “working interest” means the right granted to the lessee of a property
laws of the state of Delaware, which merged into GeoPark Colombia S.A.S.;
to explore for and to produce and own oil, gas, or other minerals. The
• “LGI” are to LG International Corp., a company incorporated under the
working interest owners bear the exploration, development and operating
laws of Korea;
costs on either a cash, penalty or carried basis.
• “Morona Block Acquisition” are to our pending Morona Block acquisition
in Northern Peru, which we expect will close in 2015 following regulatory
approvals.
• “Panoro” are to Panoro Energy do Brasil Ltda., a limited liability company
incorporated under the laws of Brazil and a subsidiary of Panoro Energy
ASA, a company incorporated under the laws of Norway, with assets in Brazil
and Africa;
• “Perupetro” are to Perupetro S.A., the Peruvian State company,
responsible for promoting, negotiating, underwriting and monitoring
contracts for exploration and exploitation of hydrocarbons in Peru.
GeoPark 20F
23
Financial statements
Financial statements
Our consolidated financial statements
This annual report includes our audited consolidated financial statements as
Non IFRS financial measures
Adjusted EBITDA
Adjusted EBITDA is a supplemental non-IFRS financial measure that is used
by management and external users of our financial statements, such as
of December 31, 2014 and 2013 and for each of the years ended December
industry analysts, investors, lenders and rating agencies.
31, 2014, 2013 and 2012, or our Annual Consolidated Financial Statements.
Our Consolidated Financial Statements are presented in U.S. dollars and have
income tax, depreciation, amortization and certain non-cash items such as
been prepared in accordance with IFRS, as issued by the International
impairments and write-offs of unsuccessful exploration and evaluation assets,
We define Adjusted EBITDA as profit for the period before net finance cost,
Accounting Standards Board (“IASB”).
accrual of stock options and stock awards and bargain purchase gain on
acquisition of subsidiaries. Adjusted EBITDA is not a measure of profit or cash
Our Annual Consolidated Financial Statements have been audited by Price
flows as determined by IFRS.
Waterhouse & Co. S.R.L., Argentina, a member firm of PricewaterhouseCoopers
Network, or PwC, an independent registered public accounting firm, as stated
We believe Adjusted EBITDA is useful because it allows us to more
in their report included elsewhere in this annual report.
effectively evaluate our operating performance and compare the results of
our operations from period to period without regard to our financing
Our fiscal year ends December 31. References in this annual report to a fiscal
methods or capital structure. We exclude the items listed above from profit
year, such as “fiscal year 2014,” relate to our fiscal year ended on December
for the period in arriving at Adjusted EBITDA because these amounts can vary
substantially from company to company within our industry depending upon
accounting methods and book values of assets, capital structures and the
method by which the assets were acquired. Adjusted EBITDA should not be
considered as an alternative to, or more meaningful than, profit for the period
or cash flows from operating activities as determined in accordance with IFRS
or as an indicator of our operating performance or liquidity. Certain items
excluded from Adjusted EBITDA are significant components in understanding
and assessing a company’s financial performance, such as a company’s cost
of capital and tax structure and significant and/or recurring write-offs, as
well as the historic costs of depreciable assets, none of which are components
of Adjusted EBITDA. Our computation of Adjusted EBITDA may not be
comparable to other similarly titled measures of other companies.
For a reconciliation of Adjusted EBITDA to the IFRS financial measure of profit
for the year, see Note 6 to our Annual Consolidated Financial Statements as of
and for the years ended 2014, 2013 and 2012, included in this annual report.
31 of that calendar year.
24
GeoPark 20F
Rounding
We have made rounding adjustments to some of the figures included in this
annual report. Accordingly, numerical figures shown as totals in some tables
may not be an arithmetic aggregation of the figures that precede them.
Oil and gas reserves and production information
D&M 2014 Year-end Reserves Report
The information included in this annual report regarding estimated quantities
of proved reserves in Brazil, Chile, Colombia and Peru is derived, in part,
from estimates of the proved reserves as of December 31, 2014. The reserves
estimates are derived from the report prepared by DeGolyer and
MacNaughton, or D&M, independent reserves engineers, or the D&M Reserves
Report, included as an exhibit to this annual report, prepared by D&M. The
D&M Reserves Report was prepared by D&M for us and presents estimates as
of December 31, 2014 of oil and gas reserves located in the Fell, Campanario,
Flamenco and Isla Norte Blocks in Chile, La Cuerva, Llanos 32, Llanos 34,
Llanos 17, and Yamú Blocks in Colombia, the interests held through Rio das
Contas in Brazil in BCAM-40 Concession (Manatí) and pro-forma estimates
for the Morona Block in Peru. We expect to close the pending Morona Block
Acquisition in 2015.
Market share and other information
Market data, other statistical information, information regarding recent
developments in Chile, Colombia, Brazil, Peru and Argentina and certain
industry forecast data used in this annual report were obtained from internal
reports and studies, where appropriate, as well as estimates, market research,
publicly available information (including information available from the
SEC website) and industry publications. Industry publications generally state
that the information they include has been obtained from sources believed
to be reliable, but that the accuracy and completeness of such information
is not guaranteed. Similarly, internal reports and studies, estimates and
market research, which we believe to be reliable and accurately extracted by
us for use in this annual report, have not been independently verified.
However, we believe such data is accurate and agree that we are responsible
for the accurate extraction of such information from such sources and its
correct reproduction in this annual report.
In addition, we have provided definitions for certain industry terms used
in this annual report in the “Glossary of oil and natural gas terms” included as
Appendix A to this annual report.
GeoPark 20F
25
Forward-looking Statements
This annual report contains statements that constitute forward-looking
• our ability to retain key members of our senior management and key
statements. Many of the forward-looking statements contained in this annual
technical employees;
report can be identified by the use of forward-looking words such as
• competition from other similar oil and natural gas companies;
“anticipate,” “believe,” “could,” “expect,” “should,” “plan,” “intend,” “will,”
• market or business conditions and fluctuations in global and local demand
“estimate” and “potential,” among others.
for energy;
Forward-looking statements appear in a number of places in this annual
incidents or responses to such incidents, including the effect on the
report and include, but are not limited to, statements regarding our intent,
availability of and premiums on insurance; and
belief or current expectations. Forward-looking statements are based on
• other factors discussed under “-Item 3. Key Information-D. Risk factors” in
• the direct or indirect impact on our business resulting from terrorist
our management’s beliefs and assumptions and on information currently
this annual report.
available to our management. Such statements are subject to risks and
uncertainties, and actual results may differ materially from those expressed
Forward-looking statements speak only as of the date they are made, and
or implied in the forward-looking statements due to various factors,
we do not undertake any obligation to update them in light of new
including, but not limited to, those identified under the section “-Item 3.
information or future developments or to release publicly any revisions to
Key Information-D. Risk factors” in this annual report. These risks and
these statements in order to reflect later events or circumstances or to
uncertainties include factors relating to:
• operating risks, including equipment failures and the amounts and timing
reflect the occurrence of unanticipated events.
of revenues and expenses;
• termination of, or intervention in, concessions, rights or authorizations
granted by the Chilean, Colombian, Brazilian and Argentine governments
to us;
• uncertainties inherent in making estimates of our oil and natural gas data;
• our ability to complete the Morona Block Acquisition;
• the volatility of oil and natural gas prices;
• environmental constraints on operations and environmental liabilities
arising out of past or present operations;
• discovery and development of oil and natural gas reserves;
• project delays or cancellations;
• financial market conditions and the results of financing efforts;
• political, legal, regulatory, governmental, administrative and economic
conditions and developments in the countries in which we operate;
• fluctuations in inflation and exchange rates in Chile, Colombia, Brazil,
Argentina and in other countries in which we may operate in the future
such as Peru;
• availability and cost of drilling rigs, production equipment, supplies,
personnel and oil field services;
• contract counterparty risk;
• projected and targeted capital expenditures and other cost commitments
and revenues;
• weather and other natural phenomena;
• the impact of recent and future regulatory proceedings and changes,
changes in environmental, health and safety and other laws and regulations
to which our company or operations are subject, as well as changes in the
application of existing laws and regulations;
• current and future litigation;
• our ability to successfully identify, integrate and complete acquisitions
26
GeoPark 20F
Enforcement of Judgments
We are incorporated as an exempted company with limited liability under
such director, officer or auditor may be guilty in relation to the company.
the laws of Bermuda, and substantially all of our assets are located in Chile,
Section 98 further provides that a Bermuda company may indemnify
Colombia, Brazil and to a lesser extent in Argentina. In addition, most of
its directors, officers and auditors against any liability incurred by them in
our directors and executive officers reside outside the United States, and all
defending any proceedings, whether civil or criminal, in which judgment
or a substantial portion of the assets of such persons are located outside
is awarded in their favor or in which they are acquitted or granted relief by
the United States. As a result, it may be difficult for investors to effect service
the Supreme Court of Bermuda pursuant to Section 281 of the Bermuda
of process on those persons in the United States or to enforce in the United
Companies Act.
States judgments obtained in U.S. courts against us or those persons based
on the civil liability provisions of the U.S. securities laws.
Our bye-laws contain provisions whereby we and our shareholders waive
any claim or right of action that we have, both individually and on our behalf,
There is no treaty in force between the United States and Bermuda providing
against any director or officer in relation to any action or failure to take
for the reciprocal recognition and enforcement of judgments in civil and
action by such director or officer, except in respect of any fraud or dishonesty
commercial matters. As a result, whether a U.S. judgment would be
of such director or officer. We may also indemnify our directors and officers
enforceable in Bermuda against us or our directors and officers depends on
in their capacity as directors and officers for any loss arising or liability
whether the U.S. court that entered the judgment is recognized by the
attaching to them by virtue of any rule of law in respect of any negligence,
Bermuda court as having jurisdiction over us or our directors and officers,
default, breach of trust of which a director or officer may be guilty in relation
as determined by reference to Bermuda conflict of law rules and the
to the company other than in respect of his own fraud or dishonesty. We
judgment is not contrary to public policy in Bermuda, has not been obtained
have entered into customary indemnification agreements with our directors.
by fraud in proceedings contrary to natural justice and is not based on an
error in Bermuda law. A judgment debt from a U.S. court that is final and
No treaty exists between the United States and Chile for the reciprocal
for a sum certain based on U.S. federal securities laws will not be enforceable
recognition and enforcement of foreign judgments. Chilean courts, however,
in Bermuda unless the judgment debtor had submitted to the jurisdiction
have enforced valid and conclusive judgments for the payment of money
of the U.S. court, and the issue of submission and jurisdiction is a matter of
rendered by competent U.S. courts by virtue of the legal principles of
Bermuda (not U.S.) law.
reciprocity and comity, subject to review in Chile of the U.S. judgment in
order to ascertain whether certain basic principles of due process and
An action brought pursuant to a public or penal law, the purpose of which is
public policy have been respected, without retrial or review of the merits of
the enforcement of a sanction, power or right at the instance of the state
the subject matter. If a U.S. court grants a final judgment, enforceability
in its sovereign capacity, may not be entertained by a Bermuda court. Certain
of this judgment in Chile will be subject to obtaining the relevant exequatur
remedies available under the laws of U.S. jurisdictions, including certain
(i.e., recognition and enforcement of the foreign judgment) according to
remedies under U.S. federal securities laws, may not be available under
Chilean civil procedure law in effect at that time, and depending on certain
Bermuda law or enforceable in a Bermuda court, as they may be contrary to
factors (the satisfaction or non-satisfaction of which would be determined
Bermuda public policy. Further, no claim may be brought in Bermuda against
us or our directors and officers in the first instance for violations of U.S.
by the Supreme Court of Chile). Currently, the most important of such factors
are: the existence of reciprocity (if it can be proved that there is no
federal securities laws because these laws have no extraterritorial jurisdiction
reciprocity in the recognition and enforcement of the foreign judgment
under Bermuda law and do not have force of law in Bermuda. A Bermuda
between the United States and Chile, that judgment would not be enforced
court may, however, impose civil liability on us or our directors and officers
in Chile); the absence of any conflict between the foreign judgment and
if the facts alleged in a complaint constitute or give rise to a cause of action
Chilean laws (excluding for this purpose the laws of civil procedure)
under Bermuda law. However, section 281 of the Bermuda Companies Act
and Chilean public policy; the absence of a conflicting judgment by a Chilean
allows a Bermuda court, in certain circumstances, to relieve officers and
court relating to the same parties and arising from the same facts and
directors of Bermuda companies of liability for acts of negligence, breach of
circumstances; the Chilean court’s determination that the U.S. courts had
duty or trust or other defaults.
jurisdiction, that process was appropriately served on the defendant and that
the defendant was afforded a real opportunity to appear before the court
Section 98 of the Bermuda Companies Act provides generally that a Bermuda
and defend its case; and the judgment being final under the laws of the
company may indemnify its directors, officers and auditors against any
country in which it was rendered. Nonetheless, we have been advised by our
liability which by virtue of any rule of law would otherwise be imposed on
Chilean counsel that there is doubt as to the enforceability in original actions
them in respect of any negligence, default, breach of duty or breach of trust,
in Chilean courts of liabilities predicated solely upon U.S. federal or state
except in cases where such liability arises from fraud or dishonesty of which
securities laws.
GeoPark 20F
27
Part I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
We have not included selected consolidated financial data as of and for
the year ended December 31, 2010 in the tables below as we qualify as an
emerging growth company under the Jumpstart Our Business Startups Act
of 2012 or the JOBS Act and we make use of an existing accommodation for
specified reduced reporting, requiring only two years of audited financial
statements at the time of our initial public offering.
A. Directors and senior management
Not applicable.
B. Advisers
Not applicable.
C. Auditors
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
A. Offer statistics
Not applicable.
B. Method and expected timetable
Not applicable.
ITEM 3. KEY INFORMATION
A. Selected financial data
We have derived our selected historical statement of income, balance sheet
and cash flow data as of December 31, 2014 and 2013 and for the years
ended December 31, 2014, 2013 and 2012 from our Annual Consolidated
Financial Statements included elsewhere in this annual report, which have
been audited by PwC. We have derived our selected balance sheet data
as of December 31, 2012 and 2011 and for the year ended December 31, 2011
from our Annual Consolidated Financial Statements not included in this
annual report.
We maintain our books and records in U.S. dollars and prepare our
consolidated financial statements in accordance with IFRS.
This financial information should be read in conjunction with “Presentation
of Financial and Other Information,” “-Item 5. Operating and Financial Review
and Prospects” and our Consolidated Financial Statements and the related
notes thereto, included elsewhere in this annual report.
The selected historical financial data set forth in this section does not include
any results or other financial information of our Colombian acquisitions or
Brazilian Acquisitions prior to their incorporation into our financial statements
or our pending Morona Block Acquisition.
28
GeoPark 20F
Statement of Income Data
For the year ended December 31,
2014
2013
2012
2011
(in thousands of US$, except per share numbers)
Revenue
Net oil sales
Net gas sales
Net revenue
Production costs
Gross profit
Exploration costs
Administrative costs
Selling expenses
Impairment loss for non-financial assets
Other operating income/(expense)
Operating profit
Financial results
Bargain purchase gain on
acquisition of subsidiaries
Profit before tax
Income tax
Profit for the year
Non-controlling interest
Profit attributable to owners of the Company
Earnings per share for profit attributable
to owners of the Company - basic
Earnings per share for profit attributable
to owners of the Company - diluted(2)
Weighted average common shares
367,102
61,632
428,734
315,435
22,918
338,353
221,564
28,914
250,478
(229,650)
199,084
(179,643)
158,710
(129,235)
121,243
(43,369)
(48,164)
(24,428)
(9,430)
(1,849)
71,844
(16,254)
(46,584)
(17,252)
-
5,344
83,964
(27,890)
(28,798)
(24,631)
-
823
40,747
73,508
38,072
111,580
(54,513)
57,067
(10,066)
(18,169)
(2,546)
-
(502)
25,784
(50,719)
(33,876)
(16,308)
(13,516)
-
-
21,125
50,088
(5,195)
15,930
8,418
7,512
0.13
0.13
(15,154)
34,934
12,922
22,012
0.50
0.47
8,401
32,840
(14,394)
18,446
6,567
11,879
0.28
0.27
-
12,268
(7,206)
5,062
5,008
54
0.00
0.00
outstanding - basic
56,396,812
43,603,846
42,673,981
41,912,685
Weighted average common shares
outstanding - diluted(2)
58,840,412
46,532,049
44,109,305
43,917,167
Common Shares outstanding at year-end
57,790,533
43,861,614
43,495,585
42,474,274
(1) See Note 18 to our Annual Consolidated Financial Statements.
GeoPark 20F
29
Balance Sheet Data
As of December 31,
(In thousands of US$)
Assets
Non current assets
2014
2013
2012
2011
Property, plant and equipment
790,767
595,446
457,837
224,635
Prepaid taxes
Other financial assets
Deferred income tax
Prepayments and other receivables
1,253
12,979
33,195
349
11,454
5,168
13,358
6,361
10,707
7,791
13,591
510
2,957
5,226
450
707
Total non current assets
838,543
631,787
490,436
233,975
-
8,532
36,917
13,993
13,459
127,672
200,573
1,039,116
58
210,886
164,613
-
8,122
42,628
35,764
6,979
121,135
214,628
846,415
44
120,426
150,371
-
3,955
32,271
49,620
3,443
48,292
137,581
628,017
43
116,817
122,561
3,000
584
15,929
24,984
147
193,650
238,294
472,269
43
112,231
96,615
375,557
270,841
239,421
208,889
103,569
479,126
95,116
365,957
72,665
312,086
41,763
250,652
Current assets
Other financial assets
Inventories
Trade receivables
Prepayments and other receivables
Prepaid taxes
Cash at bank and in hand
Total current assets
Total assets
Share capital
Share premium
Other
Equity attributable to owners
of the Company
Equity attributable to
non-controlling interest
Total equity
Liabilities
Non current liabilities
Borrowings
Provisions for other long-term liabilities
Trade and other payables
Deferred income tax
342,440
290,457
46,910
16,583
30,065
33,076
8,344
23,087
Total non current liabilities
435,998
354,964
Current liabilities
Borrowings
Current income tax
Trade and other payables
Total current liabilities
Total liabilities
27,153
7,935
88,904
123,992
559,990
26,630
7,231
91,633
125,494
480,458
165,046
25,991
-
17,502
208,539
27,986
7,315
72,091
107,392
315,931
134,643
9,412
-
13,109
157,164
30,613
187
33,653
64,453
221,617
Total equity and liabilities
1,039,116
846,415
628,017
472,269
30
GeoPark 20F
Cash Flow Data
For the year ended December 31,
2014
2013
2012
2011
(In thousands of US$)
Cash provided by (used in)
Operating activities
Investing activities
Financing activities
Net increase (decrease) in cash
Other Financial Data
230,746
(344,041)
124,716
11,421
127,295
(208,500)
164,018
82,813
129,427
(301,132)
26,375
(145,330)
68,763
(101,276)
131,739
99,226
For the year ended December 31,
2014
2013
2012
2011
Adjusted EBITDA(1) (US$ thousands)
Adjusted EBITDA margin(2)
Adjusted EBITDA per boe(3)
220,077
167,253
121,404
51.3%
33.0
49.4%
33.9
48.5%
31.1
63,391
56.8%
22.9
(1) Adjusted EBITDA is a non-IFRS financial measure. For a definition of Adjusted EBITDA and other information relating
to this measure, see “Presentation of Financial and Other Information-Financial statements-Non-IFRS financial measures.”
For a reconciliation of Adjusted EBITDA to the IFRS financial measure of profit for the year, see Note 6 to our Annual
Consolidated Financial Statements included in this annual report.
(2) Adjusted EBITDA margin is defined as Adjusted EBITDA divided by net revenue.
(3) Adjusted EBITDA per boe is defined as Adjusted EBITDA divided by total boe.
GeoPark 20F
31
Exchange rates
In Chile, Colombia, Argentina and Peru, our functional currency is the U.S.
dollar. In Brazil, our functional currency is the real.
The following table presents the monthly high and low representative market
rate during the months indicated.
The Brazilian foreign exchange system allows the purchase and sale of
Recent exchange rates of Real per U.S. dollar
Low
High
foreign currency and the international transfer of real by any person or legal
Month:
entity, regardless of the amount, subject to certain regulatory procedures.
October 2014
Since 1999, the Brazilian Central Bank has allowed the U.S. dollar-real
exchange rate to float freely, and, since then, the U.S. dollar-real exchange
rate has fluctuated considerably. Our operations in Brazil account for 15%
of our consolidated assets and 8% of our revenues for the year ended
November 2014
December 2014
January 2015
February 2015
March 2015
December 31, 2014. This portion of our business is exposed to losses that may
April 2015 (through April 27, 2015)
2.3914
2.4839
2.5607
2.5754
2.6894
2.8655
2.9236
2.5341
2.6136
2.7403
2.7107
2.8811
3.2683
3.1556
arise from currency fluctuation, as a significant amount of our revenues,
operating costs, administrative expenses and taxes in Brazil are denominated
in reais. In addition, as we financed our Rio das Contas acquisition in part
through our Brazilian subsidiary’s entrance into a US$70.5 million credit
facility with Itaú BBA International plc, this also exposes us to exchange rate
losses from the devaluation of the Brazilian reais against the U.S. dollar.
Source: Central Bank of Brazil.
The following table presents the average R$ per U.S. dollar representative
market rate for each of the five most recent years, calculated by using
the average of the exchange rates on the last day of each month during the
period, and the representative year-end market rate for each of the five
In the past, the Brazilian Central Bank has occasionally intervened to control
most recent years.
unstable movements in foreign exchange rates. We cannot predict whether
the Brazilian Central Bank or the Brazilian government will continue to
Real per U.S. dollar
Low
High
permit the real to float freely or will intervene in the exchange rate market
Period:
through the return of a currency band system or otherwise. The real may
depreciate or appreciate substantially against the U.S. dollar. Furthermore,
Brazilian law provides that, whenever there is a serious imbalance in Brazil’s
balance of payments or there are serious reasons to foresee a serious
imbalance, temporary restrictions may be imposed on remittances of foreign
2009
2010
2011
2012
2013
capital abroad. We cannot assure you that such measures will not be taken
First quarter 2014
by the Brazilian government in the future. As a result of the devaluation
Second quarter 2014
that occurred in the year ended December 31, 2014, we recorded exchange
Third quarter 2014
rate losses amounting to US$19.2 million in our Brazilian subsidiary. This
loss was generated by the credit facility of US$70.5 million that we incurred
Fourth quarter 2014
First quarter 2015
to acquire Rio das Contas in March 31, 2014. See “-D. Risk factors-Risks relating
Second quarter 2015 (through April 27, 2015)
to our business-Our results of operations could be materially adversely
affected by fluctuations in foreign currency exchange rates.”
Source: Central Bank of Brazil.
1.9936
1.7593
1.6746
1.9550
2.1605
2.3409
2.2296
2.2745
2.5437
2.8702
2.9236
1.7412
1.6662
1.8758
2.0435
2.3426
2.2630
2.2025
2.4510
2.6562
3.2080
3.1556
The following tables show the selling rate for U.S. dollars for the periods
Exchange rate fluctuation may affect the U.S. dollar value of any distributions
and dates indicated. The information in the “Average” column represents
we make with respect to our common shares. See “-D. Risk factors-
the average of the daily exchange rates during the periods presented.
Risks relating to our business-Our results of operations could be materially
The numbers in the “Period-end” column are the quotes for the exchange
adversely affected by fluctuations in foreign currency exchange rates.”
rate as of the last business day of the period in question. As of April 27, 2015,
the exchange rate for the purchase of U.S. dollars as reported by the
Central Bank of Brazil was R$2.9236 per U.S. dollar.
B. Capitalization and indebtedness
Not applicable.
C. Reasons for the offer and use of proceeds
Not applicable.
32
GeoPark 20F
D. Risk factors
• the price and availability of competitors’ supplies of oil and natural gas in
Our business, financial condition and results of operations could be materially
captive market areas;
and adversely affected if any of the risks described below occur. As a result,
• quality discounts for oil production based, among other things, on API
the market price of our common shares could decline, and you could lose
and mercury content;
all or part of your investment. This annual report also contains forward-looking
• taxes and royalties under relevant laws and the terms of our contracts;
statements that involve risks and uncertainties. See “Forward-Looking
• our ability to enter into oil and natural gas sales contracts at fixed prices;
Statements.” The risks below are not the only ones facing our Company.
• the level of global methanol demand and inventories and changes
Additional risks not currently known to us or that we currently deem immaterial
in the uses of methanol;
may also adversely affect us.
Risks relating to our business
• the price and availability of alternative fuels; and
• future changes to our hedging policies.
A substantial or extended decline in oil, natural gas and methanol prices
difficult to predict future natural gas and oil price movements. For example,
may materially adversely affect our business, financial condition or results
recently, oil and gas prices have fluctuated significantly. From January 1,
These factors and the volatility of the energy markets make it extremely
of operations.
2010 to December 31, 2014, Brent spot prices ranged from a low of US$55.27
per barrel to a high of US$128.14 per barrel, NYMEX West Texas International,
The prices that we receive for our oil and natural gas production heavily
or WTI, crude oil contracts prices ranged from a low of US$53.45 per bbl to a
influence our revenues, profitability, access to capital and growth rate.
high of US$113.39 per bbl, Henry Hub natural gas average spot prices ranged
Historically, the markets for oil, natural gas and methanol (which historically
from a low of US$1.82 per mmbtu to a high of US$8.15 per mmbtu, US Gulf
have influenced prices for almost all of our Chilean gas sales) have been
methanol spot barge prices ranged from a low of US$240.34 per metric ton
volatile and will likely continue to be volatile in the future. International oil,
to a high of US$564.12 per metric ton. Further, oil, natural gas and methanol
natural gas and methanol prices have fluctuated widely in recent years
prices do not necessarily fluctuate in direct relationship to each other.
and may continue to do so in the future.
The prices that we will receive for our production and the levels of our
from oil. Because we expect that our production mix will continue to be
production depend on numerous factors beyond our control. These factors
weighted towards oil, our financial results are more sensitive to movements
For the year ended December 31, 2014, 86% of our revenues, were derived
include, but are not limited, to the following:
• global economic conditions;
in oil prices.
• changes in global supply and demand for oil, natural gas and methanol;
As of December 31, 2014, natural gas comprised 14% of our revenues.
• the actions of the Organization of the Petroleum Exporting Countries,
A decline in natural gas prices could negatively affect our future growth,
or OPEC;
• political and economic conditions, including embargoes, in oil-producing
countries or affecting other countries;
particularly for future gas sales where we may not be able to secure or
extend our current long-term contracts.
• the level of oil- and natural gas-producing activities, particularly in the
Lower oil and natural gas prices may not only decrease our revenues on a
Middle East, Africa, Russia, South America and the United States;
per unit basis, but also may reduce the amount of oil and natural gas that we
• the level of global oil and natural gas exploration and production activity;
can produce economically. In addition, changes in oil and gas prices can
• the level of global oil and natural gas inventories;
impact our valuation of reserves and, in periods of sharply lower commodity
• the price of methanol;
• availability of markets for natural gas;
prices, we may curtail production and capital spending projects or may defer
or delay drilling wells because of lower cash flows. A substantial or extended
• weather conditions and other natural disasters;
decline in oil or natural gas prices would materially adversely affect our
• technological advances affecting energy production or consumption;
business, financial condition and results of operations. We have historically
• domestic and foreign governmental laws and regulations, including
not hedged our production to protect against fluctuations in the international
environmental, health and safety laws and regulations;
• proximity and capacity of oil and natural gas pipelines and other
oil prices. We may in the future consider adopting a hedging policy against
commodity price risk, when deemed appropriate and taking into account the
transportation facilities;
size of our business and market volatility.
GeoPark 20F
33
The current oil price crisis has impacted our operations and corporate
cash we are able to generate from current operations. If we are not able
strategies.
to generate the sales which, together with our current cash resources, are
sufficient to fund our capital program, we will not be able to efficiently
We face limitations on our ability to increase prices or improve margins
execute our work program which would cause us to further decrease our
on the oil and natural gas that we sell. As a consequence of the oil price crisis
work program, which could harm our business outlook, investor confidence
which started in the second half of 2014 (WTI and Brent, the main
and our share price.
international oil price markers, fell by approximately 50% between August
2014 and March 2015), the Company has undertaken a decisive cost cutting
In addition, actions taken by the company to maximize ongoing work
program to ensure its ability to both maximize ongoing work projects
projects and to reduce expenses, including renegotiations and reduction of
and to preserve its cash.
oil and gas service contracts and other initiatives included in the cost cutting
program adopted by us may expose us to claims and contingencies from
The main actions that are being carried out under our 2015 cost-cutting
interested parties that may have a negative impact on our business, financial
program to address the oil industry price crisis include the:
• reduction of our capital investment taking advantage of the flexible work
program;
condition, results of operations and cash flows. If oil prices continue to remain
low then we may be unable to meet our contractual obligations with oil and
service contracts and our suppliers. Equally, those third parties may be unable
• deferment of capital projects with relevant permissions and consents from
to meet their contractual obligations to us as a result of the oil price crisis,
regulatory authorities and partners, as permitted by our contracts;
impacting on our operations.
• renegotiation of licenses and concessions, where permitted, and
renegotiation and reduction of oil and gas service contracts, including drilling
Unfavorable credit and market conditions, such as the global financial
and civil work contractors, as well as transportation, trucking and pipeline
crisis that began in 2008 or the recent decline in oil prices have affected
costs; and
and could continue to affect negatively the economies of the countries
• improving the efficiency of our operating costs and the temporary
in which we operate and may negatively affect our business, and results
suspension of certain low-margin producing oil and gas fields.
of operations.
In 2015 we reduced our workforce significantly. This reduction streamlined
Global financial crises and related turmoil in the global financial system
certain internal functions and departments to meet our current needs,
have had, and may continue to have, a negative impact on our business,
which we expect will contribute to create a more efficient workforce in the
financial condition, results of operations and cash flows. The lingering effects
current economic environment. As a result, we expect to realize US$12
of the global credit crisis that began in 2008 and of financial crises generally
million annually in cost savings associated with the reduction of full-time
on our customers and on us cannot be predicted, which could have an impact
and temporary employees, excluding onetime termination costs of
on our flexibility to react to changing economic and business conditions. In
approximately US$6 million in 2015.
Further cost reductions are expected in 2015 due to the general
addition, the recent decline in WTI and Brent, the main international oil price
markers, that fell by approximately 50% between August 2014 and March
2015 and which are expected to remain volatile in the near future, may also
depreciation of Latin American currencies (Colombian peso, Brazilian real,
negatively affect the economies of the countries in which we operate.
Chilean peso, Argentine peso and Peruvian sol), in connection with operating
Any of the foregoing factors or a combination of these factors could have an
and structure costs established in local currencies and also related to a
adverse effect on our results of operations and financial condition.
voluntary salary reduction by GeoPark’s senior management team and Board
of Directors. Our preliminary capital program for 2015 calls for approximately
Unless we replace our oil and natural gas reserves, our reserves and
US$60 million - US$70 million to fund our exploration and development,
production will decline over time. Our business is dependent on
which we intend to fund through cash flows from operations and
our continued successful identification of productive fields and prospects
cash-in-hand. Funding for this program relies in part on oil prices remaining
and the identified locations in which we drill in the future may not
close to current or higher levels and other factors to generate sufficient cash
yield oil or natural gas in commercial quantities.
flow. Oil prices were very volatile at the end of 2014 and have remained
at low levels in the first part of 2015. We have restricted activity and lowered
Production from oil and gas properties declines as reserves are depleted,
our planned capital expenditure for 2015 as compared to previous years.
with the rate of decline depending on reservoir characteristics. Accordingly,
Low oil prices affect our revenues, which in turn affects our debt capacity
our current proved reserves will decline as these reserves are produced.
and the covenants in our financing agreements, as well the amount of money
As of December 31, 2014, our reserves-to-production (or reserve life) ratio for
we can borrow using our oil reserves as collateral, as well as the amount of
net proved reserves in Chile, Colombia and Brazil was 6 years. According to
34
GeoPark 20F
estimates, if on January 1, 2015, we ceased all drilling and development and
or Gunvor were to decrease or cease purchasing oil from us, or if any of them
workovers, including recompletions, refracs and workovers, our proved
were to decide not to renew their contracts with us or to renew them at a
developed producing reserves base in Chile, Colombia, Argentina and Brazil
lower sales price, this could have a material adverse effect on our business,
would decline at an annual effective rate of 33% over the first three years,
financial condition and results of operations.
including 40% during the first year.
In Brazil, all of our revenues from the sale of gas in the Manatí Field in Brazil
Our future oil and natural gas reserves and production, and therefore our
were generated from sales to Petrobras, the operator of the Manatí Field,
cash flows and income, are highly dependent on our success in efficiently
pursuant to a long-term gas off-take contract. See “-Item 4. Information
developing our current reserves and using cost-effective methods to find or
on the Company-B. Business overview-Significant agreements-Brazil-
acquire additional recoverable reserves. While we have had success in
Petrobras Natural Gas Purchase Agreement.”
identifying and developing commercially exploitable deposits and drilling
locations in the past, we may be unable to replicate that success in the
In Peru, subject to government approval of GeoPark being assigned 75%
future. We may not identify any more commercially exploitable deposits or
in the Morona Block (also known as Lote 64), and other environmental
successfully drill, complete or produce more oil or gas reserves, and the
permits and if we are able to start producing oil from this block, Petroperú,
wells which we have drilled and currently plan to drill within our blocks or
the Peruvian national oil company has the first option but not the obligation
concession areas may not discover or produce any further oil or gas or may
to purchase oil produced by us in the Marona Block.
not discover or produce additional commercially viable quantities of oil or
gas to enable us to continue to operate profitably. If we are unable to replace
Our results of operations could be materially adversely affected by
our current and future production, the value of our reserves will decrease,
fluctuations in foreign currency exchange rates.
and our business, financial condition and results of operations will be
materially adversely affected.
Although a majority of our net revenues is denominated in U.S. dollars,
unfavorable fluctuations in foreign currency exchange rates for certain of our
We derive a significant portion of our revenues from sales to a few key
expenses in Chile, Colombia, Brazil, Peru and Argentina could have a material
customers.
adverse effect on our results of operations. Furthermore, we have not
entered, into derivative transactions to hedge the effect of changes in the
In Chile, 100% of our crude oil and condensate sales are made to ENAP. For
exchange rate of local currencies to the U.S. dollar. Because our consolidated
the year ended December 31, 2014, sales to ENAP represented 32% of our
financial statements are presented in U.S. dollars, we must translate revenues,
revenues from oil and 28% of our total revenues. ENAP imports the majority
expenses and income, as well as assets and liabilities, into U.S. dollars
of the oil it refines and partially supplements those imports with volumes
at exchange rates in effect during or at the end of each reporting period.
supplied locally by its own operated fields and those operated by us. The
sales contract with ENAP is commonly revised every year to reflect changes
In addition, our Rio das Contas acquisition, significantly increased our
in the global oil market and to adjust for ENAP’s logistics costs in the
Gregorio oil terminal. As of the date of this Annual Report, we are negotiating
a new agreement with ENAP with an initial term of three to six months.
exposure to fluctuations in the real against the U.S. dollar, as Rio das Contas’s
revenues and expenses are denominated in reais. The real has experienced
frequent and substantial variations in relation to the U.S. dollar and other
In addition, in Chile, in the year ended December 31, 2014, almost all of our
foreign currencies. For example, the real was R$1.56 per US$1.00 in August
natural gas sales were made to Methanex under a long-term contract, the
2008. Following the onset of the crisis in the global financial markets,
“Methanex Gas Supply Agreement”, which expires on April 30, 2017. Sales to
the real depreciated 31.9% against the U.S. dollar and reached R$2.34 per
Methanex represented 6% of our consolidated revenues for the year ended
US$1.00 at the end of 2008. In 2011, the real appreciated against the U.S.
December 31, 2014. However, if ENAP or Methanex were to decrease or cease
dollar, reaching R$1.876 per US$1.00 at the end of 2011. In 2012, however,
purchasing our oil and gas, or if we were unable to renew these contracts
the real depreciated, and on December 31, 2013, the exchange rate
at a lower sales price or at all, this could have a material adverse effect on our
was R$2.3426 per US$1.00. As of December 31, 2014, the exchange rate was
business, financial condition and results of operations.
R$2.6562 per US$1.00. In the first three months of 2015, the real depreciated
and the exchange rate as of March 31, 2015 was R$3.2080 per US$1.00.
In Colombia, for the year ended December 31, 2014, we made 40.1% of our
Depending on the circumstances, either depreciation or appreciation of the
oil sales to Gunvor, 31.8% to Emerald and 11.0% to Perenco, with Gunvor
real could materially and adversely affect the growth of the Brazilian economy
accounting for 23.0%, Emerald 18.3% and Perenco 6.3% of our consolidated
and our business, financial condition and results of operations. For example,
revenues for the same period. Our current sales contracts with Emerald,
in 2014, we recorded exchange rate losses amounting to US$19.2 million in
Perenco and Gunvor are short-term agreements. If any of Emerald, Perenco
our Brazilian subsidiary that were generated by the credit facility of US$70.5
GeoPark 20F
35
million that we incurred to acquire Rio das Contas in March 31, 2014. See
Our management team has specifically identified and scheduled certain
“-A. Selected financial data-Exchange rates.”
potential drilling locations as an estimation of our future multi-year drilling
activities on our existing acreage. As of December 31, 2014, approximately
There are inherent risks and uncertainties relating to the exploration
75 of our specifically identified potential future drilling locations were
and production of oil and natural gas.
attributed to proved undeveloped reserves in Chile, Colombia and Brazil.
These identified potential drilling locations, including those without proved
Our performance depends on the success of our exploration and production
undeveloped reserves, represent a significant part of our growth strategy.
activities and on the existence of the infrastructure that will allow us to
take advantage of our oil and gas reserves. Oil and natural gas exploration
Our ability to drill and develop these identified potential drilling locations
and production activities are subject to numerous risks beyond our control,
depends on a number of factors, including oil and natural gas prices, the
including the risk that exploration activities will not identify commercially
availability and cost of capital, drilling and production costs, the availability
viable quantities of oil or natural gas. Our decisions to purchase, explore,
of drilling services and equipment, drilling results, lease expirations, the
develop or otherwise exploit prospects or properties will depend in part
availability of gathering systems, marketing and transportation constraints,
on the evaluation of seismic and other data obtained through geophysical,
refining capacity, regulatory approvals and other factors. Because of
geochemical and geological analysis, production data and engineering
the uncertainty inherent in these factors, there can be no assurance that
studies, the results of which are often inconclusive or subject to varying
the numerous potential drilling locations we have identified will ever be
interpretations.
drilled or, if they are, that we will be able to produce oil or natural gas from
Furthermore, the marketability of any oil and natural gas production from
our projects may be affected by numerous factors beyond our control. These
Our business requires significant capital investment and maintenance
factors include, but are not limited to, proximity and capacity of pipelines and
expenses, which we may be unable to finance on satisfactory terms
these or any other potential drilling locations.
other means of transportation, the availability of upgrading and processing
or at all.
facilities, equipment availability and government laws and regulations
(including, without limitation, laws and regulations relating to prices, sale
The oil and natural gas industry is capital intensive and we expect to make
restrictions, taxes, governmental stake, allowable production, importing and
substantial capital expenditures in our business and operations for
exporting of oil and natural gas, environmental protection and health and
the exploration and production of oil and natural gas reserves. We made
safety). The effect of these factors, individually or jointly, cannot be accurately
US$215.2 million and US$353.0 million (including US$140.1 million in Brazil
predicted, but may have a material adverse effect on our business, financial
to acquire Rio das Contas, which we financed through the incurrence of a
condition and results of operations.
loan of US$70.5 million and cash on hand) of capital expenditures during the
years ended December 31, 2013 and 2014, respectively. See “-Item 5.
There can be no assurance that our drilling programs will produce oil and
Operating and Financial Review and Prospects-B. Liquidity and capital
natural gas in the quantities or at the costs anticipated, or that our currently
producing projects will not cease production, in part or entirely. Drilling
resources-Capital Expenditures” for expected capital expenditures in 2015.
programs may become uneconomic as a result of an increase in our
The actual amount and timing of our future capital expenditures may differ
operating costs or as a result of a decrease in market prices for oil and
materially from our estimates as a result of, among other things, commodity
natural gas. Our actual operating costs or the actual prices we may receive
prices, actual drilling results, the availability of drilling rigs and other
for our oil and natural gas production may differ materially from current
equipment and services, and regulatory, technological and competitive
estimates. In addition, even if we are able to continue to produce oil and
developments. In response to improvements in commodity prices, we may
gas, there can be no assurance that we will have the ability to market
increase or decrease our actual capital expenditures. We intend to finance
our oil and gas production. See “-Our inability to access needed equipment
our future capital expenditures through cash generated by our operations
and infrastructure in a timely manner may hinder our access to oil and natural
and potential future financing arrangements. However, our financing needs
gas markets and generate significant incremental costs or delays in our
may require us to alter or increase our capitalization substantially through
oil and natural gas production” below.
the issuance of debt or equity securities or the sale of assets.
Our identified potential drilling location inventories are scheduled over
If our capital requirements vary materially from our current plans, we may
many years, making them susceptible to uncertainties that could materially
require further financing. In addition, we may incur significant financial
alter the occurrence or timing of their drilling.
indebtedness in the future, which may involve restrictions on other financing
and operating activities. We may also be unable to obtain financing or
36
GeoPark 20F
financing on terms favorable to us. These changes could cause our cost
Oil and gas operations contain a high degree of risk and we may not be
of doing business to increase, limit our ability to pursue acquisition
fully insured against all risks we face in our business.
opportunities, reduce cash flow used for drilling and place us at a competitive
disadvantage. A significant reduction in cash flows from operations or the
Oil and gas exploration and production is speculative and involves a high
availability of credit could materially adversely affect our ability to achieve
degree of risk and hazards. In particular, our operations may be disrupted
our planned growth and operating results.
by risks and hazards that are beyond our control and that are common
We are subject to complex laws common to the oil and natural gas
industrial accidents, occupational safety and health hazards, technical failures,
industry, which can have a material adverse effect on our business,
labor disputes, community protests or blockades, unusual or unexpected
financial condition and results of operations.
geological formations, flooding, earthquakes and extended interruptions due
among oil and gas companies, including environmental hazards, blowouts,
to weather conditions, explosions and other accidents. For example, in
The oil and natural gas industry is subject to extensive regulation and
the first half of 2013 we experienced a well control incident at our Chercán 1
intervention by governments throughout the world, including extensive
well in the Flamenco Block in Chile with no harm to employees or property.
local, state and federal regulations, in such matters as the award of
While we were able to bring that incident under control without injuries
exploration and production interests, the imposition of specific exploration
or environmental damage, there can be no assurance that we will not
and drilling obligations, allocation of and restrictions on production, price
experience similar or more serious incidents in the future, which could result
controls, required divestments of assets and foreign currency controls,
in damage to, or destruction of, wells or production facilities, personal
and the development and nationalization, expropriation or cancellation of
injury, environmental damage, business interruption, financial losses and
contract rights.
legal liability.
We have been required in the past, and may be required in the future,
While we believe that we maintain customary insurance coverage for
to make significant expenditures to comply with governmental laws and
companies engaged in similar operations, we are not fully insured against all
regulations, including with respect to the following matters:
• licenses, permits and other authorizations for drilling operations;
• reports concerning operations;
risks in our business. In addition, insurance that we do and may carry may
contain significant exclusions from and limitations on coverage. We may elect
not to obtain certain non-mandatory types of insurance if we believe that
• compliance with environmental, health and safety laws and regulations;
the cost of available insurance is excessive relative to the risks presented.
• drafting and implementing emergency planning;
The occurrence of a significant event or a series of events against which we
• plugging and abandonment costs; and
• taxation.
Under these laws and regulations, we could be liable for, among other
things, personal injury, property damage, environmental damage and other
types of damage. Failure to comply with these laws and regulations may also
result in the suspension or termination of our operations and subject us to
are not fully insured and any losses or liabilities arising from uninsured or
underinsured events could have a material adverse effect on our business,
financial condition or results of operations.
The development schedule of oil and natural gas projects is subject to
cost overruns and delays.
administrative, civil and criminal penalties. Moreover, these laws and
Oil and natural gas projects may experience capital cost increases and
regulations could change in ways that could substantially increase our costs.
overruns due to, among other factors, the unavailability or high cost
Any such liabilities, obligations, penalties, suspensions, terminations or
of drilling rigs and other essential equipment, supplies, personnel and oil
regulatory changes could have a material adverse effect on our business,
field services. The cost to execute projects may not be properly established
financial condition or results of operations.
and remains dependent upon a number of factors, including the
completion of detailed cost estimates and final engineering, contracting
In addition, the terms and conditions of the agreements under which
and procurement costs. Development of projects may be materially
our oil and gas interests are held generally reflect negotiations with
adversely affected by one or more of the following factors:
governmental authorities and can vary significantly. These agreements take
• shortages of equipment, materials and labor;
the form of special contracts, concessions, licenses, associations or other
• fluctuations in the prices of construction materials;
types of agreements. Any suspensions, terminations or regulatory changes
• delays in delivery of equipment and materials;
in respect of these special contracts, concessions, licenses, associations
• our ability to close our pending Morona Block Acquisition.
or other types of agreements could have a material adverse effect on our
• labor disputes;
business, financial condition or results of operations.
• political events;
GeoPark 20F
37
• title problems;
greater number of properties and prospects than our financial or personnel
• obtaining easements and rights of way;
resources permit. Our competitors may also be able to offer better
• blockades or embargoes;
• litigation;
compensation packages to attract and retain qualified personnel than we
are able to offer. In addition, there is substantial competition for capital
• compliance with governmental laws and regulations, including
available for investment in the oil and natural gas industry. As a result of each
environmental, health and safety laws and regulations;
of the aforementioned, we may not be able to compete successfully in the
• adverse weather conditions;
• unanticipated increases in costs;
• natural disasters;
• accidents;
• transportation;
• unforeseen engineering and drilling complications;
• environmental or geological uncertainties; and
• other unforeseen circumstances.
future in acquiring prospective reserves, developing reserves, marketing
hydrocarbons, attracting and retaining quality personnel or raising additional
capital, which could have a material adverse effect on our business,
financial condition or results of operations. See “-Item 4. Information on the
Company-B. Business overview-Our competition.”
In Chile, we partner with and sell to, and may from time to time compete
with, ENAP and, to a lesser extent, some companies with operations in
Argentina mentioned below. In Colombia, we partner with and sell to, and
Any of these events or other unanticipated events could give rise to delays
may from time to time compete with, Ecopetrol, as well as with privately-
in development and completion of our projects and cost overruns.
owned companies such as Pacific Rubiales, Gran Tierra, Parex Resources
Colombia Ltd. Sucursal, or Parex, and Canacol, among others. In Brazil, we
For example, in 2013, the drilling and completion cost for the exploratory
partner with and sell to, and may from time to time compete with, Petrobras,
well Chilco x-1 in our Flamenco Block in Chile was originally estimated at
privately-owned companies such as HRT, QGEP, Brasoil and some of the
US$2.6 million, but the actual cost was approximately US$4.0 million, mainly
Colombian companies mentioned above, which have entered into Brazil,
due to mechanical issues during the drilling as it was the first well drilled
among others. In Argentina, we compete for resources with YPF, as well as
with a new drilling rig.
with privately-owned companies such as Pan American Energy, Pluspetrol,
Tecpetrol, Chevron, Wintershall, Total, Sinopec and others. In Peru, we
Delays in the construction and commissioning of projects or other technical
expect to partner with and expect to sell to, Petroperú and will compete for
difficulties may result in future projected target dates for production
resources with privately-owned companies such as Pluspetrol, Gran Tierra,
being delayed or further capital expenditures being required. These projects
Repsol, Graña y Montero, Hunt Oil, Olympic Oil & Gas, Savia, among others;
may often require the use of new and advanced technologies, which can
and with state-owned oil companies such as China National Petroleum
be expensive to develop, purchase and implement and may not function
Corporation (CNPC).
as expected. Such uncertainties and operating risks associated with
development projects could have a material adverse effect on our business,
Our estimated oil and gas reserves are based on assumptions that may
results of operations or financial condition.
prove inaccurate.
Competition in the oil and natural gas industry is intense, which makes it
Our oil and gas reserves estimates in Brazil, Chile, Colombia, and Peru as
difficult for us to acquire properties and prospects, market oil and natural
of December 31, 2014 are based on the D&M Reserves Report. Although
gas and secure trained personnel.
classified as “proved reserves,” the reserves estimates set forth in the D&M
Reserves Reports are based on certain assumptions that may prove
We compete with the major oil and gas companies engaged in the
inaccurate. D&M’s primary economic assumptions in estimates included
exploration and production sector, including state-owned exploration and
oil and gas sales prices determined according to SEC guidelines, future
production companies that possess substantially greater financial and
expenditures and other economic assumptions (including interests, royalties
other resources than we do for researching and developing exploration
and taxes) as provided by us.
and production technologies and access to markets, equipment, labor
and capital required to acquire, develop and operate our properties. We also
In Chile, D&M’s estimates are based in part on the assumption that Methanex
compete for the acquisition of licenses and properties in the countries in
continues to commit to purchase Fell Block gas under the existing long-term
which we operate.
contract beyond 2017. In Brazil, D&M’s estimates are also based in part
on the assumption that the gas compression facility for the Manatí Field that
Our competitors may be able to pay more for productive oil and natural gas
started in 2014 will be completed by 2015.
properties and exploratory prospects and to evaluate, bid for and purchase a
38
GeoPark 20F
In Peru, the estimates are formulated on a pro forma basis. We expect to
inaccessible for any period of time, this could delay delivery of crude oil in
close the pending Morona Block Acquisition in 2015.
Chile and materially harm our business. For example, in January 2011, social
and labor unrest resulted in the roads to the Gregorio Refinery being closed
Oil and gas reserves engineering is a subjective process of estimating
for two days, and we were unable to deliver crude oil to ENAP.
accumulations of oil and gas that cannot be measured in an exact way, and
estimates of other engineers may differ materially from those set out herein.
In the Tierra del Fuego Blocks, we will temporarily depend on the existence of
Numerous assumptions and uncertainties are inherent in estimating
continuous ferry service to be able to transport crude oil from the island of
quantities of proved oil and gas reserves, including projecting future rates
Tierra del Fuego to the mainland. Ferry service may be adversely affected by
of production, timing and amounts of development expenditures and prices
weather conditions, in particular by certain combinations of strong winds and
of oil and gas, many of which are beyond our control. Results of drilling,
tidal currents that may occur, which may adversely affect our ability to deliver
testing and production after the date of the estimate may require revisions to
the crude oil we produce in Tierra del Fuego. In the Fell Block, we depend
be made. For example, if we are unable to sell our oil and gas to customers,
on ENAP-owned gas pipelines to deliver the gas we produce to Methanex, the
this may impact the estimate of our oil and gas reserves. Accordingly, reserves
sole purchaser of the gas we produce. If ENAP’s pipelines were unavailable,
estimates are often materially different from the quantities of oil and gas that
this could have a materially adverse effect on our ability to deliver and sell our
are ultimately recovered, and if such recovered quantities are substantially
product to Methanex, which could have a material adverse effect on our gas
lower that the initial reserves estimates, this could have a material adverse
sales. In addition, gas production in some areas in the Tierra del Fuego Blocks
impact on our business, financial condition and results of operations.
and the Otway and Tranquilo Blocks could require us to build a new network
Our inability to access needed equipment and infrastructure in a timely
which could require us to make significant capital investments.
manner may hinder our access to oil and natural gas markets and
generate significant incremental costs or delays in our oil and natural gas
In Colombia, producers of crude oil have historically suffered from tanker
of gas pipelines in order for us to be able to deliver our product to market,
production.
transportation logistics issues and limited storage capacity, which
cause delays in delivery and transfer of title of crude oil. Such capacity
Our ability to market our oil and natural gas production depends substantially
issues in Colombia may require us to transport crude from our Colombian
on the availability and capacity of processing facilities, oil tankers,
operations via truck, which may increase the costs of those operations.
transportation facilities (such as pipelines, crude oil unloading stations and
Road infrastructure is limited in certain areas in which we operate, and
trucks) and other necessary infrastructure, which may be owned and
certain communities have used and may continue to use road blockages,
operated by third parties. Our failure to obtain such facilities on acceptable
which can sometimes interfere with our operations in these areas. For
terms or on a timely basis could materially harm our business. We may be
example, in December 2014, our Colombian production had been impacted
required to shut down oil and gas wells because access to transportation or
by approximately 5,000 bopd during the last 13 days of the year by a road
processing facilities may be limited or unavailable when needed. If that
blockage, which was restored to normal production levels by the beginning
were to occur, then we would be unable to realize revenue from those wells
until arrangements were made to deliver the production to market, which
of January 2015.
could cause a material adverse effect on our business, financial condition
While Brazil has a well-developed network of hydrocarbon pipelines,
and results of operations. In addition, the shutting in of wells can lead to
storage and loading facilities, we may not be able to access these facilities
mechanical problems upon bringing the production back on line, potentially
when needed. Pipeline facilities in Brazil are often full and seasonal capacity
resulting in decreased production and increased remediation costs. The
restrictions may occur, particularly in natural gas pipelines. Our failure
exploitation and sale of oil and natural gas and liquids will also be subject
to secure transportation or access to pipelines or other facilities once we
to timely commercial processing and marketing of these products,
commence operations in the concessions we were awarded in Brazil on
which depends on the contracting, financing, building and operating of
acceptable terms or on a timely basis could materially harm our business.
infrastructure by third parties.
In Chile, we transport the crude oil we produce in the Fell Block by truck to
through the existing North Peruvian Pipeline, which has enough idle
ENAP s processing, storage and selling facilities at the Gregorio Refinery.
capacity to transport such future production. However, infrastructure
As of the date of this Annual Report, ENAP purchases all of the crude oil we
problems or social unrest affecting the pipeline operation may adversely
produce in Chile. We rely upon the continued good condition, maintenance
affect our production or revenues related to the Morona Block. In addition,
and accessibility of the roads we use to deliver the crude oil we produce.
as the Morona Block is located in a remote area of the tropical rainforest,
If the condition of these roads were to deteriorate or if they were to become
the development of the project involves that significant infrastructure has
In Peru, future production in the Morona Bock is expected to be transported
GeoPark 20F
39
to be built, as processing facilities, storages tanks and an approximately
Additionally, offshore drilling generally requires more time and more
97 km pipeline from the site to the North Peruvian Pipeline. Also, as there
advanced drilling technologies, involving a higher-risk of technological failure
are no roads available in the surrounding area, logistics will be done by
and usually higher drilling costs. Offshore projects often lack proximity to
helicopters or barges during specific seasons of the year.
existing oilfield service infrastructure, necessitating significant capital
Our use of seismic data is subject to interpretation and may not accurately
oil or gas of a commercial discovery, increasing both the financial and
identify the presence of oil and natural gas.
operational risk involved with these operations. Because of the lack and high
cost of infrastructure, some offshore reserve discoveries may never be
investment in flow line infrastructure before we can market the associated
Even when properly used and interpreted, seismic data and visualization
produced economically.
techniques are tools only used to assist geoscientists in identifying subsurface
structures as well as eventual hydrocarbon indicators, and do not enable the
Further, because we are not the operator of our offshore fields, all of these
interpreter to know whether hydrocarbons are, in fact, present in those
risks may be heightened since they are outside of our control. We have a
structures. In addition, the use of seismic and other advanced technologies
10% interest in the Manatí Field which limits our operating flexibility in
requires greater pre-drilling expenditures than traditional drilling strategies,
such offshore fields. See “-We are not, and may not be in the future, the
and we could incur losses as a result of these expenditures. Because of these
sole owner or operator of all of our licensed areas and do not, and may
uncertainties associated with our use of seismic data, some of our drilling
not in the future, hold all of the working interests in certain of our licensed
activities may not be successful or economically viable, and our overall
areas. Therefore, we may not be able to control the timing of exploration
drilling success rate or our drilling success rate for activities in a particular
or development efforts, associated costs, or the rate of production of any
area could decline, which could have a material adverse effect on us.
non-operated and, to an extent, any non-wholly-owned, assets.”
Through our Brazilian operations, we face operational risks relating to
Our pending acquisition of the Morona Block in Peru is subject to
offshore drilling that we have not faced in the past.
regulatory approvals.
To date, we have operated solely as an onshore oil and gas exploration and
In October 2014 we agreed to acquire from Petroperú a 75% working
production company. However, our operations in the BCAM-40 Concession
interest in the Morona Block in Northern Peru. We have been qualified as an
in Brazil may include shallow-offshore drilling activity in two areas in the
operator by Perupetro S.A. (“Perupetro”), the Peruvian hydrocarbons
Camamu-Almada Basin, which we expect will continue to be operated by
licensing agency. The closing of the acquisition is subject to the occurrence
Petrobras.
of certain conditions, including obtaining other governmental approvals.
Failure to obtain such approvals before June 30, 2015 may result in
Offshore operations are subject to a variety of operating risks and laws and
termination of the agreement. The transaction is expected to close in 2015.
regulations, including among other things, with respect to environmental,
See “-Item 4. Information on the Company-B. Business overview-Significant
health and safety matters, specific to the marine environment, such as
capsizing, collisions and damage or loss from hurricanes or other adverse
Agreements-Peru- Morona Block Acquisition.”
weather conditions. These conditions can cause substantial damage to
We may suffer delays or incremental costs due to difficulties in negotiations
facilities and interrupt production. As a result, we could incur substantial
with landowners and local communities where our reserves are located.
liabilities, compliance costs, fines or penalties that could reduce or eliminate
the funds available for exploration, development or leasehold acquisitions,
Access to the sites where we operate requires agreements (including, for
or result in loss of equipment and properties. For example, the Manatí
example, assessments, rights of way and access authorizations) with
Field has been subject to administrative infraction notices, which have
landowners and local communities. If we are unable to negotiate agreements
resulted in fines against Petrobras in an aggregate amount of US$12.5 million,
with landowners, we may have to go to court to obtain access to the sites
all of which are pending a final decision of the Brazilian Institute for the
of our operations, which may delay the progress of our operations at such
Environment and Natural Renewable Resources (Instituto Brasileiro do
sites. In Chile, for example, we have negotiated the necessary agreements for
Meio-Ambiente e dos Recursos Naturais Renováveis), or IBAMA. Although
many of our current operations in the Magallanes Basin. In the Tierra del
the administrative fines were filed against Petrobras, as a party to the
Fuego Blocks, although we have successfully negotiated access to our sites,
concession agreement governing the Manatí Field, Rio das Contas may be
any future disputes with landowners or court proceedings may delay our
liable up to its participation interest of 10%. See “-Item 4. Information
operations in Tierra del Fuego Blocks. In Brazil, in the event that social unrest
on the Company-B. Business overview-Health, safety and environmental
that occurred in 2013 continues or intensifies, this may lead to delays or
matters-Other regulation of the oil and gas industry-Brazil.”
damage relating to our ability to operate the assets we have acquired or may
acquire in our Brazil Acquisitions.
40
GeoPark 20F
In Colombia, although we have agreements with many landowners and are
we have identified under these contracts and agreements yield discoveries,
in negotiations with others, we expect our costs to increase following current
we may face delays in drilling these prospects or be required to relinquish
and future negotiations regarding access to our blocks, as the economic
these prospects. The costs to maintain or operate the CEOPs, E&P Contracts
expectations of landowners have generally increased, which may delay
and concession agreements over such areas may fluctuate and may increase
access to existing or future sites. In addition, the expectations and demands
significantly, and we may not be able to meet our commitments under
of local communities on oil and gas companies operating in Colombia have
such contracts and agreements on commercially reasonable terms or at all,
increased in the wake of recent changes to the royalty regime in Colombia.
which may force us to forfeit our interests in such areas. For example, on
As a result, local communities have demanded that oil and gas companies
January 17, 2013, we voluntarily and formally announced to the Chilean
invest in remediating and improving public access roads, compensate them
Ministry of Energy our decision not to proceed with the second exploration
for any damages related to use of such roads and, more generally, invest
period and to terminate the exploration phase under the Tranquilo Block
in infrastructure that was previously paid for with public funds. Due to these
CEOP, and subsequently relinquished all areas of the Tranquilo Block, except
circumstances, oil and gas companies in Colombia, including us, are now
for an area of 92,417 gross acres, where we declared four hydrocarbons
dealing with increasing difficulties resulting from instances of social unrest,
discoveries. Additionally, on April 10, 2013, we voluntarily and formally
temporary road blockages and conflicts with landowners. For example,
announced to the Chilean Ministry of Energy our decision not to proceed
in December 2014, production from certain fields in the Llanos 34 Block was
with the second exploratory period and to terminate the exploration phase
affected by a road blockage resulting in our reduction of production for a
under the Otway Block CEOP, and subsequently relinquished all areas of
period of thirteen days that was returned to normal in early January 2015.
the Otway Block, except for two areas totaling 49,421 gross acres in
There can be no assurance that disputes with landowners and local
on the Company-B. Business overview-Our operations-Operations in
communities will not delay our operations or that any agreements we reach
Argentina-Del Mosquito Block” See “-Item 4. Information on the Company-B.
with such landowners and local communities in the future will not require
Business overview-Our operations-Operations in Chile-Otway and
which we have declared hydrocarbons discoveries. See “-Item 4. Information
us to incur additional costs, thereby materially adversely affecting our
Tranquilo Blocks.”
business, financial condition and results of operations. Local communities
may also protest or take actions that restrict or cause their elected
In Peru, the rights to explore and produce hydrocarbons are granted
government to restrict our access to the sites of our operations, which may
through a License Contract signed with Perupetro, a governmental entity.
have a material adverse effect on our operations at such sites.
As GeoPark agreed to acquire a 75% interest in the Morona Block from
Petroperú, we expect to be a partner to the Morona Block License Contract
In Peru, the Morona Block is located in land inhabited by native communities.
in 2015. This contract includes the obligation for GeoPark and Petroperú,
Land use agreements will have to be signed with the communities and
our partner in the block, to build the facilities required to produce the
social support programs are expected to be implemented by GeoPark. In the
hydrocarbons discovered in the block. The scope and schedule of such
Morona Block, approximately seventy-five indigenous communities, which
development will depend on us and Petroperú. The License Contract could
fall into twelve distinct community structures, have been identified. Despite
indigenous community support for hydrocarbons activities since the mid-
be terminated by Perupetro if the development obligations included
in such agreement are not fulfilled. In addition, there is also an exploratory
nineties, similar projects in the Peruvian rainforest have faced social conflicts
commitment consisting of the drilling of one exploratory well every two
and works delays due to community claims.
and a half years. Failure to fulfill the exploratory commitment will lead to
acreage relinquishment materially affecting the project.
Under the terms of some of our various CEOPs, E&P Contracts and
concession agreements, we are obligated to drill wells, declare
Moreover, we have entered into a Joint Investment Agreement with
any discoveries and file periodic reports in order to retain our rights and
Petroperú by which we are obliged to bear 100% of capital cost required to
establish development areas. Failure to meet these obligations may
carry out long test to existing wells Situche Central 2X and Situche Central
result in the loss of our interests in the undeveloped parts of our blocks
3X. Failure to do so will result in the loss of our participating interest in
or concession areas.
the License Contract of the Morona Block, and subject us to possible damage
claims from Petroperú.
In order to protect our exploration and production rights in our license areas,
we must meet various drilling and declaration requirements. In general,
For additional details regarding the status of our operations with respect
unless we make and declare discoveries within certain time periods specified
to our various special contracts and concession agreements, see “-Item 4.
in our various CEOPs, E&P Contracts and concession agreements, our interests
Information on the Company-B. Business overview- Our operations.”
in the undeveloped parts of our license areas may lapse. Should the prospects
GeoPark 20F
41
A significant amount of our reserves and production have been
pursuant to the Fell Block CEOP, under which we are in the exploitation
derived from our operations in three blocks, the Llanos 34 in Colombia,
phase, Chile may terminate the CEOP if (i) we stop performing any of
the Fell Block in Chile and the BCAM-40 Concession in Brazil.
the substantial obligations assumed under the Fell Block CEOP without cause
and do not cure such nonperformance pursuant to the terms of the
For the year ended December 31, 2014, the Llanos 34 Block contained 49% of
concession, following notice of breach or (ii) our oil activities are interrupted
our net proved reserves and generated 42% of our production, the Fell Block
for more than three years due to force majeure circumstances (as defined
contained 26% of our net proved reserves and generated 30% of our total
in the Fell Block CEOP). If the Fell Block CEOP is terminated in the exploitation
production and the BCAM-40 Concession contained 16% of our net proved
phase, we will have to transfer to Chile, free of charge, any productive wells
reserves and generated 17% of our production. While our recent expansion
and related facilities, provided that such transfer does not interfere with
into Brazil, Argentina and Colombia with new exploratory blocks incorporated
our abandonment obligations and excluding certain pipelines and other
in our portfolio in 2014 (and our expected future expansion into Peru) mean
assets. See “-Item 4. Information on the Company-B. Business overview-
that these blocks are expected to be less significant component of our overall
Significant agreements-Chile-CEOPs- Fell Block CEOP.” If the CEOP is
business than it has been in the past, we nonetheless expect that such blocks
terminated early due to a breach of our obligations, we may not be entitled
will continue to be responsible for a significant portion of our reserves and
to compensation. Additionally, our CEOPs for the Tierra del Fuego Blocks,
production. Any government intervention, impairment or disruption of our
which are in the exploration phase, may be subject to early termination
production due to factors outside of our control or any other material adverse
during this phase under circumstances including (i) a failure by us to comply
event in our operations in such blocks would have a material adverse effect
with minimum work commitments at the termination of any exploration
on our business, financial condition and results of operations.
period, (ii) a failure to communicate our intention to proceed with the next
exploration period 30 days prior to its termination, (iii) a failure to provide
Our contracts in obtaining rights to explore and develop oil and natural gas
the Chilean Ministry of Energy requisite performance bonds, (iv) a voluntary
reserves are subject to contractual expiration dates and operating
relinquishment by us of all areas under the CEOP, (v) a failure by us to
conditions, and our CEOPs, E&P Contracts and concession agreements are
meet the requirements to enter into the exploitation phase upon the
subject to early termination in certain circumstances.
termination of the exploration phase, and (vi) a permanent suspension by us
of all operations in the CEOP area or our declaration of bankruptcy. If the
Under certain of the CEOPs, E&P Contracts and concession agreements to
Tierra del Fuego Block CEOPs are terminated within the exploration phase,
which we are or may in the future become parties, we are or may become
we are released from all obligations under the CEOPs, except for obligations
subject to guarantees to perform our commitments and/or to make payment
regarding the abandonment of fields, if any. See “-Item 4. Information
for other obligations, and we may not be able to obtain financing for all such
on the Company-B. Business overview-Significant agreements-Chile-CEOPs.”
obligations as they arise. If such obligations are not complied with when
There can be no assurance that the early termination of any of our CEOPs
due, in addition to any other remedies that may be available to other parties,
would not have a material adverse effect on us.
this could result in cancelation of our CEOPs, E&P Contracts and concession
agreements or dilution or forfeiture of interests held by us. As of December
31, 2014, the aggregate outstanding amount of this potential liability for
In addition, according to the Chilean Constitution, Chile is entitled to
expropriate our rights in our CEOPs for reasons of public interest. Although
guarantees was approximately US$69.8 million, mainly relating to guarantees
Chile would be required to indemnify us for such expropriation, there
of our minimum work program for the VIM 3 Block in Colombia, our minimum
can be no assurance that any such indemnification will be paid in a timely
work program for Tierra del Fuego Blocks in Chile and, to a significantly
manner or in an amount sufficient to cover the harm to our business caused
lesser extent, minimum work programs for our other Colombian operations,
by such expropriation.
the ten Brazilian concession areas and the new blocks in Argentina.
In Colombia, our E&P Contracts may be subject to early termination for a
Additionally, certain of the CEOPs, E&P Contracts and concession agreements
breach by the parties, a default declaration, application of any of the
to which we are or may in the future become a party are subject to set
contracts’ unilateral termination clauses or pursuant to termination clauses
expiration dates. Although we may want to extend some of these contracts
mandated by Colombian law. Anticipated termination declared by the ANH
beyond their original expiration dates, there is no assurance that we
results in the immediate enforcement of monetary guaranties against us
can do so on terms that are acceptable to us or at all, although some CEOPs
and may result in an action for damages by the ANH and/or a restriction
contain provisions enabling exploration extensions.
on our ability to engage in contracts with the Colombian government during
In particular, in Chile, our CEOPs provide for early termination by Chile in
Business overview- Significant agreements-Colombia-E&P Contracts.”
certain circumstances, depending upon the phase of the CEOP. For example,
a certain period of time. See “-Item 4. Information on the Company-B.
42
GeoPark 20F
In Brazil, concession agreements generally may be renewed, at the ANP’s
Supply Agreement, which expires on April 30, 2017. Sales to Methanex
discretion, for an additional period, provided that a renewal request is made
represented 6% of our consolidated revenues for the year ended December
at least 12 months prior to the termination of the concession agreement
31, 2014. Methanex also buys gas from ENAP and a consortium that Methanex
and there has not been a breach of the terms of the concession agreement.
has formed with ENAP. While our contract with Methanex requires it to
We expect that all our concession agreements will provide for early
purchase the entirety of our production of natural gas from the Fell Block,
termination in the event of: (i) government expropriation for reasons of
and requires us to sell to Methanex all of our natural gas production from Fell
public interest; (ii) revocation of the concession pursuant to the terms of the
Block, subject to minor exceptions, if Methanex were to decrease or cease
concession agreement; or (iii) failure by us or our partners to fulfill all of
its purchase of gas from us, this would have a material adverse effect on our
our respective obligations under the concession agreement (subject to a cure
revenues derived from the sale of gas. In addition, there can be no assurance
period). Administrative or monetary sanctions may also be applicable,
that we will be able to extend or renew our contract with Methanex past
as determined by the ANP, which shall be imposed based on applicable law
April 30, 2017, which could have a material adverse effect on our business,
and regulations. In the event of early termination of a concession agreement,
financial condition and results of operations.
the compensation to which we are entitled may not be sufficient to
compensate us for the full value of our assets. Moreover, in the event of early
Methanex has two methanol producing facilities at its Cabo Negro
termination of any concession agreement due to failure to fulfill obligations
production facility, near the city of Punta Arenas in southern Chile. However,
thereunder, we may be subject to fines and/or other penalties.
after Argentine natural gas producers cut off exports to Chile in 2007,
Methanex had to stop production at all but one of these facilities, and began
In Peru, License Contracts for hydrocarbon exploitation are in force and
to rely on local suppliers of natural gas, including ENAP, for its operations.
will remain in effect for 30 years. This term is non-renewable. With regards to
Since 2009, however, the amount of natural gas that ENAP has been able to
the Morona Block, currently one-third of the contract term has already
provide to Methanex has been decreasing, as ENAP has given priority to
elapsed, and twenty years remain. Nevertheless, since November 27, 2013,
providing natural gas to the city of Punta Arenas in the Magallanes region.
the License Contract related to the Morona Block is under force majeure.
Although we sell all the natural gas we produce in the Fell Block to Methanex,
During a force majeure period contract terms are suspended (including the
and supplied approximately 50% of all the natural gas consumed by
term time) as long as the party to the contract is fulfilling certain obligations
Methanex before the idling of its plant in May 2014, we alone cannot supply
pertaining to obtaining environmental permits, as is currently the case
Methanex with all the natural gas it requires for its operations.
with the Morona Block. The term of the agreement will be extended by
the same amount of time it has been suspended by a force majeure event.
The plant was idled due to an anticipated insufficient supply of natural gas.
The concession year expiration is related to approval of environmental
The supply of natural gas decreased during the winter months of 2014
impact assessment (EIA) study for project development. The expiration of
due to the increase in seasonal gas demand from the city of Punta Arenas,
concession will occur twenty years after EIA approval. We expect the EIA to
to which gas producers, including GeoPark, gave priority, delivering gas to
be approved in approximately in December 2016.
the city through Methanex which re-sold our gas to ENAP. Methanex
The License Contract is also subject to early termination in case of breach
continued to purchase from us the volume of gas we produced during the
idling, and we signed an amendment to the agreement, pursuant to
of contractual obligations by GeoPark. In such an event, all the existing
which Methanex pays us a premium over the current gas price for deliveries
facilities and wells located in the block will be transferred, without charge, to
exceeding certain volumes of gas, since the Methanex plant’s startup,
Perupetro, and abandonment plans will have to be carried out by GeoPark
which occurred on September 11, 2014. See “-Item 4. Information on the
for remediation and restoration of any polluted area in the block, and for de-
Company-B. Business overview-Marketing and delivery commitments-Chile.”
commissioning the facilities that are no longer required for block’s operations.
Methanex made investments aimed at lowering its plant’s minimum gas
requirements during the idling, so that the plant is currently able to function
Early termination or nonrenewal of any CEOP, E&P Contract or concession
with 21.2 mcfpd of gas.
agreement could have a material adverse effect on our business, financial
situation or results of operations.
However, there can be no assurance that Methanex will continue to purchase
the gas from us or that its efforts to reduce the risk of future shutdowns
We sell almost all of our natural gas in Chile to a single customer, who has
will be successful, which could have a material adverse effect on our gas
in the past temporarily idled its principal facility.
revenues. Additionally, there can be no assurance that Methanex will
For the year ended December 31, 2014, almost all of our natural gas sales in
our gas production. If Methanex were to cease purchasing from us, there can
Chile were made to Methanex under a long-term contract, the Methanex Gas
be no assurance that we would be able to sell our gas production to other
have sufficient supplies of gas to operate its plant and continue to purchase
GeoPark 20F
43
parties or on similar terms, which could have a material adverse effect on our
As of December 31, 2014, we are not the operator of the Llanos 17, Llanos 32
business, financial condition and results of operations.
and Jagu(cid:0) eyes 3432 A Blocks in Colombia, which represented 3% of our total
production as of December 31, 2014. In Chile we are not the sole owner of the
We may not be able to meet delivery requirements under the agreement
Tranquilo, Isla Norte, Campanario and Flamenco blocks. In Colombia we are
for the sale of our natural gas in Chile.
not the sole owner of the Llanos 34, CPO-4, Abanico and Cerrito blocks.
Under the Methanex Gas Supply Agreement, Methanex has committed to
In Brazil, we are not the operator of the BCAM-40 Concession, which
purchasing, and we have committed to selling, all of the gas that we
represented approximately 14% of our total production for the year ended
produce in the Fell Block (subject to certain exceptions, including reasonable
December 31, 2014.
quantities required to maintain our operations and quantities that we might
be required to pay in kind to Chile), with a minimum volume commitment
In Peru we will not be the sole owner of the Morona Block, as we are
which is defined by us on an annual basis. The agreement contains monthly
expected to assume a 75% working interest of the Morona Block,
DOP obligations, which require us to deliver in a given month the minimum
with Petroperú retaining a 25% working interest. Petroperú will also have
gas committed for that month or pay a deficiency penalty to Methanex,
the right to increase its working interest in the Block by up to 50%, subject
with a threshold of 90% of the committed quantities of gas. The agreement
to us recovering our investments in the Block through certain agreed
also contains monthly TOP obligations, which apply when our committed
terms. See “-Item 4. Information on the Company-B. Business overview-
volume for a given month exceeds 35.3 mcfpd, and require Methanex to take
Our operations-Operations in Peru-Morona Block.”
in such month the minimum gas volume committed for such period or face
higher TOP obligations in later months, with a threshold of 90% of the
In addition, the terms of the joint venture agreements or association
committed quantities. These DOP and TOP obligations are subject to make-
agreements governing our other partners’ interests in almost all of the blocks
up provisions without penalty, for any delivery or off-take deficiencies
that are not wholly-owned or operated by us require that certain actions
accrued, in the three months following the month where delivery or off-take
be approved by supermajority vote. The terms of our other current or future
requirements were not met.
license or venture agreements may require at least the majority of working
interests to approve certain actions. As a result, we may have limited ability
On April 1, 2014, the Company and Methanex executed a fifth amendment
to exercise influence over operations or prospects in the blocks operated
to the Gas Supply Agreement, valid until April 30, 2015, which extended
by our partners, or in blocks that are not wholly-owned or operated by us. A
the fourth amendment conditions until May 18, 2015, and defined
breach of contractual obligations by our partners who are the operators of
new conditions for the winter 2014 period (May 2014 to September 2014)
such blocks could eventually affect our rights in exploration and production
and the post-winter period (October 2014 to April 2015). For the post-winter
contracts in our blocks in Colombia. Our dependence on our partners could
period the Company committed to deliveries over 400,000 SCM/d. The
prevent us from realizing our target returns for those discoveries or prospects.
fifth amendment also waived the DOP and TOP thresholds for both parties,
replacing them with reasonable efforts to take and deliver, and giving
GeoPark’s gas first priority over any third party supplies to Methanex.
Moreover, as we are not the sole owner or operator of all of our properties,
we may not be able to control the timing of exploration or development
Though the fifth amendment waived the DOP and TOP thresholds for
be able to carry out our key business strategies of minimizing the cycle time
both parties, such clauses or new clauses introduced in further amendments
between discovery and initial production at such properties. The success
may apply for periods beyond the ones covered in the above mentioned
and timing of exploration and development activities operated by our
amendment. For example, in 2012, we failed to meet this adjusted volume for
partners will depend on a number of factors that will be largely outside of
activities or the amount of capital expenditures and may therefore not
each of the months of April through December of 2012, such that we accrued
US$1.7 million in DOP payments owed to Methanex under the Methanex
our control, including:
• the timing and amount of capital expenditures;
Gas Supply Agreement, all of which had been paid as of September 30, 2013.
• the operator’s expertise and financial resources;
• approval of other block partners in drilling wells;
We are not, and may not be in the future, the sole owner or operator of
• the scheduling, pre-design, planning, design and approvals of activities and
all of our licensed areas and do not, and may not in the future, hold all of
processes;
the working interests in certain of our licensed areas. Therefore, we may
• selection of technology; and
not be able to control the timing of exploration or development efforts,
• the rate of production of reserves, if any.
associated costs, or the rate of production of any non-operated and, to an
extent, any non-wholly-owned, assets.
44
GeoPark 20F
This limited ability to exercise control over the operations on some of our
Colombia to declare dividends only after allowing for retentions of cash
license areas may cause a material adverse effect on our financial condition
for approved work programs and budgets and capital adequacy requirements
and results of operations.
of GeoPark Colombia, working capital requirements, banking covenants
associated with any loan entered into by GeoPark Colombia or our other
LGI, our strategic partner in Chile and Colombia, may not consent to
Colombian subsidiaries and operational requirements. Our inability to obtain
our taking certain actions or may eventually decide to sell its interest in
LGI’s consent or a delay by LGI in granting its consent may restrict or delay
our Chilean and Colombian operations to a third party.
the ability of GeoPark Chile, GeoPark TdF or GeoPark Colombia to take
certain actions, which may have an adverse effect on our operations in such
We have a strategic partnership with LGI, which has a 20% equity interest in
countries and on our business, financial condition and results of operations.
GeoPark Chile, a 14% direct equity interest in GeoPark TdF (31.2% taking
into account direct and indirect participation through GeoPark Chile) and a
Acquisitions that we have completed and any future acquisitions, strategic
20% equity interest in GeoPark Colombia, through its equity interest in
investments, partnerships or alliances could be difficult to integrate and/or
GeoPark Colombia Cooperatie. Our shareholders’ agreements with LGI in each
identify, could divert the attention of key management personnel, disrupt
of Chile and Colombia provides that we have a right of first offer if LGI
our business, dilute stockholder value and adversely affect our financial
decides to sell any of its interest in GeoPark Chile or GeoPark Colombia. There
results, including impairment of goodwill and other intangible assets.
can be no assurance, however, that we will have the funds to purchase LGI’s
interest in Chile and/or Colombia and that LGI will not decide to sell its shares
One of our principal business strategies includes acquisitions of properties,
to a third party whose interests may not be aligned with ours.
prospects, reserves and leaseholds and other strategic transactions,
In addition, our shareholders’ agreements with LGI in Chile and Colombia
successful acquisition and integration of producing properties, including
contain provisions that require GeoPark Chile and GeoPark Colombia to
our acquisitions of Winchester, Luna and Cuerva in Colombia, our Brazil
obtain LGI’s consent before undertaking certain actions. For example, under
acquisitions and pending Morona Block Acquisition, requires an assessment
including in jurisdictions in which we do not currently operate. The
the terms of the shareholders’ agreement with LGI in Colombia, LGI must
approve GeoPark Colombia’s annual budget and work programs and
of several factors, including:
• recoverable reserves;
mechanisms for funding any such budget or program, the entering into any
• future oil and natural gas prices;
borrowings other than those provided in an approved budget or incurred
• development and operating costs; and
in the ordinary course of business to finance working capital needs, the
• potential environmental and other liabilities.
granting of any guarantee or indemnity to secure liabilities of parties other
than those of our Colombian subsidiaries and disposing of any material assets
The accuracy of these assessments is inherently uncertain. In connection
other than those provided for in an approved budget and work program.
with these assessments, we perform a review of the subject properties that
Similarly, in Chile, pursuant to the terms of our shareholders’ agreements
we believe to be generally consistent with industry practices. Our review
with LGI, LGI’s consent is required in order for GeoPark Chile or GeoPark TdF,
as applicable, to be able to take certain actions, including: making any
and the review of advisors and independent reserves engineers will not reveal
all existing or potential problems nor will it permit us or them to become
decision to terminate or permanently or indefinitely suspend operations in
sufficiently familiar with the properties to fully assess their deficiencies and
or surrender our blocks in Chile (other than as required under the terms of
potential recoverable reserves. Inspections may not always be performed on
the relevant CEOP for such blocks); selling our blocks in Chile to our affiliates;
every well, and environmental conditions are not necessarily observable
making any change to the dividend, voting or other rights that would give
even when an inspection is undertaken. We, advisors or independent reserves
preference to or discriminate against the shareholders of these companies;
engineers may apply different assumptions when assessing the same field.
entering into certain related party transactions; and creating a security
Even when problems are identified, the seller may be unwilling or unable
interest over our blocks in Chile (other than in connection with a financing
to provide effective contractual protection against all or part of the problems.
that benefits our Chilean subsidiaries).
We often are not entitled to contractual indemnification for environmental
Additionally, pursuant to our agreements with LGI in Chile, we and LGI have
circumstances in which we have contractual indemnification rights for pre-
agreed to vote our common shares or otherwise cause GeoPark Chile or
closing liabilities, it remains possible that the seller will not be able to fulfill
GeoPark TdF, as the case may be, to declare dividends only after allowing
its contractual obligations. There can be no assurance that problems related
for retentions of cash to meet anticipated future investments, costs and
to the assets or management of the companies and operations we have
obligations, and pursuant to our agreement with LGI in Colombia, we and
acquired, such as in Colombia or Brazil, or other companies or operations we
LGI have agreed to vote our common shares or otherwise cause GeoPark
may acquire in future, will not arise in future, and these problems could
liabilities and acquire properties on an “as is” basis. Even in those
GeoPark 20F
45
have a material adverse effect on our business, financial condition and results
13, 2013. Due to the injunction and a decision from the Board of the ANP,
of operations.
GeoPark Brazil could not proceed to execute the concession agreement,
and cannot do so until the injunction is either lifted or clarified as to what
Significant acquisitions and other strategic transactions may involve other
conditions and which type of conventional drilling activities may be carried
risks, including:
out by GeoPark Brazil. According to the terms of the Court’s injunction,
• diversion of our management’s attention to evaluating, negotiating and
the ANP will first need to take certain actions, such as conducting studies
integrating significant acquisitions and strategic transactions;
that prove that drilling unconventional resources will not contaminate
• challenge and cost of integrating acquired operations, information
the dams and aquifers in the region. On February 21, 2014, GeoPark Brazil
management and other technology systems and business cultures with those
requested that the board of the ANP suspend the execution of the concession
of ours while carrying on our ongoing business;
• contingencies and liabilities that could not be or were not identified during
the due diligence process, including with respect to possible deficiencies in
agreement (which entails delivery of the financial guarantee and performance
guarantee and payment of the signing bonus) for six months with a
possible extension of an additional six months, or until a firm court decision
the internal controls of the acquired operations; and
is reached that does not prevent GeoPark Brazil from entering into the
• challenge of attracting and retaining personnel associated with acquired
concession agreement.
operations.
If we fail to realize the benefits we anticipate from an acquisition, our results
proceedings related to the award of the concession of Block PN-T-597 to
of operations may be adversely affected.
GeoPark Brazil were suspended.
On April 16, 2014, the ANP’s Board enacted a resolution stating that all
It is also possible that we may not identify suitable acquisition targets
Due to similar law suits with the same types of claims filed in the states of
or strategic investment, partnership or alliance candidates. Our inability to
Paraná and Bahia, where the Court decision was to carry out conventional
identify suitable acquisition targets, strategic investments, partners or
drilling activities, we expect that such decisions may impact the law suit
alliances, or our inability to complete such transactions, may negatively affect
filed against us related to the Block PN-T-597, and also the ANP’s decision
our competitiveness and growth opportunities. Moreover, if we fail to
to suspend the process for not signing the concession agreement.
properly evaluate acquisitions, alliances or investments, we may not achieve
the anticipated benefits of any such transaction and we may incur costs in
However, there can be no assurance that we will be able to extend the
excess of what we anticipate.
deadlines associated with the entry into the Concession Contract or
enter into the concession agreement. See “-Item 8-Financial Information-A.
Future acquisitions financed with our own cash could deplete the cash and
Consolidated statements and other financial information-Legal
working capital available to adequately fund our operations. We may also
proceedings.”
finance future transactions through debt financing, the issuance of our equity
securities, existing cash, cash equivalents or investments, or a combination
of the foregoing. Acquisitions financed with the issuance of our equity
The present value of future net revenues from our proved reserves will
not necessarily be the same as the current market value of our estimated
securities could be dilutive, which could affect the market price of our stock.
oil and natural gas reserves.
Acquisitions financed with debt could require us to dedicate a substantial
portion of our cash flow to principal and interest payments and could subject
You should not assume that the present value of future net revenues from
us to restrictive covenants.
our proved reserves is the current market value of our estimated oil and
natural gas reserves. For the year ended December 31, 2014, we have based
The PN-T-597 concession in Brazil is subject to an injunction and may
the estimated discounted future net revenues from our proved reserves
not close.
on the 12 month unweighted arithmetic average of the first-day-of-the-
month price for the preceding 12 months. Actual future net revenues from
In Brazil, GeoPark Brazil is currently a party to a legal proceeding related
our oil and natural gas properties will be affected by factors such as:
to entry into the concession agreement of exploratory Block PN-T-597 that
• actual prices we receive for oil and natural gas;
the ANP initially awarded to GeoPark Brazil in the 12th oil and gas bidding
• actual cost of development and production expenditures;
round held in November 2013. As a result of a class action filed by the Federal
• the amount and timing of actual production; and
Prosecutor’s Office, an injunction was issued by a Brazilian Federal Court
• changes in governmental regulations, taxation or the taxation invariability
against the ANP, the Federal Government and GeoPark Brazil on December
provisions in our CEOPs.
46
GeoPark 20F
The timing of both our production and our incurrence of expenses in
Furthermore, some of our customers may be highly leveraged, and, in any
connection with the development and production of oil and natural gas
event, are subject to their own operating expenses. Therefore, the risk we face
properties will affect the timing and amount of actual future net revenues
in doing business with these customers may increase. Other customers may
from proved reserves, and thus their actual value. In addition, the 10%
also be subject to regulatory changes, which could increase the risk of
discount factor we use when calculating discounted future net revenues
defaulting on their obligations to us. Financial problems experienced by our
may not be the most appropriate discount factor based on interest rates
customers could result in the impairment of our assets, a decrease in our
in effect from time to time and risks associated with us or the oil and natural
operating cash flows and may also reduce or curtail our customers’ future use
gas industry in general.
of our products and services, which may have an adverse effect on our
revenues and may lead to a reduction in reserves.
The development of our proved undeveloped reserves may take longer
and may require higher levels of capital expenditures than we currently
We may not have the capital to develop our unconventional oil and
anticipate. Therefore, our proved undeveloped reserves ultimately
gas resources.
may not be developed or produced.
We have identified opportunities for analyzing the potential of
As of December 31, 2014, only approximately 32% of our net proved
unconventional oil and gas resources in some of our blocks and concessions.
reserves have been developed (or 33% including the Morona Block in Peru).
Our ability to develop this potential depends on a number of factors,
Development of our undeveloped reserves may take longer and require
including the availability of capital, seasonal conditions, regulatory approvals,
higher levels of capital expenditures than we currently anticipate.
negotiation of agreements with third parties, commodity prices, costs,
Additionally, delays in the development of our reserves or increases in
access to and availability of equipment, services and personnel and drilling
costs to drill and develop such reserves will reduce the standardized
results. In addition, as we have no previous experience in drilling and
measure value of our estimated proved undeveloped reserves and future
exploiting unconventional oil and gas resources, the drilling and exploitation
net revenues estimated for such reserves, and may result in some projects
of such unconventional oil and gas resources depends on our ability to
becoming uneconomic, causing the quantities associated with these
acquire the necessary technology, to hire personnel and other support
uneconomic projects to no longer be classified as reserves. This was due
needed for extraction or to obtain financing and venture partners to develop
to the uneconomic status of the reserves, given the proximity to the
such activities. Because of these uncertainties, we cannot give any assurance
end of the concessions for these blocks, which does not allow for future
as to the timing of these activities, or that they will ultimately result in the
capital investment in the blocks. There can be no assurance that we
realization of proved reserves or meet our expectations for success.
will not experience similar delays or increases in costs to drill and develop
our reserves in the future, which could result in further reclassifications
Our operations are subject to operating hazards, including extreme
of our reserves.
weather events, which could expose us to potentially significant losses.
We are exposed to the credit risks of our customers and any material
nonpayment or nonperformance by our key customers could adversely
Our operations are subject to potential operating hazards, extreme weather
conditions and risks inherent to drilling activities, seismic registration,
affect our cash flow and results of operations.
exploration, production, development and transportation and storage of
crude oil, such as explosions, fires, car and truck accidents, floods, labor
Our customers may experience financial problems that could have a
disputes, social unrest, community protests or blockades, guerilla attacks,
significant negative effect on their creditworthiness. Severe financial
security breaches, pipeline ruptures and spills and mechanical failure of
problems encountered by our customers could limit our ability to
equipment at our or third-party facilities. Any of these events could have a
collect amounts owed to us, or to enforce the performance of obligations
material adverse effect on our exploration and production operations,
owed to us under contractual arrangements.
or disrupt transportation or other process-related services provided by our
The combination of declining cash flows as a result of declines in commodity
prices, a reduction in borrowing basis under reserves-based credit
We are highly dependent on certain members of our management and
facilities and the lack of availability of debt or equity financing may result
technical team, including our geologists and geophysicists, and on
in a significant reduction of our customers’ liquidity and limit their ability to
our ability to hire and retain new qualified personnel.
make payments or perform on their obligations to us.
third-party contractors.
The ability, expertise, judgment and discretion of our management and our
technical and engineering teams are key in discovering and developing oil
GeoPark 20F
47
and natural gas resources. Our performance and success are dependent to a
in a timely manner or at all (such as due to opposition from partners,
large extent upon key members of our management and exploration team,
community or environmental interest groups, governmental delays or any
and their loss or departure would be detrimental to our future success. In
other reasons) or if we face additional requirements due to changes in
addition, our ability to manage our anticipated growth depends on our ability
applicable laws and regulations, our operations could be adversely affected,
to recruit and retain qualified personnel. Our ability to retain our employees
impeded, or terminated, which could have a material adverse effect on our
is influenced by the economic environment and the remote locations of
business, financial condition or results of operations. Some environmental
our exploration blocks, which may enhance competition for human resources
licenses related to operation of the Manatí Field production system and
where we conduct our activities, thereby increasing our turnover rate.
natural gas pipeline have expired. However, the operator submitted timely a
There is strong ongoing competition in our industry to hire employees in
request for renewal of those licenses and as such this operation is not in
operational, technical and other areas, and the supply of qualified employees
default as long as the regulator does not state its final position on the renewal.
is limited in the regions where we operate and throughout Latin America
generally. The loss of any of our executive officers or other key employees
We, as the owner, shareholder or the operator of certain of our past, current
of our technical team or our inability to hire and retain new qualified
and future discoveries and prospects, could be held liable for some or all
personnel could have a material adverse effect on us.
environmental, health and safety costs and liabilities arising out of our actions
and omissions as well as those of our block partners, third-party contractors,
We and our operations are subject to numerous environmental, health
predecessors or other operators. To the extent we do not address these
and safety laws and regulations which may result in material liabilities
costs and liabilities or if we do not otherwise satisfy our obligations, our
and costs.
operations could be suspended, terminated or otherwise adversely affected.
We have also contracted with and intend to continue to hire third parties
We and our operations are subject to various international, foreign, federal,
to perform services related to our operations. There is a risk that we may
state and local environmental, health and safety laws and regulations
contract with third parties with unsatisfactory environmental, health and
governing, among other things, the emission and discharge of pollutants
safety records or that our contractors may be unwilling or unable to cover any
into the ground, air or water; the generation, storage, handling, use,
losses associated with their acts and omissions. Accordingly, we could be
transportation and disposal of regulated materials; and human health and
held liable for all costs and liabilities arising out of the acts or omissions of our
safety. Our operations are also subject to certain environmental risks that are
contractors, which could have a material adverse effect on our results of
inherent in the oil and gas industry and which may arise unexpectedly and
operations and financial condition.
result in material adverse effects on our business, financial condition and
results of operations. Breach of environmental laws, as well as impacts on
Releases of regulated substances may occur and can be significant. Under
natural resources and unauthorized use of such resources, could result
certain environmental laws and regulations applicable to us in the countries
in environmental administrative investigations and/or lead to the termination
in which we operate, we could be held responsible for all of the costs
of our concessions and contracts. Other potential consequences include
relating to any contamination at our past and current facilities and at any
fines and/or criminal or civil environmental actions. For instance, non-
governmental organizations seeking to preserve the environment may bring
third-party waste disposal sites used by us or on our behalf. Pollution
resulting from waste disposal, emissions and other operational practices
actions against us or other oil and gas companies in order to, among
might require us to remediate contamination, or retrofit facilities, at
other things, halt our activities in any of the countries in which we operate
substantial cost. We also could be held liable for any and all consequences
or require us to pay fines. Additionally, in Colombia, recent rulings
arising out of human exposure to such substances or for other damage
have provided that environmental licenses are administrative acts subject
resulting from the release of hazardous substances to the environment,
to class actions that could eventually result in their cancellation, with
property or to natural resources, or affecting endangered species or sensitive
potential adverse impacts on our E&P Contracts.
environmental areas. Environmental laws and regulations also require that
wells be plugged and sites be abandoned and reclaimed to the satisfaction
We are required to obtain environmental permits from governmental
of the relevant regulatory authorities. We are currently required to, and
authorities for our operations, including drilling permits for our wells. We
in the future may need to, plug and abandon sites in certain blocks in each of
have not been and may not be at all times in complete compliance with
the countries in which we operate, which could result in substantial costs.
these permits and the environmental and health and safety laws and
regulations to which we are subject. If we violate or fail to comply with such
In addition, we expect continued and increasing attention to climate change
requirements, we could be fined or otherwise sanctioned by regulators,
issues. Various countries and regions have agreed to regulate emissions
including through the revocation of our permits or the suspension or
of greenhouse gases including methane (a primary component of natural
termination of our operations. If we fail to obtain, maintain or renew permits
gas) and carbon dioxide (a byproduct of oil and natural gas combustion).
48
GeoPark 20F
The regulation of greenhouse gases and the physical impacts of climate
million, which includes interest payments under the Notes due 2020
change in the areas in which we, our customers and the end-users
and the credit facility with Itaú BBA International plc. See “Item 5. Operating
of our products operate could adversely impact our operations and the
and Financial Review and Prospects-B. Liquidity and Capital Resources-
demand for our products.
Indebtedness.” We are also restricted from entering into borrowing
arrangements in some circumstances such as in Colombia where LGI must
Environmental, health and safety laws and regulations are complex and
approve GeoPark Colombia’s borrowing arrangements, see “Item 4-
change frequently, and have tended to become increasingly stringent over
Information about the Company-History,” for more information.
time. Our costs of complying with current and future climate change,
environmental, health and safety laws, the actions or omissions of our
Our substantial indebtedness could:
partners and third-party contractors and our liabilities arising from releases
• make it more difficult for us to satisfy our obligations with respect to
of, or exposure to, regulated substances may adversely affect our results
our indebtedness, and any failure to comply with the obligations of
of operations and financial condition. See “-Item 4. Information on the
any of our debt instruments, including restrictive covenants and borrowing
Company-B. Business overview-Health, safety and environmental matters”
conditions, could result in an event of default under the agreements
and “-Item 4. Information on the Company-B. Business overview-
Industry and regulatory framework.”
governing our indebtedness;
• require us to dedicate a substantial portion of our cash flow from operations
to the payments on our indebtedness, thereby reducing the availability
Legislation and regulatory initiatives relating to hydraulic fracturing
of our cash flow to fund acquisitions, working capital, capital expenditures
and other drilling activities for unconventional oil and gas resources could
and other general corporate purposes;
increase the future costs of doing business, cause delays or impede our
• place us at a competitive disadvantage compared to certain of our
plans, and materially adversely affect our operations.
competitors that have less debt;
• limit our ability to borrow additional funds;
Hydraulic fracturing of unconventional oil and gas resources is a process
• in the case of our secured indebtedness, lose assets securing such
that involves injecting water, sand, and small volumes of chemicals into the
indebtedness upon the exercise of security interests in connection with
wellbore to fracture the hydrocarbon-bearing rock thousands of feet below
a default;
the surface to facilitate a higher flow of hydrocarbons into the wellbore.
• make us more vulnerable to downturns in our business or the economy;
We are contemplating such use of hydraulic fracturing in the production of
and
oil and natural gas from certain reservoirs, especially shale formations. We
• limit our flexibility in planning for, or reacting to, changes in our operations
currently are not aware of any proposals in Chile, Colombia, Brazil, or
or business and the industry in which we operate.
Argentina to regulate hydraulic fracturing beyond the regulations already
in place. However, various initiatives in other countries with substantial shale
Our Notes due 2020 include a covenant restricting dividend payments. For
gas resources have been or may be proposed or implemented to, among
a description, see “-Item 5. Operating and Financial Review and Prospects-B.
other things, regulate hydraulic fracturing practices, limit water withdrawals
and water use, require disclosure of fracturing fluid constituents, restrict
Liquidity and Capital Resources-Indebtedness-Notes due 2020.”
which additives may be used, or implement temporary or permanent bans
As a result of these restrictive covenants, we are limited in the manner in
on hydraulic fracturing. If any of the countries in which we operate adopts
which we conduct our business, and we may be unable to engage in
similar laws or regulations, which is something we cannot predict right
favorable business activities or finance future operations or capital needs.
now, such adoption could significantly increase the cost of, impede or cause
At current prices, absent certain customary exceptions, we do not anticipate
delays in the implementation of any plans to use hydraulic fracturing for
achieving an EBITDA (as defined in the indenture governing our notes due
unconventional oil and gas resources.
2020) during fiscal year 2015 that would be sufficient enough to allow
us to incur additional indebtedness, other than certain categories and small
Our substantial indebtedness could adversely affect our financial health
baskets of permitted debt, as specified in the indenture. Failure to comply
and our ability to raise additional capital, and prevent us from fulfilling
with the restrictive covenants included in our Notes due 2020 would not
our obligations under our existing agreements and borrowing of
trigger an event of default.
additional funds.
As of December 31, 2014, we had US$369.6 million of total indebtedness
refinance or enter into new debt agreements which could intensify the risks
Similar restrictions could apply to us and our subsidiaries when we
outstanding on a consolidated basis, which is 100% secured. As of December
described above.
31, 2014, our annual debt service obligation was approximately US$25.3
GeoPark 20F
49
Our business could be negatively impacted by security threats, including
in laws and policies governing operations of foreign-based companies,
cybersecurity threats as well as other disasters, and related disruptions.
expropriation of property, cancellation or modification of contract rights,
revocation of consents or approvals, the obtaining of various approvals
Our business processes depend on the availability, capacity, reliability
from regulators, foreign exchange restrictions, price controls, currency
and security of our information technology infrastructure and our ability
fluctuations, royalty increases and other risks arising out of foreign
to expand and continually update this infrastructure in response to our
governmental sovereignty, as well as to risks of loss due to civil strife, acts of
changing needs. It is critical to our business that our facilities and
war and community-based actions, such as protests or blockades, guerilla
infrastructure remain secure. Although we have implemented internal
activities, terrorism, acts of sabotage, territorial disputes and insurrection.
control procedures to assure the security of our data, we cannot guarantee
In addition, we are subject both to uncertainties in the application of the tax
that these measures will be sufficient for this purpose. The ability of the
laws in the countries in which we operate and to possible changes in such
information technology function to support our business in the event of
tax laws (or the application thereof), each of which could result in an increase
a security breach or a disaster such as fire or flood and our ability to recover
in our tax liabilities. These risks are higher in developing countries, such as
key systems and information from unexpected interruptions cannot be
those in which we conduct our activities.
fully tested and there is a risk that, if such an event actually occurs, we may
not be able to address immediately the repercussions of a breach. In the
The main economic risks we face and may face in the future because of our
event of a breach, key information and systems may be unavailable for a
number of days leading to an inability to conduct our business or perform
operations in the countries in which we operate include the following:
• difficulties incorporating movements in international prices of crude oil
some business processes in a timely manner. We have implemented
and exchange rates into domestic prices;
strategies to mitigate the impact from these types of events.
• the possibility that a deterioration in Chile’s, Colombia’s, Argentina’s, Peru’s
Our employees have been and will continue to be targeted by parties using
will impact negatively on capital controls, and result in a deterioration of the
fraudulent “spam” and “phishing” emails to misappropriate information
business climate;
or to introduce viruses or other malware through “trojan horse” programs
• inflation, exchange rate movements (including devaluations), exchange
to our computers. These emails appear to be legitimate emails sent by us but
control policies (including restrictions on remittance of dividends), price
or Brazil’s relations with multilateral credit institutions, such as the IMF,
direct recipients to fake websites operated by the sender of the email or
instability and fluctuations in interest rates;
request that the recipient send a password or other confidential information
• liquidity of domestic capital and lending markets;
through email or download malware. Despite our efforts to mitigate “spoof”
• tax policies; and
and “phishing” emails through education, “spoof” and “phishing” activities
• the possibility that we may become subject to restrictions on repatriation of
remain a serious problem that may damage our information technology
earnings from the countries in which we operate in the future.
infrastructure.
Risks relating to the countries in which we operate
In addition, our operations in these areas increase our exposure to risks of
guerilla activities, social unrest, local economic conditions, political disruption,
civil disturbance, community protests or blockades, expropriation, piracy,
Our operations may be adversely affected by political and economic
tribal conflicts and governmental policies that may: disrupt our operations;
circumstances in the countries in which we operate and in which we may
require us to incur greater costs for security; restrict the movement of
operate in the future.
funds or limit repatriation of profits; lead to U.S. government or international
sanctions; limit access to markets for periods of time; or influence the
All of our current operations are located in South America. For the year ended
market’s perception of the risk associated with investments in these
December 31, 2014, our operations in Brazil, Chile and Colombia represented
countries. Some countries in the geographic areas where we operate have
14 %, 31 % and 55 %, respectively, of our total production, with our Argentine
experienced, and may experience in the future, political instability, and
operations representing less than 1% of our total production. If local, regional
losses caused by these disruptions may not be covered by insurance.
or worldwide economic trends adversely affect the economy of any of the
Consequently, our exploration, development and production activities may
countries in which we have investments or operations, our financial condition
be substantially affected by factors which could have a material adverse effect
and results from operations could be adversely affected.
on our results of operations and financial condition. Argentina’s National
election for President and Vice-President will take place in October 2015, and
Oil and natural gas exploration, development and production activities are
other local and federal elections will also take place in 2015. We cannot
subject to political and economic uncertainties (including but not limited
guarantee that current programs and policies that apply to the oil and gas
to changes in energy policies or the personnel administering them), changes
industry will remain in effect.
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GeoPark 20F
Our operations may also be adversely affected by laws and policies of the
provides us with a long-term off-take contract with Petrobras, the Brazilian
jurisdictions, including Bermuda, Chile, Colombia, Brazil, Peru, Argentina,
state-owned company that covers approximately 74% of net proved gas
the Netherlands and other jurisdictions in which we do business, that affect
reserves in the Manatí Field. If we, the respective host governments and the
foreign trade and taxation, and by uncertainties in the application of,
national oil companies are not able to cooperate with one another, it
possible changes to (or to the application of) tax laws in these jurisdictions.
could have an adverse impact on our business, operations and prospects.
Changes in any of these laws or policies or the implementation thereof,
and uncertainty over potential changes in policy or regulations affecting
Oil and natural gas companies in Chile, Colombia, Brazil, Peru and
any of the factors mentioned above or other factors in the future may
Argentina do not own any of the oil and natural gas reserves in such
increase the volatility of domestic securities markets and securities issued
countries.
abroad by companies operating in these countries, which could materially
and adversely affect our financial position, results of operations and cash
Under Chilean, Colombian, Brazilian, Peruvian and Argentine law, all onshore
flows. Furthermore, we may be subject to the exclusive jurisdiction of courts
and offshore hydrocarbon resources in these countries are owned by the
outside the United States or may not be successful in subjecting non-U.S.
respective sovereign. Although we are the operator of the majority of the
persons to the jurisdiction of courts in the United States, which could
blocks and concessions in which we have a working and/or economic interest
adversely affect the outcome of such dispute.
and generally have the power to make decisions as how to market the
The ongoing “Lava Jato” investigation regarding corruption at and
Argentine governments have full authority to determine the rights, royalties
with Petróleo Brasileiro S.A., or Petrobras, may hinder the growth of the
or compensation to be paid by or to private investors for the exploration or
Brazilian economy and could have an adverse effect on our business.
production of any hydrocarbon reserves located in their respective countries.
hydrocarbons we produce, the Chilean, Colombian, Brazilian, Peruvian and
Petrobras and certain other Brazilian companies active in the energy and
Under the Chilean Constitution, the state is the exclusive owner of all mineral
infrastructure sectors are facing investigations by the Securities Commission
and fossil substances, including hydrocarbons, regardless of who owns the
of Brazil (Comissão de Valores Mobiliários), the U.S. Securities and
land on which the reserves are located. The exploration and exploitation
Exchange Commission, the Brazilian Federal Police and the Brazilian Federal
of hydrocarbons may be carried out by the state, companies owned by state
Prosecutor’s Office, in connection with corruption allegations, or the
or private persons through administrative concessions granted by the
“Lava Jato” investigations. Depending on the duration and outcome of such
President of Chile by Supreme Decree or by CEOPs executed by the Minister
investigations, the companies involved may face downgrades from rating
of Energy. Hydrocarbon exploration and exploitation activities are regulated
agencies, funding restrictions and a reduction in their revenues. Given the
by the Chilean Ministry of Energy. In Chile, a participant is granted rights
relatively significant weight of the companies cited in the investigation,
to explore and exploit certain assets under a CEOP. Although the government
this could have an adverse effect on Brazil’s growth prospects and could have
cannot unilaterally modify or terminate the rights granted in the CEOP
a protracted effect on the oil and gas industry. Negative effects on a number
once it is signed, if a participant fails to complete certain obligations under
of companies may also impact the level of investments in infrastructure
in Brazil which may lead to lower economic growth in the near to medium
a CEOP, such participant may lose the right to exploit certain areas or
may be required to return all or a portion of the awarded areas back to Chile.
term. Persistently poor macroeconomic conditions resulting from, among
other things, the Lava Jato investigations and their consequences could have
In Colombia, oil and natural gas companies have acquired the exclusive
a material adverse effect on us as Brazil is one of the markets we operate in.
right to explore, develop and produce reserves discovered within certain
We depend on maintaining good relations with the respective host
Colombian government through the ANH or, prior to 2004, entered into with
governments and national oil companies in each of our countries of
Ecopetrol. However, a concessionaire owns only the oil and natural gas
concession areas, pursuant to concession agreements awarded by the
operation.
that it extracts under the concession agreements to which it is a party. If the
Colombian government were to restrict or prevent concessionaires, including
The success of our business and the effective operation of the fields in
us, from exploiting these oil and natural gas reserves, or otherwise interfere
each of our countries of operation depend upon continued good relations
with our exploration through regulations with respect to restrictions on
and cooperation with applicable governmental authorities and agencies,
future exploration and production, price controls, export controls, foreign
including national oil companies such as ENAP, Ecopetrol and Petrobras.
exchange controls, income taxes, expropriation of property, environmental
For instance, for the year ended December 31, 2014, 100% of our crude oil
legislation or health and safety, this could have a material adverse effect
and condensate sales in Chile were made to ENAP, the Chilean state-owned
on our business, financial condition and results of operations.
oil company. In addition, our recent Rio das Contas acquisition in Brazil
GeoPark 20F
51
Additionally, we are dependent on receipt of Colombian government
and Mines. The qualification has already been granted by Perupetro, and the
approvals or permits to develop the concessions we hold in Colombia. There
Supreme Decree is expected to be issued in 2015.
can be no assurance that future political conditions in Colombia will not
result in the Colombian government adopting different policies with respect
Under the License Contract of Morona Block, GeoPark and Petroperú
to foreign development and ownership of oil, environmental protection,
(GeoPark’s anticipated partner in the block) will have the exclusive right to
health and safety or labor relations. This may affect our ability to undertake
perform exploration and production activities in such block, and will pay
exploration and development activities in respect of present and future
royalties for the hydrocarbons produced in this area. The ownership of the
properties, as well as our ability to raise funds to further such activities. Any
hydrocarbons produced in the Morona Block will belong to GeoPark in
delays in receiving Colombian government approvals, permits or no
accordance with its participation interest in the block.
objection certificates may delay our operations or may affect the status of our
contractual arrangements or our ability to meet contractual obligations.
The exploration and production activities of GeoPark in the Morona Block
will largely be shaped by the provisions included in the License Contract,
Pursuant to Article 20 of the Brazilian Constitution and Article 3 of Law
and without such contract it is not possible to carry out any oil and gas
No. 9,478, dated as of August 6, 1997, as amended, or the Brazilian Petroleum
activity in the Morona Block.
Law, oil, natural gas and hydrocarbon reserves located within the Brazilian
territory, which encompasses onshore and offshore reserves, as well as
In Argentina, jurisdiction over oil and gas activities is now largely vested in
deposits in the Brazilian continental shelf, territorial waters and exclusive
the same provincial states who own the relevant underground oil and gas
economic zone, are considered assets of the Brazilian government. Therefore,
resources. The Federal Executive Branch is still empowered to design
the concessionaire owns only the oil and natural gas that it produces
and rule federal energy policy and to rule on domestic inter-jurisdictional
under the concession agreements. Oil and natural gas companies in Brazil
and international oil and gas transportation concessions and has, for example,
acquire the exclusive right to explore, develop and produce reserves
imposed measures controlling oil and gas investments in the provincial
discovered within certain concession areas pursuant to concession
states. Private companies must obtain exploration permits or exploitation
agreements awarded by the Brazilian government. However, if the Brazilian
concessions from the provincial states or otherwise enter into certain
government were to restrict or prevent concessionaires, including us,
types of joint venture or association agreements with provincial state-owned
from exploiting these oil and natural gas reserves, or interfere in the sale
oil and gas companies in order to undertake exploration and production
or transfer of the production, our ability to generate income would be
activities onshore, and must enter into certain types of joint venture or
materially adversely affected, which would have a material adverse effect
association agreements with the federally-owned oil and gas company,
on our business, financial condition and results of operations.
ENARSA, to undertake these activities offshore. Additionally, whereas until
2012, exploration permit and exploitation concession holders had
Companies in the Brazilian oil and natural gas industry also rely primarily on
the right to freely dispose of and market up to 70% of the production they
the public auction process regulated by the ANP to acquire rights to explore
generated, on July 28th, 2012, the publication of Presidential Decree
oil and natural gas reserves. While the ANP may offer concessions in certain
basins in future bidding rounds, there is a risk that future bidding rounds
1277/2012 abrogated this right. As of December 31, 2014, our production
in Argentina represented less than 1% of our total production, though
may not take place or that they do not include desirable locations, since they
recent regulations affecting the oil and gas industry in Argentina may have
are conducted by and under the Brazilian government’s discretion, which
an adverse impact on our business, operations and prospects in Argentina.
could have a material adverse effect on our business, expected results of
operations and financial condition.
Oil and gas operators are subject to extensive regulation in the countries
In Peru, oil and gas exploration and production activities are conducted
in which we operate.
under license contracts granted by the Peruvian government. GeoPark has
In Chile, rights to exploration and exploitation of a particular area are
acquired a participation interest in the License Contract of Morona Block,
established in a CEOP. According to article 19, No 24 of the Chilean
and the effectiveness of such acquisition is subject to the approval by the
Constitution, the President of Chile has the power to determine the terms
Peruvian government. The governmental approval includes the qualification
and conditions for the granting of a particular CEOP. In addition, the
of GeoPark by Perupetro, in order to determine if it fulfills all the requirements
CEOP is subject to extensive supervision by the government through the
needed to develop exploration and production activities in the Morona
Chilean Ministry of Energy. The President of Chile may also decide to
Block, as well as and the enactment of a Supreme Decree issued by the
terminate a CEOP early, though with compensation to the counterparty, and
Peruvian Ministry of Economy and Finance and the Peruvian Ministry Energy
only if the relevant area is located within an area declared relevant for
national security reasons.
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GeoPark 20F
Although the government of Chile cannot unilaterally modify the rights
of operations or our being subjected to administrative, civil and criminal
granted in the CEOP once it is signed, exploration and exploitation are
penalties, which could have a material adverse effect on our financial
nonetheless subject to significant government regulations, such as
condition and expected results of operations. We expect to also operate in a
regulations concerning the environment, tort liability, health and safety
consortium in some of our concessions, which, under the Brazilian Petroleum
and labor, all of which have an impact on our business and operations.
Law, establishes joint and strict liability among consortium members. If
Changes in laws and regulations could have an adverse effect on the costs
the operator does not maintain the appropriate licenses, the consortium may
and timing of our operations. For example, in November 2012, the
suffer administrative penalties, including fines of R$10 to R$500 million.
government approved new regulations governing the abandonment of
mines and oilfield operations that would require us to obtain prior approval
In addition, the local content policy, which is a contractual requirement in a
for new oil wells and could also require us to post a bond in connection
Brazilian concession agreements, has become a significant issue for oil
with the abandonment or closure of an oil well.
and natural gas companies operating in Brazil given the penalties related
with breaches thereof. The local content requirement will also apply to the
The Colombian hydrocarbons industry is subject to extensive regulation
production sharing contract regime. See “-Item 4. Information on the
and supervision by the government in matters such as the environment,
Company-B. Business overview-Our operations-Operations in Brazil.”
tort liability, health and safety, labor, the award of exploration and
production contracts by the ANH, the imposition of specific drilling and
In Peru, the hydrocarbons industry is also subject to extensive regulation
exploration obligations, taxation, foreign currency controls, price controls,
and supervision by the government in matters such as: environment,
capital expenditures and required divestments. Existing Colombian
health and safety, labor, imposition of specific development and exploration
regulation applies to virtually all aspects of our concessions or E&P Contracts
obligations, taxation, and tort liability. There are many supervisors and
in Colombia. The terms and conditions of the agreements with the ANH
regulators, for example: a) Perupetro, the state-owned company that
generally reflect negotiations with the ANH and other Colombian
promotes, negotiates, signs, and supervises exploration and production
governmental authorities, and may vary by fields, basins and hydrocarbons
contracts; b) The Ministry of Energy and Mines, which is the central and
discovered.
governing body for the Energy, Hydrocarbons and Mining Sector, and a part
of the Executive Branch; c) The Bureau of Environmental Evaluation and
We are required, as are all oil companies undertaking exploratory and
Control – OEFA, which is the supervisory body that regulates, enforces and
production activities in Colombia, to pay a percentage of our expected
oversees the activities undertaken related to environmental hydrocarbon
production to the Colombian government as royalties. The Colombian
issues; d) The Supervisory Body of Private Investment in Energy and Mines –
government has modified the royalty program for oil and natural gas
OSINERGMIN, which is the regulatory, supervisory body that regulates
production several times in the last 20 years, as it has modified the regime
the activities undertaken by legal entities and individuals in the hydrocarbons
regulating new contracts entered into with the Colombian government.
sectors; e) The General Bureau of Environmental Health – DIGESA, which
The royalty regime for contracts being entered into today for conventional
is the technical-regulatory body for aspects related to basic sanitation,
oil is tied to a scale ring-fenced by field starting at 8% for production of
up to 5,000 mbopd and increases up to 25% for production above 600,000
occupational health, hygienic food, zoonosis and environmental protection;
f) the Ministry of Agriculture, which is the entity that promotes the development
mbopd. Royalties for natural gas production of onshore blocks where
of organized agrarian producers in productive chains; and g) The Ministry of
our assets are located, range between 8% and 25%. Furthermore, production
Labor and Employment Promotion – MTPE, which is the body governing labor
of unconventional resources discovered as of May 19, 2012 is subject to
in Peru, responsible for enforcement of legislation for labor matters.
royalties equivalent to 60% of the royalties applicable to conventional oil.
In Brazil, the oil and natural gas industry is subject to extensive regulation
General Hydrocarbons Law (Law 26,221) (“General Hydrocarbons Law”), and
and intervention by the Brazilian government in such matters as the award of
several regulations have been enacted in order to develop the provisions
exploration and production interests, taxation and foreign currency controls.
included therein. There are specific regulations for exploration and
Ultimately, those regulations may also address restrictions on production,
production, transport, commercialization, storage, refining, distribution by
The main provisions regarding oil and gas activities are included in the
price controls, mandatory divestments of assets and nationalization,
pipelines, etc.
expropriation or cancellation of contractual rights.
Under these laws and regulations, there is potential liability for personal
foresee that the signing of an oil and gas agreement implies the guarantee
injury, property damage and other types of damages. Failure to comply with
that the tax regime in effect at the date of signature will not be changed
these laws and regulations also may result in the suspension or termination
during the life of the contract. This is intended to preserve the economy of
Furthermore, the General Hydrocarbons Law and the related tax regulations
GeoPark 20F
53
the contract so that no further tax costs are created for the contractors. The
decline in our expected net sales or net income could lead to a deterioration
signing of an agreement for the exploration or exploitation of a block freezes
in our financial condition.
the tax regime in force at the date that the contract is signed for the entire
life of the contract. Taxes covered by this provision are the taxes in which the
In Argentina, since 2001, the Argentine government has imposed and
responsibility rests on the contractor as a taxpayer.
expanded upon exchange controls and restrictions on the transfer of U.S.
dollars outside of Argentina, which substantially limit the ability of companies
The Argentine hydrocarbons industry is also extensively regulated both by
to retain foreign currency or make payments abroad. These and other
federal and provincial state regulations in matters including the award of
measures have led the implied AR$/US$ exchange rate as reflected in the
exploration permits and exploitation concessions, investment, royalty, canon,
quotations for certain Argentine securities that trade in foreign markets
price controls, export restrictions and domestic market supply obligations.
to differ substantially from the official foreign exchange rate in Argentina. If the
The terms of our exploitation concessions are embodied in Decrees and
Argentine government decides once again to tighten the restrictions on the
Administrative Decisions issued by the Federal Executive Power and
transfer of funds, we may be unable to make payments related to the import of
incorporate statutory rights and obligations provided under the General
products and services, which could have a material adverse effect on us.
Hydrocarbons Law. The federal government is further empowered to
design and implement federal energy policy and to rule on domestic inter-
Additionally, in May 2012, the Argentine government expropriated 51%
jurisdictional and international oil and gas transportation concessions, and
of YPF’s capital stock owned by Repsol YPF of Spain, and 51% of the capital
has used these powers to establish export restrictions and duties, induce
stock of Repsol YPF Gas owned by Repsol Butano.
private companies to enter into price stability agreements with the
government or otherwise impose price control regulations or create incentive
There can be no assurance that future economic, social and political
programs to promote increased production. Jurisdictional controversies
developments in the countries in which we operate currently or in the future,
among the federal government and the provincial states are not uncommon.
which are out of our control, may impair our business, financial condition
and results of operations.
Significant expenditures may be required to ensure our compliance with
governmental regulations related to, among other things, licenses for
Our operations may be affected by tax reforms in the countries in which
drilling operations, environmental matters, drilling bonds, reports concerning
we operate and in which we may operate in the future.
operations, the spacing of wells, unitization of oil and natural gas
accumulations, local content policy and taxation.
Our operations may be affected by changes in tax laws in the countries in
which we operate and in which we may operate in the future. In 2014
Governmental actions in the countries in which we operate and in which
Colombian and Chilean governments introduced tax reforms. For example,
we may operate in the future may adversely affect our business, financial
in the fourth quarter 2014, the Colombian government approved tax
condition and results of operations.
Our business, financial condition and results of operations may be adversely
legislation increasing the rate of tax applicable to ordinary income from 34%
in 2014 to 39% for 2015, 40% for 2016, 42% for 2017 and 43% for 2018. In
the same legislation, the Colombian government also instituted a new
affected by actions taken by the Chilean, Colombian, Brazilian, Peruvian or
“wealth tax” payable on the net equity of our Colombia business units at
Argentine governments concerning the economy, including actions aimed at
a rate of 1.15% for 2015, 1% for 2016 and 0.4% for 2017. (See Note 15 to our
targeting inflation, interest rates, oil and gas price controls, foreign exchange
Financial Statements included in this Annual Report).
controls and taxes.
In Brazil, the Brazilian government frequently implements changes to tax and
Brazil has in the past periodically experienced extremely high rates of
social security regimes that may affect us and our customers. These changes
inflation. As measured by the National Consumer Price Index (Índice Nacional
include changes in prevailing tax and contribution rates and, occasionally,
de Preços ao Consumidor Amplo), Brazil had annual rates of inflation of 6.5%
enactment of temporary taxes, the proceeds of which are earmarked for
in 2011, 5.8% in 2012, 5.9% in 2013 and 6.4 % in 2014. Brazil may experience
designated governmental purposes. Some of these changes in tax laws may
high levels of inflation in the future. Periods of higher inflation may slow
result in increases in our tax payments, which could materially adversely
the rate of growth of the Brazilian economy. Although the long-term off-take
affect our profitability and increase the prices of our products and services,
contract covering gas production in the Manatí Field is indexed to inflation,
restrict our ability to do business in our existing and target markets and cause
inflation is likely to increase some of our costs and expenses, and, as a result,
our results of operations to suffer. There can be no assurance that we will be
may reduce our profit margins and net income. Inflationary pressures could
able to maintain our projected cash flow and profitability following any
also lead to counter-inflationary prices that may harm our business. Any
increase in taxes applicable to us and to our operations.
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GeoPark 20F
Colombia has experienced and continues to experience internal security
implications under Argentine law with respect to our incorporation in
issues that have had or could have a negative effect on the Colombian
Bermuda, which may subject our Argentine subsidiaries to higher tax rates.
economy.
Risks related to our common shares
Colombia has experienced internal security issues, primarily due to the
activities of guerrillas, including the Revolutionary Armed Forces of Colombia
An active, liquid and orderly trading market for our common shares may
(Fuerzas Armadas Revolucionarias de Colombia), or the FARC, paramilitary
not develop and the price of our stock may be volatile, which could limit
groups and drug cartels. In the past, guerrillas have targeted the crude oil
your ability to sell our common shares.
pipelines, including the Oleoducto Transandino, Caño Limón-Coveñas and
Ocensa pipelines, and other related infrastructure disrupting the activities of
Our common shares began to trade on the New York Stock Exchange on
certain oil and natural gas companies. On several occasions guerilla attacks
February 7, 2014, and as a result have a limited trading history. We cannot
have resulted in unscheduled shut-downs of the transportation systems in
predict the extent to which investor interest in our company will maintain an
order to repair damaged sections and undertake clean-up activities. These
active trading market on the NYSE, or how liquid that market will be in the
activities, their possible escalation and the effects associated with them
future.
have had and may have in the future a negative impact on the Colombian
economy or on our business, which may affect our employees or assets. In the
The market price of our common shares may be volatile and may be
context of the political instability, allegations have been made against
members of the Colombian Congress and against government officials for
influenced by many factors, some of which are beyond our control, including:
• our operating and financial performance and identified potential drilling
possible ties with guerilla groups. This situation may have a negative impact
locations, including reserve estimates;
on the credibility of the Colombian government, which could in turn have a
• quarterly variations in the rate of growth of our financial indicators, such as
negative impact on the Colombian economy or on our business in the future.
net income per common share, net income and revenues;
• changes in revenue or earnings estimates or publication of reports by
The Colombian government commenced peace talks with the FARC in August
equity research analysts;
2012. Our business, financial condition and results of operations could be
• fluctuations in the price of oil or gas;
adversely affected by rapidly changing economic or social conditions,
• speculation in the press or investment community;
including the Colombian government’s response to current peace
• sales of our common shares by us or our shareholders, or the perception
negotiations which may result in legislation that increases our tax burden or
that such sales may occur;
that of other Colombian companies. Tensions with neighboring countries
• involvement in litigation;
may affect the Colombian economy and, consequently, our results of
• changes in personnel;
operations and financial condition.
• announcements by the company;
In addition, from time to time, community protests and blockades may arise
near our operations in Colombia, which could adversely affect our business,
to our performance.
• variations in our quarterly operating results;
financial condition or results of operations.
• volatility in our industry, the industries of our customers and the global
• domestic and international economic, legal and regulatory factors unrelated
securities markets;
Our operations may be adversely affected by political and economic
• changes in our dividend policy;
circumstances in Argentina.
• risks relating to our business and industry, including those discussed above;
• strategic actions by us or our competitors;
Some of our current operations and management offices are located in
• actual or expected changes in our growth rates or our competitors’ growth
Argentina. If local political or economic trends adversely affect the Argentine
rates;
economy, our financial condition and results from operations could be
• investor perception of us, the industry in which we operate, the investment
adversely affected. In particular, we face risks in Argentina related to the
opportunity associated with our common shares and our future performance;
following: restrictions on Argentina’s energy supplies and an inadequate
• adverse media reports about us or our directors and officers;
governmental response to such restrictions, which could negatively affect
• addition or departure of our executive officers;
Argentina’s economic activity; social and political tensions and the
• change in coverage of our company by securities analysts;
governmental response to such tensions; requirements of the Federal General
• trading volume of our common shares;
Environmental Law, which requires persons who carry out activities that are
• future issuances of our common shares or other securities;
potentially hazardous to the environment to obtain insurance; and tax
• terrorist acts;
GeoPark 20F
55
• the release or expiration of transfer restrictions on our outstanding common
Additionally, we may not be able to fully control the operations and the assets
shares.
of our joint ventures and we may not be able to make major decisions or
take timely actions with respect to our joint ventures unless our joint venture
We have never declared or paid, and do not intend to pay in the foreseeable
partners agree. For example, we have entered into shareholder agreements
future, cash dividends on our common shares, and, consequently, your
with LGI in Chile and Colombia that limit the amount of dividends that can be
only opportunity to achieve a return on your investment is if the price of
declared or returned to us, certain aspects related to the management of our
our stock appreciates.
Chilean and Colombian businesses, the incurrence of indebtedness, liens
and our ability to sell certain assets. See “-Risks relating to our business-LGI,
We have never paid, and do not intend to pay in the foreseeable future, cash
our strategic partner in Chile and Colombia, may sell its interest in our
dividends on our common shares. Any decision to pay dividends in the future,
Chilean and Colombian operations to a third party or may not consent to our
and the amount of any distributions, is at the discretion of our board of
taking certain actions.” We may, in the future, enter into other joint venture
directors and our shareholders, and will depend on many factors, such as our
agreements imposing additional restrictions on our ability to pay dividends.
results of operations, financial condition, cash requirements, prospects and
other factors.
Sales of substantial amounts of our common shares in the public market,
or the perception that these sales may occur, could cause the market price
We are also subject to Bermuda legal constraints that may affect our ability
of our common shares to decline.
to pay dividends on our common shares and make other payments. Under
the Bermuda Companies Act, we may not declare or pay a dividend if there
We may issue additional common shares or convertible securities in the future,
are reasonable grounds for believing that we are, or would after the payment
for example, to finance potential acquisitions of assets, which we intend to
be, unable to pay our liabilities as they become due or that the realizable
continue to pursue. Sales of substantial amounts of our common shares in the
value of our assets would thereafter be less than our liabilities. We are also
public market, or the perception that these sales may occur, could cause the
subject to contractual restrictions under certain of our indebtedness.
market price of our common shares to decline. This could also impair our ability
We are a holding company dependent upon dividends from our
memorandum of association, we are authorized to issue up to 5,171,949,000
subsidiaries, which may be limited by law and by contract from making
common shares, of which 57,790,533 common shares were outstanding as of
distributions to us, which would affect our financial condition, including
December 31, 2014. We cannot predict the size of future issuances of our
the ability to pay dividends on the common shares.
common shares or the effect, if any, that future sales and issuances of shares
to raise additional capital through the sale of our equity securities. Under our
would have on the market price of our common shares.
As a holding company, our only material assets are our cash on hand, the
equity interests in our subsidiaries and other investments. Our principal
Provisions of the Notes due 2020 could discourage an acquisition of us by
source of revenues and cash flow is distributions from our subsidiaries. Thus,
a third party.
our ability to pay dividends on the common shares will be contingent upon
the financial condition of our subsidiaries. Our subsidiaries are and will be
Certain provisions of the Notes due 2020 could make it more difficult or
separate legal entities, and although they may be wholly-owned or controlled
more expensive for a third party to acquire us, or may even prevent a third
by us, they have no obligation to make any funds available to us, whether
party from acquiring us. For example, upon the occurrence of a fundamental
in the form of loans, dividends, distributions or otherwise. The ability of
change, holders of the Notes due 2020 will have the right, at their option,
our subsidiaries to distribute cash to us is also subject to, among other things,
to require us to repurchase all of their notes at a purchase price equal to
restrictions that are contained in our and our subsidiaries’ financing
101% of the principal amount thereof plus any accrued and unpaid interest
(including our Notes due 2020 and GeoPark Brazil’s loan to finance Rio das
(including any additional amounts, if any) to the date of purchase. By
Contas) and joint venture agreements (principally our agreements with
discouraging an acquisition of us by a third party, these provisions could have
LGI), availability of sufficient funds in such subsidiaries and applicable state
the effect of depriving the holders of our common shares of an opportunity
laws and regulatory restrictions. Claims of creditors of our subsidiaries
to sell their common shares at a premium over prevailing market prices.
generally will have priority as to the assets of such subsidiaries over our
claims and claims of our creditors and stockholders. To the extent the ability
Variations in interest rates and exchange rate on our current and/or
of our subsidiaries to distribute dividends or other payments to us could be
future financing arrangements may result in significant increases in our
limited in any way, our business, financial condition and results of operations,
borrowing costs.
as well as our ability to pay dividends on the common shares, could be
materially adversely affected.
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GeoPark 20F
As of December 31, 2014, a part (19%) of our total debt is sensitive to changes
events, we are not required to file quarterly reports on Form 10-Q or provide
in interest rates. At December 31, 2014, the outstanding long-term borrowing
current reports on Form 8 K disclosing significant events within four days
affected by variable rates amounted to US$ 68,540,000, representing 19%
of their occurrence and our quarterly or current reports may contain less
of total long-term borrowings, which was composed by the loan from Itaú Bank
information than required under U.S. filings. In addition, we are exempt from
that has a floating interest rate based on LIBOR (the “Rio das Contas Credit
the Section 14 proxy rules, and proxy statements that we distribute will
Facility”). For more information, see “Item 4-Marketing and Delivery
not be subject to review by the SEC. Our exemption from Section 16 rules
Commitments-Brazil,” and Note 3 in our Financial Statements. Consequently,
regarding sales of common shares by insiders means that you will have
variations in interest rates could result in significant changes in the amount
less data in this regard than shareholders of U.S. companies that are subject
required to cover our debt service obligations and our interest expense.
to the Exchange Act. As a result, you may not have all the data that you are
accustomed to having when making investment decisions. For example, our
In addition, interest and principal amounts payable pursuant to debt obligations
officers, directors and principal shareholders are exempt from the reporting
denominated in or indexed to U.S. dollars are subject to variations in the foreign
and “short-swing” profit recovery provisions of Section 16 of the Exchange
currency exchange rates that could result in a significant increase in the amount
Act and the rules thereunder with respect to their purchases and sales of our
of the interest and principal payments in respect of such debt obligations.
common shares. The periodic disclosure required of foreign private issuers
Certain shareholders have substantial control over us and could limit your
therefore be less publicly available information about us than is regularly
ability to influence the outcome of key transactions, including a change
published by or about U.S. public companies. See “-Item 10. Additional
of control.
Information-H. Documents on display.”
is more limited than that required of domestic U.S. issuers and there may
Mr. Gerald E. O’Shaughnessy, our Chairman, Mr. James F. Park, our Chief
As a foreign private issuer, we will be exempt from complying with certain
Executive Officer, Mr. Juan Cristóbal Pavez, director and Mr. Steven J.
corporate governance requirements of the NYSE applicable to a U.S. issuer,
Quamme, control approximately 48% of our outstanding common shares as
including the requirement that a majority of our board of directors consist
of the date of this annual report, holding the shares either directly or through
of independent directors. As the corporate governance standards applicable
privately held funds which they control. As a result, these shareholders,
to us are different than those applicable to domestic U.S. issuers, you may
if acting together, would be able to influence or control matters requiring
not have the same protections afforded under U.S. law and the NYSE rules as
approval by our shareholders, including the election of directors and the
shareholders of companies that do not have such exemptions.
approval of amalgamations, mergers or other extraordinary transactions.
They may also have interests that differ from yours and may vote in a way
We are an “emerging growth company,” and we cannot be certain if the
with which you disagree and which may be adverse to your interests.
reduced disclosure requirements applicable to emerging growth companies
The concentration of ownership may have the effect of delaying, preventing
will make our common shares less attractive to investors.
or deterring a change of control of our company, could deprive our
stockholders of an opportunity to receive a premium for their common
shares as part of a sale of our company and might ultimately affect the market
We are an “emerging growth company,” as defined in the JOBS Act, and for
as long as we continue to be an “emerging growth company” we may choose
price of our common shares. See “Item 7. Major Shareholders and Related
to take advantage of certain exemptions from various reporting requirements
Party Transactions-A. Major shareholders” for a more detailed description
that are applicable to other public companies that are not “emerging growth
of our share ownership.
companies,” including, but not limited to, not being required to comply
with the auditor attestation requirements of Section 404(b) of the Sarbanes
As a foreign private issuer, we are subject to different U.S. securities laws
Oxley Act. We cannot predict if investors will find our common shares less
and NYSE governance standards than domestic U.S. issuers. This may
attractive because we will rely on these exemptions. If some investors find our
afford less protection to holders of our common shares, and you may not
common shares less attractive as a result, there may be a less active trading
receive corporate and company information and disclosure that you
market for our common shares and our share price may be more volatile.
are accustomed to receiving or in a manner in which you are accustomed
to receiving it.
Under the JOBS Act, emerging growth companies can delay adopting new
or revised accounting standards until such time as those standards apply to
As a foreign private issuer, the rules governing the information that we
private companies. We have irrevocably elected not to avail ourselves of
disclose differ from those governing U.S. corporations pursuant to the
this exemption from new or revised accounting standards, and, therefore, we
Securities Exchange Act of 1934, as amended, or the Exchange Act. Although
will be subject to the same new or revised accounting standards as other
we intend to report quarterly financial results and report certain material
public companies that are not emerging growth companies.
GeoPark 20F
57
Our internal controls over financial reporting may not be effective which
There are regulatory limitations on the ownership and transfer of our
could have a significant and adverse effect on our business and reputation.
common shares which could result in the delay or denial of any transfers
We have evaluated our internal controls for our financial reporting and have
you might seek to make.
determined our controls were effective for the fiscal year ended December 31,
The Bermuda Monetary Authority, or the BMA, must specifically approve all
2014. As long as we qualify as an “emerging growth company” as defined
issuances and transfers of securities of a Bermuda exempted company like
by the Jumpstart our Business Startups Act of 2012, we will not be required to
us unless it has granted a general permission. We are able to rely on a general
obtain an auditor’s attestation report on our internal controls in future annual
permission from the BMA to issue our common shares, and to freely transfer
reports on Form 20-F as otherwise required by Section 404(b) of the Sarbanes-
of our common shares as long as the common shares are listed on the NYSE
Oxley Act. Accordingly, our independent registered public accounting firm
and/or other appointed stock exchange, to and among persons who are
did not perform an audit of our internal control over financial reporting for the
non-residents of Bermuda for exchange control purposes. Any other transfers
fiscal year ended December 31, 2014. Had our independent registered public
remain subject to approval by the BMA and such approval may be denied
accounting firm performed an attestation on our internal control over financial
or delayed.
reporting, it is possible that their opinion on our internal controls could have
differed from ours which could harm our reputation and share value.
We are a Bermuda company, and it may be difficult for you to enforce
judgments against us or against our directors and executive officers.
We will continue to incur significantly increased costs and devote
substantial management time as a result of operating as a public company.
We are incorporated as an exempted company under the laws of Bermuda
and substantially all of our assets are located in Chile, Colombia, Argentina,
Our recent initial public offering in February 2014 had a transformative
Brazil and will be located additionally in Peru. In addition, most of our
effect on us. We expect to incur significant legal, accounting, reporting and
directors and executive officers reside outside the United States and all or a
other expenses as a result of having publicly traded common shares listed on
substantial portion of the assets of such persons are located outside the
the NYSE. We may also continue to incur costs which we have not incurred
United States. As a result, it may be difficult or impossible to effect service of
previously, including, but not limited to, costs and expenses for directors’
process within the United States upon us, or to recover against us on
fees, increased directors and officers insurance, investor relations, and various
judgments of U.S. courts, including judgments predicated upon the civil
other costs of a public company.
liability provisions of the U.S. federal securities laws. Further, no claim may
be brought in Bermuda against us or our directors and officers in the first
We also anticipate that we will incur costs associated with corporate
instance for violation of U.S. federal securities laws because these laws have
governance requirements, including requirements under the Sarbanes Oxley
no extraterritorial application under Bermuda law and do not have force
Act of 2002, as well as rules implemented by the SEC and NYSE. We expect
of law in Bermuda. However, a Bermuda court may impose civil liability,
these rules and regulations to increase our legal and financial compliance
including the possibility of monetary damages, on us or our directors and
costs and make some management and corporate governance activities more
time-consuming and costly, particularly after we are no longer an “emerging
officers if the facts alleged in a complaint constitute or give rise to a cause of
action under Bermuda law.
growth company.” These rules and regulations may make it more difficult
and more expensive for us to obtain director and officer liability insurance,
There is no treaty in force between the United States and Bermuda providing
and we may be required to accept reduced policy limits and coverage or incur
for the reciprocal recognition and enforcement of judgments in civil and
substantially higher costs to obtain the same or similar coverage. This could
commercial matters. As a result, whether a United States judgment would
have an adverse impact on our ability to recruit and bring on a qualified
be enforceable in Bermuda against us or our directors and officers depends
independent board.
on whether the U.S. court that entered the judgment is recognized by
the Bermuda court as having jurisdiction over us or our directors and officers,
The additional demands associated with being a public company listed
as determined by reference to Bermuda conflict of law rules. A judgment
on the NYSE may disrupt regular operations of our business by diverting the
debt from a U.S. court that is final and for a sum certain based on U.S. federal
attention of some of our senior management team away from revenue-
securities laws will not be enforceable in Bermuda unless the judgment
producing activities to management and administrative oversight, adversely
debtor had submitted to the jurisdiction of the U.S. court, and the issue of
affecting our ability to attract and complete business opportunities and
submission and jurisdiction is a matter of Bermuda (not U.S.) law.
increasing the difficulty in both retaining professionals and managing and
growing our businesses. Any of these effects could harm our business,
In addition, and irrespective of jurisdictional issues, the Bermuda courts will
financial condition and results of operations.
not enforce a U.S. federal securities law that is either penal or contrary to
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GeoPark 20F
Bermuda public policy. An action brought pursuant to a public or penal law,
agreement to be approved by the company’s board of directors and by its
the purpose of which is the enforcement of a sanction, power or right at the
shareholders. Shareholder approval is not required where (i) the holding
instance of the state in its sovereign capacity, will not be entertained by a
company and one or more of its wholly-owned subsidiary companies
Bermuda court. Certain remedies available under the laws of U.S. jurisdictions,
amalgamate or merge or (ii) two or more wholly-owned subsidiary companies
including certain remedies under U.S. federal securities laws, would not be
of the same holding company amalgamate or merge. Save for such “short-
available under Bermuda law or enforceable in a Bermuda court, as they
form” amalgamations or mergers, unless the company’s bye-laws provide
would be contrary to Bermuda public policy.
otherwise, the approval of 75% of the shareholders voting at such meeting
is required to approve the amalgamation or merger agreement, and the
Bermuda law differs from the laws in effect in the United States and might
quorum for such meeting must be two persons holding or representing more
afford less protection to shareholders.
than one-third of the issued shares of the company. Under our bye-laws,
an amalgamation or merger will require the approval of our board of directors
Our shareholders could have more difficulty protecting their interests than
and of our shareholders by Special Resolution, meaning a resolution adopted
would shareholders of a corporation incorporated in a jurisdiction of the
by 65% of more of the votes cast by shareholders who (being entitled to do
United States. As a Bermuda company, we are governed by our memorandum
so) vote in person or by proxy at any general meeting of the shareholders
of association and bye-laws and Bermuda company law. The provisions
in accordance with the provisions of the bye-laws. Under Bermuda law, in the
of the Bermuda Companies Act, which applies to us, differs in some material
event of an amalgamation or merger of a Bermuda company with another
respects from laws generally applicable to U.S. corporations and shareholders,
company or corporation, a shareholder of the Bermuda company who is not
including the provisions relating to interested directors, mergers and
satisfied that fair value has been offered for such shareholder’s shares may,
acquisitions, takeovers, shareholder lawsuits and indemnification of directors.
within one month of notice of the shareholders meeting, apply to the
Set forth below is a summary of these provisions, as well as modifications
Supreme Court of Bermuda to appraise the fair value of those shares. Under
adopted pursuant to our bye-laws, which differ in certain respects
Delaware law, with certain exceptions, a merger, consolidation or sale of all
from provisions of Delaware corporate law. Our shareholders approved the
or substantially all the assets of a corporation must be approved by the
adoption of new bye-laws which came into effect on February 19, 2014, being
board of directors and a majority of the issued and outstanding shares
the date on which the company cancelled admission of its common shares
entitled to vote thereon. Under Delaware law, a shareholder of a corporation
on AIM. Because the following statements are summaries, they do not discuss
participating in certain major corporate transactions may, under certain
all aspects of Bermuda law that may be relevant to us and our shareholders.
circumstances, be entitled to appraisal rights pursuant to which such
Interested Directors. Under our bye-laws and The Companies Act, 1981(as
amended) of Bermuda, or the Bermuda Companies Act, a director shall
declare the nature of his interest in any contract or arrangement with the
shareholder may receive cash in the amount of the fair value of the shares
held by such shareholder (as determined by a court) in lieu of the
consideration such shareholder would otherwise receive in the transaction.
company. Our bye-laws further provide that a director so interested shall not,
except in particular circumstances, be entitled to vote or be counted in the
quorum at a meeting in relation to any resolution in which he has an interest,
Shareholders’ Suit. Class actions and derivative actions are generally not
available to shareholders under Bermuda law. The Bermuda courts, however,
would ordinarily be expected to permit a shareholder to commence an action
which is to his knowledge, a material interest (otherwise than by virtue
in the name of a company to remedy a wrong to the company where the
of his interest in shares or debentures or other securities of or otherwise in
act complained of is alleged to be beyond the corporate power of the company
or through the company). In addition, the director will not be liable to us for
or illegal, or would result in the violation of the company’s memorandum
any profit realized from the transaction. In contrast, under Delaware law,
of association or bye-laws. Furthermore, consideration would be given by a
such a contract or arrangement is voidable unless it is approved by a majority
Bermuda court to acts that are alleged to constitute a fraud against the minority
of disinterested directors or by a vote of shareholders, in each case if the
shareholders or where an act requires the approval of a greater percentage of
material facts as to the interested director’s relationship or interests are
the company’s shareholders than that which actually approved it.
disclosed or are known to the disinterested directors or shareholders, or such
contract or arrangement is fair to the corporation as of the time it is approved
When the affairs of a company are being conducted in a manner which is
or ratified. Additionally, such interested director could be held liable for a
oppressive or prejudicial to the interests of some part of the shareholders,
transaction in which such director derived an improper personal benefit.
one or more shareholders may apply under the Bermuda Companies Act for
Amalgamations, Mergers and Similar Arrangements. Pursuant to the Bermuda
Companies Act, the amalgamation or merger of a Bermuda company with
an order of the Supreme Court of Bermuda, which may make such order
as it sees fit, including an order regulating the conduct of the company’s
affairs in the future or ordering the purchase of the shares of any shareholders
another company or corporation requires the amalgamation or merger
by other shareholders or by the company.
GeoPark 20F
59
Our bye-laws contain a provision by virtue of which we and our shareholders
Undertaking Tax Protection Act 1966, as amended, an assurance that, in
waive any claim or right of action that they have, both individually and on our
the event that Bermuda enacts legislation imposing tax computed on profits,
behalf, against any director or officer in relation to any action or failure to take
income, any capital asset, gain or appreciation, or any tax in the nature of estate
action by such director or officer, except in respect of any fraud or dishonesty
duty or inheritance, then the imposition of any such tax shall not be applicable
of such director or officer. Class actions and derivative actions generally are
to us or to any of our operations or shares, debentures or other obligations,
available to shareholders under Delaware law for, among other things, breach
until March 31, 2035. We could be subject to taxes in Bermuda after that date.
of fiduciary duty, corporate waste and actions not taken in accordance with
This assurance is subject to the provision that it is not to be construed to
applicable law. In such actions, the court has discretion to permit the winning
prevent the application of any tax or duty to such persons as are ordinarily
party to recover attorneys’ fees incurred in connection with such action.
resident in Bermuda or to prevent the application of any tax payable in
Indemnification of Directors. We may indemnify our directors and officers in
their capacity as directors or officers for any loss arising or liability attaching
accordance with the provisions of the Land Tax Act 1967 or otherwise payable
in relation to any property leased to us. We are incorporated in Bermuda as an
exempted company and pay annual Bermuda government fees. In addition,
to them by virtue of any rule of law in respect of any negligence, default,
all entities employing individuals in Bermuda are required to pay a payroll tax
breach of duty or breach of trust of which a director or officer may be guilty
and there are other sundry taxes payable, directly or indirectly, to the Bermuda
in relation to the company other than in respect of his own fraud or
government. Neither we nor our Bermuda subsidiaries employ individuals in
dishonesty. Our bye-laws provide that we shall indemnify our officers and
Bermuda as at the date of this annual report.
directors in respect of their acts and omissions, except in respect of their
fraud or dishonesty, or to recover any gain, personal profit or advantage to
The transfer of our common shares may be subject to capital gains taxes
which such Director is not legally entitled, and (by incorporation of the
pursuant to indirect transfer rules in Chile.
provisions of the Bermuda Companies Act) that we may advance moneys to
our officers and directors for the costs, charges and expenses incurred by
In September 2012, Chile established “indirect transfer rules,” which impose
our officers and directors in defending any civil or criminal proceedings
taxes, under certain circumstances, on capital gains resulting from indirect
against them on condition that the directors and officers repay the moneys
transfers of shares, equity rights, interests or other rights in the equity,
if any allegations of fraud or dishonesty is proved against them provided,
control or profits of a Chilean entity, as well as on transfers of other assets and
however, that, if the Bermuda Companies Act requires, and advancement of
property of permanent establishments or other businesses in Chile, or the
expenses shall be made only upon delivery to the Company of an
Chilean Assets. As we indirectly own Chilean Assets, the indirect transfer rules
undertaking, by or on behalf of such indemnitee, to repay all amounts if it
would apply to transfers of our common shares provided certain conditions
shall ultimately be determined by final decision that such indemnitee is
outside of our control are met. If such conditions were present and as a
not entitled to be indemnified for such expenses under our Bye-law. Under
result the indirect transfer rules were to apply to sales of our common shares,
Delaware law, a corporation may indemnify a director or officer of the
such sales would be subject to indirect transfer tax on the capital gain that
corporation against expenses (including attorneys’ fees), judgments, fines
may be determined in each transaction. For a description of the indirect
and amounts paid in settlement actually and reasonably incurred in defense
of an action, suit or proceeding by reason of such position if such director
transfer rules and the conditions of their application see “-Item 10. Additional
Information-E. Taxation-Chilean tax on transfers of shares.”
or officer acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the corporation and, with
Our common shares will for a time trade on two separate stock markets,
respect to any criminal action or proceeding, such director or officer had no
and investors seeking to take advantage of price differences between such
reasonable cause to believe his or her conduct was unlawful. In addition, we
markets may create unexpected volatility in our share price; in addition,
have entered into customary indemnification agreements with our directors.
investors may not be able to easily move common shares for trading
As a result of these differences, investors could have more difficulty
between such markets.
protecting their interests than would shareholders of a corporation
Our common shares are currently registered on the NYSE and the Santiago
incorporated in the United States.
Offshore Stock Exchange. Although we intend to de-register from the
We may become subject to taxes in Bermuda after March 31, 2035, which
will be traded on two markets for a period of time. During such time, price
may have a material adverse effect on our results of operations.
levels for our common shares could fluctuate between markets, independent
of our share price on the other market. Investors could seek to sell or buy
Under current Bermuda law, we are not subject to tax on income or capital
our common shares to take advantage of any price differences between the
gains. We have received from the Minister of Finance under The Exempted
markets through a practice referred to as arbitrage. Any arbitrage activity
Santiago Offshore Stock Exchange as soon as practicable, our common shares
60
GeoPark 20F
could create unexpected volatility in the price of our common shares on
As of December 31, 2014, we had net proved reserves of 43.7 mmboe
the NYSE.
(composed of 72 % oil and 28% natural gas), of which 12.1 mmboe, or 28%,
of which 24.7 mmboe, or 57% and 6.9 mmboe, or 16 %, were in Chile,
Colombia and Brazil respectively. Additionally, according to the D&M Reserves
ITEM 4. INFORMATION ON THE COMPANY
Report, as of December 31, 2014, the Morona Block in Peru had net proved
reserves, of 18.8 mmboe (composed of 100% oil). We expect to close the
A. History and development of the company
pending Morona Block Acquisition in 2015.
General
We were incorporated as an exempted company pursuant to the laws of
We have built our company around three principal capabilities:
Bermuda as GeoPark Holdings Limited in February 2006. On July 30, 2013,
our shareholders approved a change in our name to GeoPark Limited,
• as an Explorer, which is our ability, experience, methodology and creativity
to find and develop oil and gas reserves in the subsurface, based on the
effective from July 31, 2013. We maintain a registered office in Bermuda
best science, solid economics and ability to take the necessary managed risks.
at Cumberland House, 9th Floor, 1 Victoria Street, Hamilton HM 11, Bermuda.
• as an Operator, which is our ability to execute in a timely manner and
Our principal executive offices are located at Nuestra Señora de los
to have the know-how to profitably drill for, produce, treat, transport and sell
Ángeles 179, Las Condes, Santiago, Chile, telephone number +562 2242 9600,
our oil and gas – with the drive and persistence to find solutions, overcome
and Florida 981, 1st floor, Buenos Aires, Argentina, telephone number
obstacles, seize opportunities and achieve results.
+5411 4312 9400. Our website is www.geo-park.com. The information on
• as a Consolidator, which is our ability and initiative to assemble the right
our website does not constitute part of this annual report.
balance and portfolio of upstream assets in the right hydrocarbon basins
Our company
We are an independent oil and natural gas exploration and production,
in the right regions with the right partners and at the right price – coupled
with the visions and skills to transform and improve value above ground.
or E&P, company with operations in Latin America and a proven track record
We believe that our risk and capital management policies have enabled
of growth in production, reserves and cash flows since 2006. We operate
us to compile a geographically diverse portfolio of properties that balances
in Chile, Colombia, Brazil and to a lesser extent in Argentina. We also plan to
exploration, development and production of oil and gas. These attributes
expand our footprint to Peru as a result of our pending Morona Block
have also allowed us to raise capital and to partner with premier international
acquisition, which is expected to close in 2015. See “-B. Business Overview-
companies. Finally, we believe we have developed a distinctive culture within
Our operations-Operations in Peru.”
our organization that promotes and rewards partnership, entrepreneurship
and merit. Consistent with this approach, all of our employees are eligible
We have a well-balanced portfolio of assets that includes working and/or
to participate in our long-term incentive program, or our Performance-Based
economic interests in 29 hydrocarbons blocks, 28 of which are onshore
Employee Long- Term Incentive Program. See “-Item 6. Directors, Senior
blocks, including 12 in production as of December 31, 2014, as well as
an additional shallow- offshore concession in Brazil that includes the Manatí
Management and Employees-B. Compensation-Performance-Based Employee
Long-Term Incentive Program.”
Field. In addition, we have one new concessions in Brazil, the PN-T-597
Block that is still subject to the entry into the concession agreement by the
In Chile, we are the first and the largest non-state controlled oil and gas
ANP and the Morona Block in Peru, which we expect will close in 2015
producer. We began operations in 2006 in the Fell Block and have evolved from
following regulatory approvals.
having a non-operated, non-producing interest to having a fully-operated and
producing asset with 11.5 mmboe of net proved reserves as of December 31,
We produced a net average of 19,653 boepd during the year ended
2014 and average production of 5,850 boepd in 2014. In addition, we operate
December 31, 2014, 31.1 %, 55.0 %, 13.6% and 0.3% were in Chile, Colombia,
five other hydrocarbon blocks in Chile with significant prospective resources,
Brazil and Argentina, respectively, and of which 74% was oil. As we did
with three of them in production as of December 31, 2014.
not acquire our interest in the Manatí Field until March 31, 2014, the numbers
in the preceding sentences do not account for the first quarter production
In Colombia, following our successful acquisitions of Winchester, Luna and
of the Manatí Field which reached 3,667 boepd. Had the Manatí Field
Cuerva in early 2012, we have an asset base of 11 hydrocarbon blocks where
been acquired January 1, 2014, production would have been a net average
we were able to perform an active exploration and development drilling
of 20,557 boepd during the year ended December 31, 2014, 29.7 %, 52.6 %,
campaign, which resulted in multiple new oilfield discoveries and to increase
17.4% and 0.3% were in Chile, Colombia, Brazil and Argentina, respectively,
average production from 2,965 boepd for the month of April 30, 2012 (the
and of which 71% was oil.
first full month following our Colombian acquisitions) to 11,615 boepd in the
GeoPark 20F
61
fourth quarter of 2014. Total net production in Colombia averaged 10,807
Park currently serves as our Chief Executive Officer and Deputy Chairman, and
boepd in 2014. As of December 31, 2014, we had net proved reserves of
both actively contribute to our ongoing operations and business decisions.
24.7 mmboe in Colombia, which represents a 169% increase as compared to
9.4 mmboe in 2013, mainly resulting from net additions of proved reserves
Our history commenced with the purchase of AES Corporation’s upstream
related to field delineation and the appraisal of the Tigana field in the Llanos
oil and natural gas assets in Chile and Argentina. Those assets included a
34 Block. We discovered the Tigana oil field in December 2013 and, since
non-operating working interest in the Fell Block in Chile, which at that time
that time, we have moved efficiently to drill eight wells, including seven wells
was operated by the Empresa Nacional de Petróleo, or ENAP, the Chilean
in production with a total current rate of approximately 11,000 bopd gross.
state-owned hydrocarbon company, and operating working interests in the
In May 2013 we agreed to acquire Rio das Contas from Panoro, which holds
which we collectively refer to as the Argentina Blocks. Since 2002, our
Del Mosquito, Cerro Doña Juana and Loma Cortaderal Blocks in Argentina,
a 10% working interest in the shallow offshore Manatí Field, the largest
business has grown significantly.
non-associated gas field in Brazil, which produced approximately 6 % of the
gas produced in Brazil in December 31, 2014. Rio das Contas’s 10% working
In 2006, after demonstrating our technical expertise and committing to
interest in the Manatí Field represented 3,572 boepd of production during
an exploration and development plan, we obtained a 100% operating
the year ended December 31, 2014. As of December 31, 2014, we had
working interest in the Fell Block by the Republic of Chile. Also in 2006, the
net proved reserves of 6.9 mmboe corresponding to Manatí. Separately, in
International Finance Corporation, or the IFC, a member of the World
September 2013, we entered into concession agreements with the ANP
Bank Group, became one of our principal shareholders, and we listed our
relating to seven new concessions in the onshore Recôncavo Basin in the
common shares on AIM, a market operated by the London Stock Exchange
State of Bahia and in the onshore Potiguar Basin in the State of Rio Grande
plc, in an initial public offering of common shares outside the United
do Norte, or, our Round 11 concessions, and in November 2013, the ANP
States. Subsequently, in 2008 and 2009, we issued and sold additional
awarded us two additional concessions in the Parnaíba Basin in the State of
common shares outside the United States.
Maranhão and the Sergipe Alagoas Basin in the State of Alagoas, one of
them still subject to the entry into the concession agreement, on our Round
In 2008 and 2009, we continued our growth in Chile by acquiring operating
12 concessions. See “-Our operations-Operations in Brazil.
working interests in each of the Otway and Tranquilo Blocks, and by forming
partnerships with Pluspetrol, Wintershall, Methanex and IFC.
In October 2014, we executed a Joint Investment Agreement and Joint
Operating Agreement with Petroperú to acquire an interest in and operate
In 2010, we formed a strategic partnership with LGI, a Korean conglomerate,
the Morona Block located in northern Peru. We will assume a 75% working
to jointly acquire and develop upstream oil and gas projects in Latin
interest with Petroperú retaining a 25% working interest. The Morona
America. LGI’s business includes a portfolio of energy and raw material
Block covers an area of 1.9 million acres on the western side of the Marañón
projects, including oil and gas projects in the Middle East and in Southeast
Basin, one of the most prolific hydrocarbon basins in Peru. The Morona
and Central Asia.
Block contains the Situche Central oil field, which has been delineated by
two wells (with short term tests of approximately 2,400 and 5,200 bopd
In 2011, ENAP awarded us the opportunity to obtain operating working
of 35-36° API oil each) and by 3D seismic. We believe that this project will
interests in each of the Isla Norte, Flamenco and Campanario Blocks in Tierra
significantly increase GeoPark’s overall inventory of exploration resources
del Fuego, Chile, which we refer to collectively as the Tierra del Fuego Blocks,
and complement our reserves and cash flow base already established
and in 2012, jointly with ENAP we entered into special operation contracts
in Colombia, Chile and Brazil. The Morona Block includes geophysical surveys
(Contratos Especiales de Operación para la Exploración y Explotación de
of 2,783 km (2D seismic) and 465 sq km (3D seismic), and an operating field
Yacimientos de Hidrocarburo, or CEOPs) with Chile for the exploration and
camp and logistics infrastructure. As of December 31, 2014, D&M certified
exploitation of hydrocarbons within these blocks.
net proved reserves, of 18.8 mmboe in the Morona Block, composed of 100%
oil. We expect to close the pending Morona Block Acquisition in 2015.
Also in 2011, LGI acquired a 20% equity interest in GeoPark Chile and a 14%
History
We were founded in 2002 by Gerald E. O’Shaughnessy and James F. Park,
equity interest in GeoPark TdF S.A., or GeoPark TdF, for US$148.0 million.
LGI also provided to GeoPark TdF US$84.0 million in standby letters of credit
to partially secure the US$101.4 million performance bond required by
who have over 25 and 35 years of international oil and natural gas experience,
the Chilean government to guarantee GeoPark TdF’s obligations with respect
respectively, and who collectively hold approximately 26% of our common
to the minimum work program under the Tierra del Fuego CEOPs. Our
shares as of the date of this annual report, and are involved in our operations
agreement with LGI in the Tierra del Fuego Blocks allows us to earn back up
and strategy. Mr. O’Shaughnessy currently serves as our Chairman and Mr.
to 12% equity participation in GeoPark TdF, depending on the success of our
62
GeoPark 20F
operations in Tierra del Fuego. See “-Item 10. Additional Information-C.
consists of Pluspetrol (operator with a 72% working interest), EMESA
Material contracts.”
(non-operator with a 10% working interest) and GeoPark (non-operator
with an 18% working interest).
In the first quarter of 2012, we moved into Colombia by acquiring three
privately held E&P companies, Winchester, Luna and Cuerva. These acquisitions
In October 2014, we entered into an agreement to expand into Peru (our
provided us with an attractive platform in Colombia that includes working
fifth country platform in Latin America) through the pending acquisition of
interests and/or economic interests in 10 blocks located in the Llanos,
Morona Block in a joint venture with Petroperú. The Morona Block covers
Magdalena and Catatumbo Basins and covering an area of 575,700 gross acres.
an area of 1.9 million acres in the prolific Marañon Basin. Pursuant to the
terms of the agreement we will assume a 75% working interest of the Morona
In December 2012, LGI acquired a 20% equity interest in GeoPark Colombia
Block, with Petroperú retaining a 25% working interest. The Morona Block
for US$20.1 million, including the assumption of existing debt and the
contains the Situche Central oil field, which has been delineated by two wells
commitment to provide additional funding to cover LGI’s share of required
(with short term tests of approximately 2,400 and 5,200 bopd of 35-36°
future investments in Colombia. In addition, our agreement with LGI in
API oil each). The Morona Block includes geophysical surveys of 2,783 km
Colombia allows us to earn back up to 12% of equity participation in GeoPark
(2D seismic) and 465 sq km (3D seismic), and an operating field camp
Colombia, depending on the success of our operations in Colombia. See
and logistics infrastructure. The area has undergone oil and gas exploration
“-Item 10. Additional Information-C. Material contracts.” We and LGI also
activities for the past 20 years, and there exist ongoing association
agreed that we would extend our strategic partnership to build a portfolio of
agreements and cooperation projects with the local communities. The
upstream oil and gas assets throughout Latin America through 2015. We
expected work program and development plan for the Situche Central
believe our partnership with LGI represents a positive independent
oil field is to be completed in three stages. The goal of the initial stage will
assessment and validation of the quality of our Chilean and Colombian asset
be to put the field into production through a long term test to help
inventory, the extent of our technical and operational expertise and the
determine the most effective overall development plan and to begin to
ability of our management to structure and effect significant transactions.
generate cash flow. This initial stage requires an investment of approximately
In May 2013, we entered into agreements to expand our operations to Brazil.
24 months after closing. We have committed to carry Petroperú, by paying
See “-B. Business overview-Our operations-Operations in Brazil.”
its portion of the required investment in this initial phase. In November 2014,
$140 million to $160 million and is expected to be completed within 18 to
we further expanded our portfolio in Colombia through an agreement
On September 30, 2013, we entered into a strategic alliance with Tecpetrol S.A.
with SK Innovation (a subsidiary of SK Group, the Korean integrated energy
(the oil and gas subsidiary of the Techint Group) or Tecpetrol, to jointly identify,
and petrochemical company) to farm-in to the CPO-4 Block, located in the
study and potentially acquire upstream oil and gas opportunities in Brazil,
Llanos Basin. We and SK Innovation have jointly identified new prospects in
with a specific focus on the Parnaíba, Sao Francisco, Recôncavo, Potiguar and
this Block similar to prospects and leads in our Llanos 34 Block. The above
Sergipe Alagoas basins. Tecpetrol has an extensive track record as an oil
mentioned farm-in agreement, is subject to regulatory approval in Colombia.
and gas explorer and operator throughout the Americas. As part of our strategic
alliance with Tecpetrol, we expect to enter into an agreement to jointly
In 2014, two years after beginning operations in Colombia, and as a result
develop, by assigning to Tecpetrol 50% of our working interest in, the PN-T-
of well drilling, production information and 3D seismic mapping, we have been
597 concession in the Parnaíba Basin in the State of Maranhão, which we were
able to increase our proved reserves in Colombia by 169% to 24.7 mmboe
awarded by the ANP, subject to the entry into the concession agreement.
compared to 9.4 mmboe in 2013, mainly from net additions of proved reserves
related to field delineation and appraisal of the Tigana field in the Llanos 34
On July 23, 2014, during the 2014 Colombia Bidding Round, carried out by
Block. Tigana oil field was discovered in December 2013 and, since that time,
the ANH for the VIM -3 Block, we were awarded a new exploratory license. We
we have moved efficiently to drill eight wells, including seven wells in production
believe the Block has attractive oil and gas exploration potential in a large
with a total current rate of approximately 11,000 bopd gross. The Tigana field
area within a proven hydrocarbon system, surrounded by existing oil and gas
represents a combination trap with a structural component (to the east, west
fields and with sparse exploration activity carried out to date.
and north) and a stratigraphic component (to the south). Oil has been tested
On August 20, 2014, the consortium of GeoPark and Pluspetrol was awarded
Additional appraisal drilling is still required to delineate the Tigana field.
two exploration licenses in the Sierra del Nevado and Puelen Blocks, as part
of the 2014 Mendoza Bidding Round in Argentina, carried out by Empresa
See “-Item 3. Key Information-D. Risk factors-Risks relating to our business”
Mendocina de Energía S.A. (“EMESA”). The blocks are located in the Neuquen
and “-B. Business overview-Significant agreements-Peru-Morona Block
Basin, Argentina’s largest producing hydrocarbon basin. The consortium
Acquisition.”
and is being produced from both the Mirador and Guadalupe formations.
GeoPark 20F
63
B. Business overview
We are an independent oil and natural gas exploration and production, or
productive wells, a 72% success ratio. We have grown our business through
winning new licenses and acquiring strategic assets and businesses, with
E&P, company with operations in Latin America and a proven track record of
24 new blocks incorporated into our portfolio since January 1, 2006. Since our
growth in production, reserves and cash flows since 2006. We operate in Chile,
inception, we have supported our growth through our prospect development
Colombia, Brazil and, to a lesser extent, in Argentina. We may also commence
efforts and our drilling program, as well as by developing long-term strategic
operations in Peru, pending the acquisition of the Morona Block which is
partnerships and alliances with key industry participants, accessing debt
subject to regulatory approvals, though there can be no assurance that we will
and equity capital markets and developing and retaining a technical team
close the acquisition and benefit from production in the Morona Block.
with vast experience and a successful track record of finding and producing
We have a well-balanced portfolio of assets that includes working and/or
experienced team of geologists, geophysicists and engineers, including
economic interests in 29 hydrocarbons blocks, 28 of which are onshore blocks,
professionals with specialized expertise in the geology of Chile, Colombia,
oil and gas in Latin America. A key factor behind our success ratio is our
including 12 in production as of December 31, 2014, as well as an additional
Brazil, Argentina and Peru.
shallow-offshore concession in Brazil that includes the Manatí Field. We have
one new concession in Brazil, the PN-T-597 Block that is still subject to the entry
For the year ended December 31, 2014, we drilled 53 new wells, 32
into the concession agreement by the ANP and the Morona Block, which we
in Chile and 21 in Colombia in blocks in which we have working interests
expect will close in 2015 following regulatory approvals.
and/or economic interests. Our capital expenditures of US$238 million
(US$161 million, US$66 million, and US$11 million in Chile, Colombia, and
We produced a net average of 19,653 boepd during the year ended
Brazil, respectively) for the year ended December 31, 2014 including
December 31, 2014, 31.1% of which was produced in Chile, 55.0% of which was
US$110 million related to exploration.
produced in Colombia, 13.6% of which was produced in Brazil and 0.3% of
which was produced in Argentina, and of which 74% was oil. Average oil
In March 2014, we invested US$140 million in Brazil (US$115.0 million net
and gas production in 2014 represented a 45% increase as compared to our
of cash acquired) for the acquisition of Rio das Contas, which we financed
average oil and gas production for the year ended December 31, 2013 of
through the incurrence of a loan of US$70.5 million and cash on hand.
13,517 boepd. Oil production increased by 31% to 14,541 bopd (consisting of
3,690 bopd, 10,748 bopd, 42 bopd and 61 bopd in Chile, Colombia, Brazil and
In October 2014, we executed a Joint Investment Agreement and Joint
Argentina, respectively) for the year ended December 31, 2014, as compared
Operating Agreement with Petroperú to acquire an interest in and operate
to 11,113 bopd for the year ended December 31, 2013. Gas production
the Morona Block located in northern Peru. We will assume a 75% working
increased by 112% to 30,677 mcfpd (consisting of 14,484 mcfpd, 354 mcfpd,
interest with Petroperú retaining a 25% working interest. The Morona
15,753 mcfpd and 86 mcfpd in Chile, Colombia, Brazil and Argentina,
Block covers an area of 1.9 million acres on the western side of the Marañón
respectively) for the year ended December 31, 2014, as compared to 14,419
Basin, one of the most prolific hydrocarbon basins in Peru. The Morona
mcfpd for the year ended December 31, 2013. As we did not acquire our
Block contains the Situche Central oil field, which has been delineated by
interest in the Manatí Field until March 31, 2014, the numbers in the preceding
sentences do not account for the first quarter production of the Manatí Field
two wells (with short term tests of approximately 2,400 and 5,200 bopd
of 35-36° API oil each) and by 3D seismic. We believe that this project will
which reached 3,667 boepd. Had the Manatí Field been acquired January 1,
significantly increase GeoPark’s overall inventory of exploration resources
2014, production would have been a net average of 20,557 boepd during the
and complement our reserves and cash flow base already established in
year ended December 31, 2014, 29.7 %, 52.6 %, 17.4% and 0.3% were in Chile,
Colombia, Chile and Brazil. The Morona Block includes geophysical surveys
Colombia, Brazil and Argentina, respectively, and 71% of which was oil.
of 2,783 km (2D seismic) and 465 sq km (3D seismic), and an operating field
camp and logistics infrastructure. As of December 31, 2014, D&M certified
As of December 31, 2014, we had net proved reserves of 43.7 mmboe
net proved reserves, of 18.8 mmboe in the Morona Block, composed of 100%
(composed of 72% oil and 28% natural gas), of which 12.1 mmboe, or 28%,
oil. We expect to close the pending Morona Block Acquisition in 2015.
of which 24.7 mmboe, or 57% and 6.9 mmboe, or 16%, were in Chile,
Colombia and Brazil respectively. Additionally, according to the D&M Reserves
Report, as of December 31, 2014, the Morona Block had net proved reserves,
Oil industry situation and the impact on GeoPark’s operations
As a consequence of the oil price crisis which started in the second half of
of 18.8 mmboe (composed of 100% oil). We expect to close the pending
2014 (WTI and Brent, the main international oil price markers, fell by
Morona Block Acquisition in 2015.
approximately 50% between August 2014 and March 2015), the Company
has undertaken a decisive cost cutting program to ensure its ability to
We have been able to successfully develop our assets through drilling, with
both maximize the work program and preserve its cash. For more information
147 of the 205 wells that we drilled from 2006 through 2014 having become
see “-Item 3. Key Information-D. Risk Factors-Risks relating to our business-
64
GeoPark 20F
Current oil industry price crisis and the impact on GeoPark’s operations”
The following map shows the countries in which we have blocks with working
and “-Item 4. Information on the Company-B. Business Overview-2015
and/or economic interests as of December 31, 2014 and also includes our
Strategy and Outlook.”
pending Morona Block Acquisition. For information on our working interests
in each of these blocks, see “-Our assets” below.
Colombia Blocks
C O L O M B I A
La Cuerva
Llanos 34
Llanos 62
Yamu
Llanos 17
Llanos 32
Abanico
Cerrito
Jagüeyes
VIM - 3
CPO - 04 (1)
Chile Blocks
Fell
Tranquilo
Otway
Isla Norte
Campanario
Flamenco
P E R U
B R A Z I L
Peru Blocks
Morona (2)
P A C I F I C
O C E A N
A R G E N T I N A
C H I L E
Brazil Blocks
POT - T 619
POT - T 620
POT - T 663
POT - T 664
POT - T 665
REC - T 85
REC - T 94
BCAM - 40 (Manati)
SEAL - T 268
PN - T 597 (3)
A T L A N T I C
O C E A N
Argentina Blocks
Del Mosquito
Sierra del Nevado
Puelen
(1) Subject to the approval of ANH in Colombia.
(3) The PN-T-57 is still subject to an injunction and our bid for the concession
(2) We expect to close the transaction in 2015 following regulatory approvals.
has been suspended. See “-Our operations-Operations in Brazil.”
See “-Our operations-Operations in Peru.”
GeoPark 20F
65
The following table sets forth our net proved reserves and other data as of
and for the year ended December 31, 2014.
Country
Chile
Colombia
Brazil
Argentina
Total
Oil
(mmbbl)
6.4
24.7
0.1
-
31.4
Gas
(bcf)
34.0
-
40.5
-
74.4
Oil equivalent
(mmboe)
12.1
24.7
6.9
-
43.7
The following table sets forth the net proved reserves and other data as of
and for the year ended December 31, 2014 as estimated in the D&M Reserves
Report corresponding to the pending Morona Block Acquisition that we
expect to close in 2015.
Country
Peru
Total
Oil
(mmbbl)
18.8
18.8
Gas
(bcf)
-
-
Oil equivalent
(mmboe)
18.8
18.8
Our commitment to growth has translated into a strong compounded annual
growth rate, or CAGR, of 34% for production in the period from 2008 to 2014,
as measured by boepd in the table below.
For the year ended December 31, 2014
Revenues
(in thousands
of US$)
145,720
246,085
35,621
1,308
428,734
% Oil
53%
100%
2%
-
72%
% of total
revenues
34.0%
57.4%
8.3%
0.3%
100%
For the year ended December 31, 2014
Revenues
(in thousands
of US$)
-
-
% Oil
100%
100%
% of total
revenues
-
-
Average net production (mboepd)
% Oil
2014
19.7
74.0%
2013
13.5
82.2%
2012
11.3
66.3%
2011
7.6
33.0%
2010
6.9
28.4%
2009
6.3
19.5%
2008
3.4
9.8%
For the year ended December 31,
During the year ended December 31, 2014, Rio Das Contas, whose production
is not accounted for in the table above as the transaction closed in March 31,
2014, produced 3.6 mboepd. Had the Manatí Field been acquired January 1,
2014, production would have been a net average of 20,557 during the year
ended December 31, 2014.
66
GeoPark 20F
The following table sets forth our production of oil and natural gas in the
blocks in which we have a working and/or economic interest as of December
31, 2014.
Oil production
Total crude oil production (bopd)
Average sales price of crude oil (US$/bbl)
Natural gas production
Total natural gas production (mcf/day)
Average sales price of natural gas (US$/mcf)
Oil and natural gas production cost
Weighted average production cost (US$/boe)
Average daily production
For the year ended December 31, 2014
Chile
3,690
89.4
14,484
6.2
37.6
Colombia
Argentina
10,748
73.0
354
-
35.4
61
75.4
86
1.1
26.6
Brazil
42
102.4
15,753
6.5
23.5
Our assets
According to the D&M Reserves Report, as of December 31, 2014, the blocks
in Chile, Colombia, and Brazil in which we have a working interest had
43.7 mmboe of net proved reserves, with 12.1 mmboe, or 28%, 24.7 mmboe,
or 57% and 6.9 mmboe, or 16% of such net proved reserves located in Chile,
Colombia and Brazil respectively. Additionally, according to the D&M Reserves
Report, as of December 31, 2014, the net proved reserves attributable to
our pending Morona Block acquisition in Peru were 18.8 mmboe. We expect
to close the pending Morona Block Acquisition in 2015.
For the year ended December 31, 2014, we produced an average of 19,653
boepd, of which 6,104 boepd, or 31.1%, was produced in the Chilean blocks,
10,807 boepd, or 55.0%, was produced in the Colombian blocks, 2,668 boepd,
or 13.6%, was produced in the Brazilian blocks and 75 boepd or 0.3%,
was produced in the Argentine blocks. As we did not acquire our interest
in the Manatí Field until March 31, 2014, the numbers in the preceding
sentences do not account for the first quarter production of the Manatí Field
which reached 3,667 boepd. Had the Manatí Field been acquired January 1,
2014, production would have been a net average of 20,557 boepd during
the year ended December 31, 2014, 29.7 %, 52.6 %, 17.4% and 0.3% were in
Chile, Colombia, Brazil and Argentina, respectively, and 71% of which was oil.
We are the operator of a majority of the blocks in which we have a working
interest. The following table summarizes certain information about our
Chilean, Colombian, Argentine and Brazilian blocks as of December 31, 2014.
GeoPark 20F
67
Country
Concession
Operator
Block/
Working
interest
(1)(2)(12)
Basin
Fell
Tranquilo(16)
Otway
GeoPark
GeoPark
GeoPark
100% Magallanes
29% Magallanes
100% Magallanes
Gross area Net proved
(thousand
acres)(3)
367.8
reserves
(mmboe)(4)
11.5
92.4
49.4(6)
-
-
% Oil
53%
-
-
Isla Norte
GeoPark
60%(7) Magallanes
130.2
0.06
92%
Campanario
GeoPark
50%(7) Magallanes
192.2
0.04
100%
Flamenco
GeoPark
50%(7) Magallanes
141.3
973.3
0.5
12.1
52%
53%
199.1
6,103.6
Chile
Chile
Chile
Chile
Chile
Chile
Subtotal Chile
Net
production
(boepd)(5)
5,849.8
-
-
41.4
13.3
Concession
% Oil
expiration year
61% Exploitation: 2032
- Exploitation: 2043
- Exploitation: 2044
Exploration: 2019
88% Exploitation: 2044
Exploration: 2020
98% Exploitation: 2045
Exploration: 2019
37% Exploitation: 2044
60%
Exploration: 2014
Colombia
La Cuerva
GeoPark
100%
Llanos
Colombia
Llanos 34
GeoPark
45%
Llanos
Colombia
Llanos 62
GeoPark
100%
Llanos
Colombia
Yamú
GeoPark
79.5/90%(8)
Llanos
47.8
82.2
44.0
11.2
2.6
100%
1,388.8
99% Exploitation: 2038
Exploration: 2015
21.5
100%
8,306.0
100% Exploitation: 2039
-
-
-
- Exploitation: 2041
Exploration: 2017
0.5
100%
388.3
98% Exploitation: 2036
Exploration: 2015
Exploration: 2013
Colombia
Llanos 17
Parex
36.8%(9)
Llanos
108.8
0.03
100%
52.2
100% Exploitation: 2039
Colombia
Llanos 32
Parex
10%
Llanos
100.3
0.1
100%
485.6
100% Exploitation: 2039
Exploration: 2015
Colombia
Jagu(cid:0) eyes 3432A Columbus
5%
Llanos
61.0
Colombia(18)
CPO-4
GeoPark
100%
Llanos
345.6
Colombia
Colombia
Colombia
Colombia
VIM-3
Arrendajo(17)
Abanico
Cerrito
GeoPark
50% Magdalena
Pacific
Pacific
Pacific
0%
Llanos
0%(10) Magdalena
0%(10) Catatumbo
225.0
78.1
32.1
10.2
-
-
-
-
-
-
-
-
-
Exploration: 2014
- Exploitation: 2038
Exploration: 2021
- Exploitation: 2045
Exploration: 2015
- Exploitation: 2038
103.1
100% Production: 2041
83
-
-
-
Production: 2022
Production: 2028
-
-
-
-
-
-
Subtotal Colombia
1,146.4
24.7
100%
10,806.9
99%
Argentina
Argentina
Argentina
Del Mosquito
Puelen(15)
Sierra del
Nevado(15)
Subtotal Argentina
GeoPark
Pluspetrol
100%
18%
Austral
17.3
Neuquén
1,430.0
Pluspetrol
18%
Neuquén
305.0
1,752.3
-
-
-
-
-
-
-
-
75
-
-
75
81% Exploitation: 2016
- Exploitation: 2017
- Exploitation: 2017
81%
68
GeoPark 20F
Country
Concession
Operator
Block/
Working
interest
(1)(2)(12)
Basin
100% Recôncavo
100% Recôncavo
Gross area Net proved
(thousand
acres)(3)
7.7
reserves
(mmboe)(4)
-
REC T 94
REC T 85
POT T 664
POT T 665
POT T 619
POT T 620
GeoPark
GeoPark
GeoPark
GeoPark
GeoPark
GeoPark
100%
100%
100%
100%
POT T 663
GeoPark
PN T 597(13) GeoPark(14)
100%
100%(14)
SEAL T 268
GeoPark
BCAM-40
Petrobras
Potiguar
Potiguar
Potiguar
Potiguar
Potiguar
Parnaíba
Sergipe
Alagoas
Camanu-
Almada
7.7
7.9
7.9
7.9
7.9
7.9
188.7
7.8
22.8
274.2
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
Subtotal Brazil
Total GeoPark
Net
production
(boepd)(5)
-
-
-
-
-
-
-
-
-
% Oil
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6.9
6.9
2%
2%
-
2,668(19)
Concession
% Oil
expiration year
-
Exploration: 2018
- Exploitation: 2045
-
Exploration: 2018
- Exploitation: 2045
-
Exploration: 2018
- Exploitation: 2045
-
Exploration: 2018
- Exploitation: 2045
-
Exploitation: 2029(11)
2034(12)
-
2%
4,146.1
43.7
72%
19,653
74%
(1) Working interest corresponds to the working interests held by our
(9) We have a 40% working interest in the Llanos 17 Block, although we
respective subsidiaries in such block, net of any working interests and/or
have assigned a 3.2% economic interest to a third party. We expect to apply
economic interests held by other parties in such block.
to formalize this assignment with the ANH so that it will be recognized as a
(2) As of December 31, 2014, LGI has a 20% equity interest in our Chilean
working interest.
operations (through GeoPark Chile), and a 20% equity interest in our
(10) We do not have a working interest in those blocks, though we have a
Colombian operations through GeoPark Colombia.
10% economic interest in the net revenues of each of these blocks pursuant
(3) Gross area refers to the total acreage of each block.
to various partnership interests’ agreements. See “-Our operations-Operations
(4) Reflects net proved reserves as of December 31, 2014.
in Colombia.”
(5) Reflects net average production for 2014. Net production refers to average
(11) Corresponds to the Manatí Field.
production for each block, net of any working interests or economic interests
(12) Corresponds to the Camarão Norte Field.
held by others in such block but gross of any royalties due to others.
(13) PN-T-597 Block subject to the entry into the concession agreement by
(6) In April 2013, we voluntarily relinquished to the Chilean government all
the ANP and absence of any legal impediments to signing. See “-Item 3.
of our acreage in the Otway Block, except for 49,421 acres. In May 2013,
our partners under the joint operating agreement governing the Otway Block
Key information-D. Risk factors-Risks relating to our business-The PN-T-597
concession is subject to an injunction and may not close.”
decided to withdraw from such joint operating agreement, and applied
(14) We expect to jointly develop this concession with Tecpetrol and assign
for an assignment of rights permit on August 5, 2013. In September 2014,
a portion of our working interest in this concession to Tecpetrol.
the Chilean Ministry of Energy approved us as the sole participant. See
(15) New blocks awarded in the 2014 Mendoza Bidding Round.
“-Our operations-Operations in Chile-Otway and Tranquilo Blocks.”
(16) At December 31, 2013, the Consortium members and interests were:
(7) LGI has a 14% direct equity interest in our Tierra del Fuego operations
GeoPark 29%, Pluspetrol 29%, Wintershall 25% and Methanex 17%. During
through GeoPark TdF and a 20% direct equity interest in GeoPark Chile,
2014 Methanex and Wintershall announced their decision to exit the
for a total 31.2% effective equity interest in our Tierra del Fuego operations.
Consortium. The new ownership is GeoPark 50% and Pluspetrol 50%.
See “-Our operations-Operations in Chile-Tierra del Fuego Blocks
(17) On July 29, 2014, our Colombian subsidiary agreed to exchange its 10%
(Isla Norte, Campanario and Flamenco Blocks).”
non-operating economic interest in the Arrendajo Block for additional
(8) Although we are the sole title holder of the working interest in the Yamú
interests held by the seller in the Yamú Block that includes a 15% economic
Block, other parties have been granted economic interests in fields in
interest in all of the Yamú fields except for the Carupana field, where the
this block. Taking those other parties’ interests into account, we have a 79.5%
seller had a 25% economic interest.
interest in the Carupana Field and a 90% interest in the Yamú and Potrillo
(18) Subject to regulatory approval from the ANH in Colombia.
Fields, both located in the Yamú Block.
(19) Considering production since the acquisition date, March 31, 2014. Full
year 2014 production amounted to 3,572 boepd (composed of 98% gas).
GeoPark 20F
69
The table below summarizes information as of December 31, 2014 regarding
the concessions in Peru in which we expected to have a working interest fol-
lowing the completion of our pending Morona Block
Acquisition.
Block
Morona
Operator
GeoPark
Working
interest(1)
75%
Basin
Marañon
Gross area Net proved
(thousand
acres)
1,881
reserves
(mmboe)(2 )
18.8
Net
production
(boepd)
-
% Oil
100%
% Oil
-
Concession
expiration year
Exploitation: 2035(3)
(1) Corresponds to the initial working interest. Petroperú will have the right
The acquisitions of Winchester, Luna and Cuerva in Colombia in the first
to increase its working interest in the Block by up to 50%, subject to
quarter of 2012 gave us access to an additional 574,979 gross exploratory
the recovery of our investments in the Block by certain agreed factors as
and productive acres across 10 blocks in what we believe to be one of South
described below.
America’s most attractive oil and gas geographies. According to the D&M
(2) Certified by D&M as of December 31, 2014.
Reserves Report, as of December 31, 2014, the blocks in Colombia in which
(3) The concession year expiration is related to approval of environmental
we have a working interest had 24.7 mmboe of net proved reserves, all
impact assessment (EIA) study for project development. The expiration
of which were in oil. Since we acquired Winchester, Luna and Cuerva, we were
of concession will occur twenty years after EIA approval. We expect the EIA
able to perform an active exploration and development drilling campaign,
to be approved in approximately in December 2016.
which resulted in multiple new discoveries and to increase average
Our strengths
We believe that we benefit from the following competitive strengths:
production to 10,807 boepd in Colombia in 2014. Also, we have been able to
leverage our technical expertise achieving significant positive results in terms
of reduced drilling costs in our multiple new oilfield discoveries,
one of which was located in the hanging wall of a normal fault, a play type
High quality and diversified asset base built through a successful track
that had not been successfully tested before in the Llanos basin.
record of organic growth and acquisitions
Our assets include a diverse portfolio of oil- and natural gas-producing
The acquisition of Rio Das Contas gave us a 10% working interest in
reserves, operating infrastructure, operating licenses and valuable geological
the BCAM-40 Concession, including the shallow-depth offshore Manatí and
surveys. According to the D&M Reserves Report, as of December 31, 2014,
Camarão Norte Fields, in the Camamu-Almada Basin in the State of Bahia.
we had 43.7 mmboe of net proved reserves in Chile, Colombia, and Brazil of
The Manatí Field, which is in the production phase, is operated by Petrobras
which 72%, or 31.3 mmboe, was oil, and 28%, or 12.4 mmboe, was gas and of
(with a 35% working interest), the Brazilian national company and the
which 32%, or 14.2 mmboe, was net proved developed reserves. Throughout
our history, we have delivered continuous growth in our production, and
largest oil and gas operator in Brazil, in partnership with QGEP (with a 45%
working interest), and Brasoil (with a 10% working interest). See “-Significant
our management team has been able to identify under-exploited assets and
agreements-Brazil-Rio das Contas Quota Purchase Agreement.” Our Rio
turn them into valuable, productive assets. For example, in 2002, we acquired
das Contas acquisition in Brazil provides us with a long-term off-take contract
a non-operating working interest in the Fell Block in Chile, which at the
with Petrobras that covers approximately 74% of net proved gas reserves
time had no material oil and gas production or reserves despite having been
in the Manatí Field, a valuable relationship with Petrobras and an established
actively explored and drilled over the course of more than 50 years. Since
local platform and presence, with seasoned and experienced geoscience
2006, when we became the operator of the Fell Block, through 2014, we have
and administrative team to manage our Brazilian assets and to seek new
invested more than US$510 million and drilled approximately 113 wells
growth opportunities. According to the D&M Reserves Report, as of
in the Block, with 76% of such wells becoming productive during that period.
December 31, 2014, BCAM-40 Concession had 6.9 mmboe of net proved
Currently, we are the operator and sole concessionaire of the Fell Block,
reserves, (composed of approximately 98% natural gas). See “-Our operations-
which, during the year ended December 31, 2014, produced approximately
Operations in Brazil.”
5,580 boepd. As of December 31, 2014, we generated 55% of Chile’s total oil
production and 16% of its gas production, according to information provided
by the Chilean Ministry of Energy.
70
GeoPark 20F
In addition, in line with our growth strategy, the pending acquisition of the
depending on market prices, and complement our reserves and cash flow
Morona Block in Peru will give us a 75% working interest in the Morona Block.
base already established in Colombia, Chile and Brazil. As of December 31,
According to the D&M Reserves Report, as of December 31, 2014, the
2014, D&M certified net proved reserves, of 18.8 mmboe in the Morona Block
Morona Block had 18.8 mmboe of net proved reserves, (composed of 100%
composed of 100% oil. We expect to close the pending Morona Block
oil). We expect to close the pending Morona Block Acquisition in 2015.
Acquisition in 2015.
See “-Our operations- Operations in Peru.”
Our geoscience team continues to identify new potential accumulations and
Significant drilling inventory and resource potential from existing asset
expand our inventory of prospects and drilling opportunities.
base
Our portfolio includes large land holdings in high-potential hydrocarbon
basins and blocks with multiple drilling leads and prospects in different
Funding Platform
We have historically benefited from consistent cash flows and access to
geological formations, which provide a number of attractive opportunities
debt and equity capital markets, as well as other funding sources, which have
with varying levels of risk. Our drilling inventory consists of over 350
provided us in the past with funds to finance our organic growth and the
identified drilling locations, and our development plans target locations that
pursuit of potential new opportunities. We generated US$230.7 million and
provide attractive economics and support a predictable production profile.
US$127.3 million in cash from operations in the years ended December 31,
Highlights of our 2014 exploration and drilling plan include:
2014 and 2013, respectively, and had US$127.7 million and US$121.1 million
in cash and cash equivalents as of December 31, 2014 and 2013, respectively.
• In Colombia, in 2014, continued delineation of the Tigana and Tua Fields.
As of December 31, 2014 we had US$370 million of total financial debt
We discovered the Tigana oil field in December 2013 and, since that time, our
with 80% debt maturing in 2020. Our short-term objectives are to preserve
team has moved efficiently to drill a total of eight wells; put seven wells in
cash, see below “-Our long-term strategy.”
production, install facilities and infrastructure to handle approximately 20,000
barrels of fluid per day, with plans underway to expand to 100,000 barrels of
In March 2014, we borrowed US$70.5 million pursuant to a five-year term
fluid per day. The Tigana field represents a combination trap with a structural
variable interest secured loan, secured by the benefits GeoPark receives under
component (to the east, west and north) and a stratigraphic component
the Purchase and Sale Agreement for Natural Gas with Petrobras, equal
(to the south). Oil has been tested and is being produced from both the
to six-month LIBOR + 3.9% to finance part of the purchase price of our Rio
Mirador (approximately 21-29° API crude oil) and Guadalupe (approximately
das Contas acquisition, and funded the remaining amount with cash on
15.5° API crude oil) formations. The expanded Tigana field size represents
hand. In March 2015, we reached an agreement to: (i) extend the principal
increased value for GeoPark by providing an important opportunity to further
payments that were due in 2015 (amounting to approximately US$15 million),
grow production and to potentially generate attractive financial returns. In
which will be divided pro-rata during the remaining principal installments,
addition to improving the overall risk profile of GeoPark’s work program
starting in March 2016 and (ii) to increase the variable interest rate equal to
inventory, a larger field provides opportunities to reduce drilling, operating
the six-month LIBOR + 4.0%.
and transportation costs by improved efficiencies.
• In Chile, in 2014 we announced the discovery of the Primavera Sur 1 well
In February 2014, we commenced trading on the NYSE and raised US$98
that marks the first discovery of an oil field on the Campanario Block in Tierra
million (before underwriting commissions and expenses), including the
del Fuego, Chile, where we operate and have a 50% working interest in
over-allotment option granted to and exercised by the underwriters, through
partnership with ENAP. Also in 2014 we announced the successful drilling and
the issuance of 13,999,700 common shares.
testing of the Ache 1 exploration well located on the Fell Block in Chile.
• In Brazil, in 2014 we have acquired seismic data processing with regards to
In February 2013, we issued US$300.0 million aggregate principal amount
certain of our exploratory blocks in the Reconcavo and Potiguar basins.
of 7.50% senior secured notes due 2020, or the “Notes due 2020.” The Notes
• In Peru, in 2014 we executed an agreement with Petroperú to acquire a 75%
due 2020 contain limitations on the amount of indebtedness we can incur
working interest in and operate the Morona Block located in northern Peru.
See “-Item 5. Information on the Company-Indebtedness-Notes due 2020-
The Morona Block covers an area of 1.9 million acres on the western side
Covenants.”
of the Marañón Basin, one of the most prolific hydrocarbon basins in Peru.
The Morona Block contains the Situche Central oil field, which has been
In 2010, we issued US$133.0 million aggregate principal amount of 7.75%
delineated by two wells and by 3D seismic. We believe that this project will
senior secured notes in the international markets, or the Notes due 2015,
significantly increase GeoPark’s overall inventory of exploration resources,
which were redeemed following our issuance in 2013 the Notes due 2020.
GeoPark 20F
71
In 2007, we obtained financing from Methanex Chile S.A., or Methanex,
Throughout our history, our management and operating team has had success
the Chilean subsidiary of the Methanex Corporation, a leading global
in unlocking unexploited value from previously underdeveloped assets.
methanol producer, in an amount of US$40 million, structured as a gas
pre-sale agreement with a six-year term at an interest rate equal to
In addition, as of the date of this annual report, our executive directors,
the six-month LIBOR.
management and employees (excluding our founding shareholders, Mr. Gerald
E. O’Shaughnessy and Mr. James F. Park) owned 6.9% of our outstanding
In 2006, we completed an initial public offering of our common shares
common shares, aligning their interests with those of our shareholders
outside the United States on AIM and, in 2008 and 2009, we issued and sold
and helping retain the talent we need to continue to support our business
additional common shares outside the United States.
strategy. See “-Item 6. Directors, Senior Management and Employees-B.
Compensation.” Our founding shareholders are also involved in our daily
In February 2006, the IFC became a significant shareholder by contributing
operations and strategy.
US$10 million. Later that year, we entered into a loan agreement for
US$20 million with the IFC, which we have since fully repaid, to partially
Long-term strategic partnerships and strong strategic relationships, such as
finance our investment program.
Highly committed founding shareholders and technical and management
with LGI, provide us with additional funding flexibility to pursue further
acquisitions
We benefit from a number of strong partnerships and relationships. In March
teams with proven industry expertise and technically-driven culture
Our founding shareholders, management and operating teams have
2010, we entered into a framework agreement with LGI to establish a
strategic growth partnership to jointly acquire and invest in oil and natural
significant experience in the oil and gas industry and a proven technical and
gas projects throughout Latin America. In May 2011, our partnership with LGI
commercial performance record in onshore fields, as well as complex projects
was strengthened by LGI’s acquisition of a 10% equity interest in our existing
in Latin America and around the world, including expertise in identifying
Chilean operations. In October 2011, LGI acquired an additional 10% equity
acquisition and expansion opportunities. Moreover, we differentiate
interest in GeoPark Chile and a 14% equity interest in GeoPark TdF, and
ourselves from other E&P companies through our technically-driven culture,
agreed to provide additional financial support for the further development
which fosters innovation, creativity and timely execution. Our geoscientists,
of the Tierra del Fuego Blocks. In December 2012, LGI acquired a 20% equity
geophysicists and engineers are pivotal to the success of our business
interest in our Colombian business. We also agreed with LGI to extend our
strategy, and we have created an environment and supplied the resources
strategic partnership in order to build a portfolio of upstream oil and gas
that enable our technical team to focus its knowledge, skills and experience
assets throughout Latin America through 2015. As of the date of this Annual
on finding and developing oil and gas fields.
Report, we are the only independent E&P company in which LGI has equity
In addition, we strive to provide a safe and motivating workplace for
with LGI” for additional information relating to these agreements.
investments in Latin America. See “-Significant agreements-Agreements
employees in order to attract, protect, retain and train a quality team in the
competitive marketplace for capable energy professionals.
In addition, the IFC has been one of our shareholders since 2006, holding
an 6% equity interest in us as of the date of this Annual Report. In Chile, we
Our CEO, Mr. James Park, has been involved in E&P projects in Latin America
have strong long-term commercial relationships with Methanex and ENAP,
since 1978. He has been closely involved in grass-roots exploration activities,
and in Colombia, through our acquisitions of Winchester, Luna and Cuerva,
drilling and production operations, surface and pipeline construction, legal
we have inherited a strong relationship with Ecopetrol, the Colombian
and regulatory issues, crude oil marketing and transportation and capital
state-owned oil and gas company.
raising for the industry. As of December 31, 2014 Mr. Park held 12.9% of our
outstanding common shares.
Our Chairman, Mr. Gerald O’Shaughnessy, has been actively involved in
In Brazil, we believe we will continue to derive benefit from the long-term
relationship GeoPark Brazil (formerly Rio Das Contas) has with Petrobras.
the oil and gas business internationally and in North America since 1976. As
of December 31, 2014, Mr. O’Shaughnessy held 13.0% of our outstanding
2015 Strategy and Outlook
GeoPark’s strategic approach to 2015 is guided by the following principles:
common shares.
Our management and operating team has an average experience in the
flexibility and maintain balance sheet strength.
energy industry of approximately 25 years in companies such as Chevron,
• Capital Allocation Discipline: Prioritize lower-risk, higher netback, and
San Jorge, Petrobras, Total, Pluspetrol, ENAP and YPF, among others.
quicker cash flow generating projects.
• Preserve Cash: Work and Investment Reduction program to maintain
72
GeoPark 20F
• Do More For Less: Aggressively implement operating, general and
based on market conditions, our continued production, decisions by the
administrative expense and capital cost reduction measures.
operators in blocks where we are not the operator, the success of our drilling
• Stay Agile: Continuous monitoring of work programs and adjustments
results and future acquisitions. Our future financial condition and liquidity
as necessary.
will be impacted by, among other factors, our level of production of oil and
• Build for Long Term: Protect critical assets, tools and capabilities necessary
natural gas and the prices we receive from the sale thereof, the success of
for long term stability, and continue to search for potential valuable site
our exploration and appraisal drilling program, the number of commercially
opportunities.
viable oil and natural gas discoveries made and the quantities of oil and
natural gas discovered, the speed with which we can bring such discoveries
At the base budget oil price assumption of US$45-US$50 per bbl, GeoPark
to production and the actual cost of exploration, appraisal and development
is targeting a fully-funded US$60 million-US$70 million work and investment
of our oil and natural gas assets.
program for 2015. The bulk of this 2015 work program is targeted to further
develop and produce GeoPark’s Tigana and Tua oil fields in the Llanos 34
Recent developments
Block in Colombia, which currently provide the lowest risk production and
reserve growth opportunities with attractive operating netbacks.
First Quarter 2015 Operational Highlights
Our production for the first quarter 2015 has averaged approximately
19,566 boepd, with Colombian, Chilean and Brazilian production representing
The work program break-down is approximately as follows: Colombia
11,586 boepd (59%), 4,486 boepd (23%), and 3,494 (18%), respectively. Oil
with US$35 million-US$40 million in new drilling and facility construction;
and liquids represented 72% of consolidated production.
Chile with US$5 million-US$8 million in well workovers and facility
construction; Brazil with US$6 million-US$7 million in the Manatí compression
Our oil and gas production for the first quarter of 2015 increased 18% to
plant installation and seismic processing; Peru with US$8 million-US$9 million
19,586 boepd, compared to 16,583 boepd in the same period in 2014 led
mainly in environmental studies and camp facilities; and Argentina with
by the strong production growth in the Llanos 34 Block in Colombia which
US$3 million-US$4 million in seismic studies.
also compensated the temporary shut-in of marginal fields in Colombia
and Argentina. Resulting from the above, Colombian, Chilean, Brazilian and
If oil prices average higher than the base budget price, GeoPark has the
Argentinean production averaged 11,586 boepd (59%), 4,486 boepd
ability to allocate additional capital to more projects and increase its work
(23%), 3,494 boepd (18%), and 20 boepd (0%), respectively during the first
and investment program and thereby further increase oil and gas production.
quarter 2015.
In budgeting for our future activities, we have relied on a number of
Consolidated oil production accounted for 72% of total reported production,
assumptions, including, with regard to our discovery success rate, the number
increasing to 14,101 bopd in the first quarter 2015 from 13,765 bopd in the
of wells we plan to drill, our working interests in our prospects, the costs
same period of 2014.
involved in developing or participating in the development of a prospect,
the timing of third-party projects and our ability to obtain needed financing
in respect to any further acquisitions and the availability of both suitable
In Colombia, in the Llanos 34 Block, in February 2015, we announced a new
oil field discovery following the drilling of exploration well Tilo 1. The
equipment and qualified personnel. These assumptions are inherently subject
Tilo 1 prospect was defined as a structural trap with three-way dip closure
to significant business, political, economic, regulatory, environmental and
on the down-thrown side of a normal fault – targeting the two principal
competitive uncertainties, conditions in the financial markets, contingencies
productive reservoirs, the Guadalupe (main target) and Mirador (secondary
and risks, all of which are difficult to predict and many of which are beyond
target) sandstones. We drilled and completed the Tilo 1 exploratory well to a
our control. In addition, we opportunistically seek out new assets
total depth of 11,293 feet in 2014, and successfully tested in the first quarter
and acquisition targets to complement our existing operations, and have
2015 with an electrical submersible pump in the Guadalupe formation, at
financed such acquisitions in the past through the incurrence of additional
approximately 10,707 feet. In March, Tilo 1 well initiated a long-term test,
indebtedness, including additional bank credit facilities, equity issuances
and is currently on production at a rate of approximately 850 bopd. Further
or the sale of minority stakes in certain operations to our partners. We may
technical evaluation will also be undertaken to determine if the Tilo field
need to raise additional funds more quickly if one or more of our assumptions
is potentially a northeast extension of the larger Tigana field. In addition, in
prove to be incorrect or if we choose to expand our hydrocarbon asset
the first quarter 2014 in the Llanos 34 Block, we tested two appraisal wells,
acquisition, exploration, appraisal or development efforts more rapidly than
Tua 7 and Tua 9, and these were successfully tested and as of the date
we presently anticipate, and we may decide to raise additional funds even
of this Annual Report are producing approximately 1,400 and 950 bopd
before we need them if the conditions for raising capital are favorable.
gross, respectively. Production in Colombia during the first quarter 2015 was
The ultimate amount of capital that we will expend may fluctuate materially
negatively impacted by the temporary shutdown of oil fields in La Cuerva
GeoPark 20F
73
Block, which was producing 880 bopd (La Cuerva Block is located in a more
and we expect that our Morona Block in Peru, will provide us with an
remote area, and generates higher transportation and logistics expenses).
additional attractive platforms in those countries. Our enhanced regional
portfolio, primarily in investment-grade countries, and strong partnerships
In Chile, the Ache 1 gas discovery well was drilled and completed to a total
position us as a regional consolidator. We intend to continue to grow
depth of 9,694 feet in 2014. A production test through different chokes
through strategic acquisitions and potentially in other countries in Latin
in the Tobifera formation resulted in an average gas production rate of
America. Our acquisition strategy is aimed at maintaining a balanced portfolio
9.2 million standard cubic feet per day of gas and approximately 80 barrels
of lower-risk cash flow-generating properties and assets that have upside
per day of condensate of 47 degree API. The well is temporarily shut-in until
potential, keeping a balanced mix of oil- and gas-producing assets (though
surface facilities are constructed – currently targeted to be completed with
we expect to remain weighted towards oil) and focusing on both assets
production start-up in 4Q2015.
and corporate targets.
Our long-term strategy
Continue to foster a technically-driven culture and to capitalize on local
Continue to grow a risk-balanced asset portfolio
We intend to continue to focus on maintaining a risk-balanced portfolio of
knowledge
We intend to continue to build and strengthen an environment that will
assets, combining cash flow-generating assets with upside potential
allow us to fully consider and understand risk and reward and to deliberately
opportunities, and on increasing production and reserves through finding,
and collectively pursue strategies that maximize value. For this purpose,
developing and producing oil and gas reserves in the countries in which we
we intend to continue expanding our technical teams and to foster a culture
operate. For example, through our expansion into Brazil, we have secured
that rewards talent according to results. For example, we have been able
steady cash flows through our acquisition of Rio das Contas, as well as
to maintain the technical teams we inherited through our Colombian
exploratory potential through our success in two ANP oil and gas bidding
acquisitions and intend to retain our technical teams in Brazil after acquiring
rounds in which we were awarded a total of nine concessions in Brazil.
Rio das Contas on March 31, 2014. We believe local technical and professional
knowledge is key to operational and long-term success and intend to
In Peru, the pending acquisition of the Morona Block contains the Situche
continue to secure local talent as we grow our business in different locations.
Central oil field, which has been delineated by two wells and geophysical
surveys, an operating field camp and logistics infrastructure. In addition to the
Situche Central field, the Morona Block has a large exploration potential
Maintain a high degree of operatorship
As of the date of this Annual Report, we are and intend to continue to be,
with several high impact prospects and plays. This important component of
the operator of a majority of the blocks and concessions in which we have
the project will significantly increase our overall inventory of exploration
working interests. Operating the majority of our blocks and concessions
resources and complement our growing reserve and cash flow base already
gives us the flexibility to allocate our capital and resources opportunistically
established in Colombia, Chile and Brazil.
and efficiently. We believe that this strategy has allowed, and will continue
We believe this approach will allow us to sustain continuous and profitable
growth and also participate in higher risk growth opportunities with upside
operating and management teams. As of December 31, 2014, 84% of our net
proved reserves and 83% of our production came from blocks in which we
potential. See “-Our operations.”
are the operator.
to allow, us to leverage our unique culture and our talented technical,
Maintain conservative financial policies
We seek to maintain a prudent and sustainable capital structure and a strong
Maintain our commitment to environmental and social responsibility
A major component of our business strategy is our focus on our
financial position to allow us to maximize the development of our assets
environmental and social responsibility. We are committed to minimizing
and capitalize on business opportunities as they arise. We intend to remain
the impact of our projects on the environment. We also aim to create
financially disciplined by limiting substantially all our debt incurrence to
mutually beneficial relationships with the local communities in which
identified projects with repayment sources. We expect to continue benefiting
we operate in order to enhance our ability to create sustainable value in
from diverse funding sources such as our partners and customers in addition
our projects. In line with the IFC’s standards, our commitment to our
to the international capital markets.
environmental and social responsibilities is a major component of our
business strategy. These commitments are embodied in our in-house
Pursue strategic acquisitions in Latin America
We have historically benefited from, and intend to continue to grow through,
designed Environmental, Health, Safety and Security management program,
which we refer to as “S.P.E.E.D.” (Safety, Prosperity, Employees, Environment
strategic acquisitions. Our Colombian acquisitions highlight our ability to
and Community Development). Our S.P.E.E.D. program was developed in
identify and execute opportunities. These acquisitions have provided us with,
accordance with several international quality standards, including ISO 14001
74
GeoPark 20F
for environmental management issues, OHSAS 18001 for occupational
health and safety management issues, SA 8000 for social accountability and
Operations in Chile
We became the first privately-owned oil and gas producer in Chile when we
workers’ rights issues, and applicable World Bank standards. See “-Health,
began production in the Fell Block in May 2006, and, for the year ended
safety and environmental matters.”
Our operations
We have a well-balanced portfolio of assets that includes working and/or
December 31, 2014, we produced 55% of Chile’s total oil production and 16%
of its total gas production, according to information provided by the Chilean
Ministry of Energy. We believe our acreage position in Chile represents a large
fully-operated land base across the Magallanes Basin, with existing reserves,
economic interests in 29 hydrocarbons blocks, 28 of which are onshore
production and cash flows.
blocks, including 12 in production as of December 31, 2014, as well as in an
additional shallow-offshore concession in Brazil that includes the Manatí
The map below shows the location of the blocks in Chile in which we have
Field. In addition, we have one new concessions in Brazil, the PN-T-597 Block
working interests.
that is subject to the entry into the concession agreement by the ANP
and the Morona Block in Peru that we expect to close in 2015 following
regulatory approvals.
C H I L E
A R G E N T I N A
A R G E N T I N A
Tranquilo
Otway
Fell
Isla Norte
Campanario
Flamenco
GeoPark 20F
75
The table below summarizes information about the blocks in Chile in which
we have working interests as of and for the year ended December 31, 2014.
Block
Fell
Tranquilo
Otway
Isla Norte
Campanario
Flamenco
Gross acres
Working
(thousand
acres)
367.8
interest
(1)(6)
100%
Net proved
reserves Production
(boepd)
Basin
5,849.8 Magallanes
Exploitation: 2032
Concession
expiration year
Partners(2)
-
Pluspetrol;
Operator
GeoPark
(mmboe)(3)
11.5
92.4
49.4(4)
Wintershall;
29%(6) Methanex
-
100%
GeoPark
GeoPark
130.2
60%(5)
ENAP
GeoPark
192.2
50%(5)
ENAP
GeoPark
-
-
0.06
0.04
- Magallanes
- Magallanes
41.4 Magallanes
Exploitation: 2043
Exploitation: 2044
Exploration: 2019
Exploitation: 2044
Exploration: 2020
13.3 Magallanes
Exploitation: 2045
Exploration: 2019
141.3
50%(5)
ENAP
GeoPark
0.5
199.1 Magallanes
Exploitation: 2044
(1) Working interest corresponds to the working interests held by our
Our Chilean blocks are located in the provinces of Ultima Esperanza,
respective subsidiaries in such block, net of any working interests held by
Magallanes and Tierra del Fuego in the Magallanes Basin, a proven oil- and
other parties in such block. LGI has a 20% direct equity interest in our
gas-producing area. As of December 31, 2014, the Magallanes Basin
Chilean operations through GeoPark Chile. See “-Significant agreements-
accounted for all of Chile’s oil and gas production. Although this basin has
Agreements with LGI-LGI Chile Shareholders’ Agreements.”
been in production for over 60 years, we believe that it remains relatively
(2) Partners with working interests.
(3) As of December 31, 2014.
underdeveloped.
(4) In April 2013, we voluntarily relinquished to the Chilean government all
Substantial technical data (seismic, geological, drilling and production
of our acreage in the Otway Block, except for 49,421 acres. In May 2013, our
information), developed by us and by ENAP, provides an informed base for
partners under the joint operating agreement governing the Otway Block
new hydrocarbon exploration and development. Shut-in and abandoned
decided to withdraw from such joint operating agreement, and applied
fields may also have the potential to be put back in production by
for an assignment of rights permit on August 5, 2013. In September 2014,
constructing new pipelines and plants. Our geophysical analyses suggest
the Chilean Ministry of Energy approved that we will be the sole participant
with a working interest of 100%. See “-Otway and Tranquilo Blocks.”
additional development potential in known fields and exploration potential
in undrilled prospects and plays, including opportunities in the Springhill,
(5) LGI has a 14% direct equity interest in our Tierra del Fuego operations
Tertiary, Tobífera and Estratos con Favrella formations. The Springhill
through GeoPark TdF and a 20% direct equity interest in GeoPark Chile, for a
formation has historically been the source of production in the Fell Block,
total effective equity interest of 31.2% in our Tierra del Fuego operations.
though the Estratos con Favrella shale formation is the principal source
See “-Tierra del Fuego Blocks (Isla Norte, Campanario and Flamenco Blocks)”
rock of the Magallanes Basin, and we believe it contains unconventional
and “-Significant agreements-Agreements with LGI-LGI Chile Shareholders’
resource potential.
Agreements.”
(6) At December 31, 2013, the Consortium members and interest were:
GeoPark 29%, Pluspetrol 29%, Wintershall 25% and Methanex 17%.
Fell Block
In 2006, we became the operator and 100% interest owner of the Fell Block.
During 2014 Methanex and Wintershall announced their decision to exit the
When we first acquired an interest in the Fell Block in 2002, it had no material
Consortium. The new ownership is GeoPark 50% and Pluspetrol 50%.
oil and gas production. Since then, we have completed more than 1,100 sq.
km of 3D seismic surveys and drilled 95 exploration and development
wells. In the year ended December 31, 2014, we produced an average of
approximately 5,580 boepd, in the Fell Block, consisting of 61% oil.
76
GeoPark 20F
The Fell Block has an area of approximately 368,000 gross acres
in the oil window for this play. We have begun work to reinterpret core
(1,488 sq. km) and its center is located approximately 140 km northeast of
data logs and well test information, evaluate cores and fluids and determine
the city of Punta Arenas. It is bordered on the north by the international
reservoir brittleness (for fracturing) through special field tests.
border between Argentina and Chile and on the south by the Magellan Strait.
The first exploration efforts began on the Fell Block in the 1950s. Through
Tierra del Fuego Blocks (Isla Norte, Campanario and Flamenco Blocks)
In the first and second quarters of 2012, we entered into three CEOPs
2005, ENAP carried out seismic surveys and drilled numerous wells in the
with ENAP and Chile granting us working interests in the Isla Norte,
Block. From 2006 through August 2011, we invested approximately
Campanario and Flamenco Blocks, located in the center-north of the Tierra
US$210 million in exploring and developing the Fell Block, which allowed
del Fuego province of Chile. We are the operator of all three of these blocks,
us to transition approximately 84% of the Fell Block’s area from an
with working interests of 60%, 50% and 50%, respectively. We believe that
exploration phase into an exploitation phase, which we expect will last
these three blocks, which collectively cover 463,700 gross acres
through 2032. During the exploration phase, we exceeded the minimum
(1,877 sq. km) and are geologically contiguous to the Fell Block, represent
work and investment commitment required under the Fell Block CEOP
strategic acreage with resource potential. Following the successful
by more than 75 times, and as of December 31, 2014, had invested more
methodology we employed on the Fell Block, we expect to evaluate early
than US$510 million in the Fell Block. There are no minimum work and
production opportunities from existing nonproducing wells in Tierra del
investment commitments under the Fell Block CEOP associated with the
Fuego. We have committed to paying 100% of the required minimum
exploitation phase.
investment under the CEOPs covering these blocks, in an aggregate amount
of US$101.4 million through the end of the first exploratory periods for these
Geologically, the Fell Block is located in the north-eastern part of
blocks, which we expect will occur by November 2015 for the Flamenco
the Magallanes Basin. The principal producing reservoir is composed by
and Isla Norte Blocks and by January 2016 for the Campanario Block, which
sandstones in the Springhill formation, at depths of 2,200 to 3,500 meters.
includes our covering of ENAP’s investment commitment which corresponds
Additional reservoirs have been discovered and put into production in
to its working interest in the blocks. In the first quarter of 2012, we began
the Fell Block-namely, Tobífera formation volcaniclastic rocks at depths
3D seismic operations in the Flamenco Block. As of March 2015, 16 wells
of 2,900 to 3,600 meters, and Upper Tertiary and Upper Cretaceous
have been drilled (for a total investment commitment of 21 wells)
sandstones, at depths of 700 to 2,000 meters.
and 1,500 sq. km of 3D seismic have been carried out over the three blocks;
which represent the total 3D seismic program commitment.
Our geosciences team continues to identify and develop an attractive
inventory of prospects and drilling opportunities for both exploration and
Exploration in the Tierra del Fuego province in the Magallanes Basin dates
development in the Fell Block, and we expect to continue our comprehensive
back to the 1940s, when the first surface exploration focused on obtaining
drilling program in the Fell Block in the coming years. The previous oil
stratigraphic and structural information. Structural traps with transgressive
discoveries in the Konawentru, Yagán, Yagán Norte, Copihue and Guanaco
sandstone reservoirs (Springhill formation) were outlined with refraction
fields have opened up new oil and gas potential in the Fell Block. An
important discovery during 2011 was the Konawentru 1 well, which we
seismic lines and, in 1945, oil was discovered.
initially tested to have in excess of 2,000 bopd from the Tobífera formation,
In the specific area of our Tierra del Fuego Blocks, the first wells were drilled
and which has opened up additional potentially attractive opportunities
in 1951, resulting in the discovery of the Sombrero oil and gas field. At the
(workovers, well-deepening’s and new exploration and development wells)
end of the 1950s and in the early 1960s, new fields were discovered to the
in the Tobífera formation throughout the Fell Block.
east (the Catalina and Cuarto Chorrillo fields) and, following the gathering of
During the last three months of 2012, and throughout 2013 and 2014, we
existing fields were further developed. During the past decade, geological
continued our exploration and development from the Tobífera formation by
studies in the Magallanes Basin have focused on stratigraphic analysis, based
drilling wells in Konawentru, Yagán and Yagán Norte fields, as well as
on 3D and 2D seismic information, the definition and distribution of facies
deepening existing wells in Ovejero and Molino. Exploration efforts in 2014
of the deltaic and/or turbidite depositional systems of the Late Cretaceous-
resulted in the discoveries of the Ache gas field and the Loij oil field. Our team
Tertiary period and the evolution of the oil system in terms of
is working on identifying other Tobifera wells where to replicate these results.
generation/timing/expulsion and trapping.
seismic reflection data acquisition, additional new fields were discovered and
We also continue to evaluate the Estratos con Favrella shale reservoir, which
Geologically, our Tierra del Fuego Blocks are located in the south-eastern
we believe represents a high-potential, unconventional resource play for
margin of the Magallanes Basin. The principal producing reservoir is
shale oil and gas, as a broad area of the Fell Block (1,000 sq. km) appears to be
composed by sandstones in the Springhill formation at depths of 1,800 to
GeoPark 20F
77
2,300 meters. Additional reservoirs have been discovered and put into
In the Otway Block, as of December 31, 2013, we had a 25% working interest
production in the Tierra del Fuego Blocks namely Tobífera formation
and our partners were Pluspetrol (25%), Wintershall (25%), IFC (12.5%) and
volcaniclastic rocks at depths of 2,000 to 2,500 meters, and Upper Terciary
Methanex (12.5%). Our partners withdrew from the joint operating
and Upper Cretaceous sandstones, at depths of 500 to 1,400 meters.
agreement governing the Otway Block in May 2013, and applied to the
Isla Norte Block. We are the operator of, and have a 60% working interest
in partnership with ENAP in the Isla Norte Block, which covers approximately
130,200 gross acres (527 sq. km). As of March 2015 we had completed
Chilean Ministry of Energy to assign their rights to us in the Otway Block CEOP
in August 2013. In September 2014, the Chilean Ministry of Energy approved
that we will be the sole participant with a working interest of 100%.
100% of the committed 350 sq. km of 3D seismic surveys. We have also
In 2012, we drilled two wells in the Otway Block, both of which were
committed to drilling three wells during the first exploration period under
subsequently plugged and abandoned.
the CEOP governing the Isla Norte Block. Pantano Oeste 1 well marks the
first oil discovery on the Isla Norte Block. As of the date of this annual report,
On April 10, 2013, we voluntarily and formally announced to the Chilean
outstanding investment commitments related to this Block corresponds
Ministry of Energy our decision not to proceed with the second exploratory
to 2 exploratory wells until November 2015 for approximately US$6.5
period and to terminate the exploratory phase under the Otway Block CEOP,
million. In the year ended December 31, 2014, we produced an average of
such that we relinquished all areas of the Otway Block, except for two areas
approximately 41.4 boepd, in the Isla Norte Block.
totaling 49,421 gross acres in which we declared the discovery of
Campanario Block. We are the operator of, and have a 50% working interest
in, the Campanario Block, in partnership with ENAP. The Block covers
In the Tranquilo Block, as of December 31, 2014, we had a 29% working
approximately 192,200 gross acres (778 sq. km). As of March 31, 2015, we had
interest, where our partners were Pluspetrol (29%), Wintershall (25%) and
completed 100% of the committed 578 sq. km of 3D seismic surveys. We
Methanex (17%). During 2014 Methanex and Wintershall announced their
have also committed to drilling eight wells during the first exploration period
decision to exit the Consortium. The new ownership is GeoPark 50% and
hydrocarbons, in the Cabo Negro and Tatiana prospect areas.
under the CEOP governing the Campanario Block. During 2014 we drilled
Pluspetrol 50%.
5 exploratory wells, including the Primavera Sur 1 well that marks the
first discovery of an oil field on the Campanario Block in addition to one
In the Tranquilo Block we completed a seismic program consisting of
development well. As of the date of this annual report, outstanding
163 sq. km of 3D seismic and 371 sq. km of 2D seismic survey work, and
investment commitments related to this Block correspond to 3 exploratory
drilled four wells, including the Palos Quemados and Marcou Sur well.
wells until January 2016 for approximately US$11.9 million. In the year
The Marcou Sur well is under evaluation and we discovered gas in the
ended December 31, 2014, we produced an average of approximately
El Salto formation of the Palos Quemado well. At the Palos Quemados well,
13.3 boepd, in the Campanario Block.
we completed a 22-week commercial feasibility test aimed at defining
its productive potential. As the test was not conclusive, we were granted
Flamenco Block. We are the operator of, and have a 50% working interest
in, the Flamenco Block, in partnership with ENAP. The Block covers
permission by the Chilean Ministry of Energy to extend the testing period
for an additional six months. Upon such testing period, GeoPark kept
approximately 141,300 gross acres (582 sq. km). In June 2013, we discovered
4 provisional protection areas, which enable continued analysis of the area
a new oil and gas field in the Block following the successful testing of the
prior the declaration of its commercial viability for a period of 5 years. On
Chercán 1 well, the first well drilled by us in Tierra del Fuego. As of March 31,
January 17, 2013, we formally announced to the Chilean Ministry of Energy
2015, we had completed 100% of the committed 570 sq. km of 3D seismic
our decision not to proceed with the second exploratory period and to
surveys. We have also committed to drilling ten wells during the first
terminate the exploratory phase of the Tranquilo Block CEOP. Subsequently,
exploration period under the CEOP governing the Flamenco Block. During
we relinquished all areas of the Tranquilo Block, except for a remaining
2014 we drilled 6 exploratory wells and 2 development wells. As of the
area of 92,417 gross acres, for the exploitation of the Renoval, Marcou Sur,
date of this annual report, there are no outstanding investment commitments
Estancia Maria Antonieta and Palos Quemados Fields, which we have
related to this Block as we have completed 100% of 3D seismic surveys and
identified as the areas with the most potential for prospects in the Block.
10 exploratory wells. In the year ended December 31, 2014, we produced
an average of approximately 199.1 boepd in the Flamenco Block.
As of December 31, 2013, we had completed our minimum work
Otway and Tranquilo Blocks
We are the operator of the Otway and Tranquilo Blocks.
commitments for the Otway and Tranquilo Blocks, with a total investment
of approximately US$24.0 million for the first exploratory period. The Otway
Block’s seismic commitment program was completed in 2011 and included
270 sq. km of 3D seismic and 127 km of 2D seismic survey work.
78
GeoPark 20F
Operations in Colombia
In the first quarter of 2012, we acquired Winchester, Luna and Cuerva,
Our interests in Colombia include working interests and economic interests.
“Working interests” are direct participation interests granted to us pursuant
three privately-held E&P companies operating in Colombia. We closed
to an E&P Contract with the ANH, whereas “economic interests” are
the acquisitions of Winchester and Luna in February 2012 and the acquisition
indirect participation interests in the net revenues from a given block based
of Cuerva in March 2012. We acquired Winchester, Luna and Cuerva for
on bilateral agreements with the concessionaires.
a total consideration of US$105.0 million, adjusted for working capital.
Additionally, in December 2012, LGI agreed to acquire a 20% equity interest
The map below shows the location of the blocks in Colombia in which we
in GeoPark Colombia for a total consideration of US$20.1 million, composed
have working and/or economic interests.
of a US$14.9 million capital contribution, a US$4.9 million loan to GeoPark
Colombia and certain miscellaneous reimbursements. See “-Significant
agreements-Agreements with LGI-LGI Colombia Agreements.”
C A R I B B E A N S E A
On July 23, 2014 we were awarded a new exploratory license, during the
P A N A M A
2014 Colombia Bidding Round, carried out by the ANH for the VIM -3 Block.
We believe the Block has an attractive oil and gas exploration potential
in a large area within a proven hydrocarbon system, surrounded by existing
oil and gas fields and with sparse exploration activity carried out to date.
In November 2014, we further expanded our portfolio in Colombia through
an agreement with SK Innovation (a subsidiary of SK Group, the Korean
integrated energy and petrochemical company) to farm-in to the CPO-4
Block, located in the Llanos Basin. We and SK have jointly identified new
prospects in this Block similar to prospects and leads in our Llanos 34 Block.
P A C I F I C
O C E A N
Abanico
VIM-3
Cerrito
Llanos 17
Yamu
V E N E Z U E L A
Jagüeyes
La Cuerva
Llanos 62
Llanos 32
Llanos 34
CPO-4(1)
C O L O M B I A
Our Colombian assets currently give us access to 1,068.7 of gross exploratory
and productive acres across 11 blocks in what we believe to be one of
South America’s most attractive oil and gas geographies. Since we acquired
Winchester, Luna and Cuerva, we were able to perform an active exploration
and development drilling campaign, which resulted in multiple new
discoveries and to increase average production to 11,615 boepd in Colombia
in the fourth quarter of 2014.
E C U A D O R
P E R U
B R A Z I L
According to the D&M Reserves Report, as of December 31, 2014, the blocks
(1) Subject to the approval of ANH.
in Colombia in which we have a working interest had 24.7 mmboe of net
proved reserves, all of which were in oil.
Under the terms of the agreement to acquire Winchester, or the Winchester
Stock Purchase Agreement, we are obligated to make certain payments
to the previous owners of Winchester based on the production and sale of
hydrocarbons discovered by exploration wells drilled after October 25, 2011.
These payments involve both an earnings-based measure and an overriding
royalty equal to an estimated 4% of our net revenues for any new discoveries
of oil. During 2014, we paid US$21.0 million and accrued US$24.6 million
to the previous owners of Winchester pursuant to the Winchester Stock
Purchase Agreement.
GeoPark 20F
79
The table summarizes information about the blocks in Colombia in which
we have working interests as of and for the year ended December 31, 2014
Block
La Cuerva
Llanos 34
Llanos 62
Yamú
Llanos 17
Llanos 32
Gross acres
(thousand
acres)
Working
interest(1)
Net proved
reserves Production
Partners(2)
Operator
(mmboe)(3)
(boepd)
Basin
Concession
expiration year
Exploration: 2014
47.8
100.0%
-
GeoPark
2.6
1,389
Llanos
Exploitation: 2038
82.2
45.0%
Parex
GeoPark
21.5
8,306
Llanos
Exploitation: 2039
Exploration: 2015
44.0
100.0%
11.2
79.5/
90%(4)
108.8
36.8%(5)
-
-
GeoPark
GeoPark
-
0.5
-
Llanos
388
Llanos
Exploration: 2017
Exploitation: 2041
Exploration: 2013(6)
Production: 2036
Exploration: 2015
Parex
Parex
0.03
52
Llanos
Exploitation: 2039
Exploration: 2015
100.3
10%
APCO; Parex
Parex
0.1
486
Llanos
Exploitation: 2039
Jagu(cid:0) eyes 3432A
61.0
5.0%
Columbus
Columbus
VIM-3
CPO-4(7)
225.0
100%
-
GeoPark
345.6
50%
SK
GeoPark
-
-
-
-
Llanos
Exploitation: 2038
Exploration: 2014
- Magdalena
Exploitation: 2045
Exploration: 2021
Exploration: 2015
-
Llanos
Exploitation: 2038
(1) Working interest corresponds to the working interests held by our
respective subsidiaries in such block, net of any working interests held
by other parties in such block. LGI has a 20% direct equity interest in
our Colombian operations through GeoPark Colombia. See “-Significant
agreements-Agreements with LGI-LGI Colombia Agreements.”
(2) Partners with working interests.
(3) As of December 31, 2014.
(4) Although we are the sole title holder of the working interest in the
Yamú Block, other parties have been granted economic interests in fields
in this Block. Taking those other parties’ interests into account, we have
a 79.5% interest in the Carupana Field and a 90% interest in the Yamú and
Potrillo Fields, both located in the Yamú Block.
(5) We currently have a 40% working interest in the Llanos 17 Block,
although we assigned a 3.2% economic interest to a third party. We expect
to formalize this assignment with the ANH so that it will be recognized
as a working interest.
(6) The Yamú Block E&P Contract is in both the exploration and exploitation
phases. The phases overlap because the exploitation phase (lasting 24 years)
for the Yamú and Carupana Fields began on the date these fields were
declared commercially viable, while the exploration phase continued to run
for the rest of the Block.
(7) Subject to regulatory approval from the ANH in Colombia.
80
GeoPark 20F
The table summarizes information about the blocks in Colombia in which
three-way dip closure on the down-thrown side of a normal fault – targeting
we have economic interests as of and for the year ended December 31, 2014.
the two principal productive reservoirs, the Guadalupe (main target) and
Gross acres
(thousand
acres)
32.1
10.2
Economic
interest(1)
10%
10%
Block
Abanico
Cerrito
Mirador (secondary target) sandstones. We drilled and completed the
Tilo 1 exploratory well to a total depth of 11,293 feet. A test conducted with
Production
an electrical submersible pump in the Guadalupe formation, at approximately
Operator
(boepd)
Basin
10,707 feet, resulted in a production rate of approximately 1,000 bopd of
Pacific
Pacific
83 Magdalena
14.2 degree API, with approximately 10% water cut. On March 28, 2015 Tilo 1
- Catatumbo
commenced a long-term test and current production is approximately
850 bopd. Further production history is required to determine stabilized flow
(1) Economic interest corresponds to indirect participation interests in
rates of the well and the extent of the field. Further technical evaluation
the net revenues from the Block, granted to us pursuant to a joint operating
will also be undertaken to determine if the Tilo field is potentially a northeast
agreement.
extension of the larger Tigana field.
Eastern Llanos Basin: (La Cuerva, Yamú, Llanos 34, Llanos 32, Llanos 62,
For 2015, we expect to focus on facilities optimization and plan to drill up
Llanos 17, Jagu(cid:0) eyes 3432A, Abanico, Cerrito, CPO-4 and VIM-3 Blocks)
The Eastern Llanos Basin is a Cenozoic Foreland basin in the eastern region
to 4 development wells in Tua and Tigana oil fields, depending on oil prices.
of Colombia. Two giant fields (Caño Limón and Castilla), three major
Our partner in the Llanos 34 Block is Parex, which has a 55% interest.
fields (Rubiales, Apiay and Tame Complex) and approximately fifty minor
See “-Our operations.” We operate in the Block pursuant to an E&P Contract
fields had been discovered. The source rock for the basin is located beneath
with the ANH. See “-Significant agreements-Colombia-E&P Contracts-
the east flank of the Eastern Cordillera, as a mixed marine-continental shaly
Llanos 34 Block E&P Contract.”
basinal facies of the Gachetá formation. The main reservoirs of the basin
are represented by the Paleogene Carbonera and Mirador sandstones. Within
the Cretaceous sequence, several sandstones are also considered to have
good reservoirs.
Llanos 34 Block. We are the operator of, and have a 45% working interest in,
the Llanos 34 Block, which covers approximately 82,200 gross acres
La Cuerva Block. We are the operator of, and have a 100% working interest
in, the La Cuerva Block, which covers approximately 47,800 gross acres
(190 sq. km). Since we acquired an interest in the La Cuerva Block, we have
drilled a total of 15 wells in the Block, 17 of which were productive at
year-end 2014. For the year ended December 31, 2014, our average net
production at the La Cuerva Block was 1,389 bopd. We operate in the Block
(333 sq. km). We acquired an interest in and took operatorship of the Block
pursuant to an E&P Contract with the ANH. In the first quarter 2015, the
in the first quarter of 2012, which at the time had no production, reserves
block was temporarily shut down. See “-Significant agreements-Colombia-
or wells drilled on it, and with 210 sq. km of existing 3D seismic on which our
E&P Contracts-La Cuerva Block E&P Contract.”
team had mapped multiple exploration prospects. During 2012, we drilled
the Tua prospect and made a discovery in the Guadalupe and Mirador
reservoirs. Two additional follow up wells were successfully drilled and placed
Llanos 62 Block. We are the operator of, and have a 100% working interest
in, the Llanos 62 Block, which covers approximately 44,000 gross acres
on production at Tua, and a water disposal well was drilled at Max field. In
(178 sq. km). As of December 31, 2014, we had undertaken 72.2sq. km of
2013, an additional three delineation wells were drilled at Tua, which
3D seismic surveys within the Block. We operate the Block pursuant to an E&P
were all placed on production, and also the Tigana and Tarotaro fields were
Contract with the ANH. We have committed to drill two exploratory wells
discovered in 2013, for a total of four wells in Tarotaro and two wells in
before July 2015. The remaining commitment amounts to US$6.0 million.
the Tigana Field. Both fields are productive in the Guadalupe and Mirador
reservoirs and produce oil of 15º to 20º API. In 2014, we focused on the
development of Tua and the delineation and development of the Tigana
Yamú Block. We are the operator of, and have a 100% working interest in,
the Yamú Block, which covers approximately 11,200 gross acres (45.5 sq. km).
Field. In 2014, we drilled 6 additional wells in the Tigana Field, 5 of which
Economic rights to certain fields in the Yamú Block have been granted to
are in production. Furthermore, an additional 5 wells were drilled at Tua, 4 of
other parties. In May 2013, we successfully drilled and completed the Potrillo
which are in production, and 1 well, Tua 10, is to be tested. Average net oil
1 well in the Block to a total depth of 3,560 meters. The well was put in
production from Llanos 34 Block in 2014 was 8,306 bopd.
production with an initial rate of 744 bopd and a water cut of 15%. The well
has been producing from the existing facility at Carupana Field. For the year
In February 2015, we announced a new oil field discovery following the
ended December 31, 2014, our average net production at the Yamú Block was
drilling of exploration well Tilo 1 on the Llanos 34 Block. This is the sixth
388 bopd. We operate in the Block pursuant to an E&P Contract with the ANH.
discovery in this block. The Tilo prospect was defined as a structural trap with
On July 29, 2014, our Colombian subsidiary agreed to exchange its 10% non-
GeoPark 20F
81
operating economic interest in the Arrendajo Block for additional interests
rather had a 10% economic interest in the net revenues of the Arrendajo
held by the seller in the Yamú Block that includes a 15% economic interest
Block pursuant to a participating interest agreement between us and Great
in all of the Yamú fields except for the Carupana field, where the seller
North Energy Colombia Inc. (now Pacific).
had a 25% economic interest. We received US$3.2 million in cash from the
exchange, adjusted for working capital. In the first quarter 2015 we
temporarily shut down our operations in this Block.
Llanos 17 Block. We have a 40% working interest in the Llanos 17 Block,
which covers approximately 108,800 gross acres (440 sq. km). Parex is the
Abanico Block. In October 1996, Ecopetrol and Explotaciones CMS Nomeco
Inc. entered into the Abanico Block association contract. Pacific is the
operator of, and has a 100% working interest in, the Abanico Block, which
covers an area of approximately 32.1 gross acres. We do not maintain a
direct working interest in the Abanico Block, but rather have a 10% economic
operator of, and has a 60% working interest in, the Llanos 17 Block. Since we
interest in the net revenues from the Block pursuant to a joint operating
acquired a working interest in the Block, two wells have been drilled in the
agreement initially entered into with Kappa Resources Colombia Limited
Block, one of which was productive. We maintain our 40% working interest
(now Pacific, who subsequently assigned its participation interest to
in the Llanos 17 Block pursuant to an E&P Contract with the ANH. However,
Cespa de Colombia S.A., who then assigned the interest to Explotaciones
we expect to apply to the ANH to approve an assignment of 3.2% of our
CMS Oil & Gas), Maral Finance Corporation and Getionar S.A.
working interest in this Block to another party. For the Llanos 17 Block, there
is still a remaining commitment that amounts to US$4.3 million (US$1.6
million of our working interest), which is expected to be completed with an
additional exploratory well.
Llanos 32 Block. We have a 10% working interest in the Llanos 32 Block,
which covers approximately 100,300 gross acres (406 sq. km) Parex is the
Cerrito Block. In February of 2002, Ecopetrol and Kappa Resources Colombia
Limited (now Pacific) entered into the Cerrito Block association contract.
The Cerrito Block covers an area of approximately 10.2 thousand gross acres.
Pacific is the operator of, and has a 100% working interest in, the Cerrito
Block. We do not maintain a direct working interest in the Cerrito Block, but
rather have a 10% economic interest in the Block pursuant to a joint
operator of, and has a 70% working interest in, the Llanos 32 Block. Parex’s
operating agreement initially entered into with Kappa Resources Colombia
other partner in the Block is APCO Properties Ltd., or APCO, who has a
Limited (now Pacific), Maral Finance Corporation, Geoproduction Oil & Gas
20% working interest. Since we acquired an interest in the Llanos 32 Block,
Company of Colombia Limitada and Texican Oil PLC.
and as of December 31, 2013, five wells have been drilled in the Block,
three of which were productive. In 2014, three additional discoveries were
made at fields Kananaskis, Carmentea and Calona in both the Mirador
VIM-3 Block. On July 23, 2014 we were awarded a new exploratory license
during the 2014 Colombia Bidding Round, carried out by the ANH. The
and Une reservoirs, with 7 wells drilled: 4 wells in Kananaskis, 1 well in Calona,
VIM-3 Block is located in the Lower Magdalena Basin, covering an area
and 2 wells at Carmentea. For the year ended December 31, 2014, our
of approximately 225,000 acres. GeoPark’s winning bid consisted of
average net production in the Llanos 32 Block was 486 bopd.
committing to a Royalty X Factor of 3% and a minimum investment program
Jagu(cid:0) eyes 3432A Block. We have a 5% working interest in the Jagu(cid:0) eyes 3432A
Block, which covers approximately 61,000 acres (247 sq. km). Our partner in
with a total estimated investment of US$22.2 million during the initial three
year exploratory period. GeoPark will operate and have a 100% working
the Block is Columbus Energy, who maintains a 95% working interest in and is
interest in the Block. We believe the Block has an attractive oil and gas
the operator of the Jagu(cid:0) eyes 3432A Block. We maintain a working interest in
exploration potential in a large area within a proven hydrocarbon system,
the Jagu(cid:0) eyes 3432A Block pursuant to an E&P Contract with the ANH.
surrounded by existing oil and gas fields and with sparse exploration
of carrying out 200 sq km of 2D seismic and drilling one exploratory well,
activity carried out to date.
Arrendajo Block. In December 2005, Great North Energy Colombia Inc.
(now Pacific Stratus Energy Corp., or Pacific) and the ANH entered into the
Arrendajo Block E&P Contract. Pacific is the operator of, and has a 100%
CPO-4 Block. In November 2014, we expanded our portfolio in Colombia
through an agreement with SK Innovation (subsidiary of SK Group, the Korean
working interest in, the Arrendajo Block, which covers approximately 78.1
integrated energy and petrochemical company) to farm-in to the CPO-4
gross acres. On July 29, 2014, our Colombian subsidiary agreed to exchange
Block, located in the Llanos Basin. The Block covers an area of approximately
its 10% non-operating economic interest in the Arrendajo Block for additional
345,600 acres with 3D seismic coverage of approximately 880 sq km. In
interests held by the seller in the Yamú Block that includes a 15% economic
accordance with the farm-in agreement, and subject to the approval of ANH
interest in all of the Yamú fields except for the Carupana field, where the
in Colombia, we will operate and receive a 50% working interest in the CPO-4
seller had a 25% economic interest. We received US$3.2 million in cash from
Block in exchange for its commitment to drill and fund its 50% (with no carry)
the exchange, adjusted for working capital. We did not maintain a direct
of one exploration well. The well is targeted for 1H2015 and our total financial
working interest in this Block pursuant to an E&P Contract with the ANH, but
commitment is approximately $6.0 million. There is an option to move to an
82
GeoPark 20F
additional exploration phase following the drilling of a successful well. Final
not in default as long as the regulator does not state its final position on the
approval from the ANH is expected in the first half of 2015.
renewal. See “-Health, safety and environmental matters-Other regulation of
Operations in Brazil
On May 14, 2013, we announced the future extension of our footprint into
the oil and gas industry-Brazil.” The Camarão Norte Field is in the development
phase and is not yet subject to the environmental licensing requirement.
Brazil when the ANP awarded us seven new exploratory licenses in the
Our acquisition of Rio das Contas in Brazil, which closed on March 31, 2014,
REC-T 94 and REC-T 85 Concessions in the Recôncavo Basin in the State of
provides us with a long-term off-take contract with Petrobras that covers
Bahia and the POT-T 664, POT-T 665, POT-T 619, POT-T 620 and POT-T 663
approximately 74% of net proved gas reserves in the Manatí Field, a valuable
Concessions in the Potiguar Basin in the State of Rio Grande do Norte,
relationship with Petrobras and an established local platform and presence,
or our Round 11 concessions, collectively covering an area of approximately
with seasoned and experienced geoscience and administrative team to
54,900 gross acres. On September 17, 2013, we entered into seven
manage the assets and to seek new growth opportunities.
concession agreements with the ANP for the right to exploit the oil and
natural gas in these seven new concessions. For our winning bids on these
In January 31, 2015 Rio das Contas was merged into GeoPark Brazil
seven concessions, we committed to invest a minimum of US$15.3 million
Exploração e Produção de Petróleo e Gás Ltda, being the only entity
(including bonuses and estimated work program commitment) during
representing GeoPark in Brazil.
the first three years of the exploratory period for the concessions. We have
already invested US$5.4 million in seismic work and US$4.4 million in
We are currently qualified us as a class B operator, meaning that we are
bonuses paid to ANP as of the date of this annual report.
recognized as having met all technical and managerial conditions required
to operate safely in Brazil, both onshore and offshore at water depths of
These seven new concessions cover an area of approximately 54,850 gross
less than 400 meters.
acres. Pursuant to ANP requirements, actual exploitation of these new
concessions will also depend on obtaining an environmental license from
The map below shows the location of the concessions in Brazil in which we
the respective state environmental agencies.
expect to have working interests as a result of our Brazil Acquisitions.
Also in Brazil, on November 28, 2013, the ANP awarded us two new
concessions, the PN-T-597 Concession in the Parnaíba Basin in the State of
Maranhão and the SEAL-T-268 Concession in the Sergipe Alagoas Basin
in the State of Alagoas, in the 12th oil and gas bidding round. The PN-T-597
Concession is still subject to the entry into the concession agreement. For our
winning bids on these two concessions, we have committed to invest a
minimum of US$4.0 million (including bonus and estimated work program
commitments) during the first exploratory period. These two new concessions
cover an area of approximately 196,500 acres. For more information, see
B R A Z I L
“-Item 3. Key information-D. Risk factors-Risks relating to our business-
The PN-T-597 concession is subject to an injunction and may not close.”
POT-T-620
POT-T-619
POT-T-663
POT-T-664
PN-T-597(1)
POT-T-665
REC -T- 85
REC -T- 94
BCAM-40
(Manati)
SEAL-T-268
Additionally, we acquired Rio das Contas from Panoro for a total cash
consideration of US$140 million and gives us a 10% working interest in the
BCAM-40 Concession, including the shallow-depth offshore Manatí and
Camarão Norte Fields, in the Camamu-Almada Basin in the State of Bahia.
The Manatí Field, which is in the production phase, is operated by Petrobras
(with a 35% working interest), the Brazilian national company and the largest
P A R A G U A Y
oil and gas operator in Brazil, in partnership with QGEP (with a 45%
working interest), and Brasoil (with a 10% working interest). See “-Significant
A R G E N T I N A
agreements-Brazil-Rio das Contas Quota Purchase Agreement.” Some
(1) The PN-T-597 Block is subject to an injunction and our bid for the
environmental licenses related to operation of the Manatí Field production
concession has been suspended. See “-Item 3. Key Information-D. Risk factors-
system and natural gas pipeline are expired. However, the operator submitted,
Risks relating to our business-The PN-T-597concession is subject to an
timely, the request for renewal of those licenses and as such this operation is
injunction and may not close.”
GeoPark 20F
83
The following table sets forth information as of December 31, 2014 on our
concessions in Brazil in which we have a current or future working interest,
including the BCAM-40 Concession as well as the Round 11 and the
Round 12 concessions.
Concession
REC-T 94
REC-T 85
POT-T 664
POT-T 665
POT-T 619
POT-T 620
POT-T 663
PN-T-597(4)
SEAL-T-268
BCAM-40
Total Brazil
Gross acres
(thousand
acres)
Working
interest(1)
Net proved
reserves Production
Partners
Operator
(mmboe)
(boepd)
Basin
Concession
expiration year
Exploration: 2018
7.7
7.7
7.9
7.9
7.9
7.9
100%
100%
100%
100%
100%
100%
-
-
-
-
-
-
GeoPark
GeoPark
GeoPark
GeoPark
GeoPark
GeoPark
7.9
188.7
100%
100%(5)
-
-(5)
GeoPark
GeoPark
7.8
100%
-
GeoPark
Petrobras;
QGEP;
Brasoil
10%
Petrobras
22.8
251.4
-
-
-
-
-
-
-
-
-
- Recôncavo
Exploitation: 2045
- Recôncavo
Exploitation: 2045
Exploration: 2018
-
-
-
-
-
-
-
Exploration: 2018
Potiguar
Exploitation: 2045
Exploration: 2018
Potiguar
Exploitation: 2045
Exploration: 2018
Potiguar
Exploitation: 2045
Exploration: 2018
Potiguar
Exploitation: 2045
Potiguar
Parnaíba
Sergipe
Alagoas
Camamu-
Almada
Exploration: 2018
Exploitation: 2045
-(4)
-(4)
Exploitation:
2029(2) - 2034(3)
6.9
6.9
2,668(6)
2,668
(1) Working interest corresponds to the working interests held by our
respective subsidiaries, net of any working interests held by other parties in
Annual Report, confirmation remains subject to final signing and local
authority approval. See “-Item 3. Key Information-Risk factors-Risks relating
such concession, and including the working interest we expect to hold in PN-
to our business-The PN-T-597 concession is subject to an injunction and may
T-597 which as of the date of this report is pending approval. See “-Item 3.
not close.”
Key Information-Risk factors-Risks relating to our business-The PN-T-597
(5) We expect to jointly develop this concession with Tecpetrol and assign
concession is subject to an injunction and may not close.”
a portion of our working interest in this concession to Tecpetrol. See
(2) Corresponds to Manatí Field.
(3) Corresponds to Camarão Norte Field.
Item 3-Risk Factors “The PN-T-597 concession is subject to an injunction and
may not close.”
(4) PN-T-597 Block subject to the entry into the concession agreement by the
(6) Considering production since the acquisition date, March 31, 2014. Full
ANP and absence of any legal impediments to signing. As of the date of this
year 2014 production amounted to 3,572 boepd (composed of 98% gas).
84
GeoPark 20F
BCAM-40 Concession
As a result of the Rio das Contas acquisition, we have a 10% working interest
exploratory period under the concession agreement governing the
concessions, consisting of a R$7.2 million (approximately US$2.2 million, at
in the BCAM-40 Concession, which includes interests in the Manatí Field
the March 31, 2015 exchange rate of R$3.2080 to US$1.00) bonus payable
and the Camarão Norte Field, and which is located in the Camamu-Almada
to the ANP in the first year of exploration and R$12.1 million (approximately
Basin. Petrobras is the operator, and has a 35% working interest in, the BCAM-
US$3.8 million, at the March 31, 2015 exchange rate of R$3.2080 to US$1.00)
40 Concession, which covers approximately 22,784 gross acres (92.2 sq. km).
as a work program guarantee payable over the course of the three years.
In addition to us, Petrobras’ partners in the Block are Brasoil and QGEP,
The work program consists on drilling two exploratory wells and 31 sq. km of
with 10% and 45% working interests, respectively. Petrobras operates the
3D seismic surveys in the REC-T94 Concession and 30 sq. km of 2D seismic
BCAM-40 Concession pursuant to a concession agreement with the ANP,
surveys in REC-T 85 Concession. The exploratory phase for these concessions
executed on August 6, 1998. See “-Significant agreements-Brazil-Overview of
is divided into two exploratory periods, the first of which lasts for three years
concession agreements-BCAM-40 Concession Agreement.” In September 2009,
and the second of which is non-obligatory and can last for up to two years.
Petrobras announced the relinquishment of BCAM-40’s exploration
area within the concession to the ANP, except for the Manatí Field and the
During the year 2014 we executed a 3D seismic survey acquisition. Seismic
Camarão Norte Field.
data processing was concluded in the first quarter of 2015. After ANP approval,
this seismic acquisition will fulfill the work program commitments for the
The Manatí Field is located 65 km south of Salvador, at a 35 meter water depth.
Block REC-T 85 and part of the REC-T 94.
The field was discovered in October 2000, and, in 2002, Petrobras declared
the field commercially viable. Production began in January 2007. As of
September 30, 2013, 11 wells had been drilled in the Manatí Field, six of which
POT-T 663, POT-T 664, POT-T 665, POT-T 619 and POT-T 620 Concessions
The POT-T 663, POT-T 664, POT-T 665, POT-T 619 and POT-T 620 Concessions
are productive and connected to a fixed production platform installed at a
are onshore and located in the Potiguar Basin. As of December 31, 2014,
depth of 35 meters, located 9 km from the coast of the State of Bahia. From
according to the ANP, with 94 fields in production and 9 fields in development
the platform, the gas flows by sea and land through a 125 km pipeline to the
stage including onshore and offshore in the Potiguar basin.
Estação Vandemir Ferreira or EVF gas treatment plant. The gas is sold to
Petrobras up to a maximum volume as determined in the existing Petrobras
The POT-T 663, POT-T 664, POT-T 665, POT-T 619 and POT-T 620 Concessions
Gas Sales Agreement (as defined below). GeoPark Brazil is currently negotiating
cover a total area of 39,507 gross acres (160 sq. km). The concession
an amendment to the existing Gas Sales Agreement with Petrobras for the
agreements require us make total investments of R$11.3 million (approximately
sale of additional volumes from the Manatí Field.
US$3.5 million at the March 31, 2015 exchange rate of R$3.2080 to US$1.00)
REC-T 94 and REC-T 85 Concessions
The REC-T 94 and REC-T 85 Concessions are onshore and located in the
during the first exploratory period under the concession agreement, with a
R$3.0 million (approximately US$0.9 million at the March 31, 2015 exchange
rate of R$3.2080 to US$1.00) bonus payable to the ANP in the first year of
Recôncavo Basin, which covers an area of approximately 2.7 million gross
exploration and R$8.3 million (approximately US$2.6 million at the March 31,
acres (11,000 sq. km). The basin’s main source rocks belong to the Candeias
formation, with reservoirs on the fluvio-deltaic sandstones of the Marfim and
2015 exchange rate of R$3.2080 to US$1.00) as a work program guarantee
payable over the course of the three years. We have also committed to
Pojuca formations, Fluvial sandstones of the Candeias and Marancagalha
undertaking 222 km of 2D seismic work in the first exploration period for the
formations, and the Fluvio-Eolic sandstones of the Agua Grande and Sergi
concession areas, with no well drilling commitment during this period.
formations. Reconcavo basin is considered a mature basin. According to
The exploratory phase for these concessions is divided into two exploratory
the ANP, as of December 31, 2014, 92 fields are in production or development
periods, the first of which lasts for three years and the second of which is
stage in the Reconcavo basin.
non-obligatory and can last for up to two years.
The REC-T 94 and REC-T 85 Concessions cover an area of 7,660 gross acres
During the year 2014 we executed a 3D seismic survey acquisition. Seismic data
(31 sq. km) and 7,660 gross acres (31 sq. km), respectively. In connection with
processing was concluded in the first quarter of 2015. After ANP approval, this
our bid to obtain the licenses for these concessions, we have committed to
seismic acquisition will fulfill the work program commitments for the blocks.
drilling two exploratory wells in the concessions, and to undertaking 31 sq. km
of 3D seismic surveys in the REC-T 94 Concession and 30 km of 2D seismic
surveys in the REC-T 85 Concession. We have also committed, following the
Round 12 Concessions
Additionally, on November 28, 2013, the ANP awarded us two new concessions
signing of the concession agreement in respect of the concessions, to a
(the PN-T-597 Concession in the Parnaíba Basin in the State of Maranhão and
work program to the ANP of R$19.3 million (approximately US$6.0 million, at
the SEAL-T-268 Concession in the Sergipe Alagoas Basin in the State of Alagoas)
the March 31, 2015 exchange rate of R$3.2080 to US$1.00) during the first
in the 12th oil and gas bidding round. We have committed to invest a minimum
GeoPark 20F
85
of US$4 million (including bonus and work program commitments). For more
information, see “-Item 3. Key information-D. Risk factors-Risks relating
SEAL-T-268 Concession
The SEAL-T-268 Concession is located onshore in the Sergipe-Alagoas Basin.
to our business-The PN-T-597 concession is subject to an injunction and may
This basin encompasses an area of approximately 10.9 million gross acres
not close.”
(44,400 sq. km), of which 3.1 million gross acres (12600 sq. km) are situated
onshore. It has gone through 3 main tectonic stages: pre-rift, rift, and drift.
PN-T-597 Concession
The PN-T-597 Concession is located onshore in the Parnaiba Basin, which covers
Source rock intervals were identified on the Rift (Barra de Ituba and Coqueiro
Seco Fms) and Prerift sequences (Aracare Fm). Reservoirs are the fluvio-deltaic
an area of approximately 148 million gross acres (600,000 sq. km). The basin’s
and lacustrine sandstones present in the pre-rift and rift intervals (Aracare,
main petroleum system consists of the Devonian Pimenteras Fm source rock
Serraria, Penedo and Maceio Fms). Over the drift sequence, turbiditic
with reservoirs of continental to shallow marine sandstones of the Poti and
sandstones were deposited, mainly in the offshore part of the basin and the
Cabeças formations. Intrusive and extrusive magmatic rocks are interbedded
cretaceous shale acts as seal. The onshore part of the basin is considered
within the sedimentary column, influencing source rock maturation and
mature in terms of hydrocarbon exploration.
sometimes acting as seals.
As of December 31, 2014 there were 46 fields either in production or
Parnaiba is a basin with large underexplored areas. As December 31, 2014,
development stages on the basin.
the basin had three fields in production or development stage in the basin.
The SEAL-T-268 Concession covers an area of 7,799 gross acres (31.6 sq. km).
The PN-T-597 Concession covers an area of 188,667 gross acres (763.5 sq. km).
GeoPark’s winning offer requires a commitment to the ANP of R$1.6 million
The offer requires a commitment to the ANP of R$7.7 million (approximately
(approximately US$0.5 million, at the March 31, 2015 exchange rate of R$3.2080
US$2.4 million, at the March 31, 2015 exchange rate of R$3.2080 to US$1.00)
to US$1.00) for the first exploratory period. This amount is comprised of
for the first exploratory period. This amount is comprised of R$0.9 million
R$0.14 million (approximately US$0.04 million, at the March 31, 2015 exchange
(approximately US$0.3 million, at the March 31, 2015 exchange rate of
rate of R$3.2080 to US$1.00) bonus payable to the ANP in the first year of
R$3.2080 to US$1.00) bonus payable to the ANP in the first year of exploration
exploration and R$1.5 million (approximately US$0.5 million, at the March 31,
and R$6.7 million (approximately US$2.1 million, at the March 31, 2015
2015 exchange rate of R$3.2080 to US$1.00) as a work program guarantee
exchange rate of R$3.2080 to US$1.00) as a work program guarantee payable
payable over the course of three years. Work program is equivalent to 40 km of
over the course of the four years. Work program is equivalent to 180 km of 2D
2D seismic, with no well drilling committed during the first exploratory period.
seismic, with no well drilling committed during the first exploratory period.
The exploratory phase for these concessions is divided into two exploratory
periods, the first lasting three years, and the second, which is optional, can last
The exploratory phase for this concession is divided into two exploratory
periods. Given that Parnaiba basin is considered as a “new frontier” area by the
for up to two years.
ANP, the first exploratory period lasts four years, and the second exploratory
period, which is optional, can last for up to two years.
See “-Item 3. Key Information-D. Risk factors-Risks relating to our business-
The PN-T-597 concession is subject to an injunction and may not close” and
“-D. Risk factors-Risks relating to the countries in which we operate-Our
operations may be adversely affected by political and economic circumstances
in the countries in which we operate and in which we may operate in the
future” for more information.
86
GeoPark 20F
Operations in Peru
The table and map below summarize information about the Block in Peru
in which we expect to have a working interest pending completion of our
acquisition.
Block
Morona
Gross acres
(thousand
acres)
1,881
Working
interest(1)
75%
Net proved
reserves Production
Expiration
Operator
GeoPark
(mmboe)(2)
18.8
(boepd)
Basin
-
Marañon
concession year
Exploitation: 2036(3)
(1) Corresponds to the initial working interest. Petroperú will have the right
to increase its working interest in the Block by up to 50%, subject to
Morona Block
The Morona Block covers an area of approximately 1,881 thousand gross
the recovery of our investments in the Block through agreed terms in the
acres (7,600 sq. km). More than 1 billion barrels of oil have been produced
Petroperú SPA. See “-Item 4. Information on the Company-B. Business
from the surrounding blocks in this basin. We have a 75% working interest in
overview-Our operations-Operations in Peru-Morona Block.”
the Morona Block. For the year ended December 31, 2014, net proved
(2) Certified by D&M as of December 31, 2014.
reserves at the Morona Block were 18.8 mmboe (composed of 100% oil).
(3) The concession year expiration is related to approval of an environmental
impact assessment (EIA) study for project development. The concession will
On October 1, 2014, we entered into an agreement to acquire a 75%
expire twenty (20) years after EIA approval. We expect the EIA to be approved
working interest in the Morona Block in Northern Peru. As stated above, this
around December 2016.
E C U A D O R
C O L O M B I A
Morona (1)
B R A Z I L
P E R U
P A C I F I C
O C E A N
agreement includes a work program to be executed by GeoPark. This
program includes 3 phases and GeoPark may decide to continue or not at
the end of each phase.
The Morona Block contains the Situche Central oil field, which has been
delineated by two wells (with short term tests of approximately 2,400 and
5,200 bopd of 35-36° API oil each) and by 3D seismic. In addition to the
Situche Central field, the Morona Block has a large exploration potential
with several high impact prospects and plays. This important component of
the project will significantly increase our overall inventory of exploration
resources. The Morona Block includes geophysical surveys of 2,783 km
(2D seismic) and 465 sq km (3D seismic), and an operating field camp and
logistics infrastructure. The area has undergone oil and gas exploration
activities for the past 40 years, and there exist ongoing association
agreements and cooperation projects with the local communities.
The expected work program and development plan for the Situche
Central oil field is to be completed in three stages. The goal of the initial stage
will be to put the field into production through a long term test to help
determine the most effective overall development plan and to begin to
B O L I V I A
generate cash flow. This initial stage requires an investment of approximately
US$140 million to US$160 million and is expected to be completed within
C H I L E
18 to 24 months after closing. We have committed to carry Petroperú, by
paying its portion of the required investment in this initial phase.
(1) Transaction executed with Petroperú on October 1, 2014 with final closing
The subsequent work program stages, which will be initiated once production
subject to Peru government approval. We expect to close the pending
has been established, are focused on carrying out the full development
Morona Block Acquisition in 2015.
of the Situche Central field, including transportation infrastructure, and new
exploration drilling of the Block.
GeoPark 20F
87
The exploratory program entails drilling one exploratory well. Exploratory
program capital expenditures will be borne exclusively by GeoPark.
Operations in Argentina
The map below shows the location of the blocks in Argentina in which we
have working interests as of December 31, 2014.
Initially we will have a 75% working interest. However, according to the terms
of the agreement, Petroperú will have the right to increase its working
interest in the Block by up to 50%, subject to the recovery of our investments
in the Block by certain agreed factors.
In Peru, there is a 5-20% sliding scale royalty rate, depending on production
levels. Production less than 5,000 bopd is assessed at a royalty rate of 5%.
For production between 5,000 and 100,000 bopd there is a linear sliding
scale between 5% and 20%. Production over 100,000 bopd has a flat royalty
of 20%.
B O L I V I A
P A R A G U A Y
B R A Z I L
A R G E N T I N A
U R U G U A Y
Sierra Nevado
Puelen
C H I L E
Del Mosquito
The table below summarizes information about the blocks in Argentina in
which we have working interests as of December 31, 2014.
Block
Del Mosquito
Puelen(3)
Sierra del Nevado(3)
Gross acres
(thousand
acres)
Working
interest(1)
Net proved
reserves Production
Operator
(mmboe)(2)
(boepd)
Basin
17.3
1,430.0
305.0
100%
GeoPark
18% Pluspetrol
18% Pluspetrol
-
-
-
Magallanes
Austral
Neuquén
Neuquén
75
-
-
Expiration
concession year
Exploitation: 2016
Exploration: 2017
Exploration: 2017
(1) Working interest corresponds to the working interests held by our
respective subsidiaries in such block, net of any working interests held by
other parties in each block.
(2) As of December 31, 2014.
(3) Blocks awarded in the 2014 Mendoza Bidding Round.
88
GeoPark 20F
As of December 31, 2014, although we had production in Del Mosquito
portfolio following the decision to relinquish the non-productive Cerro Doña
Block in Argentina, D&M determined that there were no reserves in this Block
Juana and Loma Cortaderal Blocks.
due to the uneconomic status of the reserves, given the proximity to the end
of the concessions for these blocks, which does not allow for future capital
According to the Secretariat of Energy (Secretaría de Energía) in Argentina,
investment in the blocks.
Del Mosquito Block
We are the operator of, and have 100% working interest in, the Del Mosquito
or the Argentine Secretary of Energy, for the year ended December 31, 2014,
the Neuquin Basin produced approximately 40% of Argentina’s total oil
production and approximately 56% of its total gas production.
Block. We established oil production in the Block in 2002 by rehabilitating
the abandoned Del Mosquito Field and subsequently discovered the Del
Relinquishment of the Cerro Doña Juana and Loma Cortaderal Blocks
In April 2014, we informed the Secretary of Infrastructure and Energy of the
Mosquito Norte field. For the year ended December 31, 2014, our average
Province of Mendoza of our decision to relinquish 100% of the Cerro Doña
daily production at the Del Mosquito Block was 75 boepd.
Juana and Loma Cortaderal Concessions to the Mendoza Province. Neither
the Cerro Doña Juana nor the Loma Cortaderal had production or associated
The Del Mosquito Block covers an area of approximately 17,313 gross acres
reserves at the time of the relinquishment.
(70 sq. km), and is located in the Magallanes Austral Basin in southern
Argentina. In the first quarter 2015 we temporarily shut down our operations
Oil and natural gas reserves and production
in this Block.
Overview
We have achieved consistent growth in oil and gas reserves from our
According to the Secretariat of Energy (Secretaría de Energía) in Argentina, or
investment activities since 2007, when we began production in the Fell Block.
the Argentine Secretary of Energy, for the year ended December 31, 2014,
As of December 31, 2014, D&M reported that our total net proved reserves
the Magallanes Austral Basin produced approximately 4% of Argentina’s total
in Chile, Colombia, and Brazil were 43.7 mmboe. Of this total, 12.1 mmboe or
oil production and approximately 24% of its total gas production.
28%, 24.7 mmboe, or 57%, and 6.9 mmboe, or 15%, were in Chile, Colombia
New Blocks awarded in the 2014 Bidding Round Mendoza (Argentina)
On August 20, 2014, the consortium of GeoPark and Pluspetrol was awarded
two exploration licenses in the Sierra del Nevado and Puelen Blocks, as
and Brazil, respectively, and we had no net proved reserves in Argentina. The
D&M Reserves Report estimates total net proved reserves for the Morona
Block in Peru to be 18.8 mmboe.
part of the 2014 Mendoza Bidding Round in Argentina, carried out by
The following table summarizes our net proved reserves in Chile, Colombia,
Empresa Mendocina de Energía S.A. (“EMESA”). The blocks cover an area of
Argentina and Brazil as of December 31, 2014.
approximately 1.7 million acres and are located in the Neuquén Basin,
Argentina’s largest producing hydrocarbon basin. The consortium consists of
Pluspetrol (operator with a 72% working interest)), EMESA (non-operator with
a 10% working interest) and GeoPark (non-operator with an 18% working
interest). In accordance with the terms of the bidding, all of the expenditures
Country
related to EMESA’s working interest will be carried by Pluspetrol and GeoPark
Chile
proportionately to their respective working interests, and will be recovered
through EMESA’s participation in future potential production.
The Puelen Block covers an area of approximately 1,430.0 thousand gross
acres, and is located in the Neuquén Basin in southern Argentina.
Colombia
Argentina
Brazil
Total
Total net
proved
Gas
(bcf)
34.0
reserves
(mmboe)(1)
12.1
-
-
40.5
74.5
24.7
-
6.9
43.7
% Oil
53%
100%
-
2%
72%
Oil
(mmbbl)
6.4
24.7
-
0.1
31.3
(1) We calculate one barrel of oil equivalent as six mcf of natural gas.
The Sierra del Nevado Block covers an area of approximately 305.0 thousand
gross acres, and is located in the Neuquén Basin in southern Argentina.
We have committed to a minimum aggregate investment of US$6.2 million
for this working interest, which includes the work program commitment on
both blocks during the first three years of the exploratory period. In addition
to forming a partnership with Pluspetrol, one of the largest Latin American
independent companies, these licenses will rebalance our Argentinean
GeoPark 20F
89
The following table summarizes the net proved reserves in Peru for the
pending Morona Block Acquisition as of December 31, 2014, according to the
D&M Reserves Report. We expect to close the pending Morona Block
Acquisition in 2015.
Net proved reserves
As of December 31, 2014
Natural
Total net
proved
Oil
(mmbbl)
gas
(bcf)
reserves
(mmboe)(1)
Total net
proved
reserves
(mmboe)(1)
18.8
18.8
Gas
(bcf)
-
-
Oil
(mmbbl)
18.8
18.8
Country
Peru
Total
Net proved developed
Peru
% Oil
100%
100%
Total net proved developed
Net proved undeveloped
Peru
Our reserves
The following table sets forth our oil and natural gas net proved reserves as of
December 31, 2014, which is based on the D&M Reserves Report.
Total net proved
undeveloped
Total net proved
6.6
6.6
12.2
12.2
18.8
-
-
-
-
-
% Oil
100%
100%
6.6
6.6
12.2
100%
12.2
18.8
100%
100%
Net proved reserves
(1) We calculate one barrel of oil equivalent as six mcf of natural gas.
As of December 31, 2014
For further information relating to the reconciliation of our net proved
Natural
Total net
proved
reserves for the years ended December 31, 2014, 2013 and 2012, please see
Table 5 included in Note 39 (unaudited) to our audited consolidated
Oil
(mmbbl)
gas
(bcf)
reserves
(mmboe)(1)
Net proved developed
Chile
Colombia
Argentina
Brazil
Total net proved developed
Net proved undeveloped
Chile
Colombia
Argentina
Brazil
Total net proved
undeveloped
Total net proved (Chile,
1.5
7.6
-
0.1
9.1
5.0
17.1
-
0.1
9.4
-
-
20.9
30.2
24.6
-
-
19.6
financial statements.
% Oil
48%
Internal controls over reserves estimation process
We maintain an internal staff of petroleum engineers and geosciences
100%
professionals who work closely with our independent reserves engineers to
-
ensure the integrity, accuracy and timeliness of data furnished to our
2%
independent reserves engineers in their estimation process and who have
3.0
7.6
-
3.5
14.2
64%
knowledge of the specific properties under evaluation. Our Director of
Development, Carlos Alberto Murut, is primarily responsible for overseeing
9.1
17.1
-
3.3
55%
the preparation of our reserves estimates and for the internal control over
100%
our reserves estimation. He has more than 30 years of industry experience
-
2%
as an E&P geologist, with broad experience in reserves assessment,
field development, exploration portfolio generation and management and
acquisition and divestiture opportunities evaluation. See “-Item 6. Directors,
22.2
44.2
29.6
75%
Senior Management and Employees-A. Directors and senior management.”
Colombia, Argentina, Brazil) 31.3
74.5
43.7
72%
In order to ensure the quality and consistency of our reserves estimates and
reserves disclosures, we maintain and comply with a reserves process that
(1) We calculate one barrel of oil equivalent as six mcf of natural gas.
satisfies the following key control objectives:
The following table sets forth the oil and natural gas net proved reserves
• estimates are prepared using generally accepted practices and
as of December 31, 2014, for the Morona Block in Peru which is based on the
methodologies;
D&M Peru Reserves Report. We expect to close the pending Morona Block
• estimates are prepared objectively and free of bias;
Acquisition in 2015.
90
GeoPark 20F
• estimates and changes therein are prepared on a timely basis;
• estimates and changes therein are properly supported and approved; and
• estimates and related disclosures are prepared in accordance with
regulatory requirements.
Throughout each fiscal year, our technical team meets with Independent
D&M did not independently verify the accuracy and completeness of
Qualified Reserves Engineers, who are provided with full access to complete
information and data furnished by us with respect to ownership interests, oil
and accurate information pertaining to the properties to be evaluated
and gas production, well test data, historical costs of operation and
and all applicable personnel. This independent assessment of the internally-
development, product prices, or any agreements relating to current and
generated reserves estimates is beneficial in ensuring that interpretations
future operations of the fields and sales of production. However, if in
and judgments are reasonable and that the estimates are free of preparer and
the course of the examination something came to the attention of D&M that
management bias.
brought into question the validity or sufficiency of any such information or
data, D&M did not rely on such information or data until it had satisfactorily
Recognizing that reserves estimates are based on interpretations and
resolved its questions relating thereto or had independently verified
judgments, differences between the proved reserves estimates prepared by
such information or data. D&M independently prepared reserves estimates
us and those prepared by an Independent Qualified Reserves Engineer of
to conform to the guidelines of the SEC, including the criteria of “reasonable
10% or less, in aggregate, are considered to be within the range of reasonable
certainty,” as it pertains to expectations about the recoverability of reserves
differences. Differences greater than 10% must be resolved in the technical
in future years, under existing economic and operating conditions, consistent
meetings. Once differences are resolved, the independent Qualified Reserves
with the definition in Rule 4-10(a)(2) of Regulation S-X. D&M issued the
Engineer sends a preliminary copy of the reserves report to be reviewed by
D&M Reserves Report based upon its evaluation. D&M’s primary economic
the Technical Committee and Directors of each Buisness Unit. A final copy of
assumptions in estimates included oil and gas sales prices determined
the Reserves Report is sent by the Independent Qualified Reserve Engineer to
according to SEC guidelines, future expenditures and other economic
be Approved and Signed by the Technical Committee and our CEO and CFO.
assumptions (including interests, royalties and taxes) as provided by us. The
See “Item 6. Directors, Senior Management and Employees-C. Board Practices-
Committees of our Board of Directors.”
Independent reserves engineers
Reserves estimates as of December 31, 2014 for Brazil, Chile, Colombia and
Peru included in this annual report are based on the D&M Reserves Report,
assumptions, data, methods and procedures used, including the percentage
of our total reserves reviewed in connection with the preparation of the
D&M Reserves Report were appropriate for the purpose served by such
report, and D&M used all methods and procedures as it considered necessary
under the circumstances to prepare such reports.
completed on March 9, 2015 and effective as of December 31, 2014.
However, uncertainties are inherent in estimating quantities of reserves,
The D&M Reserves Report, a copy of which has been filed as an exhibit to
including many factors beyond our and our independent reserves engineers’
this annual report, was prepared in accordance with SEC rules, regulations,
control. Reserves engineering is a subjective process of estimating subsurface
definitions and guidelines at our request in order to estimate reserves and
accumulations of oil and natural gas that cannot be measured in an exact
for the areas and period indicated therein.
manner, and the accuracy of any reserves estimate is a function of the quality
of available data and its interpretation. As a result, estimates by different
D&M, a Delaware corporation with offices in Dallas, Houston, Calgary,
engineers often vary, sometimes significantly. In addition, physical factors
Moscow and Algiers, has been providing consulting services to the oil and gas
industry for more than 75 years. The firm has more than 150 professionals,
such as the results of drilling, testing and production subsequent to the
date of an estimate, economic factors such as changes in product prices or
including engineers, geologists, geophysicists, petrophysicists and
development and production expenses, and regulatory factors, such as
economists that are engaged in the appraisal of oil and gas properties, the
royalties, development and environmental permitting and concession
evaluation of hydrocarbon and other mineral prospects, basin evaluations,
terms, may require revision of such estimates. Our operations may also be
comprehensive field studies and equity studies related to the domestic
affected by unanticipated changes in regulations concerning the oil and gas
and international energy industry. D&M restricts its activities exclusively to
industry in the countries in which we operate, which may impact our ability
consultation and does not accept contingency fees, nor does it own
to recover the estimated reserves. Accordingly, oil and natural gas quantities
operating interests in any oil, gas or mineral properties, or securities or notes
ultimately recovered will vary from reserves estimates.
of its clients. The firm subscribes to a code of professional conduct, and its
employees actively support their related technical and professional societies.
The firm is a Texas Registered Engineering Firm.
Technology used in reserves estimation
According to SEC guidelines, proved reserves are those quantities of oil and
gas which, by analysis of geoscience and engineering data, can be estimated
The D&M Reserves Report covered 100% of our total reserves. In connection
with “reasonable certainty” to be economically producible-from a given
with the preparation of the D&M Reserves Report, D&M prepared its own
date forward, from known reservoirs, and under existing economic
estimates of our proved reserves. In the process of the reserves evaluation,
conditions, operating methods and government regulations-prior to the
GeoPark 20F
91
time at which contracts providing the right to operate expire, unless
Estimates must be prepared using all available information (open and
evidence indicates that renewal is reasonably certain, regardless of whether
cased hole logs, core analyses, geologic maps, seismic interpretation,
deterministic or probabilistic methods are used for the estimation.
production/injection data and pressure test analysis). Supporting
data, such as working interest, royalties and operating costs, must be
The project to extract the hydrocarbons must have commenced or the
maintained and updated when such information changes materially.
operator must be reasonably certain that it will commence the project within
a reasonable time. The term “reasonable certainty” implies a high degree
of confidence that the quantities of oil and/or natural gas actually recovered
Proved undeveloped reserves
As of December 31, 2014, excluding reserves from the pending acquisition
will equal or exceed the estimate. Reasonable certainty can be established
of the Morona Block, we had 29.6 mmboe in proved undeveloped reserves
using techniques that have been proved effective by actual production
an increase of 16.6 mmboe, or 127%, over our December 31, 2013 proved
from projects in the same reservoir or an analogous reservoir or by other
undeveloped reserves of 13.0 mmboe. The increase in proved undeveloped
evidence using reliable technology that establishes reasonable certainty.
oil reserves is mainly due to net additions in Colombia mainly related to
Reliable technology is a grouping of one or more technologies (including
the Tigana Field amounting to 11.0 mmboe, in Chile amounting to
computational methods) that have been field tested and have been
2.3 mmboe related to the Fell Block, and in Brazil as a result of the acquisition
demonstrated to provide reasonably certain results with consistency and
of Rio das Contas that we closed in March 31, 2014, amounting to 3.3 mmboe.
repeatability in the formation being evaluated or in an analogous formation.
Of our 29.6 mmboe of net proved undeveloped reserves, 9.1 mmboe,
There are various generally accepted methodologies for estimating reserves
17.1 mmboe, 3.3 mmboe or 31%, 58%, 11%, were located in Chile, Colombia,
including volumetrics, decline analysis, material balance, simulation models
Brazil, respectively. During 2014, we incurred approximately US$139.3
and analogies. Estimates may be prepared using either deterministic (single
million in capital expenditures to convert such proved undeveloped reserves
estimate) or probabilistic (range of possible outcomes and probability of
to proved developed reserves, of which approximately US$82.7 million,
occurrence) methods. The particular method chosen should be based on
US$55.3 million and US$1.1 million were made in Chile, Colombia and Brazil
the evaluator’s professional judgment as being the most appropriate, given
respectively. No net proved undeveloped reserves were located in Argentina
the geological nature of the property, the extent of its operating history
as of December 31, 2014. As of December 31, 2014 we had 29.6 mmboe in
and the quality of available information. It may be appropriate to employ
proved undeveloped reserves.
several methods in reaching an estimate for the property.
As of December 31, 2014, the Morona Block in Peru had 12.2 mmboe in
proved undeveloped reserves. We expect to close the pending Morona Block
Acquisition in 2015.
92
GeoPark 20F
Production, revenues and price history
The following table sets forth certain information on our production of oil
and natural gas in Chile, Colombia, Brazil and Argentina for each of the years
ended December 31, 2014, 2013 and 2012.
2014
(4)
Total
2013
Total
Average daily production(1)
As of December 31,
2012
Total
Chile Colombia
Brazil Argentina
GeoPark
Chile Colombia
(2)
Brazil Argentina
GeoPark
Chile Colombia
Brazil Argentina
GeoPark
Oil production
Average crude
oil production
(bopd)
3,690
10,748
42
61
14,541
4,581
6,482
89.4
73.0
102.4
75.4
77.5
84.3
80.3
Average sales
price of crude oil
(US$/bbl)(4)
Natural gas
Average
natural gas
production
(mcfpd)
14,484
354
15,753
86
30,677
14,283
52
Average sales
price of
natural gas
(US$/mcf)(4)
Oil and gas production cost
Average
6.2
operating cost
-
6.5
1.1
6.4
5.0
4.18
(US$/boe)
16.7
18.4
5.8
11.3
16.2
12.2
26.5
Average royalties
and Other
(US$/boe)
Average
production cost
(US$/boe)(3)
Average
depreciation
(US$/boe)
Average
production cost
3.3
3.3
3.1
8.8
3.3
2.9
4.1
20.0
21.7
8.9
20.1
19.5
15.1
30.6
17.5
13.7
12.7
3.4
14.7
11.5
16.6
(US$/boe)
37.6
35.4
21.6
23.5
34.5
26.6
47.2
-
-
-
-
-
-
-
-
-
50
11,113
4,013
3,431
70.3
82.0
85.42
97.15
84
14,419
22,663
56
1.1
5.0
4.04
4.18
4.0
19.0
10.7
34.0
8.3
3.5
2.5
4.0
12.3
22.5
13.2
38.1
2.5
13.9
9.9
20.4
14.8
36.4
23.1
58.4
-
-
-
-
-
-
-
-
-
48
7,491
67.8
90.5
84
22,804
1.1
4.0
(6.7)
16.8
7.6
2.9
0.9
19.7
142.1
13.4
143.0
33.1
(1) We present production figures net of interests due to others, but before
(3) Calculated pursuant to FASB ASC 932.
deduction of royalties, as we believe that net production before royalties is
(4) Averaged realized sales price for oil does not include our Argentine blocks
more appropriate in light of our foreign operations and the attendant
because our Argentine operations were not material during such periods.
royalty regimes.
Averaged realized sales price for gas does not include our Argentine and
(2) We acquired Winchester and Luna in February 2012 and Cuerva in March
Colombian blocks because our gas operations in those countries were not
12. Production figures do not include, for 2012, production for Winchester,
material during such period.
Luna and Cuerva prior to their acquisition by us.
GeoPark 20F
93
Drilling activities
The following table sets forth the exploratory wells we drilled as operators in
Chile, Colombia, Brazil and Argentina during the years ended December 31,
2014, 2013 and 2012.
Exploratory wells(1)
As of December 31,
Chile Colombia Argentina
2014
Brazil
Chile Colombia(4) Argentina
2013
Brazil
Chile Colombia Argentina
2012
Brazil
Productive(2)
Gross
Net
Dry(3)
Gross
Net
Total
Gross
Net
11.0
7.1
5.0
3.0
16.0
10.1
4.0
1.8
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7.0
4.8
3.0
1.5
10.0
6.3
9.0
6.0
1.0
1.0
10.0
7.0
-
-
-
-
-
-
-
-
-
-
-
-
8.0
8.0
6.0
4.5
14.0
12.5
4.0
2.4
3.0
2.5
7.0
4.9
-
-
-
-
-
-
-
-
-
-
-
-
(1) Includes appraisal wells.
(4) We acquired Winchester and Luna in February 2012 and Cuerva in
(2) A productive well is an exploratory, development, or extension well that
March 12. Figures do not include, for 2012, exploration activities for
is not a dry well.
Winchester, Luna and Cuerva prior to their acquisition by us.
(3) A dry well is an exploratory, development, or extension well that proves
The following table sets forth the development wells we drilled in Chile,
to be incapable of producing either oil or gas in sufficient quantities to justify
Colombia, Brazil and Argentina during the years ended December 31, 2014,
completion as an oil or gas well.
2013 and 2012.
Development wells
As of December 31,
Chile Colombia Argentina
2014
Brazil
Chile Colombia Argentina
2013
Brazil
Chile Colombia(1) Argentina
2012
Brazil
Productive(2)
Gross
Net
Dry(3)
Gross
Net
Total
Gross
Net
16.0
15.0
-
-
16.0
15.0
5.0
2.3
2.0
0.9
7.0
3.2
-
-
-
-
-
-
-
-
-
-
-
-
6.0
6.0
1.0
1.0
7.0
7.0
5.0
2.8
-
-
5.0
2.8
-
-
-
-
-
-
-
-
-
-
-
-
4.0
4.0
2.0
2.0
6.0
6.0
6.0
5.5
2.0
2.0
8.0
7.5
-
-
-
-
-
-
-
-
-
-
-
-
(1) We acquired Winchester and Luna in February 2012 and Cuerva in March
is not a dry well.
2012. Figures do not include, for 2012, exploration activities for Winchester,
(3) A dry well is an exploratory, development, or extension well that proves
Luna and Cuerva prior to their acquisition by us.
to be incapable of producing either oil or gas in sufficient quantities to justify
(2) A productive well is an exploratory, development, or extension well that
completion as an oil or gas well.
94
GeoPark 20F
For the year ended December 31, 2014, there were no exploratory wells or
development wells drilled in our pending Morona Block acquisition, which is
expected to close in 2015.
Developed and undeveloped acreage
The following table sets forth certain information regarding our total gross
Productive wells
The following table sets forth our total gross and net productive wells as
of March 31, 2015. Productive wells consist of producing wells and wells
capable of producing, including natural gas wells awaiting pipeline
connections to commence deliveries and oil wells awaiting connection
to production facilities. Gross wells are the total number of producing wells
and net developed and undeveloped acreage in Chile, Colombia, Argentina
in which we have an interest, and net wells are the sum of our fractional
and Brazil as of December 31, 2014.
working interests owned in gross wells.
Chile
Colombia
Acreage(1)
Argentina
(in thousands of acres)
Brazil
Total developed acreage
Gross
Net
Total undeveloped acreage
Gross
Net
Total developed and
undeveloped acreage
Gross
Net
8.0
7.6
6.9
6.7
6.8
4.4
5.7
2.8
14.9
14.3
12.5
7.2
4.1
0.4
0.0
0.0
4.1
0.4
-
-
-
-
-
-
Oil wells
Gross
Net
Gas wells
Gross
Net
Chile Colombia(2)
Productive wells(1)
Brazil
Argentina
65.0
61.1
30.0
27.8
84.0
40.8
-
-
5.0
5.0
-
-
-
-
6.0
0.6
(1) Includes wells drilled by other operators, prior to our commencing
operations, and wells drilled in blocks in which we are not the operator. A
productive well is an exploratory, development, or extension well that is
not a dry well.
(2) We acquired Winchester and Luna in February 2012 and Cuerva in March
(1) Defined as acreage assignable to productive wells. Net acreage based on
2012. Figures include wells drilled by Winchester, Luna and Cuerva prior to
our working interest.
their acquisition by us.
For the year ended December 31, 2014, total developed acreage in Peru
For the year ended December 31, 2014, there were no productive gas wells in
was 1.1 thousand acres (gross) and 0.8 thousand acres (net). Total
our pending Morona Block acquisition, which we expect to close in 2015.
undeveloped acreage was 2.1 thousand acres (gross) and 1.6 thousand acres
(net). Total developed and undeveloped acreage was 3.2 thousand acres
(gross) and 2.4 thousand acres (net).
GeoPark 20F
95
Present activities
The following table shows the number of wells in Chile, Colombia, Brazil and
Argentina that are in the process of being drilled or are in active completion
stages, and the number of wells suspended or waiting on completion as of
March 31, 2015.
Oil wells
Gross
Net
Gas wells
Gross
Net
Wells in process of being drilled
or in active completion(1)
Brazil
Argentina
Colombia
Chile
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Chile
3.0
2.0
1.0
0.5
Wells suspended or waiting
on completion(2)
Brazil
Argentina
Colombia
-
-
-
-
-
-
-
-
-
-
-
-
(1) We consider wells to be in active completion when we have begun
promote the development of gas reserves. Through this new agreement,
procedures used in finishing and equipping them for production.
the Company completed the drilling of five new gas wells during 2012.
(2) We consider wells to be waiting on completion when we have completed
Methanex contributed to the cost of drilling the wells in order to improve the
drilling in such wells but have not yet begun to perform testing procedures.
project economies of scale. The Company fulfilled all the commitments under
Marketing and delivery commitments
Chile
Our customer base in Chile is limited in number and primarily consists of
this Agreement. The Agreement also included monthly commitments for
delivering certain volumes of gas and in case of failure to do so, the Company
could satisfy the obligation through future deliveries without a penalty during
three month period. As of December 31, 2012, the accrued penalty for
ENAP and Methanex. For the year ended December 31, 2014 we sold 100%
under delivered volumes amounted to US$1.7 million which was recorded in
of our oil production in Chile to ENAP and 99% of our gas production to
“Provisions for other liabilities” in our Financial Statements as of that date.
Methanex, with sales to ENAP and Methanex accounting for 6% and 28%,
respectively, of our revenues in the same period.
On April 1, 2014, the Company and Methanex executed a fifth amendment
to the Methanex Gas Supply Agreement, valid until April 30, 2015, which
Under our oil sales agreement with ENAP, or the ENAP Oil Sales Agreement,
extended the fourth amendment terms and conditions to May 18, 2014,
ENAP has committed to purchase our oil production in the Fell Block, in the
and defined new conditions for the winter 2014 period (May 2014 to
amounts that we produce, and with the limitation being storage capacity
at the Gregorio Terminal. The sales contract with ENAP is commonly revised
September 2014) and the post winter period (October 2014 to April 2015).
For the post winter period the Company committed to deliveries of over
every year to reflect changes in the global oil market and to adjust to logistics
400,000 SCM/d. The fifth amendment also waived the DOP and TOP
costs of ENAP in the Gregorio oil terminal. As of the date of this Annual
thresholds for both parties, replacing them by reasonable efforts to deliver
Report, we are negotiating a new agreement with an initial term of three to
and take, and giving GeoPark’s gas first priority over any third party supplies
six months, effective April 2015.
to Methanex.
Commercial conditions of the amended contract are similar to the previous
We gather the gas we produce in several wells through our own flow lines
one in effect. We deliver the oil we produce in the Fell Block to ENAP at
and inject it into several gas pipelines owned by ENAP. The transportation of
the Gregorio Terminal, where ENAP assumes responsibility for the oil. ENAP
the gas we sell to Methanex through these pipelines is pursuant to a private
owns two refineries in Chile in the north central part of the country and must
contract between Methanex and ENAP. We do not own any principal natural
ship any oil from the Gregorio Terminal to these refineries unless it is
gas pipelines for the transportation of natural gas.
consumed locally.
The Company signed the Methanex Gas Supply Agreement in Chile in 2009,
temporarily delay production and sale of our oil and gas in Chile. For a
which expires in 2017. In March 2012, the Company and Methanex signed a
discussion of the risks associated with the loss of key customers, See “-Item 3.
third addendum and amendment to the Methanex Gas Supply Agreement to
Key Information-D. Risk factors-Risks relating to our business-We sell almost
If we were to lose any one of our key customers in Chile, the loss could
96
GeoPark 20F
all of our natural gas in Chile to a single customer, who has in the past
Petrobras, which provides for the delivery and transportation of the gas
temporarily idled its principal facility” and “-We derive a significant portion
produced in the Manatí Field to the EVF gas treatment plant in the State
of our revenues from sales to a few key customers.”
of Bahia. The contract is in effect until delivery of the maximum committed
volume or June 2030, whichever occurs first. The contract allows for
Colombia
Our production in Colombia consists almost exclusively of oil. Our oil sales
sales above the maximum committed volume if mutually agreed by both
seller and buyer. As of the date of this Annual Report, we are negotiating
agreements are generally for a fixed term, with a maximum length of one
an amendment to the contract in order to provide for the purchase and sale
year. They do not commit the parties to a minimum volume, and are subject
of additional volumes, pending the closing of the gas compression facility.
to the ability of either party to receive or deliver production. The contracts
The price for the gas is fixed in reais and is adjusted annually in accordance
generally provide that they can be renewed by mutual written agreement,
with the Brazilian inflation index.
and all allow for early termination by either party with advanced notice and
without penalty.
The Manatí Field is developed via a PMNT-1 production platform, which is
connected to the Estação Vandemir Ferreira, or EVF, gas treatment plant
The delivery points for our production range from the well-head to the port
through an offshore and onshore pipeline with a capacity of 335.5 mmcfpd
of export (Coveñas), depending on the client. If sales are made via pipeline,
(9.5 mm3 per day). The existing pipeline connects the field’s platform to
the delivery point is usually the pipeline injection point, whereas for direct
the EVF gas treatment plant, which is owned by the field’s current concession
export sales, the most frequent delivery point is the well-head. In Colombia,
holders. The BCAM-40 Concession, which includes the Manatí Field, also
the restrictions to access pipeline networks, especially for mid to heavy
benefits from the advantages of Petrobras’ size. As the largest onshore and
crudes, have forced the market to access different ways of transport and
offshore operator in Brazil, Petrobras has the ability to mobilize the resources
commercialization, reducing our dependency on pipeline infrastructure
necessary to support its activities in the concession.
significantly. For the year ended December 31, 2014, we sold approximately
53% of our production directly at the well-head and approximately 47% to
The condensate produced in the Manatí Field is subject to a condensate
the major oil companies that own capacity in the pipelines. In 2014, access
purchase agreement with Petrobras, pursuant to which Petrobras has
to the pipeline network has improved upon the commencement of the
committed to purchase all of our condensate production in the Manatí Field,
Bicentenario pipeline, which added transportation capacity of 100,000 bopd
but only in the amounts that we produce, without any minimum or
and also open up additional supply opportunities involving reduced
maximum deliverable commitment from us. The agreement is valid through
trucking costs. Since as of December 31, 2014 we do not own capacity in, or
December 31, 2015, but can be renewed upon an amendment signed by
have access to, the oil transportation pipelines in Colombia or have any
Petrobras and the seller.
other assets for the transportation of our commodities, we use third parties
to transport our production by pipeline or truck.
If the agreements with Petrobras were terminated, this could temporarily
delay production and sale of our natural gas and condensate oil in Brazil, and
The price of the oil that we sell under these agreements is based on a market
reference price (Brent, WTI or Vasconia), adjusted for certain marketing
could have a detrimental effect on our ability to find substitute customers
to purchase our production volumes.
and quality discounts based on, among other things, API, viscosity, sulphur
and water content, as well as for certain transportation costs (including
pipeline costs and trucking costs).
Peru
In Peru, oil production is generally traded on a free market basis and contracts
commercial conditions generally follow international markers, normally WTI
For the year ended December 31, 2014, we made 40.1% of our oil sales to
and Brent. As per the Petroperú SPA, Petroperú holds the first option, but
Gunvor, 31.8% to Emerald and 11.0% to Perenco, with Gunvor accounting
not the obligation, to purchase oil produced by us in the Morona Block. If we
for 23.0%, Emerald 18.3% and Perenco 6.3% of our consolidated revenues for
are not able to sell our production share at the Block or in Morona Station,
the same period. If we were to lose any one of our key customers, the loss
we will have to use the North Peruvian Pipeline. This transportation system
could temporarily delay production and sale of our oil in the corresponding
is owned and operated by Petroperú, and regulated and supervised by
block. However, we believe we could identify a substitute customer to
OSINERGMIN, the regulatory body in the hydrocarbons sector. Transportation
purchase the impacted production volumes.
rates should be negotiated with Petroperú. However, if an agreement cannot
Brazil
Our production in Brazil consists of natural gas and condensate oil. Natural
gas production is sold through a long-term, extendable agreement with
be reached between Petroperú and us, transportation rates will be
determined by OSINERGMIN.
GeoPark 20F
97
Argentina
In Argentina, we sell substantially all of our oil production to Oil
Combustibles, but because the volume we produce in Argentina is small and
the rights contained in a CEOP cannot be modified without consent of
the parties.
the sale price is fixed at the moment when all other producers have
Our CEOPs are subject to early termination in certain circumstances, which
delivered their product to the Punta Loyola terminal, from which we sell our
vary depending upon the phase of the CEOP. During the exploration phase,
crude, we do not sell our oil to Oil Combustibles at a predetermined formula
Chile may terminate a CEOP in circumstances including a failure by us to
or price, but rather on the basis of on-call contracts based on demand.
comply with minimum work commitments at the termination of any
We have the ability to store and process the oil we produce in Argentina
with the next exploration period 30 days prior to its termination, a failure
ourselves, and do not have material contracts with third parties for such
to provide the Chilean Ministry of Energy the performance bonds required
services. We enter into ad hoc contracts with local companies for the
under the CEOP, a voluntary relinquishment by us of all areas under the
transportation of crude from fields in the Del Mosquito Block to the Punta
CEOP or a failure by us to meet the requirements to enter into the
exploration period, or a failure to communicate our intention to proceed
Loyola terminal.
Significant agreements
Chile
CEOPs
We have entered into six CEOPs with Chile, one for each of the blocks in
exploitation phase upon the termination of the exploration phase. In the
exploitation phase, Chile may terminate a CEOP if we stop performing any of
the substantial obligations assumed under the CEOP without cause and
do not cure such nonperformance pursuant to the terms of the concession,
following notice of breach from the Chilean Ministry of Energy. Additionally,
Chile may terminate the CEOP due to force majeure circumstances (as defined
which we operate, which grant us the right to explore and exploit
in the relevant CEOP). If Chile terminates a CEOP in the exploitation phase,
hydrocarbons in these blocks, determine our working interests in the blocks
we must transfer to Chile, free of charge, any productive wells and related
and appoint the operator of the blocks. These CEOPs are divided into two
facilities, provided that such transfer does not interfere with our
phases: (1) an exploration phase, which is divided into two or more
abandonment obligations and excluding certain pipelines and other assets.
exploration periods, and which begins on the effectiveness date of the
Other than as provided in the relevant CEOP, Chile cannot unilaterally
relevant CEOP, and (2) an exploitation phase, which is determined on a per-
terminate a CEOP without due compensation. See “-Item 3. Key Information-
field basis, commencing on the date we declare a field to be commercially
D. Risk factors-Risks relating to our business-Our contracts in obtaining
viable and ending with the term of the relevant CEOP. In order to transition
rights to explore and develop oil and natural gas reserves are subject to
from the exploration phase to an exploitation phase, we must declare a
contractual expiration dates and operating conditions, and our CEOPs, E&P
discovery of hydrocarbons to the Ministry of Energy. This is a unilateral
Contracts and concession agreements are subject to early termination in
declaration, which grants us the right to test a field for a limited period of
certain circumstances.”
time for commercial viability. If the field proves commercially viable, we must
make a further unilateral declaration to the Ministry of Energy. In the
Fell Block CEOP. On November 5, 2002, we acquired a percentage of rights
exploration phase, we are obligated to fulfill a minimum work commitment,
which generally includes the drilling of wells, the performance of 2D or
and interests of the CEOP for the Fell Block with Chile, or the Fell Block
CEOP, and on May 10, 2006, we became the sole owners, with 100% of the
3D seismic surveys, minimum capital commitments and guaranties or letters
rights and interest in the Fell Block CEOP. Chile had originally entered into a
of credit, as set forth in the relevant CEOP. We also have relinquishment
CEOP for the Fell Block with ENAP and Cordex Petroleum Inc., or Cordex,
obligations at the end of each period in the exploration phase in respect
on April 29, 1997, which had an effective date of August 25, 1997. The Fell
of those areas in which we have not made a declaration of discovery.
Block CEOP grants us the exclusive right to explore and exploit hydrocarbons
We can also voluntarily relinquish areas in which we have not declared
in the Fell Block and has a term of 35 years, beginning on the effective date.
discoveries of hydrocarbons at any time, at no cost to us. In the exploitation
The Fell Block CEOP provided for a 14-year exploration period, composed
phase, we generally do not face formal work commitments, other than
of numerous phases that ended in 2011, and an up-to-35-year exploitation
the development plans we file with the Chilean Ministry of Energy for each
phase for each field.
field declared to be commercially viable.
Our CEOPs provide us with the right to receive a monthly remuneration
from Chile payable in petroleum and gas, based on the following per-field
from Chile, payable in petroleum and gas, based either on the amount of
formula: 95% of the oil produced in the field, for production of up to
petroleum and gas production per field or according to Recovery Factor,
5,000 bopd, ring fenced by field, and 97% of gas produced in the field, for
which considers the ratio of hydrocarbon sales to total cost of production
production of up to 882.9 mmcfpd. In the event that we exceed these levels
(capital expenditures plus operating expenses). Pursuant to Chilean law,
of production, our monthly retribution from Chile will decrease based on a
The Fell Block CEOP provides us with a right to receive a monthly retribution
98
GeoPark 20F
sliding scale set forth under the Fell Block CEOP to a maximum of 50% of the
Pursuant to our E&P Contracts, we are required, as are all oil and gas
oil and 60% of the gas that we produce per field.
companies undertaking exploratory and production activities in Colombia,
to pay a royalty to the Colombian government based on our production
TDF Blocks CEOPs. After an international bidding process led by ENAP and
of hydrocarbons, as of the time a field begins to produce. Under Law 756
the Chilean Ministry of Energy, in March and April, 2012, GeoPark together
of 2002, as modified by Law 1530 of 2012, the royalties we must pay in
with ENAP, signed 3 new CEOPs for the Blocks Isla Norte, Campanario
connection with our production of light and medium oil are calculated on a
and Flamenco, all of them located in Tierra del Fuego, Magallanes region.
field-by-field basis, using the following sliding scale:
GeoPark’s working interest is 60% in Isla Norte and 50% in Campanario
and Flamenco Blocks. The CEOPs have a term of 25 years, with an initial
Exploration Phase which last for 7 years, including a first period of 3 years
in which GeoPark is committed to develop several exploration activities
including 1,500 square kilometers of 3D seismic registration, and the drilling
of 21 exploratory wells. The decision to continue to the second 2-years’
Production (mbop)
Up to 5,000
5,000 to 125,000
125,000 to 400,000
exploration period has to be taken at the end of 2015. GeoPark and ENAP
400,000 to 600,000
have agreed to ask the Ministry for an extension period of 18 months for
Greater than 600,000
the first 3-year period for the Campanario and Isla Norte Blocks, in order to
Production
royalty rate
8%
8-20%
20%
20-25%
25%
re-evaluate the preliminary results of the drilling campaign and to add
In the case of natural gas, the royalties are 80% of the rates presented above
new exploration objectives to the original geological plan.
for the exploitation of onshore and offshore fields at depths less than or equal
to 304.8 meters, and 60% for the exploitation of offshore fields at depths
The hydrocarbon discoveries opened up an Exploitation Phase that lasts
exceeding 304.8 meters. For new discoveries of heavy oil, classified as oil with
up to 25 years. GeoPark discovered hydrocarbon fields in the 3 Blocks,
an API equal to or less than 15°, the royalties are 75% of the rates presented
starting 2013 in the Flamenco Block, and in 2014 in both Campanario and
above. Additionally, in the event that an exploitation area has produced
Isla Norte Blocks. The CEOPs provide GeoPark with a right to receive a
amounts in excess of an aggregate amount established in the E&P Contract
remuneration payable by means of a fraction of the production sold, which
governing such area, the ANH is entitled to receive a “windfall profit,” to be
in the TDF Blocks is based on a formula depending on the recovery of the
paid periodically, calculated pursuant to such E&P Contract.
total accumulated expenses incurred (capital expenditure plus operational
expenditure plus administrative and general expenses). While the recovery
In each of the exploration and exploitation periods, we are also obligated to
factor is less than 1.0, the remuneration is 95% of the hydrocarbons
pay the ANH a subsoil use fee. During the exploration period, this fee is
produced, either oil or gas. If the recovery factor surpasses 1,0, a formula
scaled depending on the contracted acreage. During the exploitation period,
applies reducing gradually the remuneration fraction to a minimum of 75%
the fee is assessed on the amount of hydrocarbons produced, multiplied
when the recovery factor is 2,5 times the total accumulated expenses.
by a specified dollar amount per barrel of oil produced or thousand cubic feet
Colombia
E&P Contracts
We have entered into E&P Contracts granting us the right to explore and
of gas produced. Further, the ANH has the right to receive an additional
fee when prices for oil or gas, as the case may be, exceed the prices set forth
in the relevant E&P Contract.
operate, as well as working interests in, six blocks in Colombia. Additionally,
Our E&P Contracts are generally subject to early termination for a breach by
we have applied to the ANH to recognize our economic interest in a seventh
the parties, a default declaration, application of any of the contract’s unilateral
Colombian block as a working interest. These E&P Contracts are generally
termination clauses or termination clauses mandated by Colombian law.
divided into two periods: (1) the exploration period, which may be subdivided
Anticipated termination declared by the ANH results in the immediate
into various exploration phases and (2) the exploitation period, determined
enforcement of monetary guaranties against us and may result in an action
on a per-area basis and beginning on the date we declare an area to be
for damages by the ANH. Pursuant to Colombian law, if certain conditions are
commercially viable. Commercial viability is determined upon the completion
met, the anticipated termination declared by the ANH may also result in a
of a specified evaluation program or as otherwise agreed by the parties
restriction on the ability to engage contracts with the Colombian government
to the relevant E&P Contract. The exploitation period for an area may be
during a certain period of time. See “-Item 3. Key Information-D. Risk factors-
extended until such time as such area is no longer commercially viable and
Risks relating to our business-Our contracts in obtaining rights to explore and
certain other conditions are met.
develop oil and natural gas reserves are subject to contractual expiration
dates and operating conditions, and our CEOPs, E&P Contracts and concession
agreements are subject to early termination in certain circumstances.”
GeoPark 20F
99
La Cuerva Block E&P Contract. Pursuant to an E&P Contract between us and
the ANH that became effective as of April 16, 2008, or the La Cuerva Block E&P
respectively. We are currently awaiting for the environmental license
required for the declaration of commerciality of the Max and Tua fields to be
Contract, we were granted the right to explore and operate, and a 100%
expedited. In the meantime the ANH has granted an extension of time for
working interest in, the La Cuerva Block.
such declaration until the ANLA issues the environmental license.
We are currently in the production phase of the La Cuerva Block E&P
Pursuant to the Llanos 34 Block E&P Contract and applicable law, we are
Contract. Production began in the west, southwest and southern, east and
required to pay to the ANH a royalty based on hydrocarbons produced in
northeast areas of the Block on December 9, 2011, February 10, 2012, April 23,
the Llanos 34 Block. In the Max Field, we pay the ANH a royalty of at least
2012, October 18, 2013 and October 21, 2013 respectively. The La Cuerva
6.0%, and in the Túa, Tarotaro and Tigana Fields, we pay a royalty of at least
Block E&P Contract provides for a 24-year exploitation period for each area
8.0%. Additionally, we are required to pay a subsoil use fee to the ANH,
in the La Cuerva Block, beginning from the date such area is declared
which, during the exploration period, is scaled depending on the contracted
commercially viable.
acreage, and which, during the exploitation period, is equivalent to the
amount of oil we produce multiplied by US$0.1162 per bbl or the amount of
Pursuant to the La Cuerva Block E&P Contract and applicable law, we are
natural gas we produce multiplied by US$0.01162 per mcf. The ANH also
required to pay to the ANH a royalty of at least 8.0% based on hydrocarbons
has the right to receive an additional fee when prices for oil or gas, as the
produced, in accordance with the table presented above. Additionally, we are
case may be, exceed the prices set forth in the Llanos 34 Block E&P Contract.
required to pay a subsoil use fee to the ANH, which, during the exploration
The ANH also has an additional economic right equivalent to 1% of
period, is scaled depending upon the contracted acreage, and which, during
production, net of royalties.
the exploitation period, is equivalent to the amount of oil we produce
multiplied by US$0.1119 per bbl or the amount of natural gas we produce
In accordance with the Llanos 34 Block operation contract, when the
multiplied by US$0.0119 per mcf. The ANH also has the right to receive
accumulated production of each field, including the royalties’ volume,
an additional fee when prices for oil or gas, as the case may be, exceed the
exceeds 5 million barrels and the WTI exceeds the base price settled in Table
prices set forth in the La Cuerva Block E&P Contract.
A, the Company should deliver to ANH a share of the production net of
Llanos 34 Block E&P Contract. Pursuant to an E&P Contract between Unión
Temporal Llanos 34 (a consortium between Ramshorn and GeoPark Colombia
SAS) and the ANH that became effective as of March 13, 2009, or the Llanos
royalties in accordance with the following formula: Q = ((P - Po)/P) x S;
where Q = Economic right to be delivered to ANH, P = WTI, Po = Base price
(see Table A) and S = Share (see Table B).
34 Block E&P Contract, Unión Temporal Llanos 34 was granted the right to
Table A
explore and operate the Llanos 34 Block, and we and Ramshorn were granted
a 40% and a 60% working interest, respectively, in the Llanos 34 Block. We
°API
>29°
were also granted the right to operate the Llanos 34 Block. On December 16,
>22°<29°
2009, we entered into a joint operating agreement with Ramshorn and P1
Energy in respect of our operations in the Block. On August 31, 2012, the ANH
>15°<22°
>10°<15°
approved the assignment by Ramshorn to us of an additional 5% working
interest, giving Ramshorn a 55% working interest and us a 45% working
interest in the Llanos 34 Block.
Table B
Po (US$/barrel) WTI (P)
30.22
31.39
32.56
46.50
Po < P < 2Po
2Po < P < 3Po
3Po < P < 4Po
4Po < P < 5Po
5Po < P
S
30%
35%
40%
45%
50%
Winchester and Luna Stock Purchase Agreement
Pursuant to the stock purchase agreement entered into on February 10, 2012,
We are currently in the exploration period of the Llanos 34 Block E&P
or the Winchester Stock Purchase Agreement, we agreed to pay the
Contract. The contract provides for a six-year exploration period, consisting of
Sellers a total consideration of US$30.0 million, adjusted for working capital.
two three-year phases, which can be extended for up to six additional months
Additionally, under the terms of the Winchester Stock Purchase Agreement,
to allow for the completion of exploration activities. The Llanos 34 Block E&P
we are obligated to make certain payments to the Sellers based on the
Contract provides for a 24-year exploitation period for each commercial area,
production and sale of hydrocarbons discovered by exploration wells drilled
beginning on the date on which such area is declared commercially viable.
after October 25, 2011. The agreement provides that we make a quarterly
The exploitation period may be extended for periods of up to 10 years at a
payment to the Sellers in an amount equal to 14% of adjusted revenue
time, until such time as the area is no longer commercially viable and certain
(as defined under the agreement) from any new discoveries of oil, up to the
conditions are met. We have presented evaluation programs to the ANH
maximum earn-out amount of US$35.0 million (net of Colombian taxes). Once
for the Max, Túa, Tarotaro and Tigana Fields, which expire on September 15,
the maximum earn-out amount is reached, we will pay the Sellers quarterly
2014, December 2, 2014, and November 15, 2015, and March 25, 2016,
overriding royalties in an amount equal to 4% of our net revenues from any
100 GeoPark 20F
new discoveries of oil. For the year ended December 31, 2014, we paid
Petroleum Law, which provides for the granting of concessions to operate
US$21.0 million and accrued US$24.6 million with regards to this agreement.
petroleum and gas fields in Brazil, subject to oversight by the ANP. A
concession agreement is divided into two phases: (1) exploration and (2)
Cuerva purchase and sale agreement
Pursuant to the purchase and sale agreement dated March 26, 2012 between
development and production. The exploration phase, which is further divided
into two subsequent exploratory periods, the first of which begins on the
Hupecol Cuerva Holdings LLC, as the Seller, and us, we paid to the Seller a
date of execution of the concession agreement, can last from three to eight
total consideration of US$75 million, adjusted for working capital.
years (subject to earlier termination upon the total return of the concession
Brazil
Rio das Contas Quota Purchase Agreement
Pursuant to the Rio das Contas Quota Purchase Agreement we entered into
area or the declaration of commercial viability with respect to a given area),
while the development and production phase, which begins for each
field on the date a declaration of commercial viability is submitted to the
ANP, can last up to 27 years. Upon each declaration of commercial viability, a
on May 14, 2013, we agreed to acquire from Panoro all of the quotas issued
concessionaire must submit to the ANP a development plan for the field
by Rio das Contas for a purchase price of US$140 million (subject to working
within 180 days. The concessions may be renewed for an additional period
capital adjustments at closing and further earn-out payments, if any) upon
equal to their original term if renewal is requested with at least 12 months’
satisfaction of certain conditions. With respect to the earn-out payments, the
notice, and provided that a default under the concession agreement has
Rio das Contas Quota Purchase Agreement provides that during the calendar
not occurred and is then continuing. Even if obligations have been fulfilled
periods beginning on January 1, 2013 and ending as late as December 31,
under the concession agreement and the renewal request was appropriately
2017, we will make annual earn-out payments to Panoro in an amount equal
filed, renewal of the concession is subject to the discretion of the ANP.
to 45% of “net cash flow,” calculated as EBITDA less the aggregate of capital
expenditures and corporate income taxes, with respect to the BCAM-40
The main terms and conditions of a concession agreement are set forth
Concession of any amounts in excess of US$25.0 million, up to a maximum
in Article 43 of the Brazilian Petroleum Law, and include: (1) definition of the
cumulative earn-out amount of US$20.0 million in a five-year period. Once
concession area; (2) validity and terms for exploration and production
the maximum earn-out amount is reached or the five-year period has elapsed,
activities; (3) conditions for the return of concession areas; (4) guarantees
no further earn-out amounts will be payable. For the year ended December
to be provided by the concessionaire to ensure compliance with the
31, 2014, there were no earn-out payments with regards to this agreement.
concession agreement, including required investments during each phase;
(5) penalties in the event of noncompliance with the terms of the concession
We financed our Rio das Contas acquisition in part through our Brazilian
agreement; (6) procedures related to the assignment of the agreement; and
subsidiary’s entrance into a US$70.5 million credit facility (the “Rio das Contas
(7) rules for the return and vacancy of areas, including removal of equipment
Credit Facility”) with Itaú BBA International plc, which is secured by the
and facilities and the return of assets. Assignments of participation interests
benefits GeoPark receives under the Purchase and Sale Agreement for Natural
in a concession are subject to the approval of the ANP, and the replacement
Gas with Petrobras. The facility matures five years from March 28, 2014, with
of a performance guarantee is treated as an assignment.
principal annual payments in March and September starting in 2015 and
bears interest at a variable interest rate equal to the six-month LIBOR + 3.9%.
The main rights of the concessionaires (including us in our concession
In March 2015, we reached an agreement to: (i) extend the principal
agreements) are: (1) the exclusive right of drilling and production in
payments that were due in 2015 (amounting to approximately US$15 million),
the concession area; (2) the ownership of the hydrocarbons produced; (3)
which will be divided pro-rata during the remaining principal installments,
the right to sell the hydrocarbons produced; and (4) the right to export
starting in March 2016 and (ii) to increase the variable interest rate equal
the hydrocarbons produced. However, a concession agreement set forth that,
to the six-month LIBOR + 4.0%. The facility agreement includes customary
in the event of a risk of a fuel supply shortage in Brazil, the concessionaire
events of default, and subject our Brazilian subsidiary to customary
must fulfill the needs of the domestic market. In order to ensure the domestic
covenants, including the requirement that it maintain a ratio of net debt to
supply, the Brazilian Petroleum Law granted the ANP the power to control
EBITDA of up to 3.5x the first two years and up to 3.0x thereafter. The credit
the export of oil, natural gas and oil products.
facility also limits the borrower’s ability to pay dividends if the ratio of net
debt to EBITDA is greater than 2.5x. We have the option to prepay the facility
Among the main obligations of the concessionaire are: (1) the assumption
in whole or in part, at any time, subject to a pre-payment fee to be
of costs and risks related to the exploration and production of hydrocarbons,
determined under the contract.
including responsibility for environmental damages; (2) compliance with
the requirements relating to acquisition of assets and services from domestic
Overview of concession agreements
The Brazilian oil and gas industry is governed mainly by the Brazilian
suppliers; (3) compliance with the requirements relating to execution of the
minimum exploration program proposed in the winning bid; (4) activities for
GeoPark 20F 101
the conservation of reservoirs; (5) periodic reporting to the ANP; (6) payments
Under the BCAM-40 Concession Agreement, the ANP is entitled to a
for government participation; and (7) responsibility for the costs associated
monthly royalty payment equal to 7.5% of the production of oil and natural
with the deactivation and abandonment of the facilities in accordance with
gas in the concession area. In addition, in case the special participation fee
Brazilian law and best practices in the oil industry.
of 10% shall be applicable for a field in any quarter of the calendar year,
the concessionaire is obliged to make qualified research and development
A concessionaire is required to pay to the Brazilian government the following:
investments equivalent to one percent of the field’s gross revenue. Area
• a license fee;
retention payments are also applicable under the concession agreement. We
• rent for the occupation or retention of areas;
acquired Rio das Contas’s 10% participation interest in the BCAM-40
• a special participation fee;
• royalties; and
• taxes.
Concession on March 31, 2014.
Round 11 concession agreements. Additionally, on May 14, 2013, following
the 11th oil and gas bidding round pursuant to the Brazilian Petroleum Law,
Rental fees for the occupation and maintenance of the concession areas are
we were awarded seven new exploratory licenses in Brazil in the REC-T 94
payable annually. For purposes of calculating these fees, the ANP takes into
and REC-T 85 Concessions in the Recôncavo Basin in the State of Bahia and
consideration factors such as the location and size of the relevant concession,
the POT-T 664, POT-T 665, POT-T 619, POT-T 620 and POT-T 663 Concessions
the sedimentary basin and the geological characteristics of the relevant
in the Potiguar Basin in the State of Rio Grande do Norte. We have entered
concession.
into seven concession agreements, which we collectively refer to as the
Round 11 Concession Agreements, with the ANP on September 17, 2013, for
A special participation fee is an extraordinary charge that concessionaires
the right to exploit the oil and natural gas in these seven new license areas.
must pay in the event of obtaining high production volumes and/or
We have paid to the ANP a license fee in the amount of R$10.2 million
profitability from oil fields, according to criteria established by applicable
(approximately US$4.4 million), consisting of R$7.2 million for the REC-T 94
regulations, and is payable on a quarterly basis for each field from the date on
and REC-T 85 Concessions and R$3.0 million for the POT-T 664, POT-T 665,
which extraordinary production occurs. This participation fee, whenever due,
POT-T 619, POT-T 620 and POT-T 663 Concessions, and provide to the ANP
varies between 0% and 40% of net revenues depending on (1) the volume
financial guarantees in the amount of R$20.4 million (approximately
of production and (2) whether the concession is onshore or in shallow water
US$6.4 million, at the March 31, 2015 exchange rate of R$3.2080 to US$1.00),
or deep water. Under the Brazilian Petroleum Law and applicable regulations
consisting of R$12.1 million (approximately US$3.8 million, at the March 31,
issued by the ANP, the special participation fee is calculated based on
2015 exchange rate of R$3.2080 to US$1.00) for the REC-T 94 and REC-T 85
the quarterly net revenues of each field, which consist of gross revenues
Concessions and R$8.3 million (approximately US$2.6 million, at the Mach 31,
calculated using reference prices established by the ANP (reflecting
2015 exchange rate of R$3.2080 to US$1.00) for the POT-T 664, POT-T 665,
international prices and the exchange rate for the period) less:
POT-T 619, POT-T 620 and POT-T 663 Concessions, to secure our obligations
• royalties paid;
• investment in exploration;
• operational costs; and
under the Minimum Exploratory Programs, or PEMs, for the first exploratory
period of the concessions.
• depreciation adjustments and applicable taxes.
Under the Round 11 Concession Agreements, the ANP is entitled to a
The Brazilian Petroleum Law also requires that the concessionaire of onshore
gas in the concession area, in addition to the special participation fee
fields pay to the landowners a special participation fee that varies between
described above, the payment for the occupation of the concession area of
0.5% to 1.0% of the net operational income originated by the field
approximately R$7,600 (approximately US$2,400 at the March 31, 2015
monthly royalty corresponding to 10% of the production of oil and natural
production.
BCAM-40 Concession Agreement. On August 6, 1998, the ANP and Petrobras
executed the concession agreement governing the BCAM-40 Concession,
or the BCAM-40 Concession Agreement, following the first round of bidding,
referred to as Bid Round Zero, under the regime established by the
exchange rate of R$3.2080 to US$1.00) per year and the payment to the
owners of the land of the concession equivalent to one percent of the oil and
natural gas produced in the concession area.
Round 12 concession agreements.
On November 28, 2013, following the 12th oil and gas bidding round
Brazilian Petroleum Law. The exploration phase will end in November 2029.
pursuant to the Brazilian Petroleum Law, we were awarded two new
On September 11, 2009, Petrobras announced the termination of BCAM-40
exploratory licenses in Brazil, the PN-T-597 Concession on the Parnaiba Basin
Concession’s exploration phase and the return of the exploratory area of the
in the State of Maranhão and the SEAL-T-268 Concession in the Sergipe-
concession to the ANP, except for the Manatí Field and the Camarão Norte Field.
Alagoas Basin in the State of Alagoas.
102 GeoPark 20F
Our offer requires a commitment to the ANP of R$9.3 million (approximately
operator of the BCAM-40 concession, with a 35% participation interest. QGEP,
US$2.9 million, at the March 31, 2015 exchange rate of R$3.2080 to US$1.00)
Brasoil and Rio das Contas have a 45%, 10% and 10% participation interest,
composed of R$1.6 million (approximately US$0.5 million, at the March 31,
respectively. The BCAM-40 Consortium Agreement has a specified term
2015 exchange rate of R$3.2080 to US$1.00) for the first exploratory period on
of 40 years, terminating on January 14, 2040 and, at the time the obligations
the Concession SEAL-T-268 and R$7.7 million (approximately US$2.4 million,
undertaken in the agreement are fully completed, the parties will have the
at the March 31, 2015 exchange rate of R$3.2080 to US$1.00) for the first
right to terminate it. The BCAM-40 Concession consortium has also entered
exploratory period on the PN-T-597.
into a joint operating agreement, which sets out the rights and obligations of
the parties in respect of the operations in the concession.
Part of our bid for the Round 12 concessions was comprised of work
program guarantees, or commitments to invest certain sums in the blocks
as part our exploration activities. Our SEAL-T-268 commitment is composed
Petrobras Natural Gas Purchase Agreement
QGEP, GeoPark Brazil, Brasoil and Petrobras are party to a natural gas
of R$0.14 million (approximately US$0.04 million, at the March 31, 2015
purchase agreement providing for the sale of natural gas by QGEP, GeoPark
exchange rate of R$3.2080 to US$1.00) bonus payable to the ANP and
Brazil and Brasoil to Petrobras, in an amount of 812 bcf over the term of
R$1.5 million (approximately US$0.5 million, at the March 31, 2015 exchange
agreement. The Petrobras Natural Gas Purchase Agreement is valid until the
rate of R$3.2080 to US$1.00) as part of the work program guarantee payable
earlier of Petrobras’s receipt of this total contractual quantity or June 30,
over the course of the three years. Work program is equivalent to 40 km of 2D
2030. The agreement may not be fully or partially assigned except upon
seismic, with no well drilling committed during the first exploratory period.
execution of an assignment agreement with the written consent of the other
parties, which consent may not be unreasonably withheld provided that
Our PN-T-597 commitment is composed of R$0.9 million (approximately
certain prerequisites have been met.
US$0.3 million, at the March 31, 2015 exchange rate of R$3.2080 to US$1.00)
bonus payable to the ANP in the first year of exploration and R$6.7 million
The agreement provides for the provision of “daily contractual quantities” to
(approximately US$2.1 million, at the March 31, 2015 exchange rate of
Petrobras, in the following amounts: from the first year through the end of
R$3.2080 to US$1.00) as a work program guarantee. See “-Item 3. Key
the fourth year under the contract, 211.9 mmcfpd; from the beginning of
information-D. Risk factors-Risks relating to our business-The \PN-T-597
the fifth year through the end of the ninth year, 141.3 mmcfpd; and from the
concession is subject to an injunction and may not close.” for more
beginning of the tenth year through the end of the contract, 141.3 mmcfpd
information.
or such smaller quantity as stipulated by the parties, to take into account the
Manatí Field’s depletion. Pursuant to the agreement, the base price is
Overview of consortium agreements
A consortium agreement is a standard document describing consortium
denominated in reais and is adjusted annually for inflation pursuant to the
general index of market prices (IGPM). Additionally, the gas price applicable
members’ respective percentages of participation and appointment of the
on a given day is subject to reduction as a result of the gas quantity
operator. It generally provides for joint execution of oil and natural gas
acquired by Petrobras above the volume of the annual TOP commitment
exploration, development and production activities in each of the concession
areas. These agreements set forth the allocation of expenses for each
(85% of the daily contracted quantity) in effect on such day.
of the parties with respect to their respective participation interests in the
The Petrobras Natural Gas Purchase Agreement provides that if the Manatí
concession. The agreements are supplemented by joint operating
Field’s daily production capacity is less than the amount of the applicable
agreements, which are private instruments that typically regulate the
daily contractual quantity, gas sales shall be made exclusively to Petrobras,
aggregation of funds, the sharing of costs, mitigation of operational risks,
with any sales to third parties subject to a penalty. If the field’s production is
preemptive rights and the operator’s activities.
above the applicable daily contractual quantity, the agreement provides
that Petrobras must first be offered to purchase the excess amount of gas.
An important characteristic of the consortia for exploration and production
of oil and natural gas that differs from other consortia (Article 278, paragraph
1, of the Brazilian Corporate Law) is the joint liability among consortium
Petrobras Natural Gas Condensate Purchase Agreement
On January 1, 2014, Rio das Contas and Petrobras entered into an agreement,
members as established in the Brazilian Petroleum Law (Article 38, item II).
the Petrobras Natural Gas Condensate Purchase Agreement, valid until
BCAM-40 Consortium Agreement. On January 14, 2000, the consortium
total volume of natural gas condensate to be produced in the Manatí Field.
formed by Petrobras, QG Perfurações and Petroserv entered into a
The agreement can be renewed and takes into consideration market factors
consortium agreement, or the BCAM-40 Consortium Agreement, for the
that affect the production and sale of gas.
December 31, 2015 for the sale to Petrobras of Rio das Contas’s share of the
performance of the BCAM-40 Concession Agreement. Petrobras is the
GeoPark 20F 103
Pursuant to the agreement, for each liquid barrel of condensed natural gas
and production or meet other limited requirements, as established under
sold by Rio das Contas, Petrobras will pay the monthly arithmetic average
Presidential Decree 616/2005.
of the averages of the daily prices for the “BRENT DTD” barrel, as published by
Platt’s Crude Oil Marketwire, subject to a discount of $2.87 per barrel.
In general, our Argentina concession agreement for the Del Mosquito
Block grant us the exclusive right to produce, explore and develop
Any assignment of a party’s interest under the agreement requires the other
hydrocarbons in these blocks, as well as the right to receive a transportation
party’s prior written consent.
Peru
Morona Block Acquisition
On October 1, 2014, we entered into an agreement with Petroperú to
concession to build unused pipelines or other transportation facilities beyond
the boundaries of the concessions for 35 years. The term of each of these
concessions is 25 years, with an optional extension of up to 10 years. There
is no minimum work or investment commitment under any of the
concessions other than the general requirement to make needed investments
acquire an interest in and operate the Morona Block, located in Northern
to develop the entire acreage of the concession, though the Argentine
Peru. GeoPark will assume a 75% working interest of the Morona Block,
Secretary of Energy takes into account all work and investment undertaken
with Petroperú retaining a 25% working interest.
when determining whether to grant an extension of the concession term.
Work and investment programs for the concessions are required to be
The transaction is subject to conditions precedents, which include the
presented annually to the incumbent Provincial State enforcement authority,
qualification of GeoPark by Perupetro, which has already been fulfilled, certain
the Argentine Secretary of Energy and the Strategic Planning and
modifications to the License Contract, and the enactment of a Supreme Decree
Coordination Committee for the National Hydrocarbon Investment Plan.
of the President of Peru. The transaction is expected to close in 2015.
Under the terms of our concession agreements, we are entitled to 100% of
The agreement includes a work program and development plan, for Situche
production, with no governmental participation. We are also required, under
Central oil field, in the Morona Block, to be completed in stages. Initial stage
Argentine law, to pay royalties to certain Argentine provinces, at a rate of
goal will be to start production through a long term test, which also will be
12% on both oil and gas sales. In addition to this 12% royalty, we are also
used to define the most effective development plan and to start generating
required to pay additional royalties ranging from 2.5% to 8%, pursuant to
cash flow. GeoPark has committed to carry Petroperú’s share of the capital
private royalty agreements we have entered into. We also pay annual surface
expenses required to carry out the long term test in the wells SC2X and SC3X.
rental fees established under Hydrocarbons Law 17,319 (“Hydrocarbons Law”)
The subsequent work program stages, which will be initiated once production
and Resolution 588/98 of the Argentine Secretary of Energy and Decree
has been established, are focused on carrying out the full development of
1454/2007, and certain landowner fees.
the Situche Central field, including transportation infrastructure. Petroperú
will also have the right to increase its working interest in the Block up to 50%,
Our Argentine concession agreements have no change of control provisions,
subject to GeoPark recovering its investments in the Block by certain agreed
though any assignment of these concessions is subject to the prior
factors. See “-Item 4. Information on the Company-B. Business overview-Our
operations-Operations in Peru-Morona Block.”
authorization by the executive branch of the incumbent Provincial State. For
the four years prior to the expiration of each of these concessions, the
Argentina
Overview of exploitation concessions
As the concession holder of the Del Mosquito Concession, we are subject to
concession holder must provide technical and commercial justifications for
leaving any inactive and non-producing wells unplugged. Each of these
concessions can be terminated for default in payment obligations and/or
breach of material statutory or regulatory obligations. We may also voluntarily
numerous restrictions and fees related to hydrocarbon production and
relinquish acreage to the Argentine authorities. For example, in November
foreign markets. For example, the domestic oil and gas market in Argentina
2012, we voluntarily relinquished approximately 102,500 non-producing
has supply privileges favoring the domestic market, to the detriment of the
gross acres in the Del Mosquito Block to the Argentine authorities, which
export market, including hydrocarbon export restrictions, domestic price
relinquishment is currently subject to approval by the authorities of the
controls, export duties and domestic market supply obligations. We are also
province of Santa Cruz and the completion of certain environmental audits. In
subject to certain foreign currency retention restrictions. We must comply
addition, in April 2014, we informed the Secretary of Infrastructure and
with central bank registration requirements, maintain a minimum one-year
Energy of the Province of Mendoza of our decision to relinquish 100% of the
residency in Argentina and comply with central bank registration
Cerro Doña Juana and Loma Cortaderal Concessions to the Mendoza
requirements, including the requirement that 30% of all funds remitted to
Province. The area covered by the Cerro Doña Juana and Loma Cortaderal
Argentina remain deposited in a domestic financial institution for one year
Blocks is 47.9 acres and neither the Cerro Doña Juana nor the Loma
without yielding interest unless such funds are proven invested in exploration
Cortaderal were in production or have any associated reserves.
104 GeoPark 20F
Our Argentine concessions are governed by the laws of Argentina and the
drag-along rights, and the non-transferring shareholder has the right to
resolution of any disputes must be sought in the Federal Courts, although
object to a sale to the third-party if it considers such third-party to be not of
provincial courts may have jurisdiction over certain matters.
a good reputation or one of our direct competitors. Under the LGI Chile
Agreements with LGI
LGI Chile Shareholders’ Agreements
In 2010, we formed a strategic partnership with LGI to jointly acquire and
Shareholders’ Agreements, we and LGI have also agreed to vote our common
shares or otherwise cause GeoPark Chile or GeoPark TdF, as the case may
be, to declare dividends only after allowing for retentions to meet anticipated
future investments, costs and obligations. See “-Item 3. Key Information-D.
develop upstream oil and gas projects in Latin America. In 2011, LGI acquired
Risk factors-Risks relating to our business-LGI, our strategic partner in Chile
a 20% equity interest in GeoPark Chile and a 14% equity interest in GeoPark
and Colombia, may sell its interest in our Chilean and Colombian operations
TdF, for a total consideration of US$148.0 million, plus additional equity
to a third party or may not consent to our taking certain actions.”
funding of US$18.0 million over the following three years. On May 20, 2011,
in connection with LGI’s investment in GeoPark Chile, we and LGI entered
into a shareholders’ agreement (as amended on July 4, 2011, the GeoPark
LGI Colombia Agreements
In December 2012, we and LGI agreed that we would extend our strategic
Chile Shareholders’ Agreement) and a subscription agreement (as amended
partnership to build a portfolio of upstream oil and gas assets throughout
on July 4, 2011 and October 4, 2011, in connection with LGI’s investment
Latin America through 2015. On December 18, 2012, LGI agreed to
in GeoPark TdF, the GeoPark TdF Subscription Agreement, and, together
acquire a 20% equity interest in GeoPark Colombia for a total consideration
with the GeoPark Chile Shareholders’ Agreement, the LGI Chile Shareholders’
of US$20.1 million composed of a US$14.9 million capital contribution, a
Agreements), setting forth our and LGI’s respective rights and obligations
US$4.9 million loan to GeoPark Colombia and miscellaneous reimbursements.
in connection with LGI’s investment in our Chilean oil and gas business.
Concurrently, we and LGI entered into a shareholders’ agreement, the LGI
Colombia Shareholders’ Agreement, setting forth our and LGI’s respective
The respective boards of each of GeoPark Chile and GeoPark TdF supervise
obligations in connection with LGI’s investment in our Colombian oil and gas
their day-to-day operations. Each of these boards has four directors. As long
business, and LGI and Winchester (now GeoPark S.A.S.) entered into a loan
as LGI holds at least 5% of the voting shares of GeoPark Chile, LGI has the
agreement, whereby, upon the closing of LGI’s subscription of shares in
right to elect one director and such director’s alternate, and the remaining
GeoPark Colombia, LGI granted a credit line (of which US$4.9 million was
directors, and alternates, are elected by us. As long as LGI holds at least
drawn at closing) to Winchester (now GeoPark S.A.S.) of up to US$12.0 million,
5% of the voting shares of GeoPark TdF, LGI has the right to elect one director
to be used for the acquisition, development and operation of oil and gas
and such director’s alternate, and the remaining directors, and alternates,
assets in Colombia. Further, on January 8, 2014, following an internal
are elected by GeoPark Chile.
corporate reorganization of our Colombian operations, GeoPark Colombia
Coöperatie U.A. and GeoPark Latin America entered into a new members’
The LGI Chile Shareholders’ Agreements require the consent of LGI or
agreement with LGI, or the LGI Colombia Members’ Agreement, that sets out
the LGI appointed director in order for GeoPark Chile and GeoPark TdF, as
substantially similar rights and obligations to the LGI Colombia Shareholders’
the case may be, to take certain actions, including, among others:
• making any decision to terminate or permanently or indefinitely suspend
Agreement in respect of our oil and gas business in Colombia. We refer to
the LGI Colombia Shareholders’ Agreement and the LGI Colombia Members’
operations in or surrender our blocks in Chile (other than as required under
Agreement collectively as the LGI Colombia Agreements.
the terms of the relevant CEOP for such blocks);
• selling our blocks in Chile to our affiliates;
GeoPark Colombia’s board supervises its day-to-day operations. GeoPark
• any change to the dividend, voting or other rights that would give
Colombia has four directors. As long as LGI holds at least 14% of the voting
preference to or discriminate against the shareholders of GeoPark Chile and
shares of GeoPark Colombia, LGI has the right to elect one director and
GeoPark TdF;
such director’s alternate, and the remaining directors and alternates are
• entering into certain related party transactions; and
elected by us.
• creating a security interest over our blocks in Chile (other than in
connection with a financing that benefits our Chilean subsidiaries).
Under the LGI Colombia Agreements, LGI agreed to assume its share of the
existing debt of GeoPark Colombia and to provide additional funding to
The LGI Chile Shareholders’ Agreements provide that if LGI or either Agencia
cover LGI’s share of required future investments in Colombia. In addition, we
or GeoPark Chile decides to sell its shares in GeoPark Chile or GeoPark
can earn back up to 12% additional equity interests in GeoPark Colombia
TdF, as the case may be, the transferring shareholder must make an offer to
depending on the success of our Colombian operations.
sell those shares to the other shareholder before selling those shares to a
third party. In addition, any sale to a third party is subject to tag-along and
GeoPark 20F 105
The LGI Colombia Agreements require the consent of LGI or the LGI-
Chile, the Republic of Chile grants such rights through a CEOP. In Colombia,
appointed director for GeoPark Colombia to take certain actions, including,
the Republic of Colombia grants such rights through E&P Contracts or
among others:
contracts of association. In Argentina, the Argentine Republic grants such
• making any decision to terminate or permanently or indefinitely suspend
rights through exploitation concessions. In Brazil, the Federative Republic
operations in or surrender our blocks in Colombia (other than as required
of Brazil grants such rights pursuant to concession agreements. See “-Item 3.
under the terms of the relevant concessions for such blocks);
Key Information-D. Risk factors-Risks relating to the countries in which we
• creating of a security interest over our blocks in Colombia;
operate-Oil and natural gas companies in Chile, Colombia, Brazil, Peru and
• approving of GeoPark Colombia’s annual budget and work programs and
Argentina do not own any of the oil and natural gas reserves in such
the mechanisms for funding any such budget or program;
countries.” Other than as specified in this annual report, we believe that we
• entering into of any borrowings other than those provided in an approved
have satisfactory rights to exploit or benefit economically from the oil
budget or incurred in the ordinary course of business to finance working
and gas reserves in the blocks in which we have an interest in accordance
capital needs;
• granting any guarantee or indemnity to secure liabilities of parties other
with standards generally accepted in the international oil and gas industry.
Our CEOPs, E&P Contracts, contracts of association, exploitation concessions
than those of our Colombian subsidiaries;
and concession agreements are subject to customary royalty and other
• changing the dividend, voting or other rights that would give preference to
interests, liens under operating agreements and other burdens, restrictions
or discriminate against the shareholders of GeoPark Colombia;
and encumbrances customary in the oil and gas industry that we believe do
• entering into certain related party transactions; and
not materially interfere with the use of or affect the carrying value of our
• disposing of any material assets other than those provided for in an
interests. See “-Item 3. Key Information-D. Risk factors-Risks relating to our
approved budget and work program.
business-We are not, and may not be in the future, the sole owner or operator
We have also agreed to ensure that the board of directors and rules and
of the working interests in certain of our licensed areas.” Therefore, we may
management of our other subsidiaries engaged in our Colombian oil and gas
not be able to control the timing of exploration or development efforts,
business are subject to the same principles and restrictions outlined above.
associated costs, or the rate of production of any non-operated and, to an
of all of our licensed areas and do not, and may not in the future, hold all
extent, any non-wholly-owned, assets.”
The LGI Colombia Agreements provide that if either we or LGI decide to sell
our respective shares in GeoPark Colombia, the transferring shareholder must
make an offer to sell those shares to the other shareholder before selling
Our customers
In Chile, our primary customers are ENAP and Methanex. As of December 31,
those shares to a third party. In addition, any sale to a third party is subject to
2014, ENAP purchased all of our oil and condensate production and
tag-along and drag-along rights, and the non-transferring shareholder has
Methanex purchased almost all of our natural gas production in Chile, and
the right to object to a sale to the third-party if it considers such third-party to
represented 28% and 6%, respectively, of our total revenues for the year
be not of a good reputation or one of our direct competitors.
ended December 31, 2014. Our contract with ENAP is automatically renewed
Under the LGI Colombia Agreements, we and LGI have agreed to vote our
for six-month terms, with oil pricing based on international market prices.
Our contract with Methanex is a long-term contract, with the price of natural
common shares or otherwise cause GeoPark Colombia to declare dividends
gas based on the international market prices for methanol. In Colombia,
only after allowing for retentions for approved work programs and budgets
our primary customers are Gunvor, Emerald and Perenco, who purchase our
and capital adequacy requirements of GeoPark Colombia, working capital
production through short-term contracts, and who represented 40%, 32%,
requirements, banking covenants associated with any loan entered into by
and 11%, respectively, of our total revenues for the year ended December 31,
GeoPark Colombia or our other Colombian subsidiaries and operational
2014. In Brazil, following the Manatí acquisition on March 31, 2014, all of
requirements. See “-Item 3. Key Information-D. Risk factors-Risks relating to
our hydrocarbons are sold to Petrobras. In Peru, our primary customer may
our business-LGI, our strategic partner in Chile and Colombia, may sell its
be Petroperú, who has the first option but not the obligation to purchase
interest in our Chilean and Colombian operations to a third party or may not
oil produced by us in the Morona Block.
consent to our taking certain actions.”
Title to properties
In each of the countries in which we operate, the state is the exclusive owner
Seasonality
Although there is some historical seasonality to the prices that we receive for
our production, the impact of such seasonality has not been material.
of all hydrocarbon resources located in such country and has full authority to
Additionally, seasonality does not play a significant role in our ability to
determine the rights, royalties or compensation to be paid by private
conduct our operations, including drilling and completion activities. Although
investors for the exploration or production of any hydrocarbon reserves. In
in winter months, it is more difficult or even impossible to conduct certain of
106 GeoPark 20F
our operations, such as seismic work, we take such seasonality into account
Health, safety and environmental matters
in planning for and conducting our operations, such that the impact on
our overall business is not material.
General
We and our operations are subject to various stringent and complex
international, federal, state and local environmental, health and safety laws
Our competition
The oil and gas industry is competitive, and we may encounter strong
and regulations in the countries in which we operate governing matters
including the emission and discharge of pollutants into the ground, air or
competition from other independent operators and from major oil companies
water; the generation, storage, handling, use and transportation of regulated
in acquiring and developing licenses. In Chile, we partner with and sell to,
materials; and human health and safety. These laws and regulations may,
and may from time to time compete with, ENAP and, to a lesser extent, some
among other things:
companies with operations in Argentina mentioned below. In Colombia,
• require the acquisition of various permits or other authorizations or the
we partner with and sell to, and may from time to time compete with,
preparation of environmental assessments, studies or plans (such as well
Ecopetrol, as well as with privately-owned companies such as Pacific Rubiales,
Gran Tierra, Petrominerales, Parex and Canacol, among others. In Brazil, we
closure plans) before seismic or drilling activity commences;
• enjoin some or all of the operations of facilities deemed not in compliance
partner with and sell to, and may from time to time compete with, Petrobras,
with permits;
privately-owned companies such as HRT, QGEP, Brasoil and some of the
• restrict the types, quantities and concentration of various substances that
Colombian companies mentioned above, which have entered into Brazil,
can be released into the environment in connection with oil and natural gas
among others. In Argentina, we compete for resources with YPF, as well
drilling, production and transportation activities;
as with privately-owned companies such as Pan American Energy, Pluspetrol,
• require establishing and maintaining bonds, reserves or other commitments
Tecpetrol, Chevron, Wintershall, Total, Sinopec and others. In Peru, we will
to plug and abandon wells;
partner with and will sell to, Petroperú and will compete for resources with
• limit or prohibit seismic and drilling activities in certain locations lying
privately-owned companies such as Pluspetrol, Gran Tierra, Repsol, Graña
within or near protected or otherwise sensitive areas; and
y Montero, Hunt Oil, Olympic Oil & Gas, Savia, among others; and with state-
• require remedial measures to mitigate or remediate pollution from our
owned oil companies as CNPC (China National Petroleum Corporation).
operations, which, if not undertaken, could subject us to substantial penalties.
Many of these competitors have financial and technical resources and
These laws and regulations may also restrict the rate of oil and natural
personnel substantially larger than ours. As a result, our competitors may be
gas production below the rate that would otherwise be possible. Compliance
able to pay more for desirable oil and natural gas assets, or to evaluate, bid
with these laws can be costly. The regulatory burden on the oil and gas
for and purchase a greater number of licenses than our financial or personnel
industry increases the cost of doing business in the industry and
resources will permit. Furthermore, these companies may also be better
consequently affects profitability.
able to withstand the financial pressures of unsuccessful wells, sustained
periods of volatility in financial and commodities markets and generally
Moreover, public interest in the protection of the environment continues
adverse global and industry-wide economic conditions, and may be better
able to absorb the burdens resulting from changes in relevant laws and
to increase. Drilling in some areas has been opposed by certain community
and environmental groups and, in other areas, has been restricted.
regulations, which may adversely affect our competitive position. See “-Item
Our operations could be adversely affected to the extent laws are enacted
3. Key Information-D. Risk factors-Risks relating to our business-Competition
or other governmental action is taken that prohibits or restricts seismic or
in the oil and natural gas industry is intense, which makes it difficult for
drilling activities or imposes environmental requirements that result in
us to acquire properties and prospects, market oil and natural gas and secure
increased costs to the oil and gas industry in general, such as more stringent
trained personnel.”
or costly waste handling, disposal or cleanup requirements.
We are also affected by competition for drilling rigs and the availability of
related equipment. Higher commodity prices generally increase the demand
Climate change
Our operations and the combustion of oil and natural gas-based products
for drilling rigs, supplies, services, equipment and crews, and can lead to
results in the emission of greenhouse gases, which may contribute to global
shortages of, and increasing costs for, drilling equipment, services and
climate change. Climate change regulation has gained momentum in
personnel. Over the past several years, oil and natural gas companies have
recent years internationally and at the federal, regional, state and local levels.
experienced higher drilling and operating costs. Shortages of, or increasing
On the international level, various nations have committed to reducing
costs for, experienced drilling crews and equipment and services could
their greenhouse gas emissions pursuant to the Kyoto Protocol. The Kyoto
restrict our ability to drill wells and conduct our operations.
Protocol was set to expire in 2012. In late 2011, an international climate
change conference in Durban, South Africa resulted in, among other things,
GeoPark 20F 107
an agreement to negotiate a new climate change regime by 2015 that would
Chilean government, through the Superintendency of the Environment,
aim to cover all major greenhouse gas emitters worldwide, including the
to: (1) bring administrative and judicial proceedings against companies
U.S., and take effect by 2020. In November and December 2012, at an
that violate environmental laws; (2) close non-complying facilities; (3) revoke
international meeting held in Doha, Qatar, the Kyoto Protocol was extended
required operating licenses; and (iv) impose sanctions and fines when
by amendment until 2020. In addition, the Durban agreement to develop
companies act negligently, recklessly or deliberately in connection with
the protocol’s successor by 2015 and implement it by 2020 was reinforced.
environmental matters.
Other regulation of the oil and gas industry
Chile
Companies in the oil and gas sector, like all Chilean companies, must comply
The sanction procedures and environmental liability claims derived from
environmental damage will be handled by the Chilean environmental court.
with the general principles concerning employee health and safety laws that
For additional information on environmental, health and safety regulations
are contained in the Chilean Labor Code and other labor statutes. The Chilean
applicable to the Chilean oil and gas sector, see “-Industry and regulatory
Ministry of Labor is responsible for the enforcement of those standards, with
framework-Chile-Regulatory entities.”
the authority to impose fines. In addition, the Health Department of the
Ministry of Health has the responsibility to monitor compliance and also the
authority to impose fines and stop operations of health and safety violators.
Colombia
Health, safety and environmental regulation of the oil and gas industry in
Colombia is dispersed throughout a number of different laws and regulations.
Regarding environmental matters, the Chilean Constitution grants all
Environmental regulation is primarily governed by Law 99 of 1993, which
citizens the right to live in a pollution-free environment. It further provides
established the Ministry of Environment and provided for the issuance
that other constitutional rights may be limited in order to protect the
of a number of associated laws and regulations. The Ministry of Environment
environment. Chile has numerous laws, regulations, decrees and municipal
through the ANLA monitors compliance with environmental obligations.
ordinances relating to environmental protection, pursuant to which specific
Furthermore, licenses for exploration and exploitation of hydrocarbons
approvals, consents and permits may be required in order to perform
are granted by the ANLA and this is the entity in charge of monitoring the
activities that may affect the environment.
permits. Regional corporations who are responsible for monitoring
environmental compliance within their regions have additional obligations.
The General Environmental Law (Law No. 19,300), enacted in March 1994
and modified in 2010 by Law No. 20,417, establishes a framework for
Law 99 introduced the requirement of environmental permits for activities,
environmental regulation in Chile, which has become increasingly stringent
including oil and gas exploration and production, which can cause serious
in recent years. Recent amendments include, among others, the creation
deterioration of renewable natural resources or damage to the environment,
of a new institutional framework composed of: (1) the Ministry of
or that introduce substantial changes to the landscape. Decree 2820 of 2010
Environment (Ministerio del Medio Ambiente); (2) the Council of Ministers for
requires an environmental license for all hydrocarbon projects, including
Sustainability (Consejo de Ministros para la Sustentabilidad); (3) the
Environmental Assessment Agency (Servicio de Evaluación Ambiental); and
for each of the following activities: conducting seismic exploration activities
that require the construction of roads for vehicular traffic, exploratory drilling
(4) the Superintendency of the Environment (Superintendencia del Medio
projects, exploitation of hydrocarbons and development of related facilities
Ambiente), all of which are in charge of regulating, assessing and enforcing
(including internal pipelines and storage, roads and related infrastructure),
activities that could have an environmental impact. Recent modifications
transportation and handling of liquid and gaseous hydrocarbons, developing
introduced to existing regulations also gives right for public participation
liquid hydrocarbon delivery terminals or transfer stations, and construction
for interested people and non-governmental organizations in the assessment
and operation of refineries. Other hydrocarbon activities may require
of projects, which could result in additional delays for the final approval of
environmental permits as well. Compliance with environmental regulations
new projects.
is handled under a strict sanctioning regime, established by Law 1333 of
2009, whereby liability is presumed and fines are significant.
The new institutions and regulatory framework are likely to result in
additional restrictions or costs on us relating to environmental litigation and
Legislation governing Health and Safety is varied, but mainly focuses on the
protection of the environment, particularly those related to plant and animal
Law 1562 of 2012, issued by the Colombian Congress through the System
life, wildlife protected areas, water quality standards, air emissions and soil
of Occupational Hazards.
pollution. In addition, violations of these environmental regulations may lead
to fines, the closure of facilities and the revocation of environmental
Law 1010 of 2006 established actions to prevent, correct and punish labor
approvals. The General Environmental Law and its regulations entitle the
bullying; Resolution 2646 of 2008 of the Ministry of Health and Social
108 GeoPark 20F
Protection establishes responsibilities for the identification, assessment,
CONAMA Resolution No. 350/2004 governs environmental licensing for
prevention, intervention and ongoing monitoring of exposure to psychosocial
seismic activities. Ordinance No. 422, from October 26, 2011, issued by the
risk factors at work and for determining the origin of defined diseases
Brazilian Ministry for the Environment, sets forth rules for the environmental
caused by occupational stress; among others.
licensing of: (1) seismic activities (i.e., clarifying and creating some new
steps between those mentioned above); (2) drilling; and (3) oil and gas
For additional information on environmental, health and safety regulations
production and evacuation, as well as Extended Well Tests, or EWTs. For the
applicable to the Colombian oil and gas sector, see “-Industry and regulatory
environmental licensing of oil and gas production and evacuation, as well
framework-Colombia-Regulatory entities.”
as EWTs, the proceeding is more complex. The steps differ depending on the
Brazil
In accordance with Brazilian environmental legislation, activities or ventures
for the installation of the enterprise, which needs a Preliminary License
(Licença Prévia), or LP; (2) implementation and installation of the project
that use natural resources or that are deemed to be actually or potentially
licensed with the LP, which needs an Installation License (Licença de
polluting are subject to environmental licensing requirements, under which the
Instalação) or LI; and (3) operation of the enterprise installed according with
relevant environmental body analyzes location, facilities, expansion and
the LI, which needs an Operation License (Licença de Operação).
operation of projects, as well as establishes conditions for project development.
status of the enterprise and the environmental license sought: (1) planning
The environmental licensing of oil and natural gas exploration, development
Environmental licensing of E&P activities in the offshore basin (territorial
and production activities is subject to, among several other requirements,
sea, the continental platform and exclusive economic zones) is granted on
the preparation of environmental assessments, the complexity and rules
a federal level. The environmental licensing in Brazil may be subject to
of which vary according to the activities sought, the depth and distance from
federal, state or municipal (local) licensing as a general rule, and in many
the coast and the environmental sensitivity of the area in which the
industries it is usual to have projects in which more than one of those
development of activities is sought. Among such studies, the Environmental
entities claim jurisdiction. That may be the case for onshore E&P activities
Impact Assessment (Estudo Prévio de Impacto Ambiental) and the respective
(and it is in the ports sector, for instance), but such controversy does not
Environmental Impact Report (Relatório de Impacto de Ambiental) may be
apply to offshore E&P environmental licensing.
deemed the most complex and time-demanding environmental assessment,
The IBAMA, by means of its General Supervision for Oil and Gas Licensing
an Environmental Drilling Study (Estudio Ambiental de Perfuração) may also
(Coordenação Geral de Licenciamento de Petróleo e Gás), is the entity in
be required for purposes of respective environmental licensing. This is a very
charge of the environmental licensing for E&P projects.
comprehensive, tailor-made analysis of the environmental impacts, to be
though an Environmental Seismic Study (Estudio Ambiental de Sísmica) or
produced by the enterprise.
E&P activities are divided in two subgroups, according to the Brazilian
Ministry for the Environment: (i) seismic activities; and (ii) drilling
As a compensatory measure, we are also obligated to allocate funds for
and production of hydrocarbons. In addition to the Complementary Law,
the main rules governing the environmental licensing of such activities
the implementation and maintenance of conservation areas, based on
Federal Law No. 9,985/2000, which are evaluated by the competent
are: (1) Resolution No. 237, from December 19, 1997, issued by the Brazilian
environmental agency on the basis of Federal Decree Nos. 4,340/2002 and
National Committee for the Environment (Conselho Nacional do Meio-
6,848/2009 and which must not exceed the value of 0.5% of the total cost
Ambiente), or CONAMA; (2) Resolution No. 350, from July 6, 2004, also issued
involved for the construction of the facility.
by CONAMA; and (3) Ordinance No. 422, from October 26, 2011, issued by
the Brazilian Ministry for the Environment.
Failure to maintain a valid environmental license is classified as an
administrative infraction and environmental crime. Any delays or denials
CONAMA Resolution No. 237 sets forth the general rules that must be
by the environmental licensing authority in issuing or renewing licenses,
complied with regarding environmental licensing. It prescribes that the
as well as the inability to meet the requirements established by the
competent environmental authority, with the entrepreneur’s participation,
environmental authorities during the environmental licensing process, may
shall define the plans, projects and environmental assessments necessary
harm or even prevent the construction and regular development of the
to start the environmental licensing proceeding. In addition, IBAMA
activity. Some environmental licenses related to operation of the Manatí
Normative Ordinance No. 184, from July 17, 2008, defines the general rules
Field production system and natural gas pipeline are expired. However,
of environmental licensing on the federal level. However, for oil and
the operator submitted, timely, the request for renewal of those licenses and
gas activities, these general rules do not apply and have been adjusted
as such this operation is not in default as long as the regulator does not
and regulated by specific regulation, as mentioned below.
state its final position on the renewal.
GeoPark 20F 109
Environmental nonconformities and damages may result in civil,
Due to environmental damages and noncompliance with environmental
administrative and criminal liabilities.
laws and regulations, the environmental authorities may also propose
Conduct Adjustment Agreements (Termos de Ajustamento de Conduta)
The National Environmental Policy (Federal Law No. 6,938/81) regulates civil
through which the enterprise may be obliged to fund recovery works and
liability for damages caused to the environment, such liability being of an
environmental projects.
objective nature (strict liability), i.e., irrespective of fault. Demonstration of the
cause-effect relationship between damage caused and action or inaction
For additional information on environmental, health and safety regulations
suffices to trigger the obligation to redress environmental damage. The fact
applicable to the Brazilian oil and gas sector, see “-Industry and regulatory
that the relevant entity’s operations are covered by environmental licenses
framework-Brazil-Regulatory entities.”
does not preclude such liability. The National Environmental Policy
established joint liability among polluting agents. In case of environmental
damage to an industrial area, it may be difficult to identify the source of
Peru
In accordance with Peruvian environmental legislation, before initiating any
environmental damages and intensity thereof. The victim of such damages
hydrocarbon activity (e.g. seismic exploration, drilling of exploration wells, etc.)
or whomever the law so authorizes, as indicated below, is not compelled
the contractor must file and obtain an approval for an environmental impact
to sue all polluting agents within the same proceeding. Because liability is of
study, which is a significant permit related to HSE for any hydrocarbon project.
a joint nature, the aggrieved party may choose one out of all polluting
This study includes technical, environmental, and social evaluations of the
agents (for example, the agent with the best economic standing) to redress
project to be executed in order to define the activities that should be required
all damages. A polluting agent so sued will have a right of recourse against
for preventing, minimizing, mitigating and remediating the possible negative
the other polluting agents.
environmental and social impact that hydrocarbon activities may generate.
Furthermore, under Brazilian law, due to environmental damages and
The competent authority for protection and environmental conservation
noncompliance with environmental laws and regulations, individuals or
in the case of hydrocarbon activities is the Ministry of Energy and Mines,
entities are also subject to criminal and administrative sanctions.
through the General Bureau of Energetic Environmental Affairs (Dirección
General de Asuntos Ambientales - DGAA).
In the criminal sphere, the Environmental Crimes Act (Federal Law
No. 9,605/98) applies to every individual or legal entity that carries out any
There are also some additional environmental permits that should be
activity deemed damaging to the environment. Because criminal liability
obtained by GeoPark before starting any hydrocarbon activity in the Block.
is of a subjective nature, the Environmental Crimes Act attributed liability to
These environmental permits are typically requested shortly after the
representatives of legal entities. As a result, upon occurrence of an
approval of the environmental impact assessment.
environmental violation, a legal entity’s officer, administrator, director,
manager, agent or attorney-in-fact may also be subject to criminal penalties,
Health and Safety Management at work is regulated by Law 29,783, which
which comprise fines and imprisonment. With respect to judicial actions, a
civil or administrative settlement does not prevent prosecution in a criminal
constitutes the basis for regulatory compliance across both public and
private industries. The purpose of this regulation is to foster and promote the
sphere should an environmental crime have occurred.
prevention of workplace hazards and establish minimum guidelines to be
In the administrative sphere, Federal Decree No. 6,514/2008 provides that
be managed taking into consideration the compliance with local regulations
implemented within organizations. Therefore, health and safety issues should
environmental authorities may also impose administrative sanctions for those
and best practices across the industry.
who do not comply with environmental laws and regulations, including,
among others: simple fines from R$50 to R$50 million, depending on the
The Peruvian government has enacted several environmental regulations
infraction, e.g., absence of environmental licenses or failure to comply with
regarding not only hydrocarbon activities but also in relation to waste
its terms may subject the entrepreneur to a fine ranging from R$500 to
treatment, water use, natural protected areas, biodiversity protection, etc.
R$10 million, daily fines, partial or total suspension of activities, demolition
For additional information on environmental, health and safety regulations
of the enterprise and rights restriction sanctions, such as forfeiture or
applicable to the Peruvian oil and gas sector, see “-Industry and regulatory
restriction of tax incentives or benefits, closing of the establishments or
framework-Peru-Regulatory entities.”
ventures and forfeiture or suspension of participation in credit lines with
official credit establishments.
For additional information on environmental, health and safety regulations
applicable to the Peruvian oil and gas sector, see “-Industry and regulatory
framework-Peru-Regulatory entities.”
110 GeoPark 20F
Argentina
Historically, environmental legislation and enforcement powers in respect
Our policy is to strive to meet or exceed environmental regulations in the
countries in which we operate. We believe that oil and gas can be produced
of oil and gas operations have been vested with the federal government.
in an environmentally-responsible manner with proper care, understanding
However, after the 1994 constitutional reform and after the enactment of the
and management. We have within our S.P.E.E.D. program a team that
YPF Privatization Law in 1992, provincial states have passed and enforced
is exclusively focused on securing the environmental authorizations
concurrent new environmental legislation. The federal government is
and permits for the projects we undertake. This team is also responsible for
empowered to establish minimum environmental protection standards and
the achievement of the environmental standards set by our board of
provincial governments are empowered to complement them, though
directors and for training and supporting our personnel. In these activities,
provincial environmental legislation is not always fully consistent with federal
we are supported by experienced oil and gas environmental consulting
environmental legislation.
firms. Our senior executives have also received training in proper
environmental management.
The oil and natural gas industry in Argentina is subject to environmental
regulations pursuant to concurrent provincial state and federal legislation.
Such legislation provides for restrictions and prohibitions on the release or
Our health and safety policy
We believe that the implementation of additional safety tools in our
emission of various substances produced in association with certain oil
operations in 2012 have significantly contributed to control and minimizing
and gas industry operations. In addition, such legislation requires that wells,
risks in our operation. Actions taken by us included training, permits to work,
facilities and sites be abandoned, reclaimed and/or remediated according
internal audits, drills, tailgate safety meetings, job safety analysis and risk
to specific standards and/or to the satisfaction of governmental authorities
evaluations. As of December 31, 2014, on the last 12-month basis, our HSE
and/or surface owners. Compliance with such legislation can require
development statistics shows that Lost Time Injury Frequency (LTIF) was
significant expenditures and a breach of such requirements may result in
0.75 and our Total Recordable Incident Rate (TRIR) was 1.8 (every 1.000,000
suspension or revocation of necessary licenses and authorizations, civil
worked hours) compared to 3.1 and 4.75, from 2013 respectively. We
and criminal liability for pollution damage and the imposition of material
had no workforce-related fatal incidents related to work operations in 2014.
fines and penalties.
Environmental regulations in Argentina also require that wells be plugged
Certain Bermuda law considerations
As a Bermuda exempted company, we and our Bermuda subsidiaries are
in and that facility sites be abandoned and returned to Argentina in a state
subject to regulation in Bermuda. We have been designated by the Bermuda
deemed satisfactory to the applicable regulatory authorities. Four years prior
Monetary Authority as a non-resident for Bermuda exchange control
to the expiration of any hydrocarbon concession granted by the Argentine
purposes. This designation allows us to engage in transactions in currencies
government, an operator is required to present any technical or commercial
other than the Bermuda dollar, and there are no restrictions on our ability
reasons for seeking to leave an inactive and non-producing well unplugged
to transfer funds (other than funds denominated in Bermuda dollars) in and
to the applicable regulatory authorities. In addition, the province of
out of Bermuda.
Santa Cruz, in which the Del Mosquito Block is located, has created a Registry
of Environmental Liabilities and requires operators to submit a five-year
Under Bermuda law, “exempted” companies are companies formed for
remediation program for all environmental liabilities that have been registered.
the purpose of conducting business outside Bermuda from a principal place
of business in Bermuda. As exempted companies, we and our Bermuda
For additional information on environmental, health and safety regulations
subsidiaries may not, without a license or consent granted by the Minister
applicable to the Argentine oil and gas sector, see “-Industry and regulatory
of Finance of Bermuda, participate in certain business transactions, including
framework-Argentina-Regulatory entities.”
transactions involving Bermuda landholding rights and the carrying on
of business of any kind for which we or our Bermuda subsidiaries are not
Our environmental policy
Our health, safety and environmental management plan is focused
licensed in Bermuda.
on undertaking realistic and practical programs based on recognized world
practices. Our emphasis is on building key principles and company-wide
Insurance
We maintain insurance coverage of types and amounts that we believe
ownership and then expanding programs from within as we continue
to be customary and reasonable for companies of our size and with similar
to grow. Our S.P.E.E.D. program has been developed in accordance with: ISO
operations in the oil and gas industry. However, as is customary in the
14001 for environmental management issues, OHSAS 18001 for occupational
industry, we do not insure fully against all risks associated with our business,
health and safety management issues, SA 8000 for social accountability and
either because such insurance is not available or because premium costs
workers’ rights issues and applicable World Bank standards.
are considered prohibitive.
GeoPark 20F 111
Currently, our insurance program includes, among other things, construction,
fire, vehicle, technical, umbrella liability, director’s and officer’s liability and
employer’s liability coverage. Our insurance includes various limits and
deductibles or retentions, which must be met prior to or in conjunction with
recovery. A loss not fully covered by insurance could have a materially
adverse effect on our business, financial condition and results of operations.
See “-Item 3. Key Information-D. Risk factors-Risks relating to our business-Oil
and gas operations contain a high degree of risk and we may not be fully
insured against all risks we face in our business.”
Industry and regulatory framework
Global oil and gas industry
During 2013, global consumption and production increased for all fuels,
reaching record levels for every fuel type except nuclear power. For each of
Distribution of proved oil reserves in 1993, 2003 and 2013
Percentage
Middle East
Europe & Eurasia
S. & Cent. America
Africa
North America
Asia Pacific
7.7
2.5
47.9
3.0
55.9
8.0
8.8
13.6
3.7
5.9
63.6
8.7
16.9
7.5
11.6
7.7
7.5
19.5
1993 - Total 1041.4
thousand million barrels
2003 - Total 1334.1
thousand million barrels
2013 - Total 1687.9
thousand million barrels
the fossil fuels global consumption rose more rapidly than production.
Source: BP Statistical Review
Global oil consumption grew by 1.4 million bpd, or 1.4% -just above the
According to the BP Statistical Review, world proved natural gas reserves
historical average. Global oil production did not keep pace with the growth in
at year-end 2013 stood at 185.7 trillion cubic meters (tcm), sufficient to meet
global consumption, rising by just 550,000 bpd or 0.6%. The U.S. recorded the
55.1 years of global production. Proved reserves grew by 0.2% relative to
largest growth in the world and the largest annual increase in the country’s
year-end 2012 data. An increase in the US (+7.1%) accounted for all of the net
history for a second consecutive year, according to the BP Statistical Review
growth in global proved reserves in 2013. Iran (33.8 tcm) and Russia
of World Energy June 2014, or the BP Statistical Review.
(31.3 tcm) hold the largest proved reserves.
World natural gas consumption grew by 1.4% in 2013, below the historical
average of 2.6%. Global natural gas production grew by 1.1%, which was well
below the 10-year average of 2.5%. Growth was below average in all regions
except Europe and Eurasia. The U.S. (+1.3%) remained the world’s leading
producer, but both Russia (+2.4%) and China (+9.5%) recorded larger growth
increases in 2013. Nigeria (-16.4%), India (-16.3%), and Norway (-5%) recorded
the largest decreases in production.
Total world proved oil reserves reached 1687.9 billion barrels at the end of
2013, sufficient to meet 53.3 years of global production. The largest additions
to reserves came from Russia, adding 900 million barrels and Venezuela
adding 800 million barrels. OPEC members continue to hold the majority of
reserves, accounting for 71.9% of the global total. South & Central America
continues to hold the highest R/P ratio. Over the past decade, global proved
Distribution of proved natural gas reserves in 1993, 2003 and 2013
Percentage
Middle East
Africa
Europe & Eurasia
North America
Asia Pacific
S. & Cent. America
6.3
4.1
43.2
4.7
4.4
8.9
46.5
7.6
8.2
7.4
4.6
37.5
8.1
27.4
30.5
8.5
7.8
34.2
1993 - Total 118.4
trillion cubic metres
2003 - Total 155.7
trillion cubic metres
2013 - Total 185.7
trillion cubic metres
reserves have increased by 27%, or over 350 billion barrels.
Source: BP Statistical Review
The industry’s outlook is gradually shifting, driven mainly by supply patterns.
According to BP’s Energy Outlook 2035, trade patterns are shifting. The
strong growth of US tight oil in recent years has had a dramatic impact, with
oil increasingly flowing from West to East rather than East to West. This is
likely to continue, with strong growth in China and India driving energy
demand. According to the BP Statistical Review, it is also expected that the
market in gas will become more global as liquefied natural gas integrates
regional markets and leads to greater congruence in global price movements.
112 GeoPark 20F
Second, the energy mix continues to shift. Fossil fuels are projected to
Natural gas consumption grew significantly from the late 1990s to 2004, as
provide the majority of the world’s energy needs, meeting two-thirds
direct pipeline connections were built to Argentina, providing a cheap and
of the increase in energy demand out to 2035. However, the mix will shift.
easily accessible supply. In 2002, however, the Argentine government capped
Renewables and unconventional fossil fuels will take a larger share,
the price of gas in its domestic market, resulting in increased demand
along with gas, which is set to be the fastest growing fossil fuel, as well as
for natural gas in Argentina. This led the Argentine government in 2004 to
the cleanest, meeting as much of the increase in demand as coal and
restrict natural gas exports to Chile in order to reserve them for domestic use.
oil combined.
See “-Item 3. Key Information-D. Risk factors-Risks relating to the countries
in which we operate-governmental actions in the countries in which we
Chile
Chile is recognized as the most developed and stable economy in South
operate and in which we may operate in the future may adversely affect our
business, financial condition and results of operations.” The restriction of
America. The country’s economy has grown consistently during the last
Argentine natural gas exports has caused gas consumption in Chile to
two decades, a trend which is expected to continue in the near future. With
decrease significantly since 2004, when natural gas accounted for some 24%
over 50 free trade agreements, Chile is an open-market economy, and in
of the Total Primary Energy Supply, or TPES, according to the International
2010, became the first South American country to join the Organization for
Energy Agency. By 2009, natural gas only accounted for 8% of TPES.
Economic Co-operation and Development, or the OECD. Chile holds
investment-grade sovereign debt ratings from all major ratings agencies,
LPG has been consumed in place of natural gas. As such, the LPG and
S&P, Fitch and Moody’s (AA-, A+, and Aa3, respectively).
gas markets overlap in Chile. LPG is predominantly used as a residential fuel
in Chile (notably for cooking), particularly in relatively remote regions.
Oil and gas industry
Demand and consumption
According to ENAP, national consumption of refined oil products reached
In 2013, the bulk of gas demand (51%) came from the power generation
sector. Industry and the petrochemical sector accounted for 11%, and the
18.45 mmcf in Chile during 2013, a 0.3% increase compared to 2012 and
residential/commercial sector for the remaining 13%.
equivalent to 317,930 barrels per day. This increase was mainly due to strong
and stable economic growth, offset by an increase in prices of the main
products. As is the case in many OECD countries, oil is predominantly used as
Supply and production
Chile is a large net importer of both crude oil and oil products. Its
a transport fuel, but a notable difference in Chile is that diesel is used as a
hydrocarbon reserves, which comprise limited crude oil reserves and
substitute for natural gas in power generation.
1,435 bcf of natural gas reserves according to the OPEC Annual Statistical
Bulletin 2014, or the OPEC Bulletin, are concentrated in the Magallanes
Diesel is the main product in terms of consumption in Chile, followed by
Basin at the southern tip of the country.
gasoline and liquid petroleum gas, or “LPG.” Among the different types
of refined oil products, LPG experienced the greatest increase in terms of
Due to its limited oil and natural gas reserves, Chile has in the past imported
consumption, with consumption increasing 6.4% compared to 2012.
almost all of its crude oil requirements principally from Brazil, Argentina and
Colombia, and most of its natural gas requirements principally from
Consumption in Chile by
type of oil product
(thousands of cubic meters)
Diesel
Gasoline
LPG
Fuel Oil
Kerosene
Others
Total
Source: ENAP 2013 Annual Report
2013
9,183
4,024
2,244
1,174
1,331
496
2012
9,153
3,856
2,109
1,498
1,243
542
18,452
18,401
% change
Trinidad and Tobago, Argentina, Guinea and Yemen. In the northern part of
from
the country, natural gas is imported through the Mejillones liquid natural
prior year
gas, or LNG, terminal and is used predominantly for electricity generation by
the mining industry. In the central part of the country (including the capital,
Santiago), gas is primarily supplied by the Quintero LNG terminal.
0.3%
4.4%
6.4%
-21.6%
7.1%
-8.5%
0.3%
GeoPark 20F 113
Oil and Gas Infrastructure in Chile
OIL
Oil Products pipeline
Crude Oil pipeline
Refinery
GAS
Existing pipelines
Gas Fields
Existing LNG
import terminal
Regasification plants
P E RU
Arica
B OLI V I A
B OLI V I A
PE RU
Arica
Tocopilla
Mejillones
Antofagasta
Taltal
Quintero
Con Con
Santiago
Quintero
Santiago
Bio Bio
Concepción
A R GE NTI NA
Concepción
AR GE NTI NA
C H IL E
Gregorio
Punta Arenas
Pemuco
C H IL E
Punta Arenas
are nonetheless subject to significant government regulations, such as
regulations concerning the environment, tort liability, health and safety and
labor. In the past year, for example, the Chilean government has proposed
new regulations regarding the closure plans applicable to hydrocarbon
operations that could have an impact on the timeframes and costs required
to set up exploration or exploitation activities.
Regulatory entities
The Chilean Ministry of Energy and the National Commission of Energy
(Comisión Nacional de Energía), or the CNE, are the principal government
agencies responsible for the issuance of policies and regulations for the
oil and gas sector. The Chilean Ministry of Energy is responsible for
monitoring a participant’s compliance with its obligations under a CEOP.
The Superintendency of Electricity and Fuels (Superintendencia de
Electricidad y Combustibles), or the SDEC, supervises compliance with
regulations regarding gas pipeline transportation and the Ministry of
Environment, the Environmental Assessment Agency and the
Superintendency of Environment are responsible for environmental
matters. The new Environmental Courts are responsible for settling disputes
relating to environmental permits, claims against the Superintendency of
Environment and claims concerning environmental damage.
In 2013, Chile produced 6.9 mbopd of crude oil and 965 million cubic meters
Ministry of Energy
The Chilean Ministry of Energy is responsible for developing and
of natural gas but imported 179.6 mbopd of crude oil and 137.3 bcf of natural
coordinating all plans, policies and regulations for the energy sector in Chile
gas, according to the Chilean Ministry of Energy.
and supervising and advising the government in all matters related to
energy. It coordinates the different entities in the energy sector in Chile and,
The exploration and development of oil fields in Chile has historically been
by law, its Minister is the chairman of the board of directors of ENAP. The
controlled mainly by ENAP, with few private companies working in this sector.
Ministry of Energy is also responsible for the protection, conservation and
We were the first private producer of oil and gas in Chile.
development of renewable and non-renewable energy resources.
Regulation of the oil and gas industry
Under the Chilean Constitution, the state is the exclusive owner of all mineral
SDEC
The SDEC is responsible for monitoring compliance with all regulations
and fossil substances, including hydrocarbons, regardless of who owns the
related to the generation, production, storage, transportation and distribution
land on which the reserves are located. The exploration and exploitation
of all fuels, gas and electricity for the consumer market. To enforce such
of hydrocarbons may be carried out by the state, companies owned by the
regulations, the SDEC has the power to impose fines and, if necessary, to take
state or private entities through administrative concessions granted by
over the administration of deficient services when applicable. Our operations
the President of Chile by Supreme Decree or CEOPs executed by the Minister
are not under the supervision of the SDEC.
of Energy. Exploitation rights granted to private companies are subject to
special taxes and/or royalty payments. The hydrocarbon exploration and
Ministry of Environment, Environmental Assessment Agency and Superintendency
exploitation industry is supervised by the Chilean Ministry of Energy.
of Environment
The Ministry of Environment, the Environmental Assessment Agency and the
In Chile, a participant is granted rights to explore and exploit certain assets
Superintendency of Environment are primarily responsible for environmental
under a CEOP. If a participant breaches certain obligations under a CEOP,
issues in Chile, including those affecting the oil and gas industry. The Ministry
the participant may lose the right to exploit certain areas or may be required
of Environment is responsible for the formulation and implementation
to return all or a portion of the awarded areas to Chile with no right of
of environmental policies, plans, programs and regulation, as well as for the
compensation. Although the government of Chile cannot unilaterally modify
protection and conservation of biological diversity and renewable natural
the rights granted in the CEOP once it is signed, exploration and exploitation
resources and water resources and for promoting sustainable development
114 GeoPark 20F
and the integrity of environmental policy and regulations. The Environmental
landowner through judicial process. Pursuant to the Chilean Code of Mines,
Assessment Agency is responsible for assessing whether projects that
a judge can permit a party to use an easement pending final adjudication and
might have an adverse effect on the environment comply with Chilean
settlement of compensation for the affected landowner.
environmental laws and regulations. The Environmental Assessment Agency
directs and coordinates the environmental impact assessment process,
whose final qualification is granted by the competent regional
Regulation of transportation activities
Liquid hydrocarbon transportation, storage, importation and marketing
environmental assessment commission. The Superintendency of
are subject to a number of technical regulations regarding safety, quality and
Environment’s primary responsibilities are monitoring compliance with the
other matters. The rules for the transportation of liquid fuels through
terms of an environmental impact assessment, as well as monitoring
trucks and pipelines are primarily found in Supreme Decree No. 160 of 2009
compliance with government plans to prevent environmental damage or
(the Safety Code for Facilities and Production and Refining Operations,
to clean or restore contaminated geographical areas. The Superintendency
Transportation, Storage, Distribution and Supply of Liquid Fuels) of the
of Environment has the power to suspend or terminate, or impose fines
Ministry of Economy. The Ministry of Energy is responsible for the regulation
from US$1,000 up to US$10.0 million for, activities that it deems to have an
of transportation by pipeline and the Ministry of Transport is responsible for
adverse environmental impact, even if such activities comply with a
the regulation of transportation by truck.
previously approved environmental impact assessment.
Gas transportation in Chile is subject to open access rules, in which the gas
The Environmental Courts
The Environmental Courts are principally responsible for hearing appeals of
transportation company must make its excess transportation capacity
available to third parties under equal economic, commercial and technical
decisions made by the Superintendency of Environment and for adjudicating
conditions. Laws prohibit the abuse of a dominant position by a gas
claims for environmental damage. There are currently two Environmental
transportation company in order to discriminate among potential customers
Courts in Chile, which began to hear claims on December 28, 2012 and on
for use of its pipelines. Pursuant to Ministry of Economy Supreme Decree
October 7, 2013, respectively. There is a third Environmental Court expected
No. 280 of 2009, gas pipelines must also comply with the Regulation
to begin hearing claims during 2016. The Environmental Court that will
of Security for Transportation and Distribution of Gas, which regulates the
have jurisdiction over the area in which we operate elected its members on
design, construction, operation, maintenance, inspection and termination
September 12, 2013 and began its operations in October, 2013.
of operations of a natural gas pipeline.
Regulatory framework
Regulation of exploration and production activities
Oil and gas exploration and development is governed by the Political
Additionally, Chile is a signatory state to the Substitute Protocol of the
Eighth Additional Protocol to the Economic Complementation Agreement
No. 16 between Chile Republic and Argentina Republic (ACE 16) Regulation
Constitution of the Republic of Chile and Decree with Law Force No 2 of
for Marketing, Operations and Transportation of Hydrocarbons Liquids-Crude
1986 of the Ministry of Mines, which set forth the revised text of the Decree
Oil, Liquefied Gas and Liquid Products of Petroleum and Natural Gas and
Law 1089 of 1975, on CEOPS. However, the right to explore and develop
fields is granted for each area under a CEOP between Chile and the relevant
the following international conventions: the International Convention for the
prevention of Pollution of the Sea by Oil of 1954, the Convention on the
contractors. The CEOP establishes the legal framework for hydrocarbon
Prevention of Marine Pollution by Dumping of Wastes and Other Matters of
activities, including, among other things, minimum investment commitments,
1972 and the International Convention on Civil Liability for Oil Pollution
exploration and exploitation phase durations, compensation for the
Damage of 1969.
private company (either in cash or in kind) and the applicable tax regime.
Accordingly, all the provisions governing the exploitation and development
of our Chilean operations are contained in our CEOPs and the CEOPs
Taxation
With regard to direct taxes on hydrocarbon exploitation, the general rule
constitute all the licenses that we need in order to own, operate, import and
is that hydrocarbons are transferred to the contractor (its retribution under
export any of the equipment used in our business and to conduct our gas
the CEOP), and those re-acquisitions from the contractor performed by
and petroleum operations in Chile.
Chile or its enterprises, as well as their corresponding acts, contracts and
documents, are tax exempt. In addition, hydrocarbon exports by the
Under Chilean law, the surface landowners have no property rights over
contractor are also tax exempt. With regard to income taxes, as provided
the minerals found under the surface of their land. Subsurface rights do not
by article 5 of Decree Law No. 1,089, the contractor is subject either to a
generate any surface rights, except the right to impose legal easements or
single tax calculated on its retribution, equal to 50% of such retribution, or to
rights of way. Easements or rights of way can be individually negotiated with
the general income tax regime established in the Income Tax Law (Decree
individual surface land owners or can be granted without the consent of the
Law No. 824 of 1974), in force at the time of the execution of the public deed
GeoPark 20F 115
which contains CEOPs, terms of which will be applicable and invariable
seismic work led to an improvement in the country’s exploratory success
throughout the duration of the contract. Income in Chile is subject to
rate and, consequently, to a change in the country’s production landscape.
corporate tax on an accrual basis and has a current rate of 21% for fiscal year
Discoveries in Colombia in general have not been relevant in terms of
2014. The applicable and invariable corporate income tax rates of our CEOPs
scale; however, the number of discoveries has favored a significant increase
range between 15% and 18.5%, as follows: the Fell Block is subject to a rate
in production and the creation of several medium-sized companies.
of 15%, the Otway and Tranquilo Blocks are subject to a rate of 17% and
Opportunities offered by the Colombian energy sector have changed the
the Flamenco, Isla Norte and Campanario Blocks are subject to a rate of 18.5%
competitive landscape by attracting foreign investment in the country from
for the income accrued or received during 2012 and 17% for the income
leading multinational energy companies that operate in Colombia either
accrued or received during 2013 and onward. Dividends or profits distributed
independently or through joint ventures.
to the foreign shareholders of the contractors are subject to 35% Additional
Withholding Tax with a tax credit for the corporate income tax paid by
According to the BP Statistical Review, Colombia is the third-largest producer
the contractor. With regard to the value added tax, contractors may obtain
of crude oil and the sixth largest producer of natural gas in Central and South
as a refund the value added tax (which is 19% according to the Sales and
America. According to the BP Statistical Review, in 2013, the country’s oil
Services Tax Law contained in Decree Law No. 825 of 1974) supported or paid
production reached 1.004 mmbpd, with natural gas production of 12.6 bcm.
on the import or purchase of goods or services used in connection with
the exploration and exploitation activities. The applicable tax regime for each
Colombia-production profile
CEOP remains unchanged throughout the duration of the CEOP.
The Chilean Congress approved a reform to the income tax law in September
2014. Under this reform the income tax rate will increase from 20% in 2013
to: 21% in 2014, 22.5% in 2015, 24% in 2016, 25.5% in 2017 and 27% in 2018.
The operating subsidiaries that we control in Chile, which are GeoPark TdF
S.A., GeoPark Fell S.p.A. and GeoPark Magallanes Limitada, are not affected
by the income tax reform mentioned since they are covered by the tax
treatment established in the CEOPs.
Colombia
Oil and gas industry
Today, Colombia is one of the largest and most stable economies in South
America. The country has a stable political and judicial environment, with a
1092
177
1137
193
1208
204
967
182
840
169
671
786
915
944
1004
1300
1100
900
700
500
300
100
-100
2009
2010
2011
2012
2013
Oil production (mbpd)
Gas production (mboepd)
Source: BP Statistical Review
strong track record of growth. Furthermore, Colombia holds investment-
Colombia is divided in 23 sedimentary basins. Colombian sedimentary basins
grade sovereign debt ratings from all major rating agencies (BBB, BBB- and
Baa2 from S&P, Fitch and Moody’s, respectively).
have extensively developed petroleum systems that make them well suited
for exploration and exploitation of hydrocarbons. Colombian supply growth
In 2013, the country’s GDP grew by 4.7%, with CPI inflation at 2%. In order
regional distribution systems and heavy oil development along the eastern
to stimulate growth and private investments, Colombia has throughout
part of the Tertiary Foreland basins. From 2002 to 2013, Colombian
the last years entered into several free trade agreements, which include the
production increased at a CAGR of 5.1% for oil and 6.6% for natural gas.
is driven mainly by conventional resources located in reservoirs with large
agreement with the United States in May 2012 and the creation of the
Pacific Alliance with Mexico, Peru and Chile in June 2013.
We believe Colombia offers significant potential for value creation through
the application of modern technology and exploration strategies on
Oil is currently Colombia’s leading export and source of foreign investment.
undercapitalized producing fields.
Historically, all oil production in the country was from concessions granted
to foreign operators or undertaken by Ecopetrol, in contracts of association
with foreign companies. During 1999 and 2000, the country was considered
to be at risk of becoming a net oil importer unless significant additional
reserves were discovered. As a result, Ecopetrol was restructured, and in 2003,
a regulatory agency for the sector, the ANH, was created. Following these
initial steps, consistent acreage sales to private investors coupled with better
116 GeoPark 20F
Colombia-seismic profile (thousand km 2D equivalent)
and maintaining attractive conditions for private investments in the
hydrocarbon sector and for designing bidding rounds for exploration blocks.
26.5
26.0
24.0
20.1
16.3
11.9
10.0
Any oil company selected by the ANH to explore a specific block must
execute either a TEA or an E&P Contract to develop and exploit the block
18.2
with the ANH. All royalty payments in connection with the production
of hydrocarbons are made to the ANH in kind unless the ANH grants a specific
waiver to make royalty payments in cash or the specific contract provides
for payment in cash. Any oil company working in Colombia must present to
the ANH periodic reports on the evolution of their exploration and
exploitation activities.
6.8
3.5
1.4
2.4
2.1
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Source: ANH
ANLA
The ANLA was created pursuant to Decree 3573 of 2011 issued by the
Colombian government with the participation of the Administrative
Regulation of the oil and gas industry
Under Colombian law, the state owns all hydrocarbon reserves discovered
Department of Public Functions (Departamento Administrativo de la Función
Pública), and is responsible for hydrocarbon environmental licensing in
in the Colombian territory and exercises control of the exploitation of such
Colombia. Any project in the hydrocarbons sector requiring an environmental
reserves primarily through the ANH.
license must submit to environmental licensing procedures, which require
the presentation of an environmental impact assessment, an environmental
The ANH is responsible for managing all exploration lands not subject
management plan and a contingency plan. Environmental licenses are
to previously existing association contracts with Ecopetrol. The ANH began
granted for exploration and production phases separately.
offering all undeveloped and unlicensed exploration areas in the country
under E&P Contracts and Technical Evaluation Agreements, or TEAs, which
resulted in a significant increase in Colombian exploration activity and
CREG
Laws 142 and 143 of 1994 created the CREG, a special administrative unit
competition, according to the ANH. The ANH is also in charge of negotiating
of the Ministry of Mines and Energy, responsible for establishing the
and executing contracts through “direct negotiation” mechanisms with
standards for the exploitation and use of energy, regulating the domestic
attention to special conditions in the areas to be explored.
utilities of electricity and fuel gas (liquefied petroleum gas and natural gas),
establishing price rules for energy and gas and regulating self-generation
Regulatory entities
The principal authorities that regulate our activities in Colombia are the
and cogeneration of energy. The CREG is also responsible for fostering
the development of the energy services industry, promoting competition
Ministry of Mines and Energy, the ANH, the National Environmental Licensing
Authority, or the ANLA, and the Regulatory Commission of Energy and Gas,
and responding to consumer and industry needs. Decree 4130 of 2011
assigned the CREG new functions that were previously fulfilled by the Ministry
or the CREG.
of Mines and Energy, including the regulation of tariffs for oil transportation
in poliducts and the regulation of petroleum-derived liquid fluids.
Ministry of Mines and Energy
The Ministry of Mines and Energy is responsible for managing and regulating
Colombia’s nonrenewable natural resources, assuring their optimal
Superintendency of Domiciliary Public Services
Under Colombian regulations, the distribution and marketing of natural
utilization by defining and adopting national policies regarding exploration,
gas is considered a public service. As such, this activity, as well as electricity,
production, transportation, refining, distribution and export of minerals and
are regulated by Law 142 of 1994 and supervised by the Superintendency
hydrocarbons.
of Domiciliary Public Services (Superintendencia de Servicios Públicos
Domiciliarios).
ANH
The ANH was created in 2003 and is responsible for the administration
of Colombia’s hydrocarbon reserves. The ANH’s objective is to manage the
hydrocarbon reserves owned by the state through the design, promotion
Regulatory framework
Regulation of exploration and production activities
Pursuant to Colombian law, the state is the exclusive owner of all hydrocarbon
and negotiation of the exploration and production agreements in areas
resources located in Colombia and has full authority to determine the rights,
where hydrocarbons may be found. The ANH is also responsible for creating
royalties or compensation to be paid by private investors for the exploration or
GeoPark 20F 117
production of any hydrocarbon reserves. The Ministry of Mines and Energy is
programs. A preemptive right is granted to convert the TEA into an E&P
the authority responsible for regulating all activities related to the exploration
Contract. Exploration activities can only be carried out by the TEA contractor.
and production of hydrocarbons in Colombia.
Decree Law 1056 of 1953 (Código de Petróleos), or the Petroleum Code,
their production to the ANH as royalties and an economic right as ANH’s
establishes the general procedures and requirements that must be completed
participating interest in the production. In 1999, a modification to the royalty
by a private investor prior to commencing hydrocarbon exploration or
system established a sliding scale for royalty payments, linking them to the
production activities. The Petroleum Code sets forth general guidelines,
production level of crude oil and natural gas fields discovered after July 29,
obligations and disclosure procedures that need to be followed during the
1999 and to the quality of the crude oil produced. Since 2002 the royalties
Pursuant to Colombian law, companies are obligated to pay a percentage of
performance of these activities.
system has ranged from 8% for fields producing up to 5,000 bopd to 25% for
fields producing in excess of 600,000 bopd. Changes in royalty programs only
Exploration and production activities were governed by Decree 1895 of 1973
apply to new discoveries and do not alter fields already in their production
until September 2009. Decree Law 2310 of 1974 (as complemented by Decree
stage. Producing fields pay royalties in accordance with the applicable royalty
743 of 1975) governed the contracts and contracting processes carried out
program at the time of the discovery. The purchase price is calculated
by Ecopetrol and the rules applicable to such contracts, and also provided
based on a reference price for crude oil at the wellhead and varies depending
that Ecopetrol was responsible for administering the hydrocarbons resources
on prevailing international prices. Decree 2100 of 2011 modified the
in the Country. Decree 2310 of 1974 was replaced by Decree Law 1760 of
commercialization scheme of natural gas royalties. From 2012 and until
2003, but all agreements entered into by us prior to 2003 with other oil
May 2013, producers had to directly commercialize the royalties of their own
companies are still regulated by Decree 2310 of 1974.
production on behalf of the ANH. In return, the ANH paid a commercialization
fee to producers. As of May 2013, contractors must pay in kind royalties
Decree Law 1760 of 2003 provided the faculties, structure and functions
to third parties called “Royalty Trading Companies” or “Royalty Marketing
of the ANH, and granted the ANH full and exclusive authority to regulate
Companies,” which are in charge of commercializing the royalties.
and oversee the exploration and production of hydrocarbon reserves.
Decree Law 1760 of 2003 was complemented by Decree 2288 of 2004, which
regulates all aspects related to the reversion of reserves and infrastructure
Regulation of refining and petrochemical activities
Refining and petrochemical activities are considered to be public utility
under the joint venture agreements executed by us before 2004.
activities and are subject to governmental regulation. Article 58 of the
The regime for the ANH’s contracts is set forth in Agreement 008 of 2004
throughout Colombia. Oil refineries must comply with the technical
and Agreement 004 of 2012. Accord 008 of 2004, as repealed and replaced
characteristics and requirements established by the existing regulations.
Petroleum Code establishes that oil refining activities can be developed
by Accord 004 of 2012, issued by the Directive Council of the ANH, sets
forth the necessary steps for entering into E&P Contracts with the ANH.
The Ministry of Mines and Energy is responsible for regulating, supervising
This Agreement only regulates the contracts entered into as of May 4, 2012.
Prior contracts are still ruled by Agreement 008 of 2004.
and overseeing all activities related to the refining of crude oil, import of
refined products, storage, transport and distribution.
Resolution 18-1495 of 2009 establishes a series of regulations regarding
Decree 2657 of 1964 regulated the oil refining activities and created the
hydrocarbon exploration and exploitation. In the E&P Contracts, operators
Oil Refining Planning Committee, which is responsible for studying industry
are afforded access to non-contracted blocks by committing to an exploration
problems and implementing short- and long-term refining planning policies.
work program. These E&P Contracts provide companies with 100% of new
The Committee is also responsible for evaluating and reviewing new
production, less the participation of the ANH, which participation may differ
refining projects or expansion of existing infrastructure. In evaluating a new
for each E&P Contract and depends on the percentage that each company
project, the Committee must take into account the significance of the
has offered to the ANH in order to be granted with a block, subject to
project and the economic impact, the sources of financing, profitability, social
an initial royalty payment of 8% and the payment of income taxes of 33%.
contribution, the effects on Colombia’s balance of payments and the price
In addition, the Colombian government also introduced TEAs, in which
structure of the refined products.
companies that enter into TEAs are the only ones to have the right to
explore, evaluate and select desirable exploration areas and to propose work
Pursuant to Resolution 18-0966 of 2006 issued by the Ministry of Mines and
commitments on those areas, and have a preemptive right to enter into
Energy and Article 58 of the Petroleum Code, any refining company operating
an E&P Contract, thereby providing companies with low-cost access to larger
in Colombia must provide a portion or, if needed, the total of its production
areas for preliminary evaluation prior to committing to broader exploration
to supply local demand prior to exporting any production. If the regulated
118 GeoPark 20F
production income, the principal item in the price formula, becomes lower
maintenance of pipelines must comply with environmental, social, technical
than the export parity price, the price paid for the refined products will
and economic requirements under national and international standards.
be equivalent to the price for those products in the U.S. Gulf Coast market.
Transportation networks must follow specific conditions regarding design
If there is local demand for imported crudes, the refining company may
and specifications, while complying with the quality standards demanded
charge additional transportation costs in proportion to the crudes delivered
by the oil and gas industry.
to the refinery.
In 2008, Law 1205 was issued, with the main purpose of contributing to
third-party use and owners must offer their capacity on the basis of equal
a healthier environment, and established the minimum quality that fuels
access to all. Hydrocarbon transport activity may be developed by third
should have in the country and the time frame for such a purpose.
parties and must meet all requirements established by law.
According to Law 681 of 2001, multipurpose pipelines must be open to
The Ministry of Mines and Energy establishes the safety standards for LPG,
The Ministry of Mines and Energy is responsible for studying and approving
storage equipment, maintenance and distribution. Regulations issued
the design and blueprints of all pipelines, mediation of rates between parties
in 1992 established that every local, commercial and industrial facility with a
or, in case of disagreement, establishing the hydrocarbon transport rates
storage capacity of LPG greater than 420 pounds must receive authorization
based on information furnished by the service provider, issuing hydrocarbon
for operations from the Ministry of Mines and Energy.
transport regulations, liquidation, distribution and verification of payment
of transport-related taxes and managing the information system for the oil
As of May 2012, under the powers granted by Decree 4130 of 2011 for
product distribution chain.
currency and tax matters as well as for royalties, the ANH will determine the
crude oil price reference.
Regulation of transportation activities
Hydrocarbon transportation activity is considered a public utility activity in
The construction of transportation systems requires government licenses
and local permits awarded by the Ministry of Environment, in addition to
other requirements from the regional environmental authorities.
Colombia and therefore is under governmental supervision and control.
Further regulations on pipeline access and tariff systems have been defined
It is also a public service, and pipelines are considered to be public transport
by the Ministry of Mines and Energy. Over the past months, the Ministry
companies. Transportation and distribution of crude oil, natural gas and
of Mines and Energy has been working on a project to modify the 2010
refined products must comply with the Petroleum Code, the Commerce Code
regulation of pipeline access and tariff systems.
(Código de Comercio) and with all governmental decrees and resolutions.
Notwithstanding the general rules for hydrocarbon transportation in
Taxation
The Tax Statute and Law 9 of 1991 provide the primary features of the oil
Colombia, natural gas transportation has specific regulations, due to the
and gas industry’s tax and exchange system in Colombia. Generally, national
categorization of natural gas distribution as a public utility activity
under Colombian laws. Therefore, natural gas distribution transportation is
taxes under the general tax statute apply to all taxpayers, regardless of
industry. The main taxes currently in effect-after the December 2012 tax
governed by specific regulation, issued by the CREG that seeks primarily
reform discussed below-are the income tax (25%), the special income tax for
to satisfy the needs of the population.
the development of social investments (9% for 2013 to 2015 and 8% for
The exportation of natural gas is not considered a public utility activity under
and the tax on financial transaction (0.4%). Additional regional taxes also
Colombian law and therefore is not subject to Law 142 of 1994. Nevertheless,
apply. Colombia has entered into a number of international tax treaties
the internal supply of natural gas is a priority for the Colombian government.
to avoid double taxation and prevent tax evasion in matters of income tax
2016 and beyond) the equity or net assets tax, sales or value added tax (16%),
This policy is included in Decree 2100 of 2011, providing that in the event
and net asset tax.
the supply of natural gas is reduced or halted as a result of a shortage of this
hydrocarbon, the Colombian government has the right to suspend the
Decree 2080 of 2000 (amended by Decree 4800 of 2010), or the international
supply of natural gas to foreign customers. Notwithstanding the foregoing,
investment regime, regulates foreign capital investment in Colombia.
the Decree 2100 of 2011, establishes freedom to export natural gas, under
Resolution 8 of the board of the Colombian Central Bank, or the Exchange
normal conditions for gas reserves.
Statute, and its amendments contain provisions governing exchange
operations. Articles 48 to 52 of Resolution 8 provide for a special exchange
Transport systems, classified as crude oil pipelines and multipurpose
regime for the oil industry that removes the obligation of repayment to the
pipelines, can be owned by private parties. The building, operation and
foreign exchange market currency from foreign currency sales made by
GeoPark 20F 119
foreign oil companies. Such companies may not acquire foreign currency
during this 11-year period-3.2% as compared to 1.3%-in great part favored
in the exchange market under any circumstances and must reinstate in the
by recent discoveries in the pre-salt and offshore Atlantic concessions.
foreign exchange market the capital required in order to meet expenses
In 2013, oil production reached 2,114 mmbpd.
in Colombian legal currency. Companies can avoid participating in this
special oil and gas exchange regime, however, by informing the Colombian
Similar dynamics took place for the natural gas market, with reserves in 2013
Central Bank, in which case they will be subject to the general exchange
jumping to 0.5 trillion cubic meters, or tm3, with an implied 11-year CAGR
regime of Resolution 8 and may not be able to access the special exchange
of 5.9%, significantly above the global CAGR of 1.7%. Production has also
regime for a period of 10 years.
grown above the global rate during this period-7.9% as compared to 2.7%-
also favored by both non-associated gas finds and gas associated with the
On December 26, 2012, Colombian Congress approved a number of tax
pre-salt areas. In 2013, natural gas production reached 21.3 bcm.
reforms. These changes include, among other things, VAT rate consolidation,
a reduction in corporate income tax (from 33% to 25%), changes to
Today, offshore fields are the main contributor to reserves and production;
transfer pricing rules, the creation of a new corporate income tax to pay for
however, the first phase of the production history in the sector, with
health, education and family care issues (9% for fiscal years 2013 to 2015
upstream activities dating back to the 1940s, was in the onshore space, with
and 8% from 2016 and beyond), modifications in individual income tax, new
the Recôncavo Basin in northeast Brazil playing a pivotal role. In 2013, proven
“thin capitalization” rules and a reduction of social contributions paid by
domestic oil production contributed to more than 91% of total production
certain employees. The implementation of such tax reforms requires further
(with the remainder located onshore). More than 94% of Brazil's reserves
administrative regulation. As of the date of this annual report, some
are located offshore, and 80% of all reserves are found offshore near the state
administrative regulations had been published, although we do not expect
of Rio de Janeiro. Offshore the state of Espirito Santo held the next largest
the final impact of these reforms to be material to our business.
accumulation at 9% of country's reserves.
In December 2014, Colombian Congress approved a tax reform. This
Historically, Brazil’s oil and natural gas industry was controlled by Petrobras.
reform has introduced a temporary net wealth tax assessed on net equity
In 1995, the Brazilian Federal Constitution was amended to allow privately-
on domestic and foreign legal entities, kept the rate of the income tax on
or publicly-owned companies to engage in the exploration and exploitation
equality (enterprise contribution on equality, “CREE” for its Spanish acronym)
of oil and natural gas, subject to conditions set forth in specific legislation
at 9%, and applied a CREE surcharge until 2018, among other changes.
governing the sector. In 1997, the Brazilian Petroleum Law created the ANP
The net wealth tax (NWT) assessed on net equity would apply for tax years
to promote a transparent regulatory framework and bidding rounds for new
2015 through 2017 for domestic and foreign entities that hold any wealth in
concession areas and to regulate and oversee the Brazilian oil and natural
Colombia, directly or indirectly, via permanent establishments (PEs) or
gas sector.
branches. In the case of foreign or domestic individuals, the NWT would
apply until 2018. NWT will apply, for corporate taxpayers ,at progressive rates
On May 14, 2013, the ANP hosted the 11th oil and gas bidding round offering
ranging from 1.15% in 2014; 1% in 2015 and decrease to 0.4% in 2016 and
finally disappear in 2017,. NWT paid would not be deductible or creditable
289 concessions, located in 11 basins. These concessions cover approximately
155.8 sq. km. The auction was characterized by a high level of participation
for Colombian income tax purposes. The Reform also extended the current
and raised R$2.8 billion in proceeds through license fees. Of the 289
9% CREE tax rate, which was scheduled to decrease to 8% in 2016. Also,
concessions offered, 142 were successfully bid upon by industry players.
it will introduce a new CREE surcharge, beginning in 2015, from 5% in 2015,
6% in 2016, 8% in 2017 and 9% in 2018. Therefore, the accumulated
Additionally, on November 28, 2013, the ANP hosted the 12th oil and gas
corporate income tax rate will rise to 43% in 2018.
bidding round offering 240 concessions, located in seven onshore basins.
Brazil
Oil and gas industry
Recent discoveries in the E&P space have transformed Brazil’s oil and gas
industry landscape and turned the country into one of the fastest-growing
oil and gas markets in the world. According to the BP Statistical Review,
the country’s proved oil reserves in 2013 jumping to 15.6 bboe, an increase of
The auction raised R$165.2 million in proceeds through signing bonuses.
The round was focused on conventional and unconventional resources with
natural gas potential. Of the 240 concessions offered, 72 were successfully
bid upon by industry players.
Natural gas market in Brazil
The natural gas industry in Brazil has undergone significant changes over
1.8% as compared to the previous year. The reserves’ CAGR throughout the
the past decade. During this period, natural gas was the fastest-growing
last 11 years has reached 4.3%, significantly above the world’s average CAGR
component of the non-renewable energy mix in the country. Taking into
of 2.2%. Furthermore, production has also grown above the global rate
account the increased local production and imports from Bolivia, natural gas
120 GeoPark 20F
currently accounts for about 8% of total Brazilian energy demand, according
2,000 km. Local oil pipeline systems connect the fields in the Sergipe-Alagoas,
to the 2012 National Energy Balance published by the Energy Research
Potiguar and Recôncavo Basins to the coastal export terminals where oil
Company, or EPE. Furthermore, according to EPE’s 2021 Ten Year Energy
is sent by ship to the refineries in Fortaleza, Bahia and other States. The
Expansion Plan, the share of natural gas in overall energy consumption in
Brazilian government is expected to announce a ten-year plan for pipeline
Brazil should reach 7.8% in 2016 and 8.1% in 2021. Production will be
development, or Pemat, similar to what is done today in the power and
further boosted with the next bid round, which has been pre-announced by
utilities sector, through EPE’s 2021 Ten Year Energy Expansion Plan.
the ANP for the fourth quarter of 2013, and which will be dedicated to
areas with gas potential according to studies led by the ANP.
With a well-established onshore oil and gas industry, the country has an
experienced and skilled workforce.
Brazil has the capacity for both sustained and rapid growth in natural gas
over the next decade, which may potentially change the balance between
Oil infrastructure. The oil infrastructure in Brazil is relatively limited, and the
natural gas supply and demand in the country. The increased supply
majority of oil production is offshore. Oil is loaded onto tankers and shipped
could open up new opportunities in the country. Natural gas may not only
directly to coastal terminals and refineries or exported.
help sustain the continued growth of the local market, but Brazil may also
choose to reduce the amount of gas imported and, in the long-term,
Gas infrastructure. The gas pipeline network in Brazil is still relatively
become a seasonal exporter.
underdeveloped despite the significant expansion currently underway.
There are many gas transmission pipelines, including international pipelines
The increase of the gas supply associated with a growing reserve profile is
and a large distribution system. However, the existing infrastructure
expected to enable the continued development of the domestic market
covers only a small portion of Brazil, primarily serving the main population
at rates above the historical ones. Market growth has been largely directed
centers of São Paulo and Rio de Janeiro, some states in the south and
by increased demand from the industrial and power generation sectors,
coastal states in the northeast.
which increased their demand for gas by 89.1% between 2002 and 2011,
according to the EPE.
Brazil’s production profile
2700
2200
1700
1200
500
700
200
-300
2216
192
2373
235
2463
270
2459
310
2458
344
2024
2137
2193
2149
2114
2009
2010
2011
2012
2013
Oil production (mbpd)
Gas production (mboepd)
Source: BP Statistical Review
Brazil’s sedimentary basins
The offshore area covers approximately 383.0 million gross acres and the
onshore area covers approximately 1,112.0 million gross acres.
LNG
Brazil began importing LNG in early 2009 through two import terminals,
one located in northeast Brazil, in the State of Ceará, and another
near the major gas markets in southeast Brazil, in the State of Rio de Janeiro.
Both terminals offer re-gasification vessels with an anchor point, which
may be connected directly to the national gas network. The terminals are
designed to provide flexibility in gas supply and meet the region’s
thermoelectric demand.
Refineries
There are currently 16 refineries operating in Brazil, of which 13 are
Petrobras-operated. The current refining capacity is approximately
2.2 mmboepd, up from the 1.9 mmboepd during the 2000s. This increase
has been achieved through capacity expansion of the existing refineries.
Petrobras has plans to continue the expansion of the country’s refining
capacity, and several major projects are either underway or planned that
will add a further 1.7 mmboepd of capacity.
Regulation of the oil and gas industry
Article 177 of the Brazilian Federal Constitution of 1988 provides for the
Federal Government’s monopoly over the prospecting and exploration of oil,
Infrastructure and workforce
Overview. Extensive infrastructure is already in place in the mature coastal
natural gas resources and other fluid hydrocarbon deposits, as well as over
the refining, importation, exportation and sea or pipeline transportation of
basins. The Brazilian midstream infrastructure has grown significantly during
crude oil and natural gas. Initially, paragraph one of article 177 barred the
recent years. However, it is still small in comparison to other countries, such
assignment or concession of any kind of involvement in the exploration of oil
as the U.S., China and France. In total, there are 32 oil pipes extending across
or natural gas deposits to private industry. On November 9, 1995, however,
GeoPark 20F 121
Constitutional Amendment Number 9 altered paragraph one of article 177
policies. Under these regulations, the Brazilian government: (1) introduced a
so as to allow private or state-owned companies to engage in the exploration
new methodology for determining the price of oil products designed to track
and production of oil and natural gas, subject to the conditions to be set
prevailing international prices denominated in U.S. dollars, and (2) gradually
forth by legislation.
eliminated controls on wholesale prices.
The Brazilian Petroleum Law, which enacted this constitutional provision:
• confirmed the Federal Government’s monopoly over oil and natural gas
Concessions
In addition to opening the Brazilian oil and natural gas industry to private
deposits and further provided that the exploration and production of such
investment, the Brazilian Petroleum Law created new institutions,
hydrocarbons would be regulated and overseen by the federal government;
including the ANP, to regulate and control activities in the sector. As part of
• created the CNPE (as defined below) and the ANP;
• revoked Law Number 2,004/53, which appointed Petrobras as the exclusive
agent to execute the Federal Government’s monopoly; and
this mandate, the ANP is responsible for licensing concession rights for
the exploration, development and production of oil and natural gas in Brazil’s
sedimentary basins through a transparent and competitive bidding process.
• established a transitional rule that entitled Petrobras to: (1) produce in fields
The ANP has conducted 12 bidding rounds for exploration concessions
where Petrobras had already started production under a concession
since 1999. In November 2013, the twelfth round was conducted; 240 blocks
agreement made with the ANP for 27 years, on an exclusive basis, starting
in 13 sectors of seven basins were offered, of which 72 were awarded.
on the date the field was declared commercially profitable; and (2) explore
Of these 72 blocks, we were awarded two new concessions (the PN-T-597
areas where Petrobras was able to show evidence of “established reserves”
Concession in the Parnaíba Basin in the State of Maranhão and the
prior to the enactment of the Brazilian Petroleum Law, for up to three years,
SEAL-T-268 Concession in the Sergipe Alagoas Basin in the State of Alagoas).
subsequently extended to five years.
Regulatory entities
National petroleum, natural gas and biofuel agency (ANP)
The Brazilian Petroleum Law created the ANP. The ANP is a regulatory body
Our PN-T-597 is still subject to the entry into the concession agreement.
See “-Our operations-Operations in Brazil” and “-Item 3. Key information-D.
Risk factors-Risks relating to our business-The PN-T-597 concession is
subject to an injunction and may not close” for more information.
of the federal government associated with the Ministry of Mines and Energy.
In order to participate in the auction process a company must have proven
The ANP’s function is to regulate the oil, natural gas and biofuels industry in
experience in oil and gas exploration and production activities, be legally
Brazil. One of the ANP’s primary objectives is to create a competitive
constituted under the laws of their home country and undertake that,
environment for oil and natural gas activities in Brazil that will lead to the
in the event that they are successful in bidding, the company will constitute
lowest prices and best services for consumers. Its principal responsibilities
a company with its headquarters and management in Brazil, organized
include enforcing regulations as well as awarding concessions related
under Brazilian law, and have the determined (specific for each bidding
to oil, natural gas and biofuels, in accordance with the Brazilian Petroleum
round) minimum net equity. If all requirements are met, the company will be
Law, as set forth in Decree No. 2,455, dated January 14, 1998, and regulations
considered qualified to bid and make offers for the bidding areas within
enacted by the National Council on Energy Policy and National Interest.
its category.
National council on energy policy (CNPE)
The CNPE, also created by the Brazilian Petroleum Law, is a council of the
Environmental issues
The identification and definition of the concessions to be offered is based
President of Brazil presided over by the Minister of Mines and Energy. The
on the availability of geological and geophysical data indicating the presence
CNPE is charged with submitting national energy policies, designing oil and
of hydrocarbons. Also, in order to protect the environment, the ANP,
natural gas production policies and establishing the procedural guidelines
the IBAMA and the state environmental agencies analyze all the areas prior to
for competitive bids regarding the exploration concessions and areas
deciding which concessions to offer in licensing rounds. The requirement
with established viability in accordance with the Brazilian Petroleum Law.
levels for environmental licensing for the various concessions to be auctioned
Regulatory framework
Pricing policy
Until the enactment of the Brazilian Petroleum Law, the Brazilian government
regulated all aspects of the pricing of oil and oil products in Brazil, from
the cost of oil imported for use in refineries to the price of refined oil products
are then published, allowing the future concessionaire to include environmental
considerations in determining what projects to pursue. These environmental
guidelines are revised and updated with every ANP bidding round.
Consortium
The oil and natural gas industry is characterized in Brazil by the presence of
charged to the consumer. Under the rules adopted following the Brazilian
several companies acting through consortium agreements, or unincorporated
Petroleum Law, the Brazilian government changed its price regulation
joint ventures, in order to share the risks of exploration, development and
122 GeoPark 20F
production activities. Terms of those agreements are set out by the ANP and
respect to production. Royalties generally correspond to a percentage
the actual risk sharing agreement is reflected in joint operating agreements.
ranging between 5% and 10% applied to reference prices for oil or natural
Taxation
Introduction. The Brazilian Petroleum Law introduced significant
modifications and benefits to the taxation of oil and natural gas activities.
The main component of petroleum taxation is the government take,
gas, as established in the relevant bidding guidelines (edital de licitação) and
concession agreement. In determining the percentage of royalties applicable
to a particular concession, the ANP takes into consideration, among other
factors, the geological risks involved and the production levels expected.
comprised of license fees, fees payable in connection with the occupation or
title of areas, royalties and a special participation fee. The introduction of
Relevant Tax Aspects on Upstream Activities. The special customs regime for
goods to be used in the oil and gas activities in Brazil, REPETRO, aims
the Brazilian Petroleum Law presents certain tax benefits primarily with
primarily at reducing the tax burden on companies involved in exploring
respect to indirect taxes. Such indirect taxes are very complex and can add
and extracting oil and natural gas, through the total suspension of federal
significantly to project costs. Direct taxes are mainly corporate income tax
taxes due on the importation of equipment (platforms, subsea equipment,
and social contribution on net profit.
among others), under leasing agreements, subject to the compliance
with applicable legal requirements. The period in which the goods are
Government take. With the effectiveness of the Brazilian Petroleum Law and
the regulations promulgated by the ANP, concessionaires are required to
allowed to remain in Brazil under the REPETRO regime may vary depending
on the importer, but usually corresponds to the duration of the contract
pay the Brazilian federal government the following:
• license fees;
• rent for the occupation or retention of areas;
• special participation fee; and
• royalties on production.
executed between the Brazilian company and the foreign entity, or the period
for which the company was authorized to exploit or produce oil and gas.
In 2007, the legislation regarding the State Value Added Tax-ICMS imposed
taxation on the import of equipment into Brazil under the REPETRO
regime was significantly changed by ICMS Convention No. 130/2007. This
The minimum value of the license fees is established in the bidding rules for
regulation allows each State to grant the ICMS tax calculation basis reduction
the concessions, and the amount is based on the assessment of the potential,
(generating a tax burden of 7.5% with the recoverability of credits or 3%,
as conducted by the ANP. The license fees must be paid upon the execution
without the recoverability of credits) for goods purchased under the
of the concession contract. Additionally, concessionaires are required to
REPETRO regime for the production phase and the total exemption or ICMS
pay a rental fee to landowners varying from 0.5% to 1.0% of the respective
tax calculation basis reduction (generating a tax burden of 1.5%, without
hydrocarbon production.
the recoverability of credits) for the exploration phase. In order to be in force,
the ICMS Convention No. 130/07 must be included in each state’s legislation.
The special participation fee is an extraordinary charge that concessionaires
must pay in the event of obtaining high production volumes and/or
For example, currently, based on Convention No. 130/2007 , the state of
profitability from oil fields, according to criteria established by applicable
regulation, and is payable on a quarterly basis for each field from the date
Rio de Janeiro grants tax calculation basis reduction for the exploitation
(generating a tax burden of 7.5%, with the recoverability of credits or 3%,
on which extraordinary production occurs. This participation rate, whenever
without the recoverability of credits) and production of oil and gas
due, may reach up to 40% of net revenues depending on (i) volume of
(generating a tax burden of 1.5%, without the recoverability of credits).
production and (ii) whether the block is onshore, shallow water or deep
For production activities, the legislation used to grant an exemption
water. Under the Brazilian Petroleum Law and applicable regulations issued
of ICMS, which was changed to a tax calculation basis reduction, according
by the ANP, the special participation fee is calculated based upon quarterly
to Resolution Sefaz No. 631, dated May 14th, 2013.
net revenues of each field, which consist of gross revenues calculated
using reference prices published by the ANP (reflecting international prices
It is important to mention that before the enactment of the Convention
and the exchange rate for the period) less:
No. 130/2007, the State of Rio de Janeiro has attempted to impose ICMS on
• royalties paid;
• investment in exploration;
• operational costs; and
production activities, based on State Law No. 4,117, dated June, 27, 2003,
which was regulated by Decree No. 34,761, dated February 3, 2004, and was
subsequently suspended by Decree No. 34,783 of February 4, 2004 for
• depreciation adjustments and applicable taxes.
an undetermined period of time. Nevertheless, the State of Rio de Janeiro
may choose to enforce the law at any time. Also, the constitutionality of this
The ANP is responsible for determining monthly minimum prices for
law is currently being challenged by the Public Ministry in the Supreme
petroleum produced in concessions for purposes of royalties payable with
Court (ADI 3,019-RJ).
GeoPark 20F 123
Pursuant to the Brazilian Petroleum Law and subsequent legislation, the
Peru’s production profile
federal government enacted Law No. 10,336/01, to impose the Contribution
for Intervention in the Economic Sector, or CIDE, an excise tax payable by
producers, blenders and importers on transactions with some of oil and fuel
products, which is imposed at a flat amount based on the specific quantities
of each product. Currently, the CIDE rates are zero, based on Decree No.
7,764/2012.
Brazil has enacted a corporate tax reform, Law 12.973 of 13 May 2014.
On upstream operations, as from 2015 fiscal year, the new tax law may
generate timing effects for income tax purposes on the deduction of
pre-operational costs as well as depreciation of fixed assets and amortization
of intangibles. The new law imposes restrictions for the tax deduction of
goodwill arising from in-house operations, and brings several changes to
the Brazilian CFC rules.
Peru
Peru is the eighth largest crude oil reserve holder in Central and South
America, with 633 million barrels of proved reserves, as of January 2014,
350
300
250
200
150
100
50
-
230
117
113
163
56
107
292
298
182
110
191
107
300
197
104
2009
2010
2011
2012
2013
Oil production (mbpd)
Gas production (mboepd)
Peruvian hydrocarbon legislation.
The hydrocarbons activities in Peru are mainly regulated by the General
Hydrocarbons Law (Law 26,221), and several regulations enacted in order to
develop the provisions included in such law.
according to Oil and Gas Journal. Much of Peru’s proved oil reserves are
According to the Hydrocarbons Law, oil and gas exploration and production
located onshore in the Amazon region. Proved natural gas reserves in
activities are carried out under license or service contracts granted by the
Peru were 15.4 trillion cubic feet in 2014, the third largest in Central and
government. Under a license contract, the investor pays a royalty, whereas
South America following Venezuela and Mexico.
under a service contract, the government pays remuneration to the
contractor. As stated by the Peruvian Constitution and the Organic Law for
Crude oil production in Peru has been declining since the mid-1990s, but
Hydrocarbons, a license contract does not imply a transfer or lease of
the country’s total liquid fuels production has been bolstered by increased
property over the area of exploration or exploitation. By virtue of the license
output of natural gas liquids (“NGLs”). As a result, total liquid fuels production
contract, the contractor acquires the authorization to explore or to exploit
has steadily increased over the past decade to average 175,000 barrels per
hydrocarbons in a determined area, and Perupetro (the entity that
day (b/d) in 2013, of which nearly 60% was NGLs.
holds the Peruvian state interest) transfers the property right in the extracted
hydrocarbons to the contractor, who must pay a royalty to the state.
Petroleum consumption in Peru averaged 171,000 b/d in 2013. Peru imports
crude oil and refined products to satisfy both domestic demand and export
commitments. The country imports most of its crude oil from Ecuador,
License and service contracts are approved by a supreme decree issued
by the Peruvian Ministry of Economy and Finance, and the Peruvian Ministry
with smaller amounts from other countries in South America and West Africa.
of Energy and Mining, and can only be modified by a written agreement
signed by the parties. Before initiating any negotiation, every oil and gas
Peru has six oil refineries with a total crude distillation capacity of almost
company must be duly qualified by Perupetro, in order to determine if
199,000 b/d. Repsol YPF operates the largest refinery in the country,
it fulfills all the requirements needed to develop exploration and production
the 108,000-b/d La Pampilla refinery located in Lima. Most of the other
activities under the contract form requirements mentioned above. When
refineries are owned by the state-owned company, Petroperú.
a contractor is a foreign investor, it is expected to incorporate a subsidiary
company or registered branch in accordance with Peru’s laws and to appoint
Dry natural gas production in Peru has grown rapidly since the Camisea field
local representatives who will interact with Perupetro.
went on stream in 2004.
Peru became a natural gas exporter in 2010 when it commissioned South
stage -when a commercial discovery has been made- or for an exploration
America’s first liquefied natural gas (“LNG”) plant, Melchorita.
and exploitation stage -when such discovery has not been made yet. In this
License and services agreements may be granted for just an exploitation
case, the exploration phase will last no more than 7 years, counted from
the effective date of the contract (60 days after the signing date). This term
can be divided into several periods as agreed in the contract, and all of them
124 GeoPark 20F
with a minimum work obligation that should be fulfilled by a contractor in
camps, means of communication, equipment and other goods that the
order to access to the next exploration period. The exploitation phase
contractor keeps or recovers to use in the same operations or in other
will last 40 years from the effective date of the contract in case of natural gas
operations of a different nature.
discoveries and 30 years from the effective date in case of oil discoveries.
The Ministry of Energy and Mines may exceptionally authorize an extension
separately and for each contract. If the contractor carries out related activities
of three years for the exploration stage, if the contractor has fulfilled with the
(i.e., activities related to oil and gas, but not carried out under the terms
minimum work program established in the contract, and also commits to
of the contract) or other activities (i.e., activities not related to oil and gas),
fulfill an additional work program that justifies such extension. The contractor
the contractor is obligated to determine the tax base and the amount
shall be responsible for providing the technical and economic resources
of tax, separately, and for each activity.
The contractor determines the tax base and the amount of the tax,
required for the execution of the operations of this phase.
The Peruvian regulations also established the roles of the Peruvian
that apply in each case (subject to the tax stability provisions for contract
government agencies that regulate, promote and supervise oil and gas
activities and based on the regular regime for the related activities or
industry, including the Ministry of Energy and Mines, Perupetro and
other activities). The total income tax amount that the contractor must pay is
The corresponding tax is determined based on the income tax provisions
OSINERGMIN.
the sum of the amounts calculated for each contract, for both the related
activities and for the other activities. The forms to be used for tax statements
Peruvian tax regime.
The fiscal regime that applies in Peru to the oil and gas industry consists of
and payments are determined by the tax administration. If the contractor
has more than one contract, it may offset the tax losses generated by one
a combination of corporate income tax, royalties and other levies.
or more contracts against the profits resulting from other contracts or related
activities. Moreover, the tax losses resulting from related activities may be
In general terms, oil and gas companies are subject to the general corporate
offset against the profits from one or more contracts.
income tax regime; nevertheless, there are certain special tax provisions
for the oil and gas sector. Resident companies (incorporated in Peru),
It is possible to choose the allocation of tax losses to one or more of the
are subject to income tax on their worldwide taxable income. Branches and
contracts or related activities that have generated the profits, provided that the
permanent establishments of foreign companies that are located in Peru
losses are depleted or are compensated to the limit of the profits available.
and non-resident entities are taxed on income from Peruvian sources only.
This means that if there is another contract or related activity, the taxpayer can
continue compensating tax losses until they are totally used. A contractor
Taxable income is generally computed by reducing gross revenue by cost of
with tax losses from one or more contracts or related activities may not offset
goods sold and all expenses necessary to produce the income or maintain
them against profits generated by the other activities. Furthermore, in no case
the source of income. Certain types of revenue, however, must be computed
may tax losses generated by the other activities be offset against the profits
as specified in the tax law and some expenses are not fully deductible for
tax purposes. Business transactions must be recorded in legally authorized
resulting from the contracts or from the related activities.
accounting records that are in full compliance with the International
During the exploration phase, operators are exempt from import duties
Accounting Standards (IAS). Contractors in a license or services contract
and other forms of taxation applicable to goods intended for exploration
for the exploration or exploitation of hydrocarbons (Peruvian corporations
activities. Exemptions are withdrawn at the production phase, but exceptions
and branches) are entitled to keep their accounting records in foreign
are made in certain instances, and the operator may be entitled to
currency, but taxes must be paid in Peruvian Nuevos Soles (“PEN”).
temporarily import goods tax-free for a two-year period (“Temporary Import”).
Any investments in a contract area that did not reach the commercial
up to two years upon the request of an operator, approval of the Ministry of
extraction stage and that were totally released, can be accumulated with the
Energy and Mines and authorization of the Superintendencia Nacional
same type of investments made in another contract that is in the process of
de Aduanas y de Administración Tributaria (Peruvian Customs Agency).
A temporary Import may be extended for additional one year periods for
commercial extraction. These investments are amortized in accordance
with the amortization method chosen in the letter contract. If the contractor
has entered into a single contract, the accumulated investments are charged
Peruvian labor and safety legislation.
Indefinite-term contracts are the general rule for hiring in Peru, although
as a loss against the results of the contract for the year of total release of the
fixed-term contracts and part-time contracts may also be signed as an
area for any contract that did not reach the commercial extraction stage,
exception. In any labor contract in Peru, the workers will usually have, among
with the exception of investments consisting of buildings, power installations,
others, the following labor benefits: a) vacation time, b) two legal bonuses
GeoPark 20F 125
(each one equal to one month of salary), c) severance payment (CTS), d)
The competent authority for approving the environmental studies is the
family allowance, e) public health insurance, and f) life insurance.
Ministry of Energy and Mines, through the General Bureau of Energetic
In addition, companies that generate business income are required to
Ministry of Environment in the short term.
distribute a percentage of their annual income among their workers.
The percentage to be distributed depends on the activity to be performed
There are general environmental regulations for the protection of water,
by the company. In case of companies that perform oil and gas activities,
soils, air, endangered species, biodiversity, natural protected areas, etc.
the percentage will be 5%.
In addition, there are specific environmental regulations applicable to the
Environmental Affairs (GBEEA). However, such role will be assumed by the
Employment contracts can only be terminated based on the reasons
provided by Peruvian law. If an employment contract is terminated for any
Argentina
hydrocarbon industry.
other reason, the employer will be required to pay damages to the employee
for arbitrary dismissal (calculated according to the length of service), or may
Oil and gas industry
Argentina is the second-largest producer of natural gas and the fourth-largest
be required to reinstate the employee.
producer of crude oil in Central and South America, according to the BP
Foreign workers are allowed by Peruvian labor laws. However, such workers
gas in South America, and has a globally significant unconventional oil and
should not exceed the 20% of the total workforce of the company, except
gas resource base. Production of both oil and natural gas throughout the last
by specialized technical staff or management staff for new business activities.
years has been dropping as a result of the maturing of the production fields
Any foreign worker will need a proper immigration visa work in Peru.
and lack of investment. In 2013, the country’s natural gas production reached
Statistical Review. The country is a leading producer and consumer of natural
35.5 bcm, with oil production at 656 mmbblpd.
There are several regulations for protecting the safety and health of
the workers. Oil and gas companies are obliged to fulfil not only the general
In response to the economic crisis of 2001 and 2002, the Argentine
regime included in the labor laws, but also the specific regime approved
government, pursuant to the Public Emergency Law (Law No. 25,561),
for hydrocarbons activities. These regulations contain provisions on accident
established export taxes on certain hydrocarbon products. In subsequent
prevention, living conditions, sanitary facilities, water quality in the
years, in order to satisfy growing domestic demand and abate inflationary
workplaces, medical assistance and first-aid services, safety measures related
pressures, this law was supplemented by constraints on domestic prices,
to camps, medical assistance, food conditions, handling of explosives, etc.
export restrictions and subsidies on imports of natural gas and diesel, among
Peruvian environmental regulation.
Before initiating any hydrocarbon activity (e.g. seismic exploration, drilling
of exploration wells, etc.) the contractor must file and obtain an approval
other measures. As a result, local prices for oil and natural gas products
had remained significantly below those prevalent in neighboring countries
and international commodity exchanges.
for an Environmental Impact Study (EIS), which is the most important permit
related to HSE for any hydrocarbon project. This study includes technical,
After declining during the economic crisis of 2001 and 2002, Argentina’s
real gross domestic product, or GDP, grew at a compounded average
environmental and social evaluations of the project to be executed in order
growth rate, or CAGR, of 8.5% from 2003 to 2008. Although the growth rate
to define the activities that should be required for preventing, minimizing,
decelerated to 0.9% in 2009 as a result of the global financial crisis, it
mitigating and remediation of the possible negative environmental and
recovered in 2010 and 2011, growing at an annual rate of approximately 9%,
social impacts that the hydrocarbon project may generate.
respectively, according to preliminary official data. In 2012, the Argentine
Depending on the type of hydrocarbon activity the contractor is intended to
an annualized basis compared to the preceding year according to the
execute, it should file the following types of environmental studies:
methodology of calculation prevailing until March 2014. On March 27, 2014,
economy experienced a slowdown with GDP increasing at a rate of 1.9% on
• Environmental Impact Statement (EIS).
• Environmental Impact Study (EIS).
the Argentine government announced a new method of calculating GDP
by reference to 2004 as the base year (as opposed to 1993, which was the
base reference year under the prior method of calculating GDP). As a result
• Semi detailed Environmental Impact Study (SEIS).
of the application of this new method, the estimated GDP for 2013 was
revised from 4.9% to 2.9%. In Argentina, widespread import and exchange
controls also affected business confidence and investment.
126 GeoPark 20F
Argentina’s production profile
1400
1200
1000
800
600
400
200
-
1411
1369
1312
1272
1229
668
647
625
607
573
743
722
687
665
656
2009
2010
2011
2012
2013
Oil production (mbpd)
Gas production (mboepd)
Source: BP Statistical Review
Decrees, relating specifically to deregulation of energy activities). The Oil
Deregulation Decrees eliminated restrictions on imports and exports of crude
oil, deregulated the domestic oil industry, and effective January 1, 1991,
the prices of oil and petroleum products were also deregulated. In 1992, Law
No. 24,145, referred to as the Privatization Law, privatized YPF and provided
for transfer of hydrocarbon reservoirs from the Argentine government
to the provinces, subject to the existing rights of the holders of exploration
permits and production concessions.
In October 2004, the Argentine Congress enacted Law No. 25,943, creating
a new state-owned energy company, Energía Argentina S.A., or ENARSA.
The corporate purpose of ENARSA is the exploration and exploitation of
solid, liquid and gaseous hydrocarbons; the transport, storage, distribution,
commercialization and industrialization of these products; as well as
the transportation and distribution of natural gas, and the generation,
Driven by economic expansion and stable domestic prices, energy
transportation, distribution and sale of electricity. Moreover, Law No. 25,943
consumption has increased significantly from 2002 to 2013, with demand
granted ENARSA all offshore areas located beyond 12 nautical miles
for oil and gas increasing from 331.7 mboe in 2002 to 448 mboe in 2013.
from the coastline up to the outer boundary of the continental shelf that were
Argentine natural oil and gas consumption grew at a CAGR of approximately
vacant at the time of the effectiveness of this law (i.e., November 3, 2004).
4.4% during this period, according to the BP Statistical Review. In recent
years, demand has outpaced energy supply (in 2013, the deficit reached
On May 3, 2012, the Argentine Congress passed the Hydrocarbons
66 mboe). As a result of this increasing demand and the maturing of local
Sovereignty Act. This law declared achieving self-sufficiency in the supply
reserves the country’s production surplus has shifted toward a deficit.
of hydrocarbons, as well as in the exploitation, industrialization,
Still, according to the BP Statistical Review, Argentina’s R/P ratio is at 9.8x
transportation and sale of hydrocarbons, a national public interest and
for oil and 8.9x for gas.
a priority for Argentina. In addition, the law expropriated 51% of the share
capital of YPF, the largest Argentine oil company, from Repsol, the
Regulation of the oil and gas industry
Under Argentine law, the federal executive branch establishes the federal
largest Spanish oil company.
policy applicable to the exploration, exploitation, refining, transportation and
On July 28, 2012, Presidential Decree 1277/2012, which regulated the
marketing of liquid hydrocarbons, but the licensing and enforcement of
Hydrocarbon Sovereignty Law, was released, establishing that the Strategic
exploration and production activities has been transferred from the federal
Planning and Coordination Committee for the National Hydrocarbon
government to provincial governments.
Regulatory entities
The principal authorities that regulate the activities in Argentina are the
Investment Plan must be in charge of the sector’s reference prices. The
decree introduced important changes to the rules governing Argentina’s oil
and gas industry. The decree repeals certain articles of Deregulation Decrees
passed during 1989 relating to free marketability of hydrocarbons at
Secretariat of Energy and the Strategic Planning and Coordination Committee
negotiated prices, the deregulation of the oil and gas industry, freedom to
for the National Hydrocarbon Investment Plan, at the federal level, and a
import and export hydrocarbons and the ability to keep proceeds from
local enforcement authority at each province (typically a secretariat of energy
export sales in foreign bank accounts. The repeal of these articles appears
or hydrocarbons board).
to formalize certain rules such as price controls and the repatriation of export
sales proceeds, which has been in fact required by the government over
Regulatory framework
From the 1920s to 1989, the Argentine public sector dominated the upstream
the last several years.
segment of the Argentine oil and gas industry and the midstream and
In addition, the decree created the Strategic Planning and Coordination
downstream segment of the business.
Committee for the National Hydrocarbon Investment Plan, charged
In 1989, Argentina enacted certain laws aimed at privatizing the majority of
reserves and to make Argentina more energy self-sufficient. The decree also
its state-owned companies and issued a series of presidential decrees
requires oil and gas companies, refiners and transporters of hydrocarbon
(namely, Decrees No. 1055/89, 1212/89 and 1589/89, or the Oil Deregulation
products to submit annual investment plans for approval by the commission.
with developing investment plans for the country to increase production and
GeoPark 20F 127
The decree empowers the commission to issue fines and sanctions,
Until 1989, crude oil production, whether extracted by YPF or by private
including concession termination, for companies that do not comply with
companies operating under service contracts, was delivered to YPF, and the
its requirements. Finally, the Strategic Planning and Coordination Committee
Secretariat of Energy distributed the same among the refining companies
for the National Hydrocarbon Investment Plan is also charged with the
according to quotas. Natural gas production was until then also delivered to
responsibility of assuring the reasonableness of hydrocarbon prices in the
YPF and to the then existing state-owned Gas del Estado SE utility company.
domestic market and that such prices allow companies to generate a
reasonable profit margin.
Domain and Jurisdiction of hydrocarbons resources
After a constitutional reform enacted in 1994, eminent domain over
hydrocarbon resources lying in the territory of a provincial state is now vested
The Oil Deregulation Decrees issued in 1989 deregulated the hydrocarbons
industry and granted to the holders of hydrocarbon permits and concessions
the right to freely dispose of the hydrocarbons lifted by them at free market
conditions, and abrogated the previous quota allocation system.
in such provincial state, while eminent domain over hydrocarbon resources
After the economic crisis of 2001 and 2002, hydrocarbons refiners and
lying offshore on the continental platform beyond the jurisdiction of the
producers were prompted by the Argentine government to enter into a series
coastal provincial states is vested in the federal state
of tripartite agreements whereby the prices of crude oil and certain
byproducts were capped or regulated. A series of other measures was also
Thus, oil and gas exploration permits and exploitation concessions are now
adopted, affecting the downstream segment of the industry.
granted by each provincial government. A majority of the existing
concessions were granted by the federal government prior to the enactment
of Law No. 26,197 and were thereafter transferred to the provincial states.
Regulation of transportation activities
Exploitation concessionaires have the exclusive right to obtain a
transportation concession for the transport of oil and gas from the provincial
Regulation of exploration and production activities
states or the federal government, depending on the applicable jurisdiction.
New Hydrocarbon Act:
In October 31, 2014 the Argentine Republic Official Gazette published the
Such transportation concessions include storage, ports, pipelines and other
fixed facilities necessary for the transportation of oil, gas and by-products.
text of Law No. 27,007, amending the Hydrocarbon Law No. 17,319.
Transportation facilities with surplus capacity must transport third parties’
hydrocarbons on an open-access basis, for a fee which is the same for
The most relevant aspects of the new law are as follows:
• With regards to concessions, three types of concessions are provided,
all users on similar terms. As a result of the privatizations of YPF and Gas del
Estado, a few common carriers of crude oil and natural gas were chartered
namely, conventional exploitation, unconventional exploitation, and
and continue to operate to date.
exploitation in the continental shelf and territorial waters, establishing the
respective terms for each type.
• The terms for hydrocarbon transportation concessions were adjusted in
order to comply with the exploitation concessions terms.
• With regards to royalties, a maximum of 12% is established, which may
Taxation
Exploitation concessionaires are subject to the general federal and provincial
tax regime. The most relevant federal taxes are the income tax (35%), the
value added tax (21%) and a tax on assets. The most relevant provincial taxes
reach 18% in the case of granted extensions, where the law also establishes
are the turnover tax (1% to 3%) and stamp tax. In 2002, in response to the
the payment of an extension bond for a maximum amount equal to the
economic crisis, the federal government adopted new taxes on oil and gas
amount resulting from multiplying the remaining proven reserves at the end
products, including export taxes ranging from 5% for by-products to 45%
of effective term of the concession by 2% of the average basin price
for crude oil. Despite that, under certain incentives programs established
applicable to the respective hydrocarbons over the 2 years preceding the
in 2008 (namely, the Oil Plus Program and the Refining Plus Program created
time on which the extension was granted.
by Presidential Decree 2014/2008), oil and gas companies increasing their
• The extension of the Investment Promotion Regime for the Exploitation of
oil reserves and production and refining companies increasing their
Hydrocarbons (Decree No. 929/2013) is established for projects representing
production would be granted tax rebate certificates to be credited against
a direct investment in foreign currency of at least 250 million dollars,
the payment of the export taxes. However, the Oil Plus Program and the
increasing the benefits for other type of projects.
Refining Plus Program were suspended for certain companies in February
2012 and subsequently amended and reinstated in June 2012.
Regulation of refining and petrochemical activities
Refining and petrochemical activities in Argentina have historically been
governed by free enterprise and private refineries have coexisted with
state-owned refineries.
128 GeoPark 20F
C. Organizational structure
We are an exempted company incorporated pursuant to the laws of Bermuda.
We operate and own our assets directly and indirectly through a number of
subsidiaries.
The following chart shows our main corporate structure as of December 31,
2014.
100%
GeoPark Latin
America
Limited – Bermuda
(Bermuda)
100%
GeoPark Latin
America Limited
Agencia en Chile
(Chile)
GeoPark Limited
(Bermuda)
100%
1%
99.9%
99.9%
99.9%
GeoPark Argentina
Limited – Bermuda
(Bermuda)
GeoPark Latin
America
Coöperatie U.A.
(Netherlands)
GeoPark Brazil
Coöperatie U.A.
(Netherlands)
GeoPark Brazil
Coöperatie U.A.
(Netherlands)
100%
80%
GeoPark Argentina
Limited -
Argentinean
Branch (Argentina)
GeoPark Colombia
Coöperatie
U.A.
(Netherlands)
20%
LG
International*
100%
GeoPark Colombia
SAS (Colombia)
99.9%
GeoPark Brazil
Exploração e
Produção de Petróleo
e Gás Ltda. (Brazil)
100%
Rio das Contas
Produtora de
Petróleo Ltda
(Brazil)
80%
99.9%
100%
LG
International*
20%
GeoPark Chile S.A.
(Chile)
GeoPark S.A.
(Chile)
GeoPark Colombia
S.A. (Chile)
99.9%
GeoPark SAC
(Peru)
14%
86%
100%
99%
GeoPark TdF S.A.
(Chile)
GeoPark Fell SpA.
(Chile)
GeoPark
Magallanes
Limitada (Chile)
99.9%
99.9%
GeoPark Peru
S.A.C. (Peru)
GeoPark
Operadora del Peru
S.A.C. (Peru)
Bermuda Companies
Chilean Companies
Argentinean Companies
Colombian Companies
Brazilean Companies
Netherlands Companies
Peruvian Companies
(*) LGI is not a subsidiary. It is Non-controlling interest.
D. Property, plant and equipment
See “-B. Business Overview-Title to properties”
Following the completion of our pending Morona Block Acquisition which
we expect to take place in 2015, we expect GeoPark Perú will hold the assets
we acquire in Peru.
GeoPark 20F 129
ITEM 4A. UNRESOLVED STAFF COMMENTS
Not applicable.
In March 2014 we invested US$140.1 million in Brazil to acquire Rio das
Contas, which we financed through the incurrence of a loan of US$70.5
million and cash on hand.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
At the base budget oil price assumption of US$45-US$50 per bbl, GeoPark
A. Operating results
is targeting a fully-funded US$60 million-US$70 million work and investment
program. The bulk of this 2015 work program is targeted to further develop
The following discussion of our financial condition and results of operations
and produce GeoPark’s Tigana and Tua oil fields in the Llanos 34 Block in
should be read in conjunction with our Consolidated Financial Statements and
Colombia, which currently provide the lowest risk production and reserve
the notes thereto, included elsewhere in this annual report, as well as the
growth opportunities with attractive operating netbacks.
information presented under “-Item 3. Key Information- A. Selected financial
data.”
The work program break-down is approximately as follows: Colombia
with US$35 million-US$40 million in new drilling and facility construction;
The following discussion contains forward-looking statements that involve risks
Chile with US$5 million-US$8 million in well workovers and facility
and uncertainties. Our actual results may differ materially from those discussed
construction; Brazil with US$6 million-US$7 million in the Manatí compression
in the forward-looking statements as a result of various factors, including
plant installation and seismic processing; Peru with US$8 million-US$9
those set forth in “-Item 3. Key Information-D. Risk factors” and “Forward-looking
million mainly in environmental studies; and Argentina with US$3 million-
statements.”
US$4 million in seismic studies
Factors affecting our results of operations
We describe below the year-to-year comparisons of our historical results and
If oil prices average higher than the base budget price, GeoPark has the
ability to allocate additional capital to more projects and increase its work
the analysis of our financial condition. Our future results could differ
and investment program and thereby further increase oil and gas production.
materially from our historical results due to a variety of factors, including
the following:
Our results of operations will be adversely affected in the event that our
estimated oil and natural gas asset base does not result in additional reserves
Discovery and exploitation of reserves
Our results of operations depend on our level of success in finding, acquiring
that may eventually be commercially developed. In addition, there can be
no assurance that we will acquire new exploration blocks or gain access to
(including through bidding rounds) or gaining access to oil and natural gas
exploration blocks that contain reserves. Unless we succeed in exploration and
reserves. While we have geological reports evaluating certain proved,
development activities, or acquire properties that contain new reserves, our
contingent and prospective resources in our blocks, there is no assurance that
anticipated reserves will continually decrease, which would have a material
we will continue to be successful in the exploration, appraisal, development
adverse effect on our business, results of operations and financial condition.
and commercial production of oil and natural gas. The calculation of our
geological and petrophysical estimates is complex and imprecise, and it
is possible that our future exploration will not result in additional discoveries,
Oil and gas revenue and international prices
Our revenues are derived from the sale of our oil and natural gas production,
and, even if we are able to successfully make such discoveries, there is no
as well as of condensate derived from the production of natural gas.
certainty that the discoveries will be commercially viable to produce. We have
Our oil and natural gas prices are driven by the international prices of oil
been able to successfully develop our assets through drilling, with 72%, or
and methanol (for our Chilean gas production), respectively, which are
147, of the 205 exploratory, appraisal and development wells that we drilled
denominated in U.S. dollars. The price realized for the oil we produce is
from January 1, 2006 through December 31, 2014 becoming productive wells.
linked to WTI and Brent, U.S. dollar denominated international benchmarks.
The price realized for the natural gas we produce in Chile is linked to the
For the year ended December 31, 2014, we drilled 53 new wells, 32 in Chile,
international price of methanol, which is settled in the international markets
and 21 in Colombia and acquire seismic in Brazil in blocks in which we
in U.S. dollars. The market price of these commodities is subject to significant
have working interests and/or economic interests. We made total capital
fluctuation and has historically fluctuated widely in response to relatively
expenditures of US$238.0 million (US$154.3 million, US$71.4 million, US$0.2
minor changes in the global supply and demand for oil and natural gas,
million, US$0.7 million and US$11.4 million in Chile, Colombia, Argentina,
market uncertainty, economic conditions and a variety of additional factors.
Peru and Brazil, respectively) for the year 2014, consisting of US$97.9 million
related to exploration.
130 GeoPark 20F
For example, from January 1, 2010 to December 31, 2014, Brent spot prices
If the market prices of WTI, Brent and methanol had fallen by 10% as
ranged from a low of US$55.27 per barrel to a high of US$128.14 per barrel,
compared to actual prices during the year, with all other variables held
NYMEX WTI crude oil contracts prices ranged from a low of US$53.45 per bbl
constant, after-tax profit for the year ended December 31, 2014 would
to a high of US$113.39 per bbl, Henry Hub natural gas average spot prices
have been lower by US$29.2 million (US$27.2 million in 2013).
ranged from a low of US$1.82 per mmbtu to a high of US$8.15 per mmbtu, US
Gulf methanol spot barge prices ranged from a low of US$240.34 per metric
In Brazil, prices for gas produced in the Manatí Field are based on a
ton to a high of US$564.12 per metric ton. We have historically not hedged
long-term off-take contract with Petrobras. For the year ended December 31,
our production to protect against fluctuations in the international oil prices.
2014, Rio das Contas’s average sale price was US$39/boe. The price of gas
As a consequence of the oil price crisis which started in the second half of
inflation pursuant to the Brazilian General Market Price Index (Índice Geral
sold under this contract is denominated in reais and is adjusted annually for
2014 (WTI and Brent, the main international oil price markers, fell by
de Preços-Mercado), or IGPM.
approximately 50% between August 2014 and March 2015), the Company
has undertaken a decisive cost cutting program to ensure its ability to both
We do not have a price-hedging transaction currently outstanding. Our
maximize the work program and preserve its cash. For more information
Board of Directors could consider adopting commodity price hedging
see “-Item 3. Key Information-D. Risk Factors-Risks relating to our business-
measures, when deemed appropriate, according to the size of the business,
Current oil industry price crisis and the impact on GeoPark’s operations.”
production levels and market volatility.
Additionally, the oil and gas we sell may be subject to certain discounts.
For instance, in Chile, the price of oil we sell to ENAP is based on Brent minus
Production costs
Our production costs consist primarily of expenses associated with the
certain marketing and quality discounts based on, among other things,
production of oil and gas, the most significant of which are gas plant leasing,
API and mercury content. Mercury content can vary depending on the
facilities and wells maintenance (including pulling works), labor costs,
geology and features in each field. As a result, our average realized price for
contractor and consultant fees, chemical analysis, royalties and products,
the years ended December 31, 2014 and 2013 was of US$89.4 per bbl and
among others. As commodity prices increase or decrease, our production
US$84.3 per bbl, respectively.
costs may vary. We have historically not hedged our costs to protect
We have a long-term gas supply contract with Methanex. The price of the
against fluctuations.
gas sold under this contract is determined based on a formula that takes into
account various international prices of methanol, including US Gulf methanol
Availability and reliability of infrastructure
Our business depends on the availability and reliability of operating and
spot barge prices, methanol spot Rotterdam prices and spot prices in Asia.
transportation infrastructure in the areas in which we operate. Prices
See “-Item 3. Key Information-D. Risk factors-Risks relating to our business-
and availability for equipment and infrastructure, and the maintenance
A substantial or extended decline in oil, natural gas and methanol prices may
thereof, affect our ability to make the investments necessary to operate
materially adversely affect our business, financial condition or results of
operations.” As of the date of this annual report, we had not entered into any
our business, and thus our results of operations and financial condition.
See “-Item 3. Key Information-D. Risk factors-Risks relating to our business-
derivative arrangements or contracts to mitigate the impact on our results
Our inability to access needed equipment and infrastructure in a timely
of operations of fluctuations in commodity prices.
manner may hinder our access to oil and natural gas markets and generate
significant incremental costs or delays in our oil and natural gas production.”
In Colombia, the price of oil we sell is based on Brent, adjusted for certain
marketing and quality discounts based on, among other things, API, viscosity,
In order to mitigate the risk of unavailability of operating and transportation
sulfur, delivery point and water content, as well as on certain transportation
infrastructure, we have invested in the construction of plant and pipeline
costs (including pipeline costs and trucking costs). The delivery points
infrastructure to produce, process and store hydrocarbon reserves and to
for our production range from the well head to the port of export (Coveñas),
transport them to market. In the Fell Block, for example, we have constructed
depend on the client: if sales are made via pipeline, the delivery point is
over 120 km of pipeline and a gas plant with a processing and compression
usually the pipeline injection point, whereas for direct export sales, the most
capacity of 35.3 mmcfpd. We also constructed an oil treatment plant with
frequent delivery point is the well head. As a result, our average realized
a processing capacity of 9,500 bopd to service oil produced in the Fell Block,
price for the year ended December 31, 2014 was US$73.0 per bbl. Our oil sales
which became operative in November 2013.
contracts in Colombia are short-term agreements and do not commit the
parties to a minimum volume, and are subject to the ability of either party to
receive or deliver the production, as applicable.
GeoPark 20F 131
Production levels
Our oil and gas production levels are heavily influenced by our drilling results,
administrative costs may continue to increase as a result of our Peruvian
operations, and as a result of becoming a publicly traded company in the
our acquisitions and, to a lesser extent, oil and natural gas prices. Since being
United States. Public company costs include expenses associated with our
awarded 100% of the working interest in the Fell Block in 2006, and through
annual and quarterly reporting, investor relations, registrar and transfer agent
December 31, 2014, we have drilled 113 exploratory, appraisal and
fees, incremental insurance costs and accounting and legal services.
development wells in the Fell Block, with 76%, or 86, of such wells becoming
productive. Production at the Fell Block has increased from 3,292 boepd in
2008 to 5,850 boepd as of December 31, 2014. Since acquiring our Colombian
Acquisitions
Our results of operations are significantly affected by our past acquisitions.
operations and through December 31, 2014, 67 exploratory, appraisal and
We generally incorporate our acquired business into our results of operations
development wells have been drilled in blocks in which we have working
at or around the date of closing, such as our Colombian acquisitions in 2012
interests and/or economic interests, with 69% of such wells becoming
and our Rio das Contas acquisition in 2014, which limits the comparability of
productive. Production in our Colombian operations has increased from 2,965
the period including such acquisitions with prior or future periods.
boepd for the month of April 30, 2012 to 10,807 boepd for the year ended
December 31, 2014.
As described above, part of our strategy is to acquire and consolidate assets
in Latin America. We intend to continue to selectively acquire companies,
We expect that fluctuations in our financial condition and results of
producing properties and concessions, as the pending Morona Block. As with
operations will be driven by the rate at which production volumes from our
our historical acquisitions, any future acquisitions could make year-to-year
wells decline. As initial reservoir pressures are depleted, oil and gas
comparisons of our results of operations difficult. We may also incur
production from a given well will decline over time. See “-Item 3. Key
additional debt, issue equity securities or use other funding sources to fund
Information-D. Risk factors-Risks relating to our business-Unless we replace
future acquisitions.
our oil and natural gas reserves, our reserves and production will decline over
time. Our business is dependent on our continued successful identification of
productive fields and prospects and the identified locations in which we drill
Functional and presentational currency
Our Consolidated Financial Statements are presented in U.S. dollars, which is
in the future may not yield oil or natural gas in commercial quantities.”
our functional and presentational currency. Items included in the financial
information of each of our entities are measured using the currency of the
Contractual obligations
In order to protect our exploration and production rights in our license areas,
primary economic environment in which the entity operates, or the functional
currency, which is the U.S. dollar in each case, except for our Brazil operations,
we must make and declare discoveries within certain time periods specified in
where the functional currency is the real.
our various special contracts, E&P Contracts and concession agreements. The
costs to maintain or operate our license areas may fluctuate or increase
significantly, and we may not be able to meet our commitments under these
Geographical segment reporting
We divide our business into five geographical segments-Chile, Colombia,
agreements on commercially reasonable terms or at all, which may force us to
forfeit our interests in such areas. If we do not succeed in renewing these
Brazil, Peru and Argentina-that correspond to our principal jurisdictions of
operation. Activities not falling into these four geographical segments are
agreements, or in securing new ones, our ability to grow our business may be
reported under a separate corporate segment that primarily includes certain
materially impaired. See “-Item 3. Key Information-D. Risk factors-Risks relating
corporate administrative costs not attributable to another segment.
to our business-Under the terms of some of our various CEOPs, E&P Contracts
As of December 31, 2014, our Chilean segment contributed US$145.7 million,
and concession agreements, we are obligated to drill wells, declare any
or 34.0%, of our revenues, our Colombian segment contributed US$246.1
discoveries and file periodic reports in order to retain our rights and establish
million, or 57.4%, of our revenues, our Brazilian segment contributed
development areas. Failure to meet these obligations may result in the loss of
US$35.6 million, or 8.3%, of our revenues and our Argentine segment
our interests in the undeveloped parts of our blocks or concession areas.”
contributed US$1.3 million, or 0.3%, of our revenues.
Administrative costs
Our administrative costs for the year ended December 31, 2014 increased by
In the description of our results of operations that follow, our “Other”
operations reflect our non-Chilean, non-Colombian and non-Brazilian
US$1.6 million, or 3.4%, compared to the year ended December 31, 2013. Our
operations, primarily consisting of our Argentine, Peruvian (mainly related to
administrative costs increased by US$17.8 million, or 61.8%, from 2012 to
the start-up of our operations in such country) and corporate head office
2013, mainly due to (i) higher corporate expenses related to our growth
operations.
strategy and new business efforts, (2) increased staff costs in Colombia, and
(iii) the start-up of our operations in Tierra del Fuego, Chile. Furthermore,
132 GeoPark 20F
Description of principal line items
The following is a brief description of the principal line items of our statement
Selling expenses
Selling expenses consist primarily of transportation and storage costs.
of income.
Net revenue
Net revenue includes the sale of crude oil, condensate and natural gas net
Financial results, net
Financial results, net consists of financial income offset by financial expenses.
Financial income includes interest received from bank time deposits and the
of value-added tax, or VAT, and discounts related to the sale (such as API and
effect of exchange rate differences. Financial expenses principally include
mercury adjustments) and overriding royalties due to the ex-owners of oil
interest expense not subject to capitalization, bank charges, the effect of
and gas properties where the royalty arrangements represent a retained
exchange rate differences and the unwinding of long-term liabilities.
working interest in the property. Revenue is recognized when the significant
risks and rewards of ownership have been transferred to the buyer, the
associated costs and amount of revenue can be estimated reliably, recovery
Profit for the period attributable to owners of the Company
Profit for the period attributable to owners of the Company consists of profit
of the consideration is probable, and there is no continuing management
for the year less non-controlling interest.
involvement with the goods.
Production costs
For a description of our production costs, see “-Factors affecting our results
of operations.”
Critical accounting policies and estimates
We prepare our Consolidated Financial Statements in accordance with IFRS
and the interpretations of the IFRS Interpretations Committee, or the IFRIC, as
adopted by the IASB. The preparation of the financial statements requires us
to make judgments, estimates and assumptions that affect the reported
Capitalized costs of proved oil and natural gas properties are depreciated on
amounts of assets, liabilities, revenue and expenses, and related disclosure of
a licensed-area-by-licensed-area basis, using the unit of production method,
contingent assets and liabilities. We continually evaluate these estimates and
based on commercial proved and probable reserves as calculated under
assumptions based on the most recently available information, our own
the Petroleum Resources Management System methodology promulgated
historical experience and various other assumptions that we believe to be
by the Society of Petroleum Engineers and the World Petroleum Council,
reasonable under the circumstances. Since the use of estimates is an integral
or the PRMS, which differs from SEC reporting guidelines pursuant to which
component of the financial reporting process, actual results could differ from
certain information in the forepart of this annual report is presented.
those estimates.
The calculation of the “unit of production” depreciation takes into account
estimated future discovery and development costs. Changes in reserves
An accounting policy is considered critical if it requires an accounting
and cost estimates are recognized prospectively. Reserves are converted to
estimate to be made based on assumptions about matters that are highly
equivalent units on the basis of approximate relative energy content.
uncertain at the time such estimate is made, and if different accounting
estimates that reasonably could have been used, or changes in the
Exploration costs
Exploration costs consist of geosciences costs, including wages and salaries
accounting estimates that are reasonably likely to occur periodically, could
materially impact the financial statements. We believe that the following
and share-based compensation not subject to capitalization, write-offs
accounting policies represent critical accounting policies as they involve a
of unsuccessful exploration efforts, geological consultancy costs and costs
higher degree of judgment and complexity in their application and require us
relating to independent reservoir engineer studies. In particular, upon
to make significant accounting estimates. The following descriptions of
completion of the evaluation phase, a prospect is either transferred to oil
critical accounting policies and estimates should be read in conjunction with
and gas properties if it contains reserves, or is charged as exploration costs in
our Consolidated Financial Statements and the accompanying notes and
the period in which the determination is made. See “-Critical accounting
other disclosures included elsewhere in this annual report.
policies and estimates-Oil and gas accounting.”
Administrative costs
Administrative costs consist of corporate costs such as director fees and
Business combinations
Business combinations are accounted for using the acquisition method. The
cost of an acquisition is measured as the fair market value of the assets
travel expenses, new project evaluations and back-office expenses principally
acquired, equity instruments issued and liabilities incurred or assumed on the
comprised of wages and salaries, share-based compensation, consultant fees
date of completion of the acquisition. Acquisition costs incurred are expensed
and other administrative costs, including certain costs relating to acquisitions.
and included in administrative expenses. Identifiable assets acquired and
liabilities and contingent liabilities assumed in a business combination
are measured initially at their fair market values at the acquisition date. The
GeoPark 20F 133
excess of the cost of acquisitions over fair market value of a company’s share
of the identifiable net assets acquired is recorded as goodwill. If the cost of
Oil and gas accounting
Oil and gas exploration and production activities are accounted for in
the acquisition is less than a company’s share of the net assets required, the
accordance with the successful efforts method on a field by field basis. We
difference is recognized directly in the statement of income.
account for exploration and evaluation activities in accordance with IFRS 6,
Exploration for and Evaluation of Mineral Resources, capitalizing exploration
The determination of fair value of identifiable acquired assets and assumed
and evaluation costs until such time as the economic viability of producing
liabilities means that we are to make estimates and use valuation techniques,
the underlying resources is determined. Costs incurred prior to obtaining
including independent appraisers. The valuation assumptions underlying
legal rights to explore are expensed immediately to the income statement.
each of these valuation methods are based on available updated information,
including discount rates, estimated cash flows, market risk rates and other
Exploration and evaluation costs may include: license acquisition,
data. As a result, the process of identification and the related determination
geological and geophysical studies (i.e., seismic), direct labor costs and
of fair values require complex judgments and significant estimates.
drilling costs of exploratory wells. No depreciation and/or amortization are
charged during the exploration and evaluation phase. Upon completion
Cash flow estimates for impairment assessments
Cash flow estimates for impairment assessments require assumptions
of the evaluation phase, the prospects are either transferred to oil and gas
properties or charged to expense (exploration costs) in the period in which
about two primary elements: future prices and reserves. Estimates of future
the determination is made, depending whether they have found reserves.
prices require significant judgments about highly uncertain future events.
If not developed, exploration and evaluation assets are written off after
Historically, oil and natural gas prices have exhibited significant volatility.
three years, unless it can be clearly demonstrated that the carrying value
Our forecasts for oil and natural gas revenues are based on prices derived
of the investment is recoverable. All field development costs are considered
from future price forecasts among industry analysts, as well as our own
construction in progress until they are finished and capitalized within
assessments. Estimates of future cash flows are generally based on
oil and gas properties, and are subject to depreciation once complete. Such
assumptions of long-term prices and operating and development costs.
costs may include the acquisition and installation of production facilities,
The process of estimating reserves requires significant judgments and
surveys for development purposes), project-related engineering and
decisions based on available geological, geophysical, engineering
the acquisition costs of rights and concessions related to proved properties.
and economic data. The estimation of economically recoverable oil and
natural gas reserves and related future net cash flows was performed based
Workovers of wells made to develop reserves and/or increase production
on the D&M Reserves Report. Such estimates incorporate many factors
are capitalized as development costs. Maintenance costs are charged to
development drilling costs (including dry holes, service wells and seismic
and assumptions including:
• expected reservoir characteristics based on geological, geophysical and
income when incurred.
engineering assessments;
Capitalized costs of proved oil and gas properties and production facilities
• future production rates based on historical performance and expected
future operating and investment activities;
and machinery are depreciated on a licensed area by licensed area basis,
using the unit of production method, based on commercial proved and
• future oil and natural gas prices and quality differentials;
probable reserves. The calculation of the “unit of production” depreciation
• anticipated effects of regulation by governmental agencies; and
takes into account estimated future finding and development costs, and
• future development and operating costs.
is based on current year-end un-escalated price levels. Changes in reserves
Our management believes these factors and assumptions are reasonable
to equivalent units on the basis of approximate relative energy content.
based on the information available at the time we prepare our estimates.
However, these estimates may change substantially as additional data from
Oil and gas reserves for purposes of our Audited Consolidated Financial
ongoing development activities and production performance becomes
Statements are determined in accordance with PRMS, and were estimated
available and as economic conditions impacting oil and natural gas prices
by D&M, independent reserves engineers.
and cost estimates are recognized prospectively. Reserves are converted
and costs change.
For further information relating to impairment of property, plant
furniture and vehicles) not directly associated with oil and gas activities has
and equipment, please see Note 38 to our audited consolidated financial
been calculated by means of the straight line method by applying such
Depreciation of the remaining property, plant and equipment assets (i.e.,
statements.
134 GeoPark 20F
annual rates as required to write-off their value at the end of their estimated
Non-market vesting conditions are included in assumptions in respect of
useful lives. The useful lives range between three and 10 years.
the number of options that are expected to vest. At each balance sheet date,
Asset retirement obligations
Obligations related to the plugging and abandonment of wells once
operations are terminated may result in the recognition of significant
we revise our estimates of the number of options that are expected to vest.
We recognize the impact of the revision to original estimates, if any, in the
statement of income, with a corresponding adjustment to equity.
liabilities. We record the fair value of the liability for asset retirement
The fair value of the share awards payments is determined at the grant date
obligations in the period in which the wells are drilled. When the liability is
by reference of the market value of the shares and recognized as an expense
initially recognized, the cost is also capitalized by increasing the carrying
over the vesting period.
amount of the related asset. Over time, the liability is accreted to its
present value at each reporting date, and the capitalized cost is depreciated
When options are exercised, we issue new common shares. The proceeds
over the estimated useful life of the related asset. Estimating the future
received net of any directly attributable transaction costs are credited
abandonment costs is difficult and requires management to make
to share capital (nominal value) and share premium when the options are
assumptions and judgments because most of the obligations will be settled
exercised.
after many years. Technologies and costs are constantly changing, as are
political, environmental, health, safety and public relations considerations.
Consequently, the timing and future cost of dismantling and abandonment
Taxation
The computation of our income tax expense involves the interpretation of
are subject to significant modification. Any change in the variables
applicable tax laws and regulations in many jurisdictions. The resolution of tax
underlying our assumptions and estimates can have a significant effect on
positions taken by us, through negotiations with relevant tax authorities or
the liability and the related capitalized asset and future charges related
through litigation, can take several years to complete and in some cases it is
to the retirement obligations. The present value of future costs necessary for
difficult to predict the ultimate outcome.
well plugging and abandonment is calculated for each area on the basis of
cash flows discounted at an average interest rate applicable to our company’s
In addition, we have tax-loss carry-forwards in certain taxing jurisdictions
indebtedness. The liability recognized is based upon estimated future
that are available to offset against future taxable profit. However, deferred tax
abandonment costs, wells subject to abandonment, time to abandonment,
assets are recognized only to the extent that it is probable that taxable profit
and future inflation rates.
will be available against which the unused tax losses can be utilized.
Management judgment is exercised in assessing whether this is the case.
Share-based payments
We provide several equity-settled, share-based compensation plans to
To the extent that actual outcomes differ from management’s estimates,
certain employees and third-party contractors, composed of payments in the
taxation charges or credits may arise in future periods.
form of share awards and stock options plans.
Fair value of the stock option plans for employee or contractor services
Contingencies
From time to time, we may be subject to various lawsuits, claims and
received in exchange for the grant of the options is recognized as an expense.
proceedings that arise in the normal course of business, including
The total amount to be expensed over the vesting period, which is the
employment, commercial, environmental and health & safety matters. For
period over which all specified vesting conditions are to be satisfied, is
example, from time to time, the Company receives notices of environmental,
determined by reference to the fair value of the options granted calculated
health and safety violations. Based on what our Management currently
using the Black-Scholes model. Determining the total value of our share-
knows, such claims are not expected to have a material impact on the
based payments requires the use of highly subjective assumptions, including
financial statements.
the expected life of the stock options, estimated forfeitures and the price
volatility of the underlying shares. The assumptions used in calculating the
fair value of share-based payment represent management’s best estimates,
Recent accounting pronouncements
See note 2.1.1 to our Consolidated Financial Statements beginning on page
but these estimates involve inherent uncertainties and the application of
189 to this Annual Report.
management’s judgment.
Results of operations
The following discussion is of certain financial and operating data for the
periods indicated. You should read this discussion in conjunction with our
GeoPark 20F 135
Consolidated Financial Statements and the accompanying notes included
elsewhere in this annual report.
We acquired Winchester and Luna on February 14, 2012 and Cuerva on
March 27, 2012. Accordingly, our results for the year ended December 31,
2014, 2013 and 2012 are not fully comparable with prior periods.
Revenue
Net oil sales
For accounting purposes, the results of operations of Winchester, Luna and
Net gas sales
Cuerva were consolidated into our financial statements beginning
Net revenue
on January 31, 2012, January 31, 2012 and March 31, 2012, respectively.
Production costs
See Note 34 to our Annual Consolidated Financial Statements.
In addition, we closed the acquisition of Brazilian Rio das Contas on
March 31, 2014 and began consolidating its financials beginning on
Gross profit
Gross margin (%)(1)
Exploration costs
Administrative costs
March 31, 2014. Accordingly, our results of operations for the year ended
Selling expenses
December 31, 2014, are not fully comparable with prior periods.
Year ended December 31, 2014 compared to year ended December 31, 2013
The following table summarizes certain of our financial and operating data
for the years ended December 31, 2014 and 2013.
Impairment loss for
non-financial assets
Other operating (expense)/income
Operating profit
Financial results
Profit before income tax
Income tax
Profit for the year
Non-controlling interest
Profit for the year attributable
For the year ended % Change
December 31,
from prior
2014
2013
year
(in thousands of US$, except for percentages)
367,102
61,632
428,734
(229,650)
315,435
22,918
338,353
(179,643)
199,084
158,710
46%
(43,369)
(48,164)
(24,428)
(9,430)
(1,849)
71,844
(50,719)
21,125
(5,195)
15,930
8,418
47%
(16,254)
(46,584)
(17,252)
-
5,344
83,964
(33,876)
50,088
(15,154)
34,934
12,922
16%
169%
27%
28%
25%
(1)%
167%
3%
42%
100%
(135)%
(14)%
50%
(58)%
(66)%
(54)%
(35)%
to owners of the Company
7,512
22,012
(66)%
Net production volumes
Oil (mbbl)
Gas (mcf)
Total net production (mboe)
Average net production (boepd)
Average realized sales price
Oil (US$per bbl)
Gas (US$per mmcf)
Average unit costs per boe (US$)
Operating cost
Royalties and other
Production costs(2)
Depreciation
Total production cost
Exploration costs
Administrative costs
Selling expenses
5,307
11,197
7,173
19,653
4,056
5,263
4,933
13,517
77.5
6.4
16.2
3.3
19.5
14.7
34.5
6.5
7.2
3.7
81.9
5.0
19.0
3.5
22.5
13.9
36.4
3.3
9.4
3.5
31%
112%
45%
45%
(5)%
28%
(15)%
(6)%
(13)%
6%
(5)%
97%
(23)%
6%
(1) Gross margin is defined as total revenue minus production costs, divided
by total revenue.
(2) Calculated pursuant to FASB ASC 932.
136 GeoPark 20F
The following table summarizes certain financial and operating data.
Chile
Colombia
Brazil
Other
For the year ended December 31,
2014
Total
Chile
Colombia
Other
2013
Total
Net revenue
Gross profit/(loss)
Depreciation
Impairment and write-off
145,720
68,096
(37,077)
(28,772)
246,085
114,405
(52,713)
(10,994)
35,621
15,919
(11,613)
-
1,308
664
(254)
(31)
428,734
199,084
(101,657)
(39,797)
157,491
89,906
(30,471)
(7,704)
179,324
67,612
(39,406)
(3,258)
(in thousands of US$)
1,538
1,192
(323)
-
338,353
158,710
(70,200)
(10,962)
Net revenue
For the year ended December 31, 2014, crude oil sales were our principal
source of revenue, with 86% and 14% of our total revenue from crude oil and
gas sales, respectively. The following chart shows the change in oil and
natural gas sales from the year ended December 31, 2013 to the year ended
December 31, 2014.
For the year ended December 31,
2014
2013
(in thousands of US$)
367,102
61,632
315,435
22,918
428,734
338,353
Year ended
December 31,
Change from prior year
2014
2013
%
(in thousands of US$, except for percentages)
145,720
246,085
35,621
1,308
157,491
179,324
-
1,538
(11,771)
66,761
35,621
(230)
428,734
338,353
90,381
(7)%
37%
100%
(15)%
27%
Consolidated
Sale of crude oil
Sale of gas
Total
By country
Chile
Colombia
Brazil
Other
Total
GeoPark 20F 137
Net revenue increased 27%, from US$338.4 million for the year ended
Net revenue attributable to our operations in Brazil for the year ended
December 31, 2013 to US$428.7 million for the year ended December 31,
December 31, 2014 was US$35.6 million, representing 8% of our total
2014, primarily as a result of (i) incorporation of 9 months of results for
consolidated sales, were related to our Rio das Contas operations and were
Rio das Contas in our Brazil operations and (ii) an increase in volumes of crude
composed of 96% gas sales, amounting to US$34.1 million.
sales by 33%. Sales of crude oil increased to 5.0 mmbbl in the year ended
December 31, 2014 compared to 3.8 mmbbl in the year ended December 31,
2013, and resulted in net revenue of US$367.1 million for the year ended
Production costs
The following table summarizes our production costs for the years ended
December 31, 2014 compared to US$315.4 million for the year ended
December 31, 2014 and 2013.
December 31, 2013. In addition, sales of gas increased from US$22.9 million
for the year ended December 31, 2013 to US$61.6 million for the year ended
December 31, 2014 due to the incorporation of 9 months of sales for Rio
das Contas, transaction that closed in March 31, 2014.
For the year ended % Change
December 31,
from prior
2014
2013
year
(in thousands of US$, except for percentages)
The increase in 2014 net revenue of US$90.4 million is mainly explained by:
• an increase of US$66.8 million in oil sales in Colombia.
Consolidated
(including Chile, Colombia, Argentina and Brazil)
• an increase of U$S35.6 million in sales in Brazil, related to our Rio das Contas
Depreciation
operations and including US$1.5 million of oil sales and US$34.1 million
of gas sales.
Royalties
Staff costs
• a decrease of US$11.8 million in sales in Chile, including US$16.4 million.
Transportation costs
in oil sales, partially offset by an increase in gas sales of US$4.6 million.
Well and facilities maintenance
Net revenue attributable to our operations in Chile for the year ended
Equipment rental
December 31, 2014 was US$145.7 million, a 7% decrease from US$157.5
Other costs
Consumables
(99,360)
(22,166)
(17,731)
(11,534)
(25,475)
(16,157)
(7,563)
(29,664)
(68,579)
(17,239)
(14,202)
(11,392)
(20,662)
(14,855)
(7,139)
(25,575)
million for the year ended December 31, 2013, principally due to (1)
Total
(229,650)
(179,643)
45%
29%
25%
1%
23%
9%
6%
16%
28%
decreased sales of crude oil of 1.3 mmbbl for the year ended December 31,
2014 compared to 1.6 mmbbl for the year ended December 31, 2013
(a decrease of 16%) due to the decline in base production, partially offset by
new wells drilled, (2) increased average realized prices per barrel of crude
2014
oil from US$84.3 per barrel for the year December 31, 2013 to US$89.4 per
Chile
Brazil
Colombia
barrel for the year ended December 31, 2014 (an increase of US$5.1 per
barrel or a total of 6%). The increase in the average realized price per barrel
was partly attributable to lower quality discounts in the year ended
December 31, 2014 as compared to the same period in 2013, partially offset
By country
Depreciation (35,856)
(6,777)
Royalties
(11,553)
(2,794)
by lower international reference prices. The net decreased sales of crude
Staff costs
(4,026)
oil were partially offset by a US$4.6 million increase in gas sales mainly driven
Transportation
by higher average gas prices and to a lesser extent due to our Tierra del
Fuego operations. The contribution to our net revenue during such years
from our operations in Chile was 34% and 47%, respectively.
costs
Well and
facilities
(6,784)
maintenance (14,157)
Net revenue attributable to our operations in Colombia for the year ended
Consumables
(2,111)
December 31, 2014 was US$246.1 million, compared to US$179.3 million for
Equipment
the year ended December 31, 2013, representing 57% and 53% of our
rental
(97)
-
-
-
-
-
Year ended December 31,
2013(1)
Colombia
Chile
(in thousands of US$)
(51,856)
(12,353)
(13,962)
(29,287)
(7,384)
(6,508)
(39,233)
(9,661)
(8,988)
(4,663)
(6,456)
(4,733)
(10,969)
(13,974)
(8,163)
(1,891)
(12,105)
(12,886)
(7,433)
-
(7,139)
(16,967)
total consolidated sales. Such amounts were primarily due to increased sales
Other costs
(7,816)
(5,355)
(16,470)
(7,896)
of crude oil, from 2.4 mmbbl for the year ended December 31, 2013 to
Total
(77,624)
(19,702)
(131,680)
(67,585)
(111,712)
3.7 mmbbl for the year ended December 31, 2014, an increase of 54%. This
increase resulted mainly from the development of the Tigana and Tua fields
(1) No information is available for Brazil for 2013 as Rio das Contas was
in the Llanos 34 Block. This was partially offset by a decrease in the average
acquired in March 2014.
realized prices per barrel of crude oil from US$80.3 per barrel to US$73.0
per barrel, primarily due to lower reference international prices.
138 GeoPark 20F
Production costs increased 28%, from US$179.6 million for the year ended
result, gross margin for the year ended December 31, 2014 was 46%,
December 31, 2013 to US$229.7 million for the year ended December 31,
which represented a slight decrease of 1% as compared to the gross margin
2014, primarily due to increased costs in the Colombian operations and the
for the year ended December 31, 2013. Gross profit per boe decreased 7%,
addition of US$19.7 million in such costs from our Brazilian operations
to US$19.9 per barrel for the year ended December 31, 2014.
related to the incorporation of 9 months of our Rio das Contas operations.
Gross profit attributable to our operations in Chile for the year ended
In our Chilean operations, production costs increased by 15%, due to higher
December 31, 2014 was US$68.1 million, a 24% decrease from US$89.9 million
depreciation charges per boe (that increased 41% to $17.5 per boe in 2014)
for the year ended December 31, 2013. The contribution to our gross profit
and the impact on fixed costs from lower oil and gas production and
during such years from our operations in Chile was 34% and 57%,
the startup of operations in the Tierra del Fuego Blocks. In the year ended
respectively. Gross profit margin amounted to 47% for the year ended
December 31, 2014, in Chile, operating costs per boe increased to US$16.7
December 31, 2014.
per boe from US$12.2 per boe in 2013. In the year ended December 31, 2014,
the revenue mix for Chile was 81.1% oil and 18.9% gas, whereas for the
Gross profit attributable to our operations in Colombia for the year ended
same period in 2013 it was 85.5% oil and 14.5% gas.
December 31, 2014 was US$114.4 million a 69% increase from US$67.6 million
for the year ended December 31, 2013. The contribution to our gross profit
Production costs in Colombia increased 18%, to US$131.6 million for the year
during such years from our operations in Colombia was 57% and 43%,
ended December 31, 2014 as compared to the year ended December 31,
respectively. Gross profit margin amounted to 46% for the year ended
2013, primarily due to increased production and deliveries in the year ended
December 31, 2014.
December 31, 2014. However, operating costs per boe in Colombia decreased
to US$18 per boe for the year ended December 31, 2014 from US$26 per
Gross profit attributable to our operations in Brazil for the year ended
boe for the year ended December 31, 2013, due to the fact that increased
December 31, 2014 was US$15.9 million resulting from the acquisition of
production generated improved fixed cost absorption, which positively
Rio das Contas. The contribution to our gross profit during the year ended
impacted the production costs per boe. In addition, depreciation charges per
December 31, 2014 from our operations in Brazil was 8%. Gross profit
boe decreased 17% to $14 per boe in 2014.
margin amounted to 45% for the year ended December 31, 2014.
Production costs in Brazil amounted to US$19.7 million for the year ended
Exploration costs
December 31, 2014 corresponding to our Rio das Contas operations.
Operating costs per boe in decreased to US$6 per boe for the year ended
December 31, 2014.
Gross profit
Year ended
Chile
Colombia
December 31,
Change from prior year
Brazil
2014
2013
%
(in thousands of US$, except for percentages)
Other
Total
Year ended
December 31,
Change from prior year
2014
2013
%
(in thousands of US$, except for percentages)
(35,013)
(4,567)
(2,164)
(1,625)
(9,758)
(3,341)
(1,702)
(1,453)
(25,255)
(1,226)
(462)
(172)
(43,369)
(16,254)
(27,115)
259%
37%
27%
12%
167%
Chile
Colombia
Brazil
Other
Total
68,096
114,405
15,919
664
89,906
67,612
-
1,192
(21,810)
(24)%
46,793
15,919
(528)
69%
Exploration costs increased 167%, from US$16.3 million for the year ended
100%
(44)%
December 31, 2013 to US$43.4 million for the year ended December 31, 2014,
primarily as the result of an increase in recognition of write-offs of
199,084
158,710
40,374
25%
unsuccessful efforts primarily in our Chilean operations in an amount of
US$19.4 million and to a lesser extent due to increased staff costs
Gross profit increased 25%, from US$158.7 million for the year ended
amounting to US$5.3 million.
December 31, 2013 to US$199.1 million for the year ended December 31,
2014, as a result of (i) increased sales and production in Colombia, (ii) the
The 2014 charge in write-off of unsuccessful efforts corresponds to the cost
incorporation of nine months corresponding to our Rio das Contas operations
of ten unsuccessful exploratory wells: eight of them in Chile (three in the
in Brazil in the year ended December 31, 2014, partially offset by decreased
Flamenco Block, two in the Fell Block, two in the Tranquilo Block and one in
net revenues and higher production costs in our Chilean operations. As a
the Campanario Block) and two of them in Colombia (in the non-operated
GeoPark 20F 139
Arrendajo Block). The 2014 charge also includes the loss generated by the
Selling expenses
write-off of the remaining seismic cost for Otway and Tranquilo Blocks,
registered in previous years. The 2013 charge in write-off of unsuccessful
efforts corresponds to the cost of five unsuccessful exploratory wells: two
in Chile (one in the Fell Block and one in the Tranquilo Block) and three
in Colombia (one well in the Cuerva Block and one well in each of the
non-operated blocks of Arrendajo and Llanos 32).
Administrative costs
Year ended
December 31,
Change from prior year
2014
2013
%
(in thousands of US$, except for percentages)
(2,470)
(21,456)
-
(502)
(4,062)
(12,677)
-
(513)
1,592
(8,779)
-
11
(24,428)
(17,252)
(7,176)
(39)%
69%
-
(2)%
42%
Chile
Colombia
Brazil
Other
Total
Year ended
December 31,
2014
2013
Change from prior year
%
Selling expenses increased 42%, from US$17.3 million for year ended
(in thousands of US$, except for percentages)
December 31, 2013 to US$24.4 million for the year ended December 31, 2014,
Chile
Colombia
Brazil
Other
Total
(19,401)
(11,965)
(2,819)
(13,979)
(16,420)
(16,409)
(1,404)
(12,351)
(2,981)
4,444
(1,415)
(1,628)
(48,164)
(46,584)
(1,580)
18%
primarily due to increased production and deliveries in our Colombian
operations corresponding to sales made through the pipeline. In our Chilean
operations, selling expenses were 39% lower compared to prior year,
primarily as a result of lower production and deliveries in Chile.
(27)%
101%
13%
3%
Operating profit (loss)
Administrative costs increased 3%, from US$46.6 million for the year ended
December 31, 2013 to US$48.2 million for the year ended December 31, 2014,
primarily as a result of an increase in costs in: (1) our Chilean operations,
from US$16.4 million in the year ended December 31,2013 to US$19.4 million
in the year ended December 31, 2014, mainly due to the startup of our
operations in Tierra del Fuego; (2) incorporation of our Rio das Contas
Chile
operations in Brazil and (3) higher corporate expenses related to our growth
Colombia
strategy and new business efforts, partially offset by lower administrative
expenses in Colombia.
Brazil
Other
Total
Year ended
December 31,
Change from prior year
2014
2013
%
(in thousands of US$, except for percentages)
11,733
67,212
10,658
(17,759)
71,844
63,110
38,811
(3,107)
(14,850)
(51,377)
28,401
13,765
(2,909)
83,964
(12,120)
(81)%
73%
443%
20%
(14)%
We recorded an operating profit of US$71.8 million for the year ended
December 31, 2014, a 14% decrease from US$84.0 million for the year ended
December 31, 2013, primarily due to lower gross profit and higher exploratory
costs resulting from the write-offs of unsuccessful exploratory wells in our
Chilean operations, partially offset by (i) higher operating profit in our
Colombian operations resulting from higher production and deliveries and
(ii) higher operating profit in our Brazilian operations related to the Rio das
Contas acquisition that we closed on March 31, 2014. In 2014, Colombian
operations were negatively impacted by non-cash impairment charges of
non-financial assets amounting to $9.4 million related to our La Cuerva Block,
resulting from the decrease in international oil prices.
140 GeoPark 20F
Financial results, net
Financial loss increased 50% to US$50.7 million for the year ended December
Income tax
31, 2014 as compared to US$33.9 million for the year ended December 31,
2013, due to exchange rate differences amounting to US$22 million resulting
from the depreciation of the Brazilian real in addition to increased interest
expenses, resulting from higher average indebtedness. In addition, financial
results for the year ended December 31, 2013 included accelerated debt
Chile
issuance costs in connection with the redemption of the Notes due 2015 in
Colombia
an amount of US$8.6 million following the issuance of Notes due 2020 in
February 2013.
Profit before income tax
Brazil
Other
Total
Year ended
December 31,
Change from prior year
2014
2013
%
(in thousands of US$, except for percentages)
4,080
(4,121)
(21,415)
(17,870)
7,446
4,694
528
6,309
(5,195)
(15,154)
8,201
(3,545)
6,918
(1,615)
9,959
(199)%
20%
1,310%
(26)%
(66)%
Income tax decreased 66%, from US$15.2 million for the year ended
Year ended
December 31, 2013 to US$5.2 million for the year ended December 31, 2014,
December 31,
Change from prior year
as a result of our decreased results of operations in Chile and Brazil, partially
2014
2013
%
offset by higher results of operations in our Colombian operations.
(in thousands of US$, except for percentages)
Our effective tax rate for the year ended December 31, 2014 was 25% as
Chile
Colombia
Brazil
Other
Total
13,151
61,609
(9,698)
(43,937)
21,125
49,965
31,049
(1,937)
(36,814)
(74)%
compared to 30% in the year ended December 31, 2013 due to higher
30,560
(7,761)
98%
charges from deferred income taxes in the year ended December 31, 2014
401%
mainly resulting from the effect of currency translation on tax base.
(28,989)
(14,948)
52%
50,088
(28,963)
(58)%
Profit for the year
For the year ended December 31, 2014, we recorded a profit before income
tax of US$21.1 million, a decrease of 58% from US$50.1 million for the year
ended December 31, 2013, primarily due lower profits from our Chilean,
Brazilian and Other operations amounting to US$36.8 million, US$7.8 million
and US$14.9 million, respectively, partially offset by increased profits from
Chile
our Colombian operations amounting to US$30.6 million.
Colombia
Brazil
Other
Total
Year ended
December 31,
Change from prior year
2014
2013
%
(in thousands of US$, except for percentages)
17,231
40,194
(2,252)
(39,243)
15,930
45,844
13,179
(1,409)
(28,613)
27,015
(843)
(22,680)
(16,563)
34,934
(19,004)
(62)%
205%
60%
73%
(54)%
For the year ended December 31, 2014, we recorded a profit of US$15.9
million, a 54% decrease from US$34.9 million for the year ended December
31, 2013, as a result of the reasons described above.
Profit for the year attributable to owners of the Company
Profit for the year attributable to owners of the Company decreased by
66% to US$7.5 million, for the reasons described above. Profit attributable
to non-controlling interest decreased by 35% to US$8.4 million for the
year ended December 31, 2014 as compared to the prior year.
GeoPark 20F 141
Year ended December 31, 2013 compared to year ended December 31, 2012
The following table summarizes certain of our financial and operating data
For the year ended % Change
December 31,
from
2013
2012
prior year
for the years ended December 31, 2013 and 2012.
(in thousands of US$, except for percentages)
Revenue
Net oil sales
Net gas sales
Net revenue
Production costs
Gross profit
Gross margin (%)(1)
Exploration costs
Administrative costs
Selling expenses
Other operating income/(expense)
Operating profit
Financial income
Financial expenses
Bargain purchase gain on
acquisition of subsidiaries
Profit before income tax
Income tax
Profit for the year
Non-controlling interest
315,435
221,564
22,918
28,914
338,353
(179,643)
250,478
(129,235)
158,710
121,243
47%
(16,254)
(46,584)
(17,252)
5,344
83,964
4,893
48%
(27,890)
(28,798)
(24,631)
823
40,747
892
(38,769)
(17,200)
-
50,088
(15,154)
34,934
12,922
8,401
32,840
(14,394)
18,446
6,567
42%
(21)%
35%
39%
31%
(1)%
(42)%
62%
(30)%
549%
106%
449%
125%
-
53%
5%
89%
97%
Profit for the year attributable
to owners of the Company
22,012
11,879
85%
Net production volumes
Oil (mbbl)
Gas (mcf)
Total net production (mboe)
4,056
5,263
4,933
2,513
8,346
3,904
Average net production (boepd)
13,517
11,292
Average realized sales price
Oil (US$per bbl)
Gas (US$per mmcf)
Average unit costs per boe (US$)
Operating cost
Royalties and other
Production costs(2)
Depreciation
Total production cost
Exploration costs
Administrative costs
Selling expenses
81.9
5.0
19.0
3.5
22.5
13.9
36.4
3.3
9.4
3.5
90.5
4.0
16.8
2.9
19.7
13.4
33.1
7.1
7.4
6.3
61%
(37)%
26%
20%
(10)%
25%
13%
21%
14%
4%
10%
(54)%
27%
(44)%
(1) Gross margin is defined as total revenue minus production costs, divided
by total revenue.
(2) Calculated pursuant to FASB ASC 932.
142 GeoPark 20F
The following table summarizes certain financial and operating data.
Net revenue
Gross profit/(loss)
Depreciation
Impairment and write-off
Chile
Colombia
Other
157,491
89,906
(30,471)
(7,704)
179,324
67,612
(39,406)
(3,258)
1,538
1,192
(323)
-
2013
Total
338,353
158,710
(70,200)
(10,962)
For the year ended December 31,
Chile
Colombia
Other
2012
Total
149,927
84,133
(28,734)
(18,490)
99,501
39,304
(21,050)
(5,147)
(in thousands of US$)
1,050
(2,194)
(3,533)
(1,915)
250,478
121,243
(53,317)
(25,552)
Net revenue
US$28.9 million for the year ended December 31, 2012 to US$22.9 million for
For the year ended December 31, 2013, crude oil sales were our principal
source of revenue, with 93% and 7% of our total revenue from crude oil and
gas sales, respectively. The following chart shows the change in oil and
The increase in 2013 net revenue of US$87.8 million is mainly explained by:
• an increase of US$79.8 million in oil sales in Colombia.
natural gas sales from the year ended December 31, 2012 to the year ended
• an increase of US$13.6 million in oil sales in Chile, partially offset by a
December 31, 2013.
decrease of US$6.0 million in gas deliveries in Chile.
the year ended December 31, 2013.
Consolidated
Sale of crude oil
Sale of gas
Total
By country
Chile
Colombia
Other
Total
For the year ended December 31,
Net revenue attributable to our operations in Chile for the year ended
2013
2012
December 31, 2013 was US$157.5 million, a 5% increase from
(in thousands of US$)
US$149.9 million for the year ended December 31, 2012, principally due
to (1) increased sales of crude oil of 1,592 mbbl for the year ended December
315,435
221,564
31, 2013 compared to 1,415 mbbl for the year ended December 31, 2012
22,918
28,914
(an increase of 12.5%) due to the continuing development in the Tobifera
338,353
250,478
formation, and (2) decreased average realized prices per barrel of crude
oil from US$85.4 per barrel for the year December 31, 2012 to US$84.3 per
barrel for the year ended December 31, 2013 (a decrease of US$1.1 per barrel
Year ended
or a total of 1.3%). The decrease in the average realized price per barrel
December 31,
2012
2013
Change from prior year
%
was partly attributable to quality discounts in the year ended December 31,
2013 as compared to the same period in 2012. The net increased sales of
(in thousands of US$, except for percentages)
crude oil were partially offset by a US$6.0 million reduction in gas sales mainly
157,491
179,324
1,538
149,927
99,501
1,050
7,564
79,823
488
338,353
250,478
87,875
5%
80%
46%
35%
driven by a decrease of 37% in production in the year ended December 31,
2013, partially compensated by higher average gas prices. The contribution
to our net revenue during such years from our operations in Chile was 47%
and 60%, respectively.
Net revenue attributable to our operations in Colombia for the year ended
Net revenue increased 35%, from US$250.5 million for the year ended
December 31, 2013 was US$179.3 million, compared to US$99.5 million
December 31, 2012 to US$338.4 million for the year ended December 31,
for the year ended December 31, 2012, representing 53% and 40% of our
2013, primarily as a result of an increase in volumes of crude sales by 55%.
total consolidated sales. Such amounts were primarily due to increased
Sales of crude oil in operated blocks increased to 3,800 mbbl in the year
sales of crude oil in operated blocks, from 1,087 mbbl for the year ended
ended December 31, 2013 compared to 2,448 mbbl in the year ended
December 31, 2012 to 2,185 mbbl for the year ended December 31, 2013, an
December 31, 2012, and resulted in net revenue of US$315.4 million for the
increase of 101%. This increase resulted from (i) the incorporation of an
year ended December 31, 2013 compared to US$221.6 million for the year
additional three months of Cuerva’s results in the year ended December 31,
ended December 31, 2012, partially offset by decreases in sales of gas from
2013 and the incorporation of an additional month of Winchester and
GeoPark 20F 143
Luna’s operations (the revenues for the corresponding period that were not
Production costs increased 39%, from US$129.2 million for the year ended
included in the year ended December 31, 2012 amounted to US$23.8 million)
December 31, 2012 to US$179.6 million for the year ended December 31,
as compared to the same period in 2012, and (ii) the development of the
2013, primarily due to the addition of US$51.5 million in such costs from our
Max and Tua fields and our discoveries of the Tarotaro field in the Llanos 34
Colombian operations.
Block and the Potrillo field in the Yamú Block. This was partially offset by
a decrease in the average realized prices per barrel of crude oil from US$97.1
In our Chilean operations, production costs increased by 2.7%, due to
per barrel to US$80.3 per barrel, primarily due to the fact that in 2013 we
the change in revenue mix from gas to oil, which has higher production costs
started selling part of our oil production at well-head with higher commercial
than gas, and due to an increase in our oil production. In the year ended
discounts, as opposed to transporting it to different delivery points, which
December 31, 2013, in Chile, operating costs per boe increased to US$12.2
led to lower selling expenses that offset the lower selling prices.
per boe from US$10.7 per boe in 2012. In the year ended December 31, 2013,
Production costs
the revenue mix for Chile was 85.5% oil and 14.5% gas, whereas for the
same period in 2012 it was 80.7% oil and 19.3% gas.
The following table summarizes our production costs for the years ended
Operating costs in Colombia increased 79.1%, to US$62.8 million for the year
December 31, 2013 and 2012.
ended December 31, 2013 as compared to the year ended December 31,
2012, primarily due to an increase in production and deliveries the region and
For the year ended % Change
also to the incorporation of an additional three months of Cuerva’s results
December 31,
from prior
in the year ended December 31, 2013 and the incorporation of an additional
2013
2012
year
month of Winchester and Luna’s operations in Colombia (operating costs
(in thousands of US$, except for percentages)
for the corresponding period that were not included in the year ended
Consolidated
(including Chile, Colombia and Argentina)
Depreciation
Royalties
Staff costs
Transportation costs
Well and facilities maintenance
Consumables
Equipment rental
Other costs
Total
(68,579)
(17,239)
(14,202)
(11,392)
(20,662)
(14,855)
(7,139)
(25,575)
(52,307)
(11,424)
(14,171)
(7,211)
(9,385)
(9,884)
(5,936)
(18,917)
(179,643)
(129,235)
120%
Gross profit
50%
20%
35%
39%
December 31, 2012 amounted to US$14.2 million). However, operating costs
per boe in Colombia decreased to US$26.5 per boe for the year ended
December 31, 2013 from US$34.0 per boe for the year ended December 31,
2012, due to the fact that increased production generated improved fixed
cost absorption, which positively impacted the production costs per boe.
31%
51%
0%
58%
Year ended
December 31,
Change from prior year
2013
2012
%
(in thousands of US$, except for percentages)
89,906
67,612
1,192
84,133
39,304
(2,194)
158,710
121,243
5,773
28,308
3,386
37,467
7%
72%
154%
31%
Year ended December 31,
Colombia
Chile
2013
2012
Chile
Colombia
Chile
Colombia
Other
Total
(in thousands of US$)
By country
Depreciation
Royalties
Staff costs
Transportation costs
Well and facilities
maintenance
Consumables
Equipment rental
Other costs
Total
144 GeoPark 20F
Gross profit increased 31%, from US$121.2 million for the year ended
(29,287)
(39,233)
(28,120)
(20,964)
December 31, 2012 to US$158.7 million for the year ended December 31,
(7,384)
(6,508)
(6,456)
(8,163)
(1,891)
-
(9,661)
(8,988)
(4,733)
(12,105)
(12,886)
(7,139)
(7,088)
(8,560)
(5,986)
(6,290)
(2,717)
-
(4,164)
(7,432)
(1,045)
(2,850)
(7,090)
(5,936)
2013, as a result of (i) increased sales and production in Colombia,
(ii) the incorporation of an additional three months of Cuerva’s results in the
year ended December 31, 2013 and the incorporation of an additional
month of Winchester and Luna’s operations in Colombia (gross profit for the
corresponding period that was not included in the year ended December 31,
2012 amounted to US$9.4 million) and (iii) increased net revenues in our
Chilean operations. As a result, gross margin for the year ended December 31,
(7,896)
(16,967)
(7,033)
(10,716)
2013 was 47%, which represented a slight decrease of 3% as compared to
(67,585)
(111,712)
(65,794)
(60,197)
the gross margin for the year ended December 31, 2012. Gross profit per boe
increased 4%, to US$32.2 per barrel for the year ended December 31, 2013.
Gross profit attributable to our operations in Chile for the year ended
Administrative costs increased 62%, from US$28.8 million for the year ended
December 31, 2012 was US$89.9 million, a 7% increase from US$84.1 million
December 31, 2012 to US$46.6 million for the year ended December 31, 2013,
for the year ended December 31, 2012. The contribution to our gross
primarily as a result of an increase in costs in: (1) our Chilean operations,
profit during such years from our operations in Chile was 57% and 69%,
from US$10.9 million in the year ended December 31,2012 to US$16.4 million
respectively.
in the year ended December 31, 2013, mainly due to (1) the startup of our
operations in Tierra del Fuego; (2) increased staff and other costs in Colombia,
Gross profit attributable to our operations in Colombia for the year ended
and (3) higher corporate expenses related to our growth strategy and new
December 31, 2012 was US$67.6 million a 72% increase from US$39.3 million
business efforts.
for the year ended December 31, 2012. The contribution to our gross
profit during such years from our operations in Colombia was 43% and 32%,
Selling expenses
respectively.
Exploration costs
Chile
Colombia
Other
Total
Year ended
December 31,
Change from prior year
Chile
2013
2012
%
Colombia
(in thousands of US$, except for percentages)
(9,758)
(3,341)
(3,155)
(20,452)
10,694
(5,528)
(1,910)
2,187
1,245
Other
Total
(52)%
(40%)
Year ended
December 31,
Change from prior year
2013
2012
%
(in thousands of US$, except for percentages)
(4,062)
(5,327)
(12,677)
(18,953)
(513)
(351)
(17,252)
(24,631)
1,265
6,276
162
7,379
(24)%
(33)%
(46)%
(30)%
(16,254)
(27,890)
11,636
(42)%
December 31, 2012 to US$17.3 million for the year ended December 31, 2013,
primarily due to the change in the delivery point for certain of our production
65%
Selling expenses decreased 30%, from US$24.6 million for year ended
Exploration costs decreased 42%, from US$27.9 million for the year ended
in our Colombian operations. In our Chilean operations, selling expenses
December 31, 2012 to US$16.3 million for the year ended December 31,
were 24% lower compared to prior year, primarily as a result of the impact
2013, primarily as the result of the decrease in recognition of write-offs of
of the DOP penalty we paid to Methanex in 2012, described in “-Business-
unsuccessful efforts in an amount of US$14.6 million.
Marketing and Delivery Commitments,” partially offset by the increase in oil
The 2013 charge in write-off of unsuccessful efforts corresponds to the cost
of five unsuccessful exploratory wells: two in Chile (one in Fell Block and
Operating profit (loss)
deliveries in Chile.
one in Tranquilo Block) and three in Colombia (one well in Cuerva Block and
one well in each of the non-operated blocks, Arrendajo and Llanos 32). The
2012 charge in write-off of unsuccessful efforts corresponds to the costs
of eight unsuccessful exploratory wells: five in Chile (two in Fell Block, two in
Otway Block and the remaining in Tranquilo Block) and three in Colombia
(one well in Cuerva Block, one well in Arrendajo Block and the remaining in
Chile
Llanos 17 Block). The 2012 charge also includes the loss generated by the
Colombia
relinquishment of an area in the Del Mosquito Block in Argentina.
Other
Total
Administrative costs
Year ended
December 31,
2013
2012
Change from prior year
%
(in thousands of US$, except for percentages)
63,110
38,811
(17,957)
83,964
47,915
8,499
(15,667)
40,747
15,195
30,312
(2,290)
43,217
32%
357%
15%
106%
Year ended
December 31, 2013, a 106% increase from US$40.8 million for the year ended
December 31,
Change from prior year
December 31, 2012, primarily due to the incorporation of an additional three
2013
2012
%
months of Cuerva’s results and an increase in production and deliveries
We recorded an operating profit of US$84.0 million for the year ended
Chile
Colombia
Other
Total
(in thousands of US$, except for percentages)
51%
(10,879)
(5,541)
(16,420)
in Colombia in the year ended December 31, 2013 and the incorporation of
an additional month of Winchester and Luna’s operations in Colombia. In
(16,409)
(13,755)
(7,393)
(10,526)
(46,584)
(28,798)
(9,016)
(3,229)
17,786
121%
addition, during the year ended December 31, 2013, in Chile, we recognized a
gain amounting to US$3.2 million in other operating income related to the
31%
62%
GeoPark 20F 145
reversal of certain provisions previously recorded that, based on the view
Income tax
of our management and legal advisors, were extinguished as the statute of
limitations was reached.
Financial results, net
Financial loss increased 108% to US$33.9 million, due to the accelerated
Chile
amortization of debt issuance costs incurred in connection with the
Colombia
redemption of the Notes due 2015 in an amount of US$8.6 million following
the issuance of the Notes due 2020 in February 2013, the incorporation of
an additional three months of Cuerva’s results in the year ended December
Other
Total
Year ended
December 31,
Change from prior year
2013
2012
%
(in thousands of US$, except for percentages)
(4,121)
(11,349)
(17,870)
6,837
(4,976)
1,931
(15,154)
(14,394)
7,228
(12,894)
4,906
(760)
(64)%
259%
254%
5%
31, 2013 and the incorporation of an additional month of Winchester and
Income tax increased 5%, from US$14.4 million for the year ended
Luna’s operations in Colombia into our results and higher interest expenses
December 31, 2012 to US$15.2 million for the year ended December 31, 2013,
generated by the issuance of the Notes due 2020 in an amount of US$12.1
as a result of our increased results of operations in Chile and Colombia.
million, partially offset by interest income due to increased cash and cash
Our effective tax rate for the year ended December 31, 2013 was 30% as
equivalents.
Profit before income tax
compared to 44% in the year ended December 31, 2012 due to lower
charges from deferred income taxes in the year ended December 31, 2013
mainly resulting from the effect of currency translation on tax base in
Colombia and Chile, compensated by an increase in current taxes resulting
Year ended
from higher profits in Chile and Colombia and the impact of tax loss carry
December 31,
Change from prior year
forwards recorded in Colombia.
2013
2012
%
(in thousands of US$, except for percentages)
Profit for the year
Chile
Colombia
Other
Total
49,965
31,049
42,272
11,223
7,693
19,826
(30,926)
(20,655)
(10,271)
50,088
32,840
17,248
18%
177%
50%
53%
For the year ended December 31, 2013, we recorded a profit before income
Chile
tax of US$50.1 million, an increase of 53% from US$32.8 million for the year
Colombia
ended December 31, 2012, primarily due to the incorporation of an additional
Other
three months of Cuerva’s results in the year ended December 31, 2013
and the incorporation of an additional month of Winchester and Luna’s
Total
Year ended
December 31,
Change from prior year
2013
2012
%
(in thousands of US$, except for percentages)
45,844
13,179
(24,089)
34,934
30,923
6,247
(18,724)
18,446
14,921
6,932
(5,365)
16,488
48%
111%
29%
89%
operations in Colombia into our results and to increases in production and
For the year ended December 31, 2013, we recorded a profit of US$34.9
deliveries in Colombia, and, to a lesser extent, higher profits from our Chilean
million, a 89% increase from US$18.5 million for the year ended December 31,
operations, partially offset by the occurrence of two non-recurring events:
2012, as a result of the reasons described above.
(1) accelerated amortization of debt issuance costs described above;
and (2) the comparative effect of a bargain purchase gain on acquisition of
subsidiaries of US$8.4 million as a result of the acquisitions of Winchester
Profit for the year attributable to owners of the Company
Profit for the year attributable to owners of the Company increased by
and Luna recorded in the year ended December 31, 2012.
85% to US$22.0 million, for the reasons described above. Profit attributable
to non-controlling interest increased by 97% to US$12.9 million for the
year ended December 31, 2013 as compared to the prior year due to the
incorporation of an additional three months of Cuerva’s results in the year
ended December 31, 2013 and the incorporation of an additional month
of Winchester and Luna’s operations in Colombia and an increase in
non-controlling interest resulting from LGI’s acquisition of a 20% equity
interest in our Colombian operations.
146 GeoPark 20F
B. Liquidity and capital resources
Overview
Our financial condition and liquidity is and will continue to be influenced by
a variety of factors, including:
(i) extend the principal payments that were due in 2015 (amounting
to approximately US$15 million), which will be divided pro-rata during
the remaining principal installments, starting in March 2016 and
(ii) to increase the variable interest rate equal to the six-month LIBOR + 4.0%.
• our ability to generate cash flows from our operations;
In February, 2013, we issued US$300.0 million aggregate principal amount
• our capital expenditure requirements;
of senior secured notes due 2020. The Notes due 2020 mature on February
• the level of our outstanding indebtedness and the interest we are obligated
11, 2020 and bear interest at a fixed rate of 7.50% and a yield of 7.625%
to pay on this indebtedness; and
per annum. Interest on the Notes due 2020 is payable semi-annually in arrears
• changes in exchange rates which will impact our generation of cash flows
on February 11 and August 11 of each year. Our notes due 2020 contain
from operations when measured in U.S. dollars, and, upon the completion of
limitations on the amount of indebtedness we can incur. At current prices,
our Brazil Acquisitions, the real.
absent certain customary exceptions, we do not anticipate achieving an
EBITDA (as defined in the indenture governing our notes due 2020) during
Our principal sources of liquidity have historically been contributed
fiscal year 2015 that would be sufficient enough to allow us to incur
shareholder equity, debt financings and cash generated by our operations.
additional indebtedness, other than certain categories and small baskets of
permitted debt, as specified in the indenture.
Since 2005 to 2014, we have raised approximately US$200 million in equity
offerings at the holding company level and more than US$557 million
We believe that our current operations and 2015 capital expenditures
through debt arrangements with multilateral agencies such as the IFC, gas
program can be funded from cash flow from existing operations and cash on
prepayment facilities with Methanex, international bond issuances and
hand. Should our operating cash flow decline due to unforeseen events,
bank financings, described further below, which have been used to fund our
including delivery restrictions or a protracted downturn in oil and gas prices,
capital expenditures program and acquisitions and to increase our liquidity.
we would examine measures such as further capital expenditure program
reductions, pre-sale agreements, disposition of assets, or issuance of equity,
We have also raised US$173.3 million to date through our strategic
among others.
partnership with LGI following the sale of minority interests in our Colombian
and Chilean operations.
Capital expenditures
We have funded our capital expenditures with proceeds from equity
We initially funded our 2012 expansion into Colombia through a
offerings, credit facilities, debt issuances and pre-sale agreements, as well
US$37.5 million loan, cash on hand and a subsequent sale of a minority
as through cash generated from our operations. We expect to incur
interest in our Colombian operations to LGI. We subsequently restructured
substantial expenses and capital expenditures as we develop our oil and
our outstanding debt in February 2013, by issuing US$300.0 million
natural gas prospects and acquire additional assets.
aggregate principal amount of Notes due 2020, a portion of the proceeds of
which we used to prepay the US$37.5 million loan and to redeem all of our
In the year ended December 31, 2013, we made total capital expenditures of
outstanding Notes due 2015. See “-Item 4. Information on the Company-B.
US$228.0 million (US$145.7 million, US$82.1 million and US$0.2 million in Chile,
Business Overview-Significant Agreements-Agreements with LGI.”
Colombia and Argentina, respectively), consisting of US$133.3 million related
to exploration. 39 new wells were drilled (17 in Chile and 22 in Colombia)
In February 2014, we commenced trading on the NYSE and raised
in blocks in which we have working interests and/or economic interests.
US$98 million (before underwriting commissions and expenses), including
In addition to the above, in 2013 we completed approximately 1,350 sq. km.
the over allotment option granted to and exercised by the underwriters,
in 3D seismic surveys (more than 1,100 sq. km in Chile, mainly related to the
through the issuance of 13,999,700 common shares.
blocks located in Tierra del Fuego and over 250 sq. km in Colombia). In the year
ended December 31, 2012, we made total capital expenditures of US$303.5
In March 2014, we borrowed US$70.5 million pursuant to a five-year term
million, which consisted of investments of US$105.3 million relating to the
(including annual principal amortization in March and September of each
purchase price for our acquisitions of Winchester, Luna and Cuerva in Colombia
year starting in 2015) variable interest secured loan, secured by the benefits
and other investments of US$198.2 million, including the drilling of 45 new
GeoPark receives under the Purchase and Sale Agreement for Natural Gas
wells and seismic surveys registered, principally in our Tierra del Fuego Blocks.
with Petrobras, equal to six-month LIBOR + 3.9% to finance part of the
purchase price of our Rio das Contas acquisition, and funded the remaining
In the year ended December 31, 2014, we made total capital expenditures of
amount with cash on hand. In March 2015, we reached an agreement to:
US$238.0 million (US$161 million, US$66 million, and US$11 million in Chile,
GeoPark 20F 147
Colombia and Brazil, respectively), consisting of US$110 million related
to exploration. 53 new wells were drilled (32 in Chile, and 21 in Colombia in
Cash flows provided by financing activities
Cash provided by financing activities was US$124.7 million for the year
blocks in which we have working interests and/or economic interests.
ended December 31, 2014, compared to cash provided by financing activities
In addition to the above, in 2014 we completed the acquisition of Rio das
of US$164.0 million for the year ended December 31, 2013. This change
Contas for US$115 million (net of cash acquired).
was principally the result of cash received in the 2013 period from the
Cash flows
The following table sets forth our cash flows for the periods indicated:
early redemption of our Notes due 2015 and the repayment of the Banco
Itaú BBA Credit Agreement, in an aggregate amount of US$175.0 million)
issuance of US$300.0 million of our Notes due 2020 (partially offset by the
and an increase of US$36.6 million in cash from LGI pertaining principally to
Year ended December 31,
its investment in our Colombian and Chilean operations. These were
2014
2013
2012
partially offset by funds recovered from our initial public offering and listing
(in thousands of US$)
of our common shares on the New York Stock Exchange in February 2014
amounting to US$90.9 million and the $70.5 million loan entered into
230,746
127,295
129,427
with Itaú BBA International plc used to fund the Rio das Contas acquisition.
(344,041)
(208,500)
(301,132)
124,716
164,018
26,375
Cash provided by financing activities was US$164.0 million for the year
Cash flows provided by (used in)
Operating activities
Investing activities
Financing activities
Net increase (decrease) in cash
ended December 31, 2013, compared to cash provided by financing activities
and cash equivalents
11,421
82,813
(145,330)
of US$26.4 million for the year ended December 31, 2012. This change was
Cash flows provided by operating activities
For the year ended December 31, 2014, cash provided by operating activities
principally the result of cash received in the 2013 period from the issuance
of US$300.0 million of our Notes due 2020 and an increase of US$36.6 million
in cash from LGI pertaining principally to its investment in our Colombian
was US$230.7 million, a 81.3% increase from US$127.3 million for the year
and Chilean operations. These were partially offset by the early redemption
ended December 31, 2013.
of our Notes due 2015 and the repayment of the Banco Itaú BBA Credit
Agreement, in an aggregate amount of US$175.0 million.
For the year ended December 31, 2013, cash provided by operating activities
was US$127.3 million, a 6.3% decrease from US$129.4 million for the year
ended December 31, 2012. This increase is mainly driven by higher
Indebtedness
As of December 31, 2014 and 2013, we had total outstanding indebtedness of
production and revenues that we obtained during 2014, partially offset by
US$369.6 million and US$317.1 million, respectively, as set forth in the table
higher associated costs.
below.
Cash flows used in investing activities
For the year ended December 31, 2014, cash used in investing activities
was US$344.0 million, a 64.9% increase from US$208.5 million for the year
ended December 31, 2013. This increase was primarily related to our Brazilian
acquisitions, which occurred in the first quarter of 2014. This amount
was complemented by an increase of US$22.8 million in capital expenditures
relating to the drilling of 53 new wells (32 in Chile and 21 in Colombia)
and facilities construction, as compared to the drilling of 39 wells (17 in Chile
and 22 in Colombia) for the year ended December 31, 2013.
Cash used in investing activities decreased by US$92.6 million during the
BCI Loans(1)
Bond GeoPark Latin America Agencia en Chile
(Notes due 2020)
Banco de Chile(2)
Rio das Contas Credit Facility
Overdrafts(3)
Total
As of December 31,
2014
2013
(in thousands of US$)
90
2,143
300,963
-
68,540
-
299,912
15,002
-
30
369,593
317,087
year ended December 31, 2013, from US$301.1 million in 2012 to US$208.5
(1) Facility to establish the operational base in the Fell Block.
million in 2013. This decrease includes US$105.3 million related to the
(2) Short-term financing obtained in December 2013 and fully repaid in
purchase price for our Colombian operations (net of cash acquired) in 2012;
January 2014.
this amount was partially offset by an increase of US$19.4 million in capital
(3) We have been granted credit lines for over US$69 million as of December
expenditures relating to the drilling of 39 new wells (17 in Chile and 22
31, 2014. The incurrence of debt under these credit lines could be limited
in Colombia), as compared to the drilling of 35 wells (20 wells in Chile and
by debt covenants associated with our other debt documents.
24 in Colombia) for the year ended December 31, 2012.
148 GeoPark 20F
Our material outstanding indebtedness as of December 31, 2014 is described
of the principal amount of such Notes due 2020 plus an applicable “make-
below.
Notes due 2020
whole” premium, plus accrued and unpaid interest (including, additional
amounts), if any, as such term is defined in the indenture governing the
Notes due 2020, if any, to the redemption date.
General
On February 11, 2013, we issued US$300.0 million aggregate principal
At any time and from time to time on or after February 11, 2017, we may,
at our option, redeem all or part of the Notes due 2020, at the redemption
amount of senior secured notes due 2020. The Notes due 2020 mature on
prices, expressed as percentages of principal amount, set forth below,
February 11, 2020 and bear interest at a fixed rate of 7.50% and a yield of
plus accrued and unpaid interest thereon (including additional amounts),
7.625% per annum. Interest on the Notes due 2020 is payable semi-annually
if any, to the applicable redemption date, if redeemed during the 12-month
in arrears on February 11 and August 11 of each year.
period beginning on February 11 of the years indicated below:
Ranking
The Notes due 2020 constitute senior obligations of Agencia, secured by a
first lien on certain collateral (as described below). The Notes due 2020 rank
Year
2017
2018
equally in right of payment with all senior existing and future obligations
2019 and after
of Agencia (except those obligations preferred by operation of Bermuda and
Percentage
103.750%
101.875%
100.000%
Chilean law, including, without limitation, labor and tax claims); effectively
In addition, at any time prior to February 11, 2016, we may, at our option,
senior to all unsecured debt of Agencia and GeoPark Latin America, to the
redeem up to 35% of the aggregate principal amount of the Notes due
extent of the value of the collateral; senior in right of payment to all existing
2020 (including any additional notes) at a redemption price of 107.50% of
and future subordinated indebtedness of Agencia and GeoPark Latin America;
the principal amount thereof, plus accrued and unpaid interest (including
and effectively junior to any future secured obligations of Agencia and its
additional amounts) if any to the redemption date, with the net cash
subsidiaries (other than additional notes issued pursuant to the indenture
proceeds of one or more equity offerings; provided that: (1) Notes due 2020
governing the Notes due 2020) to the extent secured by assets constituting
in an aggregate principal amount equal to at least 65% of the aggregate
with a security interest on assets not constituting collateral, in each case to
principal amount of Notes due 2020 issued on the first issue date remain
the extent of the value of the collateral securing such obligations.
outstanding immediately after the occurrence of such redemption; and
(2) the redemption must occur within 90 days of the date of the closing of
Guarantees
The Notes due 2020 are guaranteed unconditionally on an unsecured basis by
such equity offering.
us, all of our wholly-owned subsidiaries, and any subsidiary that guarantees
any of our debt, subject to certain exceptions.
Collateral
The notes are secured by a first-priority perfected security interest in certain
Change of control
Upon the occurrence of certain events constituting a change of control,
we are required to make an offer to repurchase all outstanding Notes due
2020, at a purchase price equal to 101% of the principal amount thereof
plus any accrued and unpaid interest (including any additional amounts
collateral, which consists of: 80% of the equity interests of each of GeoPark
payable in respect thereof) thereon to the date of purchase.
Chile and GeoPark Colombia held by Agencia, and loans of the net proceeds
of the Notes due 2020 made by Agencia to each of GeoPark Fell and GeoPark
Llanos SAS. Except for certain immaterial subsidiaries and other exceptions,
Covenants
The Notes due 2020 contain customary covenants, which include, among
GeoPark and Agencia are also required to pledge the equity interests of our
others, limitations on: the incurrence of debt and disqualified or preferred
subsidiaries.
stock, restricted payments (including restrictions on our ability to pay
dividends), incurrence of liens, transfer, prepayment or modification
The Notes due 2020 are also secured on a first-priority basis by intercompany
of certain collateral, guarantees of additional indebtedness, the ability of
loans, disbursed to subsidiaries, in an aggregate amount at any one time that
certain subsidiaries to pay dividends, asset sales, transactions with affiliates,
does not exceed US$300.0 million.
Optional redemption
At any time prior to February 11, 2017, we may, at our option, redeem any of
the Notes due 2020, in whole or in part, at a redemption price equal to 100%
engaging in certain businesses, and merger or consolidation with or into
another company. As of December 31, 2014, we were in compliance with
the above mentioned covenants.
GeoPark 20F 149
In the event the Notes due 2020 receive investment-grade ratings from
pledge by us to BCI of the seismic equipment acquired to start the operations
at least two of the following rating agencies, Standard & Poor’s Rating Group,
in these new blocks. The BCI Letters of Credit expired and were fully paid
Fitch Inc. and Moody’s Investors Service, Inc., and no default has occurred
by us on February 14, 2014, and the applicable interest rate ranged from 4.5%
or is continuing under the indenture governing the Notes due 2020, certain
to 5.45%.
of these restrictions, including, among others, the limitations on incurrence
of debt and disqualified or preferred stock, restricted payments (including
restrictions on our ability to pay dividends), the ability of certain subsidiaries
LGI Line of Credit
In December 2012, in connection with its investment in GeoPark Colombia,
to pay dividends, asset sales and certain transactions with affiliates will
LGI granted as a credit line to Winchester (now GeoPark Colombia S.A.S.), or
no longer be applicable.
the LGI Line of Credit, of up to US$12.0 million, to be used for the acquisition,
development and operation of oil and gas assets in Colombia. The applicable
Our notes due 2020 contain limitations on the amount of indebtedness we
interest rate is 8.00% per annum and any accrued interest is payable on a
can incur. At current oil & gas prices, absent certain customary exceptions, we
quarterly basis.
do not anticipate achieving an EBITDA (as defined in the indenture governing
our notes due 2020) during fiscal year 2015 that would be sufficient enough
As of December 31, 2013, the outstanding amount of US$8.6 million relates
to allow us to incur additional indebtedness, other than certain categories
to a loan granted by LGI as part of its funding commitment in connection
and small baskets of permitted debt, as specified in the indenture.
with our Colombian acquisition. This loan was cancelled during 2014. As
Events of default
Events of default under the indenture governing the Notes due 2020 include:
of Credit was US$16.6 million. This corresponds to a loan granted by LGI
to GeoPark Chile S.A. for financing Chilean operations in our Tierra del Fuego
the nonpayment of principal when due; default in the payment of interest,
blocks for up to US$19 million. The maturity of this loan is July 2020 and the
of December 31, 2014, the aggregate outstanding amount under the LGI Line
which continues for a period of 30 days; failure to make an offer to purchase
applicable interest rate is 8% per annum.
and thereafter accept tendered notes following the occurrence of a change
of control or as required by certain covenants in the indenture governing the
See “-Item 4. Information on the Company-B. Business Overview-Significant
Notes due 2020; the notes, or the security documents in relation thereto
Agreements-Agreements with LGI.”
that continues for a period of 60 consecutive days after written notice to
Agencia; cross payment default relating to debt with a principal amount of
US$15.0 million or more, and cross-acceleration default following a judgment
Rio das Contas Credit Facility
We financed our Rio das Contas acquisition in part through our Brazilian
for US$15.0 million or more; bankruptcy and insolvency events; invalidity or
subsidiary’s entrance into a US$70.5 million credit facility (the “Rio das Contas
denial or disaffirmation of a guarantee of the notes; and failure to maintain
Credit Facility”) with Itaú BBA International plc, which is secured by the
a perfected security interest in any collateral having a fair market value
benefits GeoPark receives under the Purchase and Sale Agreement for Natural
in excess of US$15.0 million, among others. The occurrence of an event of
Gas with Petrobras. The facility matures five years from March 28, 2014, which
default would permit or require the principal of and accrued interest on
the Notes due 2020 to become or to be declared due and payable.
was the date of disbursement and bears interest at a variable interest rate
equal to the six-month LIBOR + 3.9%. The facility agreement includes
customary events of default, and subject our Brazilian subsidiary to customary
BCI Mortgage Loan
In October 2007, in connection with our acquisition of a facility to establish an
covenants, including the requirement that it maintain a ratio of net debt to
EBITDA of up to 3.5x the first two years and up to 3.0x thereafter. The credit
operational base in the Fell Block, we executed a mortgage loan granted by
facility also limits the borrower’s ability to pay dividends if the ratio of net
the Banco de Crédito e Inversiones, or BCI, a Chilean private bank, which we
debt to EBITDA is greater than 2.5x. We have the option to prepay the facility
refer to as the BCI Mortgage Loan. The loan was granted in Chilean pesos and
in whole or in part, at any time, subject to a pre-payment fee to be
is repayable over a period of eight years. The interest rate under this loan is
determined under the contract.
fixed at 6.6%. As of December 31, 2014, the aggregate outstanding amount
under the BCI Mortgage Loan was US$0.1 million.
In March 2015, we reached an agreement to: (i) extend the principal
payments that were due in 2015 (amounting to approximately US$15 million),
BCI Letter of Credit
During the last quarter of 2011, we obtained five short-term letters of credit
which will be divided pro-rata during the remaining principal installments,
starting in March 2016 and (ii) to increase the variable interest rate equal to
from BCI, or, collectively, the BCI Letters of Credit, to commence operations in
the six-month LIBOR + 4.0%.
our Tierra del Fuego blocks. Each of the BCI Letters of Credit contains a
150 GeoPark 20F
C. Research and development, patents and licenses, etc.
See “-Item 4. Information on the Company--B. Business Overview” and “-Item
the outstanding long-term borrowing affected by variable rates amounted
to $68.5 million representing 19% of total long-term borrowings, which was
4. Information on the Company-B. Business Overview-Title to Properties.”
composed by the loan from Itaú International BBA plc that has a floating
D. Trend information
For a discussion of Trend information, see “-A. Operating Results-Factors
affecting our results of operations.”
E. Off-balance sheet arrangements
We did not have any off-balance sheet arrangements as of December 31,
2013 or as of December 31, 2014.
F. Tabular disclosure of contractual obligations
In accordance with the terms of our concessions, we are required to make
interest rate based on LIBOR (See Note 3: “Interest rate risk” to our audited
financial statements included in this Annual Report). Furthermore, in March
2015, we reached an agreement to extend the principal payments that
were due in 2015 and to increase the variable interest rate related to Itaú
International BBA plc. See “Item 5. Operating and Financial Review and
Prospects” -B. Liquidity and Capital Resources Indebtedness-Rio das Contas
Credit Facility.”
(2) Reflects the future aggregate minimum lease payments under
non-cancellable operating lease agreements.
royalty payments (1) in connection with crude oil and gas production in
(3) Includes capital commitments in Isla Norte and Campanario Blocks in
Argentina, to the Provinces of Santa Cruz and Mendoza, equivalent to 12%
Chile, nine concessions in Brazil, two non-operated blocks in Argentina
on estimated value at well head, (2) in connection with crude oil and gas
and the Llanos 62, VIM3, CPO-4 and Llanos 17 Blocks in Colombia, which are
production in Chile, to the Chilean government, equivalent to approximately
our only remaining material commitments. See “-Item 4. Information on
5% of crude oil production and 3% of gas production, and (3) in connection
the Company-B. Business overview-Our operations” and Note 31(b) to our
with crude oil production in Colombia, to the Colombian government,
audited financial statements included in this Annual Report.
equivalent to 8%.
The table below sets forth our committed cash payment obligations as of
December 31, 2014.
G. Safe harbor
See “Forward-Looking Statements.”
Less than
One to
Three to More than
Total
one year
three years
five years
five years
(in thousands of US$)
513,027
41,032
80,007
69,488
322,500
88,489
37,926
33,949
16,109
505
Debt
obligations(1)
Operating
lease
obligations(2)
Pending
investment
commitments(3) 69,844
Asset
retirement
20,064
27,580
22,200
-
obligations
33,286
-
10,687
-
22,599
Total
contractual
obligations 704,646
99,022
152,233
107,797
345,604
(1) Refers to principal and interest undiscounted cash flows. Interest payment
breakdown included in Debt Obligations is as follows (i) less than one year:
$25.4 million; one to three years: $48.7 million; three to five years:
$46.0 million and more than five years: $22.5 million. At December 31, 2014
GeoPark 20F 151
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and senior management
Board of directors
The board of directors of GeoPark is composed of seven members. At every
annual general meeting one third of the Directors shall retire from office.
From the date of the annual general meeting following the effective date of
the listing of our Common Shares on the NYSE, our Directors shall hold office
for such term as the Shareholders may determine or, in the absence of such
determination, until the next annual general meeting or until their successors
are elected or appointed or their office is otherwise vacated. The term for the
current directors expires on the date of our next annual shareholders’
meeting, to be held in 2015.
The current members of the board of directors were appointed at the
Company’s Annual General Meeting held on September 11, 2014. The table
below sets forth certain information concerning our current board of
directors.
Name
Gerald E. O’Shaughnessy
James F. Park
Carlos A. Gulisano(3)
Juan Cristóbal Pavez(1)(2)
Peter Ryalls(1)(2)
Robert Bedingfield(1)(2)
Pedro Aylwin Chiorrini
Position
Chairman and Director
Chief Executive Officer, Deputy Chairman and Director
Director
Director
Director
Director
Director, Director of Legal and Governance, Corporate Secretary
Age
At the Company since
66
59
64
45
64
66
55
2002
2002
(3)2010
2008
2006
2015
2003
(1) Member of the Audit Committee.
(2) Independent director under SEC Audit Committee rules.
(3) Carlos Gulisano joined the Company in 2002 as an advisor.
Biographical information of the current members of our Board of Directors
is set forth below. Unless otherwise indicated, the current business
addresses for our directors is Nuestra Señora de los Ángeles 179, Las Condes,
Santiago, Chile.
152 GeoPark 20F
Gerald E. O’Shaughnessy has been our Chairman and a member of our
board of directors since he co-founded the company in 2002. Following his
Carlos Gulisano has been a member of our board of directors since June
2010. Dr. Gulisano holds a bachelor’s degree in geology, a post-graduate
graduation from the University of Notre Dame with degrees in government
degree in petroleum engineering and a PhD in geology from the University
(1970) and law (1973), Mr. O’Shaughnessy was engaged in the practice
of Buenos Aires and has authored or co-authored over 40 technical papers.
of law in Minnesota. Mr. O’Shaughnessy has been active in the oil and gas
He is a former adjunct professor at the Universidad del Sur, a former thesis
business over his entire business career, starting in 1976 with Lario Oil and
director at the University of La Plata, and a former scholarship director at
Gas Company, where he served as Senior Vice President and General Counsel.
CONICET, the national technology research council, in Argentina. Dr. Gulisano
He later formed the Globe Resources Group, a private venture firm whose
is a respected leader in the fields of petroleum geology and geophysics in
subsidiaries provided seismic acquisition and processing, well rehabilitation
South America and has over 30 years of successful exploration, development
services, sophisticated logistical operations and submersible pump
and management experience in the oil and gas industry. In addition to
works for Lukoil and other companies active in Russia during the 1990s.
serving as an advisor to GeoPark since 2002 and as Managing Director from
Mr. O’Shaughnessy is also founder and owner of BOE Midstream, LLC, which
February 2008 until June 2010, Dr. Gulisano has worked for YPF, Petrolera
owns and operates the Bakken Oil Express, the largest crude by rail terminal
Argentina San Jorge S.A. and Chevron San Jorge S.A. and has led teams
in North Dakota, serving oil producers and marketing companies active
credited with significant oil and gas discoveries, including those in the Trapial
in the Bakken Shale Oil play. Over the past 25 years, Mr. O’Shaughnessy has
field in Argentina. He has worked in Argentina, Bolivia, Peru, Ecuador,
also founded and operated companies engaged in banking, wealth
Colombia, Venezuela, Brazil, Chile and the United States. Mr. Gulisano is also
management products and services, investment desktop software, computer
an independent consultant on oil and gas exploration and production.
and network security, and green clean technology, as well as other venture
investments, Mr. O’Shaughnessy has also served on a number of non-profit
boards of directors, including the Board of Economic Advisors to the
Juan Cristóbal Pavez has been a member of our board of directors since
August 2008. He holds a degree in commercial engineering from the
Governor of Kansas, the I.A. O’Shaughnessy Family Foundation, the Wichita
Pontifical Catholic University of Chile and a MBA from the Massachusetts
Collegiate School, the Institute for Humane Studies, The East West Institute
Institute of Technology. He has worked as a research analyst at Grupo
and The Bill of Rights Institute. Mr. O’Shaughnessy is a member of the
CB and later as a portfolio analyst at Moneda Asset Management. In 1998,
Intercontinental Chapter of Young Presidents Organization and World
he joined Santana, an investment company, as Chief Executive Officer. At
Presidents’ Organization.
James F. Park has served as our Chief Executive Officer and as a member
of our board of directors since co-founding the Company in 2002. He has
Santana he focused mainly on investments in capital markets and real estate.
While at Santana, he was appointed Chief Executive Officer of Laboratorios
Andrómaco, one of Santana’s main assets. In 1999, Mr. Pavez co-founded
Eventures, an internet company. Since 2001, he has served as Chief
extensive experience in all phases of the upstream oil and gas business, with
Executive Officer at Centinela, a company with a diversified global portfolio
a strong background in the acquisition, implementation and management
of investments, with a special focus in the energy industry, through the
of international joint ventures in North America, South America, Asia, Europe
development of wind parks and run-of-the-river hydropower plants.
and the Middle East. He holds a degree in geophysics from the University
of California at Berkeley and has worked as a research scientist in earthquake
Mr. Pavez is also a board member of Grupo Security, Vida Security and
Hidroelétrica Totoral. Over the last few years he has been a board member
and tectonic studies. In 1978, Mr. Park joined Basic Resources International
of several companies, including Quintec, Enaex, CTI and Frimetal.
Limited, an oil and gas exploration company, which pioneered the
development of commercial oil and gas production in Central America. As a
senior executive of Basic Resources International Limited, Mr. Park was closely
involved in the development of grass-roots exploration activities, drilling
and production operations, surface and pipeline construction and crude oil
marketing and transportation, and with legal and regulatory issues, and
raising substantial investment funds. He remained a member of the board of
directors of Basic Resources International Limited until the company was
sold in 1997. Mr. Park is also a member of the board of directors of Energy
Holdings. Mr. Park has also been involved in oil and gas projects in California,
Louisiana, Argentina, Yemen and China. Mr. Park has lived in Argentina
and Chile since 2002.
GeoPark 20F 153
Peter Ryalls has been a member of our board of directors since April 2006.
Mr. Ryalls started his career working as a wireline engineer for Schlumberger
Pedro Aylwin has served as a member of our board of directors since July
2013 and as our Director of Legal and Governance since April 2011. From
in West Africa. Returning to the UK in 1976 to study for his Master’s degree
2003 to 2006, Mr. Aylwin worked for us as an advisor on governance and legal
in Petroleum Engineering at Imperial College, London following which
matters. Mr. Aylwin holds a degree in law from the Universidad de Chile
he joined Mobil North Sea. He moved to Unocal Corporation in 1979 where
and an LLM from the University of Notre Dame. Mr. Aylwin has extensive
he held increasingly senior positions, including as Managing Director of
experience in the natural resources sector. Mr. Aylwin is also a partner at the
Unocal UK in Aberdeen, Scotland, and where he developed extensive
law firm of Aylwin Abogados in Santiago, Chile, where he represented mining,
experience in offshore production and drilling operations. In 1994, Mr. Ryalls
chemical and oil and gas companies in numerous transactions. From 2006
represented Unocal Corporation in the Azerbaijan International Operating
until 2011, he served as Lead Manager and General Counsel at BHP Billiton,
Company as Vice President of Operations and was responsible for production,
Base Metals, where he was in charge of legal and corporate governance
drilling, reservoir engineering and logistics. In 1998, Mr. Ryalls became
matters on BHP Billiton’s projects, operations and natural resource assets in
General Manager for Unocal in Argentina. He also served as Vice President
South America, North America, Asia, Africa and Australia. Mr. Aylwin is also
of Unocal’s Gulf of Mexico onshore oil and gas business and as Vice President
a member of the board of directors of Egeda Chile.
of Global Engineering and Construction, where he was responsible for the
implementation of all major capital projects ranging from deep water
developments in Indonesia and the Gulf of Mexico to conventional oil and
gas projects in Thailand. Mr. Ryalls is also an Independent Petroleum
Consultant advising on international oil and gas development projects
both onshore and offshore.
Robert Bedingfield has been a member of our board of directors since
March 2015. Until his retirement in June 2013, he was one of Ernst & Young’s
most senior Global Lead Partners with more than 40 years of experience,
including 32 years as a partner in Ernst & Young's accounting and auditing
practices, as well as serving on Ernst & Young’s Senior Governing Board.
He has extensive experience serving Fortune 500 companies; including acting
as Lead Audit Partner or Senior Advisory Partner for Lockheed Martin, AES,
Gannett, General Dynamics, Booz Allen Hamilton, Marriott and the US
Postal Service. Since 2000, Mr. Bedingfield has been a Trustee, an Executive
Committee Member, and the Audit Committee Chair of the University of
Maryland at College Park Board of Trustees. Mr. Bedingfield served on
the National Executive Board (1995 to 2003) and National Advisory Council
(since 2003) of the Boy Scouts of America. He also served on the Board of
Governors of the Congressional Country Club in Bethesda, Maryland. Since
2013, Mr. Bedingfield has also served as Board Member and Chairman
of the Audit Committee of NYSE-listed Science Applications International
Corp (SAIC).
154 GeoPark 20F
Executive officers
Our executive officers are responsible for the management and
representation of our company. The table below sets forth certain information
concerning our executive officers.
Name
James F. Park
Andrés Ocampo
Position
Chief Executive Officer and Director
Chief Financial Officer
Pedro Aylwin Chiorrini
Director, Director of Legal and Governance, and Corporate Secretary
Augusto Zubillaga
Alberto Matamoros
Marcela Vaca
Dimas Coelho
Jose Díaz
Carlos Murut
Salvador Minniti
Horacio Fontana
Ruben Marconi
Agustina Wisky
Guillermo Portnoi
Pablo Ducci
Director for Argentina and Director of Operations
Director for Chile
Director for Colombia
Director for Brazil
Director for Peru
Director of Development
Director of Exploration
Director of Drilling
Director of Health, Safety & Environment
Director of People
Director of Administration and Finance
Director of Capital Markets
Age
At the Company since
59
37
55
45
42
46
58
60
58
60
57
70
38
40
35
2002
2010
2003
2006
2014
2012
2013
2013
2006
2007
2008
2008
2002
2006
2012
Biographical information of the members of our executive officers is set
forth below. Unless otherwise indicated, the current business addresses for
Augusto Zubillaga has served as our Director of Operations since January
2012 and Director for Argentina since February 2015. He previously served
our executive officers is Nuestra Señora de los Ángeles 179, Las Condes,
as our Production Director. He is a petroleum engineer with 19 years of
Santiago, Chile.
Andrés Ocampo has served as our Chief Financial Officer since November
2013. He previously served as our Director of Growth and Capital (from
experience in production, engineering, well completions, corrosion control,
reservoir management and field development. He has a degree in petroleum
engineering from the Instituto Tecnológico de Buenos Aires. Prior to joining
our company, Mr. Zubillaga worked for Petrolera Argentina San Jorge S.A.
January 2011 through October 2013), and has been with our company since
and Chevron San Jorge S.A. At Chevron San Jorge S.A., he led multi-
July 2010. Mr. Ocampo graduated with a degree in Economics from the
disciplinary teams focused on improving production, costs and safety, and
Universidad Católica Argentina. He has more than 12 years of experience
in business and finance. Before joining our company, Mr. Ocampo worked at
was the leader of the Asset Development Team, which was responsible
for creating the field development plan and estimating and auditing the oil
Citigroup and served as Vice President Oil & Gas and Soft Commodities at
and gas reserves of the Trapial field in Argentina. Mr. Zubillaga was also
Crédit Agricole Corporate & Investment Bank.
part of a Chevron San Jorge S.A. team that was responsible for identifying
business opportunities and working with the head office on the
establishment of best business practices. He has authored several industry
papers, including papers on electrical submersible pump optimization,
corrosion control, water handling and intelligent production systems.
GeoPark 20F 155
Alberto Matamoros has been our Director for Chile since January 2015.
He is an industrial engineer and MBA, with more than 17 years of experience
Bahia, Brazil, a Ph.D. in geology (Numerical Basin Modelling) from Cornell
University and an MBA in general administration from the Federal University
in the Oil & Gas industry. He started his career in the Argentinian oil company
of Rio de Janeiro, Brazil.
ASTRA, as a Production Engineer of La Ventana-Vizcacheras Block in the
province of Mendoza (1997-2000). He then joined Chevron, where he worked
as a Production Engineer in El Trapial Block in the province of Neuquén for
Carlos Murut has been our Director of Development since January 2012. He
previously served as our Development Manager. Mr. Murut holds a master’s
three years. Later, he became a Field Engineering Manager, also for three
degree in petroleum geology from the University of Buenos Aires where he
years, in Buenos Aires, and then moved to Kern, California, to lead the
also undertook postgraduate studies in reservoir engineering, specializing in
production team. His experience in Chevron enabled him to manage different
field exploitation. He also completed a Business Management Development
technical and administrative teams, designing and executing working plans
Program at Austral University. Mr. Murut has over 30 years of experience
focused in the optimization of resources. In 2014, he joined GeoPark to be
working for international and major oil companies, including YPF S.A.,
part of the Corporate Operation team before being selected as the new
Tecpetrol S.A., Petrolera Argentina San Jorge S.A. and Chevron San Jorge S.A.
Country Manager of GeoPark in Chile. Matamoros holds a degree in Industrial
Engineering from the Universidad Nacional del Sur and an MBA in IAE, from
the Business School of Universidad Austral of Buenos Aires, Argentina.
Salvador Minniti has been our Director of Exploration since January 2012.
He previously served as our Exploration Manager. He holds a bachelor degree
in geology from National University of La Plata and has a graduate degree
Marcela Vaca has been our Director for Colombia since August 2012. Ms.
Vaca holds a degree in law from Pontificia Universidad Javeriana in Bogotá,
from the Argentine Oil and Gas Institute in oil geology. Mr. Minniti has over 30
years of experience in oil exploration and has worked with YPF S.A., Petrolera
Colombia, a Master’s Degree in commercial law from the same university and
Argentina San Jorge S.A. and Chevron Argentina.
an LLM from Georgetown University. She has served in the legal departments
of a number of companies in Colombia, including Empresa Colombiana de
Carbon Ltda (which later merged with INGEOMINAS), and from 2000 to 2003,
Jose Díaz has been our Director for Peru since September 2014. He previously
served as our Director of Operations (from January 2013 through September
she served as Legal and Administrative Manager at GHK Company Colombia.
2014). Mr. Díaz holds a degree in petroleum engineering from Cuyo National
Prior to joining our company in 2012, Ms. Vaca served for nine years as
University, Argentina, has taken executive business classes at IAE Business
General Manager of the Hupecol Group where she was responsible for
School, and pursued graduate studies in oil and gas law and project
supervising all areas of the company as well as managing relationships with
management at University of Buenos Aires School of Law and Alta Dirección
Ecopetrol, ANH, the Colombian Ministry of Mines and Energy, the Colombian
Escuela de Negocios, respectively. He has over 30 years of experience in
Ministry of Environment and other governmental agencies. At the Hupecol
upstream operations as a petroleum engineer, including more than 15 years
Group, Ms. Vaca was also involved in the structuring of the Hupecol Group’s
in managerial positions. This experience includes positions at international
asset development and sales strategy.
and major oil companies, including OEA S.A., Chevron San Jorge S.A.,
ChevronTexaco and Petrolera El Trebol S.A.
Dimas Coelho has served as our Director for Brazil since February 2013. He is
a geologist and geophysicist with over 30 years of experience in
hydrocarbons exploration. From 1981 to 2011, Dr. Coelho served Petrobras’
Horacio Fontana has been our Corporate Drilling Manager since March 2012.
He previously served as our Engineer Manager. He holds a degree in civil
E&P and R&D areas in innumerous capacities, including as a Petroleum
engineering from Rosario National University and is also a graduate from
Exploration Manager in Business Unit (from 2001 to 2004) and Corporate
the Argentine Oil and Gas Institute, National University of Buenos Aires, with
areas (from 2006 to 2010), in which roles he was responsible for the planning,
a specialty in oilfield exploitation and an extensive background in drilling
management and execution of exploration programs in the exploration
operations. He has recently taken part in a Management Development
and production blocks in Brazil’s Campos and Santos Basin. Later (2011) as
Program at IAE Business School of Austral University. Mr. Fontana has over
a Joint Venture Project Manager he was responsible for the coordination
25 years of drilling experience in major Argentine companies such as
of Petrobras’s functional areas to support Petrobras’s work programs in the
YPF S.A., Petrolera Argentina San Jorge and Chevron.
Santos Basin. In 2012, he served as Executive Vice President of Exploration at
Panoro Energy do Brasil, where he oversaw the exploration functional
workflow for Panoro Energy ASA’s exploration assets in Brazil. Dr. Dimas holds
Ruben Marconi has been our Director of Health, Safety and Environment
since March 2012. He previously served as our Drilling Director. He holds
a degree in geology from the Federal University of Rio de Janeiro, Brazil, an
a degree in mechanical engineering from Rosario University and was a YPF
MSc degree in geophysics (seismic processing) from the Federal University of
scholar at the University of Buenos Aires where he graduated in oil
engineering with a concentration in exploitation. Mr. Marconi has over 40
156 GeoPark 20F
years of field onshore, offshore drilling, completion and safety experience
US$500,000. The payment of a bonus to Mr. O’Shaughnessy or Mr. Park is at
with YPF, Petrolera Argentina San Jorge, ChevronTexaco, Chevron Mid
our discretion. They each also received equity awards described below under
Continent Business Unit and Chevron Argentina.
“Equity Incentive Compensation.” Our agreements with Mr. O’Shaughnessy
and Mr. Park contain covenants that restrict them, for a period of 12 months
Agustina Wisky has worked with our Company since it was founded
in November 2002, and has served as our Director of People since 2012.
following termination of employment, from soliciting senior employees
of our company and, for a period of six months following the termination of
Mrs. Wisky is a public accountant, and also holds a degree in human
employments, from being involved in any competing undertaking. Pedro
resources from the Universidad Austral-IAE. She has 14 years of experience
Aylwin, who was appointed as an executive director in July 2013, has a service
in the oil industry. Before joining our company, Mrs. Wisky worked at AES
contract with our company that provides for him to act as Director of Legal
Gener and PricewaterhouseCoopers.
and Governance, and as such has decided to forego his director fees, but he
Guillermo Portnoi has been our Director of Administration and Finance
since 2011 and has worked for us since June 2006. Mr. Portnoi is a public
The following chart summarizes payments made to our executive directors
accountant and holds an MBA from Universidad Austral-IAE. He has more
for the year ended December 31, 2014:
received consultancy fees of approximately US$568,000.
than 10 years of experience in the oil industry. Before joining our company,
Mr. Portnoi worked at Pluspetrol, Río Alto and PricewaterhouseCoopers,
where he counted several major oil companies as his clients.
Pablo Ducci has served as our Director of Capital Markets since 2012.
Mr. Ducci holds a bachelor’s degree in science and economics from Pontifical
Catholic University of Chile and a master’s degree in business administration
Executive director
Gerald E. O’Shaughnessy
James F. Park
Executive
directors’ fees
US$250,000
US$500,000
Cash payment
Bonus
US$150,000
US$650,000
from Duke University. From 2004 to 2009, Mr. Ducci worked as a Corporate
Bonus payments above were approved by the Remuneration Committee
Finance Analyst and Corporate Finance Associate with Celfin Capital. In 2010,
in May and August 2014 and reflect awards for previous years performance.
he worked as an Associate for Anka Funds, and from 2011 to 2012, he served
As part of Company's cost reduction efforts, no bonus has been paid
as Vice President of Development for Falabella Retail.
for 2014 performance, and executive fees for 2015 have been voluntarily
B. Compensation
reduced by 20%.
Executive compensation
For the year ended December 31, 2014, the aggregate compensation
Non-executive directors’ contracts
During the first half of 2014, our non-executive directors were paid an
annual fee of GBP35,000, payable quarterly in arrears. At our option, the fee
accrued or paid to the members of our board of directors (including our
paid to our non-executive directors can be paid through the issuance
executive directors) for services in all capacities was approximately
US$5.4 million. Gerald E. O’Shaughnessy, James F. Park and Pedro Aylwin are
of new common shares and/or cash. In addition, the Chairmen of the Audit
Committee, the Remuneration Committee and the Nomination Committee
our executive directors. For the year ended December 31, 2014, the
were paid an additional annual fee of GBP5,750 each. The termination of
aggregate compensation accrued or paid to the members of our senior
the employment relationship does not entitle non-executive directors to any
management (excluding our executive directors) for services in all capacities
financial compensation. From the second half of 2014, an increase in the
was approximately US$9.1 million.
Executive directors’ contracts
It is our policy that executive directors have contracts of an indefinite term
compensation program for the services of the non-executive Directors was
approved. The current annual fees correspond to US$80,000 to be settled
in cash and US$100,000 to be settled in stock, paid quarterly in equal
installments. In the event that a non-executive Director serves as Chairman
providing for a maximum of one-year’s notice in writing of termination
of any Board Committees, an additional annual fee of US$20,000 applies.
at any time.
A Director who serves as a member of any Board Committees receives an
annual fee of US$10,000. Total payment due shall be calculated on an
Gerald E. O’Shaughnessy has a service contract with our company that
aggregate basis for Directors serving in more than one Committee. The
provides for him to act as Executive Chairman at an annual salary of
Chairman fee is not be added to the member’s fee while serving for the same
US$250,000. James F. Park has a service contract with our company that
Committee. Payments of Chairmen and Committee members’ fees are be
provides for him to act as Chief Executive Officer at an annual salary of
made quarterly in arrears and settled in cash only.
GeoPark 20F 157
The following chart summarizes payments made to our non-executive
shares for zero or nominal consideration, subject to the achievement of
directors for the year ended December 31, 2014.
performance conditions and other vesting terms. The maximum number of
Cash payment
Share payment(1)
Fees paid in
common shares available for issuance under the Stock Awards Plan is 12%
of the issued share capital of the Company.
Non-executive
directors’ fees
directors’ fees
(in number of
and Exchange Commission (the “SEC”) for shares to be issued under the
Non-executive
Non-executive
common shares
On December 17, 2014, we registered 3,435,600 shares with the U.S. Securities
in US$
common shares)
Stock Awards Plan. The following table sets forth the common share awards
granted to our executive directors, management and key employees under
the Stock Awards Plan commencing in 2008 through March 2015, that
remained outstanding as of such latter date.
7,003
7,003
5,250
director
Juan Cristóbal
Pavez(2)
Peter Ryalls(3)
Carlos Gulisano(4)
Steven J.
Quamme(5)
in GBP
11,625
8,750
20,375
11,625
55,000
57,500
55,000
55,000
7,003
Number of underlying
(1) 2,301 shares of total shares (which amount to 26,259) were issued during
2014.
common shares outstanding
873,409(1)
817,600
(2) Compensation Committee Chairman and Member of Audit Committee.
(3) Technical Committee Chairman, Member of Audit Committee and Member
of Compensation Committee.
(4) Nomination Committee Chairman and Member of Technical Committee.
(5) Audit Committee Chairman and Member of Compensation Committee
478,000
720,000(2)
400,500(3)
417,000(4)
500,000
until resignation in 2015.
Grant
date
Vesting
Expiration
date
date
12/15/2008 12/15/2012 12/15/2018
12/15/2010 12/15/2014 12/15/2020
12/15/2011 12/15/2015 12/15/2021
11/23/2012 11/23/2015 11/23/2016
12/15/2012 12/15/2016 12/15/2022
6/30/2013 12/31/2015 12/31/2019
12/31/2014 12/31/2017 12/31/2022
Pension and retirement benefits
We do not maintain any defined benefit pension plans or any other
(1) Dr. Carlos Gulisano holds 100,000 shares of such awards.
(2) James F. Park received 450,000 shares of such awards, and Gerald E.
O’Shaughnessy received 270,000 shares of such awards.
retirement programs for our employees or directors.
(3) This amount includes 50,000 common share awards that vested on
Equity Incentive Compensation
Management and Employee Plans
In November 2007, our shareholders voted to authorize the board of directors
to use up to a maximum of 12% of our issued share capital for the purposes
October 31, 2014.
(4) Vesting of these common share awards is subject to the achievement of
certain minimum financial and operational targets during a performance
period that runs through 2015.
Our executive directors, senior management and key employees who have
of granting equity awards to our employees and other service providers.
received option awards or common share awards under the Stock Awards
The shareholders also authorized the board of directors to adopt programs
Plan authorize the Company to deposit any common shares they have
for this purpose and to determine specific conditions and broadly defined
received under this plan in our Employee Benefit Trust, or EBT. The EBT is held
guidelines for such programs. Pursuant to this authorization, we established
to facilitate holdings and dispositions of those common shares by the
the Stock Awards Plan and the Value Creation Plan.
participants thereof. Under the terms of the EBT, each participant is entitled
to receive any dividends we may pay which correspond to their common
Stock Awards Plan
In November 2008, the board of directors adopted the Stock Awards Plan. The
shares held by the trust, according to instructions sent by the Company to the
trust administrator. The trust provides that Mr. James F. Park is entitled to
purpose of the Stock Awards Plan is to align the interests of our management,
vote all the common shares held in the trust.
employees and key advisors with those of shareholders. Under the Stock
Awards Plan, the board of directors, or its designee, may award options or
performance shares. An option confers the right to acquire a specified
Value Creation Plan
In July 2013, our remuneration committee established the Value Creation
number of common shares of the Company at an exercise price equal to the
Plan, or VCP, to give our executive officers and key management members
par value of the common shares subject to such an option. A performance
the opportunity to share in a percentage of the value created for shareholders
share confers a conditional right to acquire a specified number of common
in excess of a pre-determined share price target at the end of a performance
158 GeoPark 20F
period. Under the VCP, if as of December 31, 2015, our share price (defined
Program. The repurchased shares will be used to offset, in part, any expected
as the average trading price of our common shares on the NYSE for the
dilution effects resulting from the Company’s equity incentive compensation
month of December 2015) exceeds US$13.66, VCP participants will receive
plans, including grants under the Stock Awards Plan and the Non-Executive
awards with an aggregate value equal to 10% of the excess above the market
Director Plan. As of March 27, 2015 US$1.4 million of shares has been purchased
capitalization threshold generated by this share price (assuming that the
under the Share Repurchase Program. On April 13, 2015, our board of directors
share capital of the Company has remained at the same level as applicable
approved the resumption of the Share Repurchase Program commencing
at the time of establishment of the VCP: 43,495,585 shares). The awards
on April 14, 2015 and expiring at the close of business on May 20, 2015.
will vest and be paid in common shares 50% on December 31, 2015, and the
remaining 50% on December 31, 2016. Notwithstanding the foregoing,
C. Board practices
the total number of common shares granted pursuant to this plan shall not
exceed 5% of the issued share capital of the Company. Additionally, the share
price (and number of common shares outstanding) used to calculate if the
Overview
Our board of directors is responsible for establishing our strategic goals,
market capitalization threshold has been met is subject to adjustment for any
ensuring that the necessary resources are in place to achieve these goals
stock splits. Based on the Company’s performance to date, we currently do
and reviewing our management and financial performance. Our board of
not expect the performance conditions of the VCP awards to be achieved.
directors directs and monitors the company in accordance with a framework
Non-Executive Director Plan
In August 2014, our board of directors adopted the Non-Executive
of controls, which enable risks to be assessed and managed through clear
procedures, lines of responsibility and delegated authority. Our board of
directors also has responsibility for establishing our core values and
Director Plan in order to grant shares to Non-Executive directors as part of
standards of business conduct and for ensuring that these, together with our
their compensation program for serving as directors. The purpose of the
obligations to our shareholders, are understood throughout the company.
Non-Executive Director Plan is to grant shares in connection with the
quarterly payments of the Non-Executive Directors’ fees which are settled in
stock, according to the Board Resolution dated May 20, 2014. Under the
Board composition
Our bye-laws and board resolutions provide that the board of directors
Non-Executive Director Plan, the remuneration committee may award
consist of a minimum of three and a maximum of nine members. All of our
common shares, restricted share units and other share-based awards that
directors were elected at our annual shareholders’ meeting held on
may be denominated or payable in common shares or factors that influence
September 11, 2014, with the exception of Mr. Robert Bedingfield who was
the value of common shares. The maximum number of common shares
appointed by the Board of Directors on March 19, 2015, to fill the vacancy
available for issuance under the Non-Executive Director Plan is 180,000
created by Mr. Steven Quamme’s resignation. Their term expires on the
common shares. The remuneration committee has, as of March 31, 2015,
date of our next annual shareholders’ meeting, to be held in 2015. The board
awarded an aggregate amount of 37,172 common shares, which were
of directors meets at least on a quarterly basis.
immediately vested upon grant, under the Non-Executive Director Plan.
Potential dilution resulting from Equity Incentive Compensation Plans
The percentage of total share capital that could be awarded to our directors,
Committees of our board of directors
Our board of directors has established an Audit Committee, a Compensation
Committee, a Nomination Committee, and a Technical Committee. The
management and key employees under the Stock Awards Plan and the
composition and responsibilities of each committee are described below.
VCP and the Non-Executive Director Plan described above would represent
Members serve on the Audit Committee for a period of three years. For
approximately 12% of our issued common shares. However, as of the date of
the Compensation and Nomination Committees, members serve for a period
this annual report, we have awarded approximately 5.95% of our current
of one year. For the Technical Committee and Disclosures Committee,
total issued share capital. This percentage does not include shares that may
members serve on these committees until their resignation or until otherwise
be issued under the VCP, and we currently do not expect to issue any shares
determined by our board of directors. In the future, our board of directors
under the VCP.
may establish other committees to assist with its responsibilities.
Share Repurchase Program
In December 2014, our board of directors approved a Share Repurchase
Audit Committee
The Audit Committee is composed of three directors: Mr. Peter Ryalls,
Program of up to US$10 million of our common shares, par value US$0.001 per
Mr. Juan Cristóbal Pavez and Mr. Robert Bedingfield (who currently serves as
share. The Share Repurchase Program began on December 19, 2014 and
Chairman of the committee). We have determined that Mr. Peter Ryalls
expired at the close of business on March 27, 2015. We engaged BTG Pactual
and Mr. Juan Cristóbal Pavez and Robert Bedingfield are independent, as such
US Capital LLC to act as the broker in connection with the Share Repurchase
term is defined under SEC rules applicable to foreign private issuers.
GeoPark 20F 159
The Audit Committee’s responsibilities include: (a) approving our financial
and Compensation Committee in consultation with the chairman of each
statements; (b) reviewing financial statements and formal announcements
committee, and with respect to the appointment of any director or executive
relating to our performance; (c) assessing the independence, objectivity and
officer or other officer other than the position of the Chairman and Chief
effectiveness of our external auditors; (d) making recommendations for the
Executive Officer and (d) succession planning for directors and senior
appointment, re-appointment and removal of our external auditors and
executives.
approving their remuneration and terms of engagement; (e) implementing
and monitoring policy on the engagement of external auditors supplying
non-audit services to us; (f) obtaining, at our expense, outside legal or other
Technical Committee
The Technical Committee is composed of three directors along with the
professional advice on any matters within its terms of reference and securing
Chief Operating Officer. The members of the Technical Committee are
the attendance at its meetings of outsiders with relevant experience and
Mr. Peter Ryalls (who serves as Chairman of the committee), Mr. Carlos
expertise if it considers it necessary; and (g) reviewing our arrangements for
Gulisano, Mr. James Park and Mr. Augusto Zubillaga.
our employees to raise concerns about possible wrongdoing in financial
reporting or other matters and the procedures for handling such allegations,
The Technical Committee’s responsibilities include: (a) overseeing the
and ensuring that these arrangements allow proportionate and independent
technical studies and evaluations of the Company’s properties and proposals
investigation of such matters and appropriate follow-up action.
to acquire new properties and/or relinquish existing ones as well as reviewing
Compensation Committee
The Compensation Committee is composed of three directors. The current
environmental programs and their effectiveness and the Company’s health
and safety program and its effectiveness; and (c) providing a forum for ideas
members of the compensation committee are Mr. Juan Cristóbal Pavez
and solutions for the key technical people within the Company.
project plans; (b) reviewing the Annual Reserve Report, the Company’s
(who serves as Chairman of the committee), and Mr. Peter Ryalls. Currently
there is a vacancy created by the resignation of Mr. Steve J. Quamme
Liability insurance
effective March 19, 2015.
We maintain liability insurance coverage for all of our directors and officers,
The Compensation Committee meets at least twice a year, and its specific
the level of which is reviewed annually.
responsibilities include: (a) determining, in conjunction with the board
of directors, the remuneration policy for the Chief Executive Officer, the
Chairman, our executive directors and other members of executive
D. Employees
As of December 31, 2014, we had approximately 456 employees, of which
management; (b) reviewing the performance of our executive directors and
197 were located in Chile, 133 were located in Colombia, 100 were located in
members of executive management; and (c) reviewing all incentive
Argentina, 12 were located in Brazil and 14 in Peru. This represented an
compensation plans, equity-based plans, and all modifications to such plans
increase of 13% from December 31, 2013, an increase largely attributable to
as well as administering and granting awards under all such plans and
the growth of our Colombian operations and new projects in Peru, mainly
approving plan payouts; and (d) reviewing and making recommendations
to the Board with respect to the adoption or modification of executive
related to the Morona Block.
officer and director share ownership guidelines and monitor compliance
The following table sets forth a breakdown of our employees by geographic
with any adopted share ownership guidelines.
segment for the periods indicated.
Nomination Committee
The Nomination Committee is composed of three directors. The members of
the Nomination Committee are Mr. Gerald E. O’Shaughnessy, Mr. Carlos
Chile
Gulisano (who serves as Chairman of the committee) and Mr. Pedro Aylwin.
Colombia
Argentina
The Nomination Committee meets at least twice a year and its responsibilities
Peru
include: (a) reviewing the structure, size and composition of the board of
directors and making recommendations to the board of directors in respect
Brazil
Total
of any required changes; (b) identifying, nominating and submitting for
Year ended December 31,
2014
197
133
100
14
12
456
2013
193
109
98
-
4
2012
163
98
92
-
-
404
353
approval by the board of directors candidates to fill vacancies on the board
From time to time, we also utilize the services of independent contractors to
of directors as and when they arise; (c) making recommendations to the
perform various field and other services as needed. As of December 31, 2014,
board of directors with respect to the membership of the Audit Committee
14 of our employees were represented by labor unions or covered by
160 GeoPark 20F
collective bargaining agreements. We believe that relations with our
“-Item 6. Directors, Senior Management and Employees-B. Compensation-
employees are satisfactory.
Employee Benefit Trust.” Although Mr. Park has voting rights with respect to
all the common shares held in the trust, Mr. Park disclaims beneficial
E. Share ownership
As of the date of this annual report, members of our board of directors and
ownership over those common shares.
(3) Held through Socoservin Overseas Ltd, which is controlled by Juan
our senior management held as a group 19,028,992 of our common shares
Cristóbal Pavez. The common shares reflected as being held by Mr. Pavez
and 33.03% of our outstanding share capital.
include 18,863 common shares held by him personally.
The following table shows the share ownership of each member of our board
of directors and senior management as of the date of this annual report.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
Shareholder
Gerald E. O’Shaughnessy(1)
James F. Park(2)
Juan Cristóbal Pavez(3)
Carlos Gulisano
Pedro Aylwin
Peter Ryalls
Robert Bedingfield
Augusto Zubillaga
Alberto Matamoros
Marcela Vaca
Dimas Coelho
Carlos Murut
Salvador Minniti
Jose Díaz
Horacio Fontana
Ruben Marconi
Agustina Wisky
Guillermo Portnoi
Andrés Ocampo
Pablo Ducci
Common
shares
7,601,276
7,441,269
2,896,667
125,832
153,031
54,988
15,000
*
*
*
*
*
*
*
*
*
*
*
*
*
Percentage of
outstanding
A. Major shareholders
The following table presents the beneficial ownership of our common shares
common shares
as of April 8, 2015.
13.20
12.91
5.03
0.20
0.23
0.08
0.03
*
*
*
*
*
*
*
*
*
*
*
*
*
Shareholder
Steven J. Quamme(1)
Gerald E. O’Shaughnessy(2)
James F. Park(3)
IFC Equity Investments(4)
Juan Cristóbal Pavez(5)
Moneda A.F.I.(6)
Other shareholders
Total
Common
shares
9,708,698
7,601,276
7,441,269
3,456,594
2,896,667
2,685,421
23,813,820
57,603,745
Percentage of
outstanding
common shares
16.85
13.20
12.91
6.00
5.03
4.66
41.34
100.0%
(1) Held through certain private investment funds managed and controlled
by Cartica Management, LLC. The common shares reflected as being
held by Mr. Quamme include 17,736 common shares held by him personally.
Mr. Steven Quamme, one of our principal shareholders is the Senior
Managing Director of Cartica Management, LLC, and therefore may be
deemed to have voting and investment power over the common shares of
GeoPark held by Cartica Management, LLC.
Sub-total senior management
ownership of less than 1%
Total
740,929
19,028,992
(2) Held directly and indirectly through GP Investments LLP, GPK Holdings
1.30
LLC and The Globe Resources Group Inc. 3,000,000 of these common shares
33.03
have been pledged pursuant to lending arrangements.
(3) Held by Energy Holdings, LLC, which is controlled by James F. Park, a
* Indicates ownership of less than 1% of outstanding common shares.
member of our Board of Directors. The number of common shares held by
(1) Held directly and indirectly through GP Investments LLP, GPK Holdings
Mr. Park does not reflect the 588,664 common shares held as of December 31,
LLC and The Globe Resources Group Inc., all of which are controlled by
2014 in the employee benefit trust described under “-Item 6. Directors,
Mr. O’Shaughnessy. 3,000,000 of these common shares have been pledged
Senior Management and Employees-B. Compensation-Employee Benefit
pursuant to lending arrangements.
Trust.” Although Mr. Park has voting rights with respect to all the common
(2) Held by Energy Holdings, LLC, which is controlled by James F. Park, a
shares held in the trust, Mr. Park disclaims beneficial ownership over
member of our Board of Directors. 498,915 pf these shares have been
those common shares. 498,915 of these common shares have been pledged
pledged pursuant to lending agreements. The number of common shares
pursuant to lending arrangements.
held by Mr. Park does not reflect the 588,664 common shares held as of the
(4) IFC Equity Investments voting decisions are made through a portfolio
date of this annual report in the employee benefit trust described under
management process which involves consultation from investment officers,
GeoPark 20F 161
credit officers, managers and legal staff.
party is subject to tag-along and drag-along rights, and the non-transferring
(5) Held through Socoservin Overseas Ltd, which is controlled by Juan
shareholder has the right to object to a sale to the third-party if it considers
Cristóbal Pavez. The common shares reflected as being held by Mr. Pavez
such third-party to be not of a good reputation or one of our direct
include 9,326 common shares held by him personally.
competitors. We and LGI also agreed to vote our common shares or otherwise
(6) Held through various funds managed by Moneda A.F.I. (Administradora
cause GeoPark Chile or GeoPark TdF, as applicable, to declare dividends
de Fondos de Inversión), an asset manager.
only after allowing for retentions to meet anticipated future investments,
costs and obligations. See “-Item 4. Information on the Company-B. Business
Principal shareholders do not have any different or special voting rights in
overview-Significant agreements-Agreements with LGI-LGI Chile
comparison to any other common shareholder.
Shareholders’ Agreements.”
According to our transfer agent, as of March 31, 2015, we had 5 shareholders
registered in the U.S. As of December 31, 2014, there were a total of 16
LGI Colombia Agreements
On December 18, 2012, we, Agencia, GeoPark Colombia and LGI entered
shareholders of record. Since some of the shares are held by nominees, the
into the LGI Colombia Shareholders’ Agreement and a subscription share
number of shareholders may not be representative of the number of
agreement, pursuant to which LGI acquired a 20% interest in GeoPark
beneficial owners.
B. Related party transactions
We have entered into the following transactions with related parties:
Colombia. Further, on January 8, 2014, following an internal corporate
reorganization of our Colombian operations, GeoPark Colombia Coöperatie
U.A. and GeoPark Latin America entered into a new members’ agreement
with LGI, or the LGI Colombia Members’ Agreement, that sets out
substantially similar rights and obligations to the LGI Colombia Shareholders’
LGI Chile Shareholders’ Agreements
In 2010, we formed a strategic partnership with LGI to acquire and develop
Agreement in respect of our oil and gas business in Colombia. We refer to
the LGI Colombia Shareholders’ Agreement and the LGI Colombia Members’
jointly upstream oil and gas projects in Latin America. In 2011, LGI acquired a
Agreement collectively as the LGI Colombia Agreements. The LGI Colombia
20% equity interest in GeoPark Chile and a 14% equity interest in GeoPark
Agreements provide that the board of GeoPark Colombia will consist of
TdF, for a total consideration of US$148.0 million, plus additional equity
four directors; as long as LGI holds at least 14% of GeoPark Colombia, LGI has
funding of US$18.0 million through 2014. On May 20, 2011, in connection
the right to elect one director and such director’s alternate, while the
with LGI’s investment in GeoPark Chile, we and LGI entered into the LGI Chile
remaining directors, and alternates, are elected by us. Additionally, the LGI
Shareholders’ Agreements, setting forth our and LGI’s respective rights and
Colombia Agreements require the consent of LGI or the LGI appointed
obligations in connection with LGI’s investment in our Chilean oil and gas
director for GeoPark Colombia to be able to take certain actions, including,
business. Specifically, the LGI Chile Shareholders’ Agreements provide that
among others: making any decision to terminate or permanently or
the boards of each of GeoPark Chile and GeoPark TdF will consist of four
indefinitely suspend operations in or surrender our blocks in Colombia (other
directors; as long as LGI holds at least 5% of the voting shares of GeoPark
than as required under the terms of the relevant concessions for such blocks);
Chile or GeoPark TdF, as applicable, LGI has the right to elect one director and
such director’s alternate, while the remaining directors, and alternates, are
creating a security interest over our blocks in Colombia; approving of
GeoPark Colombia’s annual budget and work programs and the mechanisms
elected by us. Additionally, the agreements require the consent of LGI or its
for funding any such budget or program; entering into any borrowings other
appointed director in order for GeoPark Chile or GeoPark TdF, as applicable,
than those provided in an approved budget or incurred in the ordinary
to be able to take certain actions, including, among others: making any
course of business to finance working capital needs; granting any guarantee
decision to terminate or permanently or indefinitely suspend operations in or
or indemnity to secure liabilities of parties other than those of our Colombian
surrender our blocks in Chile (other than as required under the terms of the
subsidiaries; changing the dividend, voting or other rights that would give
relevant CEOP for such blocks); selling our blocks in Chile to our affiliates;
preference to or discriminate against the shareholders of GeoPark Colombia;
making any change to the dividend, voting or other rights that would give
entering into certain related party transactions; and disposing of any
preference to or discriminate against the shareholders of these companies;
material assets other than those provided for in an approved budget and
entering into certain related party transactions; and creating a security
work program. The LGI Colombia Agreements also provide that: (i) if either
interest over our blocks in Chile (other than in connection with a financing
we or LGI decide to sell our respective shares in GeoPark Colombia, the
that benefits our Chilean subsidiaries). The LGI Chile Shareholders’
transferring shareholder must make an offer to sell those shares to the other
Agreements also provide that: (i) if LGI or either Agencia or GeoPark Chile
shareholder before selling those shares to a third party; and (ii) any sale to a
decides to sell its shares in GeoPark Chile or GeoPark TdF, as applicable, the
third party is subject to tag-along and drag-along rights, and the non-
transferring shareholder must make an offer to sell those shares to the other
transferring shareholder has the right to object to a sale to the third-party if it
shareholder before selling them to a third party; and (ii) any sale to a third
considers such third-party to be not of a good reputation or one of our direct
162 GeoPark 20F
competitors. We and LGI also agreed to vote our common shares or
management of our activities; maintain certain forms of insurance coverage,
otherwise cause GeoPark Colombia to declare dividends only after allowing
including coverage for public liability and director’s and officer’s liability
for retentions for approved work programs and budgets, capital adequacy
reasonably acceptable to IFC, and in respect of certain of our operations;
and tied surplus requirements of GeoPark Colombia, working capital
not undertake certain prohibited activities; and ensure that no prohibited
requirements, banking covenants associated with any loan entered into
payments are made by us or on our or the Lead Investors’ behalf, in respect
by GeoPark Colombia or our other Colombian subsidiaries and operational
of our operations.
requirements. See “-Item 4. Information on the Company-B. Business
overview-Significant agreements-Agreements with LGI-LGI Colombia
We also agreed to provide to IFC, within 30 days of the end of the first half
Agreements.”
LGI Stand-by Letters of Credit
In 2011, in connection with LGI’s acquisition of a 20% equity interest in
of the year, copies of our unaudited consolidated financial statements
for the period (prepared under IFRS), a report on our capital expenditures for
the period, a comprehensive report on the progress of the exploration,
development and exploitation of our blocks in Latin America and a statement
GeoPark Chile and a 14% equity interest in GeoPark TdF for US$148.0 million.
of all related party transactions during the period, with a certification by a
company officer that these were on an arm’s-length basis; within 90 days of
LGI provided to GeoPark TdF standby letters of credit for an amount of
the end of our fiscal year, copies of our audited consolidated financial
US$31.6 million (corresponding to its pro rata share in GeoPark TdF) and for
statements for the year (prepared under IFRS), a management letter from our
an additional amount of US$52.3 million (or the additional amount),
auditors in respect of our financial control procedures, accounting and
resulting in an aggregate of US$84.0 million in standby letters of credit, or
management information systems and any litigation, an annual monitoring
the LGI Stand-by Letters of Credit, to partially secure the US$101.4 million
report confirming compliance with national or local requirements and the
performance bond required by the Chilean government to guarantee
environmental and social requirements mandated by the agreement, a report
GeoPark TdF’s obligations with respect to the first period’s minimum work
indicating any payments in the year to any governmental authority in
program under the Tierra del Fuego CEOPs. The remaining US$17.4 million
connection with the documents governing our Chilean and Argentine blocks
was provided by GeoPark. All costs and liabilities regarding the additional
and certificates of insurance, with a certificate of our insurer confirming that
amount shall be paid by GeoPark. GeoPark has already applied to the Ministry
effectiveness of our policies and payment of all applicable premiums; within
of Energy for an aggregate reduction of approximately US$35 million in the
45 days before each fiscal year begins, a proposed annual business plan and
amount owed on the performance bond because minimum work obligations
budget for the upcoming year; within 3 days after its occurrence, notification
imposed by the terms of the bond have been met.
of any incident that had or may reasonably be expected to have an adverse
effect on the environment, health or safety; copies of notices, reports or other
The LGI Stand-by Letters of Credit initially expired on March 31, 2013, and
communications between us and our board of directors or shareholders; and,
were renewed until May 18, 2016, and the applicable interest rate is 1.5%. As
within five days of receipt thereof, copies of any reports, correspondence,
of December 31, 2014, the aggregate outstanding amount attributable to
documentation or notices from any third-party, governmental authority or
GeoPark’s share under the LGI Stand-by Letters of Credit was US$50.3 million.
IFC Subscription and Shareholders’ Agreement
On February 7, 2006, in order to finance the exploration, development and
exploitation of our blocks in Chile and Argentina and the acquisition of
state-owned company that could reasonably be expected to materially
impact our operations. Mr. O’Shaughnessy and Mr. Park have also agreed to
procure that shareholders holding 51% of our common shares cause us to
comply with the covenants above.
additional exploration, development and exploitation blocks in Latin America,
we, IFC and Gerald E. O’Shaughnessy and James F. Park, as Lead Investors,
Executive Directors’ Service Agreements
We have entered into service contracts with certain of our executive directors.
entered into an agreement, or the IFC Subscription and Shareholders’
See “-Item 6. Directors, Senior Management and Employees-B. Compensation-
Agreement, pursuant to which IFC agreed to subscribe and pay for
Executive compensation-Executive directors’ contracts.”
2,507,161 of our common shares, representing approximately 10.5% of our
then-outstanding common shares, at an aggregate subscription price of
For further information relating to our related party transactions and balances
US$10.0 million (or approximately US$3.99 per common share).
outstanding as of December 31, 2014, 2013 and 2012, please see Note 32 to
We agreed, for so long as IFC is a shareholder in the company, among other
things, to: ensure that our operations are in compliance with certain
environmental and social guidelines; appoint and maintain a technically
qualified individual to be responsible for the environmental and social
our audited consolidated financial statements.
C. Interests of Experts and Counsel
Not applicable.
GeoPark 20F 163
ITEM 8. FINANCIAL INFORMATION
Dividends and dividend policy
Holders of common shares will be entitled to receive dividends, if any, paid
A. Consolidated statements and other financial information
on the common shares.
Financial statements
See “-Item 18. Financial Statements,” which contains our audited financial
We have never declared or paid any cash dividends on our common shares.
We intend to retain all of our future earnings, if any, generated by our
statements prepared in accordance with IFRS.
operations for the development and growth of our business. Accordingly,
we do not expect to pay cash dividends on our common shares in
Legal proceedings
From time to time, we may be subject to various lawsuits, claims and
the foreseeable future. Because we are a holding company with no direct
operations, we will only be able to pay dividends from our available
proceedings that arise in the normal course of business, including
cash on hand and any funds we receive from our subsidiaries. The terms
employment, commercial, environmental, safety and health matters.
of our indebtedness may restrict us from paying dividends, or restrict our
For example, from time to time, we receive notice of environmental, health
subsidiaries from paying dividends to us.
and safety violations. It is not presently possible to determine whether
any such matters will have a material adverse effect on our consolidated
Under the Bermuda Companies Act, we may not declare or pay a dividend
financial position and results of operations.
if there are reasonable grounds for believing that we are, or would after the
payment be, unable to pay our liabilities as they become due or that the
As of the date of this Annual Report, in Brazil, GeoPark Brazil is a party to a
realizable value of our assets would thereafter be less than our liabilities. We
legal proceeding related to the entry into the concession agreement of
do not presently have any reasonable grounds for believing that, if we were
exploratory Block PN-T-597 that the ANP initially awarded to GeoPark Brazil in
to declare or pay a dividend on our common shares outstanding, we would
the 12th oil and gas bidding round held in November 2013. As a result of a
thereafter be unable to pay our liabilities as they became due or that the
class action filed by the Federal Prosecutor’s Office, an injunction was issued
realizable value of our assets would thereafter be less than our liabilities.
by a Brazilian Federal Court against the ANP, the Federal Government and
GeoPark Brazil on December 13, 2013. Due to the injunction and a decision
Additionally, any decision to pay dividends in the future, and the amount
from the Board of ANP GeoPark Brazil could not proceed to execute the
of any distributions, is at the discretion of our board of directors and
concession agreement, and cannot do so until the injunction is either lifted
our shareholders, and will depend on many factors, such as our results of
or clarified as to what conditions and which type of conventional drilling
operations, financial condition, cash requirements, prospects and other
activities may be carried out by GeoPark Brazil. According to the terms of the
factors. See “-Item 3. Key Information-D. Risk factors-Risks related to
Court’s injunction, the ANP will first need to take certain actions, such as
our common shares-We have never declared or paid, and do not intend to
conducting studies that prove that drilling unconventional resources will not
pay in the foreseeable future, cash dividends on our common shares, and,
contaminate the dams and aquifers in the region. On February 21, 2014,
consequently, your only opportunity to achieve a return on your investment
GeoPark Brazil requested that the board of the ANP suspend the execution
of the concession agreement (which entails delivery of the financial
is if the price of our stock appreciates” and “-We are a holding company
dependent upon dividends from our subsidiaries, which may be limited by
guarantee and performance guarantee and payment of the signing bonus)
law and by contract from making distributions to us, which would affect
for six months with a possible extension of an additional six months, or until
our ability to pay dividends on the common shares,” as well as “-Item 10.
a firm court decision is reached that does not prevent GeoPark Brazil from
Additional Information-B. Memorandum of association and bye-laws.”
entering into the concession agreement.
On April 16, 2014, the ANP’s Board enacted a resolution stating that all
B. Significant changes
A discussion of the significant changes in our business can be found under
proceedings related to the award of the concession of Block PN-T-597 to
“-Item 4. Information on the Company-B. Business Overview-Recent
GeoPark Brazil were suspended.
Developments.”
Due to similar law suits with the same types of claims filed in the states
of Paraná and Bahia, where the Court decision was to carry out conventional
ITEM 9. THE OFFER AND LISTING
drilling activities we expect that such decisions may impact the law suit
filed against us related to the Block PN-T-597, and also the ANP’s decision to
suspend the process for not signing the concession agreement.
A. Offering and listing details
Not applicable.
164 GeoPark 20F
B. Plan of distribution
Not applicable.
F. Expenses of the issue
Not applicable.
C. Markets
On February 6, 2014 we completed our initial public offering and listed our
common shares on the New York Stock Exchange, or NYSE.
Our common shares have been listed on the NYSE under the symbol “GPRK”
since February 7, 2014. They were previously listed on the AIM under the
ITEM 10. ADDITIONAL INFORMATION
A. Share capital
Not applicable.
symbol “GPK” until February 19, 2014, and, since 2009, have been admitted
to trade on the Santiago Offshore Stock Exchange (Bolsa Offshore de la Bolsa
B. Memorandum of association and bye-laws
The following description of our memorandum of association and bye-laws
de Comercio de Santiago) in Chile. We intend to de-register from the
does not purport to be complete and is subject to, and qualified by reference
Santiago Offshore Stock Exchange as soon as practicable.
to, all of the provisions of our memorandum of association and bye-laws.
The table below presents, for the periods indicated, the annual, quarterly
and monthly high and low closing prices (in US$) of our common shares on
General
We are an exempted company with limited liability incorporated under the
the NYSE.
Annual price history
2014 (from February 7
through December 31, 2014)
2015 (through April 27, 2015)
Quarterly price history
3rd Quarter 2014
4th Quarter 2014
1st Quarter 2015
2nd Quarter 2015
(through April 27, 2015)
Monthly price history
November 2014
December 2014
January 2015
February 2015
March 2015
April 2015 (through April 27, 2015)
Source: Bloomberg
D. Selling shareholders
Not applicable.
E. Dilution
Not applicable.
laws of Bermuda with registration number 33273 from the Registrar of
Companies. The rights of our shareholders will be governed by Bermuda law
Common shares
and by our memorandum of association and bye-laws. Bermuda company law
Average daily
differs in some material respects from the laws generally applicable to Delaware
trading
corporations. Below is a summary of some of those material differences.
High
Low
volume
(US$ per share)
(in shares)
Because the following statements are summaries, they do not discuss all
aspects of Bermuda law that may be relevant to us and to our shareholders.
11.00
5.48
11.00
9.64
5.48
5.49
8.50
6.61
5.48
4.75
4.40
5.49
4.92
3.60
9.17
4.92
3.60
47,795
40,535
Share capital and bye-laws
Our share capital consists of common shares only. Our authorized share
capital consists of 5,171,949,000 common shares of par value US$0.001
26,216
56,218
42,734
per share. As of the date of this annual report, there are 57,603,745 common
shares outstanding. All of our issued and outstanding common shares are
fully paid and nonassessable. We also have an employee incentive program,
3.72
30,701
pursuant to which we have granted share awards to our senior management
and certain key employees. See “-Item 6. Directors, Senior Management
and Employees.”
6.92
4.92
3.70
3.71
3.60
3.72
50,434
75,079
50,362
50,972
28,684
30,701
According to our bye-laws, if our share capital is divided into different
classes of shares, the rights attached to any class (unless otherwise provided
by the terms of issue of the shares of that class) may, whether or not the
Company is being wound-up, be varied with the consent in writing of
the holders of at least two-thirds of the issued shares of that class or with
the sanction of a resolution passed by a majority of the votes cast at a
separate general meeting of the holders of the shares of the class at which
meeting the necessary quorum shall be two persons at least holding or
representing by proxy one-third of the issued shares of the class. The rights
conferred upon the holders of the shares of any class issued with preferred
or other rights shall not, unless otherwise expressly provided by the terms
of issue of the shares of that class, be deemed to be varied by the creation or
issue of further shares ranking pari passu therewith.
GeoPark 20F 165
Our bye-laws give our board of directors the power to issue any unissued
meetings of the board of directors shall be the presence of a majority of the
shares of the company on such terms and conditions as it may determine,
board of directors from time to time.
subject to the terms of the bye-laws and any resolution of the shareholders
to the contrary.
Duties of directors
Under Bermuda common law, members of a board of directors owe a
Common shares
Holders of our common shares are entitled to one vote per share on all
fiduciary duty to the Company to act in good faith in their dealings with or
on behalf of the company, and to exercise their powers and fulfill the duties
matters submitted to a vote of holders of common shares. Subject to
of their office honestly. This duty has the following essential elements: (1) a
preferences that may be applicable to any issued and outstanding preference
duty to act in good faith in the best interests of the company; (2) a duty
shares, holders of common shares are entitled to receive such dividends,
not to make a personal profit from opportunities that arise from the office of
if any, as may be declared from time to time by our board of directors
director; (3) a duty to avoid conflicts of interest; and (4) a duty to exercise
out of funds legally available for dividend payments. Holders of common
powers for the purpose for which such powers were intended. The Bermuda
shares have no redemption, sinking fund, conversion, exchange or other
Companies Act also imposes a duty on directors of a Bermuda company,
subscription rights. In the event of our liquidation, the holders of common
to act honestly and in good faith, with a view to the best interests of the
shares are entitled to share equally and ratably in our assets, if any,
company, and to exercise the care, diligence and skill that a reasonably
remaining after the payment of all of our debts and liabilities, subject to
prudent person would exercise in comparable circumstances. In addition,
any liquidation preference on any outstanding preference shares.
the Bermuda Companies Act imposes various duties on directors with respect
to certain matters of management and administration of the company.
Board composition
Our bye-laws provide that our board of directors will determine the size
The Bermuda Companies Act provides that in any proceedings for negligence,
of the board, provided that it shall be not be composed of fewer than three
default, breach of duty or breach of trust against any director, if it appears
directors. Our board of directors currently consists of seven directors.
to a court that such officer is or may be liable in respect of the negligence,
Election and removal of directors
Our bye-laws provide that our directors shall hold office for such term as
default, breach of duty or breach of trust, but that he has acted honestly
and reasonably, and that, having regard to all the circumstances of the case,
including those connected with his appointment, he ought fairly to be
the shareholders shall determine or, in the absence of such determination,
excused for the negligence, default, breach of duty or breach of trust, that
until the next annual general meeting or until their successors are elected
court may relieve him, either wholly or partly, from any liability on such terms
or appointed or their office is otherwise vacated. Directors whose office has
as the court may think fit. This provision has been interpreted to apply only
expired may offer themselves for re-election at each election of the directors.
to actions brought by or on behalf of the company against the directors.
Under our bye-laws, a director may be removed by a resolution adopted by
By comparison, under Delaware law, the business and affairs of a corporation
65% or more of the votes cast by shareholders who (being entitled to do so)
vote in person or by proxy at any general meeting of the shareholders
are managed by or under the direction of its board of directors. In exercising
their powers, directors are charged with a duty of care and a duty of loyalty.
in accordance with the provisions of our bye-laws. Notice convened for the
The duty of care requires that directors act in an informed and deliberate
purpose of removing the director, containing a statement of the intention to do
manner and to inform themselves, prior to making a business decision, of all
so, must be served on such director not less than 14 days before the meeting.
relevant material information reasonably available to them. The duty of
Any vacancy created by the removal of a director at a special general meeting
of corporate employees. The duty of loyalty is the duty to act in good faith,
may be filled at that meeting by the election of another director in his or
not out of self-interest, and in a manner which the director reasonably
her place or, in the absence of any such election, by the board of directors.
believes to be in the best interests of the shareholders. A party challenging
Any other vacancy, including a newly created directorship, may be filled
the propriety of a decision of a board of directors bears the burden of
care also requires that directors exercise care in overseeing the conduct
by our board of directors.
Proceedings of board of directors
Our bye-laws provide that our business shall be managed by or under the
rebutting the presumptions afforded to directors by the “business judgment
rule.” If the presumption is not rebutted, the business judgment rule attaches
to protect the directors and their decisions. Where, however, the presumption
is rebutted, the directors bear the burden of demonstrating the fairness
direction of our board of directors. Our board of directors may act by the
of the relevant transaction. Notwithstanding the foregoing, Delaware courts
affirmative vote of a majority of the directors present at a meeting at which a
subject directors’ conduct to enhanced scrutiny in respect of defensive
quorum is present. The quorum necessary for the transaction of business at
actions taken in response to a threat to corporate control and approval of a
transaction resulting in a sale of control of the corporation.
166 GeoPark 20F
Interested directors
Pursuant to our bye-laws, a director shall declare the nature of his interest in
meeting of shareholders each calendar year, unless the shareholders in a
general meeting, elect to dispense with the holding of annual general
any contract or arrangement with the company as required by the Bermuda
meetings. Under Bermuda law and our bye-laws, a special general meeting
Companies Act. A director so interested shall not, except in particular
of shareholders may be called by the board of directors or the chairman
circumstances set out in our bye-laws, be entitled to vote or be counted
and may be called upon the requisition of shareholders holding not less than
in the quorum at a meeting in relation to any resolution in which he has an
10% of the paid-up capital of the company carrying the right to vote at
interest, which is to his knowledge, a material interest (otherwise than by
general meetings of shareholders.
virtue of his interest in shares or debentures or other securities of or
otherwise in or through the company). In addition, the director will not be
Our bye-laws provide that, at any general meeting of the shareholders, the
liable to us for any profit realized from the transaction. In contrast, under
presence in person or by proxy of two or more shareholders representing
Delaware law, such a contract or arrangement is voidable unless it is
in excess of 50% of the total issued voting shares of the company shall
approved by a majority of disinterested directors or by a vote of shareholders,
constitute a quorum for the transaction of business unless the company only
in each case if the material facts as to the interested director’s relationship
has one shareholder, in which case such shareholder shall constitute a
or interests are disclosed or are known to the disinterested directors or
quorum. Unless otherwise required by law or by our bye-laws, shareholder
shareholders, or such contract or arrangement is fair to the corporation
action requires a resolution adopted by a majority of votes cast by
as of the time it is approved or ratified. Additionally, such interested director
shareholders at a general meeting at which a quorum is present.
could be held liable for a transaction in which such director derived an
improper personal benefit.
Indemnification of directors and officers
Bermuda law provides generally that a Bermuda company may indemnify
Shareholder proposals
Under Bermuda law, shareholders holding at least 5% of the total voting
rights of all the shareholders having at the date of the requisition a right
to vote at the meeting to which the requisition relates or any group
its directors and officers against any loss arising from or liability which by
composed of at least 100 or more shareholders may require a proposal to
virtue of any rule of law would otherwise be imposed on them in respect of
be submitted to an annual general meeting of shareholders. Under our
any negligence, default, breach of duty or breach of trust except in cases
bye-laws, any shareholders wishing to nominate a person for election as a
where such liability arises from fraud or dishonesty of which such director or
director or propose business to be transacted at a meeting of shareholders
officer may be guilty in relation to the company.
must provide (among other things) advance notice, as set out in our
bye-laws. Shareholders may only propose a person for election as a director
Our bye-laws provide that we shall indemnify our officers and directors
at an annual general meeting.
in respect of their actions and omissions, except in respect of their fraud or
dishonesty, or to recover any gain, personal profit or advantage to which
such director is not legally entitled, and (by incorporation of the provisions of
Shareholder action by written consent
Our bye-laws provide that, except for the removal of auditors and
the Bermuda Companies Act) that we may advance monies to our officers
and directors for costs, charges and expenses incurred by our officers and
directors, any actions which shareholders may take at a general meeting of
shareholders may be taken by the shareholders through the unanimous
directors in defending any civil or criminal proceeding against them on the
written consent of the shareholders who would be entitled to vote on the
condition that the officers and directors repay the monies if any allegation of
matter at the general meeting.
fraud or dishonesty is proved against them provided, however, that, if the
Bermuda Companies Act requires, an advancement of expenses shall be made
only upon delivery to the Company of an undertaking ,by or on behalf
Amendment of memorandum of association and bye-laws
Our memorandum of association and bye-laws may be amended with the
of such indemnitee, to repay all amounts so advanced if it shall ultimately be
approval of a majority of our board of directors and by a resolution by a
determined by final judicial decision from which there is no further right to
majority of the votes cast by shareholders who (being entitled to do so) vote
appeal that such indemnitee is not entitled to be indemnified for such expenses
in person or by proxy at any general meeting of the shareholders in
under this Bye-law or otherwise. Our bye-laws provide that the company and
accordance with the provisions of the bye-laws.
the shareholders waive all claims or rights of action that they might have,
individually or in right of the company, against any of the company’s directors
or officers for any act or failure to act in the performance of such director’s or
Business combinations
A Bermuda company may engage in a business combination pursuant to a
officer’s duties, except in respect of any fraud or dishonesty.
tender offer, amalgamation, merger or sale of assets. The amalgamation
Meetings of shareholders
Under Bermuda law, a company is required to convene the annual general
or merger of a Bermuda company with another company generally requires
the amalgamation or merger agreement to be approved by the company’s
GeoPark 20F 167
board of directors and by its shareholders. Shareholder approval is not
court for appraisal of the value of their shares within one month of the
required where (a) a holding company and one or more of its wholly-owned
compulsory acquisition notice. If a dissenting shareholder is successful in
subsidiary companies amalgamate or merge or (b) two or more wholly-
obtaining a higher valuation, that valuation must be paid to all shareholders
owned subsidiary companies of the same holding company amalgamate
being squeezed out.
or merge. Under the Bermuda Companies Act (save for such “short-form
amalgamations”), unless a company’s bye-laws provide otherwise,
the approval of 75% of the shareholders voting at a meeting is required to
Dividends and repurchase of shares
Pursuant to our bye-laws, our board of directors has the authority to declare
approve the amalgamation or merger agreement, and the quorum for
dividends and authorize the repurchase of shares subject to applicable law.
such meeting must be two persons holding or representing more than one-
Under Bermuda law, a company may not declare or pay a dividend if there are
third of the issued shares of the company. Our bye-laws provide that an
reasonable grounds for believing that the company is, or would after the
amalgamation or merger will require the approval of our board of directors
payment be, unable to pay its liabilities as they become due or the realizable
and of our shareholders by a resolution adopted by 65% or more of the
value of its assets would thereby be less than its liabilities. Under Bermuda
votes cast by shareholders who (being entitled to do so) vote in person or
law, a company cannot purchase its own shares if there are reasonable
by proxy at any general meeting of the shareholders in accordance
grounds for believing that the company is, or after the repurchase would be,
with the provisions of the bye-laws. Under Bermuda law, in the event of
unable to pay its liabilities as they become due.
an amalgamation or merger of a Bermuda company with another company
or corporation, a shareholder who is not satisfied that fair value has been
offered for such shareholder’s shares may, within month of the notice
Shareholder suits
Class actions and derivative actions are generally not available to
of the shareholders meeting, apply to the Supreme Court of Bermuda to
shareholders under Bermuda law. The Bermuda courts, however, would
appraise the value of those shares.
ordinarily be expected to permit a shareholder to commence an action
in the name of a company to remedy a wrong to the company where the act
Under the Bermuda Companies Act, we are not required to seek the approval
complained of is alleged to be beyond the corporate power of the company
of our shareholders for the sale of all or substantially all of our assets.
or illegal, or would result in the violation of the company’s memorandum
However, Bermuda courts will view decisions of the English courts as highly
of association or bye-laws. Furthermore, consideration would be given
persuasive and English authorities suggest that such sales do require
by a Bermuda court to acts that are alleged to constitute a fraud against the
shareholder approval. Our bye-laws provide that the directors shall manage
minority shareholders or where an act requires the approval of a greater
the business of the Company and may exercise all such powers as are not,
percentage of the company’s shareholders than that which actually
by the Bermuda Companies Act or by these Bye-laws, required to be
approved it.
exercised by the Company in general meeting and may pay all expenses
incurred in promoting and incorporating the company and may exercise all
When the affairs of a company are being conducted in a manner which
the powers of the Company including, but not by way of limitation,
is oppressive or prejudicial to the interests of some part of the shareholders,
the power to borrow money and to mortgage or charge all or any part of the
undertaking property and assets (present and future) and uncalled capital
one or more shareholders may apply under the Bermuda Companies Act
for an order of the Supreme Court of Bermuda, which may make such order
of the Company and to issue debentures and other securities, whether
as it sees fit, including an order regulating the conduct of the company’s
outright or as collateral security for any debt, liability or obligation of the
affairs in the future or ordering the purchase of the shares of any shareholders
Company or any other persons.
by other shareholders or by the company.
Under Bermuda law, where an offer is made for shares of a company and,
within four months of the offer, the holders of not less than 90% of the shares
Access to books and records and dissemination of information
Members of the general public have a right to inspect the public documents
not owned by the offeror, its subsidiaries or their nominees accept such
of a company available at the office of the Registrar of Companies
offer, the offeror may by notice require the non-tendering shareholders to
in Bermuda. These documents include the company’s memorandum of
transfer their shares on the terms of the offer. Dissenting shareholders do not
association and any amendments thereto. The shareholders have the
have express appraisal rights but are entitled to seek relief (within one month
additional right to inspect the bye-laws of the company, minutes of general
of the compulsory acquisition notice) from the court, which has power to
meetings of shareholders and the company’s audited financial statements.
make such orders as it thinks fit. Additionally, where one or more parties hold
The company’s audited financial statements must be presented at the annual
not less than 95% of the shares of a company, such parties may, pursuant
general meeting of shareholders, unless the board and all the shareholders
to a notice given to the remaining shareholders, acquire the shares of such
agree to the waiving of the audited financials. The company’s share register is
remaining shareholders. Dissenting shareholders have a right to apply to the
open to inspection by shareholders and by members of the general public
168 GeoPark 20F
without charge. A company is required to maintain its share register in
does not describe all of the tax consequences that may be relevant in light
Bermuda but may, subject to the provisions of the Bermuda Companies Act,
of the U.S. Holder’s particular circumstances, including alternative minimum
establish a branch register outside of Bermuda. Bermuda law does not,
tax and Medicare contribution tax consequences and differing tax
however, provide a general right for shareholders to inspect or obtain copies
consequences applicable to a U.S. Holder subject to special rules, such as:
of any other corporate records.
• certain financial institutions;
Registrar or transfer agent
A register of holders of the common shares is maintained by Coson Corporate
accounting;
• a person holding common shares as part of a straddle, wash sale or
Services Limited in Bermuda, and a branch register is maintained in the
conversion transaction or entering into a constructive sale with respect to
• a dealer or trader in securities who uses a mark-to-market method of tax
United States by Computershare Trust Company, N.A., who serves as branch
registrar and transfer agent.
C. Material contracts
See “-Item 4. Information on the Company-B. Business overview-Significant
agreements.”
D. Exchange controls
Not applicable.
E. Taxation
The following summary contains a description of certain Bermudian, U.S.
federal income, and Chilean tax consequences of the acquisition, ownership
the common shares;
• a person whose functional currency for U.S. federal income tax purposes
is not the U.S. dollar;
• a partnership or other entities classified as partnerships for U.S. federal
income tax purposes;
• a tax-exempt entity, including an “individual retirement account” or
“Roth IRA;”
• a person that owns or is deemed to own 10% or more of our voting stock;
• a person who acquired our shares pursuant to the exercise of an employee
stock option or otherwise as compensation; or
• a person holding common shares in connection with a trade or business
conducted outside of the United States.
and disposition of our common shares. The summary is based upon the
If an entity that is classified as a partnership for U.S. federal income tax
tax laws of Bermuda, the United States, and Chile, and regulations thereunder
purposes holds common shares, the U.S. federal income tax treatment of a
as of the date hereof, which are subject to change.
partner will generally depend on the status of the partner and the activities
Bermuda tax consideration
At the date of this annual report, there is no Bermuda income or profits
tax, withholding tax, capital gains tax, capital transfer tax, estate duty
of the partnership. Partnerships holding common shares and partners in
such partnerships should consult their tax advisers as to the particular U.S.
federal income tax consequences of their investment in our common shares.
or inheritance tax payable by us or by our shareholders in respect of our
This discussion is based on the Internal Revenue Code of 1986, as amended,
common shares. We have obtained an assurance from the Minister of Finance
or the Code, administrative pronouncements, judicial decisions, and final,
of Bermuda under the Exempted Undertakings Tax Protection Act 1966
that, in the event that any legislation is enacted in Bermuda imposing any
temporary and proposed Treasury regulations, all as of the date hereof, any
of which is subject to change, possibly with retroactive effect. U.S. Holders
tax computed on profits or income, or computed on any capital asset,
should consult their tax advisers concerning the U.S. federal, state, local and
gain or appreciation or any tax in the nature of estate duty or inheritance tax,
foreign tax consequences of owning and disposing of our common shares
such tax shall not, until March 31, 2035, be applicable to us or to any of our
in their particular circumstances.
operations or to our common shares, debentures or other obligations except
insofar as such tax applies to persons ordinarily resident in Bermuda or is
A “U.S. Holder” is a beneficial owner of our common shares for U.S. federal
payable by us in respect of real property owned or leased by us in Bermuda.
income tax purposes that is:
We pay annual Bermuda government fees.
• a citizen or individual resident of the United States;
Material U.S. federal income tax considerations
The following is a description of the material U.S. federal income tax
consequences to U.S. Holders (as defined below) of owning and disposing of
• a corporation, or other entity taxable as a corporation, created or organized
in or under the laws of the United States, any state therein or the District of
Columbia; or
• an estate or trust the income of which is subject to U.S. federal income
our common shares. This discussion is not a comprehensive description of
taxation regardless of its source.
all tax considerations that may be relevant to a particular person’s decision
to hold our common shares. This discussion applies only to a U.S. Holder that
This discussion assumes that we are not, and will not become, a passive
holds our common shares as capital assets for tax purposes. In addition, it
foreign investment company, as described below.
GeoPark 20F 169
Taxation of distributions
Distributions paid on our common shares, other than certain pro rata
PFIC is made annually and is based upon the composition of our income and
assets (including the income and assets of, among others, entities in which
distributions of common shares, will generally be treated as dividends
we hold at least a 25% interest), and the nature of our activities.
to the extent paid out of our current or accumulated earnings and profits
(as determined under U.S. federal income tax principles). Because we do not
If we were a PFIC for any taxable year during which a U.S. Holder held
maintain calculations of our earnings and profits under U.S. federal income
our common shares, gain recognized by a U.S. Holder on a sale or other
tax principles, it is expected that distributions will generally be reported
disposition (including certain pledges) of our common shares would
to U.S. Holders as dividends. Dividends paid by qualified foreign corporations
generally be allocated ratably over the U.S. Holder’s holding period for the
to certain non-corporate U.S. Holders may be taxable at favorable rates.
common shares. The amounts allocated to the taxable year of the sale or
A foreign corporation is treated as a qualified foreign corporation with
other disposition and to any year before we became a PFIC would be taxed
respect to dividends paid on stock that is readily tradable on a securities
as ordinary income. The amount allocated to each other taxable year would
market in the United States, such as the NYSE where our common shares
be subject to tax at the highest rate in effect for individuals or corporations
are traded. Non-corporate U.S. Holders should consult their tax advisers
for that year, as appropriate, and an interest charge would be imposed on
to determine whether the favorable rate will apply to dividends they receive
the tax on such amount. Further, to the extent that any distribution received
and whether they are subject to any special rules that limit their ability
by a U.S. Holder on its common shares exceeds 125% of the average of the
to be taxed at this favorable rate.
annual distributions on the shares received during the preceding three years
or the U.S. Holder’s holding period, whichever is shorter, that distribution
A dividend generally will be included in a U.S. Holder’s income when
would be subject to taxation in the same manner as gain, as described
received, will be treated as foreign-source income to U.S. Holders and will not
immediately above. Certain elections may be available that would result
be eligible for the dividends-received deduction generally available to U.S.
in alternative treatments (such as mark-to-market treatment) of our common
corporations under the Code with respect to dividends paid by domestic
shares. U.S. Holders should consult their tax advisers to determine whether
corporations.
any of these elections would be available and, if so, what the consequences
of the alternative treatments would be in their particular circumstances.
Sale or other taxable disposition of common shares
Subject to the passive foreign investment company rules described below,
gain or loss realized on the sale or other taxable disposition of our common
Information reporting and backup withholding
Payments of dividends and sales proceeds that are made within the United
shares will be capital gain or loss, and will be long-term capital gain or loss
States or through certain U.S.-related financial intermediaries generally are
if the U.S. Holder held our common shares for more than one year.
subject to information reporting, and may be subject to backup withholding,
Long-term capital gain of a non-corporate U.S. Holder is generally taxed at
unless (1) the U.S. Holder is a corporation or other exempt recipient or (2)
preferential rates. The deductibility of capital losses is subject to limitations.
in the case of backup withholding, the U.S. Holder provides a correct
The amount of the gain or loss will equal the difference between the U.S.
taxpayer identification number and certifies that it is not subject to backup
Holder’s tax basis in the common shares disposed of and the amount realized
on the disposition. If a Chilean tax is withheld on the sale or disposition
withholding. The amount of any backup withholding from a payment to
a U.S. Holder will be allowed as a credit against the U.S. Holder’s U.S. federal
of the common shares, a U.S. Holder’s amount realized will include the gross
income tax liability and may entitle it to a refund, provided that the required
amount of the proceeds of the sale or disposition before deduction of the
information is timely furnished to the Internal Revenue Service.
Chilean tax. See “-Chilean tax on transfers of shares” for a description of
when a disposition may be subject to taxation by Chile. This gain or loss will
generally be U.S.-source gain or loss for foreign tax credit purposes. U.S.
Chilean tax on transfers of shares
In September 2012, Article 10 of the Chilean Income Tax Law Decree Law
Holders should consult their tax advisers as to whether the Chilean tax on
No. 824 of 1974, or the indirect transfer rules, were enacted, and impose taxes
gains may be creditable against the U.S. Holder’s U.S. federal income tax
on the indirect transfer of shares, equity rights, interests or other rights in
on foreign-source income from other sources.
the equity, control or profits of a Chilean entity as well as transfers of other
assets and property of permanent establishments or other businesses in Chile,
Passive foreign investment company rules
We believe that we were not a “passive foreign investment company,” or PFIC,
or the Chilean Assets. The 2014 tax reform introduces a measure which
obliges the company from which shares are transferred to pay taxes if the
for U.S. federal income tax purposes for 2014, and we do not expect to be a
entity which undertakes the transfer of shares fails to do so.
PFIC in the foreseeable future. However, because the composition of our
income and assets will vary over time, there can be no assurance that we will
not be a PFIC for any taxable year. The determination of whether we are a
The indirect transfer rules apply to sales of shares of an entity:
• If such entity is an offshore holding company located in a black-listed tax
170 GeoPark 20F
haven jurisdiction as determined by Chilean tax law, or a black-listed
Based on information available to us, (i) no Chilean resident holds 5% or
jurisdiction, (such as Bermuda) that holds Chilean Assets; and either a Chilean
more of our rights to equity, control or profits; or (ii) residents in black-listed
resident holds 5% or more of such entity, or such entity’s rights to equity,
jurisdictions hold 50% or more of our rights to equity, control or profits.
control or profits, or 50% or more of such entity’s rights to equity or profits
Therefore, we do not believe the indirect transfer rules will apply to transfers
are held by residents in black-listed jurisdictions; or
of our common shares, unless the shares or rights transferred represent
• the shares or rights transferred represent 10% or more of the offshore
10% or more of the company and the other conditions described above are
holding company (considering dispositions by related persons and over
met (considering dispositions by related persons and over the preceding
the preceding 12-month period) and the underlying Chilean Assets indirectly
12-month period).
transferred, in the proportion indirectly owned by the seller, (a) are
valued in an amount equal to or higher than UTA 210,000 (approximately
However, there can be no assurance that, at any time in the future, a
US$200 million) (adjusted by the Chilean inflation unit of reference) or
Chilean resident will not hold 5% or more of our rights to equity, control or
(b) represent 20% or more of the market value of the interest held by such
profits or that residents in black-listed jurisdictions will not hold 50% or
seller in such offshore holding company.
more of our rights to equity, control or profits. If this were to occur, all sales
of our common shares would be subject to the indirect transfer tax referred
As a result of these rules, a capital gain tax of 35% will be applied by the
to above.
Chilean tax authorities to the sale of any of our common shares if either of the
above alternative are met. This rate might be subject to change in the short
Our expectations regarding the indirect transfer rules are based on our
term. See “-Item 4. Information on the Company-B. Business Overview-Other
understandings, analysis and interpretation of these enacted indirect transfer
regulation of the oil and gas industry-Chile.”
rules, which are subject to additional interpretation and rule-making by the
Chilean authorities. As such, there is uncertainty relating to the application by
As of December 31, 2014, our Chilean Assets represented more than UTA
Chilean authorities of the indirect transfer rules on us.
210,000 and represent more than 20% of our market value.
The 35% rate is calculated pursuant to one of the following methods, as
shares-The transfer of our common shares may be subject to capital gains
See “-Item 3. Key Information-D. Risk Factors-Risks related to our common
determined by the seller:
• the sale price of the shares minus the acquisition cost of such shares,
multiplied by the percentage or proportion of the part of the underlying
Chilean Assets’ fair market value (which assets are deemed to be “indirectly
transferred” by virtue of the sale of shares) to the fair market value of the
shares of the seller; or
• the portion of the sales price of the shares equal to the proportion of the
fair market value of the underlying Chilean Assets, minus the corresponding
proportion in the tax cost of such Chilean Assets for the corresponding
holding entity.
taxes pursuant to indirect transfer rules in Chile.”
F. Dividends and paying agents
Not applicable.
G. Statement by experts
Not applicable.
H. Documents on display
We are subject to the informational requirements of the Exchange Act.
Accordingly, we are required to file reports and other information with the
However, the seller may opt to be taxed as if the underlying Chilean Assets
SEC, including annual reports on Form 20-F and reports on Form 6-K. You
had been sold directly in which case a different set of tax rules may apply.
may inspect and copy reports and other information filed with the SEC
at the Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549.
The tax is payable by the seller of the shares; however, the buyer shall make
Information on the operation of the Public Reference Room may be obtained
a provisional withholding unless the seller declares and pays the tax within
by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an
the month following the sale, payment, remittance or it is credited into
Internet website that contains reports and other information about issuers,
its account or is put at its disposal. Also, if the seller fails to declare and pay
like us, that file electronically with the SEC. The address of that website is
this tax, and the buyer has not complied with its withholding obligations,
www.sec.gov.
the Chilean tax authority (Servicio de Impuestos Internos) may charge such
tax directly to any of them. In addition, the Chilean tax authority may require
us, the seller, the buyer, or its representative in Chile, to file an affidavit with
I. Subsidiary information
Not applicable.
the information necessary to assess this tax.
GeoPark 20F 171
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
We are exposed to a variety of market risks, including commodity price risk,
interest rate risk, currency risk and credit (counterparty and customer) risk.
The term “market risk” refers to the risk of loss arising from adverse changes
in interest rates, oil and natural gas prices and foreign currency exchange
rates.
For further information on our market risks, please see Note 3 to our audited
consolidated financial statements.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A. Debt securities
Not applicable.
B. Warrants and rights
Not applicable.
C. Other securities
Not applicable.
D. American Depositary Shares
Not applicable.
172 GeoPark 20F
Part II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
procedures that:
A. Defaults
No matters to report.
B. Arrears and delinquencies
No matters to report.
• pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect transactions and dispositions of our assets;
• provide reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements, in accordance with generally
accepted accounting principles, and that receipts and expenditures are
being made only in accordance with authorization of our management and
directors; and
• provide reasonable assurance regarding prevention or timely detection
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
of unauthorized acquisition, use or disposition of our assets that could have a
HOLDERS AND USE OF PROCEEDS
Not applicable.
material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Therefore, effective control over
ITEM 15. CONTROLS AND PROCEDURES
financial reporting cannot, and does not, provide absolute assurance of
A. Disclosure Controls and Procedures
As of December 31, 2014, under the supervision and with the participation
achieving our control objectives. Also, projections of, and any evaluation of
effectiveness of the internal controls in future periods are subject to the
risk that controls may become inadequate because of changes in conditions,
of our management, including our Chief Executive Officer and Chief Financial
or that the degree of compliance with the policies or procedures may
Officer, we performed an evaluation of the effectiveness of the design
deteriorate.
and operation of our disclosure controls and procedures (as defined in Rule
13a-15(e) under the Exchange Act). There are inherent limitations to the
Under the supervision and with the participation of our management,
effectiveness of any disclosure controls and procedures system, including
including our Chief Executive Officer, our Chief Financial Officer, and our
the possibility of human error and circumventing or overriding them. Even if
Director of Legal and Governance, we conducted an evaluation of the
effective, disclosure controls and procedures can provide only reasonable
effectiveness of our internal control over financial reporting as of December
assurance of achieving their control objectives.
31, 2014, based on the criteria established in Internal Control-Integrated
Framework of the Committee of Sponsoring Organizations of the Treadway
Based on such evaluation, our Chief Executive Officer and Chief Financial
Commission (2013).
Officer concluded that our disclosure controls and procedures are effective
to provide reasonable assurance that the information we are required
Based on this assessment, management believes that, as of December 31,
to disclose in the reports we file or submit under the Exchange Act is (1)
2014, its internal control over financial reporting was effective based on
recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and forms and (2) accumulated and
communicated to our management to allow timely decisions regarding
required disclosures.
those criteria.
C. Attestation Report of the Registered Public Accounting Firm
Not applicable.
B. Management’s Annual Report on Internal Control over Financial
Reporting
Our management is responsible for establishing and maintaining an
D. Changes in Internal Control over Financial Reporting
There have been changes in our internal control over financial reporting
during the period covered by this annual report on Form 20-F that
adequate internal control over financial reporting as defined in Rule 13a-15(f)
have materially affected our internal control over financial reporting.
under the Exchange Act.
Our internal control over financial reporting is a process designed by, or
enterprise resource planning system (“ERP”) with a view to making its
under the supervision of, our principal executive and principal financial
operations more efficient, improving process management and decision-
officers, management and other personnel, to provide reasonable assurance
making, and strengthening its internal control system. As part of this
regarding the reliability of financial reporting and the preparation of our
process, in 2014 GeoPark has successfully undertaken the implementation
financial statements for external reporting purposes, in accordance with
of this new ERP to its Colombian, Chilean, Brazilian and Argentinean
generally accepted accounting principles. These include those policies and
operations to support its business processes.
In the year ended December 31, 2014, GeoPark implemented a new
GeoPark 20F 173
ITEM 16. [RESERVED]
Tax Fees
Tax fees are fees billed for professional services for tax compliance, tax advice
ITEM 16A. Audit committee financial expert
and tax planning.
We have determined that Mr. Peter Ryalls, Mr. Juan Cristóbal Pavez and Mr.
Robert Bedingfield are independent, as such term is defined under SEC rules
Pre-Approval Policies and Procedures
Following the listing of our common shares on the NYSE, the Audit
applicable to foreign private issuers. In addition, Mr. Robert Bedingfield and
Committee proposes the appointment of the independent auditor to the
Mr. Juan Cristobal Pavez are regarded as audit committee financial experts.
Board to be put to shareholders for approval at the Annual General meeting.
ITEM 16B. Code of Conduct
The committee oversees the auditor selection process for new auditors
and ensures key partners in the appointed firm are rotated in accordance
with best practices. Also, following our NYSE listing, the Audit Committee
We have adopted a code of conduct applicable to the board of directors
is required to pre-approve the audit and non-audit fees and services
and all employees. Since its effective date on September 24, 2012, we have
performed by the Company’s auditors in order to assure that the provision
not waived compliance with or amended the code of conduct.
of such services does not impair the audit firm’s independence.
ITEM 16C. Principal Accountant Fees and Services
All of the audit fees, audit-related fees and tax fees described in this item
16C have been approved by the Audit Committee.
ITEM 16D. Exemptions from the listing standards for audit committees
[NONE]
Amounts billed by Price Waterhouse & Co. S.R.L. for audit and other services
were as follows:
Audit fees
Audit-related fees
Tax fees
Other fees paid
Total
2014
2013
(in millions of US$)
0.62
-
0.28
0.54
1.44
0.81
0.03
0.26
0.33
1.43
Audit Fees
Audit fees are fees billed for professional services rendered by the principal
accountant for the audit of the registrant’s annual financial statements
or services that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements for those fiscal years. It
includes the audit of our annual consolidated financial statements and other
services that generally only the independent accountant reasonably can
provide, such as comfort letters, statutory audits, consents and assistance
with and review of documents filed with the Securities and Exchange
Commission.
Audit-Related Fees
Audit-related fees are fees billed for assurance and related services that
are reasonably related to the performance of the audit or review of
our consolidated financial statements for fiscal years 2014 and 2013 and
not reported under the previous category. These services would include,
among others: accounting consultations and audits in connection with
acquisitions, internal control reviews, attest services that are not required by
statue or regulation and consultation concerning financial accounting and
reporting standards.
174 GeoPark 20F
ITEM 16E. Purchases of equity securities by the issuer and affiliated
purchasers
The following table reflects purchases of our common shares by or on behalf
of us or by any affiliated purchaser in 2014.
Total number
Total number of
common shares
Maximum number
(or approximate
dollar value)
purchased as part
of common shares
of publicly
that may yet
of common shares
Average price paid per
announced plans
be purchased under
purchased
-
common share (US$)
-
or programs
-
the plans or programs
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
73,082
73,082
5.30
5.30
73,082
73,082
US$10 million
US$10 million
2014
January 1 to January 31
February 1 to February 28
March 1 to March 31
April 1 to April 30
May 1 to May 31
June 1 to June 30
July 1 to July 31
August 1 to August 31
September 1 to September 30
October 1 to October 31
November 1 to November 30(1)
December 1 to December 31
Total
(1) In December 2014, the Board of Directors has approved a program to
repurchase up to US$10 million of common shares, par value US$0.001
ITEM 16F. Change in registrant’s certifying accountant
Not applicable.
per share of the Company. This Repurchase Program began on December 19,
2014 and expired on March 27, 2015. The Shares repurchased are used to
ITEM 16G. Corporate governance
offset, in part, any expected dilution effects resulting from the Company’s
employee incentive schemes, including grants under the Company’s Stock
Our common shares are listed on the New York Stock Exchange,
Award Plan and the Limited Non-Executive Director Plan.
or NYSE. We are therefore required to comply with certain of the NYSE’s
corporate governance listing standards, or the NYSE Standards. As a
foreign private issuer, we may follow our home country’s corporate
governance practices in lieu of most of the NYSE Standards. Our corporate
governance practices differ in certain significant respects from those
that U.S. companies must adopt in order to maintain NYSE listing and,
in accordance with Section 303A.11 of the NYSE Listed Company Manual,
a brief, general summary of those differences is provided as follows.
GeoPark 20F 175
Director independence
The NYSE Standards require a majority of the membership of NYSE-listed
Additional audit committee functions
The NYSE standards require that audit committees of domestic companies
company boards to be composed of independent directors. Neither
to serve a number of functions in addition to reviewing and approving the
Bermuda law, the law of our country of incorporation, nor our memorandum
company’s financial statements, engaging auditors and assessing their
of association or bye-laws require a majority of our board to consist of
independence, and obtaining the legal and other professional advice of
independent directors.
experts when necessary. For instance, the NYSE Standards require that the
audit committee meet independently with management in a separate
Non-management directors’ executive sessions
The NYSE Standards require non-management directors of NYSE-listed
session in order to maximize the effectiveness of the committee’s oversight
function. In addition, audit committees must obtain and review a report
companies to meet at regularly scheduled executive sessions without
by the independent auditors describing the firm’s internal quality-control
management. Our memorandum of association and bye-laws do not require
procedures and any issues raised by these procedures. Finally, audit
our non-management directors to hold such meetings.
committees are responsible for designing and implementing an internal
Committee member composition
The NYSE Standards require domestic NYSE-listed domestic companies
audit function that assesses the company’s risk management processes and
systems of internal control on an ongoing basis.
to have a nominating/corporate governance committee and a compensation
Foreign private issuers such as us are exempt from these additional
committee that are composed entirely of independent directors. Bermuda
requirements if home country practice is followed. Bermuda law does not
law, the law of our country of incorporation, does not impose similar
impose similar requirements, and consequently, our audit committee
requirements.
does not perform these additional functions.
Independence of the compensation committee and its advisers
On January 11, 2013, the SEC approved NYSE listing standards that require
Miscellaneous
In addition to the above differences, we are not required to: make our audit
that the board of directors of a domestic listed company consider two factors
and compensation committees prepare a written charter that addresses
(in addition to the existing general independence tests) in the evaluation
either purposes and responsibilities or performance evaluations in a manner
of the independence of compensation committee members: (i) the source of
that would satisfy the NYSE’s requirements; acquire shareholder approval
compensation of the director, including any consulting, advisory or other
of equity compensation plans in certain cases; or adopt and make publicly
compensatory fees paid by the listed company, and (ii) whether the director
available corporate governance guidelines.
has an affiliate relationship with the listed company, a subsidiary of the listed
company or an affiliate of a subsidiary of the listed company. In addition,
We are incorporated under, and are governed by, the laws of Bermuda.
before selecting or receiving advice from a compensation consultant or other
For a summary of some of the differences between provisions of Bermuda
adviser, the compensation committee of a listed company will be required
law applicable to us and the laws applicable to companies incorporated
to take into consideration six specific factors, as well as all other factors
relevant to an adviser’s independence.
in Delaware and their shareholders, See “-Item 10. Additional Information-B.
Memorandum of association and bye-laws.”
Foreign private issuers such as us will be exempt from these requirements
if home country practice is followed. Bermuda law does not impose similar
ITEM 16H. Mine safety disclosure
Not applicable.
requirements, so we will not be required to implement the new NYSE
listing standards relating to compensation committees of domestic listed
companies. All of the members of our compensation committee are
independent, and the charter of our compensation committee does not
require the remuneration committee to consider the independence of any
advisers that assist them in fulfilling their duties.
176 GeoPark 20F
Part III
ITEM 17. Financial statements
We have responded to Item 18 in lieu of this item.
ITEM 19. Exhibits
ITEM 18. Financial statements
Financial Statements are filed as part of this annual report, see pages 185 to
to Exhibit 3.1 to the Company’s Registration Statement
on Form F-1 (File No. 333-191068) filed with the SEC on
this Annual Report.
September 9, 2013).
Exhibit no. Description
1.1
Certificate of Incorporation (incorporated herein by reference
1.2
Memorandum of Association (incorporated herein by reference
1.3
1.4
to Exhibit 3.2 to the Company’s Registration Statement
on Form F-1 (File No. 333-191068) filed with the SEC on
September 9, 2013).
Current bye-laws (incorporated herein by reference to Exhibit
3.3 to the Company’s Registration Statement on Form F-1
(File No. 333-191068) filed with the SEC on September 9, 2013).
Form of amended and restated bye-laws (incorporated herein
by reference to Exhibit 3.4 to the Company’s Registration
Statement on Form F-1 (File No. 333-191068) filed with the
SEC on September 9, 2013).
2.2
Indenture, dated February 11, 2013, among GeoPark Chile
Limited Agencia en Chile, GeoPark Limited, GeoPark Latin
America Limited and Deutsche Bank Trust Company Americas
(incorporated herein by reference to Exhibit 4.2 to the
Company’s Registration Statement on Form F-1 (File No. 333-
191068) filed with the SEC on September 9, 2013).
2.3
Share Pledge Agreement, dated February 11, 2013, among
GeoPark Chile Limited Agencia en Chile, GeoPark Chile S.A.,
GeoPark Colombia S.A. and Deutsche Bank Trust Company
Americas (incorporated herein by reference to Exhibit 4.3
to the Company’s Registration Statement on Form F-1
(File No. 333-191068) filed with the SEC on September 9, 2013).
2.4
Intercompany Loan Pledge Agreement, dated February 11,
2013, among GeoPark Chile Limited Agencia en Chile, GeoPark
Fell S.p.A., GeoPark Llanos SAS and Deutsche Bank Trust
Company Americas (incorporated herein by reference to Exhibit
4.4 to the Company’s Registration Statement on Form F-1
(File No. 333-191068) filed with the SEC on September 9, 2013).
2.5
Supplemental Indenture, dated December 20, 2013, among
GeoPark Latin America Limited Agencia en Chile, GeoPark Latin
America Limited, GeoPark Limited, GeoPark Latin America
Coöperatie U.A. and Deutsche Bank Trust Company Americas
(incorporated herein by reference to Exhibit 4.5 to
the Company’s Registration Statement on Form F-1/A
(File No. 333-191068) filed with the SEC on January 21, 2014).
GeoPark 20F 177
Exhibit no. Description
4.1
Special Contract for the Exploration and Exploitation of
Exhibit no. Description
4.8
Subscription Agreement, dated December 18, 2012, among
Hydrocarbons, Fell Block, dated April 29, 1997, among the
LG International Corporation, GeoPark Chile Limited Agencia
Republic of Chile, the Chilean Empresa Nacional de Petróleo
en Chile, GeoPark Colombia S.A. and GeoPark Holdings
(ENAP) and Cordex Petroleums Inc. (incorporated herein
Limited (incorporated herein by reference to Exhibit 10.8 to
by reference to Exhibit 10.1 to the Company’s Registration
the Company’s Registration Statement on Form F-1
Statement on Form F-1 (File No. 333-191068) filed with
(File No. 333-191068) filed with the SEC on September 9, 2013).
the SEC on September 9, 2013).
4.9
Shareholders’ Agreement, dated December 18, 2012, among
4.2
Exploration and Production Contract regarding exploration
LG International Corporation, GeoPark Chile Limited Agencia
for and exploitation of hydrocarbons in the La Cuerva
en Chile and GeoPark Colombia S.A. (incorporated herein
Block, dated April 16, 2008, between the Colombian Agencia
by reference to Exhibit 10.9 to the Company’s Registration
Nacional de Hidrocarburos and Hupecol Caracara LLC
Statement on Form F-1 (File No. 333-191068) filed with
(incorporated herein by reference to Exhibit 10.l2 to the
the SEC on September 9, 2013).
Company’s Registration Statement on Form F-1
4.10
Subordinated Loan Agreement, dated December 18, 2012,
(File No. 333-191068) filed with the SEC on September 9, 2013).
between LG International Corporation and Winchester
4.3
Exploration and Production Contract regarding exploration
Oil & Gas S.A. (incorporated herein by reference to Exhibit
for and exploitation of hydrocarbons in the Llanos 34 Block,
10.10 to the Company’s Registration Statement on Form F-1
dated March 13, 2009, between the Colombian Agencia
(File No. 333-191068) filed with the SEC on September 9, 2013).
Nacional de Hidrocarburos and Unión Temporal Llanos 34
4.11
Subscription Agreement, dated October 18, 2011, among
(incorporated herein by reference to Exhibit 10.3 to the
LG International Corporation and GeoPark TdF S.A.
Company’s Registration Statement on Form F-1
(incorporated herein by reference to Exhibit 10.11 to the
(File No. 333-191068) filed with the SEC on September 9, 2013).
Company’s Registration Statement on Form F-1
4.4
Subscription and Shareholders Agreement, dated February 7,
(File No. 333-191068) filed with the SEC on September 9, 2013).
2006, among the International Finance Corporation, GeoPark
4.12
Shareholders’ Agreement, dated October 4, 2011, among
Holdings Limited, Gerald O’Shaughnessy and James F. Park
LG International Corporation, GeoPark TdF S.A. and GeoPark
(incorporated herein by reference to Exhibit 10.4 to the
Chile S.A. (incorporated herein by reference to Exhibit 10.12
Company’s Registration Statement on Form F-1
to the Company’s Registration Statement on Form F-1
(File No. 333-191068) filed with the SEC on September 9, 2013).
(File No. 333-191068) filed with the SEC on September 9, 2013).
4.5
Purchase and Sale Agreement, dated March 26, 2012,
4.13
Quota Purchase Agreement, dated May 14, 2013, between
between Hupecol Cuerva Holdings LLC and GeoPark Llanos S.A.S.
Panoro Energy do Brasil Ltda. and GeoPark Brazil Exploracão
(incorporated herein by reference to Exhibit 10.5 to
e Producão de Petróleo e Gás Ltda (incorporated herein
the Company’s Registration Statement on Form F-1
(File No. 333-191068) filed with the SEC on September 9, 2013).
by reference to Exhibit 10.13 to the Company’s Registration
Statement on Form F-1 (File No. 333-191068) filed with the
4.6
Subscription Agreement, dated May 20, 2011, among
SEC on September 9, 2013).
LG International Corporation, GeoPark Chile Limited Agencia
4.14
Purchase and Sale Agreement for Crude Oil and Condensate of
en Chile, GeoPark Chile S.A. and GeoPark Holdings Limited
Fell Block between Empresa Nacional del Petróleo (ENAP) and
(incorporated herein by reference to Exhibit 10.6 to the
GeoPark Fell S.p.A. (incorporated herein by reference to Exhibit
Company’s Registration Statement on Form F-1
10.14 to the Company’s Registration Statement on Form F-1
(File No. 333-191068) filed with the SEC on September 9, 2013).
(File No. 333-191068) filed with the SEC on September 9, 2013).
4.7
Shareholders’ Agreement, dated May 20, 2011, among
4.15
Purchase and Sale Agreement for Natural Gas between
LG International Corporation, GeoPark Chile Limited Agencia
GeoPark Chile Limited, Agencia en Chile and Methanex
en Chile and GeoPark Chile S.A. (incorporated herein
Chile S.A. (incorporated herein by reference to Exhibit 10.15
by reference to Exhibit 10.7 to the Company’s Registration
to the Company’s Registration Statement on Form F-1/A
Statement on Form F-1 (File No. 333-191068) filed with
(File No. 333-191068) filed with the SEC on October 10, 2013).†
the SEC on September 9, 2013).
178 GeoPark 20F
Exhibit no. Description
4.16
First Addendum and Amendment to Purchase and Sale
Exhibit no. Description
12.1
Certification pursuant to section 302 of the Sarbanes-Oxley Act
Agreement for Natural Gas between GeoPark Chile Limited,
of 2002.*
Agencia en Chile and Methanex Chile S.A. (incorporated herein
12.2
Certification pursuant to section 302 of the Sarbanes-Oxley Act
by reference to Exhibit 10.16 to the Company’s Registration
of 2002.*
Statement on Form F-1/A (File No. 333-191068) filed with the
13.1
Certification pursuant to 18 U.S.C. section 1350, as adopted
SEC on October 10, 2013).†
4.17
Second Addendum and Amendment to Purchase and Sale
Agreement for Natural Gas between GeoPark Chile Limited,
Agencia en Chile and Methanex Chile S.A. (incorporated herein
by reference to Exhibit 10.7 to the Company’s Registration
Statement on Form F-1/A (File No. 333-191068) filed with the
SEC on September 26, 2013).
13.2
15.1
15.2
99.1
pursuant to section 906 of the Sarbanes-Oxley Act of 2002.*
Certification pursuant to 18 U.S.C. section 1350, as adopted
pursuant to section 906 of the Sarbanes-Oxley Act of 2002.*
Consent of Price Waterhouse & Co. S.R.L., Argentina.*
Consents of Degolyer & MacNaughton to use its report.*
Reserves Report of DeGolyer and MacNaughton dated March 9,
2015, for reserves in Chile, Colombia, Brazil and Peru as of
4.18
Third Addendum and Amendment to Purchase and Sale
December 31, 2014.*
Agreement for Natural Gas between GeoPark Chile Limited,
Agencia en Chile and Methanex Chile S.A. (incorporated herein
* Filed with this Annual Report on Form 20-F.
by reference to Exhibit 10.18 to the Company’s Registration
† Confidential treatment of certain provisions of these exhibits has been
Statement on Form F-1/A (File No. 333-191068) filed with the
requested with the SEC. Omitted material for which confidential treatment
SEC on October 10, 2013).†
has been requested has been filed separately with the SEC.
4.19
Fourth Addendum and Amendment to Purchase and Sale
Agreement for Natural Gas between GeoPark Chile Limited,
Agencia en Chile and Methanex Chile S.A. (incorporated herein
by reference to Exhibit 10.19 to the Company’s Registration
Statement on Form F-1/A (File No. 333-191068) filed with the
SEC on October 10, 2013).†
4.20
Members’ Agreement, dated January 8, 2014, among GeoPark
Latin America Coöperatie U.A., GeoPark Colombia Coöperatie
U.A. and LG International Corporation (incorporated herein
by reference to Exhibit 10.20 to the Company’s Registration
Statement on Form F-1/A (File No. 333-191068) filed with the
SEC on January 21, 2014).
4.21
Loan Agreement no. 4131, dated March 28, 2014, between Itaú
BBA International plc and GeoPark Brasil Exploracão e Produção
de Petróleo e Gás Ltda. (incorporated herein by reference to
exhibit 4.21 to the Company’s Annual Report on Form 20-F filed
with the SEC on April 30, 2014)
4.22
Addendum and Amendment to Loan Agreement no. 4131,
dated March 12, 2015, between Itaú BBA International plc and
GeoPark Brasil Exploracão e Produção de Petróleo e Gás Ltda.*
4.23
Fifth Addendum and Amendment to Purchase and Sale
Agreement for Natural Gas between GeoPark Chile Limited,
Agencia en Chile and Methanex Chile S.A. dated April 1, 2014.*†
8.1
Subsidiaries of GeoPark Limited (incorporated herein by
reference to Exhibit 8.1 to the Company’s Annual Report on
Form 20-F filed with the SEC on April 30, 2014).*
GeoPark 20F 179
Glossary of Oil and Natural Gas Terms
The terms defined in this section are used throughout this annual report:
service well, or a stratigraphic test well as those items are defined below.
“field” means an area consisting of a single reservoir or multiple reservoirs all
“appraisal well” means a well drilled to further confirm and evaluate the
grouped on or related to the same individual geological structural feature
presence of hydrocarbons in a reservoir that has been discovered.
and/or stratigraphic condition. There may be two or more reservoirs in a field
“API” means the American Petroleum Institute’s inverted scale for denoting
that are separated vertically by intervening impervious strata, or laterally
the “light” or “heaviness” of crude oils and other liquid hydrocarbons.
by local geologic barriers, or by both. Reservoirs that are associated by being
“bbl” means one stock tank barrel, of 42 U.S. gallons liquid volume, used
in overlapping or adjacent fields may be treated as a single or common
herein in reference to crude oil, condensate or natural gas liquids.
operational field. The geological terms structural feature and stratigraphic
“bcf” means one billion cubic feet of natural gas.
condition are intended to identify localized geological features as opposed to
“boe” means barrels of oil equivalent, with 6,000 cubic feet of natural gas
being equivalent to one barrel of oil.
“boepd” means barrels of oil equivalent per day.
“bopd” means barrels of oil per day.
the broader terms of basins, trends, provinces, plays, areas-of-interest, etc.
“formation” means a layer of rock which has distinct characteristics that differ
from nearby rock.
“mbbl” means one thousand barrels of crude oil, condensate or natural gas
“British thermal unit” or “btu” means the heat required to raise the
liquids.
temperature of a one-pound mass of water from 58.5 to 59.5 degrees
“mboe” means one thousand barrels of oil equivalent.
Fahrenheit.
“mcf” means one thousand cubic feet of natural gas.
“basin” means a large natural depression on the earth’s surface in which
“Measurements” include:
sediments generally brought by water accumulate.
• “m” or “meter” means one meter, which equals approximately 3.28084 feet;
“CEOP” (Contrato Especial de Operación) means a special operating contract
• “km” means one kilometer, which equals approximately 0.621371 miles;
the Chilean signs with a company or a consortium of companies for the
• “sq. km” means one square kilometer, which equals approximately
exploration and exploitation of hydrocarbon wells
247.1 acres;
“completion” means the process of treating a drilled well followed by
• “bbl” “bo,” or “barrel of oil” means one stock tank barrel, which is equivalent
the installation of permanent equipment for the production of natural gas
to approximately 0.15898 cubic meters;
or oil, or in the case of a dry hole, the reporting of abandonment to the
• “boe” means one barrel of oil equivalent, which equals approximately
appropriate agency.
160.2167 cubic meters, determined using the ratio of 6,000 cubic feet of
“developed acreage” means the number of acres that are allocated or
natural gas to one barrel of oil;
assignable to productive wells or wells capable of production.
• “cf” means one cubic foot;
“developed reserves” are expected quantities to be recovered from existing
• “m,” when used before bbl, boe or cf, means one thousand bbl, boe or cf,
wells and facilities. Reserves are considered developed only after the
respectively;
necessary equipment has been installed or when the costs to do so
• “mm,” when used before bbl, boe or cf, means one million bbl, boe or cf,
are relatively minor compared to the cost of a well. Where required facilities
respectively;
become unavailable, it may be necessary to reclassify developed reserves
as undeveloped.
• “b,” when used before bbl, boe or cf, means one billion bbl, boe or cf,
respectively; and
“development well” means a well drilled within the proved area of an oil or
• “pd” means per day.
gas reservoir to the depth of a stratigraphic horizon known to be productive.
“metric ton” or “MT” means one thousand kilograms. Assuming standard
“dry hole” means a well found to be incapable of producing hydrocarbons
quality oil, one metric ton equals 7.9 bbl.
in sufficient quantities such that proceeds from the sale of such production
“mmbbl” means one million barrels of crude oil, condensate or natural gas
exceed production expenses and taxes.
liquids.
“E&P Contract” means exploration and production contract
“mmboe” means one million barrels of oil equivalent.
“economic interest” means an indirect participation interest in the net
“mmbtu” means one million British thermal units.
revenues from a given block based on bilateral agreements with the
“NYMEX” means The New York Mercantile Exchange.
concessionaires.
“net acres” means the percentage of total acres an owner has out of a
“economically producible” means a resource that generates revenue that
particular number of acres, or a specified tract. An owner who has a 50%
exceeds, or is reasonably expected to exceed, the costs of the operation.
“exploratory well” means a well drilled to find and produce oil or gas in an
interest in 100 acres owns 50 net acres.
“productive well” means a well that is found to be capable of producing
unproved area, to find a new reservoir in a field previously found to be
hydrocarbons in sufficient quantities such that proceeds from the sale of the
productive of oil or gas in another reservoir, or to extend a known reservoir.
production exceed production expenses and taxes.
Generally, an exploratory well is any well that is not a development well, a
“prospect” means a potential trap which may contain hydrocarbons and is
180 GeoPark 20F
supported by the necessary amount and quality of geologic and geophysical
reservoir. Spacing is often expressed in terms of acres (e.g., 40-acre spacing,
data to indicate a probability of oil and/or natural gas accumulation ready
and is often established by regulatory agencies).
to be drilled. The five required elements (generation, migration, reservoir,
“spud” means the very beginning of drilling operations of a new well,
seal and trap) must be present for a prospect to work and if any of them fail
occurring when the drilling bit penetrates the surface utilizing a drilling rig
neither oil nor natural gas will be present, at least not in commercial volumes.
capable of drilling the well to the authorized total depth.
“proved developed reserves” means those proved reserves that can be
“stratigraphic test well” means a drilling effort, geologically directed,
expected to be recovered through existing wells and facilities and by existing
to obtain information pertaining to a specific geologic condition. Such wells
operating methods.
customarily are drilled without the intention of being completed for
“proved reserves” means estimated quantities of crude oil, natural gas, and
hydrocarbon production. This classification also includes tests identified as
natural gas liquids which geological and engineering data demonstrate with
core tests and all types of expendable holes related to hydrocarbon
reasonable certainty to be economically recoverable in future years from
exploration. Stratigraphic test wells are classified as (i) exploratory-type, if not
known reservoirs under existing economic and operating conditions, as well
as additional reserves expected to be obtained through confirmed improved
drilled in a proved area, or (ii) development-type, if drilled in a proved area.
“undeveloped reserves” are quantities expected to be recovered through
recovery techniques, as defined in SEC Regulation S-X 4-10(a)(2).
“proved undeveloped reserves” means are those proved reserves that
future investments: (1) from new wells on undrilled acreage in known
accumulation, (2) from deepening existing wells to a different (but known)
are expected to be recovered from future wells and facilities, including future
reservoir, (3) from infill wells that will increase recover, or (4) where a
improved recovery projects which are anticipated with a high degree of
relatively large expenditure (e.g., when compared to the cost of drilling a new
certainty in reservoirs which have previously shown favorable response to
well) is required to (a) recomplete an existing well or (b) install production
improved recovery projects.
or transportation facilities for primary or improved recovery projects.
“reasonable certainty” means a high degree of confidence.
“unit” means the joining of all or substantially all interests in a reservoir
“recompletion” means the process of re-entering an existing wellbore that
or field, rather than a single tract, to provide for development and operation
is either producing or not producing and completing new reservoirs in
without regard to separate property interests. Also, the area covered by a
an attempt to establish or increase existing production.
unitization agreement.
“reserves” means estimated remaining quantities of oil and gas and related
“wellbore” means the hole drilled by the bit that is equipped for oil or gas
substances anticipated to be economically producible, as of a given date,
production on a completed well. Also called well or borehole.
by application of development projects to known accumulations. In addition,
“working interest” means the right granted to the lessee of a property to
there must exist, or there must be a reasonable expectation that there
explore for and to produce and own oil, gas, or other minerals. The working
will exist, a revenue interest in the production, installed means of delivering
interest owners bear the exploration, development, and operating costs
oil, gas, or related substances to market, and all permits and financing
on either a cash, penalty, or carried basis.
required to implement the project.
“workover” means operations in a producing well to restore or increase
“reservoir” means a porous and permeable underground formation
production.
containing a natural accumulation of producible oil and/or gas that
is confined by impermeable rock or water barriers and is individual and
separate from other reservoirs.
“royalty” means a fractional undivided interest in the production of oil
and natural gas wells or the proceeds therefrom, to be received free and
clear of all costs of development, operations or maintenance.
“service well” means a well drilled or completed for the purpose of supporting
production in an existing field. Specific purposes of service wells include
gas injection, water injection, steam injection, air injection, saltwater disposal,
water supply for injection, observation, or injection for in-situ combustion.
“shale” means a fine grained sedimentary rock formed by consolidation of
clay- and silt-sized particles into thin, relatively impermeable layers. Shale
can include relatively large amounts of organic material compared with other
rock types and thus has the potential to become rich hydrocarbon source
rock. Its fine grain size and lack of permeability can allow shale to form a good
cap rock for hydrocarbon traps.
“spacing” means the distance between wells producing from the same
GeoPark 20F 181
Index to Consolidated Financial Statements
Audited Annual Consolidated Financial Statements-GeoPark Limited
Report of Independent Registered Public Accounting Firm
182
Consolidated Statements of Income and
Comprehensive Income for the Fiscal Years
Ended December 31, 2014, 2013 and 2012
Consolidated Statement of Financial Position
as of December 31, 2014 and 2013
Consolidated Statements of Changes
in Shareholders’ Equity for the Fiscal Years Ended
December 31, 2014, 2013, 2012
Consolidated Statements of Cash Flows
for the Fiscal Years ended
December 31, 2014, 2013, 2012
Notes to the Audited Annual Consolidated
Financial Statements for the Fiscal Years Ended
December 31, 2014, 2013 and 2012
183
184
185
186
187
182 GeoPark 20F
GeoPark 20F 183
Report of Independent Registered
Public Accounting Firm
To the Board of Directors and Shareholders of GeoPark Limited
In our opinion, the accompanying consolidated statement of financial
position and the related consolidated statements of income, comprehensive
income, changes in equity and cash flow present fairly, in all material
respects, the financial position of GeoPark Limited and its subsidiaries
at December 31, 2014 and 2013, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2014,
in conformity with International Financial Reporting Standards as issued
by the International Accounting Standards Board. These financial statements
are the responsibility of the Company’s management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits of these statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
/s/ PRICE WATERHOUSE & CO. S.R.L.
By /s/ Carlos Martín Barbafina (Partner)
Carlos Martín Barbafina
Autonomous City of Buenos Aires, Argentina
March 19, 2015
184 GeoPark 20F
Consolidated Statement of Income
Amounts in US$ ´000
Note
2014
2013
2012
Net revenue
Production costs
Gross profit
Exploration costs
Administrative costs
Selling expenses
Impairment loss for non-financial assets
Other operating (loss)/income
Operating profit
Financial results
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$) for profit attributable
to owners of the Company - basic
Earnings per share (in US$) for profit attributable
to owners of the Company - diluted
7
8
11
12
13
38
14
34
16
18
18
428,734
(229,650)
199,084
(43,369)
(48,164)
(24,428)
(9,430)
(1,849)
71,844
338,353
(179,643)
158,710
(16,254)
(46,584)
(17,252)
-
5,344
83,964
(50,719)
(33,876)
-
-
21,125
50,088
(5,195)
15,930
(15,154)
34,934
7,512
8,418
0.13
0.13
22,012
12,922
0.50
0.47
250,478
(129,235)
121,243
(27,890)
(28,798)
(24,631)
-
823
40,747
(16,308)
8,401
32,840
(14,394)
18,446
11,879
6,567
0.28
0.27
Consolidated Statement of Comprehensive Income
Amounts in US$ ´000
2014
2013
2012
Profit for the year
Other comprehensive income:
Items that may be subsequently reclassified to profit
Currency translation difference
Total comprehensive income for the year
15,930
34,934
18,446
(2,448)
13,482
(1,956)
32,978
-
18,446
Attributable to:
Owners of the Company
Non-controlling interest
5,064
8,418
20,056
12,922
11,879
6,567
The notes on pages 189 to 238 are an integral part of these consolidated financial statements.
GeoPark 20F 185
Consolidated Statement of Financial Position
Amounts in US$ ´000
Note
2014
2013
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
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
Retained earnings (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
Trade and other payables
Total non current liabilities
Current liabilities
Borrowings
Current income tax liabilities
Trade and other payables
Total current liabilities
Total liabilities
Total equity and liabilities
19
21
24
17
23
22
23
23
21
24
25
26
27
17
28
26
28
790,767
595,446
1,253
12,979
33,195
349
11,454
5,168
13,358
6,361
838,543
631,787
8,532
36,917
13,993
13,459
127,672
200,573
1,039,116
58
210,886
124,017
40,596
375,557
103,569
479,126
8,122
42,628
35,764
6,979
121,135
214,628
846,415
44
120,426
126,465
23,906
270,841
95,116
365,957
342,440
290,457
46,910
30,065
16,583
33,076
23,087
8,344
435,998
354,964
27,153
7,935
88,904
123,992
559,990
1,039,116
26,630
7,231
91,633
125,494
480,458
846,415
The financial statements were approved by the Board of Directors on 19 March 2015.
The notes on pages 189 to 238 are an integral part of these consolidated financial statements.
186 GeoPark 20F
Consolidated Statement of Changes in Equity
Attributable to owners of the Company
Retained
earnings
Non-
Share
capital(1)
43
Share
premium
112,231
Other
Translation
(accumulated
controlling
reserve
114,270
reserve
894
losses)
(18,549)
interest
41,763
Total
250,652
Amount in US$ ´000
Equity at 1 January 2012
Comprehensive income:
Profit for the year
Total comprehensive
income for the year 2012
Transactions with owners:
Proceeds from transaction
with non-controlling
interest (Notes 25 and 34)
Share-based payment
(Note 29)
Total 2012
-
-
-
-
-
-
-
-
4,586
4,586
Balances at 31 December 2012
43
116,817
Comprehensive income:
Profit for the year
Currency translation differences
Total comprehensive
income for the year 2013
Transactions with owners:
Proceeds from transaction
with non-controlling interest
(Notes 25 and 34)
Share-based payment (Note 29)
Repurchase of shares (Note 25)
Total 2013
-
-
-
-
1
-
1
-
-
-
-
4,049
(440)
3,609
Comprehensive income:
Profit for the year
Currency translation differences
Total comprehensive
income for the year 2014
Transactions with owners:
-
-
-
-
-
-
Proceeds from issue of shares
14
90,848
Proceeds from transaction
with non-controlling
interest (Notes 25 and 34)
Share-based payment (Note 29)
Repurchase of shares (Note 25)
Total 2014
Balances at 31 December 2014
(1) See Note 1.
-
-
-
14
58
-
-
(388)
90,460
-
-
13,257
-
13,257
127,527
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The notes on pages 189 to 238 are an integral part of these consolidated financial statements.
210,886
127,527
(3,510)
Balances at 31 December 2013
44
120,426
127,527
(1,062)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,879
6,567
18,446
11,879
6,567
18,446
-
24,335
37,592
810
810
-
24,335
72,665
894
(5,860)
-
22,012
12,922
(1,956)
-
-
5,396
42,988
312,086
34,934
(1,956)
(1,956)
22,012
12,922
32,978
-
7,754
-
7,754
23,906
7,512
-
9,529
-
-
9,529
95,116
8,418
-
9,529
11,804
(440)
20,893
365,957
15,930
(2,448)
-
(2,448)
(2,448)
7,512
8,418
13,482
-
-
9,178
-
9,178
40,596
-
90,862
35
-
-
35
103,569
35
9,178
(388)
99,687
479,126
GeoPark 20F 187
Consolidated Statement of Cash Flow
Amounts in US$ '000
Note
2014
2013
2012
Cash flows from operating activities
Income for the year
Adjustments for:
Income tax for the year
Depreciation of the year
Allowance for doubtful accounts
Loss on disposal of property, plant and equipment
Impairment loss
Write-off of unsuccessful efforts
Accrual of interest on borrowings
Amortisation of other long-term liabilities
Unwinding of long-term liabilities
Accrual of share-based payment
Bargain purchase gain on acquisition of subsidiaries
Deferred income
Exchange difference on borrowings
Income tax paid
Changes in working capital
Cash flows from operating activities - net
Cash flows from investing activities
Purchase of property, plant and equipment
Acquisitions of companies, net of cash acquired
Collections related to financial leases
16
9
13-23
38
11
27
27
10
34
27
14
5
34
15,930
34,934
18,446
5,195
101,657
741
591
9,430
30,367
25,754
(468)
1,972
8,373
-
-
19,163
(1,306)
13,347
230,746
(238,047)
(114,967)
8,973
15,154
70,200
-
575
-
10,962
22,085
(1,165)
1,523
9,167
-
-
-
(4,040)
(32,100)
127,295
(215,234)
-
6,734
14,394
53,317
-
546
-
25,552
12,513
(2,143)
1,262
5,396
(8,401)
5,550
-
(408)
3,403
129,427
(195,829)
(105,303)
-
Cash flows used in investing activities - net
(344,041)
(208,500)
(301,132)
Cash flows from financing activities
Proceeds from borrowings
Proceeds from transaction with non-controlling interest(1)
Proceeds from loans from related parties
Proceeds from issuance of shares
Repurchase of shares
Principal paid to related parties
Principal paid
Interest paid
Cash flows from financing activities - net
67,633
35
16,563
90,862
(388)
(8,344)
(17,087)
(24,558)
124,716
307,259
40,667
8,344
3,442
(440)
-
(179,360)
(15,894)
164,018
37,200
12,452
-
-
-
-
(12,382)
(10,895)
26,375
Net increase (decrease) in cash and cash equivalents
11,421
82,813
(145,330)
Cash and cash equivalents at 1 January
Currency translation differences
Cash and cash equivalents at the end of the year
121,105
(4,854)
127,672
38,292
-
121,105
Ending Cash and cash equivalents are specified as follows:
Cash in bank
Cash in hand
Bank overdrafts
Cash and cash equivalents
127,560
121,113
112
-
22
(30)
127,672
121,105
183,622
-
38,292
48,268
24
(10,000)
38,292
The notes on pages 189 to 238 are an integral part of these consolidated financial statements.
(1) Proceeds from transaction with Non-controlling interest for the year ended 31 December 2013 includes:
US$ 9,529,000 from capital contributions received in the period; and US$ 31,138,000 as result of collection
of receivables included in Prepayment and other receivables as of 31 December 2012, relating to equity
transactions made in 2012 and 2011.
188 GeoPark 20F
Notes
Note 1
General information
The transaction is subject to customary conditions, certain license
modifications and a presidential decree (see Note 34.d).
GeoPark Limited (the Company) is a company incorporated under the laws
Additionally, the Company was awarded with two new blocks in Argentina
of Bermuda. The Registered office address is Cumberland House, 9th Floor,
in which the operator will be Pluspetrol: Puelen and Sierra del Nevado in
1 Victoria Street, Hamilton HM 11, Bermuda.
the Neuquén Basin. The Company is the operator of the Del Mosquito Block
On 7 February 2014, the Securities and Exchange Commission (“SEC”)
in Argentina.
declared effective the Company’s registration statement upon which
These consolidated financial statements were authorised for issue by the
13,999,700 shares were issued at a price of US$ 7 per share, including over-
Board of Directors on 19 March 2015.
allotment option. Gross proceeds from the offering totalled US$ 98 million.
As a result, the Company commenced trading on the New York Stock
Exchange (“NYSE”) under the ticker symbol GPRK. Also its shares
Note 2
are authorized for trading on the Santiago Off-Shore Stock Exchange.
Summary of significant accounting policies
Subsequently, the Company listing cancellation on the AIM London Stock
Exchange became effective on 19 February 2014.
The principal accounting policies applied in the preparation of these
The principal activity of the Company and its subsidiaries (“the Group”) are
consistently applied to the years presented, unless otherwise stated.
consolidated financial statements are set out below. These policies have been
exploration, development and production for oil and gas reserves in Chile,
Colombia, Brazil, Peru and Argentina. The Group has working interests
and/or economic interests in 31 hydrocarbon blocks.
2.1 Basis of preparation
The consolidated financial statements of GeoPark Limited have been
prepared in accordance with International Financial Reporting Standards
In Chile the Group operates 6 blocks: Fell Block, Otway Block, Tranquilo Block
(“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
and Isla Norte, Flamenco and Campanario blocks in Tierra del Fuego.
By acquiring three privately held companies in 2012, the Company obtained
of United States Dollars and all values are rounded to the nearest thousand
and maintained working interests and/or economic interests in 9 blocks
(US$'000), except where otherwise indicated.
located in the Llanos, Magdalena and Catatumbo basins in Colombia. In July
and November 2014, the Company expanded its operations in Colombia
The consolidated financial statements have been prepared on a historical
The consolidated financial statements are presented in thousands (US$´000)
through two new blocks: VIM-3 Block in the Lower Magdalena Basin and CPO-
cost basis.
4 Block in the Llanos Basin (see Note 34), respectively. The Company is the
operator in 6 of the 11 blocks in Colombia.
The preparation of financial statements in conformity with IFRS requires
the use of certain critical accounting estimates. It also requires management
In May 2013, the Company has extended its footprint into Brazil since it has
to exercise its judgement in the process of applying the Group’s accounting
been awarded 7 new licenses in the Brazilian Round 11 of which two are
policies. The areas involving a higher degree of judgement or complexity,
in the Reconcavo Basin in the State of Bahia and five are in the Potiguar Basin
or areas where assumptions and estimates are significant to the consolidated
in the State of Rio Grande do Norte. In addition, in November 2013, the
financial statements are disclosed in this note under the title “Accounting
Company has also been awarded 2 new concessions in a new international
estimates and assumptions”.
bidding round, Round 12, in the Parnaíba Basin in the State of Maranhão
and Sergipe Alagoas Basin in the State of Alagoas, subject to removal of
2.1.1 Changes in accounting policy and disclosure
injunction for Block PN-T-597 (see Note 34.c).
On 31 March 2014, the Company acquired a 10% working interest in the
New and amended standards adopted by the Group
The following standards have been adopted by the Group for the first time
offshore Manatí gas field, the largest natural gas producing field in Brazil.
for the financial year beginning on or after 1 January 2014:
The Manatí Field is operated by Petrobras (see Note 34).
In the fourth quarter of 2014, the Company signed an agreement to acquire
and liability offsetting. These amendments are to the application guidance
an interest on the Morona Block in Peru, which belongs to Marañón Basin.
in IAS 32, ‘Financial instruments: Presentation’, and clarify some of the
Amendment to IAS 32, ‘Financial instruments: Presentation’ on asset
GeoPark 20F 189
requirements for offsetting financial assets and financial liabilities on the
Amendments to IFRS 10 and IAS 28 regarding the sale or contribution of
balance sheet.
assets between an investor and its associate or joint venture. These
amendments address an inconsistency between IFRS 10 and IAS 28 in the
Amendment to IAS 36, ‘Impairment of assets’ on recoverable amount
sale or contribution of assets between an investor and its associate or
disclosures. This amendment addresses the disclosure of information about
joint venture. A full gain or loss is recognised when a transaction involves
the recoverable amount of impaired assets if that amount is based on fair
a business. A partial gain or loss is recognised when a transaction involves
value less costs of disposal.
assets that do not constitute a business, even if those assets are in a
subsidiary. The Group is yet to assess amendment to IFRS 10 and 28’s full
IFRIC 21, ‘Levies’, is an interpretation of IAS 37, ‘Provisions, contingent
impact and intends to adopt it no later than the accounting period
liabilities and contingent assets’. IAS 37 sets out criteria for the recognition
beginning on or after 1 January 2016.
of a liability, one of which is the requirement for the entity to have a present
obligation as a result of a past event (known as an obligating event).
Amendment to IAS 27, ‘Separate financial statements’ regarding the equity
The interpretation addresses what the obligating event is that gives rise to
method. The amendment allow entities to use the equity method to account
the payment of a levy and when a liability should be recognised.
for investments in subsidiaries, joint ventures and associates in their separate
financial statements. The Group is yet to assess amendment to IAS 27’s full
Amendment to IAS 19, ‘Employee benefits’ regarding employee or third
impact and intends to adopt it no later than the accounting period beginning
party contributions to defined benefit plans. The amendment applies
on or after 1 January 2016.
to contributions from employees or third parties to defined benefit plans and
clarifies the treatment of such contributions. The amendment distinguishes
Annual improvements 2014. These annual improvements amend standards
between contributions that are linked to service only in the period in which
from the 2012 - 2014 reporting cycle. It includes changes to:
they arise and those linked to service in more than one period. The objective
of the amendment is to simplify the accounting for contributions that are
• IAS 19,’Employee benefits’ - The amendment clarifies that, when
independent of the number of years of employee service, for example
determining the discount rate for post-employment benefit obligations,
employee contributions that are calculated according to a fixed percentage
it is the currency that the liabilities are denominated in that is important, not
of salary. Entities with plans that require contributions that vary with service
the country where they arise. The assessment of whether there is a deep
will be required to recognise the benefit of those contributions over
market in high-quality corporate bonds is based on corporate bonds in
employee’s working lives.
that currency, not corporate bonds in a particular country. Similarly, where
there is no deep market in high-quality corporate bonds in that currency,
Management assessed the relevance of new standards, amendments or
government bonds in the relevant currency should be used. The amendment
interpretations and concluded that their adoption did not have a significant
is retrospective but limited to the beginning of the earliest period presented
impact on these financial statements.
and the Group is yet to assess its full impact and intends to adopt it no later
than the accounting period beginning on or after 1 July 2016.
New standards, amendments and interpretations issued but not effective for the
financial year beginning 1 January 2014 and not early adopted.
IFRS 15, ‘Revenue from contracts with customers’. This is the converged
standard on revenue recognition. It replaces IAS 11, ‘Construction contracts’,
Amendment to IFRS 11, ‘Joint arrangements’ regarding acquisition of an
IAS 18,’Revenue’ and related interpretations. Revenue is recognised when
interest in a joint operation. This amendment provides new guidance on how
a customer obtains control of a good or service. A customer obtains control
to account for the acquisition of an interest in a joint venture operation
when it has the ability to direct the use of and obtain the benefits from the
that constitutes a business. The amendments require an investor to apply
good or service. The core principle of IFRS 15 is that an entity recognises
the principles of business combination accounting when it acquires an
revenue to depict the transfer of promised goods or services to customers in
interest in a joint operation that constitutes a ‘business’. The amendments
an amount that reflects the consideration to which the entity expects to be
are applicable to both the acquisition of the initial interest in a joint operation
entitled in exchange for those goods or services. An entity recognises revenue
and the acquisition of additional interest in the same joint operation.
in accordance with that core principle by applying the following steps:
However, a previously held interest is not re-measured when the acquisition
- Step 1: Identify the contract(s) with a customer
of an additional interest in the same joint operation results in retaining
- Step 2: Identify the performance obligations in the contract
joint control. The Group is yet to assess amendment to IFRS 11’s full impact
- Step 3: Determine the transaction price
and intends to adopt it no later than the accounting period beginning on
- Step 4: Allocate the transaction price to the performance obligations in
or after 1 January 2016.
the contract
190 GeoPark 20F
- Step 5: Recognise revenue when (or as) the entity satisfies a performance
Considering macroeconomic environment conditions (see Note 37), the
obligation
performance of the operations, Group’s cash position and over 80% of its
total indebtedness maturing in 2020, the Directors have formed a judgement,
IFRS 15 also includes a cohesive set of disclosure requirements that will
at the time of approving the financial statements, that there is a reasonable
result in an entity providing users of financial statements with comprehensive
expectation that the Group has adequate resources to meet all its obligations
information about the nature, amount, timing and uncertainty of revenue
for the foreseeable future. For this reason, the Directors have continued to
and cash flows arising from the entity’s contracts with customers. The Group
adopt the going concern basis in preparing the consolidated financial
is yet to assess amendment to IFRS 15’s full impact and intends to adopt it no
statements.
later than the accounting period beginning on or after 1 January 2017.
IFRS 9, ‘Financial instruments’. The complete version of IFRS 9 replaces most
2.3 Consolidation
Subsidiaries are all entities (including structured entities) over which the group
of the guidance in IAS 39. IFRS 9 retains but simplifies the mixed measurement
has control. The Group controls an entity when the Group is exposed to, or
model and establishes three primary measurement categories for financial
has rights to, variable returns from its involvement with the entity and has the
assets: amortised cost, fair value through OCI and fair value through P&L.
ability to affect those returns through its power over the entity. Subsidiaries
The basis of classification depends on the entity’s business model and the
are fully consolidated from the date on which control is transferred to the
contractual cash flow characteristics of the financial asset. Investments in equity
Group. They are deconsolidated from the date that control ceases.
instruments are required to be measured at fair value through profit or loss
with the irrevocable option at inception to present changes in fair value in OCI.
The Group applies the acquisition method to account for business
There is now a new expected credit losses model that replaces the incurred
combinations. The consideration transferred for the acquisition of a subsidiary
loss impairment model used in IAS 39. For financial liabilities there were
is the fair values of the assets transferred, the liabilities incurred to the
no changes to classification and measurement except for the recognition of
former owners of the acquiree and the equity interests issued by the Group.
changes in own credit risk in other comprehensive income, for liabilities
The consideration transferred includes the fair value of any asset or liability
designated at fair value, through profit or loss.
resulting from a contingent consideration arrangement. Identifiable assets
IFRS 9 relaxes the requirements for hedge effectiveness by replacing
combination are measured initially at their fair values at the acquisition date.
acquired and liabilities and contingent liabilities assumed in a business
the bright line hedge effectiveness tests. It requires an economic relationship
between the hedged item and hedging instrument and for the ‘hedged ratio’
Acquisition-related costs are expensed as incurred.
to be the same as the one management actually use for risk management
purposes. Contemporaneous documentation is still required but is different
The excess of the consideration transferred, the amount of any non-
to that currently prepared under IAS 39. The Group is yet to assess
controlling interest in the acquiree and the acquisition-date fair value of any
amendment to IFRS 9’s full impact and intends to adopt it no later than the
previous equity interest in the acquiree over the fair value of the identifiable
accounting period beginning on or after 1 January 2018.
net assets acquired is recorded as goodwill. If the total of consideration
transferred, non-controlling interest recognised and previously held interest
There are no other IFRSs or IFRIC interpretations that are not yet effective that
measured is less than the fair value of the net assets of the subsidiary
would be expected to have a material impact on the Group.
acquired in the case of a bargain purchase, the difference is recognised
Management assessed the relevance of other new standards, amendments
or interpretations not yet effective and concluded that they are not relevant
Intercompany transactions, balances and unrealised gains on transactions
directly in the income statement.
to Group.
2.2 Going concern
The Directors regularly monitor the Group's cash position and liquidity
between the Group and its subsidiaries are eliminated. Unrealised losses
are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred. Amounts reported in the financial
statements of subsidiaries have been adjusted where necessary to ensure
risks throughout the year to ensure that it has sufficient funds to meet
consistency with the accounting policies adopted by the Group.
forecast 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
2.4 Segment reporting
Operating segments are reported in a manner consistent with the internal
falls and/or potential debt covenant breaches.
reporting provided to the chief operating decision-maker. The chief operating
decision-maker, who is responsible for allocating resources and assessing
GeoPark 20F 191
performance of the operating segments, has been identified as the strategic
steering committee that makes strategic decisions. This committee
2.8 Production costs
Production costs include wages and salaries incurred to achieve
consists of the CEO, COO, CFO and managers in charge of the Exploration,
the net revenue for the year. Direct and indirect costs of raw materials
Development, Drilling, Operations, SPEED and Finance departments.
and consumables, rentals and leasing, property, plant and equipment
This committee reviews the Group’s internal reporting in order to assess
depreciation and royalties are also included within this account.
performance and allocate resources. Management has determined the
operating segments based on these reports.
2.5 Foreign currency translation
2.9 Financial costs
Financial costs include interest expenses, realised and unrealised gains and
losses arising from transactions in foreign currencies and the amortisation
of financial assets and liabilities. The Company has capitalised borrowing
a) Functional and presentation currency
The consolidated financial statements are presented in US Dollars, which is
cost for wells and facilities that were initiated after 1 January 2009. Amounts
capitalised during the year totalled US$ 3,112,317 (US$ 1,312,953 in 2013
the Group’s presentation currency.
and US$ 1,368,952 in 2012).
Items included in the financial statements of each of the Group’s entities are
measured using the currency of the primary economic environment in which
2.10 Property, plant and equipment
Property, plant and equipment are stated at historical cost less depreciation
the entity operates (the “functional currency”). The functional currency of
and impairment charge, if applicable. Historical cost includes expenditure
Group companies incorporated in Chile, Colombia, Peru and Argentina is the
that is directly attributable to the acquisition of the items; including
US Dollar, meanwhile for the Group Brazilian company the functional
provisions for asset retirement obligation.
currency is the local currency, which is the Brazilian Real.
Oil and gas exploration and production activities are accounted for in
b) Transactions and balances
Foreign currency transactions are translated into the functional currency
accordance with the successful efforts method on a field by field basis. The
Group accounts for exploration and evaluation activities in accordance
using the exchange rates prevailing at the dates of the transactions. Foreign
with IFRS 6, Exploration for and Evaluation of Mineral Resources, capitalizing
exchange gains and losses resulting from the settlement of such transactions
exploration and evaluation costs until such time as the economic viability
and from the translation at period end exchange rates of monetary assets
of producing the underlying resources is determined. Costs incurred prior to
and liabilities denominated in foreign currencies are recognised in the
obtaining legal rights to explore are expensed immediately to the
Consolidated Statement of Income.
Consolidated Statement of Income.
2.6 Joint arrangements
The company has applied IFRS 11 to all joint arrangements as of 1 January
Exploration and evaluation costs may include: license acquisition, geological
and geophysical studies (i.e.: seismic), direct labour costs and drilling
2013. Under IFRS 11 investments in joint arrangements are classified as either
joint operations or joint ventures depending on the contractual rights and
costs of exploratory wells. No depreciation and/or amortisation are charged
during the exploration and evaluation phase. Upon completion of
obligations each investor.
the evaluation phase, the prospects are either transferred to oil and gas
properties or charged to expense (exploration costs) in the period in which
The Company has assessed the nature of its joint arrangements and
the determination is made depending whether they have found reserves
determined them to be joint operations. The company combines its share in
or not. If not developed, exploration and evaluation assets are written
the joint operations individual assets, liabilities, results and cash flows on a
off after three years, unless it can be clearly demonstrated that the carrying
line-by-line basis with similar items in its financial statements.
value of the investment is recoverable.
2.7 Revenue recognition
Revenue from the sale of crude oil and gas is recognised in the Statement of
A charge of US$ 30,367,000 has been recognised in the Consolidated
Statement of Income within Exploration costs (US$ 10,962,000 in 2013 and
Income when risk transferred to the purchaser, and if the revenue can be
US$ 25,552,000 in 2012) for write-offs in Argentina, Colombia and Chile
measured reliably and is expected to be received. Revenue is shown net of
(see Note 11).
VAT, discounts related to the sale and overriding royalties due to the
ex-owners of oil and gas properties where the royalty arrangements represent
All field development costs are considered construction in progress until they
a retained working interest in the property.
are finished and capitalised within oil and gas properties, and are subject
to depreciation once complete. Such costs may include the acquisition and
192 GeoPark 20F
installation of production facilities, development drilling costs (including
obligations in the period in which the wells are drilled. When the liability is
dry holes, service wells and seismic surveys for development purposes),
initially recorded, the Group capitalises the cost by increasing the carrying
project-related engineering and the acquisition costs of rights and
amount of the related long-lived asset. Over time, the liability is accreted
concessions related to proved properties.
to its present value at each reporting period, and the capitalized cost is
Workovers of wells made to develop reserves and/or increase production
interpretations and application of current legislation and on the basis of the
are capitalized as development costs. Maintenance costs are charged to
changes in technology and the variations in the costs of restoration necessary
depreciated over the estimated useful life of the related asset. According to
income when incurred.
to protect the environment, the Group has considered it appropriate to
periodically re-evaluate future costs of well-capping. The effects of this
Capitalised costs of proved oil and gas properties and production facilities
recalculation are included in the financial statements in the period in which
and machinery are depreciated on a licensed area by the licensed area basis,
this recalculation is determined and reflected as an adjustment to the
using the unit of production method, based on commercial proved and
provision and the corresponding property, plant and equipment asset.
probable reserves. The calculation of the “unit of production” depreciation
takes into account estimated future finding and development costs and
is based on current year end unescalated price levels. Changes in reserves
2.11.2 Deferred income
Relates to contributions received in cash from the Group’s clients to improve
and cost estimates are recognised prospectively. Reserves are converted to
the project economics of gas wells. The amounts collected are reflected
equivalent units on the basis of approximate relative energy content.
as a deferred income in the balance sheet and recognised in the Consolidated
Depreciation of the remaining property, plant and equipment assets
depreciation of the gas wells that generated the deferred income is charged
(i.e. furniture and vehicles) not directly associated with oil and gas activities
to the Consolidated Statement of Income simultaneously with the
has been calculated by means of the straight line method by applying
amortisation of the deferred income.
Statement of Income over the productive life of the associated wells. The
such annual rates as required to write-off their value at the end of their
estimated useful lives. The useful lives range between 3 years and 10 years.
2.12 Impairment of non-financial assets
Assets that are not subject to depreciation and/or amortisation
Depreciation is allocated in the Consolidated Statement of Income
(i.e.: exploration and evaluation assets) are tested annually for impairment.
as production and administrative expenses, based on the nature of the
Assets that are subject to depreciation and/or amortisation are reviewed
associated asset.
for impairment whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable.
An asset’s carrying amount is written down immediately to its recoverable
amount if the asset’s carrying amount is greater than its estimated
An impairment loss is recognised for the amount by which the asset’s
recoverable amount (see Impairment of non-financial assets in Note 2.12).
carrying amount exceeds its recoverable amount. The recoverable amount is
2.11 Provisions and other long-term liabilities
Provisions for asset retirement obligations, deferred income, restructuring
the higher of an asset’s fair value less costs to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels
for which there are separately identifiable cash flows (cash-generating units),
obligations and legal claims are recognised when the Group has a present
generally a licensed area. Non-financial assets other than goodwill that
legal or constructive obligation as a result of past events; it is probable
suffered impairment are reviewed for possible reversal of the impairment at
that an outflow of resources will be required to settle the obligation; and the
each reporting date.
amount has been reliably estimated. Restructuring provisions comprise
lease termination penalties and employee termination payments.
No asset should be kept as an exploration and evaluation asset for a period
Provisions are measured at the present value of the expenditures expected
carrying value of the investment will be recoverable.
to be required to settle the obligation using a pre-tax rate that reflects current
market assessments of the time value of money and the risks specific to the
The impairment loss recognised in 2014 is explained in Note 38; no
obligation. The increase in the provision due to passage of time is recognised
impairment loss has been recognised during 2013 and 2012. The write-offs
as interest expense.
are detailed in Note 11.
of more than three years, except if it can be clearly demonstrated that the
2.11.1 Asset retirement obligation
The Group records the fair value of the liability for asset retirement
2.13 Lease contracts
All current lease contracts are considered to be operating leases on the basis
GeoPark 20F 193
that the lessor retains substantially all the risks and rewards related to
case. To the extent that actual outcomes differ from management’s estimates,
the ownership of the leased asset. Payments related to operating leases and
taxation charges or credits may arise in future periods.
other rental agreements are recognised in the Consolidated Income
Statement on a straight line basis over the term of the contract. The Group's
Deferred income tax liabilities are provided on taxable temporary differences
total commitment relating to operating leases and rental agreements is
arising from investments in subsidiaries and joint arrangements, except
disclosed in Note 31.
for deferred income tax liability where the timing of the reversal of the
temporary difference is controlled by the Group and it is probable that the
Leases in which substantially all of the risks and rewards of ownership are
temporary difference will not reverse in the foreseeable future. The Group
transferred to the lessee are classified as finance leases. Under a finance lease,
is able to control the timing of dividends from its subsidiaries and hence does
the Company as lessor has to recognize an amount receivable equal to the
not expect taxable profit. Hence deferred tax is recognized in respect of the
aggregate of the minimum lease payments plus any unguaranteed residual
retained earnings of overseas subsidiaries only if at the date of the statements
value accruing to the lessor, discounted at the interest rate implicit in the lease.
of financial position, dividends have been accrued as receivable or a binding
2.14 Inventories
Inventories comprise crude oil and materials.
agreement to distribute past earnings in future has been entered into by
the subsidiary. As mentioned above the Company does not expect that the
temporary differences will revert in the foreseeable future. In the event
that these differences revert in total (e.g. dividends are declared and paid),
Crude oil is measured at the lower of cost and net realisable value. Materials
the deferred tax liability which the Company would have to recognize
are measured at the lower of cost and recoverable amount. The cost of
amounts to approximately US$ 16,000,000.
materials and consumables is calculated at acquisition price with the addition
of transportation and similar costs. Cost is determined using the first-in,
Deferred tax balances are provided in full, with no discounting.
first-out (FIFO) method.
2.15 Current and deferred income tax
The tax expense for the year comprises current and deferred tax. Tax is
2.16 Financial assets
Financial assets are divided into the following categories: loans and
receivables; financial assets at fair value through the profit or loss; available-
recognised in the Consolidated Statement of Income.
for-sale financial assets; and held-to-maturity investments. Financial assets
are assigned to the different categories by management on initial
The current income tax charge is calculated on the basis of the tax laws
recognition, depending on the purpose for which the investments were
enacted or substantially enacted at the balance sheet date in the countries
acquired. The designation of financial assets is re-evaluated at every reporting
where the Company’s subsidiaries operate and generate taxable income.
date at which a choice of classification or accounting treatment is available.
The computation of the income tax expense involves the interpretation of
applicable tax laws and regulations in many jurisdictions. The resolution
All financial assets are recognised when the Group becomes a party to the
of tax positions taken by the Group, through negotiations with relevant tax
authorities or through litigation, can take several years to complete and
contractual provisions of the instrument. All financial assets are initially
recognised at fair value, plus transaction costs.
in some cases it is difficult to predict the ultimate outcome.
Deferred income tax is recognised, using the liability method, on temporary
flows from the investments expire or are transferred and substantially all of
differences arising between the tax bases of assets and liabilities and their
the risks and rewards of ownership have been transferred. An assessment
carrying amounts in the consolidated financial statements. Deferred income
for impairment is undertaken at each balance sheet date.
Derecognition of financial assets occurs when the rights to receive cash
tax is determined using tax rates (and laws) that have been enacted or
substantially enacted by the balance sheet date and are expected to apply
Interest and other cash flows resulting from holding financial assets are
when the related deferred income tax asset is realised or the deferred income
recognised in the Consolidated Income Statement when receivable,
tax liability is settled.
regardless of how the related carrying amount of financial assets is measured.
In addition, the Group has tax-loss carry-forwards in certain taxing
Loans and receivables are non-derivative financial assets with fixed or
jurisdictions that are available to offset against future taxable profit. However,
determinable payments that are not quoted in an active market. They are
deferred tax assets are recognized only to the extent that it is probable that
included in current assets, except for maturities greater than twelve months
taxable profit will be available against which the unused tax losses can be
after the balance sheet date. These are classified as non current assets. The
utilized. Management judgment is exercised in assessing whether this is the
Group’s loans and receivables comprise trade receivables, prepayments and
194 GeoPark 20F
other receivables and cash at bank and in hand in the balance sheet. They
Direct issue costs are charged to the Consolidated Statement of Income on
arise when the Group provides money, goods or services directly to a
an accruals basis using the effective interest method.
debtor with no intention of trading the receivables. Loans and receivables
are subsequently measured at amortised cost using the effective interest
method, less provision for impairment. Any change in their value through
2.22 Share capital
Equity comprises the following:
impairment or reversal of impairment is recognised in the Consolidated
Statement of Income. All of the Group’s financial assets are classified as loan
• “Share capital” representing the nominal value of equity shares.
and receivables.
2.17 Other financial assets
Non current other financial assets include contributions made for
environmental obligations according to a Colombian government request.
• “Share premium” representing the excess over nominal value of the fair
value of consideration received for equity shares, net of expenses of the
share issue.
• “Other reserve” representing:
- the equity element attributable to shares granted according to IFRS 2
This investment was intended to guarantee interest payments and was
but not issued at year end or,
recovered at repayment date (see Note 26).
- the difference between the proceeds from the transaction with non-
2.18 Impairment of financial assets
Provision against trade receivables is made when objective evidence is
in the Chilean and Colombian subsidiaries (see Note 34.b).
• “Translation reserve” representing the differences arising from translation
received that the Group will not be able to collect all amounts due to
of investments in overseas subsidiaries.
it in accordance with the original terms of those receivables. The amount
• “Retained earnings (accumulated losses)” representing accumulated
controlling interests received against the book value of the shares acquired
of the write-down is determined as the difference between the asset's
earnings and losses.
carrying amount and the present value of estimated future cash flows.
2.19 Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call
2.23 Share-based payment
The Group operates a number of equity-settled and cash-settled share-based
compensation plans comprising share awards payments and stock options
with banks, other short-term highly liquid investments with original
plans to certain employees and other third party contractors.
maturities of three months or less, and bank overdrafts. Bank overdrafts,
if any, are shown within borrowings in the current liabilities section of
Share-based payment transactions are measured in accordance with IFRS 2.
the Consolidated Statement of Financial Position.
Fair value of the stock option plan for employee or contractors services
2.20 Trade and other payables
Trade payables are obligations to pay for goods or services that have been
received in exchange for the grant of the options is recognised as an expense.
The total amount to be expensed over the vesting period is determined
acquired in the ordinary course of the business from suppliers. Accounts
payable are classified as current liabilities if payment is due within one year
by reference to the fair value of the options granted calculated using the
Black-Scholes model.
or less (or in the normal operating cycle of the business if longer). If not,
they are presented as non current liabilities.
Non-market vesting conditions are included in assumptions about the
Trade payables are recognised initially at fair value and subsequently
the entity revises its estimates of the number of options that are expected
measured at amortised cost using the effective interest method.
to vest. It recognises the impact of the revision to original estimates,
number of options that are expected to vest. At each balance sheet date,
if any, in the Consolidated Statement of Income, with a corresponding
2.21 Borrowings
Borrowings are obligations to pay cash and are recognised when the Group
adjustment to equity.
becomes a party to the contractual provisions of the instrument.
The fair value of the share awards payments is determined at the grant date
by reference of the market value of the shares and recognised as an
Borrowings are recognised initially at fair value, net of transaction
expense over the vesting period.
costs incurred. Borrowings are subsequently stated at amortised cost; any
difference between the proceeds (net of transaction costs) and the
When the options are exercised, the Company issues new shares.
redemption value is recognised in the Consolidated Statement of Income
The proceeds received net of any directly attributable transaction costs are
over the period of the borrowings using the effective interest method.
GeoPark 20F 195
credited to share capital (nominal value) and share premium when the
Most of the Group's assets held in those countries are associated with oil and
options are exercised.
gas productive assets. Those assets, even in the local markets, are generally
settled in US Dollar equivalents.
For cash-settled share-based payment transactions, the Company
measures the services acquired for amounts that are based on the price of
During 2014, the Argentine Peso devaluated by 31% (devaluated by 33% and
the Company’s shares. The fair value of the liability incurred is measured
16% in 2013 and 2012 respectively) against the US Dollar, the Chilean Peso
using Geometric Brownian Motion method. Until the liability is settled,
devaluated by 16% (devaluated by 10% and strengthened by 8% in 2013 and
the Company is required to remeasure the fair value of the liability at each
2012 respectively) and the Colombian Peso devaluated by 24% (devaluated
reporting date and at the date of settlement, with any changes in value
by 9% and strengthened by 9% in 2013 and 2012 respectively).
recognised in profit or loss for the period.
Note 3
If the Argentine Peso, the Chilean Peso and the Colombian Peso had each
devaluated an additional 10% against the US dollar, with all other variables
held constant, post-tax profit for the year would have been lower by
Financial Instruments-risk management
US$ 621,400 (higher by US$ 279,000 in 2013 and lower by US$ 91,000 in
2012). As of 31 December 2014, the balances denominated in the
The Group is exposed through its operations to the following financial risks:
Peruvian local currency (Peruvian Soles) are not material.
• Currency risk.
• Price risk.
• Credit risk - concentration.
• Funding and liquidity risk.
• Interest rate risk.
• Capital risk management.
In Brazil the functional currency is the local currency, which is the Brazilian
Real. The fluctuation of the US Dollars against the Brazilian Real does not
impact the loans, costs and revenues held in Brazilian Real; but it does impact
the balances denominated in US Dollars. Such is the case of the cash at
bank and Itaú loan. Most of the balances are denominated in Brazilian Real,
and since it is the functional currency of the Brazilian subsidiary, there
The policy for managing these risks is set by the Board. Certain risks are
is no exposure to currency fluctuation except from cash at bank held in
managed centrally, while others are managed locally following guidelines
US Dollars and for the Itaú loan described in Note 26.
communicated from the corporate office. The policy for each of the above
risks is described in more detail below.
During 2014, the Brazilian Real devaluated by 13% against the US Dollar.
If the Brazilian Real had devaluated an additional 10% against the US dollar,
Currency risk
In Argentina, Colombia, Chile and Peru the functional currency is the US
with all other variables held constant, post-tax profit for the year would
have been lower by US$ 5,660,000 (higher by US$ 3,652,000 in 2013).
Dollar. The fluctuation of the local currencies of these countries against the
US Dollar does not impact the loans, costs and revenues held in US Dollars;
but it does impact the balances denominated in local currencies. Such is
As currency rate changes between the U.S. Dollar and the local currencies, the
Group recognizes gains and losses in the Consolidated Statement of Income.
the case of the prepaid taxes.
In Chile, Colombia and Argentina subsidiaries most of the balances
Price risk
The price realised for the oil produced by the Group is linked to WTI (West
are denominated in US Dollars, and since it is the functional currency of the
Texas Intermediate) and Brent, US dollar denominated international
subsidiaries, there is no exposure to currency fluctuation except from
benchmarks. The market price of these commodities is subject to significant
receivables or payables originated in local currency mainly corresponding to
fluctuation and has historically fluctuated widely in response to relatively
VAT. The balances as of 31 December 2014 of VAT were credits for
minor changes in the global supply and demand for oil and natural gas,
US$ 73,000 (US$ 3,177,000 in 2013) in Argentina, credits for US$ 5,107,000
market uncertainty, economic conditions and a variety of additional factors.
(US$ 5,288,000 in 2013) in Chile, and payable for US$ 1,358,000 (US$ 5,870,000
in 2013) in Colombia.
Between September 2014 and February 2015, WTI and Brent have fallen more
than 40%, affecting both: the Company’s results in 2014 and the Company’s
The Group minimises the local currency positions in Argentina, Colombia
expectations for 2015 (see Note 37).
and Chile by seeking to equilibrate local and foreign currency assets and
liabilities. However, tax receivables (VAT) seldom match with local currency
liabilities. Therefore the Group maintains a net exposure to them.
196 GeoPark 20F
In Colombia, the price of oil is based on Brent, adjusted for certain marketing
owned oil and gas company. In Chile, most of gas production is sold to
and quality discounts based on, among other things, API, viscosity, sulphur,
the local subsidiary of the Methanex, a Canadian public company (6% of
delivery point and water content.
consolidated revenues, 7% in 2013 and 12% in 2012).
In Chile, the oil price is based on Brent minus certain marketing and quality
In Brazil, all the hydrocarbons from Manatí Field are sold to Petrobras, the
discounts such as, inter alia, API quality and others. In Argentina, the oil price
operator of the Manatí Field and the State owned company.
is also subject to the impact of the retention tax on oil exports defined
by the Argentine government which limits the direct correlation to the WTI.
The mentioned companies all have good credit standing and despite the
concentration of the credit risk, the Directors do not consider there to
The Company has signed a long-term Gas Supply Contract with Methanex in
be a significant collection risk.
Chile. The price of the gas sold under this contract is determined based
on a formula that takes into account various international prices of methanol,
See disclosure in Note 24.
including US Gulf methanol spot barge prices, methanol spot Rotterdam
prices and spot prices in Asia.
Funding and liquidity risk
In the past, the Group was able to raise capital through different sources of
In Brazil, prices for gas produced in the Manatí Field are based on a long-term
funding including equity, strategic partnerships and financial debt.
off-take contract with Petrobras. The price of gas sold under this contract is
denominated in Brazilian Real and is adjusted annually for inflation pursuant
The Group is positioned at the end of 2014 with a cash balance of
to the Brazilian General Market Price Index (Indice Geral de Preços do
US$ 128 million and over 80% of its total indebtedness maturing in 2020.
Mercado), or IGPM.
In addition, the Group has a large portfolio of attractive and largely
discretional projects - both oil and gas - in multiple countries with over
If the market prices of WTI, Brent and methanol had fallen by 10% compared
20,000 boepd in production. This scale and positioning permit
to actual prices during the year, with all other variables held constant,
GeoPark to protect its financial condition and selectively allocate capital
post-tax profit for the year would have been lower by US$ 29,186,000 (lower
to the optimal projects subject to prevailing macroeconomic conditions.
by US$ 27,179,000 in 2013 and US$ 18,784,000 in 2012).
The Group has no price-hedging transaction currently outstanding. The Board
could consider adopting commodity price hedging measures, when
On February 2014, the Group received a gross proceed of US$ 98 million from
deemed appropriate, according to the size of the business, production levels
the issuance of new shares (see Note 1).
The most significant funding transactions executed in 2014 and 2013 include:
and market implied volatility.
Credit risk - concentration
The Group’s credit risk relates mainly to accounts receivable where the credit
International (Itau) for US$ 70.5 million to finance the acquisition of a working
interest in the Manatí field (Brazil) (see Note 34.c) maturing between 2015
On March 2014, GeoPark executed a loan agreement with Itaú BBA
risks correspond to the recognised values. There is not considered to be any
and 2019.
significant risk in respect of the Group’s major customers.
In Colombia, the Group have diversified the customer base and for the
These notes contain customary incurrence covenants, which include,
year ended 31 December 2014, the Colombian subsidiary made 40.1% of
among others, limitations on the incurrence of additional debt (see Note 26).
On February 2013 the Group placed US$ 300 million notes maturing in 2020.
the oil sales to Gunvor (a global privately-held company, dedicated to
commodities trading), 31.8% to Emerald (a UK based company engaged
in the exploration and production of hydrocarbons) and 11% to Perenco
Interest rate risk
The Group’s profit and operating cash flows are substantially independent
(a global independent company, dedicated to oil and gas production),
of changes in market interest rates. The Group’s interest rate risk arises from
with Gunvor accounting for 23%, Emerald 18.3% and Perenco 6.3%
long-term borrowings issued at variable rates, which expose the Group to
of consolidated revenues for the same period.
cash flow to interest rate risk.
All the oil produced in Chile is sold to ENAP as well as the gas produced by
The Group does not face interest rate risk on its US$ 300,000,000 Notes which
TdF Blocks (28% of total revenue, 40% in 2013 and 48% in 2012), the State
carry a fixed rate coupon of 7.50% per annum.
GeoPark 20F 197
At 31 December 2014 the outstanding long-term borrowing affected by
Note 4
variable rates amounted to US$ 68,540,000, representing 19% of total
Accounting estimates and assumptions
long-term borrowings, which was composed by the loan from Itaú Bank
that has a floating interest rate based on LIBOR.
Estimates and assumptions are used in preparing the financial statements.
Although these estimates are based on management's best knowledge
The Group analyses its interest rate exposure on a dynamic basis. Various
of current events and actions, actual results may differ from them. Estimates
scenarios are simulated taking into consideration refinancing, renewal of
and judgements are continually evaluated and are based on historical
existing positions, alternative financing and hedging. Based on these
experience and other factors, including expectations of future events that are
scenarios, the Group calculates the impact on profit and loss of a defined
believed to be reasonable under the circumstances.
interest rate shift. For each simulation, the same interest rate shift is used for
all currencies. The scenarios are run only for liabilities that represent the
The key estimates and assumptions used in these consolidated financial
major interest-bearing positions.
statements are noted below:
At 31 December 2014, if 1% is added to interest rates on currency-
• The Group adopts the successful efforts method of accounting. The
denominated borrowings with all other variables held constant, post-tax
Management of the Company makes assessments and estimates regarding
profit for the year would have been US$ 312,000 lower (nil in 2013 and
whether an exploration asset should continue to be carried forward as
US$ 160,866 lower in 2012).
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s
an exploration and evaluation asset not yet determined or when insufficient
information exists for this type of cost to remain as an asset. In making this
assessment the Management takes professional advice from qualified experts.
ability to continue as a going concern in order to provide returns for
• Cash flow estimates for impairment assessments require assumptions
shareholders and benefits for other stakeholders and to maintain an optimal
about two primary elements - future prices and reserves. Estimates of future
capital structure to reduce the cost of capital.
prices require significant judgments about highly uncertain future events.
Consistent with others in the industry, the Group monitors capital on the
forecasts for oil and gas revenues are based on prices derived from future
basis of the gearing ratio. This ratio is calculated as net debt divided by total
price forecasts amongst industry analysts and our own assessments.
capital. Net debt is calculated as total borrowings (including ‘current and
Our estimates of future cash flows are generally based on our assumptions
non current borrowings’ as shown in the consolidated balance sheet) less
of long-term prices and operating and development costs.
Historically, oil and gas prices have exhibited significant volatility. Our
cash at bank and in hand. Total capital is calculated as ‘equity’ as shown in the
consolidated balance sheet plus net debt.
Given the significant assumptions required and the possibility that actual
conditions will differ, we consider the assessment of impairment to be
The Group’s strategy is to keep the gearing ratio within a 30% to 45% range.
a critical accounting estimate (see Notes 37 and 38).
The gearing ratios at 31 December 2014 and 2013 were as follows:
The process of estimating reserves is complex. It requires significant
Amounts in US$ '000
Net debt
Total equity
Total capital
Gearing ratio
judgements and decisions based on available geological, geophysical,
2014
241,921
479,126
721,047
34%
2013
265,952(a)
365,957
engineering and economic data. The estimation of economically recoverable
oil and natural gas reserves and related future net cash flows was performed
based on the Reserve Report as of 31 December 2014 prepared by DeGolyer
631,909
and MacNaughton, an international consultancy to the oil and gas industry
42%
based in Dallas. It incorporates many factors and assumptions including:
(a) For the calculation of the gearing ratio the Group does not consider the
- expected reservoir characteristics based on geological, geophysical and
cash that has been allocated for future M&A activities. In 2013, the Group has
allocated US$ 70 million for the acquisition of Río Das Contas (see Note 34.c).
engineering assessments;
- future production rates based on historical performance and expected
future operating and investment activities;
- future oil and gas prices and quality differentials;
- assumed effects of regulation by governmental agencies; and
- future development and operating costs.
198 GeoPark 20F
Management believes these factors and assumptions are reasonable based
The following chart describes non-cash transactions related to the
on the information available to them at the time of preparing the estimates.
Consolidated Statement of Cash Flow:
However, these estimates may change substantially as additional data
from ongoing development activities and production performance becomes
Amounts in US$ '000
2014
2013
2012
available and as economic conditions impacting oil and gas prices and
Increase in asset retirement
costs change.
obligation (Note 27)
Financial leases (Note 19)
• Oil and gas assets held in property plant and equipment are mainly
Increase in provisions for other
depreciated on a unit of production basis at a rate calculated by reference to
long-term liabilities (Note 27)
proven and probable reserves and incorporating the estimated future cost
Purchase of property, plant
1,603
-
5,636
7,183
14,133
-
3,440
-
-
of developing and extracting those reserves. Future development costs are
and equipment
1,382
12,799
2,375
estimated using assumptions as to the numbers of wells required to produce
those reserves, the cost of the wells and future production facilities.
Cash flows from investing activities include payments in connection with
the purchase and sale of property, plant and equipment, cash flows relating
• Obligations related to the plugging of wells once operations are terminated
to the purchase and sale of enterprises to third parties and cash flows
may result in the recognition of significant obligations. Estimating the future
from financial lease transactions. Cash flows from financing activities include
abandonment costs is difficult and requires management to make estimates
changes in Shareholders’ equity, and proceeds from borrowings and
and judgments because most of the obligations are many years in the
repayment of loans. Cash and cash equivalents include bank overdraft and
future. Technologies and costs are constantly changing as well as political,
liquid funds with a term of less than three months.
environmental, safety and public relations considerations. The Company
has adopted the following criterion for recognising well plugging and
Changes in working capital shown in the Consolidated Statement of Cash
abandonment related costs: The present value of future costs necessary
Flow are disclosed as follows:
for well plugging and abandonment is calculated for each area on the basis
of a cash flow that is discounted at an average interest rate applicable to
Amounts in US$ '000
Company’s indebtedness. The liabilities recognised are based upon
Increase in prepaid taxes
estimated future abandonment costs, wells subject to abandonment, time
(Increase)/decrease in inventories
to abandonment, and future inflation rates.
Decrease/(increase) in
trade receivables
2014
(3,310)
(410)
2013
(4,283)
(4,166)
2012
(11,046)
8,837
13,791
(10,357)
(7,842)
• From time to time, the Company may be subject to various lawsuits,
Decrease/(increase) in prepayments
claims and proceedings that arise in the normal course of business, including
and other receivables and other assets
12,569
(13,330)
7,384
employment, commercial, environmental, safety and health matters. For
(Decrease)/increase in trade and
example, from time to time, the Company receives notice of environmental,
health and safety violations. Based on what the Management of the
other payables
(9,293)
13,347
36
(32,100)
6,070
3,403
Company currently knows, it is not expected any material impact on the
financial statements.
Note 5
Note 6
Segment information
Consolidated Statement of Cash Flow
Management has determined the operating segments based on the reports
reviewed by the strategic steering committee that are used to make
The Consolidated Statement of Cash Flow shows the Group's cash flows
strategic decisions. The committee considers the business from a geographic
for the year for operating, investing and financing activities and the change
perspective.
in cash and cash equivalents during the year.
Cash flows from operating activities are computed from the results for the
segments based on a measure of adjusted earnings before interest, tax,
year adjusted for non-cash operating items, changes in net working capital,
depreciation, amortisation and certain non-cash items such as write-offs,
and corporation tax. Tax paid is presented as a separate item under
impairments and share-based payment (Adjusted EBITDA). This measurement
operating activities.
basis excludes the effects of non-recurring expenditure from the operating
The strategic steering committee assesses the performance of the operating
GeoPark 20F 199
segments, such as impairments when it is the result of an isolated, non-
expenses included in Administrative, Exploration and Other operating costs.
recurring event. Interest income and expenses are not included in the result
Other information provided, except as noted below, to the strategic steering
for each operating segment that is reviewed by the strategic steering
committee is measured in a manner consistent with that in the financial
committee. Operating Netback is equivalent to Adjusted EBITDA before cash
statements.
Segment areas (geographical segments):
Amounts in US$ '000
Argentina
Brazil
Colombia
Peru
Chile
Corporate
Total
1,308
1,304
4
(644)
(94)
(241)
(87)
(222)
664
(4,321)
(816)
(229)
-
(31)
3,839
100
1,538
1,532
6
(346)
(59)
(194)
(204)
111
1,192
(1,942)
166
(225)
-
7,977
97
35,621
1,541
34,080
(19,702)
(11,554)
(2,794)
-
(5,354)
15,919
10,658
22,637
(11,613)
-
-
151,770
10
-
-
-
-
-
-
-
-
-
(3,107)
(3,037)
(2)
-
29,222
3
246,085
246,054
31
(131,680)
(51,856)
(12,354)
(4,663)
(62,807)
114,405
67,212
130,209
(52,713)
(9,430)
(1,564)
263,070
121
179,324
179,324
-
(111,712)
(39,233)
(9,661)
(4,733)
(58,085)
67,612
38,811
82,611
(39,406)
(3,258)
259,421
107
-
-
-
-
-
-
-
-
-
(2,419)
(2,425)
-
-
-
4,813
4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
145,720
118,203
27,517
(77,624)
(35,856)
(6,777)
(6,784)
(28,207)
68,096
11,733
76,420
(37,077)
-
(28,772)
541,481
208
157,491
134,579
22,912
(67,585)
(29,287)
(7,384)
(6,455)
(24,459)
89,906
63,110
96,348
(30,471)
(7,704)
477,263
184
-
-
-
-
-
-
-
-
-
(11,019)
(5,948)
(25)
-
-
428,734
367,102
61,632
(229,650)
(99,360)
(22,166)
(11,534)
(96,590)
199,084
71,844
220,077
(101,657)
(9,430)
(30,367)
74,143
1,039,116
-
-
-
-
-
-
-
-
-
-
(12,908)
(8,835)
(96)
-
72,532
-
443
338,353
315,435
22,918
(179,643)
(68,579)
(17,239)
(11,392)
(82,433)
158,710
83,964
167,253
(70,200)
(10,962)
846,415
391
2014
Net revenue
- Sale of crude oil
- Sale of gas
Production costs
- Depreciation
- Royalties
- Transportation costs
- Other costs
- Gross profit
Operating (loss)/profit
Adjusted EBITDA
Depreciation
Impairment loss
Write-off
Total assets
Employees (average)
2013
Net revenue
- Sale of crude oil
- Sale of gas
Production costs
- Depreciation
- Royalties
- Transportation costs
- Other costs
Gross profit
Operating (loss)/profit
Adjusted EBITDA
Depreciation
Write-off
Total assets
Employees (average)
200 GeoPark 20F
Amounts in US$ '000
Argentina
Brazil
Colombia
Peru
Chile
Corporate
Total
2012
Net revenue
- Sale of crude oil
- Sale of gas
Production costs
- Depreciation
- Royalties
- Transportation costs
- Other costs
Gross (loss)/profit
Operating (loss)/profit
Adjusted EBITDA
Depreciation
Write-off
Total assets
Employees (average)
1,050
1,045
5
(3,244)
(3,223)
(172)
(180)
331
(2,194)
(6,129)
2,051
(3,408)
(1,915)
6,108
100
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
99,501
99,501
-
(60,197)
(20,964)
(4,165)
(1,045)
(34,023)
39,304
8,500
34,474
(21,050)
(5,147)
213,202
80
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
149,927
121,018
28,909
(65,794)
(28,120)
(7,087)
(5,986)
(24,601)
84,133
47,915
93,908
(28,734)
(18,490)
405,674
144
-
-
-
-
-
-
-
-
-
(9,539)
(9,029)
(125)
-
3,033
-
250,478
221,564
28,914
(129,235)
(52,307)
(11,424)
(7,211)
(58,293)
121,243
40,747
121,404
(53,317)
(25,552)
628,017
324
Approximately 66% of capital expenditure was allocated to Chile (63% in
2013 and 70% in 2012), 29% was allocated to Colombia (37% in 2013 and 30%
in 2012) and 5% was allocated to Brazil (nil in 2013 and 2012). The capital
expenditure referred does not include total consideration for M&A activities.
A reconciliation of total Operating netback to total profit before income tax is
provided as follows:
Amounts in US$ '000
Operating netback
Administrative costs(a)
Exploration costs(b)
Adjusted EBITDA for
reportable segments
Depreciation(c)
Share-based payment
Impairment and write-off
of unsuccessful efforts
Others(d)
Operating profit
Financial results
Bargain purchase gain on
acquisition of subsidiaries
Profit before tax
2014
274,509
(40,340)
(14,092)
2013
214,683
(39,573)
(7,857)
220,077
(100,528)
167,253
(69,968)
(8,373)
(9,167)
2012
151,270
(25,507)
(4,359)
121,404
(56,448)
(5,396)
(39,797)
(10,962)
(25,552)
465
71,844
(50,719)
6,808
83,964
(33,876)
6,739
40,747
(16,308)
-
-
21,125
50,088
8,401
32,840
(a) Excludes depreciation and share-based payment.
(b) Includes staff costs and other services.
(c) Net of capitalised costs for oil stock included in Inventories.
(d) Includes internally capitalised costs.
GeoPark 20F 201
Note 9
Depreciation
2014
2013
2012
Amounts in US$ '000
367,102
315,435
221,564
Oil and gas properties
61,632
22,918
28,914
Production facilities and machinery
428,734
338,353
250,478
Furniture, equipment and vehicles
Buildings and improvements
Depreciation of property,
2014
89,651
9,621
1,862
523
2013
59,234
9,341
964
661
2012
44,552
7,708
713
344
plant and equipment
101,657
70,200
53,317
Recognised as follows:
2012
Production costs
52,307
Administrative costs
9,385
Depreciation total
11,424
9,884
12,384
Note 10
99,360
2,297
101,657
68,579
1,621
70,200
52,307
1,010
53,317
2014
99,360
25,475
22,166
16,157
16,112
1,619
11,534
7,563
9,730
5,733
5,932
3,277
-
4,992
2013
68,579
20,662
17,239
14,855
11,650
2,552
11,392
7,139
5,635
4,843
4,805
3,217
-
7,075
Staff costs and Directors Remuneration
1,787
7,211
5,936
1,030
1,428
2,407
3,371
3,826
6,855
Average number of employees
Amounts in US$ '000
Wages and salaries
Share-based payment (Note 29)
Share-based payment -
Cash awards (Note 29)
Social security charges
Director’s fees and allowance
229,650
179,643
129,235
Recognised as follows:
Production costs
Exploration costs
Administrative costs
Board of Directors’ and
key managers’ remuneration(1)
Salaries and fees
Share-based payment
Other benefits
2014
443
2013
391
2012
324
41,593
9,178
29,504
8,362
19,132
5,396
(805)
6,597
1,998
805
5,291
1,426
-
3,636
1,516
58,561
45,388
29,680
17,731
12,939
27,891
58,561
14,202
7,676
23,510
45,388
14,171
4,418
11,091
29,680
11,003
3,314
130
7,702
2,971
742
5,711
846
-
14,447
11,415
6,557
(1) All the figures are included in the Staff costs and Directors
Remuneration table.
Note 7
Net Revenue
Amounts in US$ '000
Sale of crude oil
Sale of gas
Note 8
Production costs
Amounts in US$ '000
Depreciation
Well and facilities maintenance
Royalties
Consumables
Staff costs (Note 10)
Share-based payment
(Notes 10 and 29)
Transportation costs
Equipment rental
Non operated blocks costs
Safety and Insurance costs
Field camp
Gas plant costs
Cost of crude oil sold from
acquired business
Other costs
202 GeoPark 20F
202 GeoPark 20F
Directors’ Remuneration
Gerald O’Shaughnessy
James F. Park
Pedro Aylwin2
Peter Ryalls3
Juan Cristóbal Pavez4
Carlos Gulisano5
Steven J. Quamme6
Executive
directors’
fees
US$ 250,000
US$ 500,000
Executive
directors’
bonus
US$ 150,000
US$ 650,000
-
-
-
-
-
-
-
-
-
-
Non-executive
Non-executive
Director fees
Cash equivalent
directors’ fees
directors’ fees
(in £)
(in US$)
-
-
-
£ 8,750
£ 11,625
£ 20,375
£ 11,625
-
-
US$ 57,500
US$ 55,000
US$ 55,000
US$ 55,000
paid in shares
No. of shares1
-
-
-
7,003
7,003
5,250
7,003
total
remuneration
US$ 400,000
US$ 1,150,000
-
US$ 195,091
US$ 195,036
US$ 195,043
US$ 195,036
1 Only 2,301 shares of the 26,259 shares paid as Director Fees were issued
during 2014 (see Note 29).
2 Pedro Aylwin has a service contract that provides for him to act as Manager
of Legal and Governance so he resigned his fees as Director.
3 Technical Committee Chairman.
4 Compensation Committee Chairman.
5 Nomination Committee Chairman.
6 Audit Committee Chairman.
From the second half of 2014, an increase in the compensation program for
the services of the non-executive Directors was approved. The annual fees
correspond to US$ 80,000 to be settled in cash and US$ 100,000 to be settled
in stocks, paid quarterly in equal installments.
In the event that a non-executive Director serves as Chairman of any Board
Committees, an additional annual fee of USD 20,000 shall apply. A Director
who serves as a member of any Board Committees shall receive an annual fee
of USD 10,000. Total payment due shall be calculated in an aggregate basis
for Directors serving in more than one Committee. The Chairman fee shall not
be added to the member´s fee for the same Committee. Payments of
Chairmen and Committee members´ fees shall be made quarterly in arrears
and settled in cash only.
GeoPark 20F 203
GeoPark 20F 203
IPO Stock Options to Executive Directors
The following Stock Options were issued to Executive Directors during 2006:
Note 11
Exploration costs
N° of
underlying
common
shares
Exercise
price (£)
Earliest
exercise
date
Amounts in US$ '000
Write-off of unsuccessful efforts(a)
Staff costs (Note 10)
Expiry
date
Other services
Name
Gerald O’Shaughnessy
153,345
306,690
James F. Park
153,345
306,690
3.20
4.00
3.20
4.00
15 May
15 May
Allocation to capitalised project
2008
2013
Share-based payment (Notes 10 and 29)
15 May
15 May
Amortisation of other long-term
2008
2013
liabilities related to unsuccessful efforts
15 May
15 May
Recovery of abandonments costs
2008
2013
15 May
15 May
2014
30,367
11,712
2,380
(2,317)
1,227
-
-
2013
10,962
6,451
1,406
(2,437)
1,225
(600)
(753)
2012
25,552
3,090
1,269
(1,849)
1,328
(1,500)
-
43,369
16,254
27,890
During 2013 the abovementioned stock options were fully exercised by the
two in Tranquilo Block and one in Campanario Block) and two of them in
2008
2013
(a) The 2014 charge corresponds to the cost of ten unsuccessful exploratory
wells: eight of them in Chile (three in Flamenco Block, two in Fell Block,
Executive Directors.
Stock Awards to Executive Directors
The following Stock Options were issued to Executive Directors during 2012:
Colombia (two in the non-operated Arrendajo Block, see Note 34). The 2014
charge also includes the loss generated by the write-off of the remaining
seismic cost for Otway and Tranquilo Blocks, registered in previous years.
The 2013 charge corresponds to the cost of five unsuccessful exploratory
wells: two of them in Chile (one in Fell Block and one in Tranquilo Block) and
N° of
underlying
common
shares
Name
Gerald O’Shaughnessy
270,000
James F. Park
450,000
Grant
date
23 Nov
2012
23 Nov
2012
Exercise
Earliest
three of them in Colombia (one well in Cuerva Block, one well in each of
price
(US$)
exercise
the non-operated blocks, Arrendajo and Llanos 32).
date
23 Nov
The 2012 charge corresponds to the costs of eight unsuccessful exploratory
0.001
2015
wells: five of them in Chile (two in Fell Block, two in Otway Block and
23 Nov
the remaining in Tranquilo Block) and three of them in Colombia (one well
0.001
2015
in Cuerva Block, one well in Arrendajo Block and the remaining in
Llanos 17 Block). The 2012 charge also includes the loss generated by the
relinquishment of an area in the Del Mosquito Block in Argentina.
In addition, Dr Carlos Gulisano holds the following interests in stock options
and awards as a result of the services that he has previously provided to
the Company:
• 50,000 IPO Stock Options issued on 15 May 2008 at an exercise price
of £ 4.00 to be exercised between 15 May 2008 and 15 May 2013. These were
fully exercised during 2013.
• 100,000 Stock awards issued on 15 December 2008 at an exercise price of
$0.001 to be exercised between 15 December 2012 and 15 December 2018.
In addition, Pedro Aylwin holds the following interests in stock options
and awards as a result of the services that he has previously provided to
the Company:
• 156,431 shares fully exercised.
• 12,000 stock awards related to the 2011 Programme not yet vested.
204 GeoPark 20F
204 GeoPark 20F
Note 12
Administrative costs
Amounts in US$ '000
Staff costs (Note 10)
Share-based payment (Notes 10 and 29)
Consultant fees
New projects
Office expenses
Director’s fees and allowance
Travel expenses
Depreciation
Other administrative expenses
2014
20,366
2013
16,694
5,527
6,791
2,798
3,190
1,998
2,052
2,297
3,145
5,390
6,424
3,720
2,652
1,426
1,258
1,621
7,399
2012
7,294
2,281
5,122
2,927
3,293
1,516
1,563
1,010
3,792
Note 15
Tax reforms in Colombia and Chile
Colombia
The Colombian Congress approved a Tax Reform in December 2014. This
reform has introduced a temporary net wealth tax assessed on net equity on
domestic and foreign legal entities, kept the rate of the income tax on
equality (Enterprise contribution on equality, “CREE” for its Spanish acronym)
at 9%, and applied a CREE surcharge until 2018, among other changes.
The net wealth tax (NWT) assessed on net equity would apply for tax years
2015 through 2017 for domestic and foreign entities that hold any wealth
in Colombia, directly or indirectly, via permanent establishments (PEs)
Note 13
Selling expenses
Amounts in US$ '000
Transportation
Selling taxes
Storage
Allowance for doubtful accounts
Delivery or pay penalty
Note 14
Financial results
Amounts in US$ '000
Financial expenses
Interest and amortisation of
debt issue costs
Less: amounts capitalised on
qualifying assets
Exchange difference(1)
Bank charges and other
financial costs
Unwinding of long-term liabilities
Notes GeoPark Fell SpA
cancellation costs (Note 26)
Financial income
Interest received
48,164
46,584
28,798
or branches. In the case of foreign or domestic individuals, the NWT would
apply until 2018.
NWT would apply at progressive rates ranging from 1.15% in 2014; 1% in
2015 and decrease to 0.4% in 2016 and finally disappear in 2017, for
corporate taxpayers. NWT paid would not be deductible or creditable for
2012
Colombian income tax purposes.
22,066
202
645
The Reform also extended the current 9% CREE tax rate, which was scheduled
to decrease to 8% in 2016. Also, it will introduce a new CREE surcharge,
-
beginning in 2015, from 5% in 2015, 6% in 2016, and 8% in 2017 to 9% in
1,718
2018. Therefore, the accumulated corporate income tax rate will raise
2014
23,106
2013
16,181
433
148
741
-
406
665
-
-
24,428
17,252
24,631
to 43% in 2018. The Company has considered the effects of this rate increase
in the deferred income tax calculation.
2014
2013
2012
Chile
The Chilean Congress approved a reform to the income tax law in September
2014. Under this reform the income tax rate will increase from 20% in 2013
according to this schedule: 21% in 2014, 22.5% in 2015, 24% in 2016, 25.5%
in 2017 and 27% in 2018.
29,466
25,209
13,114
The operating subsidiaries that GeoPark controls in Chile, which are GeoPark
(3,112)
23,097
(1,313)
760
(1,369)
affected by the income tax reform mentioned since they are covered by the
2,081
tax treatment established in the Special contract of operations (“CEOPs”).
TdF S.A., GeoPark Fell SpA and GeoPark Magallanes Limitada, are not
2,672
1,972
2,519
1,523
1,764
1,262
-
8,603
-
(3,376)
50,719
(3,425)
33,876
(544)
16,308
(1) Includes in 2014, US$ 19,163,000 generated by borrowings in US Dollars
held by the Brazilian subsidiary.
GeoPark 20F 205
GeoPark 20F 205
Note 16
Income tax
Amounts in US$ '000
Current tax
Deferred income tax (Note 17)
The Group has significant tax losses available which can be utilised against
future taxable profit in the following countries:
2014
23,574
(18,379)
5,195
2013
13,337
1,817
15,154
2012
7,536
6,858
14,394
Amounts in US$ '000
Argentina
Chile(1)
Brazil(1)
Total tax losses at 31 December
2014
6,707
33,222
3,191
43,120
2013
10,259
15,935
-
2012
11,645
4,380
-
26,194
16,025
The tax on the Group’s profit before tax differs from the theoretical amount
that would arise using the weighted average tax rate applicable to profits
(1) Taxable losses have no expiration date.
of the consolidated entities as follows:
Amounts in US$ '000
Profit before tax
Tax losses from
non-taxable jurisdictions
Taxable profit
Income tax calculated at domestic
tax rates applicable to profits in the
respective countries
Tax losses where no deferred
income tax is recognised
Effect of currency translation
on tax base
Expiration of tax loss carry-forwards
Changes in the income tax rate
(Note 15)
Non-taxable results(1)
Income tax
2014
21,125
2013
50,088
5,010
26,135
14,348
64,436
At the balance sheet date deferred tax assets in respect of tax losses in
2012
Argentina have not been recognised as there is insufficient evidence of future
32,840
taxable profits before the statute of limitation of these tax losses causes
them to expire.
8,373
41,213
Expiring dates for tax losses accumulated at 31 December 2014 are:
7,606
14,011
6,290
148
328
2,864
Expiring date
2015
2016
2017
Amounts in US$ '000
3,222
1,503
1,982
(8,128)
-
(5,146)
1,988
691
4,878
5,195
-
3,973
2,436
-
-
Note 17
Deferred income tax
2,804
The gross movement on the deferred income tax account is as follows:
15,154
14,394
Amounts in US$ '000
2014
(9,729)
(3,132)
(2,123)
(265)
18,379
3,130
2013
(3,911)
-
(4,001)
-
(1,817)
(9,729)
2012
(12,659)
15,606
-
-
(6,858)
(3,911)
(1) Includes non-deductible expenses in each jurisdiction and changes in the
Deferred tax at 1 January
estimation of deferred tax assets and liabilities.
Under current Bermuda law, the Company is not required to pay any taxes
Acquisition of subsidiaries
Reclassification(1)
Currency translation differences
in Bermuda on income or capital gains. The Company has received an
Income statement credit/(charge)
undertaking from the Minister of Finance in Bermuda that, in the event of
Deferred tax at 31 December
any taxes being imposed, they will be exempt from taxation in Bermuda until
March 2035. Income tax rates in those countries where the Group operates
(Argentina, Brazil, Colombia, Peru and Chile) ranges from 15% to 35%.
206 GeoPark 20F
206 GeoPark 20F
The breakdown and movement of deferred tax assets and liabilities as of
31 December 2014, 2013 and 2012 are as follows:
Amounts in US$ '000
of year
subsidiaries
differences
to net profit
At end of year
At the beginning
Acquisition of
Currency translation
(Charged)/credited
Deferred tax assets
Difference in depreciation rates and other
Taxable losses
Total 2014
Total 2013
Total 2012
Amounts in US$ '000
Deferred tax liabilities
Difference in depreciation
rates and other
Taxable losses
Total 2014
Total 2013
Total 2012
(2,577)
15,935
13,358
13,591
450
-
-
-
-
15,606
-
(423)
(423)
-
-
4,011
16,249
20,260
(233)
(2,465)
1,434
31,761
33,195
13,358
13,591
At the beginning
Acquisition of
(Charged)/credited
Currency translation
of year
subsidiaries
to net profit
Reclassification(1)
differences
At end of year
(23,087)
-
(23,087)
(17,502)
(13,109)
(3,132)
-
(3,132)
-
-
(6,533)
4,652
(1,881)
(1,584)
(4,393)
(2,123)
-
(2,123)
(4,001)
-
158
-
158
-
-
(34,717)
4,652
(30,065)
(23,087)
(17,502)
(1) Corresponds to the difference between income tax provision and the final
tax return presented.
Note 18
Earnings per share
Amounts in US$ '000
Numerator:
Profit for the year
Denominator:
Weighted average number
of shares used in basic EPS
Earnings after tax per
share (US$) - basic
Amounts in US$ '000
Weighted average number
of shares used in basic EPS
Effect of dilutive potential
common shares
Stock awards at US$ 0.001
Weighted average number of
common shares for the purposes
of diluted earnings per shares
Earnings after tax
per share (US$) - diluted
2014
2013
2012
7,512
22,012
11,879
56,396,812
43,603,846
42,673,981
0.13
0.50
0.28
2014
2013
2012
56,396,812 43,603,846
42,673,981
2,443,600
2,928,203
1,435,324
58,840,412
46,532,049
44,109,305
0.13
0.47
0.27
GeoPark 20F 207
GeoPark 20F 207
Note 19
Property, plant and equipment
Amount in US$ '000
Cost at 1 January 2012
Additions
Disposals
Write-off/Impairment loss
Acquisition of subsidiaries
Transfers
Cost at 31 December 2012
Additions
Disposals
Write-off/Impairment loss
Transfers
Cost at 31 December 2013
Additions
Acquisition of subsidiaries
Currency translation differences
Disposals
Write-off/Impairment loss
Transfers
Cost at 31 December 2014
Depreciation and write-down
at 1 January 2012
Depreciation
Depreciation and write-down
at 31 December 2012
Depreciation
Depreciation and write-down
at 31 December 2013
Depreciation
Disposals
Currency translation differences
Depreciation and write-down
Furniture,
Production
Buildings
Oil & gas
equipment
facilities and
and
Construction in
properties
and vehicles
machinery
improvements
171,956
4,071
(416)
-
62,449
106,311
344,371
9,367
(553)
-
140,075
493,260
3,013
112,646
(21,941)
-
(9,430)
172,399
749,947
(53,604)
(44,552)
(98,156)
(59,234)
(157,390)
(89,651)
-
6,602
2,175
637
-
-
389
375
3,576
2,060
(22)
-
117
5,731
3,367
201
(122)
(353)
-
3,233
12,057
(1,123)
(713)
(1,836)
(964)
(2,800)
(1,862)
278
(65)
47,102
32,335
(130)
-
10,865
(3,223)
86,949
512
(15,870)(*)
-
27,246
98,837
11
-
-
(666)
-
13,464
111,646
(18,628)
(7,708)
(26,336)
(9,341)
(35,677)
(9,621)
151
-
2,437
-
-
-
-
761
3,198
-
-
-
3,820
7,018
490
-
-
-
-
(716)
(344)
(1,060)
(661)
(1,721)
(523)
-
-
progress
32,896
81,241
-
-
9,452
(69,564)
54,025
89,976
-
-
(103,572)
40,429
136,232
-
-
-
-
Exploration
and evaluation
assets(1)
42,140
83,360
-
(25,552)
27,818
(34,660)
93,106
133,301
-
(10,962)
(67,686)
147,759
97,919
-
(988)
-
(30,367)
(73,879)
Total
298,706
201,644
(546)
(25,552)
110,973
-
585,225
235,216
(16,445)
(10,962)
-
793,034
241,032
112,847
(23,051)
(1,019)
(39,797)
-
140,444
1,083,046
-
-
-
-
-
-
-
-
-
(74,071)
(53,317)
(127,388)
(70,200)
(197,588)
(101,657)
429
6,537
(292,279)
-
-
-
-
-
-
-
-
-
2,019
9,527
(117,236)
59,425
at 31 December 2014
(240,439)
(4,449)
(45,147)
(2,244)
246,215
1,740
60,613
2,138
54,025
93,106
457,837
335,870
2,931
63,160
5,297
40,429
147,759
595,446
509,508
7,608
66,499
7,283
59,425
140,444
790,767
Carrying amount at 31
December 2012
Carrying amount at 31
December 2013
Carrying amount at 31
December 2014
208 GeoPark 20F
208 GeoPark 20F
As of 31 December 2014, the Group has pledged, as security for a mortgage
Amounts in US$ '000
obtained for the acquisition of the operating base in Chile, assets
amounting to US$ 482,000 (US$ 493,000 in 2013 and US$ 692,000 in 2012).
Exploration wells at 31 December 2011
Additions
See Note 26 (c).
Write-offs
Transfers
(*) During 2013, the Company entered into a finance lease for which it has
Acquisition of subsidiaries
transferred a substantial portion of the risk and rewards of some assets which
had a book value of US$ 14,100,000. As of 31 December 2013, prepayments
Exploration wells at 31 December 2012
Additions
and other receivables include receivables under finance leases amounting to
Write-offs
US$ 8,000,000, which US$ 6,500,000 are maturity no later than one year and
Transfers
US$ 1,500,000 between one and five years. In 2014, the finance lease finalized
when the purchase option on the assets subject to the agreement was
Exploration wells at 31 December 2013
Additions
exercised by the lessee.
Write-offs
Transfers
(1) Exploration wells movement and balances are shown in the table
Exploration wells at 31 December 2014
below; seismic and other exploratory assets amount to US$ 99,939,000
Total
22,241
47,891
(21,339)
(23,496)
1,868
27,165
77,933
(7,934)
(67,246)
29,918
87,741
(24,339)
(52,815)
40,505
(US$ 117,841,000 in 2013 and US$ 65,941,000 in 2012).
As of 31 December 2014, there were two exploratory wells that have been
capitalised for a period over a year amounting to US$ 4,657,000 and
ten exploratory wells that have been capitalised for a period less than a year
amounting to US$ 35,848,000.
GeoPark 20F 209
GeoPark 20F 209
Note 20
Subsidiary undertakings
The following chart illustrates main companies of the Group structure as of 31
December 2014:
100%
GeoPark Latin
America
Limited – Bermuda
(Bermuda)
100%
GeoPark Latin
America Limited
Agencia en Chile
(Chile)
GeoPark Limited
(Bermuda)
100%
1%
99.9%
99.9%
99.9%
GeoPark Argentina
Limited – Bermuda
(Bermuda)
GeoPark Latin
America
Coöperatie U.A.
(Netherlands)
GeoPark Peru
Coöperatie U.A.
(Netherlands)
GeoPark Brazil
Coöperatie U.A.
(Netherlands)
100%
80%
GeoPark Argentina
Limited -
Argentinean
Branch
GeoPark Colombia
Coöperatie
U.A.
(Netherlands)
20%
LG
International*
100%
GeoPark Colombia
SAS (Colombia)
99.9%
GeoPark Brazil
Exploração e
Produção de Petróleo
e Gás Ltda. (Brazil)
100%
Rio das Contas
Produtora de
Petróleo Ltda
(Brazil)
80%
99.9%
100%
LG
International*
20%
GeoPark Chile S.A.
(Chile)
GeoPark S.A.
(Chile)
GeoPark Colombia
S.A. (Chile)
99.9%
GeoPark SAC
(Peru)
14%
86%
100%
99%
GeoPark TdF S.A.
(Chile)
GeoPark Fell SpA.
(Chile)
GeoPark
Magallanes
Limitada (Chile)
99.9%
99.9%
GeoPark Peru
S.A.C. (Peru)
GeoPark
Operadora del Peru
S.A.C. (Peru)
(*) LGI is not a subsidiary, it is Non-controlling interest.
During 2013 and 2014, with the purpose of conducting its multilocation
activities and for allowing future business structures, the Company has
incorporated certain wholly owned subsidiaries, that are dormant companies
at the date of the issuance of these financial statements.
210 GeoPark 20F
210 GeoPark 20F
Details of the subsidiaries and joint operations of the Company are
set out below:
Subsidiaries
Joint operations
Name and registered office
GeoPark Argentina Limited - Bermuda
GeoPark Argentina Limited - Argentinean Branch
GeoPark Latin America Limited
GeoPark Latin America Limited - Agencia en Chile
GeoPark S.A. (Chile)
GeoPark Brazil Exploração y Produção de Petróleo e Gás Ltda. (Brazil)
Rio das Contas Produtora de Petróleo Ltda (Brazil)
GeoPark Chile S.A. (Chile)
GeoPark Fell S.p.A. (Chile)
GeoPark Magallanes Limitada (Chile)
GeoPark TdF S.A. (Chile)
GeoPark Colombia S.A. (Chile)
GeoPark Colombia SAS (Colombia)
GeoPark Brazil S.p.A. (Chile)
GeoPark Latin America Coöperatie U.A. (The Netherlands)
GeoPark Colombia Coöperatie U.A. (The Netherlands)
GeoPark S.A.C. (Peru)
GeoPark Perú S.A.C. (Peru)
GeoPark Operadora del Perú S.A.C. (Peru)
GeoPark Perú Coöperatie U.A. (The Netherlands)
GeoPark Brazil Coöperatie U.A. (The Netherlands)
Tranquilo Block (Chile)
Otway Block (Chile)
Flamenco Block (Chile)
Campanario Block (Chile)
Isla Norte Block (Chile)
Llanos 17 Block (Colombia)
Yamu/Carupana Block (Colombia)
Llanos 34 Block (Colombia)
Llanos 32 Block (Colombia)
CPO-4 Block (Colombia)
Puelen (Argentina)
Sierra del Nevado (Argentina)
Manatí Field (Brazil)
Ownership interest
100%
100%(a)(k)
100%(g)
100%(a)(g)
100%(a)(b)
100%(a)
100%(a)(j)
80%(a)(c)
80%(a)(c)
80%(a)(c)
68.8%(a)(d)
100%(a)
100%(a)(h)
100%(a)(b)
100%
100%(a)(c)
100%(m)(a)
100%(m)(a)
100%(m)(a)
100%(m)
100%
29%(i)(f)
100%(e)(f)
50%(f)
50%(f)
60%(f)
36.84%(l)
75%/54.5%(f) (l)
45%(f)(l)
10%(l)
50%(l)
18%
18%
10%(j)
(a) Indirectly owned.
(b) Dormant companies.
(c) LG International has 20% interest.
(h) During 2013, the Company finalized a merger process by which GeoPark
Colombia SAS continued the operations related to GeoPark Luna SAS
(Colombia), GeoPark Llanos SAS (Colombia), La Luna Oil Co. Ltd. (Panama),
(d) LG International has 20% interest through GeoPark Chile S.A. and a 14%
Winchester Oil and Gas S.A. (Panama), GeoPark Cuerva LLC (United States),
direct interest, totalling 31.2%.
Sucursal La Luna Oil Co. Ltd. (Colombia), Sucursal Winchester Oil and Gas S.A.
(e) In September 2014, the Chilean Ministry of Energy approved that the
(Colombia) and Sucursal GeoPark Cuerva LLC (Colombia).
Group will be the sole participant with a working interest of 100%.
(i) At 31 December 2013, the Consortium members and interest were:
(f) GeoPark is the operator in all blocks.
(g) Formerly named GeoPark Chile Limited.
GeoPark 29%, Pluspetrol 29%, Wintershall 25% and Methanex 17%. During
2014, Methanex and Wintershall announced their decision to abandon the
GeoPark 20F 211
GeoPark 20F 211
Consortium. The new ownership is GeoPark 50% and Pluspetrol 50%.
Note 23
(j) On 17 December 2014, the ANP approved the transfer of cession of
Trade receivables and Prepayments and other receivables
rights of the Block from Rio das Contas to GeoPark Brazil. On 31 January 2015,
both companies, Rio das Contas and GeoPark Brazil were merged into
Amounts in US$ '000
GeoPark Brazil (see Note 34.c).
Trade accounts receivable
(k) In April 2014, the Company informed the Secretary of Infrastructure
and Energy of the province of Mendoza of its decision to relinquish 100%
To be recovered from co-venturers
of the Cerro Doña Juana and Loma Cortaderal Concessions to the
Prepayments and other receivables
2014
36,917
36,917
5,931
8,411
14,342
51,259
2013
42,628
42,628
15,508
26,617
42,125
84,753
50,910
349
51,259
78,392
6,361
84,753
Total
Classified as follows:
Current
Non current
Total
2014
8,884
4,834
994
2013
Trade receivables that are aged by less than three months are not
10,635
considered impaired. As of 31 December 2014, trade receivables of US$ 6,092
4,945
2,853
(US$ 1,143,393 in 2013) were aged by more than 3 months, but not impaired.
These relate to customers for whom there is no recent history of default.
14,712
18,433
There are no balances due between 31 days and 90 days as of 31 December
13,459
1,253
14,712
2014
6,719
1,813
8,532
2014 and 2013.
6,979
11,454
Movements on the Group provision for impairment are as follows:
18,433
Amounts in US$ '000
At 1 January
Allowance for doubtful accounts (Note 13)
2014
33
741
774
2013
33
-
33
2013
4,464
3,658
The credit period for trade receivables is 30 days. The maximum exposure
to credit risk at the reporting date is the carrying value of each class of
receivable. The Group does not hold any collateral as security related to trade
8,122
receivables.
The carrying value of trade receivables is considered to represent a
reasonable approximation of its fair value due to their short-term nature.
Mendoza Province.
(l) See Note 34.a.
(m) See Note 34.d.
Note 21
Prepaid taxes
Amounts in US$ '000
V.A.T.
Income tax payments in advance
Other prepaid taxes
Total prepaid taxes
Classified as follows:
Current
Non current
Total prepaid taxes
Note 22
Inventories
Amounts in US$ '000
Crude oil
Materials and spares
212 GeoPark 20F
212 GeoPark 20F
Note 24
Financial instruments by category
Cash at bank and other financial assets(1)
Amounts in US$ '000
Assets as per statement of financial position
Trade receivables
To be recovered from co-venturers
Other financial assets (*)
Cash at bank and in hand
Amounts in US$ '000
2014
2013
Loans and receivables
Counterparties with an external credit rating
2014
2013
(Moody’s, S&P, Fitch, BRC Investor Services)
36,917
5,931
12,979
42,628
15,508
5,168
127,672
121,135
183,499
184,439
A1
A2
Aa3
P1
P2
P3
AA+
BRC 1+
17
22,621
-
40,402
42,218
21,145
-
994
4,812
-
11
102,390
460
3,789
2,643
3,546
8,631
(*) Other financial assets relate to contributions made for environmental
obligations according to Colombian and Brazilian government regulations.
Counterparties without an external credit rating
13,142
For 2014, they also include a non current account receivable.
Total
140,539
126,282
Other financial liabilities
hand amounting to US$ 112,000 (US$ 21,000 in 2013).
(1) The rest of the balance sheet item ‘cash at bank and in hand’ is cash on
Amounts in US$ '000
Liabilities as per statement of financial position
Trade payables
Payables to related parties
To be paid to co-venturers
Borrowings
at amortised cost
2014
2013
64,457
16,591
1,335
61,130
8,456
1,201
369,593
317,087
451,976
387,874
Credit quality of financial assets
The credit quality of financial assets that are neither past due nor impaired
can be assessed by reference to external credit ratings (if available) or to
historical information about counterparty default rates:
Amounts in US$ '000
2014
2013
Financial liabilities - contractual undiscounted cash flows
The table below analyses the Group’s financial liabilities into relevant
maturity groupings based on the remaining period at the balance sheet to
the contractual maturity date. The amounts disclosed in the table are the
contractual undiscounted cash flows.
Between
Between
Less than
1 and 2
2 and 5
Amounts in US$ '000
1 year
years
years
Over
5 years
At 31 December 2014
Borrowings
Trade payables
Payables to related parties
Trade receivables
Counterparties with an external credit rating
(Moody’s)
Ba2
Baa2
Baa3
At 31 December 2013
Borrowings
Trade payables
-
Payables to related parties
2,048
17,321
11,793
-
11,292
Counterparties without an external credit rating
Group1 (*)
Total trade receivables
13,832
36,917
23,259
42,628
(*) Group 1 - existing customers (more than 6 months) with no defaults in the
past.
All trade receivables are denominated in US Dollars, except in Brazil where are
denominated in Brazilian Real.
41,124
64,457
1,325
40,342
109,152
322,500
-
-
1,325
17,226
-
-
106,906
41,667
126,378
322,500
39,585
61,130
8,456
22,600
67,500
345,000
-
-
-
-
-
-
109,171
22,600
67,500
345,000
GeoPark 20F 213
GeoPark 20F 213
Note 25
Share capital
Issued share capital
Common stock (amounts in US$ '000)
The share capital is
distributed as follows:
2014
58
On 17 September 2013, 295,599 common shares were allotted to the trustee
of the Employee Beneficiary Trust (“EBT”), generating a share premium of
US$ 3,441,689. On 22 October 2012, 976,211 common shares were allotted to
2013
the trustee of the EBT, generating a share premium of US$ 4,191,000.
44
On 29 October 2013, the Company put into place an irrevocable, non-
discretionary share purchase program for the purchase of its common shares
Common shares, of nominal US$ 0.001
Total common shares in issue
57,790,533
57,790,533
43,861,614
for the account of the EBT. This Purchase Program expired on 31 December
43,861,614
2013. The common shares purchased under the program will be used to
Authorised share capital
US$ per share
Number of common shares
(US$ 0.001 each)
Amount in US$
satisfy future awards under the incentive schemes. During 2013, the Company
purchased 50,000 common shares for a total amount of US$ 440,000.
0.001
0.001
5,171,949,000
5,171,949,000
statement upon which 13,999,700 shares were issued at a price of US$ 7
5,171,949
5,171,949
per share, including over-allotment option. Gross proceeds from the offering
On 7 February 2014, the SEC declared effective the Company’s registration
totalled US$ 98 million (see Note 1).
Details regarding the share capital of the Company are set out below:
On 19 December 2014, the Company approved a program to repurchase up
Common shares
As of 31 December 2014, the outstanding common shares confer the
to US$ 10 million of common shares, par value US$ 0.001 per share of the
Company (the “Repurchase Program”). The Repurchase Program began on
following rights on the holder:
• the right to one vote per share;
19 December 2014 and will expire at the close of business on March 27, 2015,
but may be terminated prior to such date. The Shares repurchased will
• ranking pari passu, the right to any dividend declared and payable on
be used to offset, in part, any expected dilution effects resulting from the
common shares;
GeoPark
Company’s employee incentive schemes, including grants under the
Company’s Stock Award Plan and the Limited Non-Executive Director Plan.
Shares
issued
Shares
closing
US$
During 2014, the Company purchased 73,082 common shares for a total
(´000)
amount of US$ 388,000. This transaction had no impact on the Company’s
common shares history
Date
(millions)
(millions)
closing
results.
Shares outstanding
at the end of 2011
Issue of shares to
42.5
43
During 2014, the Company issued 2,301 (10,430 in 2013 and 15,100 in 2012)
shares to Non-Executive Directors in accordance with contracts as
Non-Executive Directors
Stock awards
2012
Oct 2012
0.02
1.01
42.5
43.5
43
43
compensation, generating a share premium of US$ 22,413 (US$ 100,988
in 2013 and US$ 142,492 in 2012). The amount of shares issued is determined
43.5
43
for each relevant period.
considering the contractual compensation and the fair value of the shares
0.01
0.46
(0.1)
14.0
0.0
(0.1)
43.5
44.0
43.9
43.9
57.9
57.9
57.8
57.8
43
44
44
44
58
58
58
58
Under the stock awards programmes and other share based payments,
during 2013, 60,000 (30,000 in 2012) new common shares were issued,
pursuant to a consulting agreement for services rendered to GeoPark Limited
generating a share premium of US$ 506,630 (US$ 253,315 in 2012).
The accounting treatment of the shares is in line with the Group’s policy on
share-based payment.
Shares outstanding
at the end of 2012
Issue of shares to
Non-Executive Directors
2013
Stock awards
Buyback program
Shares outstanding
at the end of 2013
IPO
Stock awards
Buyback program
Shares outstanding
at the end of 2014
Sept 2013
Oct 2013
Feb 2014
Feb 2014
Dec 2014
214 GeoPark 20F
214 GeoPark 20F
Other Reserve
During 2012, LGI acquired a 20% interest in the Colombian business by
Under the terms of the Notes, the Issuer is required to comply with certain
financial covenants for the incurrence of additional debt and other specific
making a capital contribution for an amount of US$ 14,920,000. The
corporate actions (dividends, mergers, etc.) consisting on: i) Leverage Ratio,
differences between total consideration and the net equity of the Companies
defined as Gross Debt to Adjusted EBITDA, lower than 2.75x for the year
as per the book value were recorded as Other Reserve in the Consolidated
2014 and lower than 2.5x from 2015 onwards; and ii) Interest Coverage Ratio,
Statement of Changes in Equity (see Note 34.b).
defined as Adjusted EBITDA divided by Interest Expenses, above 3.5x.
Note 26
Borrowings
As of the date of these consolidated financial statements, the Company has
complied with these covenants.
(b) During March 2014, GeoPark executed a loan agreement with Itaú BBA
International for US$ 70,450,000 to finance the acquisition of a 10%
Amounts in US$ '000
2014
2013
working interest in the Manatí field in Brazil (see Note 34.c). The interest rate
Outstanding amounts as of 31 December
Notes GeoPark Latin America Agencia en Chile(a)
Banco Itaú(b)
Banco de Crédito e Inversiones(c)
Banco de Chile(d)
Overdrafts(e)
applicable to this loan is LIBOR plus 3.9% per annum. The interest will be
300,963
299,912
paid semi-annually; principal will be cancelled semi-annually with a year
68,540
-
grace period. The debt issuance cost for this transaction amounted to
90
-
-
2,143
US$ 3,295,000. The facility agreement includes customary events of default,
15,002
and requires the Brazilian subsidiary to comply with customary covenants,
30
including the maintenance of a ratio of net debt to EBITDA of up to 3.5x
Classified as follows:
Non current
Current
369,593
317,087
for the first two years and up to 3.0x thereafter. The credit facility also limits
342,440
27,153
the borrower’s ability to pay dividends if the ratio of net debt to EBITDA
290,457
is greater than 2.5x. As of the date of these consolidated financial statements,
26,630
the Company has complied with these covenants.
The fair value of these financial instruments at 31 December 2014 amounts
(c) Facility to establish the operational base in the Fell Block. This facility
to US$ 360,181,000 (US$ 312,208,000 in 2013). The fair values are based
was acquired through a mortgage loan granted by the Banco de Crédito e
on cash flows discounted using a rate based on the borrowing rate of 7.40%
Inversiones (BCI), a Chilean private bank. The loan was granted in Chilean
(2013: 7.81%) and are within level 2 of the fair value hierarchy.
pesos and is repayable over a period of 8 years. The interest rate applicable
to this loan is 6.6%. The outstanding amount at 31 December 2014 is
(a) During February 2013, the Company successfully placed US$ 300 million
US$ 90,000 (US$ 212,000 in 2013).
notes which were offered under Rule 144A and Regulation S exemptions
of the United States Securities laws.
The Notes, issued by the Company's wholly-owned subsidiary GeoPark Latin
In addition, during 2011, GeoPark TdF obtained financing from BCI to start
the operations in the newly acquired blocks. The outstanding amount at
31 December 2013 was US$ 1,931,000. This financing was structured as letter
America Limited Agencia en Chile (“the Issuer”), were priced at 99.332% and
of credit and was fully repaid in February 2014.
carry a coupon of 7.50% per annum to yield 7.625% per annum. Final maturity
of the notes will be 11 February 2020. The Notes are guaranteed by GeoPark
(d) Short term financing obtained in December 2013 and fully repaid in
Limited and GeoPark Latin America Coöperatie U.A. and are secured with
January 2014. The interest rate applicable to this loan was 0.71% per annum.
a pledge of all of the equity interests of the Issuer in GeoPark Chile S.A. and
GeoPark Colombia Coöperatie U.A. and a pledge of certain intercompany
(e) The Group has been granted with credit lines for over US$ 69,000,000.
loans. Notes were rated single B by both Standard & Poor's and Fitch Ratings.
The exercise of these credit lines could be limited by debt covenants
The debt issuance cost for this transaction amounted to US$ 7,637,000.
associated to other borrowings.
GeoPark 20F 215
GeoPark 20F 215
Note 27
Provisions and other long-term liabilities
Asset
retirement
Deferred
Amounts in US$ '000
obligation
At 1 January 2012
Addition to provision/
Contributions received
Acquisition of subsidiaries
5,450
3,440
6,061
income
3,962
5,550
-
Amortisation
Unwinding of discount
At 31 December 2012
Addition to provision
Recovery of
-
(2,143)
1,262
16,213
7,183
-
7,369
-
abandonments costs
(753)
-
-
(1,165)
Amortisation
Unwinding of discount
At 31 December 2013
Addition to provision
Recovery of
abandonments costs
Acquisition of subsidiaries
Exchange difference
Amortisation
1,523
24,166
1,603
(1,317)
6,862
-
-
Unwinding of discount
At 31 December 2014
1,972
33,286
-
6,204
-
-
-
-
(468)
-
5,736
Note 28
Trade and other payables
Amounts in US$ '000
V.A.T
Total
9,412
9,090
8,370
Trade payables
Payables to related parties(1) (Note 32)
Staff costs to be paid
Royalties to be paid
Taxes and other debts to be paid
(2,143)
To be paid to co-ventures
1,262
25,991
7,480
(753)
Classified as follows:
Non current
Current
2014
3,449
64,457
16,591
7,226
2,398
10,031
1,335
2013
8,074
61,130
8,456
8,551
3,375
9,190
1,201
105,487
99,977
16,583
88,904
8,344
91,633
(1,165)
(1) As of 31 December 2014, the outstanding amount corresponds to a loan
1,523
granted by LGI to GeoPark Chile S.A. for financing Chilean operations in TdF’s
Other
-
100
2,309
-
-
2,409
297
-
-
-
2,706
5,934
33,076
7,537
blocks. The maturity of this loan is July 2017 and the applicable interest rate
is 8% per annum. As of 31 December 2013, the outstanding amount relates to
-
-
(752)
-
-
a loan granted by LGI as part of its funding commitment in connection with
(1,317)
Colombian companies acquisition (see Note 34.b). This loan was cancelled
6,862
during 2014.
(752)
(468)
The average credit period (expressed as creditor days) during the year ended
1,972
31 December 2014 was 50 days (2013: 58 days)
7,888
46,910
The fair value of these short-term financial instruments is not individually
The provision for asset retirement obligation relates to the estimation of
determined as the carrying amount is a reasonable approximation of
future disbursements related to the abandonment and decommissioning of
fair value.
oil and gas wells (see Note 4).
Deferred income relates to contributions received to improve the project
economics of the gas wells. The amortisation is in line with the related asset.
Other mainly relates to fiscal controversies associated to income taxes in one
of the Colombian subsidiaries. These controversies relate to fiscal periods
prior to the acquisition of these subsidiaries by the Company. In connection
to this, the Company has recorded an account receivable with the previous
owners for the same amount, which is recognized under Other financial
assets in the Balance sheet.
216 GeoPark 20F
216 GeoPark 20F
Note 29
Share-based payment
IPO Award Programme and Executive Stock Option plan
The Group has established different stock awards programmes and other
Main characteristics of these news plans are:
• Exercise price: US$ 0.001.
• Grant date: July 2013.
• Grant price: £ 5.8.
• Vesting date: 31 December 2015.
share-based payment plans to incentivise the Directors, senior management
• Conditions to be able to exercise:
and employees, enabling them to benefit from the increased market
- Continue to be an employee.
capitalization of the Company.
- Obtain the Company minimum Production, Adjusted EBITDA and Reserves
Stock Award Programmes and Other Share Based Payments
During 2008, GeoPark Shareholders voted to authorize the Board to use up
to 12% of the issued share capital of the Company at the relevant time for
target for the year of vesting.
- The stock market price at the date of vesting should be higher than the
share price at the price of grant.
• Amount of shares for equity-settled plan: 500,000.
the purposes of the Performance-based Employee Long-Term Incentive Plan.
• Estimated equivalent amount of shares for cash-settled plan: 500,000.
Main characteristics of the Stock Awards Programmes are:
• All employees are eligible.
According to current market conditions, the Company estimated that
for the cash awards plan, the share price at the vesting date would not reach
• Exercise price is equal to the nominal value of shares.
the threshold for granting. Therefore, no liability has been recognized
• Vesting period is four years.
as of 31 December 2014.
• Specific Award amounts are reviewed and approved by the Executive
Directors and the Remuneration Committee of the Board of Directors.
Also during 2013, the Company approved a plan named Value creation plan
(“VCP”) oriented to Top Management. The VCP establishes awards payables
On 23 November 2012, the Remuneration Committee and the board of
in a variable number of shares with some limitation, subject to certain market
directors approved granting 720,000 options over ordinary shares of
conditions, among others, reach certain stock market price for the Company
US$ 0.001 each to the Executive Directors. Options granted vest on the third
share at vesting date. VCP has been classified as an equity-settled plan.
anniversary of the date on which they are granted and have an exercise
price of US$ 0.001.
Additionally, during 2013 the Company approved two new share-based
compensation programmes: i.) a stock awards plan oriented to Managers
(non-Top Management) and key employees which qualifies as an equity-
settled plan and ii.) a cash awards plan, oriented to all non-management
employees which qualifies as a cash-settled plan.
GeoPark 20F 217
GeoPark 20F 217
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:
Year of issuance
2013
2012
2011
2010
2008
Subtotal
Stock options to
Executive Directors
Shares granted to
Non-Executive Directors
VCP
Awards
at the
beginning
500,000
443,000
494,000
835,600
-
720,000
Awards
granted in
the year
-
-
-
-
-
-
-
-
26,259
-
Awards
forfeited
22,000
15,000
16,000
18,000
-
-
-
-
Awards
Awards at
exercised
year end
478,000
428,000
478,000
817,600
-
-
-
-
-
-
-
Charged to net profit
2014
1,291
1,102
848
2,623
-
5,864
2013
619
1,296
893
2,779
-
5,587
720,000
2,474
2,365
2,301
-
23,958
-
223
617
9,178
101
309
8,362
2012
-
55
926
2,929
1,087
4,997
257
142
-
5,396
2,992,600
26,259
71,000
2,301
2,945,558
The awards that are forfeited correspond to employees that had left the
Group before vesting date.
Other share-based payment
As it is mentioned in Note 25, the Company granted 2,301 (10,430 in 2013
and 15,100 in 2012) shares for services rendered by the Non-Executive
Directors of the Company. Fees paid in shares were directly expensed in the
Administrative costs line in the amount of US$ 22,413 (US$ 100,988 in 2013
and US$ 142,492 in 2012).
On 19 December 2014, the Company has approved a new share-based
compensation programme for 500,000 shares oriented to new employees.
This new programme, which was granted on 31 December 2014, has a
vesting period of three years.
218 GeoPark 20F
218 GeoPark 20F
Note 30
Interests in Joint operations
The Group has interests in nine joint operations, which are involved in the
exploration of hydrocarbons in Chile, Colombia and Brazil.
In Chile, GeoPark is the operator in all the blocks. In Colombia, GeoPark is
the operator in Llanos 34 and Yamu/Carupana Blocks.
The following amounts represent the Company’s share in the assets, liabilities
and results of the joint operations which have been consolidated line by line
in the consolidated statement of financial position and statement of income:
Subsidiary /
Joint operation
2014
GeoPark Magallanes Ltda.
Tranquilo Block
Otway Block
GeoPark TdF S.A.
Flamenco Block
Campanario Block
Isla Norte Block
Colombia SAS
Llanos 17 Block
Interest
50%
100%
50%
50%
60%
36.84%
Yamu/Carupana Block
90% - 79.5%
45%
10%
Llanos 34 Block
Llanos 32 Block
GeoPark Brazil
Exploração y Produção
de Petróleo e Gas Ltda.
Manatí Field
PP&E
E&E
Other
assets
Total
assets
Current
liabilities
Total
Net
assets/
Net
Operating
liabilities
(liabilities)
revenue
profit (loss)
109
139
35,110
34,309
12,208
6,037
16,590
76,726
8,909
-
-
-
-
-
-
2,211
1,514
27
109
139
35,110
34,309
12,208
6,037
18,801
78,240
8,936
(125)
(146)
(1,653)
(7,086)
(241)
(122)
(2,727)
(3,380)
(122)
(125)
(146)
(1,653)
(7,086)
(241)
(122)
(2,727)
(3,380)
(122)
(16)
(7)
33,457
27,223
11,967
5,915
16,074
74,860
8,814
-
-
4,385
216
901
1,292
10,560
176,624
11,024
(220)
(12)
(6,278)
(6,151)
(283)
(160)
(2,916)
96,889
4,041
10%
46,382
43,891
90,273
(11,587)
(11,587)
78,686
35,621
18,935
GeoPark 20F 219
GeoPark 20F 219
Subsidiary /
Joint operation
2013
GeoPark Magallanes Ltda.
Tranquilo Block
Otway Block
GeoPark TdF S.A.
Flamenco Block
Campanario Block
Isla Norte Block
Colombia SAS
Llanos 17 Block
Interest
29%
100%
50%
50%
60%
36.84%
Yamu/Carupana Block
75% - 54.50%
Llanos 34 Block
Llanos 32 Block
2012
GeoPark Magallanes Ltda.
Tranquilo Block
Otway Block
Colombia SAS
Llanos 17 Block
45%
10%
29%
25%
36.84%
Yamu/Carupana Block
75% - 54.50%
Llanos 34 Block
Llanos 32 Block
45%
10%
PP&E
E&E
Other
assets
Total
assets
Current
liabilities
Total
Net
assets/
Net
Operating
liabilities
(liabilities)
revenue
profit (loss)
15,255
6,009
42,048
17,172
4,497
6,448
15,476
51,963
4,993
13,328
6,516
3,872
12,626
25,178
4,384
210
175
-
-
-
29
482
1,129
-
1,467
1,326
144
26
72
1,484
15,465
6,184
42,048
17,172
4,497
6,477
15,958
53,092
4,993
14,795
7,842
4,016
12,652
25,250
5,868
(391)
(48)
(2,537)
(405)
(303)
-
-
-
-
(391)
(48)
(2,537)
(405)
(303)
-
-
-
-
(3,252)
(2,412)
(3,252)
(2,412)
(224)
(224)
-
-
-
-
(1,509)
(1,509)
15,074
6,136
39,511
16,767
4,194
6,477
15,958
53,092
4,993
11,543
5,430
3,792
12,652
25,250
4,359
-
-
243
-
-
1,407
17,727
78,390
5,507
-
-
144
23,283
10,362
2,900
(275)
(100)
(239)
-
-
(544)
2,127
39,192
1,035
(544)
(386)
144
4,034
3,767
1,207
Capital commitments are disclosed in Note 31 (b).
Note 31
Commitments
Under Law 756 of 2002, as modified by Law 1530 of 2012, the royalties
in connection with Colombian production of light and medium oil
are calculated on a field-by-field basis, using the following sliding scale:
(a) Royalty commitments
In Chile, royalties are payable to the Chilean Government. In the Fell Block,
Average daily production in barrels
Production royalty rate
royalties are calculated at 5% of crude oil production and 3% of gas
Up to 5,000
8%
production. In the Flamenco Block, Campanario Block and Isla Norte Block,
5,000 to 125,000
8% + (production - 5,000)*0.1
royalties are calculated at 5% of gas and oil production.
125,000 to 400,000
400,000 to 600,000
In Colombia, royalties on production are payable to the Colombian
Greater than 600,000
Government and are determined on a field-by-field basis using a level of
20%
20% + (production - 400,000)*0.025
25%
production sliding scale and a rate which ranges between 6%-8%. The
When the API is lower than 15°, the payment is reduced to the 75% of the
Colombian National Hydrocarbons Agency (“ANH”) also has an additional
total calculation.
economic right equivalent to 1% of production, net of royalties.
220 GeoPark 20F
In accordance with Llanos 34 Block operation contract, when the
(b) Capital commitments
accumulated production of each field, including the royalties’ volume,
exceeds 5 million of barrels and the WTI exceeds the base price settled
in table a, the Company should deliver to ANH a share of the production net
Chile
As of 31 December 2014 the only remaining commitments in Chile are
of royalties in accordance with the following formula: Q = ((P - Po)/P) x S;
related to Tierra del Fuego blocks. The future investment commitments
where Q = Economic right to be delivered to ANH, P = WTI, Po = Base price
assumed by GeoPark outstanding are:
(see table A) and S = Share (see table B).
Table A
°API
>29°
>22°<29°
>15°<22°
>10°<15°
Table B
• Isla Norte Block: 2 exploratory wells before November 2015 (US$ 6,480,000).
• Campanario Block: 3 exploratory wells before January 2016 (US$ 11,880,000).
Po (US$/barrel) WTI (P)
30.22
31.39
Po < P < 2Po
2Po < P < 3Po
32.56
46.50
3Po < P < 4Po
4Po < P < 5Po
5Po < P
S
30%
35%
40%
45%
50%
The investments made in the first exploratory period will be assumed
100% by GeoPark. As of 31 December 2014, the Company has established a
guarantee for its commitments that amounts to US$ 17,500,000.
Colombia
For the Llanos 17 Block, the activities were performed but there is still a
Additionally, under the terms of the Winchester Stock Purchase Agreement,
remaining commitment that amounts to US$ 4,299,000 (US$ 1,584,000
we are obligated to make certain payments to the previous owners of
at GeoPark’s working interest (36.84%)) which is expected to be completed
Winchester based on the production and sale of hydrocarbons discovered by
with an additional well.
exploration wells drilled after October 25, 2011. These payments involve
both an earnings based measure and an overriding royalty equal to an
The Llanos 62 Block (100% working interest) has committed to drill two
estimated 4% carried interest on the part of the vendor. As at the balance
exploratory wells before July 2015. The remaining commitment amounts to
sheet date and based on preliminary internal estimates of additions
US$ 6,000,000.
of 2P reserves since acquisition, the Company’s best estimate of the total
commitment over the remaining life of the concession is a range of
The VIM 3 Block minimum investment program consists of 200 sq km of 2D
US$ 50 million - US$ 60 million. During 2014, the Company has accrued and
seismic and drilling one exploratory well, with a total estimated investment of
paid US$ 24.6 million (US$ 11.5 million in 2013 and US$ 1.3 million in 2012)
US$ 22,200,000 during the initial three year exploratory period ending in
and US$ 21.0 million (US$ 7.8 million in 2013), respectively.
September 2018.
In Brazil, the Brazilian National Petroleum, Natural Gas and Biofuels Agency
In accordance with the farm-in agreement, and subject to the approval of
(ANP) is responsible for determining monthly minimum prices for petroleum
Agencia Nacional de Hidrocarburos (ANH) in Colombia, GeoPark will operate
produced in concessions for purposes of royalties payable with respect to
production. Royalties generally correspond to a percentage ranging between
and receive a 50% working interest (WI) in the CPO-4 Block in exchange for
its commitment to drill and fund its 50% WI (with no carry) of one exploration
5% and 10% applied to reference prices for oil or natural gas, as established in
well before August 2015. The financial commitment for GeoPark is
the relevant bidding guidelines (edital de licitação) and concession
approximately US$ 6,000,000.
agreement. In determining the percentage of royalties applicable to a
particular concession, the ANP takes into consideration, among other factors,
the geological risks involved and the production levels expected. In the
Brazil
On 14 May 2013, the ANP awarded GeoPark seven new concessions in
Manatí Block, royalties are calculated at 7.5% of gas production.
Brazil in an international bidding round, Round 11. For these seven
In Argentina, crude oil production accrues royalties payable to the Provinces
(including bonuses and work program commitment) during the first three
of Santa Cruz and Mendoza equivalent to 12% on estimated value at well
years of the exploratory period for the concessions. GeoPark has already
head of those products. This value is equivalent to final sales price less
invested US$ 5,400,000 in seismic and US$ 4,400,000 in bonuses paid to ANP.
concessions, GeoPark committed to invest a minimum of US$ 15,300,000
transport, storage and treatment costs.
GeoPark 20F 221
On 28 November 2013, the ANP awarded GeoPark two new concessions
Note 32
in a new international bidding round, Round 12. For these two concessions,
Related parties
GeoPark have committed to invest a minimum of US$ 4,000,000 (including
bonus and work program commitments) during the first exploratory period.
Controlling interest
For PN-T-597 Block the commitment amounts to US$ 3,300,000 and for
the SEAL-T-268 Block is US$ 700,000. See Note 34 for further details.
The main shareholders of GeoPark Limited, a company registered in Bermuda,
as of 31 December 2014, are:
Argentina
On 20 August 2014, the consortium of GeoPark and Pluspetrol was awarded
two exploration licenses in the Sierra del Nevado and Puelen Blocks, as
part of the 2014 Mendoza Bidding Round in Argentina, carried out by
Empresa Mendocina de Energia S.A. (“EMESA”). The blocks cover an area of
approximately 1.7 million acres and are located in the Neuquen Basin,
Argentina's largest producing hydrocarbon basin.
The consortium consists of Pluspetrol (Operator with a 72% working interest
(“WI”)), EMESA (Non-operated with a 10% WI) and GeoPark (Non-operated
with an 18% WI).
GeoPark has committed to a minimum aggregate investment of
US$ 6,200,000 for its WI, which includes the work program commitment
on both blocks during the first three years of the exploratory period.
Shareholder
Gerald E. O’Shaughnessy(1)
James F. Park(2)
Steven J. Quamme(3)
IFC Equity Investments(4)
Moneda A.F.I.(5)
Juan Cristóbal Pavez(6)
BTG Pactual
Charles Schwab & Co.
Other shareholders
Common shares
7,533,907
7,441,269
9,699,161
3,456,594
2,741,650
2,887,130
4,518,886
4,352,780
15,159,156
57,790,533
Percentage of
outstanding
common shares
13.04%
12.88%
16.78%
5.98%
4.74%
5.00%
7.82%
7.53%
26.23%
100.00%
(c) Operating lease commitments - Group company as lessee
The Group leases various plant and machinery under non-cancellable
Resources Group Inc., all of which are controlled by Mr. O’Shaughnessy.
(2) Held by Energy Holdings, LLC, which is controlled by James F. Park,
(1) Held directly and indirectly through GP Investments LLP, and The Globe
operating lease agreements.
a member of our Board of Directors. The number of common shares held
by Mr. Park does not reflect the 588,664 common shares held as
The Group also leases offices under non-cancellable operating lease
of 31 December 2014 in the employee benefit trust described under
agreements. The lease terms are between 2 and 3 years, and the majority of
‘‘Management-Compensation-Employee Benefit Trust’’.
lease agreements are renewable at the end of the lease period at market rate.
(3) Held through certain private investment funds managed and controlled
by Cartica Management, LLC. The common shares reflected as being
During 2014 a total amount of US$ 19,409,000 (US$ 19,110,000 in 2013
and US$ 4,531,000 in 2012) was charged to the income statement and
held by Mr. Quamme include 8,189 common shares held by him personally.
Mr. Steven Quamme, one of our principal shareholders and a member of our
US$ 51,341,000 of operating leases were capitalised as Property, plant and
board of directors, is the Senior Managing Director of Cartica Management,
equipment (US$ 37,263,000 in 2013 and US$ 32,706,000 in 2012).
LLC, and therefore may be deemed to have voting and investment power
The future aggregate minimum lease payments under non-cancellable
(4) IFC Equity Investments voting decisions are made through a portfolio
operating leases are as follows:
management process which involves consultation from investment officers,
over the common shares of GeoPark held by Cartica Management, LLC.
credit officers, managers and legal staff.
Amounts in US$ '000
2014
2013
2012
(5) Held through various funds managed by Moneda A.F.I. (Administradora
Operating lease commitments
Falling due within 1 year
Falling due within 1 - 3 years
Falling due within 3 - 5 years
Falling due over 5 years
37,926
33,949
16,109
505
68,817
56,556
31,145
505
de Fondos de Inversión), an asset manager.
26,464
(6) Held through Socoservin Overseas Ltd, which is controlled by Juan
3,709
Cristóbal Pavez. The common shares reflected as being held by Mr. Pavez
include 9,326 common shares held by him personally.
443
895
Total minimum lease payments
88,489
157,023
31,511
222 GeoPark 20F
222 GeoPark 20F
Balances outstanding and transactions with related parties
Account (Amounts in ´000)
2014
To be recovered from co-ventures
Payables account
To be paid to co-venturers
Financial expenses
Exploration costs
Administrative costs
Administrative costs
2013
To be recovered from co-ventures
Payables account
To be paid to co-venturers
Financial expenses
Exploration costs
Administrative costs
2012
To be recovered from co-ventures
Prepayment and other receivables
To be paid to co-venturers
Exploration costs
Administrative costs
Transaction in the year
Balances at year end
Related party
Relationship
-
-
-
592
16
114
568
-
-
-
112
24
176
-
-
-
31
219
5,931
(16,591)
(1,335)
-
-
-
-
Joint Operations
Joint Operations
LGI
Partner
Joint Operations
Joint Operations
LGI
Partner
Carlos Gulisano
Carlos Gulisano
Pedro Aylwin
Non-Executive
Director(*)
Non-Executive
Director(*)
Executive Director(**)
15,508
(8,456)
(1,201)
Joint Operations
Joint Operations
LGI
Partner
Joint Operations
Joint Operations
-
-
-
8,773
31,138
(2,007)
-
-
LGI
Carlos Gulisano
Carlos Gulisano
Partner
Non-Executive
Director(*)
Non-Executive
Director(*)
Joint Operations
Joint Operations
LGI
Partner
Joint Operations
Joint Operations
Carlos Gulisano
Carlos Gulisano
Non-Executive
Director(*)
Non-Executive
Director(*)
(*) Corresponding to consultancy services.
(**) Corresponding to: wages and salaries for US$ 374,000 and bonus for
US$ 194,000.
There have been no other transactions with the Board of Directors, Executive
Board, Executive officers, significant shareholders or other related parties
during the year besides the intercompany transactions which have been
eliminated in the consolidated financial statements, the normal remuneration
of Board of Directors and Executive Board and other benefits informed in
Note 10.
GeoPark 20F 223
GeoPark 20F 223
Note 33
Fees paid to Auditors
Amounts in US$ ´000
Fees payable to the Group’s
auditors for the audit of the
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.
2014
2013
2012
The following table summarises the combined consideration paid for
Winchester Luna and Hupecol, the fair value of assets acquired and liabilities
assumed for these transactions:
consolidated financial statements
381
668(*)
346
Amounts in US$ ´000
Hupecol
Luna
Total
Winchester
Fees payable to the Group’s
auditors for the review of
interim financial statements
Fees payable for the audit
of the Group’s subsidiaries
pursuant to legislation
Fees payable to the Group’s auditors
for the review of 20-F
Non-audit services
Fees paid to auditors
128
150
52
Cash (including working
36
70
826
273
-
337
capital adjustments)
Total consideration
Cash and cash equivalents
298
Property, plant and equipment
-
(including mineral interest)
713
Trade receivables
1,441
1,428
1,409
Prepayments and other receivables
(*) Include fees related to the 2013 IPO process.
Deferred income tax assets
Inventories
Non-audit services relates to tax services for US$ 281,000 (US$ 292,000 in
Borrowings
-
Trade payables and other debt
(20,487)
2013 and US$ 121,000 in 2012) and due diligence, consultancy fees and other
Provision for other
services for US$ 545,000 (US$ 45,000 in 2013 and US$ 592,000 in 2012).
long-term liabilities
79,630
79,630
976
73,791
4,402
5,640
10,344
10,596
32,243
32,243
5,594
111,873
111,873
6,570
37,182
110,973
4,098
2,983
5,262
1,612
(11,981)
(1,368)
8,500
8,623
15,606
12,208
(32,468)
(1,368)
(5,632)
79,630
(2,738)
(8,370)
40,644
120,274
-
8,401
8,401
Total identifiable net assets
Bargain purchase gain on
acquisition of subsidiaries(1)
Note 34
Business transactions
a. Colombia
Acquisitions in Colombia
On 14 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”).
(1) The bargain purchase gain is related to the fact that the Company
paid a full market price for the proved reserves but received a discount on
the probable and possible reserves and resource base acquired due to
the vendor’s limited ability to fund the future development of these assets.
The purchase price allocation above mentioned is final.
For accounting purposes, these acquisitions were computed as if they
Acquisition-related costs have been charged to administrative expenses in
had occurred on 1 February 2012.
the consolidated income statement for the year ended 31 December 2012.
On 27 March 2012, a second acquisition occurred with the purchase of
New exploratory license: VIM-3 Block
Hupecol Cuerva LLC (“Hupecol”), a privately-held company with two
GeoPark expanded in Colombia through the award of a new exploratory
exploration and production blocks in Colombia. For accounting purposes,
license during the 2014 Colombia Bidding Round, carried out by the Agencia
this acquisition was computed as if it had occurred on 1 April 2012.
Nacional de Hidrocarburos (“ANH”) on 23 July 2014 in Cartagena, Colombia.
Under the terms of the sale and purchase agreement entered into in 2012 in
GeoPark was awarded the VIM-3 Block in the Lower Magdalena Basin,
respect of the acquisition of Winchester Luna, the Company has to make
covering an area of approximately 225,000 acres. The block has an attractive
certain payments to the former owners arising from the production and sale
oil and gas exploration potential in a large area within a proven hydrocarbon
of hydrocarbons discovered by exploration wells drilled after 25 October 2011
system, surrounded by existing oil and gas fields and with sparse exploration
on the working interests of the companies at that date. These payments
activity carried out to date.
224 GeoPark 20F
224 GeoPark 20F
224 GeoPark 20F
GeoPark’s winning bid consisted of committing to a minimum investment
During 2012, LGI also joined GeoPark’s operations in Colombia through the
program of 200 sq km of 2D seismic and drilling one exploration well,
acquisition of 20% interest in Colombian Business. In addition, LGI committed
with a total estimated investment of US$ 22.2 million during the initial three
to fund Colombian operations through the granting of loans.
year exploratory period and a Royalty X Factor of 3% (see Note 31). GeoPark
will operate and have a 100% working interest in the block.
In addition, in March 2013 GeoPark and LGI announced their agreement
to extend their strategic alliance to build a portfolio of upstream oil and gas
New exploratory license: CPO-4 Block
assets throughout Latin America through 2015.
On 4 November 2014, the Company expanded its operations in Colombia
with the addition of the CPO-4 Block to its portfolio through a partnership
c. Brazil
agreement with SK Innovation (subsidiary of SK Group, the Korean
integrated energy and petrochemical company).
Acquisition in Brazil
GeoPark entered into Brazil with the acquisition of a 10% working interest
The CPO-4 Block is an attractive high potential block on trend with GeoPark’s
in the offshore Manatí gas field (“Manatí Field”), the largest natural gas
successful Llanos 34 Block in the Llanos Basin (approximately 60 km away).
producing field in Brazil. On 14 May, 2013, GeoPark executed a stock purchase
The CPO-4 Block covers an area of approximately 345,600 acres (1,398 sq km)
agreement (“SPA”) with Panoro Energy do Brazil Ltda., the subsidiary of
with 3D seismic coverage of approximately 880 sq km and sparse drilling
Panoro Energy ASA, (“Panoro”), a Norwegian listed company with assets in
activity (with only 4 wells drilled to date). SK and GeoPark have jointly
Brazil and Africa, to acquire all of the issued and outstanding shares of its
identified new prospects in CPO-4 similar to prospects and leads in GeoPark’s
wholly-owned Brazilian subsidiary, Rio das Contas Produtora de Petróleo Ltda
Llanos 34 Block where GeoPark has successfully discovered oil.
(“Rio das Contas”), the direct owner of 10% of the BCAM-40 Block (the
“Block”), which includes the shallow-depth offshore Manatí Field in the
In accordance with the farm-in agreement, and subject to the approval of
Camamu-Almada Basin.
Agencia Nacional de Hidrocarburos (ANH) in Colombia, GeoPark will operate
and receive a 50% working interest (WI) in the CPO-4 Block in exchange for
GeoPark has paid a cash consideration of US$ 140 million at 31 March 2014
its commitment to drill and fund its 50% WI (with no carry) of one exploration
or the closing date, which was adjusted for working capital with an effective
well. GeoPark’s total financial commitment is approximately $6.0 million
date of 30 April 2013. The agreement also provides for possible future
(see Note 31). There is an option to move to an additional exploration phase
contingent payments by GeoPark over the next five years, depending on
following the drilling of a successful well.
the economic performance and cash generation of the block. The Company
Swap operation
On 29 July 2014, GeoPark’s Colombian subsidiary agreed to exchange its 10%
has estimated that there are no any future contingent payments at the
acquisition date and as of the date of these financial statements either.
non-operating economic interest in Arrendajo Block for additional interests
The Manatí Field is a strategically important, profitable upstream asset in
held by the counterpart in the Yamú Block (GeoPark operated) that includes
a 15% economic interest in all of the Yamú fields except for the Carupana
Brazil and currently provides approximately 50% of the gas supplied to
the northeastern region of Brazil and more than 75% of the gas supplied to
field, where the counterparty had a 25% economic interest. According to
Salvador, the largest city and capital of the northeastern state of Bahia.
the terms of the exchange, GeoPark received US$ 3.2 million in cash from the
The field is largely developed with existing producing wells and an extensive
exchange, adjusted by working capital. Following this transaction, GeoPark
pipeline, treatment and delivery infrastructure and is not expected to
will continue to be the operator and have a 79.5% interest in the Carupana
require significant future capital expenditures to meet current production
Field and 90% in Yamú and Potrillo Fields, all fields located in the Yamú Block.
estimates. Additional reserve development may be possible.
This transaction had no impact on the results of the Company.
b. LGI partnership
On 12 March 2010, LGI and the Company agreed to form a new strategic
the Brazilian national company, largest oil and gas operator in Brazil and
internationally-respected offshore operator. Other partners in the
partnership to jointly acquire and develop upstream oil and gas projects in
Block include Queiroz Galvao Exploração e Produção (45% working interest)
Latin America.
and Brasoil Manatí Exploração Petrolífera S.A. (10% working interest).
The Manatí Field is operated by Petrobras (35% working interest),
During 2011, GeoPark and LGI entered into several agreements through
In accordance with the acquisition method of accounting, the acquisition cost
which LGI acquires 20% interest in the Chilean Business of the Group.
was allocated to the underlying assets acquired and liabilities assumed
based primarily upon their estimated fair values at the date of acquisition.
GeoPark 20F 225
GeoPark 20F 225
GeoPark 20F 225
An income approach (being the net present value of expected future cash flows)
Round 12
was adopted to determine the fair values of the mineral interest. Estimates
On 28 November 2013, the ANP awarded GeoPark with two new concessions
of expected future cash flows reflect estimates of projected future revenues,
in a new international bidding round, Round 12.
production costs and capital expenditures based on our business model.
In Brazil, GeoPark Brazil is currently a party to a legal proceeding related to
The following table summarises the consideration paid, the fair value of assets
the concession agreement of Block PN-T-597 that the ANP initially awarded
acquired and liabilities assumed for the abovementioned transaction:
to GeoPark Brazil in the 12th oil and gas bidding round. As a result of a
Amounts in US$ '000
Total
by a Brazilian Federal Court against the ANP, the Federal Government and
Cash (including working capital adjustments)
140,100
GeoPark Brazil on 13 December 2013. Due to the injunction GeoPark
Total consideration
Cash and cash equivalents
140,100
25,133
Brazil could not proceed to execute the concession agreement, and cannot
do so until the injunction is lifted. According to the terms of the Court’s
Property, plant and equipment (including mineral interest)
112,847
injunction, the ANP will first need to take certain actions, such as conducting
class action filed by the Federal Prosecutor’s Office, an injunction was issued
Trade receivables
Prepayments and other receivables
Other financial assets
Deferred income tax liabilities
Trade and other payables
Provision for other long-term liabilities
Total identifiable net assets
9,757
5,945
studies that prove that drilling unconventional resources will not contaminate
the dams and aquifers in the region. On 21 February 2014, GeoPark Brazil
950
requested that the board of the ANP suspend the execution of the concession
(3,132)
(4,538)
(6,862)
agreement (which entails delivery of the financial guarantee and
performance guarantee and payment of the signing bonus) for six months
with a possible extension of an additional six months, or until a firm court
140,100
decision is reached that does not prevent GeoPark Brazil from entering into
the concession agreement. On 16 April 2014, the ANP’s Board enacted a
The purchase price allocation above mentioned is final. Acquisition-related
resolution stating that all proceedings related to the award of the concession
costs have been charged to administrative expenses in the consolidated
of Block PN-T-597 to GeoPark Brazil were suspended.
income statement for the year ended 31 December 2012.
The revenue included in the consolidated statement of comprehensive
d. Peru
income since acquisition date contributed by the acquired company was US$
35,621,000. The acquired company also contributed profit of US$ 18,952,000
Entry in Peru
The Company has executed a Joint Investment Agreement and Joint
over the same period.
Operating Agreement with Petróleos del Perú S.A. (“Petroperú”) to acquire an
interest in and operate the Morona Block located in northern Peru. GeoPark
Had Rio das Contas been consolidated from 1 January 2014 the consolidated
will assume a 75% working interest (“WI”) of the Morona Block, with
statement of income would show pro-forma revenue of US$ 440,298,000 and
profit of US$ 23,139,000.
Petroperú retaining a 25% WI. The transaction has been approved by the
Board of Directors of both Petroperú and GeoPark.
Round 11
On 14 May 2013, the Company has been awarded seven new licenses in the
The transaction is subject to customary conditions, certain license
modifications and a presidential decree. The transaction is expected to close
Brazilian Round 11 of which two are in the Reconcavo Basin in the State of
by the second half of 2015.
Bahia and five are in the Potiguar Basin in the State of Rio Grande do Norte.
The licensing round was organized by the ANP and all proceedings and bids
on the western side of the Marañón Basin, one of the most prolific
have been made public. On 17 September 2013, the winning bids were
hydrocarbon basins in Peru.
The Morona Block, also known as Lote 64, covers an area of 1.9 million acres
approved by the ANP.
For its winning bids on the seven blocks, GeoPark has committed to invest a
delineated by two wells (with short term tests of approximately 2,400 and
minimum of US$ 15.3 million (including bonus and work program
5,200 bopd of 35-36° API oil each) and by 3D seismic. In addition to the
commitment) during the first 3 years of the exploratory period (see Note 31).
Situche Central field, the Morona Block has a large exploration potential
The new blocks cover an area of approximately 54,850 acres.
with several high impact prospects and plays - with exploration resources
The Morona Block contains the Situche Central oil field, which has been
currently estimated to range from 200 to 600 mmbo.
226 GeoPark 20F
226 GeoPark 20F
226 GeoPark 20F
The Morona Block includes geophysical surveys of 2,783 km (2D seismic)
500,000 SCM/d (subject to certain exceptions based on methanol prices).
and 465 sq km (3D seismic), and an operating field camp and logistics
The amendment also provides for temporary DOP and TOP thresholds of
infrastructure. The expected work program and development plan for the
100% and 50%, respectively. As of 31 December 2013, the Company fulfilled
Situche Central oil field is to be completed in three stages.
the delivery volume commitment.
The goal of the initial stage will be to put the field into production through
On 1 April 2014, the Company and Methanex executed a fifth amendment
a long term test to help determine the most effective overall development
to the Gas Supply Agreement, valid until 30 April 2015, which extended the
plan and to begin to generate cash flow. This initial stage requires
fourth amendment conditions until 18 May 2014, and defined new conditions
an investment of approximately US$ 140 million to US$ 160 million and is
for the winter 2014 period (May 2014 to September 2014) and the post winter
expected to be completed within 18 to 24 months after closing. GeoPark
period (October 2014 to April 2015). During the winter 2014 period the
has committed to carry Petroperú during this initial phase. The subsequent
price was fixed on US$ 4.0 per mmbtu plus 50% of any price difference that
work program stages, which will be initiated once production has been
Methanex obtained if gas were delivered to third parties. For the post winter
established, are focused on carrying out the full development of the Situche
period the Company committed deliveries over 400,000 SCM/d, under the
Central field, including transportation infrastructure, and new exploration
same price conditions of the fourth amendment. The fifth amendment also
drilling of the block. Petroperú will also have the right to increase its WI
waived the DOP and TOP thresholds for both parties, replacing them by
in the block up to 50%, subject to GeoPark recovering its investments in the
reasonable efforts to deliver and take, and giving GeoPark’s gas first priority
block by certain agreed factors.
over any third party supplies to Methanex.
GeoPark has already been qualified as an Operator by Perupetro, the Peruvian
petroleum licensing agency.
Note 36
Note 35
Agreement with Methanex
Strategic alliance with Tecpetrol in Brazil
On 30 September 2013, the Company and Tecpetrol S.A. (“Tecpetrol”)
announced the formation of a new strategic alliance to jointly identify,
study and potentially acquire upstream oil and gas opportunities in Brazil,
The Company has signed a long-term Gas Supply Contract with Methanex
with a specific focus on the Parnaiba, Sao Francisco, Reconcavo, Potiguar
in Chile, which expires in 2017.
and Sergipe-Alagoas basins.
In March 2012, the Company and Methanex signed a third addendum and
Tecpetrol is the oil and gas subsidiary of the Techint Group (a multinational
amendment to the Gas Supply Agreement to promote the development
oilfield and steel conglomerate) with an extensive track-record as an
of gas reserves. Through this new agreement, the Company completed
oil and gas explorer and operator with its portfolio of assets currently in
the drilling of five new gas wells during 2012. Methanex contributed to the
cost of drilling the wells in order to improve the project economics. The
Argentina, Peru, Colombia, Ecuador, Mexico, Bolivia, Venezuela and
the United States, and with a current net production of over 85,000 barrels
Company fulfilled all the commitments under this agreement.
of oil equivalent per day.
The Agreement also included monthly commitments for delivering certain
At 31 December 2014, there is no accounting impact of the creation of
volumes of gas and in case of failure, the Company could satisfy the obligation
the alliance.
through future deliveries without penalty during a period of three months.
On 30 August 2013, the Company signed a fourth amendment to the
Note 37
Methanex Gas Supply Agreement, pursuant to which the Company
Oil industry situation and the impact on GeoPark’s operations
committed, for a period of six months commencing 15 September, 2013,
to deliver an increased volume, in a total amount of 400,000 SCM/d per
As a consequence of oil price crisis which started in the second half
month (subject to reduction for deliveries in excess of 200,000 SCM/d
of 2014 (WTI and Brent, the main international oil price markers, fell more
to Methanex or ENAP made between 29 April and 15 September, 2013),
than 40% between September 2014 and February 2015), the Company has
at an additional price per month of US$ 1.50 per mmbtu for volumes in
undertaken a decisive cost cutting program to ensure its ability to both
excess of 180,000 SCM/d, or an additional price per month of US$ 2.00 per
maximize the work program and preserve its liquidity. The main decisions
mmbtu in any month in which we were able to commit to deliver at least
within the mentioned program for 2015 include:
GeoPark 20F 227
GeoPark 20F 227
GeoPark 20F 227
- Reduction of its capital investment taking advantage of the discretionary
The main assumptions taken into account for the impairment tests for the
work programme.
blocks below mentioned were:
- Deferment of capital projects by regulatory authority and partner
agreement.
- The future oil prices have been calculated taking into consideration the oil
- Renegotiation and reduction of oil and gas service contracts, including
curves prices available in the market, provided by international advisory
drilling and civil work contractors, as well as transportation trucking and
companies, weighted through internal estimations in accordance with price
pipeline costs.
curves used by D&M;
- Operating cost improved efficiencies and temporary suspension of certain
- Three price scenarios were projected and weighted in order to minimize
marginal producing oil and gas fields.
misleading: low price, middle price and high price (see below table “Oil price
- Further cost reductions are expected to result from a general depreciation
of Latin American currencies (Colombian peso, Brazilian real, Chilean peso,
Argentine peso and Peruvian sol), in connection with operating and structure
scenarios”);
- The table “Oil price scenarios” was based on WTI future price estimations;
the Company adjusted this marker price on its model valuation to reflect
costs established in local currencies.
Note 38
the effective price applicable in each location (see Note 3 “Price risk”);
- The model valuation was based on the expected cash flow approach;
- The revenues were calculated linking price curves with levels of production
according to certified reserves (see below table “Oil price scenarios”);
Impairment test on Property, plant and equipment
- The levels of production have been linked to certified risked 1P, 2P and 3P
reserves (see Note 4);
Considering the scenario described in Note 37, the Company has addressed
- Production and structure costs were estimated considering internal
the process of evaluating the recoverability of its fixed assets affected by
historical data according to GeoPark’s own records and aligned to 2015
oil price drop. From an accounting point of view, this price drop constitutes
approved budget;
an impairment indicator according to IAS 36 and, consequently, it triggers
- The capital expenditures were estimated considering the drilling campaign
the need of assessing fair value of the assets involved against their carrying
necessary to develop the certified reserves;
amount.
- The assets subject to impairment test are the ones classified as Oil and Gas
properties and Production facilities and machinery;
The Management of the Company considers as Cash Generating Unit (CGU)
- The carrying amount subject to impairment test includes mineral interest;
each of the blocks in which the Group has working or economic interests.
- The income tax charges have considered future changes in the applicable
The blocks with no material investment on fixed assets or with operations
income tax rates (see Note 16).
that are not linked to oil prices were not subject to impairment test.
Table Oil price scenarios (*):
Year
2015
2016
2017
2018
2019
2020
Over 2021
Amounts in US$ per Bbl
Weighted market price
used for the
Low price (15%)
Middle price (60%)
High price (25%)
impairment test
46,0
51,8
61,0
64,0
66,0
67,0
67,0
56,8
67,1
75,0
75,0
85,0
95,0
100,0
72,0
81,0
81,0
90,0
100,0
100,0
100,0
59,0
68,3
74,4
77,1
85,9
92,1
96,6
(*) The percentages indicated between brackets represent the Company
estimation regarding each price scenario.
228 GeoPark 20F
228 GeoPark 20F
228 GeoPark 20F
Summary for Chilean blocks impairment:
Carrying amount
Block name
Flamenco
Campanario
Isla Norte
Fell
Working interest
(US$ million)
Impairment impact
Projections year end
Pre-tax discount rate
50%
50%
60%
100%
15,0
3,6
3,7
355,7
No
No
No
No
2024
2024
2024
2029
10.5%
10.5%
10.5%
10.5%
Summary for Colombian blocks impairment:
Working interest
(US$ million)
Impairment impact
Projections year end
Pre-tax discount rate
Carrying amount
Block name
Cuerva Block(1)
Llanos 17 Block
100%
36.84%
Yamu/Carupana Block
90% - 79.5%
Llanos 34 Block
Llanos 32 Block
45%
10%
68,0
6,0
17,0
77,0
9,0
Yes
No
No
No
No
2020
2016
2017
2022
2025
15.3%
15.3%
15.3%
15.3%
15.3%
(1) The Company recognized an impairment loss in Cuerva Block that
amounts to US$ 9,400,000; the carrying amount of the fixed assets related to
Cuerva Block after deduction of impairment loss amounts to US$ 59,600,000.
If the weighted market price used for the impairment test had been 5%
lower in each of the future years, with all other variables held constant, the
impairment loss would have been higher by approximately US$ 13,000,000.
Brazil segment did not present any impairment indicator as it produces
mainly gas, which price is established by a supply agreement; Peru
and Argentina segments have no associated assets subject to impairment.
GeoPark 20F 229
GeoPark 20F 229
GeoPark 20F 229
Note 39
Supplemental information on oil and gas activities (unaudited)
Table 1 - Costs incurred in exploration, property acquisitions and
development(1)
The following table presents those costs capitalized as well as expensed
The following information is presented in accordance with ASC No. 932
that were incurred during each of the years ended as of 31 December 2014,
“Extractive Activities - Oil and Gas”, as amended by ASU 2010 - 03 “Oil and
2013 and 2012. The acquisition of properties includes the cost of acquisition
Gas Reserves. Estimation and Disclosures”, issued by FASB in January 2010
of proved or unproved oil and gas properties. Exploration costs include
in order to align the current estimation and disclosure requirements with
geological and geophysical costs, costs necessary for retaining undeveloped
the requirements set in the SEC final rules and interpretations, published on
properties, drilling costs and exploratory well equipment. Development
December 31, 2008. This information includes the Company’s oil and gas
costs include drilling costs and equipment for developmental wells,
production activities carried out in Chile, Colombia, Brazil and Argentina.
the construction of facilities for extraction, treatment and storage of
hydrocarbons and all necessary costs to maintain facilities for the existing
developed reserves.
Amounts in US$ '000
Year ended 31 December 2014
Acquisition of properties
Proved
Unproved
Total property acquisition
Exploration
Development
Total costs incurred
Amounts in US$ '000
Year ended 31 December 2013
Acquisition of properties
Proved
Unproved
Total property acquisition
Exploration
Development
Total costs incurred
Amounts in US$ '000
Year ended 31 December 2012
Acquisition of properties
Proved
Unproved
Total property acquisition
Exploration
Development
Total costs incurred
Chile
Colombia
Argentina
Brazil
Total
-
-
-
84,251
82,742
166,993
-
-
-
14,114
55,336
69,450
-
-
-
(123)
126
3
112,646
-
112,646
12,004
1,052
125,702
112,646
-
112,646
110,246
139,256
362,148
Chile
Colombia
Argentina
Brazil
Total
-
-
-
91,140
61,748
152,888
-
-
-
47,668
37,983
85,651
-
-
-
(1,917)
124
(1,793)
-
-
-
1,702
-
1,702
-
-
-
138,593
99,855
238,448
Chile
Colombia
Argentina
Total
-
-
-
58,301
89,669
147,970
82,766
27,818
110,584
28,999
27,479
167,062
-
-
-
(1,602)
499
(1,103)
82,766
27,818
110,584
85,698
117,647
313,929
(1) Includes capitalised amounts related to asset retirement obligations.
230 GeoPark 20F
230 GeoPark 20F
230 GeoPark 20F
Table 2 - Capitalised costs related to oil and gas producing activities
The following table presents the capitalized costs as at 31 December 2014,
2013 and 2012, for proved and unproved oil and gas properties, and the
related accumulated depreciation as of those dates.
Amounts in US$ '000
At 31 December 2014
Proved properties
- Equipment, camps and other facilities
- Mineral interest and wells(1)
- Other uncompleted projects
Unproved properties
Gross capitalised costs
Accumulated depreciation(1)
Total net capitalised costs
Chile
Colombia
Argentina
Brazil
Total
81,998
426,638
37,902
113,403
659,941
(163,217)
496,724
28,805
227,755
20,204
18,176
294,940
(111,855)
183,085
843
4,849
-
-
5,692
(5,562)
130
-
90,705
1,053
8,865
100,623
(4,951)
95,672
111,646
749,947
59,159
140,444
1,061,196
(285,585)
775,611
(1) Includes capitalised amounts related to asset retirement obligations and impairment loss in Colombia for US$ 9.4 million.
Amounts in US$ '000
At 31 December 2013
Proved properties
- Equipment, camps and other facilities
- Mineral interest and wells(1)
- Other uncompleted projects
Unproved properties
Gross capitalised costs
Accumulated depreciation(1)
Total net capitalised costs
Chile
Colombia
Argentina
Brazil
Total
77,481
310,364
33,176
109,862
530,883
(127,447)
403,436
20,514
178,048
7,053
37,853
243,468
(60,150)
183,318
843
4,849
-
31
5,723
(5,470)
253
-
-
-
13
13
-
13
98,838
493,261
40,229
147,759
780,087
(193,067)
587,020
(1) Includes capitalised amounts related to asset retirement obligations.
Amounts in US$ '000
At 31 December 2012
Proved properties
- Equipment, camps and other facilities
- Mineral interest and wells(1)
- Other uncompleted projects
Unproved properties
Gross capitalised costs
Accumulated depreciation(1)
Total net capitalised costs
(1) Includes capitalised amounts related to asset retirement obligations.
Chile
Colombia
Argentina
Total
69,755
236,499
44,806
59,924
410,984
(98,161)
312,823
16,351
103,023
8,520
33,151
161,045
(20,917)
140,128
843
4,849
-
31
5,723
(5,414)
309
86,949
344,371
53,326
93,106
577,752
(124,492)
453,260
GeoPark 20F 231
GeoPark 20F 231
GeoPark 20F 231
Table 3 - Results of operations for oil and gas producing activities
The breakdown of results of the operations shown below summarises
revenues and expenses directly associated with oil and gas producing
activities for the years ended 31 December 2014, 2013 and 2012. Income tax
for the years presented was calculated utilizing the statutory tax rates.
Chile
Colombia
Argentina
Brazil
Total
145,720
246,085
(34,991)
(6,777)
(41,768)
(36,057)
(816)
-
(35,856)
31,223
(4,684)
26,539
(67,470)
(12,354)
(79,824)
(4,567)
(547)
(9,430)
(51,856)
99,861
(33,953)
65,908
1,308
(309)
(241)
(550)
123
-
-
(94)
787
(275)
512
35,621
428,734
(5,354)
(2,794)
(8,148)
(2,164)
(609)
-
(11,554)
13,146
(4,470)
8,676
(108,124)
(22,166)
(130,290)
(42,665)
(1,972)
(9,430)
(99,360)
145,017
(43,382)
101,635
Chile
Colombia
Argentina
Brazil
Total
157,491
179,324
(30,915)
(7,383)
(38,298)
(13,138)
(429)
(29,287)
76,339
(11,451)
64,888
(62,818)
(9,661)
(72,479)
(3,341)
(880)
(39,233)
63,391
(20,919)
42,472
1,538
(92)
(195)
(287)
1,928
(214)
(59)
2,906
(1,017)
1,889
-
-
-
-
(1,703)
-
-
(1,703)
579
(1,124)
338,353
(93,825)
(17,239)
(111,064)
(16,254)
(1,523)
(68,579)
140,933
(32,808)
108,125
Amounts in US$ '000
Year ended 31 December 2014
Net revenue
Production costs, excluding depreciation
- Operating costs
- Royalties
Total production costs
Exploration expenses(1)
Accretion expense(2)
Impairment loss for non-financial assets
Depreciation, depletion and amortization
Results of operations before income tax
Income tax
Results of oil and gas operations
Amounts in US$ '000
Year ended 31 December 2013
Net revenue
Production costs, excluding depreciation
- Operating costs
- Royalties
Total production costs
Exploration expenses
Accretion expense(2)
Depreciation, depletion and amortization
Results of operations before income tax
Income tax
Results of oil and gas operations
232 GeoPark 20F
232 GeoPark 20F
232 GeoPark 20F
Amounts in US$ '000
Year ended 31 December 2012
Net revenue
Production costs, excluding depreciation
Operating costs
Royalties
Total production costs
Exploration expenses
Accretion expense(2)
Depreciation, depletion and amortization
Results of operations before income tax
Income tax
Results of oil and gas operations
(1) Do not include Peru costs.
(2) Represents accretion of ARO liability.
Chile
Colombia
Argentina
Total
149,927
99,501
1,050
250,478
(30,586)
(7,088)
(37,674)
(22,080)
(265)
(28,120)
61,788
(9,268)
52,520
(35,069)
(4,164)
(39,233)
(5,528)
(803)
(20,964)
32,973
(10,881)
22,092
151
(172)
(21)
(282)
(194)
(3,223)
(2,670)
935
(1,735)
(65,504)
(11,424)
(76,928)
(27,890)
(1,262)
(52,307)
92,091
(19,214)
72,877
Table 4 - Reserve quantity information
The Company estimates its reserves at least once a year. The Company’s
Estimated oil and gas reserves
Proved reserves represent estimated quantities of oil (including crude oil
DeGolyer and MacNaughton Reserves Report (the “D&M Reserves Report”).
DeGolyer and MacNaughton prepared its proved oil and natural gas reserve
and condensate) and natural gas, which available geological and engineering
estimates in accordance with Rule 4-10 of Regulation S-X, promulgated by
data demonstrates with reasonable certainty to be recoverable in the future
the SEC, and in accordance with the oil and gas reserves disclosure provisions
from known reservoirs under existing economic and operating conditions.
of ASC 932 of the FASB Accounting Standards Codification (ASC) relating
Proved developed reserves are proved reserves that can reasonably be
to Extractive Activities-Oil and Gas (formerly SFAS no. 69 Disclosures about
reserves estimation as of 31 December 2014, 2013 and 2012 was based on the
expected to be recovered through existing wells with existing equipment
Oil and Gas Producing Activities).
and operating methods. The choice of method or combination of methods
employed in the analysis of each reservoir was determined by the stage
Reserves engineering is a subjective process of estimation of hydrocarbon
of development, quality and reliability of basic data, and production history.
accumulation, which cannot be accurately measured, and the reserve
The Company believes that its estimates of remaining proved recoverable
estimation depends on the quality of available information and the
interpretation and judgment of the engineers and geologists. Therefore,
oil and gas reserve volumes are reasonable and such estimates have been
the reserves estimations, as well as future production profiles, are often
prepared in accordance with the SEC Modernization of Oil and Gas Reporting
different than the quantities of hydrocarbons which are finally recovered.
rules, which were issued by the SEC at the end of 2008.
The accuracy of such estimations depends, in general, on the assumptions
on which they are based.
GeoPark 20F 233
GeoPark 20F 233
GeoPark 20F 233
The estimated GeoPark net proved reserves for the properties evaluated as
of 31 December 2014, 2013 and 2012 are summarised as follows, expressed
in thousands of barrels (Mbbl) and millions of cubic feet (MMcf):
Net proved developed
Chile(1)
Colombia(2)
Brazil(3)
Total consolidated
Net proved undeveloped
Chile(4)
Colombia(5)
Brazil(5)
Total consolidated
Total proved reserves
As of 31 December 2014
As of 31 December 2013
As of 31 December 2012
Oil and
Oil and
Oil and
condensate
Natural gas
condensate
Natural gas
condensate
Natural gas
(Mbbl)
(MMcf)
(Mbbl)
(MMcf)
(Mbbl)
(MMcf)
1,463.7
7,594.8
69.0
9,127.5
4,978.2
17,140.5
61.0
22,179.7
31,307.2
9,352.0
-
20,863.0
30,215.0
24,618.0
-
19,601.0
44,219.0
74,434.0
2,236.6
3,250.9
-
5,487.5
3,138.4
6,175.7
-
9,314.1
14,801.6
10,037.0
-
-
10,037.0
22,122.0
-
-
22,122.0
32,159.0
2,104.8
2,008.6
-
4,113.4
3,153.3
4,618.4
-
7,771.7
11,885.1
12,768.0
-
-
12,768.0
16,813.0
-
-
16,813.0
29,581.0
(1) Fell Block accounts for 92% of the reserves (100% in 2013 and 2012)
(LGI owns a 20% interest) and Flamenco Block accounts for 8%
(LGI owns 31.2% interest).
(2) Llanos 34 Block and Cuerva Block account for 79% and 17% (58% and 36%
in 2013 and 31% and 53% in 2012) of the proved developed reserves,
respectively (LGI owns a 20% interest).
(3) BCAM-40 Block accounts for 100% of the reserves.
(4) Fell Block accounts for 96% of the reserves (100% in 2013 and 2012)
(LGI owns a 20% interest), Flamenco Block accounts for 3% and Isla Norte
accounts for 1% (LGI owns 31.2% interest).
(5) Llanos 34 Block and Cuerva Block account for 91% and 7% (74% and 23%
in 2013 and 72% and 25% in 2012) of the proved undeveloped reserves,
respectively (LGI owns a 20% interest).
234 GeoPark 20F
234 GeoPark 20F
234 GeoPark 20F
Chile
5,254.1
(1,250.8)
2,670.0
-
(1,415.2)
5,258.1
271.1
1,431.0
(1,585.2)
5,375.0
124.9
2,314.0
-
(1,372.0)
6,441.9
Colombia
Brazil
-
-
-
7,522.8
(895.8)
6,627.0
(277.0)
5,210.0
(2,133.4)
9,426.6
2,489.7
16,477.0
-
(3,658.0)
24,735.3
-
-
-
-
-
-
-
-
-
-
-
-
150.0
(20.0)
130.0
Total
5,254.1
(1,250.8)
2,670.0
7,522.8
(2,311.0)
11,885.1
(5.9)
6,641.0
(3,718.6)
14,801.6
2,614.6
18,791.0
150.0
(5,050.0)
31,307.2
Table 5 - Net proved reserves of oil, condensate and natural gas
Net proved reserves (developed and undeveloped) of oil and condensate:
Thousands of barrels
Reserves as of 31 December 2011
Increase (decrease) attributable to:
Revisions(1)
Extensions and discoveries
Purchases of minerals in place
Production
Reserves as of 31 December 2012
Increase (decrease) attributable to:
Revisions
Extensions and discoveries(2)
Production
Reserves as of 31 December 2013
Increase (decrease) attributable to:
Revisions(3)
Extensions and discoveries(4)
Purchases of minerals in place (Note 34)
Production
Reserves as of 31 December 2014
(1) The revisions are mainly related to condensate from the reduced gas
and two fields in the Fell Block (Copihue and Guanaco) where there were
reductions in proved recovery based on performance.
(2) Mainly due to 2013 discoveries in Llanos 34 (Taro Taro, Tigana and
Tigana Sur) and Yamú (Potrillo).
(3) In Chile, the revisions are mainly due to Field’s performance in Fell and
TdF Blocks. In Colombia, the revisions are mainly due to the performance
of Tua Field and secondly to the performance of Max and Taro-taro Fields in
Llanos 34 Block.
(4) In Chile, the discoveries mainly due to Loij Field discovery and
Konawentru Field extensions. In Colombia, the discoveries mainly due to
Tigana Field extensions wells and Aruco Field discovery in Llanos 34 Block.
GeoPark 20F 235
GeoPark 20F 235
GeoPark 20F 235
Net proved reserves (developed and undeveloped) of natural gas:
Millions of cubic feet
Reserves as of 31 December 2011
Increase (decrease) attributable to:
Revisions(1)
Extensions and discoveries
Purchases
Production
Reserves as of 31 December 2012
Increase (decrease) attributable to:
Revisions(2)
Extensions and discoveries
Production
Reserves as of 31 December 2013
Increase (decrease) attributable to:
Revisions(3)
Extensions and discoveries(4)
Purchases of minerals in place (Note 34)
Production
Reserves as of 31 December 2014
Chile
57,157.0
(21,860.0)
2,256.0
-
(7,972.0)
29,581.0
4,691.0
2,219.0
(4,332.0)
32,159.0
3,312.0
3,014.0
-
(4,515.0)
33,970.0
Brazil
-
-
-
-
-
-
-
-
-
-
-
-
47,680.0
(7,216.0)
40,464.0
Total
57,157.0
(21,860.0)
2,256.0
-
(7,972.0)
29,581.0
4,691.0
2,219.0
(4,332.0)
32,159.0
3,312.0
3,014.0
47,680.0
(11,731.0)
74,434.0
(1) The revisions are mainly due to the effect of having reduced the
(3) The revisions are mainly due to Chercán Field development in TdF Block
Company’s future gas production profile in Chile because of expected
and gas and associated gas performance/development in Fields of Fell Block.
reduced deliveries to the Methanex plant. This causes a significant
(4) Mainly due to the Ache Field discovery and the associated gas from
portion of the gas reserves to be produced below an economic level later
Konawentru extensions wells.
in the productive life of the Fell Block and after the expiration of the
Methanex Gas Supplies Agreement.
Revisions refer to changes in interpretation of discovered accumulations
(2) The revisions are mainly due to adjustments in the Fell Block as a
and some technical/logistical needs in the area obliged to modify
response to a workover in Monte Aymond field, and associated gas from
the timing and development plan of certain fields under appraisal and
drilling campaigns in Konawentru and Yagán Norte fields.
development phases.
236 GeoPark 20F
236 GeoPark 20F
236 GeoPark 20F
Table 6 - Standardized measure of discounted future net cash flows related to
This standardized measure is not intended to be and should not be interpreted
proved oil and gas reserves
as an estimate of the market value of the Company’s reserves. The purpose
The following table discloses estimated future net cash flows from future
of this information is to give standardized data to help the users of the financial
production of proved developed and undeveloped reserves of crude oil,
statements to compare different companies and make certain projections.
condensate and natural gas. As prescribed by SEC Modernization of
It is important to point out that this information does not include, among other
Oil and Gas Reporting rules and ASC 932 of the FASB Accounting Standards
items, the effect of future changes in prices, costs and tax rates, which past
Codification (ASC) relating to Extractive Activities - Oil and Gas (formerly SFAS
experience indicates that are likely to occur, as well as the effect of future cash
no. 69 Disclosures about Oil and Gas Producing Activities), such future net cash
flows from reserves which have not yet been classified as proved reserves,
flows were estimated using the average first day- of-the-month price during
of a discount factor more representative of the value of money over the
the 12-month period for 2014, 2013 and 2012 and using a 10% annual discount
lapse of time and of the risks inherent to the production of oil and gas. These
factor. Future development and abandonment costs include estimated
future changes may have a significant impact on the future net cash flows
drilling costs, development and exploitation installations and abandonment
disclosed below. For all these reasons, this information does not necessarily
costs. These future development costs were estimated based on evaluations
indicate the perception the Company has on the discounted future net cash
made by the Company. The future income tax was calculated by applying
flows derived from the reserves of hydrocarbons.
the statutory tax rates in effect in the respective countries in which we have
interests, as of the date this supplementary information was filed.
Amounts in US$ '000
At 31 December 2014
Future cash inflows
Future production costs
Future development costs
Future income taxes
Undiscounted future net cash flows
10% annual discount
Standardized measure of discounted future net cash flows
At 31 December 2013
Future cash inflows
Future production costs
Future development costs
Future income taxes
Undiscounted future net cash flows
10% annual discount
Standardized measure of discounted future net cash flows
At 31 December 2012
Future cash inflows
Future production costs
Future development costs
Future income taxes
Undiscounted future net cash flows
10% annual discount
Standardized measure of discounted future net cash flows
Chile
Colombia
Brazil
Total
778,820
(250,529)
(184,352)
(54,442)
289,497
(61,839)
227,658
610,106
(164,820)
(215,426)
(38,599)
191,261
(27,401)
163,860
568,647
(135,525)
(149,100)
(44,218)
239,804
(37,355)
202,449
1,732,395
(587,096)
(100,036)
(303,090)
742,173
(158,102)
584,071
686,227
(274,246)
(82,964)
(118,104)
210,913
(37,121)
173,792
491,578
(181,780)
(45,966)
(98,773)
165,059
(31,414)
133,645
307,535
(124,265)
(19,965)
(19,566)
143,739
(31,594)
112,145
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,818,750
(961,890)
(304,353)
(377,098)
1,175,409
(251,535)
923,874
1,296,333
(439,066)
(298,390)
(156,703)
402,174
(64,522)
337,652
1,060,225
(317,305)
(195,066)
(142,991)
404,863
(68,769)
336,094
GeoPark 20F 237
GeoPark 20F 237
GeoPark 20F 237
Chile
285,603
(110,331)
45,100
(73,255)
108,768
57,055
(174,757)
-
23,250
36,215
4,801
202,449
(128,993)
(4,925)
(118,760)
63,948
83,983
37,389
4,102
24,667
163,860
(110,451)
18,310
(134,272)
96,614
157,988
25,114
(9,751)
-
20,246
227,658
Colombia
-
(10,015)
-
-
-
-
-
143,660
-
-
-
133,645
(118,417)
4,754
(68,337)
186,738
39,922
(9,928)
(17,827)
23,242
173,792
(208,337)
19,215
(51,176)
600,391
59,272
103,411
(141,687)
-
29,190
584,071
Brazil
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(39,414)
7,409
(22,143)
-
1,340
1,559
4,156
142,423
16,815
112,145
Total
285,603
(120,346)
45,100
(73,255)
108,768
57,055
(174,757)
143,660
23,250
36,215
4,801
336,094
(247,410)
(171)
(187,097)
250,686
123,905
27,461
(13,725)
47,909
337,652
(358,202)
44,934
(207,591)
697,005
218,600
130,084
(147,282)
142,423
66,251
923,874
Table 7 - Changes in the standardized measure of discounted future net cash
flows from proved reserves
Amounts in US$ '000
Present value at 31 December 2011
Sales of hydrocarbon, net of production costs
Net changes in sales price and production costs
Changes in estimated future development costs
Extensions and discoveries less related costs
Development costs incurred
Revisions of previous quantity estimates
Purchase of minerals in place
Net changes in income taxes
Accretion of discount
Other changes
Present value at 31 December 2012
Sales of hydrocarbon, net of production costs
Net changes in sales price and production costs
Changes in estimated future development costs
Extensions and discoveries less related costs
Development costs incurred
Revisions of previous quantity estimates
Net changes in income taxes
Accretion of discount
Present value at 31 December 2013
Sales of hydrocarbon, net of production costs
Net changes in sales price and production costs
Changes in estimated future development costs
Extensions and discoveries less related costs
Development costs incurred
Revisions of previous quantity estimates
Net changes in income taxes
Purchase of minerals in place
Accretion of discount
Present value at 31 December 2014
238 GeoPark 20F
238 GeoPark 20F
238 GeoPark 20F
Exhibit 12.1
Exhibit 12.2
CERTIFICATION BY THE PRINCIPAL EXECUTIVE OFFICER PURSUANT TO
CERTIFICATION BY THE PRINCIPAL FINANCIAL OFFICER
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, James F. Park, certify that:
I, Andrés Ocampo, certify that:
1. I have reviewed this annual report on Form 20-F of GeoPark Limited;
1. I have reviewed this annual report on Form 20-F of GeoPark Limited;
2. Based on my knowledge, this report does not contain any untrue statement
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the company
financial condition, results of operations and cash flows of the company as of,
as of, and for, the periods presented in this report;
and for, the periods presented in this report;
4. The company’s other certifying officer(s) and I are responsible for
4. The company’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a 15(f) and 15d 15(f))
financial reporting (as defined in Exchange Act Rules 13a 15(f) and 15d 15(f))
for the company and have:
for the company and have:
a. Designed such disclosure controls and procedures, or caused such
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
disclosure controls and procedures to be designed under our supervision, to
to ensure that material information relating to the company, including its
ensure that material information relating to the company, including
consolidated subsidiaries, is made known to us by others within those
its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such
b. Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial
to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes
reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles;
in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the company’s disclosure controls and
c. Evaluated the effectiveness of the company’s disclosure controls and
procedures and presented in this report our conclusions about the
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
effectiveness of the disclosure controls and procedures, as of the end of
period covered by this report based on such evaluation; and
the period covered by this report based on such evaluation; and d. Disclosed
d. Disclosed in this report any change in the company’s internal control over
in this report any change in the company’s internal control over financial
financial reporting that occurred during the period covered by the annual
reporting that occurred during the period covered by the annual report that
report that has materially affected, or is reasonably likely to materially affect,
has materially affected, or is reasonably likely to materially affect, the
the company’s internal control over financial reporting; and
5. The company’s other certifying officer(s) and I have disclosed, based on
company’s internal control over financial reporting; and
5. The company’s other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
our most recent evaluation of internal control over financial reporting, to the
to the company’s auditors and the audit committee of the company’s board
company’s auditors and the audit committee of the company’s board of
of directors (or persons performing the equivalent functions):
directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or
a. All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
operation of internal control over financial reporting which are reasonably
likely to adversely affect the company’s ability to record, process,
likely to adversely affect the company’s ability to record, process, summarize
summarize and report financial information; and
and report financial information; and
b. Any fraud, whether or not material, that involves management or other
b. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the company’s internal control over
employees who have a significant role in the company’s internal control over
financial reporting.
Date: April 30, 2015
/s/ James F. Park
James F. Park
Chief Executive Officer
(Principal Executive Officer)
financial reporting.
Date: April 30, 2015
/s/ Andrés Ocampo
Andrés Ocampo
Chief Financial Officer
(Principal Financial Officer)
GeoPark 20F 239
GeoPark 20F 239
GeoPark 20F 239
Exhibit 13.1
Exhibit 13.2
CERTIFICATION BY THE PRINCIPAL EXECUTIVE OFFICER
CERTIFICATION BY THE PRINCIPAL FINANCIAL OFFICER
PURSUANT TO18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The certification set forth below is being submitted in connection with the
The certification set forth below is being submitted in connection with the
Annual Report on Form 20-F of GeoPark Limited (the “Company”) for the
Annual Report on Form 20-F of GeoPark Limited (the “Company”) for the
fiscal year ended December 31, 2014 (the “Report”), I, James F. Park, certify
fiscal year ended December 31, 2014 (the “Report”), I, Andrés Ocampo, certify
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
1. the Report fully complies with the requirements of Section 13(a) or 15(d)
1. the Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
of the Securities Exchange Act of 1934; and
2. the information contained in the Report fairly presents, in all material
2. the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
respects, the financial condition and results of operations of the Company.
Date: April 30, 2015
/s/ James F. Park
James F. Park
Chief Executive Officer
(Principal Executive Officer)
Date: April 30, 2015
/s/ Andrés Ocampo
Andrés Ocampo
Chief Financial Officer
(Principal Financial Officer)
240 GeoPark 20F
GeoPark 20F 241
242 GeoPark 20F
Designed by:
Chiappini + Becker
Tel. +54 11 4314 7774
www.ch-b.com
Photographer:
Diego Dicarlo, Geologist
GeoPark 20F 243
Directors, Secretary & Advisors
Gerald E. O’Shaughnessy (Chairman)
James F. Park (Chief Executive Officer and Deputy Chairman)
Peter Ryalls (Non-Executive Director)
Juan Cristóbal Pavez (Non-Executive Director)
Carlos Gulisano (Non-Executive Director)
Bob Bedingfield (Non-Executive Director)
Pedro Aylwin (Executive Director)
Cumberland House 9th Floor,
1 Victoria Street
Hamilton HM11 - Bermuda
Buenos Aires Office
Florida 981 - 1st Floor
C1005AAS Buenos Aires
Argentina | + 54 11 4312 9400
Santiago Office
Nuestra Señora de los Ángeles 176
7550000 Las Condes, Santiago
Chile | + 56 2 242 9600
Pedro Aylwin
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, NY 10017
USA
Cox Hallett Wilkinson
Cumberland House 9th Floor,
1 Victoria Street
Hamilton HM11 - Bermuda
P.O. Box HM 1561
Hamilton HMFX - Bermuda
Price Waterhouse & Co. S.R.L.
Bouchard 557, 8th Floor
Buenos Aires
Argentina
DeGolyer and MacNaughton
5001 Spring Valley Road Suite 800 East
Dallas, Texas 75244
USA
Computershare Investor Services
480 Washington Blvd.
Jersey City, NJ 07310
USA
Directors
Registered Office
Corporate Offices
Director of Legal and
Governance and
Corporate Secretary
Counsel to the Company
as to New York Law
Solicitors to the Company
as to Bermuda Law
Independent Auditors
Petroleum Consultant
Registrar & Transfer Agent
244
Peter Ryalls | Non-Executive Director
Mr. Ryalls has been a member of our board of directors since April 2006.
He holds a master’s degree in petroleum engineering from imperial
College in London. Mr. Ryalls has worked for schlumberger Limited in
Angola, Gabon and Nigeria, as well as for Mobil North sea. He has also
worked for Unocal Corporation where he held increasingly senior
positions, including as Managing director in Aberdeen, scotland, and
where he developed extensive experience in offshore production and
drilling operations. in 1994, Mr. Ryalls represented Unocal Corporation in
the Azerbaijan international Operating Company as Vice President of
Operations and was responsible for production, drilling, reservoir
engineering and logistics. in 1998, Mr. Ryalls became General Manager
for Unocal in Argentina. He also served as Vice President of Unocal’s Gulf
of Mexico onshore oil and gas business and as Vice President of Global
Engineering and Construction, where he was responsible for the
implementation of all major capital projects ranging from deep water
developments in indonesia and the Gulf of Mexico to conventional oil
and gas projects in Thailand. Mr. Ryalls is also an independent petroleum
consultant advising on international oil and gas development projects
both onshore and offshore.
Bob Bedingfield | Non-Executive Director
Mr. Bedingfield is a qualified sEC financial expert and has assumed the
role of Chairman of GeoPark’s Audit Committee. Until his retirement in
June 2013, Mr. Bedingfield was one of Ernst & Young’s most senior
Global Lead Partners with more than 40 years of experience, including
32 years as a partner in Ernst & Young's accounting and auditing
practices, as well as serving on Ernst & Young’s senior Governing Board.
He has extensive experience serving Fortune 500 companies; including
acting as Lead Audit Partner or senior Advisory Partner for Lockheed
Martin, AEs, Gannett, General dynamics, Booz Allen Hamilton, Marriott
and the Us Postal service. since 2000, Mr. Bedingfield has been a
Trustee, an Executive Committee Member, and the Audit Committee
Chair of the University of Maryland at College Park Board of Trustees.
Mr. Bedingfield served on the National Executive Board (1995 to 2003)
and National Advisory Council (since 2003) of the Boy scouts of America.
He also served on the Board of Governors of the Congressional Country
Club in Bethesda, Maryland. since 2013, Mr. Bedingfield has also served
as Board Member and Chairman of the Audit Committee of NYsE-listed
science Applications international Corp (sAiC).
James F. Park | Chief Executive Officer and Deputy Chairman
Mr. Park has served as our Chief Executive Officer and as a member of
our board of directors since co-founding the Company in 2002. He has
extensive 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 in North America, south
America, Asia, Europe and the Middle East. He holds a degree in
geophysics from the University of California at Berkeley and has worked
as a research scientist in earthquake and tectonic studies. in 1978,
Mr. Park joined Basic Resources international Limited, an oil and gas
exploration company, which pioneered the development of commercial
oil and gas production in Central America. As a senior executive of
Basic Resources international Limited, Mr. Park was closely involved in
the development of grass-roots exploration activities, drilling and
production operations, surface and pipeline construction and crude oil
marketing and transportation, legal and regulatory issues, and raising
substantial investment funds. He remained a member of the board of
directors of Basic Resources international Limited until the company was
sold in 1997. Mr. Park is also a member of the board of directors of
Energy Holdings. Mr. Park has also been involved in oil and gas projects
in California, Louisiana, Argentina, Yemen and China. Mr. Park has
lived in Argentina and Chile since 2002.
Board of directors
Gerald E. O’Shaughnessy | Chairman
Mr. O’shaughnessy has been our Chairman and a member of our board
of directors since he co-founded the company in 2002. Following his
graduation from the University of Notre dame with degrees in
government (1970) and law (1973), Mr. O’shaughnessy was engaged
in the practice of law in Minnesota. Mr. O’shaughnessy has been active
in the oil and gas business over his business career, starting in 1976 with
Lario Oil and Gas Company, where he served as senior Vice President
and General Counsel. He later formed the Globe Resources Group, a
private venture firm whose subsidiaries provided seismic acquisition
and processing, well rehabilitation services, sophisticated logistical
operations and submersible pump works for Lukoil in Russia during the
1990s. in 2010 Mr. O’shaughnessy founded Lario Logistics, a U.s.
midstream company which owns and operates the Bakken Oil Express,
serving oil producers and service providers in the Bakken Oil play. in
addition to his oil and gas activities Mr. O’shaughnessy is also engaged
in investments in banking, wealth management, desktop software,
computer and network security, and green clean technology. Over the
past 25 years, Mr. O’shaughnessy has also served on a number of
non-profit boards of directors, including the Board of Economic Advisors
to the Governor of Kansas, the i.A. O’shaughnessy Family Foundation,
the Wichita Collegiate school, the institute for Humane studies, The
East West institute and The Bill of Rights institute. Mr. O’shaughnessy is
a member of the intercontinental Chapter of Young Presidents
Organization and World Presidents’ Organization.
Pedro Aylwin | Executive Director
Mr. Aylwin has served as a member of our board of directors since July
2013 and as our director of Legal and Governance since April 2011.
From 2003 to 2006, Mr. Aylwin worked for GeoPark as an advisor on
governance and legal matters. Mr. Aylwin holds a degree in law from
the Universidad de Chile and an LLM from the University of Notre dame.
Mr. Aylwin has extensive experience in the natural resources sector.
Mr. Aylwin is also a partner at the law firm of Aylwin Abogados in
santiago, Chile, where he represented mining, chemical and oil and gas
companies in numerous transactions. From 2006 until 2011, he served
as Lead Manager and General Counsel at BHP Billiton, Base Metals,
where he was in charge of legal and corporate governance matters on
BHP Billiton’s projects, operations and natural resource assets in
south America, North America, Asia, Africa and Australia. Mr. Aylwin is
also a member of the board of directors of Egeda España.
Carlos Gulisano | Non-Executive Director
Mr. Gulisano has been a member of our board of directors since June
2010. dr. Gulisano holds a bachelor’s degree in geology, a post-graduate
degree in petroleum engineering and a Phd in geology from the
University of Buenos Aires and has authored or 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 is a respected leader in the fields of
petroleum geology and geophysics in south America and has over
30 years of successful exploration, development and management
experience in the oil and gas industry. in addition to serving as an
advisor to GeoPark since 2002 and as Managing director from February
2008 until June 2010, dr. Gulisano has worked for YPF, Petrolera
Argentina san Jorge s.A. and Chevron san Jorge s.A. and has led teams
credited with significant oil and gas discoveries, including those in the
Trapial field in Argentina. He has worked in Argentina, Bolivia,
Peru, Ecuador, Colombia, Venezuela, Brazil, Chile and the United states.
Mr. Gulisano is also an independent consultant on oil and gas
exploration and production.
Juan Cristóbal Pavez | Non-Executive Director
Mr. Pavez has been a member of our board of directors since August
2008. He holds a degree in commercial engineering from the Pontifical
Catholic University of Chile and a MBA from the Massachusetts institute
of Technology. He has worked as a research analyst at Grupo CB and
later as a portfolio analyst at Moneda Asset Management. in 1998, he
joined santana, an investment company, as Chief Executive Officer.
At santana he focused mainly on investments in capital markets and
real estate. While at santana, he was appointed Chief Executive Officer
of Laboratorios Andrómaco, one of santana’s main assets. in 1999,
Mr. Pavez cofounded Eventures, an internet company. since 2001, he
has served as Chief Executive Officer at Centinela, a company with a
diversified global portfolio of 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 Hidroeléctrica Totoral. Over the
last few years he has been a board member of several companies,
including Quintec, Enaex, CTi and Frimetal.
ANNUAL REPORT 2014
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