Geopark Ltd
Annual Report 2016

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ANNUAL REPORT 2016 6 1 0 2 T R O P E R L A U N N A k r a P o e G ANNUAL REPORT 2016 WWW.GEO-PARK.COM EXPLORER OPERATOR CONSOLIDATOR CORPORATE MANAGEMENT TEAM JAMES F. PARK Chief Executive Officer AUGUSTO ZUBILLAGA Chief Operating Officer ANDRÉS OCAMPO Chief Financial Officer PEDRO E. AyLWIN Legal & Governance MARCELA vACA Colombia ALBERTO MATAMOROS Argentina, Brazil & Chile BARBARA BRUCE Peru SALvADOR MINNITI Exploration CARLOS MURUT Reserves & Development JUAN CARLOS FERRERO Operations HORACIO FONTANA Drilling & Workovers AGUSTINA WISKy Performance GUILLERMO PORTNOI New Business STACy STEIMEL Shareholder value SECRETARy & ADvISORS Registered Office Cumberland House 9th floor, Counsel to the Company Davis Polk & Wardwell LLP Corporate Offices 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 Las Condes, Santiago Chile | + 56 2 242 9600 Bogota Office Street 94 N° 11-30, 8, 9, 10th floor Colombia | +57 1 743 2337 Corporate Secretary Pedro E. Aylwin as to New York Law 450 Lexington Avenue New york, Ny 10017 USA Solicitors to the Company Cox Hallett Wilkinson as to Bermuda Law Cumberland House 9th floor, 1 victoria Street Hamilton HM11 - Bermuda P.O. Box HM 1561 Hamilton HMFX - Bermuda Independent Auditors Price Waterhouse & Co. S.R.L. Bouchard 557, floor 8 Buenos Aires Argentina Petroleum Consultant DeGolyer and MacNaughton 5001 Spring valley Road Suite 800 East Dallas, Texas 75244 USA Registrar Computershare Investor Services Queensway House 480 Washington Blvd. Jersey City, NJ 07310 CONTENTS 4 12 18 20 22 24 Letter to Shareholders Business Approach and Guidelines 2016 Performance Our Strengths Our Approach Our value System 27 Form 20-F 150 Consolidated Financial Statements 204 Board of Directors 205 Corporate Management Team, Secretary & Advisors Casanare Department, Colombia BOTTOM LINE Oil and Gas Production 20 15 10 5 0 ) d / e o b M ( n o i t c u d o r P y l i a D e g a r e v A 2011 2012 2013 2014 2015 2016 Oil Gas Oil and Gas Reserves 120 90 60 30 0 ) e o b M M ( h t w o r G s e v r e s e R P 2 2011 2012 2013 2014 2015 2016 Oil Gas “In 2016 we discovered and produced more oil and gas. We increased our efficiency and did more for less. We generated more cash and strengthened our balance sheet. We became a better and more capable organization. We grew total Company value and the underlying value of every share owned by our shareholders. We again extended our leading 10+ year growth track record. And, we positioned GeoPark for an even more exciting year to come in 2017.” 2 Annual Report 2016 Magallanes Region, Chile 4 Annual Report 2016 / Letter to Shareholders Jacana Field, Llanos 34 Block, Colombia LETTER TO SHAREHOLDERS Dear Fellow Shareholders: We are pleased to report that the GeoPark team again delivered • More opportunities: New business and new project inventory growth in 2016 – keeping our durable 15 year growth track record expanded to over $2 billion of potential projects in Colombia, Brazil, marching on. Despite some ground-scraping world oil prices, we Argentina, Peru and Mexico – with a strong focus on initiatives with finished the year as a better, more capable, stronger, and more national oil companies (NOCs) across Latin America. valuable Company than we were the year before. Bottom-line, GeoPark’s successful 2016 results include: foundation and tools for building GeoPark. Our high quality Our conservative long term approach has created the necessary • More oil and gas: Production increased 10% to a record 22,400 operational know-how, and capital allocation agility, coupled with boepd with an exit production of 24,400 boepd. Total certified our exceptional cost efficiency, allow GeoPark to permanently adapt proven and probable (2P) reserves increased by 14% to 142.8 million to and thrive in a world of lower oil prices. assets, risk-balanced platform across the region, financial stability, boe. In Colombia, production increased by 17% and 2P reserves increased by 45% resulting from the continuing extension of the large Tigana/Jacana oil field complex. People Great people create great results. So we please want to begin by • More efficiencies / less costs: Industry-leading finding and thanking and recognizing the men and women in GeoPark who development costs of $1.7 per boe (consolidated) and $0.9 per boe have kept us growing consistently towards our exciting and unique (Colombia). Operating costs per boe were reduced by 31%, G&A business opportunity in Latin America. Prospering through the 2015 costs per boe were reduced by 13%, and cash costs per boe were and 2016 global oil price downturn was the perfect acid test for a reduced by 23% - resulting in 85% of production being cash flow player in our industry; and our successful record during these years positive at oil prices of $25-30 per barrel. – as well as through previous global financial or local crises – is a • More cash generation: Cash flows from operating activities were up 220% to $82.9 million. Adjusted EBITDA increased by 6% to $78.3 million. As an entrepreneurial and battle-tested company that has grown testament to the heart, professionalism and agility of our team. • More value: Net Present Value (NPV) of certified 2P reserves attribute our success to a proud culture based on trust – and which increased by 15% to $1.9 billion. Investment of $28 million in is the catalyst for our continuous record of safe, clean, neighborly, from scratch into one of Latin America’s leading independents, we Colombia in 2016 returned an increase in 2P NPV of $351 million. transparent and successful operations. Net debt adjusted 2P NPV/share increased by 19% to $23.6/share. • More upside: Identified and audited exploration oil and gas team members who have contributed immensely by supporting where resources on potential plays and prospects on existing assets of we have been and where we are going. And, as always, important 800 million to 1.5 billion boe. thanks to our Board of Directors for their hands-on approach, strong Our gratitude extends to the relentlessly supportive families of all our commitment, and extra efforts in helping GeoPark improve and grow. • More financial strength: Balance sheet deleveraging with $20 million less debt, cash-on-hand of $73.6 million, and credit facilities over $100 million. Implemented effective hedging program to protect against oil price volatility. Business Platform Latin America has an immense hydrocarbon resource base - second only to the Middle East, a welcoming business environment, and • More capabilities: Continuous increase in technical and financial relatively few independent players. GeoPark’s vision and value capacities and teams, including heavy oil operating expertise, proposition are to capture this big upstream oil and gas opportunity performance management and oil and gas marketing specialization. by becoming the leading independent company in the region. We GeoPark 5 GeoPark 5 take a technical approach and identify high value under-exploited Our in-house SPEED value system is the critical success ingredient, proven hydrocarbon basins – based on geological, infrastructure and which creates positive interdependence with the communities where regulatory factors – and then work to establish long term strategic we operate and ensures safe and environmentally-clean operational positions in the targeted regions. performance with the goal of making us the partner-of-choice, Our systematic expansion to date has resulted in building stable and growing businesses in Colombia, Chile, Brazil, Argentina and Peru. Briefly looking at each of our businesses: Each country is managed by reputable and capable local teams, with supporting production and cash flows, attractive underlying reserves Colombia Business employer-of-choice and neighbor-of-choice. and resources, and inventories of new project opportunities. Our GeoPark is leading the strongest upstream project currently in unique self-funding platform now consists of 27 hydrocarbon blocks Colombia. In less than five years we have grown from zero to be the covering 6 million acres in 10 proven hydrocarbon basins in fourth largest oil operator in the country – and are currently proving 5 countries, with a rich and balanced mix of production, up what is being called the largest oil field discovery in Colombia in development, exploration and unconventional resource projects. the last 20 years. Our independent country businesses are further enhanced by being Our key asset is the Llanos 34 block (GeoPark operated), which we supported by an overall corporate organization, which improves have grown from 0 to 45,000+ bopd gross production in just five efficiencies, reduces costs with operational and financial synergies, years. During 2016, following the successful appraisal drilling in the controls quality, pushes performance, and more effectively grows our Tigana/Jacana oil field complex, we materially increased the field overall company by allocating capital to the best shareholder value- size – and our Colombian certified 2P and 3P reserves increased by adding projects. 45% and 63% to 67.4 million boe and 94.9 million boe respectively. 6 Annual Report 2016 / Letter to Shareholders Magallanes Region, Chile Our 2P reserve life index increased to 11.8 years and the reserve production of approximately 3,500 boepd (64% gas, 36% oil), 2P replacement ratio reached a record-high 468%. Our 2P NPV10 reserves of 38 million boe and 6 blocks with approximately one and 3P NPV10 in Colombia increased to $1.0 billion and million acres, consisting of approximately 320-770 million boe of $1.4 billion respectively. exploration and unconventional resources. Production and reserves decreased in 2016 due the natural decline of the fields and limited Llanos 34 is a highly-attractive, low risk, low cost and high netback drilling activity since 2014. Our Chilean team has done an excellent block which provides a very profitable production base in a cyclical job of improving efficiencies and maintaining production stability business. Due to the expertise of our local teams, net finding and with very little new investment. development costs (F&D costs) for 2016 were just $1.8 per boe on a 1P basis and $0.9 per boe on a 2P basis. We have a big inventory of In early 2017, GeoPark extended its gas off-take contract with wells to increase production, with IRRs exceeding 500% and six- Methanex to 2026 to supply its large methanol plant in Punta Arenas. month paybacks, assuming a $40 per barrel Brent oil price. Brazil Business In a constant effort to find the best route to market, we implemented Our Brazil business represents a strategic base with a fully developed an off-take agreement with Trafigura and increased the amount of oil secure cash flow producing asset (a non-operated interest in the that we sell at the wellhead. We are also carrying out engineering and Manati field, one of Brazil’s largest producing gas fields, operated environmental studies to increase pipeline access. by Petrobras) and 8 exploration blocks in onshore mature proven Chile Business hydrocarbon basins (Potiguar, Reconcavo, and Sergipe Alagoas). Estimated exploration resources for our Brazilian asset base are We are Chile’s first private oil and gas producer. We built the business approximately 70-130 million boe – and GeoPark will drill 2-3 from a flat-footed start-up in 2006 to a solid business with current exploration wells in 2017 to begin to test this potential. GeoPark 7 8 Annual Report 2016 / Letter to Shareholders Jacana Field, Llanos 34 Block, Colombia GeoPark has identified attractive onshore hydrocarbon opportunities America and has built an impressive inventory of new projects over the in Brazil and is working with Petrobras and other operators in an last ten years. Following the lower oil price environment, national and effort to expand its asset base. major oil companies, which control the biggest and best hydrocarbon Argentina Business acreage, are reevaluating their portfolios and initiating divestment programs. Our regional platform and reputation give us first mover Our team has strong technical and operational experience and a advantage in potentially acquiring these attractive projects. proven track-record in Argentina. We acquired high potential low risk exploration blocks in the prolific Neuquen basin – with estimated net We are also making progress towards establishing a new platform in exploration resources of 30-50 million boe - and will be testing those Mexico, where regulatory reforms have opened the door for private prospects, with our partners, Pluspetrol and Wintershall, in 2017. companies to access Mexico’s highly attractive hydrocarbon assets – many of which are an excellent fit for GeoPark’s skill set. A new administration was elected in Argentina in December 2015, which has improved the outlook for investing in Argentina, paved the As a result of its large and diversified organic asset portfolio, GeoPark way for renewed interest in direct foreign investments, and attracted has the ability to be a patient asset acquirer, and can wait for good new upstream players to the country. market windows to secure new assets and acreage at economic prices. Peru Business GeoPark was selected as the partner of choice by PetroPeru in their return to the upstream business and the new government issued a Outlook Our 2017 plan is focused on growth. We are more than doubling our presidential decree ratifying this decision in December 2016, giving capital expenditures this year to a $80-90 million base case capital us the requisite regulatory approval for developing the Morona Block. investment program - considering Brent oil prices of $45-50 per This project has become emblematic of Peru’s return to upstream barrel. The work program provides for a 30-35 well drilling program activity, and GeoPark is the operator with a 75% working interest. targeting production growth of 20-25% and an exit production of 30,000 boepd, and includes: Morona is a large block in the proven Maranon Basin with a very large upside potential (approximately 320-500 million boe) with several • 15-20 gross well development, appraisal and exploration drilling high impact plays and prospects. The key asset within this block is program in the Llanos 34 Block in the Llanos Basin in Colombia the Situche Central oil field, which was discovered and proven up • 8 gross well exploration drilling program in the prolific Neuquen by two tested wells, and which has certified gross 3P reserves of 83 Basin in Argentina million barrels, a big 200 million barrel potential, and the opportunity • 3-4 gross well exploration and development drilling program in the for near term cash flow. Morona represents an important acquisition mature Magallanes Basin in Chile and strategic fit for GeoPark that significantly increases our overall • 2-3 gross well exploration drilling program in the mature onshore inventory of reserves and exploration resources and can contribute to Reconcavo and Potiguar Basins in Brazil our long term durable growth. GeoPark has designed a phased work program that permits a step-by-step development to put the Situche An effective tool which GeoPark has developed to manage its five Central field into production initially through a long-term test to country portfolio is its capital allocation methodology. This system begin generating cash flow. enables the Company to review and select from a wide range of New Projects and Countries With our long term approach, GeoPark has stayed in the hunt to acquire projects generated by each business unit team with different returns, potentials, risks, sizes, timelines and geographies. It ensures that our capital will be directed always to our top value-adding projects after ranking them on technical, strategic and economic criteria. It creates attractively-valued new oil and gas upstream opportunities across Latin a healthy competition between our different business units which GeoPark 9 further helps push performance and it also provides greater comfort in volatile markets by allowing us to easily add or remove projects depending on oil prices and project performance – and to fine-tune our desired risk exposure. Thank You Our sincere thanks and appreciation to our investors – old and new alike – who have partnered with us, believe in our project, and support our efforts. In the second half of 2016, we started a concerted campaign to reach out to new investors and better align our market value with the underlying asset value we have unlocked in the field. As a result, our stock trading volumes have begun to accelerate (now at levels exceeding $1.5 million per day) and which has opened up shareholder participation to the wider investment community. As always, your comments and recommendations are welcomed and appreciated. We please invite you to visit us in the field or at any of our offices to get to know us better and learn first-hand how we work. We look forward to delivering and reporting to you on our results in 2017. Sincerely, Gerald E. O’Shaughnessy Chairman James F. Park Chief Executive Officer 10 Annual Report 2016 / Letter to Shareholders Magallanes Region, Chile GeoPark 11 12 Annual Report 2016 / Business Approach and Guidelines 12 Annual Report 2015 / Business Approach and Guidelines Tua Field, Llanos 34 Block, Colombia BUSINESS APPROACH AND GUIDELINES Strategic Context GeoPark’s objective is to create value by building the leading Latin available opportunities. In contrast to many areas of the world, the American upstream independent oil and gas company. By this, we environment and resources for operating and funding a business are mean an action-oriented, persistent, aware and caring company with welcoming and increasingly more feasible. Furthermore, numerous the best ‘shareholder value-adding’ oil and gas assets. good oil and gas 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 start with a short term ‘exit strategy’ in mind and we have focused society can advance without the supply of energy, and energy on building a team and sustainable business. Our approach has remains the critical element in allowing people to better their lives. required patience in order to create the necessary foundation, but it Much of the world still lacks adequate energy supplies for the most has enabled us to stay solidly ‘ in the game’ and be positioned to now basic needs and demand is continually increasing. Although new have the chance to grab the bigger prizes. exciting technologies and sources are being developed, oil and gas is the most reliable energy source and will be required to support The founders and our management team have a substantial part over half of our planet’s continuous and rising energy needs far of our net worth invested in GeoPark. (The CEO founder has never into this century. sold a share of GeoPark stock.) The management team has no special class of stock or arrangements that benefit us differently We believe the best places for us to find and develop from any other shareholder other than our salaries and stock hydrocarbons are in areas around the world where oil and gas performance incentive programs. The entire GeoPark team (100% have already been discovered, but which for economic, technical, of our employees have received GeoPark share awards) is solidly funding or other reasons have been inadequately developed or aligned with all of our shareholders to build real and enduring prematurely abandoned. These projects have proven hydrocarbon value for every share of GeoPark. systems, valuable technical information, existing infrastructure, and, in many cases, unexploited low-risk exploration and re- development opportunities. By applying new technology and investment, creating stable markets and better economic conditions, and/or more efficient operations, an under-performing Opportunity Enhancement and Risk Diversification By its very nature, the upstream oil and gas business represents or bypassed asset can be converted into an attractive economic the undertaking of risk in search of significant rewards. To succeed, project. Work in these proven areas also frequently opens up an oil and gas company must effectively identify and manage exciting new hydrocarbon resources in new geological play types prevailing risks and uncertainties to capture the available rewards. and formations. We believe this to be one of GeoPark’s key capabilities; and our year-over-year track record is evidence of our success in effectively We are focused on Latin America because of the abundance of balancing risk among the subsurface, geological, funding, these types of opportunities throughout the region. Latin America organizational, market, price, partner, shareholder, regulatory and ranks as one of the highest potential hydrocarbon resource political environments. For example, GeoPark was able to respond regions in the world and its economies are thirsty for new energy. constructively to the 2008/9 financial crisis and, now again, to the Historically, it has been dominated by larger major and national oil volatility of 2015-2016. oil companies, with the presence of only a modest number of more-agile independent companies. North America is home to We believe the best results in the upstream business are achieved thousands of independent oil and gas operators, whereas Latin with a larger scale portfolio approach with multiple attractive America, an area substantially larger and with greater resource projects in multiple regions managed by talented oil and gas potential, has only a handful of independents taking advantage of teams. This diversification reflects both a defensive and offensive GeoPark 13 approach. It is protective of any downside because the collective Capabilities Our experience in the oil and gas business has repeatedly demonstrated strength of our projects limits the negative impact of any the need for good people with commitment and real oil and gas know- underperforming asset or timing delay. It also has an exciting how. We believe in and have experienced the amazing capacity of multiplier effect on the potential upside because of the increased people to excel in an environment of expanding opportunity and trust. number of opportunities independently marching ahead. These GeoPark is blessed to have an incredible group of men and women who represent important advantages given the nature of the oil truly work day and night to make us better in every way. Our results exploration and production business. speak to the daily heroics (mostly unseen) by our team that keep us together and have moved us consistently closer to our goals. Our country businesses are managed by experienced local professionals and teams with respected reputations. They know Our record of delivery is based on three fundamental and distinct both the specific subsurface rocks and conditions and the above- skill sets – as Explorers, Operators and Consolidators – which we ground operating and business environments in each region and deem critical for enduring success in the oil and gas business. Our give us the characteristics of a local company. Our pride and care in team has consistently demonstrated the science and creativity how we act and perform in our home regions are key elements of to find hydrocarbons in the subsurface, but also the muscle and our success. experience to get the oil and gas out of the ground and profitably to market. Our attractive asset portfolio is evidence of our ability to These generally independent businesses are further enhanced acquire good projects in the right basins in the right countries with by being tied together by an overall corporate organization, the right partners and at the right price. which improves efficiencies, reduces costs with operational and financial synergies, controls quality, and can more effectively raise Today, we have an amazing team of employees from Chile, Colombia, capital for our projects. It also is a source for new technologies Brazil, Peru and Argentina – each of whom joined GeoPark with the and ideas to spread from one region to another. For example, our purpose of building a unique and special company that is prepared team introduced a new geological play-type to the Llanos Basin in to handle challenges and seize opportunities. As a quickly growing Colombia (an area that has been explored for more than 75 years) company, we have repeatedly seen individuals step-up to the new that resulted in multiple new oil field discoveries, and new oil responsibilities presented – and we have a deep and powerful technology to the Magallanes Basin in Chile. leadership team taking GeoPark to the next level. Importantly, through effective and controlled capital allocation, our The international upstream oil and gas business is not for the projects within each country business can be ranked against each fainthearted or easily discouraged. Time-after-time, the GeoPark other on economic, technical and strategic criteria and, therefore, team has been able to push ahead to find solutions where often ensure our capital resources flow to the highest performing and others have given-up or failed. This is the engine and fire of our most attractive projects. growth and the true long term intangible value of our Company. We are immensely grateful to all these men and women for their We believe this business approach makes GeoPark a more professionalism, discipline, unity and heart. attractive investment vehicle for all our shareholders – with a strong foundation 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 New Projects and Countries We are excited about potential new business opportunities in model allows our investors to be exposed to and benefit from the Latin America with its high resource potential, attractive business results of multiple supporting and aligned businesses across diverse environment, and limited competition. We are actively pursuing geologies and geographies. new projects in targeted proven hydrocarbon basins throughout 14 Annual Report 2016 / Business Approach and Guidelines Magallanes Region, Chile 16 Annual Report 2016 / Business Approach and Guidelines Tigana Field, Llanos 34 Block, Colombia the region – selected in consideration of geological, infrastructure account for multiple factors (including technical, cost, tax, and time) and regulatory factors – with our principal efforts in Colombia, Brazil, that impact the economics of oil and gas projects. We also avoid Chile, Peru, Argentina, and Mexico. markets or ‘bubbles’ when assets are over-priced. With our overall growth targets and portfolio approach, new project acquisitions are an important part of our business. Our acquisition efforts begin with a technical approach to define the hydrocarbon Culture ‘Creating Value and Giving Back’ is our motto and represents GeoPark’s basins where our geological and engineering teams identify an market-based approach to align our business objectives with our attractive potential. After screening for political risks, our new core values and responsibilities. Our in-house designed program, business teams proactively ‘scratch and dig’ to locate interests or titled S.P.E.E.D., targets and integrates the critical elements – Safety, opportunities within those areas and to establish a position. It is Prosperity, Employees, Environment and Community Development – a long term and continuous effort and we have been building an necessary to make our total business plan work. Only by succeeding attractive inventory of new projects in the region over the last ten equally in each of these interdependent areas can we realize our years, aided by our team’s 25+ year experience in Latin America. overall success and ambitions. This is important in every country where we operate, and we make every effort to achieve the most effective Our focus is always to build a larger scale balanced portfolio that governance, full compliance and consistent transparency with all includes lower-risk short term cash flow generating properties, mid term relevant authorities. Not only does this allow us to be a more successful medium-risk development projects, and longer term higher-risk big business enterprise over the long term, it reflects our pride in carrying upside projects. This permits steady secure growth with an opportunity out an important mission in the right way. The men and women for accelerated high growth ‘home-runs’ from the bigger projects. of GeoPark care passionately about how our Company acts – both Good oil and gas partners are a key element of our new business asset and the prime source of our past success and future opportunity. internally and externally – and we all consider our culture to be our core efforts and we like to balance our acquisition risk by including experienced partners in our new projects. We have developed a The world is continuously moving in a more regulated direction with long term strategic alliance with LG to build a portfolio of upstream higher expectations, and to be able to operate in this new environment is assets across Latin America and the International Finance Corporation a fundamental part of business today. We believe that GeoPark’s ability to (IFC) of the World Bank is a long term principal shareholder of (and meet these challenges and perform to or beyond these ever increasing sometimes lender to and working interest partner of ) GeoPark. We standards represents a competitive advantage for the future. For also have developed long term relationships with the national oil example, the manner of, results from, and impact on the communities companies where we operate, such as with ENAP in Chile, Ecopetrol in of our overall work in Chile and Colombia provided the rationale and Colombia, Petrobras in Brazil, YPF in Argentina and Petroperu in Peru. support for the government and regional community to allow us to Critical to the success of any new project is to conduct a thorough such as with our full scholarships targeting young women, in the local technical and economic analysis prior to acquiring any new asset. communities near our field operations, for training in the sciences. expand our project into new areas. It can also be meaningful and fun, We make sure we understand the project, its risks and its value – and we buy right. It is difficult to turn a faulty or overpriced project The IFC of the World Bank, our long time shareholder, has been a into a good business. Following intensive geological, geophysical, constructive force in helping us operate and manage our business in engineering, operational, legal and financial analyses and due consideration of the environment and communities around us. The diligence, we perform a detailed discounted cash flow (DCF) IFC further assists us by carrying out annual audits and physical site valuation. We also consider the option value or strategic benefits visits of both our regulatory compliance and best-practices approach. Tigana Field, Llanos 34 Block, Colombia of a project when entering a new region. We do not buy assets on simplified ‘$ per barrel’ metrics which we believe do not properly - James F. Park (2010) GeoPark 17 2016 PERFORMANCE MORE OIL AND GAS MORE EFFICIENCIES AND CASH GENERATION MORE OPPORTUNITIES Production • Production up 10% to 22,400 boepd. Finding and Development Costs • $1.7/boe consolidated 2P. Morona Block Approval in Peru Final regulatory approval obtained for Morona • Colombia production up 18% to • $0.9/boe Colombia 2P. Block, with 2P reserves of 42 million boe and 15,536 bopd. • Record exit production of 24,400 boepd. Reserves • 1P reserves up 10% to 78.3 million boe. • 2P reserves up 14% to 142.8 million boe. • Colombia 2P reserves up 45% to Operating Costs • OPEX down 31% to $8 per boe. • Colombian OPEX down 39% to $6 per boe. Cash Generation • Adjusted EBITDA up 6% to $78.3 million. an unrisked upside potential in the Situche Central oil field of 200 million boe (at 100% WI). 2017 Outlook • Base case capital investment program of $80-90 million. 67.4 million boe. • Operating Netback down 6% to $16 • Drilling program of 30-35 exploration and Asset Value • 1P reserve NPV10 up 26% to $1.1 billion. per boe. development wells in Colombia, Chile, • Cash Flow from operations up 220% Argentina and Brazil. to $82.9 million. • Targeted production growth of 20-25%. • 2P reserve NPV10 up 15% to $1.9 billion. • Over $160 million in cash and available • Targeted exit production of 30,000 boepd. • 2P reserve Colombian assets NPV10 facilities. up 54% to $1 billion. • Financial debt reduced by $20 million. Upside • 800 million to 1.5 million boe Value Per Share • Net debt adjusted 2P NPV10 increased of exploration resources. by 19% to $23.6 per share. Oil Gas 2006 2007 2008 2009 2010 18 Annual Report 2016 / Performance 23 22 21 20 19 18 17 16 15 14 13 12 11 10 09 08 07 06 05 04 03 02 01 0 ) d / e o b M ( n o i t c u d o r P s a G d n a l i O y l i a D e g a r e v A GeoPark 19 2011 2012 2013 2014 2015 2016 OUR STRENGTHS Know-How Strong Team, Capabilities, Approach and Culture. Capital Supporting Cash Flow, Access to Funding and Strategic Partners. Track Record Consistent Operational and Financial Growth / Ability to Unlock Value from Assets. Assets Diversified Risk-Balanced Asset Base with Proven Value, Scale and Upside. 20 Annual Report 2016 / Our Strengths Casanare Department, Colombia Mexico Colombia 67.4 MMBOE Peru 31.5 MMBOE Argentina Chile 38.3 MMBOE Latin American Platform 2P Reserves (D&M Dec 2016) Production Assets Development Assets Exploration Assets Unconventional Resource Assets New Project Opportunities Brazil 5.6 MMBOE GeoPark 21 OUR APPROACH GeoPark has been built around five fundamental and distinct capabilities: Explorer The ability, experience, methodology and creativity to find and develop Value Risk Management The comprehensive management approach to consistently and oil and gas reserves in the subsurface – based on the best science, significantly grow and build economic value per share by effective solid economics and ability to take the necessary managed risks. planning, balanced work programs, cost efficiency focus, secure access 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. Consolidator The ability and initiative to assemble the right balance and portfolio of to capital sources, reliable communication with shareholders, and by accommodating risk among the subsurface, funding, organizational, market, partner/shareholder, and regulatory/political 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 upstream assets in the right hydrocarbon basins in the right regions system and represents an integrated approach to align our business with the right partners and at the right price – coupled with the vision objectives with our core principles and responsibilities and provides and skills to transform and improve value above ground. our competitive advantage. 22 Annual Report 2016 / Our Approach Tigana Field, Llanos 34 Block, Colombia GeoPark 23 Casanare Department, Colombia Alagoinhas, Brazil Safety GeoPark is committed to creating a safe and healthy workplace. Simply speaking, everybody must return home everyday safe OUR VALUE SYSTEM SPEED represents GeoPark’s underlying value system which provides us the leadership, confidence and foundation required for long-term success. It is our competitive advantage. And, it reflects our pride and sound. in achieving an important mission in the right way. If we are the true performer, the best place to work, the preferred partner and the cleanest operator – our future is bigger, better and more secure. 24 Annual Report 2016 / Our Value System Morona River, Loreto, Peru Alagoinhas, Brazil Prosperity GeoPark is committed to Employees GeoPark is committed to creating Environment GeoPark is committed to delivering significant bottom-line a motivating workplace for minimizing the impact of our Community Development GeoPark is committed to being financial value to our shareholders. employees. With today’s shortage projects on the environment. As the preferred neighbor and Only a financially-healthy of capable energy professionals, our footprint becomes cleaner partner by creating a mutually company can continue to grow, the company which is able to and smaller, the more areas and beneficial exchange with the attract needed resources and attract, protect, retain and train opportunities will be opened up local communities where we create real long-term benefits. the best team with the best for us to work in. Our long-term work. Unlocking local knowledge attitude will always prevail. well-being requires us to properly creates and supports long-term fit within our surroundings. sustainable value in our projects. If our efforts enhance local goals and customs, we will be invited to do more. GeoPark 25 HIGHLIGHTED SECTIONS 38 58 101 120 128 150 Risk Factors Information on the Company Operating and Financial Information Directors and Management Major Shareholders and Related Parties Consolidated Financial Statements 26 Annual Report 2016 Casanare Department, Colombia 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 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 2016 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to ________________ 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. Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes 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 Common shares: 59,940,881 Securities Exchange Act of 1934. Yes 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. 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: Accelerated filer Large accelerated filer US GAAP International Financial Reporting Standards as issued by Other the International Accounting Standards Board 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. Item 17 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 No GeoPark 27 Table of Contents PRESENTATION OF FINANCIAL AND OTHER INFORMATION FORWARD-LOOKING STATEMENTS PART I 29 32 33 ITEM 10. ADDITIONAL INFORMATION A. Share capital B. Memorandum of association and bye-laws ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS 33 Enforcement of Judgments 132 132 132 137 138 138 138 140 140 140 140 140 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 ABOUT MARKET RISK ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES 140 A. Debt securities B. Warrants and rights C. Other securities D. American Depositary Shares PART II ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES 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 ITEM 16. RESERVED ITEM 16A. Audit committee financial expert ITEM 16B. Code of Conduct ITEM 16C. Principal Accountant Fees and Services ITEM 16D. Exemptions from the listing standards for audit committees 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 Index to Consolidated Financial Statements 140 140 140 140 141 141 141 141 141 141 141 141 141 141 141 141 141 142 142 143 143 143 144 145 145 145 145 147 151 A. Directors and senior management 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 D. Selling shareholders E. Dilution F. Expenses of the issue 28 GeoPark 20F 33 33 33 33 33 33 33 33 37 37 38 58 58 60 101 101 101 101 101 116 119 119 119 119 120 120 120 124 126 127 128 128 128 129 130 130 130 131 131 131 131 131 131 131 132 Presentation of Financial and Other Information Certain definitions Unless otherwise indicated or the context otherwise requires, all references in this annual report to: • “GeoPark Limited,” “GeoPark,” “we,” “us,” “our,” the “Company” and words of a similar effect, are to GeoPark Limited (formerly GeoPark Holdings Limited), an exempted company incorporated under the laws of Bermuda, together with its consolidated subsidiaries; • “Agencia” are to GeoPark Latin America Limited Agencia en Chile, an established branch, under the laws of Chile, of GeoPark Latin America Limited (“GeoPark Latin America”), an exempted company incorporated under the laws of Bermuda; • “GeoPark Colombia” are prior to our internal corporate reorganization of our Colombian operations, to our subsidiary GeoPark Colombia S.A., 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; • “LGI” are to LG International Corp., a company incorporated under the laws of Korea”; • “Notes due 2020” are to our 2013 issuance of US$300.0 million aggregate principal amount of 7.50% senior secured notes due 2020; • “US$” and “U.S. dollar” are to the official currency of the United States of America; • “Ch$” and “Chilean pesos” are to the official currency of Chile; • “AR$” and “Argentine pesos” are to the official currency of Argentina; • “ real ,” “ reais ” and “R$” are to the official currency of Brazil; • “ANP” are to the Brazilian National Petroleum, Natural Gas and Biofuels Agency ( Agência Nacional do Petróleo, Gás Natural e Biocombustíveis ); • “ANH” are to the Colombian National Hydrocarbons Agency ( Agencia Nacional de Hidrocarburos ); • “ENAP” are to the Chilean National Petroleum Company ( Empresa Nacional de Petróleo ) • “economic interest” means an indirect participation interest in the net revenues from a given block based on bilateral agreements with the concessionaires; and • “working interest” means the right granted to the lessee of a property to explore for and to produce and own oil, gas, or other minerals. The working interest owners bear the exploration, development and operating costs on either a cash, penalty or carried basis. GeoPark 29 Financial statements Non IFRS financial measures Our consolidated financial statements Adjusted EBITDA This annual report includes our audited consolidated financial statements as Adjusted EBITDA is a supplemental non-IFRS financial measure that is used by of December 31, 2016 and 2015 and for each of the years ended December 31, management and external users of our financial statements, such as industry 2016, 2015 and 2014 (hereinafter “Consolidated Financial Statements”). analysts, investors, lenders and rating agencies. Our Consolidated Financial Statements are presented in US$ and have been We define Adjusted EBITDA as profit for the period before net finance cost, prepared in accordance with International Financial Reporting Standards income tax, depreciation, amortization and certain non-cash items such (“IFRS”), as issued by the International Accounting Standards Board (“IASB”). as impairment charges or impairment reversals, write-offs of unsuccessful Our Consolidated Financial Statements have been audited by Price unrealized gains in commodity risk management contracts and bargain Waterhouse & Co. S.R.L., Argentina, a member firm of PricewaterhouseCoopers purchase gain on acquisition of subsidiaries. Adjusted EBITDA is not a measure Network (“PwC”), an independent registered public accounting firm, as stated of profit or cash flows as determined by IFRS. exploration and evaluation assets, accrual of stock options and stock awards, in their report included elsewhere in this annual report. Our fiscal year ends December 31. References in this annual report to a fiscal evaluate our operating performance and compare the results of our year, such as “fiscal year 2016,” relate to our fiscal year ended on December 31 operations from period to period without regard to our financing methods or We believe Adjusted EBITDA is useful because it allows us to more effectively capital structure. We exclude the items listed above from profit 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, or unrealized gains in commodity risk management contracts, 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 Consolidated Financial Statements as of and for the years ended 2016, 2015 and 2014. of that calendar year. 30 GeoPark 20F Oil and gas reserves and production information Rounding DeGolyer and MacNaughton 2016 Year-end Reserves Report We have made rounding adjustments to some of the figures included The information included elsewhere in this annual report regarding estimated elsewhere in this annual report. Accordingly, numerical figures shown as totals quantities of proved reserves in Colombia, Chile, Brazil and Peru is derived, in some tables may not be an arithmetic aggregation of the figures that in part, from estimates of the proved reserves as of December 31, 2016. precede them. The reserves estimates are derived from the DeGolyer and MacNaughton Reserves Report (“D&M Reserves Report”), which was prepared for us by the independent reserves engineering team of DeGolyer and MacNaughton and is included as an exhibit to this annual report. The D&M Reserves Report presents oil and gas reserves estimates located in the Fell, Campanario, Flamenco and Isla Norte Blocks in Chile, Llanos 32, Llanos 34, Yamú Blocks, La Cuerva in Colombia, BCAM-40 (Manati) in Brazil and the Morona Block in Peru. 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 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 31 Forward-looking Statements This annual report contains statements that constitute forward-looking • the direct or indirect impact on our business resulting from terrorist incidents statements. Many of the forward-looking statements contained in this or responses to such incidents, including the effect on the availability of and annual report can be identified by the use of forward-looking words such as premiums on insurance; and “anticipate,” “believe,” “could,” “expect,” “should,” “plan,” “intend,” “will,” “estimate” • other factors discussed under “Item 3. Key Information—D. Risk factors” in and “potential,” among others. this annual report. Forward-looking statements appear in a number of places in this annual Forward-looking statements speak only as of the date they are made, and we report and include, but are not limited to, statements regarding our intent, do not undertake any obligation to update them in light of new information or belief or current expectations. Forward-looking statements are based on future developments or to release publicly any revisions to these statements our management’s beliefs and assumptions and on information currently in order to reflect later events or circumstances or to reflect the occurrence of available to our management. Such statements are subject to risks and unanticipated events. uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to, those identified under the section “Item 3. Key Information—D. Risk factors” in this annual report. These risks and uncertainties include factors relating to: • the volatility of oil and natural gas prices; • operating risks, including equipment failures and the amounts and timing of revenues and expenses; • termination of, or intervention in, concessions, rights or authorizations granted by the Chilean, Colombian, Brazilian, Peruvian and Argentine governments to us; • uncertainties inherent in making estimates of our oil and natural gas data; • 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 Colombia, Chile, Brazil, Peru, Argentina and in other countries in which we may operate in the future; • 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; • our ability to retain key members of our senior management and key technical employees; • competition from other similar oil and natural gas companies; • market or business conditions and fluctuations in global and local demand for energy; 32 GeoPark 20F PART I ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS 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 balance sheet data as of December 31, 2016 and 2015 and our income statement and cash flow data for the years ended December 31, 2016, 2015 and 2014 from our 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, 2014, 2013, and 2012 and our income statement and cash flow data for the years ended December 31, 2013 and 2012 from our Consolidated Financial Statements not included elsewhere in this annual report. During 2015, our Management changed the presentation of the Consolidated Statement of Income by reordering the profit and loss line items, eliminating gross profit and presenting depreciation and write-off of unsuccessful efforts as separate line items. This change is intended to provide readers of our financial statements with more relevant information and a better explanation of the elements of performance. This change has been applied to comparative figures for the years 2014, 2013 and 2012 presented in this document. We maintain our books and records in US$ 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. The selected historical financial data set forth in this section does not include any results or other financial information of our Colombian, Brazilian or Peruvian acquisitions prior to their incorporation into our financial statements. GeoPark 33 Statement of income data For the year ended December 31, (in thousands of US$, except per share numbers) 2016 2015 2014 2013 2012 367,102 61,632 428,734 315,435 22,918 338,353 221,564 28,914 250,478 - - (131,419) (111,296) 145,193 47,477 192,670 (2,554) (67,235) (10,282) (34,170) (4,222) (75,774) (31,366) 5,664 (1,344) 162,629 47,061 209,690 - (86,742) (13,831) (37,471) (5,211) (105,557) (30,084) (149,574) (13,711) (28,613) (232,491) (34,101) 13,872 – (35,655) (33,474) – (13,002) (45,867) (24,428) (100,528) (30,367) (9,430) (1,849) 71,844 (27,622) (23,097) – (48,842) (301,620) 21,125 (11,804) (60,646) 17,054 (284,566) (11,554) (49,092) (50,535) (234,031) (0.82) (4.05) (0.82) (4.05) (5,195) 15,930 7,845 8,085 0.14 0.14 - (76,928) (2,338) (27,788) (24,631) (53,317) (25,552) – 823 40,747 (14,227) (2,081) 8,401 32,840 (14,394) 18,446 6,567 11,879 0.28 0.27 (5,292) (44,962) (17,252) (69,968) (10,962) – 5,343 83,964 (33,115) (761) – 50,088 (15,154) 34,934 12,413 22,521 0.52 0.48 59,777,145 57,759,001 56,396,812 43,603,846 42,673,981 59,777,145 57,759,001 58,840,412 46,532,049 44,109,305 59,940,881 59,535,614 57,790,533 43,861,614 43,495,585 Revenue Net oil sales Net gas sales Net revenue Commodity risk management contracts Production and operating costs Geological and geophysical expenses Administrative expenses Selling expenses Depreciation Write-off of unsuccessful efforts Impairment for non-financial assets Other operating income/(expense) Operating (loss)/profit Financial costs Foreign exchange loss Bargain purchase gain on acquisition of subsidiaries (Loss) Profit before tax Income tax benefit (expense) (Loss) Profit for the year Non-controlling interest (Loss) Profit attributable to owners of the Company (Losses) Earnings per share for profit attributable to owners of the Company—Basic (Losses) Earnings per share for profit attributable to owners of the Company—Diluted(1) Weighted average common shares outstanding—Basic Weighted average common shares outstanding—Diluted(1) Common Shares outstanding at year-end (1) See Note 18 to our Consolidated Financial Statements. 34 GeoPark 20F Balance sheet data As of December 31, (In thousands of US$) Assets Non-current assets Property, plant and equipment Prepaid taxes Other financial assets Deferred income tax Prepayments and other receivables Total non-current assets Current assets Other financial assets Inventories Trade receivables Prepayments and other receivables Prepaid taxes Cash at bank and in hand Total current assets Total assets 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 Total non-current liabilities Current liabilities Borrowings Derivative financial instrument liabilities Current income tax Trade and other payables Total current liabilities Total liabilities 2016 2015 2014 2013 2012 473,646 522,611 790,767 595,446 457,837 2,852 19,547 23,053 241 1,172 13,306 34,646 220 1,253 12,979 33,195 349 11,454 5,168 13,358 6,361 10,707 7,791 13,591 510 519,339 571,955 838,543 631,787 490,436 2,480 3,515 18,426 7,402 15,815 73,563 121,201 640,540 60 236,046 (130,341) 105,765 35,828 141,593 319,389 42,509 34,766 2,770 1,118 4,264 13,480 11,057 19,195 82,730 131,844 703,799 59 232,005 (85,412) 146,652 53,515 200,167 343,248 42,450 19,556 16,955 — 8,532 36,917 13,993 13,459 127,672 200,573 1,039,116 58 210,886 164,613 375,557 103,569 479,126 342,440 46,910 16,583 30,065 — 8,122 42,628 35,764 6,979 121,135 214,628 846,415 44 120,426 150,371 270,841 95,116 365,957 290,457 33,076 8,344 23,087 399,434 422,209 435,998 354,964 39,283 3,067 5,155 52,008 99,513 498,947 35,425 – 208 45,790 81,423 503,632 27,153 – 7,935 88,904 123,992 559,990 26,630 – 7,231 91,633 125,494 480,458 — 3,955 32,271 49,620 3,443 48,292 137,581 628,017 43 116,817 122,561 239,421 72,665 312,086 165,046 25,991 — 17,502 208,539 27,986 – 7,315 72,091 107,392 315,931 Total equity and liabilities 640,540 703,799 1,039,116 846,415 628,017 GeoPark 35 Cash flow data For the year ended December 31, (In thousands of US$) Cash provided by (used in) Operating activities Investing activities Financing activities Net increase (decrease) in cash Other financial data 2016 2015 2014 2013 2012 82,884 (39,306) (51,136) (7,558) 25,895 (48,842) (18,022) (40,969) 230,746 (344,041) 124,716 11,421 127,295 (208,500) 164,018 82,813 129,427 (301,132) 26,375 (145,330) For the year ended December 31, 2016 2015 2014 2013 2012 Adjusted EBITDA(1) (US$ thousands) Adjusted EBITDA margin(2) Adjusted EBITDA per boe(3) 78,321 40.6% 10.2 73,787 35.2% 10.5 220,077 51.3% 33.0 167,253 49.4% 33.9 121,404 48.5% 31.1 (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 Consolidated Financial Statements. (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. 36 GeoPark 20F Exchange rates In Colombia, Chile, Argentina and Peru, our functional currency is the U.S. Recent exchange rates Period dollar. In Brazil, our functional currency is the real . of Real per US$ Month: Our operations in Brazil accounted for 16% of our consolidated assets and October 2016 15% of our revenues for the years ended December 31, 2015 and 2016, November 2016 respectively. This portion of our business is exposed to losses that may arise December 2016 from currency fluctuation, as a significant amount of our revenues, operating January 2017 costs, administrative expenses and taxes in Brazil are denominated in reais. February 2017 Furthermore, we financed our acquisition of Rio das Contas Produtora de March 2017 Petróleo Ltda. (a Brazilian limited liability company; “Rio das Contas”) in part April 2017 End Average Low High 3.1811 3.3967 3.2591 3.1270 3.0993 3.1282 3.1872 3.3420 3.3562 3.1966 3.1042 3.1261 3.1193 3.2024 3.2591 3.1270 3.0510 3.0765 3.2359 3.4446 3.4650 3.2729 3.1479 3.1735 through our Brazilian subsidiary’s entrance into a US$70.5 million credit facility (through April 6, 2017) 3.1160 3.1120 3.0923 3.1231 with Itaú BBA International plc. This exposes us to exchange rate losses from the devaluation of the Brazilian reais against the U.S. dollar. Source: Central Bank of Brazil. In the past, the Brazilian Central Bank has occasionally intervened to control The following table presents the average R$ per U.S. dollar representative unstable movements in foreign exchange rates. We cannot predict whether market rate for each of the five most recent years, calculated by using the the Brazilian Central Bank or the Brazilian government will continue to permit average of the exchange rates on the last day of each month during the the real to float freely or will intervene in the exchange rate market through period, and the representative year-end market rate for each of the five most the return of a currency band system or otherwise. The real may depreciate recent years. or appreciate substantially against the U.S. dollar. Furthermore, Brazilian law provides that, whenever there is a serious imbalance in Brazil’s balance of Period/ payments or there are reasons to foresee a serious imbalance, temporary Real per US$ Year End Average Low High restrictions may be imposed on remittances of foreign capital abroad. We Period: cannot assure you that such measures will not be taken by the Brazilian government in the future. As a result of the devaluation that occurred in the year ended December 31, 2015, we recorded exchange rate losses amounting to US$35.6 million in 2015 2012 2013 2014 2015 2016 and we recorded exchange rate gains amounting to US$14.5 million in the First quarter 2016 year ended December 31, 2016, due to revaluation of the local currency in our Second quarter 2016 Brazilian subsidiary. This result was mainly generated by the credit facility with Third quarter 2016 Itaú BBA International plc that we incurred to acquire Rio das Contas in March Fourth quarter 2016 31, 2014. See “—D. Risk factors—Risks relating to our business—Our results First quarter 2017 of operations could be materially adversely affected by fluctuations in foreign Second quarter 2017 currency exchange rates.” (through April 6, 2017) 2.1121 2.3426 2.6562 3.9048 3.2591 3.5589 3.2098 3.2462 3.2591 3.1282 3.1160 1.9476 2.1579 2.3564 3.3876 3.4500 3.8604 3.4186 3.2418 3.2790 3.1182 3.1120 1.7024 1.9528 2.1974 2.5690 3.1193 3.5589 3.2098 3.1302 3.1193 3.0510 3.0923 2.1121 2.4457 2.7403 4.1949 4.1558 4.1558 3.6921 3.3388 3.4650 3.2729 3.1231 The following tables show the selling rate for the U.S. dollar for the periods Source: Central Bank of Brazil. and dates indicated. The information in the “Average” column represents the average of the daily exchange rates during the periods presented. The Exchange rate fluctuation may affect the US$ value of any distributions we numbers in the “Period-end” column are the quotes for the exchange rate make with respect to our common shares. See “—D. Risk factors—Risks as of the last business day of the period in question. As of April 6, 2017, the relating to our business—Our results of operations could be materially exchange rate for the purchase of the U.S. dollar as reported by the Central adversely affected by fluctuations in foreign currency exchange rates.” Bank of Brazil was R$3.1160 per U.S. dollar. The following table presents the monthly high and low representative market Not applicable. rate during the months indicated. B. Capitalization and indebtedness C. Reasons for the offer and use of proceeds Not applicable. GeoPark 37 Risk factors D. Risk factors • quality discounts for oil production based, among other things, on API and mercury content; Our business, financial condition and results of operations could be • taxes and royalties under relevant laws and the terms of our contracts; materially and adversely affected if any of the risks described below • our ability to enter into oil and natural gas sales contracts at fixed prices; occur. As a result, the market price of our common shares could decline, • the level of global methanol demand and inventories and changes in the and you could lose all or part of your investment. This annual report also uses of methanol; contains forward-looking statements that involve risks and uncertainties. • the price and availability of alternative fuels; and See “Forward-Looking Statements.” The risks below are not the only ones • future changes to our hedging policies. facing our Company. Additional risks not currently known to us or that we currently deem immaterial may also adversely affect us. These factors and the volatility of the energy markets make it extremely Risks relating to our business difficult to predict future oil, natural gas and methanol price movements. For example, recently, oil and natural gas prices have fluctuated significantly. From January 1, 2011 to December 31, 2016, Brent spot prices ranged from A substantial or extended decline in oil, natural gas and methanol prices a low of US$30.7 per barrel to a high of US$125.5 per barrel, NYMEX West may materially adversely affect our business, financial condition or results Texas International (“WTI”) crude oil contracts prices ranged from a low of operations. of US$30.3 per bbl to a high of US$109.5 per bbl, Henry Hub natural gas average spot prices ranged from a low of US$1.7 per mmbtu to a high of The prices that we receive for our oil and natural gas production heavily US$6.0 per mmbtu, US Gulf methanol spot barge prices ranged from a low influence our revenues, profitability, access to capital and growth rate. of US$250 per metric ton to a high of US$635 per metric ton. Furthermore, Historically, the markets for oil, natural gas and methanol (which have oil, natural gas and methanol prices do not necessarily fluctuate in direct influenced prices for almost all of our Chilean gas sales) have been volatile and relationship to each other. will likely continue to be volatile in the future. International oil, natural gas and methanol prices have fluctuated widely in recent years and may continue to For the year ended December 31, 2016, 75% of our revenues, were derived from do so in the future. oil. Because we expect that our production mix will continue to be weighted towards oil, our financial results are more sensitive to movements in oil prices. The prices that we will receive for our production and the levels of our production depend on numerous factors beyond our control. These factors As of December 31, 2016, natural gas comprised 25% of our revenues. A include, but are not limited, to the following: decline in natural gas prices could negatively affect our future growth, particularly for future gas sales where we may not be able to secure or extend • global economic conditions; our current long-term contracts. • changes in global supply and demand for oil, natural gas and methanol; • the actions of the Organization of the Petroleum Exporting Countries Lower oil and natural gas prices may impact our revenues on a per unit basis, (“OPEC”); and may also reduce the amount of oil and natural gas that can be produced • political and economic conditions, including embargoes, in oil-producing economically. In addition, changes in oil and natural gas prices can impact the countries or affecting other countries; valuation of our reserves and, in periods of lower commodity prices, we may • the level of oil- and natural gas-producing activities, particularly in the Middle curtail production and capital spending or may defer or delay drilling wells East, Africa, Russia, South America and the United States; because of lower cash generation. Lower oil and natural gas prices could also • the level of global oil and natural gas exploration and production activity; affect our growth, including future and pending acquisitions. A substantial • the level of global oil and natural gas inventories; or extended decline in oil or natural gas prices could adversely affect our • the price of methanol; • availability of markets for natural gas; • weather conditions and other natural disasters; business, financial condition and results of operations. For example, during 2014 and 2015, we evaluated the recoverability of our • technological advances affecting energy production or consumption; fixed assets affected by the oil price decline and recorded an impairment of • domestic and foreign governmental laws and regulations, including non-financial assets amounting to, respectively, US$9.4 million and US$149.6 environmental, health and safety laws and regulations; million. US$5.7 million of the impairment recorded in 2015 was reversed • proximity and capacity of oil and natural gas pipelines and other in 2016 due to increased estimated market prices for 2017 and 2018 and transportation facilities; improvements in cost structure. See Note 35 to our Consolidated Financial • the price and availability of competitors’ supplies of oil and natural gas in Statements for details regarding oil price scenarios, discount rates considered captive market areas; and sensitivity analysis affecting the impairment charges. 38 GeoPark 20F During 2016, we entered into derivative financial instruments to manage inherently subject to significant business, political, economic, regulatory, exposure to oil price risk. These derivatives were zero-premium collars and environmental and competitive uncertainties, conditions in the financial were placed with major financial institutions and commodity traders. We markets, contingencies and risks, all of which are difficult to predict and entered into the derivatives under ISDA Master Agreements and Credit many of which are beyond our control. In addition, we opportunistically Support Annexes, which provide credit lines for collateral posting thus seek out new assets and acquisition targets to complement our existing alleviating possible liquidity needs under the instruments and protecting the operations, and have financed such acquisitions in the past through Company from potential non-performance risk by its counterparties. See Note the incurrence of additional indebtedness, including additional bank 36 to our Consolidated Financial Statements for details regarding Commodity credit facilities, equity issuances or the sale of minority stakes in certain Risk Management Contracts. operations to our partners. We may need to raise additional funds more quickly if one or more of our assumptions prove to be incorrect or if we The current oil price crisis has impacted our operations and corporate strategy. choose to expand our hydrocarbon asset acquisition, exploration, appraisal or development efforts more rapidly than we presently anticipate, and We face limitations on our ability to increase prices or improve margins on the we may decide to raise additional funds even before we need them if the oil and natural gas that we sell. As a consequence of the oil price crisis which conditions for raising capital are favorable. The ultimate amount of capital started in the second half of 2014 (WTI and Brent, the main international oil that we will expend may fluctuate materially based on market conditions, price markers, fell by more than 60% between August 2014 and March 2016), our continued production, decisions by the operators in blocks where the Company has undertaken decisive measures to ensure its ability to both we are not the operator, the success of our drilling results and future maximize ongoing projects and to preserve its cash. acquisitions. Our future financial condition and liquidity will be impacted by, among other factors, our level of production of oil and natural gas and Funding our anticipated capital expenditures relies in part on oil prices the prices we receive from the sale thereof, the success of our exploration remaining close to our estimates or higher levels and other factors to and appraisal drilling program, the number of commercially viable oil generate sufficient cash flow. Low oil prices affect our revenues, which in turn and natural gas discoveries made and the quantities of oil and natural affect our debt capacity and the covenants in our financing agreements, as gas discovered, the speed with which we can bring such discoveries to well as the amount of cash we can borrow using our oil reserves as collateral, production and the actual cost of exploration, appraisal and development the amount of cash we are able to generate from current operations and the of our oil and natural gas assets. amount of cash we can obtain from prepayment agreements. If we are not able to generate the sales which, together with our current cash resources, Unfavorable credit and market conditions, declines in oil prices have are sufficient to fund our capital program, we will not be able to efficiently affected and could continue to affect negatively the economies of the execute our work program, which would cause us to further decrease our countries in which we operate and may negatively affect our business, and work program and would harm our business outlook, investor confidence results of operations. and our share price. Declines in oil prices have had, and may continue to have, a negative impact In addition, actions taken by the company to maximize ongoing projects on our business, financial condition, results of operations and cash flows. and to reduce expenses, including renegotiations and reduction of oil and In addition, the declines in WTI and Brent, the main international oil price gas service contracts and other initiatives such as cost cutting may expose markers, which fell by more than 60% between August 2014 and March us to claims and contingencies from interested parties that may have a 2016 and which are expected to remain volatile in the near future, may also negative impact on our business, financial condition, results of operations negatively affect the economies of the countries in which we operate. Any of and cash flows. If oil prices are lower than expected, we may be unable to the foregoing factors or a combination of these factors could have an adverse meet our contractual obligations with oil and service contracts and our effect on our results of operations and financial condition. suppliers. Equally, those third parties may be unable to meet their contractual obligations to us as a result of the oil price crisis, impacting on our operations. Unless we replace our oil and natural gas reserves, our reserves and In budgeting for our future activities, we have relied on a number of continued successful identification of productive fields and prospects and assumptions, including, with regard to our discovery success rate, the the identified locations in which we drill in the future may not yield oil or production will decline over time. Our business is dependent on our number of wells we plan to drill, our working interests in our prospects, natural gas in commercial quantities. the costs involved in developing or participating in the development of a prospect, the timing of third-party projects and our ability to obtain needed Production from oil and gas properties declines as reserves are depleted, financing with respect to any further acquisitions and the availability of with the rate of decline depending on reservoir characteristics. Accordingly, both suitable equipment and qualified personnel. These assumptions are our current proved reserves will decline as these reserves are produced. As of GeoPark 39 December 31, 2016, our reserves-to-production (or reserve life) ratio for net In Brazil, all of our revenues from the sale of gas and condensate in the Manati proved reserves in Colombia, Chile, Brazil and Peru was 9.0 years. According Field in Brazil were generated from sales to Petróleo Brasileiro S.A. (“Petrobras”), to estimates, if on January 1, 2017 we ceased all drilling and development the operator of the Manati Field, pursuant to a long-term gas off-take contract. activities, including recompletions, refracs and workovers, our proved See “Item 4. Information on the Company—B. Business Overview—Significant developed producing reserves base in Colombia, Chile, Brazil and Peru would Agreements—Brazil—Petrobras Natural Gas Purchase Agreement.” decline 30% during the first year. Our future oil and natural gas reserves and production, and therefore our or if any of them were to decide not to renew their contracts with us or to cash flows and income, are highly dependent on our success in efficiently renew them at a lower sales price, this could have a material adverse effect developing our current reserves and using cost-effective methods to find on our business, financial condition and results of operations. For example, or acquire additional recoverable reserves. While we have had success in see “Item 4. Information on the Company—B. Business Overview—Significant identifying and developing commercially exploitable fields and drilling Agreements—Colombia” and ““Item 4. Information on the Company—B. locations in the past, we may be unable to replicate that success in the Business Overview—Significant Agreements—Chile.” If any of our buyers were to decrease or cease purchasing oil or gas from us, future. We may not identify any more commercially exploitable fields or successfully drill, complete or produce more oil or gas reserves, and the Our results of operations could be materially adversely affected by wells which we have drilled and currently plan to drill within our blocks or fluctuations in foreign currency exchange rates. concession areas may not discover or produce any further oil or gas or may not discover or produce additional commercially viable quantities of oil or Although a majority of our net revenues is denominated in US$, unfavorable gas to enable us to continue to operate profitably. If we are unable to replace fluctuations in foreign currency exchange rates for certain of our expenses in our current and future production, the value of our reserves will decrease, Colombia, Chile, Brazil, Peru and Argentina could have a material adverse effect and our business, financial condition and results of operations will be on our results of operations. A portion of the cost reductions that we achieved materially adversely affected. in 2015 and 2016 (as compared to 2014) were related to the depreciation of local currencies, including mainly the Col$, the Ch$ and the Brazilian real . An We derive a significant portion of our revenues from sales to a few key appreciation of local currencies can increase our costs and negatively impact customers. our results from operations. In Colombia, for the year ended December 31, 2016, we made 90% of our oil Furthermore, we have not entered, into derivative transactions to hedge the sales to C.I. Trafigura Petroleum Colombia S.A.S., a leading commodity trading effect of changes in the exchange rate of local currencies to the US$. Because and logistics company (“Trafigura”), representing 59% of our consolidated our Consolidated Financial Statements are presented in US$, we must translate revenues for the same period. Sales for the year ended December 31, 2016 revenues, expenses and income, as well as assets and liabilities, into US$ at were made mostly under long-term agreements. In 2017 we are expected to exchange rates in effect during or at the end of each reporting period. sell most of our Colombian production to Trafigura. Through our Brazilian operations, we are exposed to fluctuations in the In Chile, 100% of our crude oil and condensate sales are made to ENAP. For real against the US$, as our Brazilian revenues and expenses are mostly the year ended December 31, 2016, sales to ENAP represented 10% of our denominated in reais . The real has experienced frequent and substantial total revenues. ENAP imports the majority of the oil it refines and partially variations in relation to the US$ and other foreign currencies, which could supplements those imports with volumes supplied locally by its own operated materially and adversely affect the growth of the Brazilian economy and fields and those operated by us. The sales contract with ENAP is commonly our business, financial condition and results of operations. For example, in revised every year to reflect changes in the global oil market and to adjust for 2016, we recorded exchange rate gains amounting to US$14.5 million in ENAP’s logistics costs in the Gregorio oil terminal. As of the date of this annual our Brazilian subsidiary that were mainly generated by the credit facility of report, we are negotiating a new agreement with ENAP that we expect will US$70.5 million that we incurred to acquire Rio das Contas in March 31, 2014. take effect in April 2017. In addition, in Chile, in the year ended December See “—A. Selected financial data—Exchange rates.” 31, 2016, almost all of our natural gas sales were made to Methanex Chile S.A., the Chilean subsidiary of the Methanex Corporation (or “Methanex”), a There are inherent risks and uncertainties relating to the exploration and leading global methanol producer, under a long-term contract, the “Methanex production of oil and natural gas. Gas Supply Agreement”, which expires on April 30, 2017. In March 2017, we executed a new gas supply agreement with Methanex effective from May Our performance depends on the success of our exploration and 1, 2017 to December 31, 2026. Sales to Methanex represented 9% of our production activities and on the existence of the infrastructure that will consolidated revenues for the year ended December 31, 2016. allow us to take advantage of our oil and gas reserves. Oil and natural 40 GeoPark 20F gas exploration and production activities are subject to numerous risks availability of gathering systems, marketing and transportation constraints, beyond our control, including the risk that exploration activities will not refining capacity, regulatory approvals and other factors. Because of the identify commercially viable quantities of oil or natural gas. Our decisions uncertainty inherent in these factors, there can be no assurance that the to purchase, explore, develop or otherwise exploit prospects or properties numerous potential drilling locations we have identified will ever be drilled or, will depend in part on the evaluation of seismic and other data obtained if they are, that we will be able to produce oil or natural gas from these or any through geophysical, geochemical and geological analysis, production other potential drilling locations. data and engineering studies, the results of which are often inconclusive or subject to varying interpretations. Furthermore, the marketability of any oil and natural gas production from Our business requires significant capital investment and maintenance expenses, which we may be unable to finance on satisfactory terms or at all. our projects may be affected by numerous factors beyond our control. These Because the oil and natural gas industry is capital intensive, we expect to factors include, but are not limited to, proximity and capacity of pipelines and make substantial capital expenditures in our business and operations for other means of transportation, the availability of upgrading and processing the exploration and production of oil and natural gas reserves. See “Item 4. facilities, equipment availability and government laws and regulations Information on the Company –B. Business Overview—2017 Strategy and (including, without limitation, laws and regulations relating to prices, sale Outlook.” We incurred capital expenditures of US$39 million and US$49 million restrictions, taxes, governmental stake, allowable production, importing and during the years ended December 31, 2016 and 2015, respectively. See “Item exporting of oil and natural gas, environmental protection and health and 5. Operating and Financial Review and Prospects—A. Operating Results— safety). The effect of these factors, individually or jointly, cannot be accurately Factors Affecting our Results of Operations—Discovery and exploitation of predicted, but may have a material adverse effect on our business, financial reserves.” condition and results of operations. The actual amount and timing of our future capital expenditures may differ There can be no assurance that our drilling programs will produce oil materially from our estimates as a result of, among other things, commodity and natural gas in the quantities or at the costs anticipated, or that our prices, actual drilling results, the availability of drilling rigs and other currently producing projects will not cease production, in part or entirely. equipment and services, and regulatory, technological and competitive Drilling programs may become uneconomic as a result of an increase in developments. In response to changes in commodity prices, we may increase our operating costs or as a result of a decrease in market prices for oil and or decrease our actual capital expenditures. We intend to finance our future natural gas. Our actual operating costs or the actual prices we may receive capital expenditures through cash generated by our operations and potential for our oil and natural gas production may differ materially from current future financing arrangements. However, our financing needs may require estimates. In addition, even if we are able to continue to produce oil and us to alter or increase our capitalization substantially through the issuance of gas, there can be no assurance that we will have the ability to market our oil debt or equity securities or the sale of assets. and gas production. See “—Our inability to access needed equipment and infrastructure in a timely manner may hinder our access to oil and natural gas If our capital requirements vary materially from our current plans, we may markets and generate significant incremental costs or delays in our oil and require further financing. In addition, we may incur significant financial natural gas production” below. indebtedness in the future, which may involve restrictions on other financing and operating activities. We may also be unable to obtain financing or Our identified potential drilling location inventories are scheduled over financing on terms favorable to us. These changes could cause our cost many years, making them susceptible to uncertainties that could materially of doing business to increase, limit our ability to pursue acquisition alter the occurrence or timing of their drilling. opportunities, reduce cash flow used for drilling and place us at a competitive disadvantage. A significant reduction in cash flows from operations or the Our management team has specifically identified and scheduled certain availability of credit could materially adversely affect our ability to achieve our potential drilling locations as an estimation of our future multi-year drilling planned growth and operating results. activities on our existing acreage. These identified potential drilling locations, including those without proved undeveloped reserves, represent a significant Oil and gas operations contain a high degree of risk and we may not be fully part of our growth strategy. insured against all risks we face in our business. Our ability to drill and develop these identified potential drilling locations Oil and gas exploration and production is speculative and involves a high depends on a number of factors, including oil and natural gas prices, the degree of risk and hazards. In particular, our operations may be disrupted availability and cost of capital, drilling and production costs, the availability by risks and hazards that are beyond our control and that are common of drilling services and equipment, drilling results, lease expirations, the among oil and gas companies, including environmental hazards, blowouts, GeoPark 41 industrial accidents, occupational safety and health hazards, technical • accidents; failures, labor disputes, community protests or blockades, unusual or • transportation; unexpected geological formations, flooding, earthquakes and extended • unforeseen engineering and drilling complications; interruptions due to weather conditions, explosions and other accidents. • environmental or geological uncertainties; and For example, in the first half of 2013 we experienced a well control • other unforeseen circumstances. incident at our Chercán 1 well in the Flamenco Block in Chile with no harm to employees or property. While we were able to bring that incident Any of these events or other unanticipated events could give rise to delays in under control without injuries or environmental damage, there can be no development and completion of our projects and cost overruns. assurance that we will not experience similar or more serious incidents in the future, which could result in damage to, or destruction of, wells or For example, in 2013, the drilling and completion cost for the exploratory production facilities, personal injury, environmental damage, business well Chilco x-1 in our Flamenco Block in Chile was originally estimated at interruption, financial losses and legal liability. US$2.6 million, but the actual cost was approximately US$4.0 million, mainly due to mechanical issues during the drilling as it was the first well drilled While we believe that we maintain customary insurance coverage for with a new drilling rig. companies engaged in similar operations, we are not fully insured against all risks in our business. In addition, insurance that we do and plan to carry Delays in the construction and commissioning of projects or other technical may contain significant exclusions from and limitations on coverage. We may difficulties may result in future projected target dates for production being elect not to obtain certain non-mandatory types of insurance if we believe delayed or further capital expenditures being required. These projects that the cost of available insurance is excessive relative to the risks presented. may often require the use of new and advanced technologies, which can The occurrence of a significant event or a series of events against which we be expensive to develop, purchase and implement and may not function are not fully insured and any losses or liabilities arising from uninsured or as expected. Such uncertainties and operating risks associated with underinsured events could have a material adverse effect on our business, development projects could have a material adverse effect on our business, financial condition or results of operations. results of operations or financial condition. The development schedule of oil and natural gas projects is subject to cost Competition in the oil and natural gas industry is intense, which makes it overruns and delays. difficult for us to attract capital, acquire properties and prospects, market oil and natural gas and secure trained personnel. Oil and natural gas projects may experience capital cost increases and overruns due to, among other factors, the unavailability or high cost of drilling We compete with the major oil and gas companies engaged in the exploration rigs and other essential equipment, supplies, personnel and oil field services. and production sector, including state-owned exploration and production The cost to execute projects may not be properly established and remains companies that possess substantially greater financial and other resources dependent upon a number of factors, including the completion of detailed than we do for researching and developing exploration and production cost estimates and final engineering, contracting and procurement costs. technologies and access to markets, equipment, labor and capital required Development of projects may be materially adversely affected by one or more to acquire, develop and operate our properties. We also compete for the of the following factors: • shortages of equipment, materials and labor; acquisition of licenses and properties in the countries in which we operate. • fluctuations in the prices of construction materials; Our competitors may be able to pay more for productive oil and natural • delays in delivery of equipment and materials; gas properties and exploratory prospects and to evaluate, bid for and • labor disputes; • political events; • title problems; • obtaining easements and rights of way; • blockades or embargoes; • litigation; purchase a greater number of properties and prospects than our financial or personnel resources permit. Our competitors may also be able to offer better compensation packages to attract and retain qualified personnel than we are able to offer. In addition, there is substantial competition for capital available for investment in the oil and natural gas industry. As a result of each of the aforementioned, we may not be able to compete successfully in the future in • compliance with governmental laws and regulations, including acquiring prospective reserves, developing reserves, marketing hydrocarbons, environmental, health and safety laws and regulations; attracting and retaining quality personnel or raising additional capital, which • adverse weather conditions; • unanticipated increases in costs; • natural disasters; 42 GeoPark 20F 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.” Our estimated oil and gas reserves are based on assumptions that may upon bringing the production back on line, potentially resulting in decreased prove inaccurate. production and increased remediation costs. The exploitation and sale of oil and natural gas and liquids will also be subject to timely commercial processing Our oil and gas reserves estimates in Colombia, Chile, Brazil, and Peru as and marketing of these products, which depends on the contracting, financing, of December 31, 2016 are based on the D&M Reserves Report. Although building and operating of infrastructure by third parties. classified as “proved reserves,” the reserves estimates set forth in the D&M Reserves Reports are based on certain assumptions that may prove inaccurate. In Colombia, producers of crude oil have historically suffered from tanker DeGolyer and MacNaughton’s primary economic assumptions in estimates transportation logistics issues and limited storage capacity, which cause delays included oil and gas sales prices determined according to SEC guidelines, in delivery and transfer of title of crude oil. Such capacity issues in Colombia future expenditures and other economic assumptions (including interests, may require us to transport crude from our Colombian operations via truck, royalties and taxes) as provided by us. which may increase the costs of those operations. Road infrastructure is limited in certain areas in which we operate, and certain communities have In Chile, DeGolyer and MacNaughton ’s estimates are based in part on the used and may continue to use road blockages, which can sometimes interfere assumption that Methanex continues to commit to purchase Fell Block gas with our operations in these areas. For example, in December 2014, our under the existing long-term contract beyond April 30, 2017. In March 2017, Colombian production was impacted by approximately 5,000 bopd during we executed a new gas supply agreement with Methanex effective from May the last 13 days of the year by a road blockage, which was restored to normal 1, 2017 to December 31, 2026. production levels by the beginning of January 2015. Oil and gas reserves engineering is a subjective process of estimating In Chile, we transport the crude oil we produce in the Fell Block by truck to accumulations of oil and gas that cannot be measured in an exact way, ENAP’s processing, storage and selling facilities at the Gregorio Refinery. and estimates of other engineers may differ materially from those set out As of the date of this annual report, ENAP purchases all of the crude oil we herein. Numerous assumptions and uncertainties are inherent in estimating produce in Chile. We rely upon the continued good condition, maintenance quantities of proved oil and gas reserves, including projecting future rates of and accessibility of the roads we use to deliver the crude oil we produce. If production, timing and amounts of development expenditures and prices of the condition of these roads were to deteriorate or if they were to become oil and gas, many of which are beyond our control. Results of drilling, testing inaccessible for any period of time, this could delay delivery of crude oil in and production after the date of the estimate may require revisions to be Chile and materially harm our business. For example, in January 2011, social made. For example, if we are unable to sell our oil and gas to customers, this and labor unrest resulted in the roads to the Gregorio Refinery being closed may impact the estimate of our oil and gas reserves. Accordingly, reserves for two days, and we were unable to deliver crude oil to ENAP. estimates are often materially different from the quantities of oil and gas that are ultimately recovered, and if such recovered quantities are substantially In the Fell Block, we depend on ENAP-owned gas pipelines to deliver the gas lower than the initial reserves estimates, this could have a material adverse we produce to Methanex, the sole purchaser of the gas we produce. If ENAP’s impact on our business, financial condition and results of operations. pipelines were unavailable, this could have a materially adverse effect on our ability to deliver and sell our product to Methanex, which could have a Our inability to access needed equipment and infrastructure in a timely material adverse effect on our gas sales. In addition, gas production in some manner may hinder our access to oil and natural gas markets and generate areas in the Tierra del Fuego Blocks and the Otway and Tranquilo Blocks could significant incremental costs or delays in our oil and natural gas production. require us to build a new network of gas pipelines in order for us to be able to deliver our product to market, which could require us to make significant Our ability to market our oil and natural gas production depends substantially capital investments. on the availability and capacity of processing facilities, oil tankers, transportation facilities (such as pipelines, crude oil unloading stations and While Brazil has a well-developed network of hydrocarbon pipelines, storage trucks) and other necessary infrastructure, which may be owned and operated and loading facilities, we may not be able to access these facilities when by third parties. Our failure to obtain such facilities on acceptable terms or needed. Pipeline facilities in Brazil are often full and seasonal capacity on a timely basis could materially harm our business. We may be required to restrictions may occur, particularly in natural gas pipelines. Our failure to shut down oil and gas wells because access to transportation or processing secure transportation or access to pipelines or other facilities once we facilities may be limited or unavailable when needed. If that were to occur, then commence operations in the concessions we were awarded in Brazil on we would be unable to realize revenue from those wells until arrangements acceptable terms or on a timely basis could materially harm our business. were made to deliver the production to market, which could cause a material adverse effect on our business, financial condition and results of operations. In Peru, future production in the Morona Block is expected to be transported In addition, the shutting down of wells can lead to mechanical problems through the existing North Peruvian Pipeline, which is currently out of service GeoPark 43 due to technical issues. Though the Peruvian government is implementing a final decision of the Brazilian Institute for the Environment and Natural a program to maintain the pipeline, significant delays in restoring pipeline Renewable Resources ( Instituto Brasileiro do Meio-Ambiente e dos Recursos capacity, future technical issues, other general infrastructure problems Naturais Renováveis ). Although the administrative fines were filed against or social unrest affecting pipeline operation may adversely affect the Petrobras, as a party to the concession agreement governing the Manati Field, recoverability of our future investments, our future production or revenues Rio das Contas may be liable up to its participation interest of 10%. related to the Morona Block. Additionally, offshore drilling generally requires more time and more advanced In addition, as the Morona Block is located in a remote area of the tropical drilling technologies, involving a higher-risk of technological failure and usually rainforest, the development of the project involves that significant higher drilling costs. Offshore projects often lack proximity to existing oilfield infrastructure has to be built, as processing facilities, storages tanks and an service infrastructure, necessitating significant capital investment in flow line approximately 97 km pipeline from the site to the North Peruvian Pipeline. infrastructure before we can market the associated oil or gas of a commercial Also, as there are no roads available in the surrounding area, logistics will be discovery, increasing both the financial and operational risk involved with performed by helicopters or barges during specific seasons of the year. These these operations. Because of the lack and high cost of infrastructure, some issues may lead us to incur significant costs or investments that may not be offshore reserve discoveries may never be produced economically. recoverable through our commercial activities in the Morona Block. Our use of seismic data is subject to interpretation and may not accurately risks may be heightened since they are outside of our control. We have a identify the presence of oil and natural gas. 10% interest in the Manati Field which limits our operating flexibility in such Further, because we are not the operator of our offshore fields, all of these offshore fields. See “—We are not, and may not be in the future, the sole owner Even when properly used and interpreted, seismic data and visualization or operator of all of our licensed areas and do not, and may not in the future, techniques are tools only used to assist geoscientists in identifying subsurface hold all of the working interests in certain of our licensed areas. Therefore, we structures as well as eventual hydrocarbon indicators, and do not enable may not be able to control the timing of exploration or development efforts, the interpreter to know whether hydrocarbons are, in fact, present in those associated costs, or the rate of production of any non-operated and, to an structures. In addition, the use of seismic and other advanced technologies extent, any non-wholly-owned, assets.” requires significant expenditures and we could incur losses as a result of these expenditures. Because of these uncertainties associated with our We may suffer delays or incremental costs due to difficulties in negotiations use of seismic data, some of our drilling activities may not be successful with landowners and local communities, including native communities, or economically viable, and our overall drilling success rate or our drilling where our reserves are located. success rate for activities in a particular area could decline, which could have a material adverse effect on us. Access to the sites where we operate requires agreements (including, for example, assessments, rights of way and access authorizations) with Through our Brazilian operations, we face operational risks relating to landowners and local communities. If we are unable to negotiate agreements offshore drilling. with landowners, we may have to go to court to obtain access to the sites of our operations, which may delay the progress of our operations at such Our operations in the BCAM-40 Concession in Brazil may include shallow- sites. In Chile, for example, we have negotiated the necessary agreements for offshore drilling activity in two areas in the Camamu-Almada Basin, which we many of our current operations in the Magallanes Basin. In Brazil, in the event expect will continue to be operated by Petrobras. that social unrest continues or intensifies, this may lead to delays or damage relating to our ability to operate the assets we have acquired or may acquire in Offshore operations are subject to a variety of operating risks and laws and our Brazil Acquisitions. regulations, including among other things, with respect to environmental, health and safety matters, specific to the marine environment, such as In Colombia, although we have agreements with many landowners and are capsizing, collisions and damage or loss from hurricanes or other adverse in negotiations with others, we expect our costs to increase following current weather conditions. These conditions can cause substantial damage to facilities and future negotiations regarding access to our blocks, as the economic and interrupt production. As a result, we could incur substantial liabilities, expectations of landowners have generally increased, which may delay compliance costs, fines or penalties that could reduce or eliminate the funds access to existing or future sites. In addition, the expectations and demands available for exploration, development or leasehold acquisitions, or result in of local communities on oil and gas companies operating in Colombia may loss of equipment and properties. For example, the Manati Field has been also increase. As a result, local communities have demanded that oil and subject to administrative infraction notices, which have resulted in fines against gas companies invest in remediating and improving public access roads, Petrobras in an aggregate amount of US$12.5 million, all of which are pending compensate them for any damages related to use of such roads and, more 44 GeoPark 20F generally, invest in infrastructure that was previously paid for with public In Peru, the rights to explore and produce hydrocarbons are granted through funds. Due to these circumstances, oil and gas companies in Colombia, a license contract signed with Perupetro. The scope and schedule of such including us, are now dealing with increasing difficulties resulting from development will depend on us and Petroperu. The license contract could instances of social unrest, temporary road blockages and conflicts with be terminated by Perupetro if the development obligations included in such landowners. For example, in December 2014, production from certain fields agreement are not fulfilled. In addition, there is also an exploratory commitment in the Llanos 34 Block was affected by a road blockage resulting in our consisting of the drilling of one exploratory well every two and a half years. reduction of production for a period of 13 days that was returned to normal Failure to fulfill the exploratory commitment will lead to acreage relinquishment in early January 2015. materially affecting the project. Moreover, we have entered into a Joint Investment Agreement with Petroperu by which, subject to the economic There can be no assurance that disputes with landowners and local and technical feasibility of the Morona Project, we are obliged to bear 100% communities will not delay our operations or that any agreements we reach of capital cost required to carry out long test to existing well Situche Central with such landowners and local communities in the future will not require us 3X, and if we decide to continue with the project after that, to the existing to incur additional costs, thereby materially adversely affecting our business, well Situche Central 2X. In addition, we are required to cover any capital or financial condition and results of operations. Local communities may also operational expenditures associated with the project until December 31, 2020. protest or take actions that restrict or cause their elected government to We expect these expenditures to be substantially reimbursed by Petroperu from restrict our access to the sites of our operations, which may have a material revenues associated with future sales. Failure to fulfill such obligations will result adverse effect on our operations at such sites. in the loss of our participating interest in the License Contract of the Morona Block, and subject us to possible damage claims from Petroperu. In Peru, the Morona Block is located in land inhabited by native communities. Though we have already signed certain agreements with native communities For additional details regarding the status of our operations with respect authorizing the execution of the Environmental Impact Assessment for the to our various special contracts and concession agreements, see “Item 4. Morona Project, similar projects in the Peruvian rainforest have faced significant Information on the Company—B. Business Overview—Our operations.” social conflicts and work delays due to community claims. Social conflicts or community claims could adversely affect the recoverability of our future A significant amount of our reserves or production have been derived from investments, our future production and revenues related to the Morona Block. our operations in certain blocks, including the Llanos 34 in Colombia, the Fell Block in Chile, the BCAM-40 Concession in Brazil and the Morona Block in Peru. Under the terms of some of our various CEOPs, E&P Contracts and concession agreements, we are obligated to drill wells, declare any discoveries and file For the year ended December 31, 2016, the Llanos 34 Block contained 50% of periodic reports in order to retain our rights and establish development our net proved reserves and generated 66% of our production, the Fell Block areas. Failure to meet these obligations may result in the loss of our interests contained 17% of our net proved reserves and generated 17% of our total in the undeveloped parts of our blocks or concession areas. production, the BCAM-40 Concession contained 7% of our net proved reserves and generated 13% of our production and the Morona Block contained 25% of In order to protect our exploration and production rights in our license areas, our net proved reserves. While our continuing expansion with new exploratory we must meet various drilling and declaration requirements. In general, unless blocks incorporated in our portfolio mean that the above mentioned blocks we make and declare discoveries within certain time periods specified in our may be expected to be a less significant component of our overall business, various special operation contracts ( Contratos Especiales de Operación para la we cannot be sure that we will be able to continue diversifying our reserves Exploración y Explotación de Yacimientos de Hidrocarburo ; hereinafter “CEOP”), and production. Resulting from these, any government intervention, E&P Contracts and concession agreements, our interests in the undeveloped impairment or disruption of our production due to factors outside of our parts of our license areas may lapse. Should the prospects we have identified control or any other material adverse event in our operations in such blocks under these contracts and agreements yield discoveries, we may face delays in would have a material adverse effect on our business, financial condition and drilling these prospects or be required to relinquish these prospects. The costs results of operations. to maintain or operate the CEOPs, E&P Contracts and concession agreements over such areas may fluctuate and may increase significantly, and we may Our contracts in obtaining rights to explore and develop oil and natural not be able to meet our commitments under such contracts and agreements gas reserves are subject to contractual expiration dates and operating on commercially reasonable terms or at all, which may force us to forfeit our conditions, and our CEOPs, E&P Contracts and concession agreements are interests in such areas. For example, in 2016, after fulfilling the committed subject to early termination in certain circumstances. exploratory commitments, five exploratory blocks were relinquished to the ANP. See “Item 4. Information on the Company—B. Business Overview—Our Under certain CEOPs, E&P Contracts and concession agreements to which operations—Operations in Brazil.” we are or may in the future become parties, we are or may become subject GeoPark 45 to guarantees to perform our commitments and/or to make payment for Company—B. Business Overview—Significant Agreements—Chile—CEOPs.” other obligations, and we may not be able to obtain financing for all such There can be no assurance that the early termination of any of our CEOPs obligations as they arise. If such obligations are not complied with when would not have a material adverse effect on us. In addition, according to due, in addition to any other remedies that may be available to other parties, the Chilean Constitution, Chile is entitled to expropriate our rights in our this could result in cancelation of our CEOPs, E&P Contracts and concession CEOPs for reasons of public interest. Although Chile would be required to agreements or dilution or forfeiture of interests held by us. As of December indemnify us for such expropriation, there can be no assurance that any such 31, 2016, the aggregate outstanding amount of this potential liability for indemnification will be paid in a timely manner or in an amount sufficient to guarantees was approximately US$69.8 million, mainly related to capital cover the harm to our business caused by such expropriation. commitments in Isla Norte, Campanario and Flamenco Blocks in Chile, rounds 11, 12 and 13 concessions in Brazil, three blocks in Argentina and the Llanos In Brazil, concession agreements generally may be renewed at the ANP’s 32, VIM-3, and Llanos 34 Blocks in Colombia. See “Item 4. Information on the discretion for an additional period, provided that a renewal request is made Company—B. Business Overview—Our operations” and Note 31(b) to our at least 12 months prior to the termination of the concession agreement Consolidated Financial Statements. and there has not been a breach of the terms of the concession agreement. We expect that all our concession agreements will provide for early Additionally, certain of the CEOPs, E&P Contracts and concession agreements termination in the event of: (i) government expropriation for reasons of to which we are or may in the future become a party are subject to set public interest; (ii) revocation of the concession pursuant to the terms of the expiration dates. Although we may want to extend some of these contracts concession agreement; or (iii) failure by us or our partners to fulfill all of our beyond their original expiration dates, there is no assurance that we can do respective obligations under the concession agreement (subject to a cure so on terms that are acceptable to us or at all, although some CEOPs contain period). Administrative or monetary sanctions may also be applicable, as provisions enabling exploration extensions. determined by the ANP, which shall be imposed based on applicable law and regulations. In the event of early termination of a concession agreement, the In Colombia, our E&P Contracts may be subject to early termination for a compensation to which we are entitled may not be sufficient to compensate breach by the parties, a default declaration, application of any of the contracts’ us for the full value of our assets. Moreover, in the event of early termination of unilateral termination clauses or pursuant to termination clauses mandated any concession agreement due to failure to fulfill obligations thereunder, we by Colombian law. Anticipated termination declared by the ANH results in the may be subject to fines and/or other penalties. immediate enforcement of monetary guaranties against us and may result in an action for damages by the ANH and/or a restriction on our ability to engage In Peru, License Contracts for hydrocarbon exploitation are in force and will in contracts with the Colombian government during a certain period of time. remain in effect for 30 years. This term is non-renewable. With regard to the See “Item 4. Information on the Company—B. Business Overview—Significant Morona Block, approximately one-third of the contract term has already Agreements—Colombia—E&P Contracts.” elapsed, and twenty years remain. Nevertheless, since May 14, 2013, the License Contract related to the Morona Block is under force majeure. During a In Chile, our CEOPs provide for early termination by Chile in certain force majeure period contract terms are suspended (including the term time) circumstances, depending upon the phase of the CEOP. For example, pursuant as long as the party to the contract is fulfilling certain obligations related to to the Fell Block CEOP, Chile has the right to terminate the CEOP under certain obtaining environmental permits, as is currently the case with the Morona circumstances if we fail to perform. If the Fell Block CEOP is terminated in Block. The term of the agreement will be extended by the same amount of the exploitation phase, we will have to transfer to Chile, free of charge, any time it has been suspended by a force majeure event. The concession year productive wells and related facilities, provided that such transfer does not expiration is related to approval of environmental impact assessment (EIA) interfere with our abandonment obligations and excluding certain pipelines study for project development. The expiration of the License Contract will and other assets. See “Item 4. Information on the Company—B. Business occur twenty years after EIA approval. The License Contract is also subject Overview—Significant Agreements—Chile—CEOPs—Fell Block CEOP.” If the to early termination in case of our breach of contractual obligations. In CEOP is terminated early due to a breach of our obligations, we may not be such an event, all the existing facilities and wells located in the block will entitled to compensation. Our CEOPs for the Tierra del Fuego Blocks, which be transferred, without charge, to Perupetro, and we will have to carry out are in the exploration phase, may be subject to early termination during this abandonment plans for remediation and restoration of any polluted area in phase under certain circumstances, including if we fail to perform under the block and for de-commission the facilities that are no longer required for the terms of the CEOPs, voluntarily relinquish all areas under the CEOPs or the block’s operations. if we cease to operate in the CEOP area or declare bankruptcy. If the Tierra del Fuego Block CEOPs are terminated within the exploration phase, we Early termination or nonrenewal of any CEOP, E&P Contract or concession are released from all obligations under the CEOPs, except for obligations agreement could have a material adverse effect on our business, financial regarding the abandonment of fields, if any. See “Item 4. Information on the situation or results of operations. 46 GeoPark 20F We may not be able to meet delivery requirements under the crude sale Information on the Company—B. Business Overview—Marketing and delivery agreements in Colombia. commitments—Chile.” We historically sold to several customers in Colombia, including sales made However, we cannot be sure that Methanex will continue to purchase the gas through wellhead or pipeline. For 2017 and 2018, we expect to sell most of from us, including the above committed levels as from May 1, 2017, or that its our Colombian production under long-term agreements with Trafigura. The efforts to reduce the risk of future shut-downs will be successful, which could Trafigura offtake contract began in March 2016 and expires in December 2018. have a material adverse effect on our gas revenues. Additionally, we cannot be sure that Methanex will have sufficient supplies of gas to operate its plant Under the Trafigura Agreement, we follow agreed priorities for the volumes and continue to purchase our gas production or that methanol prices would to be transported through the ODL Pipeline. For the period March 1, 2016 be sufficient to cover the operating costs. We cannot be sure that we would to September 2016, Trafigura received 10,000 bopd of our production. The be able to sell our gas production to other parties or on similar terms, which Trafigura Agreement was amended in 2016 and February 2017, setting the could have a material adverse effect on our business, financial condition and current volumes to be delivered to Trafigura to 12,000 bopd until December results of operations. 2018. Nonperformance of our obligations of delivery to Trafigura in terms, amounts and quality of the crude may lead us to pay Trafigura’s fare We are not, and may not be in the future, the sole owner or operator of all commitments in the ODL Pipeline for the transport, dilution and download of our licensed areas and do not, and may not in the future, hold all of the of crude, and may lead to early termination of the crude sales agreement as working interests in certain of our licensed areas. Therefore, we may not be well as the immediate repayment of any amounts outstanding under the able to control the timing of exploration or development efforts, associated prepayment agreement of up to US$100 million, as well as compensation for costs, or the rate of production of any non-operated and, to an extent, any other damages. non-wholly-owned, assets. We sell almost all of our natural gas in Chile to a single customer, who has in As of December 31, 2016, we are not the operator of approximately 26% or the past temporarily idled its principal facility. sole owner of approximately 33% of the blocks included in our portfolio. See “Item 4. Information on the Company—B. Business Overview—Operations For the year ended December 31, 2016, almost all of our natural gas sales in Colombia, Operations in Chile, Operations in Brazil, Operations in Peru and in Chile were made to Methanex under a long-term contract, the Methanex Operations in Argentina”. Gas Supply Agreement, which expires on April 30, 2017. Sales to Methanex represented 9% of our consolidated revenues for the year ended December In addition, the terms of the joint venture agreements or association 31, 2016. Methanex also buys gas from ENAP and a consortium that Methanex agreements governing our other partners’ interests in almost all of the blocks has formed with ENAP. While our current contract with Methanex requires it that are not wholly-owned or operated by us require that certain actions be to purchase the entirety of our production of natural gas from the Fell Block, approved by supermajority vote. The terms of our other current or future and requires us to sell to Methanex all of our natural gas production from Fell license or venture agreements may require at least the majority of working Block, subject to minor exceptions, if Methanex were to decrease or cease interests to approve certain actions. As a result, we may have limited ability its purchase of gas from us, this would have a material adverse effect on our to exercise influence over operations or prospects in the blocks operated revenues derived from the sale of gas. In March 2017, we executed a new gas by our partners, or in blocks that are not wholly-owned or operated by us. A supply agreement with Methanex effective from May 1, 2017 to December breach of contractual obligations by our partners who are the operators of 31, 2026. Under the new agreement, Methanex commits to purchase up to such blocks could eventually affect our rights in exploration and production 400,000 SCM/d of gas produced by us. contracts in some of our blocks in Colombia and Brazil. Our dependence on our partners could prevent us from realizing our target returns for those Methanex has two methanol producing facilities at its Cabo Negro production discoveries or prospects. facility, near the city of Punta Arenas in southern Chile. Methanex relies on local suppliers of natural gas, including ENAP, for its operations. We alone Moreover, as we are not the sole owner or operator of all of our properties, cannot supply Methanex with all the natural gas it requires for its operations. we may not be able to control the timing of exploration or development In the past, the Methanex plant was idled due to an anticipated insufficient able to carry out our key business strategies of minimizing the cycle time supply of natural gas. The supply of natural gas decreased during the winter between discovery and initial production at such properties. The success months of 2015 due to the increase in seasonal gas demand from the city of and timing of exploration and development activities operated by our Punta Arenas, to which gas producers, including us, gave priority, delivering partners will depend on a number of factors that will be largely outside of gas to the city through Methanex which re-sold our gas to ENAP. See “Item 4. our control, including: activities or the amount of capital expenditures and may therefore not be GeoPark 47 • the timing and amount of capital expenditures; • the operator’s expertise and financial resources; • approval of other block partners in drilling wells; Colombia SAS and operational requirements. Our inability or failure to obtain LGI’s consent or a delay by LGI in granting its consent may restrict or delay the ability of GeoPark Chile, GeoPark TdF or GeoPark Colombia to take certain • the scheduling, pre-design, planning, design and approvals of activities actions, which may have an adverse effect on our operations in such countries and processes; • selection of technology; and • the rate of production of reserves, if any. and on our business, financial condition and results of operations. Acquisitions that we have completed and any future acquisitions, strategic investments, partnerships or alliances could be difficult to integrate and/or This limited ability to exercise control over the operations on some of our identify, could divert the attention of key management personnel, disrupt license areas may cause a material adverse effect on our financial condition our business, dilute stockholder value and adversely affect our financial and results of operations. results, including impairment of goodwill and other intangible assets. LGI, our strategic partner in Chile and Colombia, may not consent to our One of our principal business strategies includes acquisitions of properties, taking certain actions or may eventually decide to sell its interest in our prospects, reserves and leaseholds and other strategic transactions, including Chilean and Colombian operations to a third party. in jurisdictions in which we do not currently operate. The successful acquisition and integration of producing properties requires an assessment of We have a strategic partnership with LGI, which has a 20% equity interest several factors, including: in GeoPark Chile S.A., (a sociedad anónima cerrada incorporated under the • recoverable reserves; laws of Chile; hereinafter “GeoPark Chile”), a 14% direct equity interest • future oil and natural gas prices; in GeoPark TdF S.A. (“GeoPark TdF”) (31.2% taking into account direct • development and operating costs; and and indirect participation through GeoPark Chile) and a 20% equity • potential environmental and other liabilities. interest in GeoPark Colombia SAS, through its equity interest in GeoPark Colombia Coöperatie. Our shareholders’ agreements with LGI in each The accuracy of these assessments is inherently uncertain. In connection of Chile and Colombia provides that we have a right of first offer if LGI with these assessments, we perform a review of the subject properties decides to sell any of its interest in GeoPark Chile or GeoPark Colombia that we believe to be generally consistent with industry practices. Our Coöperatie. There can be no assurance, however, that we will have the review and the review of advisors and independent reserves engineers funds to purchase LGI’s interest in Chile and/or Colombia and that LGI will will not reveal all existing or potential problems nor will it permit us or not decide to sell its shares to a third party whose interests may not be them to become sufficiently familiar with the properties to fully assess aligned with ours. their deficiencies and potential recoverable reserves. Inspections may not always be performed on every well, and environmental conditions are not In addition, our shareholders’ agreements with LGI in Chile and Colombia necessarily observable even when an inspection is undertaken. We, advisors contain provisions that require GeoPark Chile and GeoPark Colombia or independent reserves engineers may apply different assumptions when Coöperatie, the sole shareholder of GeoPark Colombia SAS, to obtain LGI’s assessing the same field. Even when problems are identified, the seller consent before undertaking certain actions. For example, under the terms of may be unwilling or unable to provide effective contractual protection the shareholders’ agreement with LGI in Colombia, LGI must approve GeoPark against all or part of the problems. We often are not entitled to contractual Colombia’s annual budget and work programs and mechanisms for funding indemnification for environmental liabilities and acquire properties on any such budget or program, the entering into any borrowings other than an “as is” basis. Even in those circumstances in which we have contractual those provided in an approved budget or incurred in the ordinary course of indemnification rights for pre-closing liabilities, it remains possible that business to finance working capital needs, the granting of any guarantee or the seller will not be able to fulfill its contractual obligations. There can be indemnity to secure liabilities of parties other than those of our Colombian no assurance that problems related to the assets or management of the subsidiary and disposing of any material assets other than those provided for companies and operations we have acquired, or operations we may acquire in an approved budget and work program. or add to our portfolio in the future, will not arise in future, and these problems could have a material adverse effect on our business, financial Additionally, pursuant to our agreement with LGI in Colombia, we and condition and results of operations. LGI have agreed to vote our common shares or otherwise cause GeoPark Colombia Coöperatie to declare dividends only after allowing for retentions Significant acquisitions and other strategic transactions may involve other of cash for approved work programs and budgets capital adequacy risks, including: requirements, working capital requirements, banking covenants associated • diversion of our management’s attention to evaluating, negotiating and with any loan entered into by GeoPark Colombia Coöperatie and GeoPark integrating significant acquisitions and strategic transactions; 48 GeoPark 20F • challenge and cost of integrating acquired operations, information There is no assurance that we will be able to enter into a concession management and other technology systems and business cultures with ours agreement in the PN-T-597 Block that would be favorable to our exploration while carrying on our ongoing business; goals. See “Item 8—Financial Information—A. Consolidated statements and • contingencies and liabilities that could not be or were not identified during other financial information—Legal proceedings.” the due diligence process, including with respect to possible deficiencies in the internal controls of the acquired operations; and The present value of future net revenues from our proved reserves will not • challenge of attracting and retaining personnel associated with acquired necessarily be the same as the current market value of our estimated oil operations. and natural gas reserves. If we fail to realize the benefits we anticipate from an acquisition, our results of You should not assume that the present value of future net revenues from our operations may be adversely affected. proved reserves is the current market value of our estimated oil and natural gas reserves. For the year ended December 31, 2016, we have based the It is also possible that we may not identify suitable acquisition targets or estimated discounted future net revenues from our proved reserves on the 12 strategic investment, partnership or alliance candidates. Our inability to month unweighted arithmetic average of the first-day-of-the-month price for identify suitable acquisition targets, strategic investments, partners or the preceding 12 months. Actual future net revenues from our oil and natural alliances, or our inability to complete such transactions, may negatively affect gas properties will be affected by factors such as: our competitiveness and growth opportunities. Moreover, if we fail to properly • actual prices we receive for oil and natural gas; evaluate acquisitions, alliances or investments, we may not achieve the • actual cost of development and production expenditures; anticipated benefits of any such transaction and we may incur costs in excess • the amount and timing of actual production; and of what we anticipate. • changes in governmental regulations, taxation or the taxation invariability provisions in our CEOPs. Future acquisitions financed with our own cash could deplete the cash and working capital available to adequately fund our operations. We may also The timing of both our production and our incurrence of expenses in finance future transactions through debt financing, the issuance of our equity connection with the development and production of oil and natural gas securities, existing cash, cash equivalents or investments, or a combination properties will affect the timing and amount of actual future net revenues from of the foregoing. Acquisitions financed with the issuance of our equity proved reserves, and thus their actual value. In addition, the 10% discount securities could be dilutive, which could affect the market price of our stock. factor we use when calculating discounted future net revenues may not be the Acquisitions financed with debt could require us to dedicate a substantial most appropriate discount factor based on interest rates in effect from time to portion of our cash flow to principal and interest payments and could subject time and risks associated with us or the oil and natural gas industry in general. us to restrictive covenants. The PN-T-597 Concession Agreement in Brazil may not close. and may require higher levels of capital expenditures than we currently The development of our proved undeveloped reserves may take longer anticipate. Therefore, our proved undeveloped reserves ultimately may not In Brazil, GeoPark Brasil is a party to a class action filed by the Federal be developed or produced. Prosecutor’s Office regarding a concession agreement of exploratory Block PN-T-597, which the ANP initially awarded GeoPark Brasil in the 12th oil and As of December 31, 2016, approximately 41% of our net proved reserves are gas bidding round held in November 2013. The Brazilian Federal Court issued developed. Development of our undeveloped reserves may take longer and an injunction against the ANP and GeoPark Brasil in December 2013 that require higher levels of capital expenditures than we currently anticipate. prohibited GeoPark Brasil’s execution of the concession agreement until the Additionally, delays in the development of our reserves or increases in costs ANP conducted studies on whether drilling for unconventional resources would to drill and develop such reserves will reduce the standardized measure contaminate the dams and aquifers in the region. On July 17, 2015, GeoPark value of our estimated proved undeveloped reserves and future net revenues Brasil, at the instruction of the ANP, signed the concession agreement, which estimated for such reserves, and may result in some projects becoming included a clause prohibiting GeoPark Brasil from conducting unconventional uneconomic, causing the quantities associated with these uneconomic exploration activity in the area. Despite the clause containing the prohibition, projects to no longer be classified as reserves. This was due to the uneconomic the judge in the case concluded that the concession agreement should not status of the reserves, given the proximity to the end of the concessions for be executed. Thus, GeoPark Brasil requested that the ANP comply with the these blocks, which does not allow for future capital investment in the blocks. decision and annul the concession agreement, which the ANP’s Board did on There can be no assurance that we will not experience similar delays or October 9, 2015. The annulment reverted the status of all parties to the status increases in costs to drill and develop our reserves in the future, which could quo ante , which maintains GeoPark Brasil’s right to the block. result in further reclassifications of our reserves. GeoPark 49 We are exposed to the credit risks of our customers and any material exploration, production, development and transportation and storage of crude nonpayment or nonperformance by our key customers could adversely oil, such as explosions, fires, car and truck accidents, floods, labor disputes, affect our cash flow and results of operations. social unrest, community protests or blockades, guerilla attacks, security Our customers may experience financial problems that could have a our or third-party facilities. Any of these events could have a material adverse significant negative effect on their creditworthiness. Severe financial problems effect on our exploration and production operations, or disrupt transportation encountered by our customers could limit our ability to collect amounts or other process-related services provided by our third-party contractors. breaches, pipeline ruptures and spills and mechanical failure of equipment at owed to us, or to enforce the performance of obligations owed to us under contractual arrangements. We are highly dependent on certain members of our management and technical team, including our geologists and geophysicists, and on our The combination of declining cash flows as a result of declines in commodity ability to hire and retain new qualified personnel. prices, a reduction in borrowing basis under reserves-based credit facilities and the lack of availability of debt or equity financing may result in a The ability, expertise, judgment and discretion of our management and our significant reduction of our customers’ liquidity and limit their ability to make technical and engineering teams are key in discovering and developing oil and payments or perform on their obligations to us. natural gas resources. Our performance and success are dependent to a large extent upon key members of our management and exploration team, and their Furthermore, some of our customers may be highly leveraged, and, in any loss or departure would be detrimental to our future success. In addition, our event, are subject to their own operating expenses. Therefore, the risk we ability to manage our anticipated growth depends on our ability to recruit and face in doing business with these customers may increase. Other customers retain qualified personnel. Our ability to retain our employees is influenced by may also be subject to regulatory changes, which could increase the risk of the economic environment and the remote locations of our exploration blocks, defaulting on their obligations to us. Financial problems experienced by our which may enhance competition for human resources where we conduct our customers could result in the impairment of our assets, a decrease in our activities, thereby increasing our turnover rate. There is strong competition in operating cash flows and may also reduce or curtail our customers’ future our industry to hire employees in operational, technical and other areas, and use of our products and services, which may have an adverse effect on our the supply of qualified employees is limited in the regions where we operate revenues and may lead to a reduction in reserves. and throughout Latin America generally. The loss of any of our executive We may not have the capital to develop our unconventional oil and gas and retain new qualified personnel could have a material adverse effect on us. officers or other key employees of our technical team or our inability to hire resources. We have identified opportunities for analyzing the potential of safety laws and regulations which may result in material liabilities and costs. We and our operations are subject to numerous environmental, health and unconventional oil and gas resources in some of our blocks and concessions. Our ability to develop this potential depends on a number of factors, We and our operations are subject to various international, foreign, federal, including the availability of capital, seasonal conditions, regulatory approvals, state and local environmental, health and safety laws and regulations negotiation of agreements with third parties, commodity prices, costs, access governing, among other things, the emission and discharge of pollutants into to and availability of equipment, services and personnel and drilling results. the ground, air or water; the generation, storage, handling, use, transportation In addition, as we have no previous experience in drilling and exploiting and disposal of regulated materials; and human health and safety. Our unconventional oil and gas resources, the drilling and exploitation of such operations are also subject to certain environmental risks that are inherent unconventional oil and gas resources depends on our ability to acquire in the oil and gas industry and which may arise unexpectedly and result the necessary technology, to hire personnel and other support needed in material adverse effects on our business, financial condition and results for extraction or to obtain financing and venture partners to develop such of operations. Breach of environmental laws could result in environmental activities. Because of these uncertainties, we cannot give any assurance administrative investigations and/or lead to the termination of our concessions as to the timing of these activities, or that they will ultimately result in the and contracts. Other potential consequences include fines and/or criminal or realization of proved reserves or meet our expectations for success. civil environmental actions. For instance, non-governmental organizations Our operations are subject to operating hazards, including extreme weather and gas companies in order to, among other things, halt our activities in any events, which could expose us to potentially significant losses. of the countries in which we operate or require us to pay fines. Additionally, in Colombia, recent rulings have provided that environmental licenses are Our operations are subject to potential operating hazards, extreme weather administrative acts subject to class actions that could eventually result in their conditions and risks inherent to drilling activities, seismic registration, cancellation, with potential adverse impacts on our E&P Contracts. seeking to preserve the environment may bring actions against us or other oil 50 GeoPark 20F We have not been and may not be at all times in complete compliance with Environmental, health and safety laws and regulations are complex environmental permits that we are required to obtain for our operations and and change frequently, and our costs of complying with such laws and the environmental and health and safety laws and regulations to which we regulations may adversely affect our results of operations and financial are subject. If we fail to comply with such requirements, we could be fined condition. See “Item 4. Information on the Company—B. Business or otherwise sanctioned by regulators, including through the revocation of Overview—Health, safety and environmental matters” and “Item 4. our permits or the suspension or termination of our operations. If we fail to Information on the Company—B. Business Overview—Industry and obtain, maintain or renew permits in a timely manner or at all, our operations regulatory framework.” could be adversely affected, impeded, or terminated, which could have a material adverse effect on our business, financial condition or results of Legislation and regulatory initiatives relating to hydraulic fracturing and operations. Some environmental licenses related to operation of the Manati other drilling activities for unconventional oil and gas resources could Field production system and natural gas pipeline have expired. However, the increase the future costs of doing business, cause delays or impede our operator submitted in a timely manner a request for renewal of those licenses plans, and materially adversely affect our operations. and as such this operation is not in default as long as the regulator does not state its final position on the renewal. Hydraulic fracturing of unconventional oil and gas resources is a process that involves injecting water, sand, and small volumes of chemicals into We have contracted with and intend to continue to hire third parties to perform the wellbore to fracture the hydrocarbon-bearing rock thousands of feet services related to our operations. We could be held liable for some or all below the surface to facilitate a higher flow of hydrocarbons into the environmental, health and safety costs and liabilities arising out of our actions wellbore. We are contemplating such use of hydraulic fracturing in the and omissions as well as those of our block partners, third-party contractors, production of oil and natural gas from certain reservoirs, especially shale predecessors or other operators. To the extent we do not address these costs formations. We currently are not aware of any proposals in Colombia, and liabilities or if we do not otherwise satisfy our obligations, our operations Chile, Brazil, Argentina or Peru to regulate hydraulic fracturing beyond the could be suspended, terminated or otherwise adversely affected. There is a regulations already in place. However, various initiatives in other countries risk that we may contract with third parties with unsatisfactory environmental, with substantial shale gas resources have been or may be proposed health and safety records or that our contractors may be unwilling or unable to or implemented to, among other things, regulate hydraulic fracturing cover any losses associated with their acts and omissions. practices, limit water withdrawals and water use, require disclosure of fracturing fluid constituents, restrict which additives may be used, or Releases of regulated substances may occur and can be significant. Under implement temporary or permanent bans on hydraulic fracturing. If any certain environmental laws and regulations applicable to us in the countries of the countries in which we operate adopts similar laws or regulations, in which we operate, we could be held responsible for all of the costs relating which is something we cannot predict right now, such adoption to any contamination at our past and current facilities and at any third-party could significantly increase the cost of, impede or cause delays in the waste disposal sites used by us or on our behalf. Pollution resulting from implementation of any plans to use hydraulic fracturing for unconventional waste disposal, emissions and other operational practices might require oil and gas resources. us to remediate contamination, or retrofit facilities, at substantial cost. We also could be held liable for any and all consequences arising out of human Our indebtedness and other commercial obligations could adversely affect exposure to such substances or for other damage resulting from the release our financial health and our ability to raise additional capital, and prevent of hazardous substances to the environment, property or to natural resources, us from fulfilling our obligations under our existing agreements and or affecting endangered species or sensitive environmental areas. We are borrowing of additional funds. currently required to, and in the future may need to, plug and abandon sites in certain blocks in each of the countries in which we operate, which could As of December 31, 2016, we had US$358.7 million of total indebtedness result in substantial costs. outstanding on a consolidated basis, which is 100% secured. As of December 31, 2016, our annual debt service obligation was approximately US$30.6 In addition, we expect continued and increasing attention to climate million, which mainly includes the interest payments under the Notes due change issues. Various countries and regions have agreed to regulate 2020 and the credit facility with Itaú BBA International plc. See “Item 5. emissions of greenhouse gases including methane (a primary component Operating and Financial Review and Prospects—B. Liquidity and Capital of natural gas) and carbon dioxide (a byproduct of oil and natural gas Resources—Indebtedness.” We are also restricted from entering into financial combustion). The regulation of greenhouse gases and the physical impacts arrangements in some circumstances such as in Colombia where LGI must of climate change in the areas in which we, our customers and the end- approve GeoPark Colombia’s financial arrangements. See “Item 4. Information users of our products operate could adversely impact our operations and on the Company—B. Business Overview—Significant Agreements— the demand for our products. Agreements with LGI—LGI Colombia Agreements” for more information. GeoPark 51 We have also entered into a prepayment agreement with Trafigura, which measures will be sufficient for this purpose. The ability of the information allows us to receive up to US$100 million in advance payments from Trafigura technology function to support our business in the event of a security breach on future oil deliveries. Our indebtedness could: or a disaster such as fire or flood and our ability to recover key systems and information from unexpected interruptions cannot be fully tested and there is a risk that, if such an event actually occurs, we may not be able to address • limit our capacity to satisfy our obligations with respect to our indebtedness, immediately the repercussions of a breach. In the event of a breach, key and any failure to comply with the obligations of any of our debt instruments, information and systems may be unavailable for a number of days leading to including restrictive covenants and borrowing conditions, could result in an an inability to conduct our business or perform some business processes in a event of default under the agreements governing our indebtedness; timely manner. We have implemented strategies to mitigate the impact from • require us to dedicate a substantial portion of our cash flow from operations these types of events. to the payments on our indebtedness, thereby reducing the availability of our cash flow to fund acquisitions, working capital, capital expenditures and Our employees have been and will continue to be targeted by parties using other general corporate purposes; fraudulent “spam” and “phishing” emails to misappropriate information • place us at a competitive disadvantage compared to certain of our or to introduce viruses or other malware through “trojan horse” programs competitors that have less debt; • limit our ability to borrow additional funds; to our computers. These emails appear to be legitimate emails sent by us but direct recipients to fake websites operated by the sender of the • in the case of our secured indebtedness, lose assets securing such indebtedness email or request that the recipient send a password or other confidential upon the exercise of security interests in connection with a default; information through email or download malware. Despite our efforts to • make us more vulnerable to downturns in our business or the economy; and mitigate “spoof” and “phishing” emails through education, “spoof” and • limit our flexibility in planning for, or reacting to, changes in our operations or “phishing” activities remain a serious problem that may damage our business and the industry in which we operate. information technology infrastructure. The indenture governing our Notes due 2020 includes covenants Risks relating to the countries in which we operate restricting dividend payments. For a description, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources— Our operations may be adversely affected by political and economic Indebtedness—Notes due 2020.” circumstances in the countries in which we operate and in which we may As a result of these restrictive covenants, we are limited in the manner operate in the future. in which we conduct our business, and we may be unable to engage in All of our current operations are located in South America. If local, regional favorable business activities or finance future operations or capital needs. or worldwide economic trends adversely affect the economy of any of the In the year ended December 31, 2016, we did not achieve an Adjusted countries in which we have investments or operations, our financial condition EBITDA (as defined in the indenture governing our Notes due 2020) that and results from operations could be adversely affected. was sufficient to allow us to incur additional financial indebtedness, other than certain categories and baskets of permitted debt, as specified in the Oil and natural gas exploration, development and production activities are indenture. Failure to comply with the restrictive covenants included in our subject to political and economic uncertainties (including but not limited to Notes due 2020 would not trigger an event of default. changes in energy policies or the personnel administering them), changes Similar restrictions could apply to us and our subsidiaries when we refinance or expropriation of property, cancellation or modification of contract rights, enter into new debt agreements which could intensify the risks described above. revocation of consents or approvals, the obtaining of various approvals in laws and policies governing operations of foreign-based companies, from regulators, foreign exchange restrictions, price controls, currency Our business could be negatively impacted by security threats, including fluctuations, royalty increases and other risks arising out of foreign cybersecurity threats as well as other disasters, and related disruptions. governmental sovereignty, as well as to risks of loss due to civil strife, acts of Our business processes depend on the availability, capacity, reliability activities, terrorism, acts of sabotage, territorial disputes and insurrection. and security of our information technology infrastructure and our ability In addition, we are subject both to uncertainties in the application of the to expand and continually update this infrastructure in response to tax laws in the countries in which we operate and to possible changes in our changing needs. It is critical to our business that our facilities and such tax laws (or the application thereof ), each of which could result in an infrastructure remain secure. Although we have implemented internal control increase in our tax liabilities. These risks are higher in developing countries, procedures to assure the security of our data, we cannot guarantee that these such as those in which we conduct our activities. war and community-based actions, such as protests or blockades, guerilla 52 GeoPark 20F The main economic risks we face and may face in the future because of our be subject to the exclusive jurisdiction of courts outside the United States or operations in the countries in which we operate include the following: may not be successful in subjecting non-U.S. persons to the jurisdiction of • difficulties incorporating movements in international prices of crude oil and courts in the United States, which could adversely affect the outcome of such exchange rates into domestic prices; dispute. Changes in tax laws may result in increases in our tax payments, which • the possibility that a deterioration in Chile’s, Colombia’s, Argentina’s, Peru’s could materially adversely affect our profitability and increase the prices of our or Brazil’s relations with multilateral credit institutions, such as the IMF, will products and services, restrict our ability to do business in our existing and target impact negatively on capital controls, and result in a deterioration of the markets and cause our results of operations to suffer. There can be no assurance business climate; that we will be able to maintain our projected cash flow and profitability • inflation, exchange rate movements (including devaluations), exchange following any increase in taxes applicable to us and to our operations. control policies (including restrictions on remittance of dividends), price instability and fluctuations in interest rates; The political and economic uncertainty in Brazil along with the ongoing “Lava • liquidity of domestic capital and lending markets; Jato” investigations regarding corruption at Petrobras may hinder the growth • tax policies; and of the Brazilian economy and could have an adverse effect on our business. • the possibility that we may become subject to restrictions on repatriation of earnings from the countries in which we operate in the future. Our Brazilian operations represent approximately 15% of our revenues as of December 31, 2016. The Brazilian economy has been experiencing a In addition, our operations in these areas increase our exposure to risks of slowdown. Inflation, unemployment and interest rates have increased more guerilla activities, social unrest, local economic conditions, political disruption, recently and the Brazilian reais has weakened significantly in comparison to civil disturbance, community protests or blockades, expropriation, piracy, tribal the US$. Our results of operations and financial condition may be adversely conflicts and governmental policies that may: disrupt our operations; require affected by the economic conditions in Brazil. us to incur greater costs for security; restrict the movement of funds or limit repatriation of profits; lead to U.S. government or international sanctions; limit Petrobras and certain other Brazilian companies in the energy and access to markets for periods of time; or influence the market’s perception of infrastructure sectors are facing investigations by the Securities Commission the risk associated with investments in these countries. Some countries in the of Brazil ( Comissão de Valores Mobiliários ), the U.S. Securities and Exchange geographic areas where we operate have experienced, and may experience Commission (“SEC”), the Brazilian Federal Police and the Brazilian Federal in the future, political instability, and losses caused by these disruptions may Prosecutor’s Office in connection with corruption allegations (the “Lava not be covered by insurance. Consequently, our exploration, development and Jato” investigations). Depending on the duration and outcome of such production activities may be substantially affected by factors which could have investigations, the companies involved may face downgrades from rating a material adverse effect on our results of operations and financial condition. We agencies, funding restrictions and a reduction in their revenues. Given the cannot guarantee that current programs and policies that apply to the oil and significance of the companies under investigation including Petrobras, this gas industry will remain in effect. could adversely affect Brazil’s growth prospects and could have a protracted effect on the oil and gas industry. In addition to the recent economic crisis, Our operations may also be adversely affected by laws and policies of the protests, strikes and corruption scandals have led to a fall in confidence. jurisdictions, including Bermuda, Colombia, Chile, Brazil, Peru, Argentina, the Netherlands and other jurisdictions in which we do business, that affect foreign We depend on maintaining good relations with the respective host trade and taxation, and by uncertainties in the application of, possible changes governments and national oil companies in each of our countries of operation. to (or to the application of) tax laws in these jurisdictions. For example, in 2016 the Colombian government introduced tax reforms with provisions The success of our business and the effective operation of the fields in each of our that are effective January 1, 2017. See Note 15 to our Consolidated Financial countries of operation depend upon continued good relations and cooperation Statements. With regards to Chile, although our CEOPs have protection against with applicable governmental authorities and agencies, including national oil tax changes through invariability tax clauses, potential issues may arise on companies such as Ecopetrol, ENAP, Petrobras, or Petroperu. For instance, for certain aspects not clearly defined in current or future tax reforms. the year ended December 31, 2016, 100% of our crude oil and condensate sales Changes in any of these laws or policies or the implementation thereof, and our Brazilian operations in BCAM-40 Concession provide us with a long-term uncertainty over potential changes in policy or regulations affecting any of the off-take contract with Petrobras, the Brazilian state-owned company that covers factors mentioned above or other factors in the future may increase the volatility approximately 100% of net proved gas reserves in the Manati Field, one of the of domestic securities markets and securities issued abroad by companies largest non-associated gas fields in Brazil. If we, the respective host governments operating in these countries, which could materially and adversely affect our and the national oil companies are not able to cooperate with one another, it financial position, results of operations and cash flows. Furthermore, we may could have an adverse impact on our business, operations and prospects. in Chile were made to ENAP, the Chilean state-owned oil company. In addition, GeoPark 53 Oil and natural gas companies in Colombia, Chile, Brazil, Peru and Argentina For example, in Brazil there is potential liability for personal injury, property do not own any of the oil and natural gas reserves in such countries. damage and other types of damages. Failure to comply with these laws and regulations also may result in the suspension or termination of operations Under Colombian, Chilean, Brazilian, Peruvian and Argentine law, all or our being subjected to administrative, civil and criminal penalties, onshore and offshore hydrocarbon resources in these countries are owned which could have a material adverse effect on our financial condition and by the respective sovereign. Although we are the operator of the majority expected results of operations. We expect to also operate in a consortium of the blocks and concessions in which we have a working and/or economic in some of our concessions, which, under the Brazilian Petroleum Law, interest and generally have the power to make decisions as how to market establishes joint and strict liability among consortium members, and the hydrocarbons we produce, the Chilean, Colombian, Brazilian, Peruvian failure to maintain the appropriate licenses may result in fines of R$10 to and Argentine governments have full authority to determine the rights, R$500 million. In addition, there is a contractual requirement in Brazilian royalties or compensation to be paid by or to private investors for the concession agreements regarding local content, which has become a exploration or production of any hydrocarbon reserves located in their significant issue for oil and natural gas companies operating in Brazil given respective countries. the penalties related with breaches thereof. The local content requirement will also apply to the production sharing contract regime. See “Item 4. If these governments were to restrict or prevent concessionaires, including Information on the Company—B. Business Overview—Our operations— us, from exploiting oil and natural gas reserves, or otherwise interfered with Operations in Brazil.” our exploration through regulations with respect to restrictions on future exploration and production, price controls, export controls, foreign exchange Significant expenditures may be required to ensure our compliance controls, income taxes, expropriation of property, environmental legislation with governmental regulations related to, among other things, licenses or health and safety, this could have a material adverse effect on our business, for drilling operations, environmental matters, drilling bonds, reports financial condition and results of operations. concerning operations, the spacing of wells, unitization of oil and natural gas accumulations, local content policy and taxation. Additionally, we are dependent on receipt of government approvals or permits to develop the concessions we hold in some countries. There can Colombia has experienced and continues to experience internal security issues be no assurance that future political conditions in the countries in which that have had or could have a negative effect on the Colombian economy. we operate will not result changes to policies with respect to foreign development and ownership of oil, environmental protection, health and Colombia has experienced internal security issues, primarily due to the safety or labor relations, which may negatively affect our ability to undertake activities of guerrillas, including the Revolutionary Armed Forces of Colombia ( exploration and development activities in respect of present and future Fuerzas Armadas Revolucionarias de Colombia or FARC). In the past, guerrillas properties, as well as our ability to raise funds to further such activities. Any have targeted the crude oil pipelines, including the Oleoducto Transandino, delays in receiving government approvals in such countries may delay our Caño Limón-Coveñas and Ocensa pipelines, and other related infrastructure operations or may affect the status of our contractual arrangements or our disrupting the activities of certain oil and natural gas companies and have ability to meet contractual obligations. resulted in unscheduled shut-downs of transportation systems. These Oil and gas operators are subject to extensive regulation in the countries in had and may have in the future a negative impact on the Colombian economy which we operate. or on our business, which may affect our employees or assets. activities, their possible escalation and the effects associated with them have The Colombian, Chilean, Brazilian, Peruvian and Argentine hydrocarbons In 2016, the Colombian government and the FARC signed a peace agreement, industries are subject to extensive regulation and supervision by their pursuant to which the FARC agreed to demobilize its troops and to hand respective governments in matters such as the environment, social over its weapons to a United Nations mission within 180 days. Our business, responsibility, tort liability, health and safety, labor, the award of exploration financial condition and results of operations could be adversely affected by and production contracts, the imposition of specific drilling and exploration rapidly changing economic or social conditions, including the Colombian obligations, taxation, foreign currency controls, price controls, capital government’s response to current peace agreements and negotiations with expenditures and required divestments. In some countries in which other groups, including the ELN, which may result in legislation that increases we operate, such as Colombia, we are required to pay a percentage of our tax burden or that of other Colombian companies. our expected production to the government as royalties. See “Item 4. Information on the Company—B. Business Overview—Industry and In addition, from time to time, community protests and blockades may arise regulatory framework—Columbia” and see Note 31 (a) to our Consolidated near our operations in Colombia, which could adversely affect our business, Financial Statements. financial condition or results of operations. 54 GeoPark 20F Risks related to our common shares consequently, your only opportunity to achieve a return on your investment is if the price of our stock appreciates. An active, liquid and orderly trading market for our common shares may not develop and the price of our stock may be volatile, which could limit your We have never paid, and do not intend to pay in the foreseeable future, ability to sell our common shares. cash dividends on our common shares. Any decision to pay dividends in the future, and the amount of any distributions, is at the discretion of our board of Our common shares began to trade on the New York Stock Exchange directors and our shareholders, and will depend on many factors, such as our (“NYSE”) on February 7, 2014, and as a result have a limited trading history. results of operations, financial condition, cash requirements, prospects and We cannot predict the extent to which investor interest in our company will other factors. Due to losses resulting from the oil price decline, accumulated maintain an active trading market on the NYSE, or how liquid that market losses amount to US$260.5 million as of December 31, 2016. will be in the future. We are also subject to Bermuda legal constraints that may affect our ability The market price of our common shares may be volatile and may be to pay dividends on our common shares and make other payments. Under influenced by many factors, some of which are beyond our control, including: the Companies Act, 1981 (as amended) of Bermuda (“Bermuda Companies • our operating and financial performance and identified potential drilling Act”), we may not declare or pay a dividend if there are reasonable grounds locations, including reserve estimates; for believing that we are, or would after the payment be, unable to pay our • quarterly variations in the rate of growth of our financial indicators, such as liabilities as they become due or that the realizable value of our assets would net income per common share, net income and revenues; thereafter be less than our liabilities. We are also subject to contractual • changes in revenue or earnings estimates or publication of reports by equity restrictions under certain of our indebtedness. research analysts; • fluctuations in the price of oil or gas; We are a holding company dependent upon dividends from our subsidiaries, • speculation in the press or investment community; which may be limited by law and by contract from making distributions to • sales of our common shares by us or our shareholders, or the perception that us, which would affect our financial condition, including the ability to pay such sales may occur; • involvement in litigation; • changes in personnel; • announcements by the company; dividends on the 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 • domestic and international economic, legal and regulatory factors unrelated source of revenues and cash flow is distributions from our subsidiaries. to our performance. Thus, our ability to pay dividends on the common shares will be contingent • variations in our quarterly operating results; upon the financial condition of our subsidiaries. Our subsidiaries are and • volatility in our industry, the industries of our customers and the global will be separate legal entities, and although they may be wholly-owned or securities markets; • changes in our dividend policy; controlled by us, they have no obligation to make any funds available to us, whether in the form of loans, dividends, distributions or otherwise. The • risks relating to our business and industry, including those discussed above; ability of our subsidiaries to distribute cash to us is also subject to, among • strategic actions by us or our competitors; other things, restrictions that are contained in our and our subsidiaries’ • actual or expected changes in our growth rates or our competitors’ growth rates; financing (including our Notes due 2020 and GeoPark Brasil’s loan to finance • investor perception of us, the industry in which we operate, the investment Rio das Contas) and joint venture agreements (principally our agreements opportunity associated with our common shares and our future performance; with LGI), availability of sufficient funds in such subsidiaries and applicable • adverse media reports about us or our directors and officers; state laws and regulatory restrictions. Claims of creditors of our subsidiaries • addition or departure of our executive officers; generally will have priority as to the assets of such subsidiaries over our • change in coverage of our company by securities analysts; claims and claims of our creditors and stockholders. To the extent the • trading volume of our common shares; ability of our subsidiaries to distribute dividends or other payments to us • future issuances of our common shares or other securities; could be limited in any way, our business, financial condition and results of • terrorist acts; operations, as well as our ability to pay dividends on the common shares, • the release or expiration of transfer restrictions on our outstanding common could be materially adversely affected. shares. We have never declared or paid, and do not intend to pay in the assets of our joint ventures and we may not be able to make major decisions foreseeable future, cash dividends on our common shares, and, or take timely actions with respect to our joint ventures unless our joint Additionally, we may not be able to fully control the operations and the GeoPark 55 venture partners agree. For example, we have entered into shareholder of total borrowings, which was mainly composed of the loan from Itaú Bank agreements with LGI in Chile and Colombia that limit the amount of that has a floating interest rate based on LIBOR (the “Rio das Contas Credit dividends that can be declared or returned to us, certain aspects related to Facility”). For more information, see “Item 4. Information on the Company—B. the management of our Chilean and Colombian businesses, the incurrence of Business Overview—Marketing and delivery commitments—Brazil,” and indebtedness, liens and our ability to sell certain assets. See “—Risks relating Note 3 in our Consolidated Financial Statements. Consequently, variations in to our business—LGI, our strategic partner in Chile and Colombia, may not interest rates could result in significant changes in the amount required to consent to our taking certain actions or may eventually decide to sell its cover our debt service obligations and our interest expense. interest in our Chilean and Colombian operations to a third party.” We may, in the future, enter into other joint venture agreements imposing additional In addition, interest and principal amounts payable pursuant to debt obligations restrictions on our ability to pay dividends. denominated in or indexed to US$ are subject to variations in the foreign currency exchange rates that could result in a significant increase in the amount Sales of substantial amounts of our common shares in the public market, or of the interest and principal payments in respect of such debt obligations. the perception that these sales may occur, could cause the market price of our common shares to decline. Certain shareholders have substantial control over us and could limit your ability to influence the outcome of key transactions, including a We may issue additional common shares or convertible securities in the change of control. future, for example, to finance potential acquisitions of assets, which we intend to continue to pursue. Sales of substantial amounts of our common Mr. Gerald E. O’Shaughnessy, our Chairman, Mr. James F. Park, our shares in the public market, or the perception that these sales may occur, Chief Executive Officer, and Mr. Juan Cristóbal Pavez, director, control could cause the market price of our common shares to decline. This could approximately 30% of our outstanding common shares as of December 31, also impair our ability to raise additional capital through the sale of our 2016, holding the shares either directly or through privately held funds. As equity securities. Under our memorandum of association, we are authorized a result, these shareholders, if acting together, would be able to influence to issue up to 5,171,949,000 common shares, of which 59,940,881 common or control matters requiring approval by our shareholders, including the shares were outstanding as of December 31, 2016. We cannot predict the election of directors and the approval of amalgamations, mergers or other size of future issuances of our common shares or the effect, if any, that extraordinary transactions. They may also have interests that differ from future sales and issuances of shares would have on the market price of our yours and may vote in a way with which you disagree and which may common shares. be adverse to your interests. The concentration of ownership may have the effect of delaying, preventing or deterring a change of control of our Provisions of the Notes due 2020 could discourage an acquisition of us by company, could deprive our stockholders of an opportunity to receive a a third party. premium for their common shares as part of a sale of our company and might ultimately affect the market price of our common shares. See “Item 7. Certain provisions of the Notes due 2020 could make it more difficult or Major Shareholders and Related Party Transactions—A. Major shareholders” more expensive for a third party to acquire us, or may even prevent a third for a more detailed description of our share ownership. party from acquiring us. For example, upon the occurrence of a fundamental change, holders of the Notes due 2020 will have the right, at their option, to As a foreign private issuer, we are subject to different U.S. securities laws require us to repurchase all of their notes at a purchase price equal to 101% of and NYSE governance standards than domestic U.S. issuers. This may afford the principal amount thereof plus any accrued and unpaid interest (including less protection to holders of our common shares, and you may not receive any additional amounts, if any) to the date of purchase. By discouraging an corporate and company information and disclosure that you are accustomed acquisition of us by a third party, these provisions could have the effect of to receiving or in a manner in which you are accustomed to receiving it. depriving the holders of our common shares of an opportunity to sell their common shares at a premium over prevailing market prices. As a foreign private issuer, the rules governing the information that we Variations in interest rates and exchange rate on our current and/or Securities Exchange Act of 1934, as amended (“Exchange Act”). Although we future financing arrangements may result in significant increases in our intend to report quarterly financial results and report certain material events, disclose differ from those governing U.S. corporations pursuant to the borrowing costs. we are not required to file quarterly reports on Form 10-Q or provide current reports on Form 8-K disclosing significant events within four days of their As of December 31, 2016, a portion of our total debt is sensitive to changes in occurrence and our quarterly or current reports may contain less information interest rates. At December 31, 2016, the outstanding long-term borrowing than required under U.S. filings. In addition, we are exempt from the Section affected by variable rates amounted to US$54.5 million, representing 15% 14 proxy rules, and proxy statements that we distribute will not be subject 56 GeoPark 20F to review by the SEC. Our exemption from Section 16 rules regarding sales of We have evaluated our internal controls for our financial reporting and have common shares by insiders means that you will have less data in this regard determined our controls were effective for the fiscal year ended December than shareholders of U.S. companies that are subject to the Exchange Act. 31, 2016. As long as we qualify as an “emerging growth company” as defined As a result, you may not have all the data that you are accustomed to having by the JOBS Act, we will not be required to obtain an auditor’s attestation when making investment decisions. For example, our officers, directors and report on our internal controls in future annual reports on Form 20-F as principal shareholders are exempt from the reporting and “short-swing” otherwise required by Section 404(b) of the Sarbanes-Oxley Act. Accordingly, profit recovery provisions of Section 16 of the Exchange Act and the rules our independent registered public accounting firm did not perform an thereunder with respect to their purchases and sales of our common shares. audit of our internal control over financial reporting for the fiscal year ended The periodic disclosure required of foreign private issuers is more limited December 31, 2016. Had our independent registered public accounting firm than that required of domestic U.S. issuers and there may therefore be performed an attestation on our internal control over financial reporting, it is less publicly available information about us than is regularly published by possible that their opinion on our internal controls could have differed from or about U.S. public companies. See “Item 10. Additional Information—H. ours which could harm our reputation and share value. Documents on display.” As a foreign private issuer, we will be exempt from complying with certain common shares which could result in the delay or denial of any transfers you There are regulatory limitations on the ownership and transfer of our corporate governance requirements of the NYSE applicable to a U.S. issuer, might seek to make. including the requirement that a majority of our board of directors consist of independent directors as well as the requirement that shareholders approve The Bermuda Monetary Authority (“BMA”), must specifically approve all any equity issuance by us which represents 20% or more of our outstanding issuances and transfers of securities of a Bermuda exempted company like us common shares. As the corporate governance standards applicable to us are unless it has granted a general permission. We are able to rely on a general different than those applicable to domestic U.S. issuers, you may not have the permission from the BMA to issue our common shares, and to freely transfer our same protections afforded under U.S. law and the NYSE rules as shareholders common shares as long as the common shares are listed on the NYSE and/or of companies that do not have such exemptions. other appointed stock exchange, to and among persons who are non-residents of Bermuda for exchange control purposes. Any other transfers remain subject We are an “emerging growth company,” and we cannot be certain if the to approval by the BMA and such approval may be denied or delayed. reduced disclosure requirements applicable to emerging growth companies will make our common shares less attractive to investors. 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 are an “emerging growth company,” as defined in the Jumpstart our Business Startups Act of 2012 (“JOBS Act”), and for as long as we continue We are incorporated as an exempted company under the laws of Bermuda to be an “emerging growth company” we may choose to take advantage of and substantially all of our assets are located in Colombia, Chile, Argentina, certain exemptions from various reporting requirements that are applicable to Brazil and Peru. In addition, most of our directors and executive officers other public companies that are not “emerging growth companies,” including, reside outside the United States and all or a substantial portion of the but not limited to, not being required to comply with the auditor attestation assets of such persons are located outside the United States. As a result, requirements of Section 404(b) of the Sarbanes Oxley Act. We cannot predict it may be difficult or impossible to effect service of process within the if investors will find our common shares less attractive because we will rely on United States upon us, or to recover against us on judgments of U.S. courts, these exemptions. If some investors find our common shares less attractive as including judgments predicated upon the civil liability provisions of the a result, there may be a less active trading market for our common shares and U.S. federal securities laws. Further, no claim may be brought in Bermuda our share price may be more volatile. against us or our directors and officers in the first instance for violation of U.S. federal securities laws because these laws have no extraterritorial Under the JOBS Act, emerging growth companies can delay adopting new application under Bermuda law and do not have force of law in Bermuda. or revised accounting standards until such time as those standards apply to However, a Bermuda court may impose civil liability, including the private companies. We have irrevocably elected not to avail ourselves of this possibility of monetary damages, on us or our directors and officers if the exemption from new or revised accounting standards, and, therefore, we will facts alleged in a complaint constitute or give rise to a cause of action be subject to the same new or revised accounting standards as other public under Bermuda law. companies that are not emerging growth companies. Our internal controls over financial reporting may not be effective which for the reciprocal recognition and enforcement of judgments in civil and could have a significant and adverse effect on our business and reputation. commercial matters. As a result, whether a United States judgment would There is no treaty in force between the United States and Bermuda providing GeoPark 57 Information on the company be enforceable in Bermuda against us or our directors and officers depends 9400. Our website is www.geo-park.com. The information on our website on whether the U.S. court that entered the judgment is recognized by the does not constitute part of this annual report. Bermuda court as having jurisdiction over us or our directors and officers, as determined by reference to Bermuda conflict of law rules. A judgment Our company debt from a U.S. court that is final and for a sum certain based on U.S. federal We are a leading independent oil and natural gas exploration and production securities laws will not be enforceable in Bermuda unless the judgment debtor (“E&P”) company with operations in Latin America and a proven track record of had submitted to the jurisdiction of the U.S. court, and the issue of submission growth in production and reserves since 2006. We operate in Colombia, Chile, and jurisdiction is a matter of Bermuda (not U.S.) law. Brazil, Peru and Argentina. In addition, and irrespective of jurisdictional issues, the Bermuda courts will We produced a net average of 22.4 mboepd during the year ended December not enforce a U.S. federal securities law that is either penal or contrary to 31, 2016, of which 70%, 17% and, 13% were, respectively, in Colombia, Chile, Bermuda public policy. An action brought pursuant to a public or penal law, and Brazil, and of which 75% was oil. Currently, we are ranked as the third the purpose of which is the enforcement of a sanction, power or right at the largest private oil and gas operator in Colombia and the first private oil and instance of the state in its sovereign capacity, will not be entertained by a gas operator in Chile. Bermuda court. Certain remedies available under the laws of U.S. jurisdictions, including certain remedies under U.S. federal securities laws, would not be We have built our company around three principal capabilities: available under Bermuda law or enforceable in a Bermuda court, as they would be contrary to Bermuda public policy. • 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 best The transfer of our common shares may be subject to capital gains taxes science, solid economics and ability to take the necessary managed risks. pursuant to indirect transfer rules in Chile. • as an Operator, which is our ability to execute in a timely manner and to have the know-how to profitably drill for, produce, treat, transport and sell In September 2012, Chile established “indirect transfer rules,” which impose our oil and gas – with the drive and persistence to find solutions, overcome taxes, under certain circumstances, on capital gains resulting from indirect obstacles, seize opportunities and achieve results. transfers of shares, equity rights, interests or other rights in the equity, • as a Consolidator, which is our ability and initiative to assemble the right control or profits of a Chilean entity, as well as on transfers of other assets and balance and portfolio of upstream assets in the right hydrocarbon basins in property of permanent establishments or other businesses in Chile (“Chilean the right regions with the right partners and at the right price – coupled with Assets”). As we indirectly own Chilean Assets, the indirect transfer rules the visions and skills to transform and improve value above ground. would apply to transfers of our common shares provided certain conditions outside of our control are met. If such conditions were present and as a We believe that our risk and capital management policies have enabled result the indirect transfer rules were to apply to sales of our common shares, us to compile a geographically diverse portfolio of properties that such sales would be subject to indirect transfer tax on the capital gain that balances exploration, development and production of oil and gas. may be determined in each transaction. For a description of the indirect These attributes have also allowed us to raise capital and to partner with transfer rules and the conditions of their application see “Item 10. Additional premier international companies. Finally, we believe we have developed Information—E. Taxation—Chilean tax on transfers of shares.” a distinctive culture within our organization that promotes and rewards ITEM 4. INFORMATION ON THE COMPANY partnership, entrepreneurship and merit. Consistent with this approach, all of our employees are eligible to participate in our long-term incentive program, which is the Performance-Based Employee Long-Term Incentive A. History and development of the company Program. See “Item 6. Directors, Senior Management and Employees—B. General We were incorporated as an exempted company pursuant to the laws of Compensation—Equity Incentive Compensation—Performance-Based Employee Long-Term Incentive Program.” Bermuda as GeoPark Holdings Limited in February 2006. On July 30, 2013, Our regional platform and risk-balanced portfolio has been built following a our shareholders approved a change in our name to GeoPark Limited, proactive but conservative long term technical approach, converting projects effective from July 31, 2013. We maintain a registered office in Bermuda at into successful value-generating assets. Cumberland House, 9th Floor, 1 Victoria Street, Hamilton HM 11, Bermuda. Our principal executive offices are located at Nuestra Señora de los Ángeles History 179, Las Condes, Santiago, Chile, telephone number +562 2242 9600, and We were founded in 2002 by Gerald E. O’Shaughnessy and James F. Park, Florida 981, 1st floor, Buenos Aires, Argentina, telephone number +5411 4312 who have over 30 years of international oil and natural gas experience, 58 GeoPark 20F respectively, and who collectively hold approximately 25% of our common Colombia PN S.A. Sucursal Colombia), a Colombian branch of a sociedad shares as of the date of this annual report. Mr. O’Shaughnessy currently serves anónima incorporated under the laws of Panama, which merged into GeoPark as our Chairman and Mr. Park currently Colombia SAS (“Winchester”), (ii) La Luna Oil Company Limited S.A., a sociedad anónima incorporated under the laws of Panama, which merged into GeoPark Our history commenced with the purchase of AES Corporation’s upstream Colombia SAS (“Luna”) and (iii) GeoPark Cuerva LLC, formerly known as oil and natural gas assets in Chile and Argentina. Those assets included a Hupecol Caracara LLC, a limited liability company incorporated under the laws non-operating working interest in the Fell Block in Chile, which at that time of the state of Delaware, which merged into GeoPark Colombia SAS (“Cuerva”). was operated by ENAP, the Chilean state-owned hydrocarbon company, These acquisitions provided us with an attractive platform in Colombia that and operating working interests in the Del Mosquito, Cerro Doña Juana currently includes working interests and/or economic interests in 9 blocks and Loma Cortaderal Blocks in Argentina. Since 2002, our business has located in the Llanos and Magdalena Basins. grown significantly. In December 2012, LGI acquired a 20% equity interest in GeoPark Colombia In 2006, after demonstrating our technical expertise and committing to for US$20.1 million, including the assumption of existing debt and the an exploration and development plan, we obtained a 100% operating commitment to provide additional funding to cover LGI’s share of required working interest in the Fell Block from the Republic of Chile. Also in 2006, future investments in Colombia. Our agreement with LGI in Colombia the International Finance Corporation (“IFC”), a member of the World allows us to earn back up to 12% equity participation in GeoPark Colombia, Bank Group, became one of our principal shareholders, and we listed our depending on the success of our operations in Colombia. See “Item 10. common shares on AIM, a market operated by the London Stock Exchange Additional Information—C. Material contracts”. We believe our partnership plc, in an initial public offering of common shares outside the United States. with LGI represents a positive independent assessment and validation of Subsequently, in 2008 and 2009, we issued and sold additional common the quality of our Chilean and Colombian asset inventory, the extent of our shares outside the United States. technical and operational expertise and the ability of our management to In 2008 and 2009, we continued our growth in Chile by acquiring operating working interests in each of the Otway and Tranquilo Blocks, and by forming In May 2013, we entered into agreements to expand our operations to Brazil. partnerships with Pluspetrol, Wintershall, Methanex and IFC. See “—B. Business Overview—Our operations—Operations in Brazil.” structure and effect significant transactions. In 2010, we formed a strategic partnership with LGI, a Korean conglomerate, to In February 2014, we commenced trading on the NYSE and raised US$98 jointly acquire and develop upstream oil and gas projects in Latin America. LGI’s million (before underwriting commissions and expenses), including the over- business includes a portfolio of energy and raw material projects, including oil allotment option granted to and exercised by the underwriters, through the and gas projects in the Middle East and in Southeast and Central Asia. issuance of 13,999,700 common shares. In 2011, ENAP awarded us the opportunity to obtain operating working In July 2014, we were awarded a new exploratory license, the VIM-3 Block, interests in each of the Isla Norte, Flamenco and Campanario Blocks in Tierra during the 2014 Colombia Bidding Round, carried out by the ANH. del Fuego, Chile, which we refer to collectively as the Tierra del Fuego Blocks, and in 2012, jointly with ENAP, we entered into CEOPs with Chile for the In August 2014, we and Pluspetrol were awarded two exploration licenses in exploration and exploitation of hydrocarbons within these blocks. the Sierra del Nevado and Puelen Blocks, as part of the 2014 Mendoza Bidding Round in Argentina. The blocks are located in the Neuquén Basin, Argentina’s Also in 2011, LGI acquired a 20% equity interest in GeoPark Chile and a 14% largest producing hydrocarbon basin. equity interest in GeoPark TdF for US$148.0 million. LGI also provided GeoPark TdF with US$84.0 million in standby letters of credit to partially secure the In October 2014, we entered into an agreement to expand our footprint US$101.4 million performance bond required by the Chilean government into Peru through the acquisition of Morona Block in a joint venture with to guarantee GeoPark TdF’s obligations with respect to the minimum work Petroperu. Petroperu awarded a 75% working interest in and operatorship of program under the Tierra del Fuego CEOPs. Our agreement with LGI in the the Morona Block to us. The agreement was subject to regulatory approval, Tierra del Fuego Blocks allows us to earn back up to 12% equity participation which was completed in December 2016, as described below. in GeoPark TdF, depending on the success of our operations in Tierra del Fuego. See “Item 10. Additional Information—C. Material contracts.” In July 2015, we signed a farm-in agreement with Wintershall for the CN-V Block in Argentina. In October 2015, we were awarded four exploratory In the first quarter of 2012, we moved into Colombia by acquiring three blocks in the Brazilian ANP Bid Round 13 in the Reconcavo and privately held E&P companies: (i) Winchester Oil and Gas S.A. (now GeoPark Potiguar Basins. GeoPark 59 In December 2015, as part of our long term effort to build an upstream businesses. Since our inception, we have supported our growth through platform in Mexico, we participated in the Mexican Bid Round 1.3 with Grupo our prospect development efforts, drilling program, long-term strategic Alfa for onshore projects, however, no blocks were awarded. partnerships and alliances with key industry participants, accessing debt and equity capital markets, developing and retaining a technical team In December 2016, we obtained final regulatory approval for our acquisition with vast experience and creating a successful track record of finding and of the Morona Block in Peru. The Joint Investment and Operating Agreement producing oil and gas in Latin America. A key factor behind our success dated October 1, 2014 and its amendments were closed on December 1, 2016 ratio is our experienced team of geologists, geophysicists and engineers, following the issuance of Supreme Decree 031-2016-MEM. including professionals with specialized expertise in the geology of Colombia, Chile, Brazil, Peru and Argentina. See “Item 3. Key Information—D. Risk factors—Risks relating to our business.” B. Business Overview Oil industry situation and the impact on our operations As a consequence of the oil price decline which started in the second half of We are a leading independent oil and natural gas exploration and production 2014 (WTI and Brent, the main international oil price markers, fell by more than (“E&P”), company with operations in Latin America and a proven track record 60% between August 2014 and March 2016), the Company has undertaken of growth in production and reserves since 2006. We operate in Colombia, decisive measures to ensure its ability to both maximize the work program Chile, Brazil, Peru and Argentina. and preserve its cash. For more information see “Item 3. Key Information—D. Risk Factors—Risks Relating to our Business—The current oil price crisis has We have grown our business through drilling, developing and producing impacted our operations and corporate strategy” and “Item 4. Information on oil and gas, winning new licenses and acquiring strategic assets and the Company –B. Business Overview—2017 Strategy and Outlook.” 60 GeoPark 20F The following map shows the countries in which we have blocks with working and/or economic interests as of December 31, 2016. For information on our working interests in each of these blocks, see “—Our assets” below. Colombia Blocks COLOMBIA La Cuerva Llanos 34 Yamu Llanos 17 Llanos 32 Abanico Jagüeyes VIM - 3 Chile Blocks Fell Tranquilo Otway Isla Norte Campanario Flamenco Peru Block Morona PERU BRAZIL PA CIFIC OCEAN ARGENTINA CHILE (1) The PN-T-57 is still subject to the entry into the concession agreement and absence of legal impediments, by the ANP in the Parnaíba Basin. See “—Our operations—Operations in Brazil.” Brazil Blocks POT - T 619 REC - T 94 BCAM - 40 (Manati) SEAL - T 268 POT - T 747 POT - T 882 REC - T 93 REC - T 128 PN - T 597(1) ATLANTIC OCEAN Argentina Blocks CN-V Sierra del Nevado Puelen GeoPark 61 The following table sets forth our net proved reserves and other data as of and for the year ended December 31, 2016. For the year ended December 31 2016 Country Colombia Chile Brazil Peru Total Oil (mmbbl) Gas (bcf ) (mmboe) Oil equivalent 37.3 6.6 0.1 18.6 62.6 - 36.3 29.6 - 65.9 37.3 12.6 5.0 18.6 73.6 Revenues (in thousands of US$) 126,228 36,723 29,719 - % of total revenues 66% 19% 15% - 192,670 100% %Oil 100% 52% 1% 100% 85% Our commitment to growth has translated into a strong compounded annual growth rate (“CAGR”), of 19% for production in the period from 2012 to 2016, as measured by boepd in the table below. For the year ended December 31, Average net production (mboepd) % oil 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, 2016. Average daily production For the year ended December 31, 2016 Oil production Total crude oil production (bopd) Natural gas production Total natural gas production (mcf/day) Oil and natural gas production 2016 22.4 75% 2015 20.4 74% 2014 19.7 74% 2013 13.5 82% 2012 11.3 66% Colombia Chile Brazil Peru Total 15,536 1,380 39 324 14,964 17,346 - - - 16,955 32,634 22,394 Total oil and natural gas production (mboed) 15,590 3,874 2,930 Our assets According to the D&M Reserves Report, as of December 31, 2016, the blocks in Colombia, Chile, Brazil and Peru in which we have a working interest had 73.6 mmboe of net proved reserves, with 51%, 17%, 7% and 25% of such net proved reserves located in Colombia, Chile, Brazil and Peru, respectively. We produced a net average of 22.4 mboepd during the year ended December 31, 2016 of which 70%, 17%, and 13%, were in Colombia, Chile and Brazil, respectively, and of which 75% was oil. We are the operator of a majority of the blocks in which we have a working interest. 62 GeoPark 20F Our strengths Funding Platform We believe that we benefit from the following competitive strengths: We have historically benefited from consistent cash flows and access to debt and equity capital markets, as well as other funding sources, which have High quality and diversified asset base built through a successful track provided us with funds to finance our organic growth and the pursuit of record of organic growth and acquisitions potential new opportunities. The significant decline in oil prices since the end Our assets include a diverse portfolio of oil- and natural gas-producing reserves, of 2014 significantly impacted our revenues and results from operations for operating infrastructure, operating licenses and valuable geological surveys. the year ended December 31, 2016. We generated US$82.9 million, US$25.9 Throughout our history, we have delivered continuous growth in our production, million and US$230.7 million in cash from operations in the years ended and our management team has been able to identify under-exploited assets and December 31, 2016, 2015 and 2014, respectively, and had US$73.6 million and turn them into valuable, productive assets as illustrated below. US$82.7 million in cash and cash equivalents as of December 31, 2016 and 2015, respectively. As of December 31, 2016 we had US$358.7 million of total • In 2002, we acquired a non-operating working interest in the Fell Block in financial debt with over 80% of our debt maturing in 2020. Our short-term Chile, which at the time had no material oil and gas production or reserves objectives are to preserve cash. See “—Our long-term strategy” below. despite having been actively explored and drilled over the course of more than 50 years. Since 2006, when we became the operator of the Fell Block In February 2013, we issued US$300.0 million aggregate principal amount of we performed active exploration and development drilling that resulted in 7.50% senior secured notes due 2020 (“Notes due 2020”). The Notes due 2020 multiple oil and gas discoveries. contain incurrence-based limitations on the amount of indebtedness we can • In 2012, the acquisitions of Winchester, Luna and Cuerva in Colombia gave incur See “Item 5. Operating and Financial Review and Prospects—Liquidity us access to attractive exploratory and productive acres. In the Llanos Basin, and capital resources—Indebtedness—Notes due 2020—Covenants.” we pioneered a new play type combining structural and stratigraphic traps. Since we started activity in the Llanos 34 Block, we were able to perform an In February 2014, we commenced trading on the NYSE and raised US$98 active exploration and development drilling campaign, which resulted in million (before underwriting commissions and expenses), including the over- multiple new discoveries including the Tigana and Jacana fields. allotment option granted to and exercised by the underwriters, through the • In 2013, the acquisition of Rio das Contas, which closed on March 31, 2014, issuance of 13,999,700 common shares. gave us a 10% working interest in the BCAM-40 Concession, including the shallow-depth offshore Manati and Camarão Norte Fields in the Camamu- In March 2014, we borrowed US$70.5 million pursuant to a five-year term Almada Basin in the State of Bahia. The Manati Field is operated by Petrobras variable interest secured loan, secured by the benefits we receive under (with a 35% working interest), the Brazilian national company and the largest the Purchase and Sale Agreement for Natural Gas with Petrobras, equal to oil and gas operator in Brazil. Our Rio das Contas acquisition in Brazil provides 6-month LIBOR + 3.9% to finance part of the purchase price of our Rio das us with a long-term off-take contract with Petrobras that covers approximately Contas acquisition. In March 2015, we reached an agreement to: (i) extend 100% of net proved gas reserves in the Manati Field, a valuable relationship the principal payments that were due in 2015 (amounting to approximately with Petrobras and an established local platform and presence. US$15 million), which were divided pro-rata during the remaining principal • In 2014, we entered into an agreement to expand our footprint into installments, starting in March 2016 and (ii) to increase the variable interest Peru through the acquisition of the Morona Block in a joint venture with rate equal to the 6-month LIBOR + 4.0%. Petroperu. The Morona Block contains the Situche Central oil field, and offers a large exploration potential with several high impact prospects and plays. In December 2015, we entered into an offtake and prepayment agreement The joint venture agreement was subject to regulatory approval, which we with Trafigura under which we sell and deliver a portion of our Colombian received in December 2016. See “—Our operations—Operations in Peru.” crude oil production to Trafigura. The offtake agreement also provides us with prepayment of up to US$100 million, subject to applicable volumes Significant drilling inventory and resource potential from existing asset base corresponding to the terms of the agreement, in the form of prepaid future oil sales. Following subsequent amendments in February 2017, the availability Our portfolio includes large land holdings in high-potential hydrocarbon basins period under the prepayment agreement was extended until June 30, 2017. and blocks with multiple drilling leads and prospects in different geological formations, which provide a number of attractive opportunities with varying Highly committed founding shareholders and technical and management levels of risk. Our drilling inventory and our development plans target locations teams with proven industry expertise and technically-driven culture that provide attractive economics and support a predictable production profile. Our founding shareholders, management and operating teams have significant experience in the oil and gas industry and a proven technical and Our geoscience team continues to identify new potential accumulations and commercial performance record in onshore fields, as well as complex projects expand our inventory of prospects and drilling opportunities. in Latin America and around the world, including expertise in identifying GeoPark 63 acquisition and expansion opportunities. Moreover, we differentiate in our Colombian business. As of the date of this annual report, we are the ourselves from other E&P companies through our technically-driven culture, only independent E&P company in which LGI has equity investments in Latin which fosters innovation, creativity and timely execution. Our geoscientists, America. See “—Significant Agreements—Agreements with LGI” for additional geophysicists and engineers are pivotal to the success of our business information relating to these agreements. strategy, and we have created an environment and supplied the resources that enable our technical team to focus its knowledge, skills and experience on In addition, the IFC has been one of our shareholders since 2006, holding finding and developing oil and gas fields. an 5.8% equity interest in us as of December 31, 2016. In Chile, we have strong long-term commercial relationships with Methanex and ENAP, and In addition, we strive to provide a safe and motivating workplace for in Colombia, we have developed a strong relationship with Ecopetrol, the employees in order to attract, protect, retain and train a quality team in the Colombian state-owned oil and gas company. In Brazil, we believe we will competitive marketplace for capable energy professionals. continue to derive benefit from the long-term relationship GeoPark Brasil Our CEO, Mr. James Park, has been involved in E&P projects in Latin America since 1978. He has been closely involved in grass-roots exploration activities, 2017 Strategy and Outlook (formerly Rio das Contas) has with Petrobras. drilling and production operations, surface and pipeline construction, legal Oil prices were volatile since the end of 2014. In preparation for continued and regulatory issues, crude oil marketing and transportation and capital volatility, we have developed multiple scenarios for our 2017 capital raising for the industry. As of March 15, 2017, Mr. Park held 13.2% of our expenditure program. outstanding common shares. Our Chairman, Mr. Gerald O’Shaughnessy, has been actively involved in the oil assumption of US$45-US$50 per barrel and calls for approximately US$80 and gas business internationally and in North America since 1976. As of March million-US$90 million to fund our exploration and development, which we 15, 2017, Mr. O’Shaughnessy held 12.1% of our outstanding common shares. intend to fund through cash flows from operations and cash-in-hand, to be Our preliminary base capital program for 2017 considers a reference oil price allocated approximately as follows: Our management and operating team has an average experience in the • Colombia: US$60-65 million. Focus on Llanos 34 Block to develop, appraise energy industry of approximately 25 years in companies such as Chevron, San and further explore potential of the Tigana/Jacana oil play Jorge, Petrobras, Total, Pluspetrol, ENAP and YPF, among others. Throughout • Chile: US$10-12 million. Focus on gas growth opportunities and business our history, our management and operating team has had success in optimization at the Fell Block unlocking unexploited value from previously underdeveloped assets. • Brazil: US$5-7 million. Initiate exploration drilling in onshore blocks. Work program also includes maintenance activities at Manati production platform In addition, as of March 15, 2017, our executive directors, management and • Argentina: US$5-7 million. Initiate exploration drilling in CN-V, Sierra del employees (excluding our founding shareholders, Mr. Gerald E. O’Shaughnessy Nevado and Puelen blocks in the Neuquen Basin and Mr. James F. Park) owned approximately 1.7% of our outstanding common shares, aligning their interests with those of our shareholders and helping In addition, we have developed downside and upside work program scenarios retain the talent we need to continue to support our business strategy. See based on different oil prices and project performance. The downside scenario “Item 6. Directors, Senior Management and Employees—B. Compensation.” Our work program considers a reference oil price assumption below US$40 founding shareholders are also involved in our daily operations and strategy. per barrel and consists of an alternative capital expenditure program of approximately US$50 million-US$60 million consisting mainly of certain Long-term strategic partnerships and strong strategic relationships, such low risk and quick cash flow generating projects. The upside scenario work as with LGI, provide us with additional funding flexibility to pursue further program considers a reference oil price assumption of US$50 per barrel acquisitions or higher and consists of an alternative capital expenditure program of We benefit from a number of strong partnerships and relationships. In approximately US$110 million-US$120 million to be selected from identified March 2010, we entered into a framework agreement with LGI to establish a projects designed to increase reserves and production. strategic growth partnership to jointly acquire and invest in oil and natural gas projects throughout Latin America. In May 2011, our partnership with LGI During the year ended December 31, 2016, we entered into derivative was strengthened by LGI’s acquisition of a 10% equity interest in our existing financial instruments to manage our exposure to oil price risk. These Chilean operations. In October 2011, LGI acquired an additional 10% equity derivatives were zero-premium collars and were placed with major financial interest in GeoPark Chile and a 14% equity interest in GeoPark TdF, and agreed institutions and commodity traders. We entered into the derivatives under to provide additional financial support for the further development of the ISDA Master Agreements and Credit Support Annexes, which provide credit Tierra del Fuego Blocks. In December 2012, LGI acquired a 20% equity interest lines for collateral posting thus alleviating possible liquidity needs under the 64 GeoPark 20F instruments and protect the Company from potential non-performance risk by focusing on both assets and corporate targets. For example, during 2015, its counterparties. See Note 36 to our Consolidated Financial Statements for as part of our long term effort to build an upstream platform in Mexico, details regarding Commodity Risk Management Contracts. we participated in the Mexican Bid Round 1.3 with Grupo Alfa for onshore projects, however, no blocks were awarded. Our long-term strategy Continue to grow a risk-balanced asset portfolio Continue to foster a technically-driven culture and to capitalize on local We intend to continue to focus on maintaining a risk-balanced portfolio knowledge of assets, combining cash flow-generating assets with upside potential We intend to continue to deliberately and collectively pursue strategies opportunities, and on increasing production and reserves through finding, that maximize value. For this purpose, we intend to continue expanding developing and producing oil and gas reserves in the countries in which our technical teams and to foster a culture that rewards talent according we operate. In general, when we enter a new country we look for a mix of to results. For example, we have been able to maintain the technical teams three elements: (i) producing fields, or existing discoveries with near-term we inherited through our Colombian and Brazilian acquisitions. We believe possibility of production, to generate cash flows; (ii) an inventory of adjacent local technical and professional knowledge is key to operational and long- prospects that can offer medium-term upside for steady growth; and (iii) term success and intend to continue to secure local talent as we grow our a periphery of higher-risk projects which have a potential to generate business in different locations. significant upside in the long run. For example, in Colombia, we acquired three companies simultaneously to As of the date of this Annual Report, we are and intend to continue to be, pursue a risk-balanced approach: one company had mainly proven production the operator of a majority of the blocks and concessions in which we have and reserves to provide us with a steady cash flow base, and the remaining working interests. Operating the majority of our blocks and concessions gives had highly prospective exploration license blocks. Within four years of us the flexibility to allocate our capital and resources opportunistically and entering Colombia, we made multiple oil discoveries in block Llanos 34 that efficiently. We believe that this strategy has allowed, and will continue to allowed us to increase production and cash flows. allow, us to leverage our unique culture and our talented technical, operating Maintain a high degree of operatorship and management teams. We believe this approach will allow us to sustain continuous and profitable growth and also participate in higher risk growth opportunities with upside Maintain our commitment to environmental and social responsibility potential. See “—Our operations.” A major component of our business strategy is our focus on our environmental and social responsibility. We are committed to minimizing the Maintain conservative financial policies impact of our projects on the environment. We also aim to create mutually We seek to maintain a prudent and sustainable capital structure and a strong beneficial relationships with the local communities in which we operate in financial position to allow us to maximize the development of our assets order to enhance our ability to create sustainable value in our projects. In and capitalize on business opportunities as they arise. We intend to remain line with the IFC’s standards, our commitment to our environmental and financially disciplined by limiting substantially all our debt incurrence to social responsibilities is a major component of our business strategy. These identified projects with repayment sources. We expect to continue benefiting commitments are embodied in our in-house designed Environmental, Health, from diverse funding sources such as our partners and customers in addition Safety and Security management program, which we refer to as “S.P.E.E.D.” to the international capital markets. (Safety, Prosperity, Employees, Environment and Community Development). Our S.P.E.E.D. program was developed in accordance with several international Pursue strategic acquisitions in Latin America quality standards, including ISO 14001 for environmental management issues, We have historically benefited from, and intend to continue to grow OHSAS 18001 for occupational health and safety management issues, SA 8000 through, strategic acquisitions. Our Colombian acquisitions highlight for social accountability and workers’ rights issues, and applicable World Bank our ability to identify and execute opportunities. These acquisitions have standards. See “—Health, safety and environmental matters.” provided us with an additional attractive platforms in those countries. Our enhanced regional portfolio, primarily in investment-grade countries, and Our operations strong partnerships position us as a regional consolidator. We intend to We have a well-balanced portfolio of assets that includes working and/or continue to grow through strategic acquisitions and potentially in other economic interests in 26 hydrocarbons blocks, 25 of which are onshore blocks, countries in Latin America. Our acquisition strategy is aimed at maintaining including 6 in production as of December 31, 2016, as well as in an additional a balanced portfolio of lower-risk cash flow-generating properties and shallow-offshore concession in Brazil that includes the Manati Field. In assets that have upside potential, keeping a balanced mix of oil- and gas- addition, we have one concession in Brazil, the PN-T-597 Block that is subject producing assets (though we expect to remain weighted towards oil) and to the entry into the concession agreement by the ANP. GeoPark 65 Operations in Colombia The map below shows the location of the blocks in Colombia in which we have Our Colombian assets currently give us access to more than 600,000 gross working and/or economic interests. exploratory and productive acres across 8 blocks in what we believe to be one of South America’s most attractive oil and gas geographies. Since we entered Colombia in 2012, we have achieved consistent growth in our oil production and proved reserves in Colombia, mainly achieved through PANAMA successful exploration and development activities we made at our operated CARIBBEAN SEA Llanos 34 Block, which as of December 31, 2016 accounts for 93% of our VIM - 3 production and 99% of our proved reserves in Colombia. VENEZUELA The table below shows average production and proved oil reserves (derived from D&M Reserves Report) in Colombia for the years ended December 31, 2016, 2015 and 2014: Average net production (mboepd) Net proved reserves at year-end (mmbbl) 2016 15.5 37.3 2015 13.2 30.4 2014 10.7 24.7 PACIFIC OCEAN Llanos 17 Yamu Jagüeyes La Cuerva Abanico Llanos 32 Llanos 34 COLOMBIA PERU BRAZIL Highlights of the year ended December 31, 2016 related to our operations in Colombia included: ECUADOR • Successful drilling campaign with 6 gross wells drilled and put into production in the Jacana and Tigana oil fields in the Llanos 34 Block; • Average net production increased by 17%, to 15.5 mboepd in 2016 from 13.2 mboepd in 2015; • Proved oil reserves increased by 23% to 37.3 mmbbls at year-end 2016, from 30.4 mmbbls at year-end 2015 after producing 5.7 mmbbl; • Capital expenditures were reduced by 15% to US$26.2 million in 2016 from US$30.7 million in 2015; and • Successful cost reduction efforts impacting Production and operating costs that represented a 25% reduction, to US$36.6 million in 2016 as compared to US$48.8 million in 2015. Our interests in Colombia include working interests and economic interests. “Working interests” are direct participation interests granted to us pursuant to an E&P Contract with the ANH, whereas “economic interests” are indirect participation interests in the net revenues from a given block based on bilateral agreements with the concessionaires. 66 GeoPark 20F Gross acres (thousand acres) Working interest(1) Partners(2) Operator Net proved reserves (mmboe)(3) Production (boepd) Basin Concession expiration year Exploration: 2017 82.2 45.0% Parex GeoPark 37.1 14,890 Llanos Exploitation: 2039 The table summarizes information about the blocks in Colombia in which we have working interests as of and for the year ended December 31, 2016. Block Llanos 34 La Cuerva Yamú Llanos 17 Llanos 32 47.8 11.2 100.0% 89.5/ 100%(4) 108.8 36.8% 100.3 10% — — Parex APCO; Parex GeoPark GeoPark Parex Parex Jagüeyes 3432A 61.0 5.0% Columbus Columbus VIM-3 225.0 100% — GeoPark (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 currently has a 20% direct equity interest in our Colombian operations through GeoPark Colombia SAS. However, we can earn back up to 12% additional equity interests in GeoPark Colombia depending on the success of our Colombian operations. See “—Significant Agreements— Agreements with LGI—LGI Colombia Agreements.” (2) Partners with working interests. (3) As of December 31, 2016. (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 89.5% interest in the Carupana Field and a 100% interest in the Yamú and Potrillo Fields, both located in the Yamú Block. The table summarizes information about the blocks in Colombia in which we have economic interests as of and for the year ended December 31, 2016. Gross acres (thousand acres) 32.1 Economic interest(1) 10% Block Abanico Production Operator (boepd) Basin Pacific 55 Magdalena (1) Economic interest corresponds to indirect participation interests in the net revenues from the block, granted to us pursuant to a joint operating agreement. — 0.1 — 0.1 — — 388 Llanos Exploitation: 2038 Exploration: 2014 7 — Llanos Exploration: 2013 Production: 2036 Exploration: 2015 Llanos Exploitation: 2039 Exploration: 2015 250 Llanos Exploitation: 2039 Exploration: 2014 — Llanos Exploitation: 2038 Exploration: 2021 — Magdalena Exploitation: 2045 GeoPark 67 Eastern Llanos Basin: (Llanos 34, La Cuerva, Yamú, Llanos 32, Llanos 17, Jagüeyes a working interest in the block, two wells have been drilled, one of which 3432A, Abanico, and VIM-3 Blocks) was productive. We maintain our 40% working interest in the Llanos 17 Block The Eastern Llanos Basin is a Cenozoic Foreland basin in the eastern region pursuant to an E&P Contract with the ANH. There are no pending commitments of Colombia. Two giant fields (Caño Limón and Castilla), three major fields in this block. Consequently, the contract is now entering liquidation. (Rubiales, Apiay and Tame Complex) and approximately fifty minor fields had been discovered. The source rock for the basin is located beneath the east flank Llanos 32 Block . We have a 10% working interest in the Llanos 32 Block, which of the Eastern Cordillera, as a mixed marine-continental shaly basinal facies covers approximately 100,300 gross acres (406 sq. km) Parex is the operator of the Gachetá formation. The main reservoirs of the basin are represented of, and has a 70% working interest in this block. Pluspetrol has a 20% working by the Paleogene Carbonera and Mirador sandstones. Within the Cretaceous interest. Since 2015, the operator focused on the commissioning of a gas sequence, several sandstones are also considered to have good reservoirs. facility on this block to produce natural gas and light crude oil from the Une Llanos 34 Block . We are the operator of, and have a 45% working interest in, the Llanos 34 Block. For the year ended December 31, 2016, our average net Llanos 34 Block, which covers approximately 82,200 gross acres (333 sq. km). production in the Llanos 32 Block was 250 bopd. The remaining commitment We acquired an interest in and took operatorship of the block in the first quarter related to this block is to drill one exploratory well before August 2018 of 2012, which at the time had no production, reserves or wells drilled on it, and amounting to US$0.6 million at our working interest. formation and to facilitate shipment of processed gas south to the adjacent with 210 sq. km of existing 3D seismic data on which our team had mapped multiple exploration prospects. From 2012 to 2016 we engaged in exploration Jagüeyes 3432A Block . We have a 5% working interest in the Jagüeyes 3432A and development activities that resulted in multiple new oil fields discovered Block, which covers approximately 61,000 acres (247 sq. km). Our partner in and increased production and proved reserves year by year until 2016. Average the block is Columbus Energy, who maintains a 95% working interest in and is net production in 2016 was 14,890 bopd and net reserves of 37.1 mmbbl. The the operator of the Jagüeyes 3432A Block. remaining commitment amounts to US$6.3 million at our working interest. As of the date of this Annual Report, we are awaiting the ANH’s approval of US$3.6 Abanico Block . In October 1996, Ecopetrol and Explotaciones CMS Nomeco Inc. million related to one well already drilled that was presented as fulfilment of entered into the Abanico Block association contract. Pacific is the operator of, the commitment to be performed before September 2019. 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 Our partner in the Llanos 34 Block is Parex, which has a 55% interest. See “— the Abanico Block, but rather have a 10% economic interest in the net revenues Our operations.” We operate in the block pursuant to an E&P Contract with the from the block pursuant to a joint operating agreement initially entered into with ANH. See “—Significant Agreements—Colombia—E&P Contracts—Llanos 34 Kappa Resources Colombia Limited (now Pacific, who subsequently assigned its Block E&P Contract.” participation interest to Cespa de Colombia S.A., who then assigned the interest to Explotaciones CMS Oil & Gas), Maral Finance Corporation and Getionar S.A. 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. VIM-3 Block. On July 23, 2014 we were awarded a new exploratory license km). Since we acquired an interest in the La Cuerva Block, we have drilled a during the 2014 Colombia Bidding Round, carried out by the ANH. We will total of 15 wells in the block, 10 of which were productive at year-end 2016. operate and have a 100% working interest in the block. The VIM-3 Block is Due to the impact of low oil prices, the block was temporarily shut in 2015 located in the Lower Magdalena Basin, covering an area of approximately and 2016. Average net oil production in 2016 was 388 bopd. We operate in the 225,000 acres. Our winning bid consisted of committing to a Royalty X Factor block pursuant to an E&P Contract with the ANH. of 3% and a minimum investment program of carrying out 200 sq. km of 2D seismic data and drilling one exploratory well, with a total estimated Yamú Block . We are the operator of, and have a 100% working interest in, the investment of US$22.3 million during the initial three-year exploratory period Yamú Block, which covers approximately 11,200 gross acres (45.5 sq. km). ending September 2018. Economic rights to certain fields in the Yamú Block have been granted to other parties. In May 2013, we successfully drilled and completed the Potrillo Operations in Chile 1 well. For the year ended December 31, 2016, our average net production at Our Chilean assets currently give us access to 936,000 of gross exploratory the Yamú Block was 7 bopd, resulting from the temporary shutdown of our and productive acres across 6 blocks in a large fully-operated land base across operations in this block. the Magallanes Basin, with existing reserves, production and cash flows. Llanos 17 Block . We have a 40% working interest in the Llanos 17 Block, which Our Chilean blocks are located in the provinces of Ultima Esperanza, covers approximately 108,800 gross acres (440 sq. km). Parex is the operator Magallanes and Tierra del Fuego in the Magallanes Basin, a proven oil- and gas- of, and has a 60% working interest in, the Llanos 17 Block. Since we acquired producing area. As of December 31, 2016, the Magallanes Basin accounted for 68 GeoPark 20F all of Chile’s oil and gas production. Although this basin has been in production The map below shows the location of the blocks in Chile in which we have for over 60 years, we believe that it remains relatively underdeveloped. working interests. Substantial technical data (seismic, geological, drilling and production information), developed by us and by ENAP, provides an informed base for new hydrocarbon exploration and development. Shut-in and abandoned fields may also have the potential to be put back in production by constructing new pipelines and plants. Our geophysical analyses suggest additional development potential in known fields and exploration potential in undrilled prospects and plays, including opportunities in the Springhill, Tertiary, Tobífera and Estratos con Favrella formations. The Springhill formation has historically been the source of production in the Fell Block, though the Estratos con Favrella shale formation is the principal source rock of the Magallanes Basin, and we believe it contains unconventional resource potential. Highlights of the year ended December 31, 2016 related to our operations in Chile included: • Average net oil and gas production remained flat at 3,874 boepd in 2016 as compared to 3,816 boepd in 2015; • Proved oil and gas reserves increased by 4% to 12.6 mmboe at year-end 2016, from 12.1 mmboe at year-end 2015 after producing 1.4 mmboe; • Capital expenditures were reduced by 37% to US$7.8 million in 2016 from US$12.4 million in 2015; and • Successful cost reduction efforts impacting Production and operating costs that represented a 23% reduction, to US$22.2 million in 2016 as compared to US$28.7 million in 2015. CHILE ARGENTINA Tranquilo Otway Fell Isla Norte Campanario Flamenco GeoPark 69 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, 2016. Block Fell Tranquilo Otway Gross acres (thousand acres) Working interest(1) Partners(2) Operator Net proved reserves (mmboe)(3) Production (boepd) Basin Concession expiration year 367.8 100% — GeoPark 12.4 3,816 Magallanes Exploitation: 2032 92.4 50% Pluspetrol GeoPark 49.4(4) 100% — GeoPark Isla Norte 130.2 60%(5) ENAP GeoPark Campanario 192.2 50%(5) ENAP GeoPark Flamenco 105.9 50%(5) ENAP GeoPark — — — — 0.2 — Magallanes Exploitation: 2043 Exploitation: 2044 — Magallanes Exploration: 2019 — Magallanes Exploitation: 2044 Exploration: 2020 — Magallanes Exploitation: 2045 Exploration: 2019 58 Magallanes Exploitation: 2044 (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 The Fell Block has an area of approximately 368,000 gross acres (1,488 sq. km) and its center is located approximately 140 km northeast of the city of in such block. LGI has a 20% direct equity interest in our Chilean operations Punta Arenas. It is bordered on the north by the international border between through GeoPark Chile. See “—Significant Agreements—Agreements with Argentina and Chile and on the south by the Magellan Strait. LGI—LGI Chile Shareholders’ Agreements.” (2) Partners with working interests. (3) As of December 31, 2016. (4) In April 2013, we voluntarily relinquished to the Chilean government all of our acreage in the Otway Block, except for 49,421 acres. In May 2013, our The first exploration efforts began on the Fell Block in the 1950s. Through 2005, ENAP carried out seismic surveys and drilled numerous wells in the block. From 2006 through August 2011, we successfully explored and developed the Fell Block, which allowed us to transition approximately 84% of the Fell Block’s area partners under the joint operating agreement governing the Otway Block from an exploration phase into an exploitation phase, which we expect will last decided to withdraw from such joint operating agreement, and applied for through 2032. During the exploration phase, we exceeded the minimum work an assignment of rights permit on August 5, 2013. In September 2014, the and investment commitment required under the Fell Block CEOP by more than Chilean Ministry of Energy approved that we will be the sole participant with a 75 times. There are no minimum work and investment commitments under the working interest of 100%. See “—Otway and Tranquilo Blocks.” (5) LGI has a 14% direct equity interest in our Tierra del Fuego operations through GeoPark TdF and a 20% direct equity interest in GeoPark Chile, for Fell Block CEOP associated with the exploitation phase. The Fell Block is located in the north-eastern part of the Magallanes Basin. a total effective equity interest of 31.2% in our Tierra del Fuego operations. The principal producing reservoir is composed of sandstones in the Springhill See “—Tierra del Fuego Blocks (Isla Norte, Campanario and Flamenco formation, at depths of 2,200 to 3,500 meters. Additional reservoirs have Blocks)” and “—Significant Agreements—Agreements with LGI—LGI Chile been discovered and put into production in the Fell Block—namely, Tobífera Shareholders’ Agreements.” Fell Block formation volcanoclastic rocks at depths of 2,900 to 3,600 meters, and Upper Tertiary and Upper Cretaceous sandstones, at depths of 700 to 2,000 meters. In 2006, we became the operator and 100% interest owner of the Fell Block. Our geosciences team identified and developed an attractive inventory of When we first acquired an interest in the Fell Block in 2002, it had no material prospects and drilling opportunities for both exploration and development oil and gas production. Since then, we have completed more than 1,100 in the Fell Block. Previous oil discoveries in the Konawentru, Yagán, Yagán sq. km of 3D seismic surveys and drilled 114 exploration and development Norte, Copihue and Guanaco fields have opened up new oil and gas potential wells. In the year ended December 31, 2016, we produced an average of in the Fell Block. An important discovery during 2011 was the Konawentru approximately 3,816 boepd, in the Fell Block, consisting of 36% oil. 1 well, which we initially tested to have in excess of 2,000 bopd from the 70 GeoPark 20F Tobífera formation, and which has opened up additional potentially attractive marks the first discovery of an oil field on the Campanario Block in addition opportunities (workovers, well-deepening’s and new exploration and to one development well. As of the date of this annual report, outstanding development wells) in the Tobífera formation throughout the Fell Block. investment commitments of approximately US$11.9 million related to this block correspond to three exploratory wells until July 10, 2019. From 2012 to 2014, we focused our exploration and development plan in the Tobífera formation by drilling wells in Konawentru, Yagán and Yagán Norte fields, Flamenco Block . We are the operator of, and have a 50% working interest in, as well as deepening existing wells in Ovejero and Molino. Exploration efforts in the Flamenco Block, in partnership with ENAP. The block covers approximately 2014 resulted in the discoveries of the Ache gas field and the Loij oil field. 141,300 gross acres (582 sq. km). In June 2013, we discovered a new oil and gas field in the block following the successful testing of the Chercán 1 well, the first During 2015, although there were no wells drilled, we put into production a well drilled by us in Tierra del Fuego. As of March 31, 2017, we had completed new gas field, Ache, that was discovered in 2014. During 2016, we successfully 100% of the committed 570 sq. km of 3D seismic surveys. We have also drilled the Pampa Larga 16 well and continued focusing on maintaining committed to drilling ten wells during the first exploration period under the production levels and reducing production and operating costs. CEOP governing the Flamenco Block. In the year ended December 31, 2016, The Fell Block also contains the Estratos con Favrella shale reservoir, which we believe represents a high-potential, unconventional resource play for shale oil, The first exploration period of the Flamenco Block ended in November 2015, as a broad area within Fell Block (1,000 sq. km) which appears to be in the oil and we and ENAP notified the Ministry of Energy of our decision to continue we produced an average of approximately 58 boepd in the Flamenco Block. window for this play. with the second exploration period, which will last for 2 years. As of the date of this annual report, outstanding investment commitments related to this block Tierra del Fuego Blocks (Isla Norte, Campanario and Flamenco Blocks) correspond to 1 exploratory well until November 7, 2017 for approximately In the first and second quarters of 2012, we entered into three CEOPs with US$2.1 million, to be assumed 100% by us. On January 6, 2017, we proposed to ENAP and Chile granting us working interests in the Isla Norte, Campanario extend the second exploratory period for an additional period of 18 months. and Flamenco Blocks, located in the center-north of the Tierra del Fuego As of the date of this Annual Report, the Chilean Ministry has not replied. province of Chile. We are the operator of all three of these blocks, with working interests of 60%, 50% and 50%, respectively. We believe that these Otway and Tranquilo Blocks three blocks, which collectively cover 463,700 gross acres (1,877 sq. km) and We are the operator of the Otway and Tranquilo Blocks. are geologically contiguous to the Fell Block, represent strategic acreage with resource potential. We have committed to paying 100% of the required In the Otway Block, we have a 100% working interest. On April 10, 2013, we minimum investment under the CEOPs covering these blocks, in an aggregate voluntarily and formally announced to the Chilean Ministry of Energy our amount of US$101.4 million through the end of the first exploratory periods decision not to proceed with the second exploratory period and to terminate for these blocks, which occurred in November 2015 for the Flamenco Block the exploratory phase under the Otway Block CEOP, such that we relinquished and is expected to occur by May 2017 for the Isla Norte Block and by July 2017 all areas of the Otway Block, except for two areas totaling 49,421 gross acres for the Campanario Block, which includes our covering of ENAP’s investment in which we declared the discovery of hydrocarbons, in the Cabo Negro and commitment corresponding to its working interest in the blocks. Tatiana prospect areas. Isla Norte Block . We are the operator of, and have a 60% working interest in In the Tranquilo Block, as of December 31, 2016, we had a 50% working partnership with ENAP in the Isla Norte Block, which covers approximately interest alongside our partner Pluspetrol. In 2014, Methanex and Wintershall 130,200 gross acres (527 sq. km). As of March 2017, we had completed announced their decision to exit the Consortium, which was approved by the 100% of the committed 350 sq. km of 3D seismic surveys and drilled one Ministry of Energy and formalized in 2016. exploratory well, which represents the first oil discovery within the block. As of the date of this Annual Report, outstanding investment commitments In the Tranquilo Block we completed a seismic program consisting of 163 of approximately US$6.6 million related to this block correspond to two sq. km of 3D seismic and 371 sq. km of 2D seismic survey work, and drilled exploratory wells until May 7, 2019. four wells, including the Palos Quemados and Marcou Sur well. The Marcou Sur well is under evaluation and we discovered gas in the El Salto formation Campanario Block . We are the operator of, and have a 50% working interest of the Palos Quemado well. At the Palos Quemados well, we completed in, the Campanario Block, in partnership with ENAP. The block covers a 22-week commercial feasibility test aimed at defining its productive approximately 192,200 gross acres (778 sq. km). As of March 31, 2017, we potential. As the test was not conclusive, we were granted permission by had completed 100% of the committed 578 sq. km of 3D seismic surveys and the Chilean Ministry of Energy to extend the testing period for an additional have also drilled five exploratory wells, including the Primavera Sur 1 well that six months. Upon such testing period, we kept 4 provisional protection GeoPark 71 areas, which enabled continued analysis of the area prior the declaration The map below shows the location of our concessions in Brazil in which we of its commercial viability for a period of 5 years. On January 17, 2013, we have a current or future working interest, including the BCAM-40 Concession formally announced to the Chilean Ministry of Energy our decision not to and the concessions from bidding rounds 11, 12 and 13. proceed with the second exploratory period and to terminate the exploratory phase of the Tranquilo Block CEOP. Subsequently, we relinquished all areas of the Tranquilo Block, except for a remaining area of 92,417 gross acres, for the exploitation of the Renoval, Marcou Sur, Estancia Maria Antonieta and Palos Quemados Fields, which we have identified as the areas with the most potential for prospects in the block. 9 POT - T 747 POT - T 619 As of December 31, 2016, we had completed our minimum work commitments for the Otway and Tranquilo Blocks, with a total investment of BRAZIL POT - T 882 PN - T 597(1) approximately US$24 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. REC - T 94 REC- T 128 SEAL - T 268 REC - T 93 BCAM - 40 (Manati) Operations in Brazil Our Brazilian assets currently give us access to 242,000 of gross exploratory and productive acres across 9 blocks (8 exploratory blocks and the BCAM-40 Concession, which is in production phase) in an attractive oil and gas geography. Highlights of the year ended December 31, 2016 related to our operations in Brazil included: • Average net oil and gas production of 2,930 boepd (99% gas) in the year ended December 31, 2016, as compared to 3,342 boepd, mainly impacted by lower industrial demand affecting production in the Manati Field; • Capital expenditures were reduced by 37%, to US$3.6 million in 2016, from US$5.6 in 2015; and PARAGUAY ARGENTINA (1) The PN-T-597 Block is subject to an injunction and our bid for the concession has been suspended. See “Item 3. Key Information—D. Risk factors—Risks relating to our business—The PN-T-597 Concession • Seismic interpretation and other preliminary studies in our onshore Agreement in Brazil may not close.” exploratory blocks, in preparation to drill our first operated well during 2017. 72 GeoPark 20F The following table sets forth information as of December 31, 2016 on our concessions in Brazil in which we have a current or future working interest, including the BCAM-40 Concession and the concessions from bidding rounds 11, 12 and 13. Gross acres (thousand acres) Working interest(1) 7.7 100% 7.9 188.7 7.8 7.8 7.6 6.9 100% 100% 100% 100%(5) 100%(5) 7.9 100%(5) — — — — — GeoPark GeoPark GeoPark GeoPark GeoPark 70% Geosol GeoPark — — GeoPark GeoPark Petrobras; Concession REC-T 94 POT-T 619 PN-T-597(4) SEAL-T-268 REC-T-93 REC-T-128 POT-T-747 POT-T-882 BCAM-40 Partners(2) Operator Net proved reserves (mmboe)(3) Production (boepd) Basin Concession expiration year Exploration: 2018 — — — — — — — — — Recôncavo Exploitation: 2045 — — — Potiguar Parnaíba Sergipe Alagoas Exploration: 2018 Exploitation: 2045 — Exploration: 2019 Exploitation: 2046 Exploration: 2020 — Recôncavo Exploitation: 2047 — Recôncavo Exploitation: 2047 Exploration: 2020 Exploration: 2020 Potiguar Exploitation: 2047 — — Potiguar Camamu- Exploration: 2020 Exploitation: 2047 Exploitation: 2029(2) - 2034(3) 22.8 10% QGEP; Brasoil Petrobras 5.0 2,930 Almada (1) Working interest corresponds to the working interests held by our respective subsidiaries, net of any working interests held by other parties in such agreements—BCAM-40 Concession Agreement.” In September 2009, Petrobras announced the relinquishment of BCAM-40’s exploration area within the concession. See “Item 3. Key Information—D. Risk factors—Risks relating to concession to the ANP, except for the Manati Field and the Camarão Norte Field. our business—The PN-T-597 Concession Agreement in Brazil may not close.” (2) Corresponds to Manati Field. (3) Corresponds to Camarão Norte Field. (4) PN-T-597 Block subject to the entry into the concession agreement by the ANP and absence of any legal impediments to signing. As of the date of this The Manati Field is located 65 km south of Salvador, offshore at a 35 meter water depth. The field was discovered in October 2000, and, in 2002, Petrobras declared the field commercially viable. Production began in January 2007. As of December 31, 2016, 11 wells had been drilled in the Manati Field, annual report, confirmation remains subject to final signing and local authority six of which are productive and connected to a fixed production platform approval. See “Item 3. Key Information—D. Risk factors—Risks relating to our installed at a depth of 35 meters, located 9 km from the coast of the State of business—The PN-T-597 Concession Agreement in Brazil may not close.” (5) A 30% working interest of proposed partners is subject to ANP approval. BCAM-40 Concession Bahia. From the platform, the gas flows by sea and land through a 125 km pipeline to the 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 Gas Sales Agreement (as defined below). In July 2015, we signed an As a result of the Rio das Contas acquisition, we have a 10% working interest amendment to the existing Gas Sales Agreement with Petrobras that covers in the BCAM-40 Concession, which includes interests in the Manati Field and 100% of the remaining gas reserves of the Manati Field. the Camarão Norte Field, and which is located in the Camamu-Almada Basin. Petrobras is the operator, and has a 35% working interest in, the BCAM-40 Also in 2015, in order to improve the field gas recovery and production, Concession, which covers approximately 22,784 gross acres (92.2 sq. km). In Manatì’s consortium built an onshore compression plant that started addition to us, Petrobras’ partners in the block are Brasoil and QGEP, with 10% operating in August 2015. The compression plant involved capital and 45% working interests, respectively. Petrobras operates the BCAM-40 expenditures of approximately US$3.7 million at our working interest and Concession pursuant to a concession agreement with the ANP, executed on allowed us to classify all existing proved undeveloped reserves as proved August 6, 1998. See “—Significant Agreements—Brazil—Overview of concession developed as of December 31, 2016. GeoPark 73 The acquisition of Rio das Contas provides us with a long-term off-take contract Basin in the State of Maranhão and the SEAL-T-268 Concession in the Sergipe with Petrobras that covers 100% of net proved gas reserves in the Manati Field, Alagoas Basin) in the State of Alagoas. a valuable relationship with Petrobras and an established local platform and presence, with a seasoned and experienced geoscience and administrative For more information, see “Item 3. Key information—D. Risk factors—Risks relating team to manage the assets and to seek new growth opportunities. to our business—The PN-T-597 Concession Agreement in Brazil may not close.” Some environmental licenses related to operation of the Manati Field PN-T-597 Concession production system and natural gas pipeline are expired. However, the operator The Parnaiba Basin, which covers an area of approximately 148 million submitted, in a timely manner, the request for renewal of those licenses and as gross acres (600,000 sq. km), is a basin with large underexplored areas. As of such this operation is not in default as long as the regulator does not state its December 31, 2016, the basin had two fields in production in the basin. final position on the renewal. The Camarão Norte Field is in the development phase and is not yet subject to the environmental licensing requirement. In the PN-T-597 Concession we committed R$7.7 million (approximately Round 11 Concessions During ANP’s 11 th bidding round, held in May 14th, 2013, we were awarded US$2.3 million, at the December 31, 2016 exchange rate of R$3.3 to US$1.00) for the first exploratory period, equivalent to 180 km of 2D seismic. 7 exploratory blocks, of which 2 were in the Reconcavo Basin in the state of The exploratory phase for this concession is divided into two exploratory Bahia and 5 were in the Potiguar Basin in the state of Rio Grande do Norte. periods. Given that Parnaiba Basin is considered as a “new frontier” area by the The exploratory phase for these concessions is divided into two exploratory ANP, the first exploratory period lasts four years, and the second exploratory periods, the first of which lasts for three years and the second of which is non- period, which is optional, can last for up to two years. obligatory and can last for up to two years. In 2016, after fulfilling the committed exploratory commitments and further The PN-T-597 may not close” and “—D. Risk factors—Risks relating to the reevaluation of commercial potential, five exploratory blocks were relinquished countries in which we operate—Our operations may be adversely affected by to the ANP (REC T 85, POT T 620, POT T 663, POT T 664 and POT T 665). political and economic circumstances in the countries in which we operate See “Item 3. Key Information—D. Risk factors—Risks relating to our business— and in which we may operate in the future” for more information. REC-T 94 Concession In the REC-T 94 we committed R$17.6 million (approximately US$5.35 million, SEAL-T-268 Concession at the December 31, 2016 exchange rate of R$3.3 to US$1.00) during the first In the SEAL-T-268 Concession we committed R$1.6 million (approximately exploratory period consisting of drilling two exploratory wells and 31 sq. km US$0.5 million, at the December 31, 2016 exchange rate of R$3.3 to of 3D seismic surveys. US$1.00) for the first exploratory period. The exploratory phase for this concession is divided into two exploratory periods, the first lasting three During the year 2014 we executed a 3D seismic survey. Seismic data years, and the second, which is optional, can last for up to two years. During interpretation in 2015 and 2016 defined two well locations which we plan 2016, an electromagnetic survey acquisition of 70 stations and reprocessing to drill in 2017. POT-T 619 Concession of 58 km of vintage 2D seismic was performed and, after ANP approval, will fulfill part of the committed work program. Interpretation of the new data is currently ongoing. In the POT-T 619 Concession we committed investments of R$2.3 million (approximately US$0.7 million at the December 31, 2016 exchange rate of Round 13 Concessions R$3.3 to US$1.00) during the first exploratory period, equivalent to 46 km of During ANP’s 13th round of bidding held on October 7, 2015, we were 2D seismic work. awarded four exploratory concessions, of which two were in the Potiguar Basin in the state of Rio Grande do Norte and two were in the Reconcavo Basin During the year 2014 we executed a 2D seismic survey. Seismic data in the state of Bahia. The exploratory phase for these concessions is divided processing was concluded in 2015. After seismic interpretation, we decided into two exploratory periods, the first of which lasts for three years and the to continue to the second exploratory period, which lasts for two years with a second of which is non-obligatory and can last for up to two years. commitment to drill one exploratory well. Round 12 Concessions The POT-T-747 and POT-T-882 blocks are located in the Potiguar Basin and On November 28, 2013, in the 12 th oil and gas bidding round, the ANP encompass an area of 14,829 acres (60 square km). Total commitment to the awarded us two new concessions (the PN-T-597 Concession in the Parnaíba ANP was of R$8.5 million (approximately US$2.6 million, at the December 31, POT-T-747 and POT-T-882 74 GeoPark 20F 2016 exchange rate of R$3.3 to US$1.00) during the first exploratory period The map below shows the location of the Morona Block in Peru. and is equivalent to acquiring 70 km of 2D seismic, and drilling one well. REC-T-128 and REC-T-93 Both blocks are part of the Reconcavo Basin and have a combined area of 15,405 acres (62.3 square km). The block REC-T-128 was bid for in partnership with Geosol with a 70% working interest for us and 30% working interest for Geosol. The total commitment to the ANP was R$7.9 million (approximately 2.4 million at the December 31st, 2016 exchange rate of R$3.3 to US$1.00) during the first exploratory period and consists of acquiring 9 km 2 of 3D seismic, drilling one well and performing geochemical analysis at two levels. During 2016, regional interpretation studies were performed in the area. Part of the minimum exploratory program of Block REC-T-93 has been fulfilled and approved by ANP with the 3D regional seismic acquisition which also covered Block REC T 94 (Round 11). Operations in Peru In October 2014, we entered into an agreement to expand our footprint into Peru (our fifth country platform in Latin America) through the acquisition of Morona Block in a joint venture with Petroperu. The Morona Block has DeGolyer and MacNaughton certified net proved reserves of 18.6 mmboe as of December 31, 2016, composed of 100% oil. PACIFIC OCEAN ECUA DOR COLOMBIA Morona BRAZIL PERU BOLIVIA CHILE GeoPark 75 The table below summarizes information about the block in Peru. Block Morona Gross acres (thousand acres) 1,881 Working interest(1) 75% Operator GeoPark Net proved reserves (mmboe)(2) 18.6 Production (boepd) Basin — Marañon Expiration concession year Exploitation: 2038 (3) (1) Corresponds to the initial working interest. Petroperu will have the right to increase its working interest in the block by up to 50%, subject to the recovery to 36 months after closing. We have committed to cover Petroperu, by paying its portion of the required investment in these initial phases. In addition, we of our investments in the block through agreed terms in the Petroperu SPA. are required to cover any capital or operational expenditures of Petroperu See “Item 4. Information on the Company—B. Business Overview—Our associated with the project until December 31, 2020. We expect these operations—Operations in Peru—Morona Block.” (2) Certified by DeGolyer and MacNaughton as of December 31, 2016. (3) The concession year expiration is related to approval of an environmental impact assessment (EIA) study for project development. The concession will expenditures to be substantially reimbursed by Petroperu from revenues associated to future sales. In accordance with the agreement between us and Petroperu, commitments expire twenty (20) years after EIA approval. assumed by GeoPark are subject to certain economical and technical conditions being met. Morona Block The Morona Block covers an area of approximately 1,881 thousand gross acres The third stage, which will be initiated once production has been established, (7,600 sq. km). More than 1 billion barrels of oil have been produced from the is expected to focus on carrying out the full development of the Situche surrounding blocks in this basin. Central field, including transportation infrastructure and new exploration On October 1, 2014, we entered into an agreement to acquire a 75% working drilling of the block. interest in the Morona Block in Northern Peru. As stated above, this agreement The exploratory program entails drilling one exploratory well. Exploratory includes a work program to be executed by us. This program includes 3 program capital expenditures will be borne exclusively by us. Expected phases, and we may decide whether to continue or not at the end of each capital expenditures in 2017 for the Morona Block are mainly related to facility phase. On December 1, 2016, through Supreme Decree N° 031-2016-MEN, maintenance and environmental and engineering studies. the Peruvian government approved the amendment to the License Contract of Morona Block appointing GeoPark as operator and holder of 75% of the Initially we will have a 75% working interest. However, according to the terms License-Contract. of the agreement, Petroperu 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 The Morona Block contains the Situche Central oil field, which has been block by certain agreed factors. 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 See “Item 3. Key Information—D. Risk factors—Risks relating to our business— Situche Central field, the Morona Block has a large exploration potential “Our inability to access needed equipment and infrastructure in a timely with several high impact prospects and plays. The Morona Block includes manner may hinder our access to oil and natural gas markets and generate geophysical surveys of 2,783 km (2D seismic) and 465 sq. km (3D seismic), and significant incremental costs or delays in our oil and natural gas production” an operating field camp and logistics infrastructure. The area has undergone and “—We may suffer delays or incremental costs due to difficulties in oil and gas exploration activities for the past 40 years, and there exist ongoing negotiations with landowners and local communities, including native association agreements and cooperation projects with the local communities. communities, where our reserves are located.” 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 two stages is to put the field into production through a long term test of the two wells already drilled in the field, in order to determine the most effective overall development plan and to begin to generate cash flow. These initial stages require an investment of approximately US$100 million to US$150 million and are expected to be completed within 24 76 GeoPark 20F Operations in Argentina The map below shows the location of the blocks in Argentina in which we have working interests as of December 31, 2016. BOLIVIA PARAGUAY ARGENTINA BRAZIL URUGUAY Sierra del Nevado Puelen CV-V CHILE The table below summarizes information about the blocks in Argentina in which we have working interests as of December 31, 2016. Block Puelen (3) Sierra del Nevado (3) CN-V Gross acres (thousand acres) 305.4 1,433.2 117.0 Working interest(1) 18% 18% 50% Operator Pluspetrol Pluspetrol GeoPark Net proved reserves (mmboe)(2) — — — Production (boepd) — — — Basin Neuquén Neuquén Neuquén Expiration concession year Exploration: 2017 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, 2016. (3) Blocks awarded in the 2014 Mendoza Bidding Round. GeoPark 77 2014 Mendoza Bidding Round Oil and natural gas reserves and production On August 20, 2014, the consortium of Pluspetrol and us was awarded two Overview exploration licenses in the Sierra del Nevado and Puelen Blocks, as part of We have achieved consistent growth in oil and gas reserves from our the 2014 Mendoza Bidding Round in Argentina, carried out by Empresa investment activities since 2007, when we began production in the Fell Block, Mendocina de Energía S.A. (“EMESA”). followed by successful acquisition, exploration and development activities in other countries in which we have a presence, including Colombia, Brazil and The consortium consists of Pluspetrol (operator with a 72% working Peru. interest), EMESA (non-operator with a 10% working interest) and us (non- operator with an 18% working interest). In accordance with the terms of The following table summarizes DeGolyer and MacNaughton reported net the bidding, all of the expenditures related to EMESA’s working interest will proved reserves in Colombia, Chile, Brazil and Peru as of December 31, 2016. be carried by Pluspetrol and us proportionately to our respective working interests, and will be recovered through EMESA’s participation in future potential production. Puelen Block : the Puelen Block covers an area of approximately 305.4 thousand Country gross acres, and is located in the Neuquén Basin in southern Argentina. During Colombia 2016, 200 square kilometers of 3D seismic was registered, amounting to US$1.6 million at our working interest. Sierra del Nevado Block : the Sierra del Nevado Block covers an area of approximately 1,433.2 thousand gross acres, and is located in the Neuquén Chile Brazil Peru Total Total net proved reserves (mmboe)(1) 37.3 12.6 5.0 18.6 73.6 Gas (bcf ) - 36.3 29.6 - 65.9 % Oil 100% 52% 1% 100% 85% Oil (mmbbl) 37.3 6.6 0.1 18.6 62.6 Basin in southern Argentina. (1) We calculate one barrel of oil equivalent as six mcf of natural gas. We have committed to a minimum aggregate investment of US$6.2 million for Our reserves this working interest, which includes the work program commitment on both The following table sets forth our oil and natural gas net proved reserves as of blocks during the first three years of the exploratory period. December 31, 2016, which is based on the D&M Reserves Report. CN-V Block Farm-in Agreement Net proved reserves On July 22, 2015, we signed a farm-in agreement with Wintershall for the CN-V As of December 31, 2016 Block in Argentina, which complements our existing acreage in the basin. Wintershall is Germany’s largest oil and gas producer and a subsidiary of BASF Group. We will operate during the exploratory phase and receive a 50% working interest in the CN-V Block in exchange for our commitment to drill Net proved developed one exploratory well before the end of the second quarter of 2017 and to drill Colombia another exploratory well before the end of the second exploration period, for a total of US$10 million. Chile Peru Brazil Oil (mmbbl) 9.5 0.5 9.3 0.1 The CN-V Block covers an area of approximately 117,000 acres and is located in Total net proved developed 19.4 the Neuquén Basin in southern Argentina. The block has 3D seismic coverage Net proved undeveloped of 180 sq. km and is adjacent to the producing Loma Alta Sur oil field, a region Colombia and play-type well known to our team. The block includes upside potential in the developing Vaca Muerta unconventional play. Del Mosquito Block Chile Peru Brazil Total net proved 27.8 6.1 9.3 - Total net Natural proved gas (bcf ) reserves (mmboe)(1) - 6.6 - 29.6 36.2 - 29.7 - - 9.5 1.7 9.3 5.0 25.5 27.8 11.0 9.3 - % Oil 100% 33% 100% 1% 76% 100% 55% 100% - On April 2016 the concession of the Del Mosquito expired and we relinquished undeveloped 43.2 29.7 48.1 90% the entire remaining acreage to provincial authorities. As of the date of this Total net proved Annual Report, the approval of the abandonment plan for remediation and (Colombia, Chile, Peru, Brazil) 62.6 65.9 73.6 85% restoration of the block is still pending. 78 GeoPark 20F (1) We calculate one barrel of oil equivalent as six mcf of natural gas. For further information relating to the reconciliation of our net proved reserves for the Independent reserves engineers years ended December 31, 2016, 2015 and 2014, please see Table 5 included in Reserves estimates as of December 31, 2016 for Colombia, Chile, Brazil and Note 37 (unaudited) to our Consolidated Financial Statements. Peru included elsewhere in this annual report are based on the D&M Reserves Report, dated April 11, 2017 and effective as of December 31, 2016. The D&M Internal controls over reserves estimation process Reserves Report, a copy of which has been filed as an exhibit to this annual We maintain an internal staff of petroleum engineers and geosciences report, was prepared in accordance with SEC rules, regulations, definitions and professionals who work closely with our independent reserves engineers guidelines at our request in order to estimate reserves and for the areas and to ensure the integrity, accuracy and timeliness of data furnished to our period indicated therein. independent reserves engineers in their estimation process and who have knowledge of the specific properties under evaluation. Our Director of DeGolyer and MacNaughton, a Delaware corporation with offices in Dallas, Development, Carlos Alberto Murut, is primarily responsible for overseeing Houston, Calgary, Moscow and Algiers, has been providing consulting services the preparation of our reserves estimates and for the internal control over to the oil and gas industry for more than 75 years. The firm has more than 150 our reserves estimation. He has more than 30 years of industry experience professionals, including engineers, geologists, geophysicists, petrophysicists as an E&P geologist, with broad experience in reserves assessment, field and economists that are engaged in the appraisal of oil and gas properties, development, exploration portfolio generation and management and the evaluation of hydrocarbon and other mineral prospects, basin evaluations, acquisition and divestiture opportunities evaluation. See “Item 6. Directors, comprehensive field studies and equity studies related to the domestic Senior Management and Employees—A. Directors and senior management.” and international energy industry. DeGolyer and MacNaughton restricts its In order to ensure the quality and consistency of our reserves estimates and nor does it own operating interests in any oil, gas or mineral properties, or reserves disclosures, we maintain and comply with a reserves process that securities or notes of its clients. The firm subscribes to a code of professional satisfies the following key control objectives: conduct, and its employees actively support their related technical and • estimates are prepared using generally accepted practices and professional societies. The firm is a Texas Registered Engineering Firm. activities exclusively to consultation and does not accept contingency fees, methodologies; • estimates are prepared objectively and free of bias; The D&M Reserves Report covered 100% of our total reserves. In • estimates and changes therein are prepared on a timely basis; connection with the preparation of the D&M Reserves Report, DeGolyer • estimates and changes therein are properly supported and approved; and and MacNaughton prepared its own estimates of our proved reserves. In • estimates and related disclosures are prepared in accordance with regulatory the process of the reserves evaluation, DeGolyer and MacNaughton did not requirements. independently verify the accuracy and completeness of information and data furnished by us with respect to ownership interests, oil and gas production, Throughout each fiscal year, our technical team meets with Independent well test data, historical costs of operation and development, product prices, Qualified Reserves Engineers, who are provided with full access to complete or any agreements relating to current and future operations of the fields and and accurate information pertaining to the properties to be evaluated and sales of production. However, if in the course of the examination something all applicable personnel. This independent assessment of the internally- came to the attention of DeGolyer and MacNaughton that brought into generated reserves estimates is beneficial in ensuring that interpretations question the validity or sufficiency of any such information or data, DeGolyer and judgments are reasonable and that the estimates are free of preparer and and MacNaughton did not rely on such information or data until it had management bias. satisfactorily resolved its questions relating thereto or had independently verified such information or data. DeGolyer and MacNaughton independently Recognizing that reserves estimates are based on interpretations and prepared reserves estimates to conform to the guidelines of the SEC, judgments, differences between the proved reserves estimates prepared by including the criteria of “reasonable certainty,” as it pertains to expectations us and those prepared by an Independent Qualified Reserves Engineer of about the recoverability of reserves in future years, under existing economic 10% or less, in aggregate, are considered to be within the range of reasonable and operating conditions, consistent with the definition in Rule 4-10(a)(2) differences. Differences greater than 10% must be resolved in the technical of Regulation S-X. DeGolyer and MacNaughton issued the D&M Reserves meetings. Once differences are resolved, the independent Qualified Reserves Report based upon its evaluation. D&M’s primary economic assumptions Engineer sends a preliminary copy of the reserves report to be reviewed by in estimates included oil and gas sales prices determined according to SEC the Technical Committee and Directors of each Business Unit. A final copy of guidelines, future expenditures and other economic assumptions (including the Reserves Report is sent by the Independent Qualified Reserve Engineer interests, royalties and taxes) as provided by us. The assumptions, data, to be approved and signed by the Technical Committee and our CEO and methods and procedures used, including the percentage of our total reserves CFO. See “Item 6. Directors, Senior Management and Employees—C. Board reviewed in connection with the preparation of the D&M Reserves Report Practices—Committees of our board of directors.” were appropriate for the purpose served by such report, and DeGolyer and GeoPark 79 MacNaughton used all methods and procedures as it considered necessary the geological nature of the property, the extent of its operating history and under the circumstances to prepare such reports. the quality of available information. It may be appropriate to employ several methods in reaching an estimate for the property. However, uncertainties are inherent in estimating quantities of reserves, including many factors beyond our and our independent reserves engineers’ Estimates must be prepared using all available information (open and cased control. Reserves engineering is a subjective process of estimating subsurface hole logs, core analyses, geologic maps, seismic interpretation, production/ accumulations of oil and natural gas that cannot be measured in an exact injection data and pressure test analysis). Supporting data, such as working manner, and the accuracy of any reserves estimate is a function of the quality interest, royalties and operating costs, must be maintained and updated when of available data and its interpretation. As a result, estimates by different such information changes materially. engineers often vary, sometimes significantly. In addition, physical factors such as the results of drilling, testing and production subsequent to the Proved undeveloped reserves date of an estimate, economic factors such as changes in product prices As of December 31, 2017, we had 48.1 mmboe in proved undeveloped or development and production expenses, and regulatory factors, such as reserves, an increase of 15.6 mmboe, or 47%, over our December 31, 2016 royalties, development and environmental permitting and concession terms, proved undeveloped reserves of 33.0 mmboe. The increase in proved may require revision of such estimates. Our operations may also be affected undeveloped oil reserves is mainly due to net additions in Colombia related by unanticipated changes in regulations concerning the oil and gas industry to appraisal success in Jacana Oil Field, and the incorporation of proved in the countries in which we operate, which may impact our ability to recover undeveloped reserves in Peru. This was partially offset by proved undeveloped the estimated reserves. Accordingly, oil and natural gas quantities ultimately reserves being converted to proved reserves in Colombia for approximately 4.7 recovered will vary from reserves estimates. mmboe and Chile for approximately 0.6 mmboe, as stated in the table below. Technology used in reserves estimation Of our 48.1 mmboe of net proved undeveloped reserves, 27.8 mmboe (58%), According to SEC guidelines, proved reserves are those quantities of oil and 11.0 mmboe (23%), and 9.3 mmboe (19%) were located in Colombia, Chile and gas which, by analysis of geoscience and engineering data, can be estimated Peru, respectively. with “reasonable certainty” to be economically producible—from a given date forward, from known reservoirs, and under existing economic conditions, During 2016, we incurred approximately US$10.1 million in capital operating methods and government regulations—prior to the time at which expenditures to convert such proved undeveloped reserves to proved contracts providing the right to operate expire, unless evidence indicates developed reserves, of which approximately US$7.3 million, and US$3.1 that renewal is reasonably certain, regardless of whether deterministic or million were made in Colombia and Chile, respectively. probabilistic methods are used for the estimation. No net proved undeveloped reserves were located in Argentina and Brazil as The project to extract the hydrocarbons must have commenced or the of December 31, 2016. operator must be reasonably certain that it will commence the project within a reasonable time. The term “reasonable certainty” implies a high The following table shows the evolution of total net proved undeveloped degree of confidence that the quantities of oil and/or natural gas actually (“PUD”) reserves in the year ended December 31, 2016. recovered will equal or exceed the estimate. Reasonable certainty can be established using techniques that have been proved effective by actual production from projects in the same reservoir or an analogous reservoir or by other evidence using reliable technology that establishes reasonable certainty. Reliable technology is a grouping of one or more technologies (including computational methods) that have been field tested and have been demonstrated to provide reasonably certain results with consistency and repeatability in the formation being evaluated or in an analogous formation. There are various generally accepted methodologies for estimating reserves including volumetrics, decline analysis, material balance, simulation models and analogies. Estimates may be prepared using either deterministic (single estimate) or probabilistic (range of possible outcomes and probability of occurrence) methods. The particular method chosen should be based on the evaluator’s professional judgment as being the most appropriate, given 80 GeoPark 20F Total Net Proved Undeveloped (“PUD”) Reserves at December 31, 2015 (All amounts shown in mmboe) Plus: Extensions, discoveries and acquisitions: -Colombia -Chile -Brazil -Peru (1) Less: PUD Reserves converted to proved developed reserves: -Colombia -Chile -Brazil Plus/less: PUD Reserves revisions and movement to/from other categories: -Colombia -Chile -Brazil Total Net Proved Undeveloped Reserves at December 31, 2016 33.0 6.3 – – 9.3 (4.7) (0.6) – 4.0 0.8 – 48.1 (1) On December 1, 2016, through Supreme Decree N° 031-2016-MEN, the Peruvian government approved the amendment to the License Contract of Morona Block appointing GeoPark as operator and holder of 75% of the License-Contract. See “Item 4. Information on the Company—B. Business Overview—Our operations—Operations in Peru.” GeoPark 81 Production, revenues and price history The following table sets forth certain information on our production of oil and natural gas in Colombia, Chile, Brazil for each of the years ended December 31, 2016, 2015 and 2014. Average daily production(1) As of December 31 Colombia Chile 2016 Brazil Colombia Chile 2015 Brazil Colombia Chile 2014 Brazil Oil production Average crude oil production (bopd) 15,536 1,380 39 13,183 1,938 48 10,748 3,690 42 Average sales price of crude oil (US$/bbl) (3) Natural gas Average natural gas production (mcfpd) Average sales price of natural gas (US$/mcf ) (3) Oil and gas production cost Average operating cost (US$/boe) Average royalties and Other (US$/boe) Average production cost (US$/boe)(2) 24.4 37.0 48.0 30.4 42.2 53.1 73.0 89.4 102.4 - - 5.4 1.4 6.7 14,964 17,346 3.8 15.8 1.1 16.9 5.0 5.8 2.8 8.5 - - 8.8 1.8 10.6 11,380 19,672 354 14,474 15,753 4.5 21.0 1.5 22.5 4.7 4.4 2.6 7.1 - 18.4 3.3 21.7 6.2 16.7 3.3 20.0 6.5 5.8 3.1 8.9 (1) We present production figures net of interests due to others, but before deduction of royalties, as we believe that net production before royalties is more appropriate in light of our foreign operations and the attendant royalty regimes. (2) Calculated pursuant to FASB ASC 932. (3) Averaged realized sales price for oil does not include our Argentine blocks because our Argentine operations were not material during such periods. Averaged realized sales price for gas does not include our Argentine and Colombian blocks because our gas operations in those countries were not material during such period. 82 GeoPark 20F Drilling activities The following table sets forth the exploratory wells we drilled as operators during the years ended December 31, 2016, 2015 and 2014. Exploratory wells(1) As of December 31 Productive(2) Gross Net Dry(3) Gross Net Total Gross Net Colombia Chile 2016 Brazil Colombia Chile 2015 Brazil Colombia Chile 2014 Brazil 3.0 1.4 - - 3.0 1.4 - - - - - - - - - - - - 3.0 1.4 1.0 0.5 4.0 1.9 - - - - - - - - - - - - 4.0 1.8 - - 4.0 1.8 11.0 7.1 5.0 3.0 16.0 10.1 - - - - - - (1) Includes appraisal wells. (2) A productive well is an exploratory, development, or extension well that is not a dry well. (3) A dry well is an exploratory, development, or extension well that proves to be incapable of producing either oil or gas in sufficient quantities to justify completion as an oil or gas well. The following table sets forth the development wells we drilled as operators during the years ended December 31, 2016, 2015 and 2014. Colombia Chile 2016 Brazil Colombia Chile 2015 Brazil Colombia Chile 2014 Brazil Development wells(1) As of December 31 3.0 1.4 - - 3.0 1.4 1.0 1.0 - - 1.0 1.0 - - - - - - 2.0 0.9 - - 2.0 0.9 - - - - - - - - - - - - 5.0 2.3 2.0 0.9 7.0 3.2 16.0 15.0 - - 16.0 15.0 - - - - - - Productive(2) Gross Net Dry(3) Gross Net Total Gross Net (1) A productive well is an exploratory, development, or extension well that is not a dry well. (2) A dry well is an exploratory, development, or extension well that proves to be incapable of producing either oil or gas in sufficient quantities to justify completion as an oil or gas well. GeoPark 83 Developed and undeveloped acreage Present activities The following table sets forth certain information regarding our total gross Our average oil and gas production in the first quarter of 2017 totaled 25.2 and net developed and undeveloped acreage in Colombia, Chile, Brazil and mboepd, with oil production of 20.5 mbopd and gas production of 4.7 Peru as of December 31, 2016. mboepd, of which total production 77%, 13% and 10% were in Colombia, Chile and Brazil, respectively. Acreage(1) (in thousands of acres) During the first quarter of 2017 we drilled and put into production three wells in Colombia in the Llanos 34 Block, as follows: Colombia Chile Gross Net Total undeveloped acreage Gross Net Total developed and undeveloped acreage Gross Net 7.3 4.6 8.0 3.9 8.1 7.6 5.6 5.3 15.3 8.5 13.7 12.9 Peru 1.1 0.8 2.2 1.6 3.3 2.4 Brazil • Chiricoca 1 exploration well was drilled to a total depth of 11,966 feet. A 4.1 0.4 - - 4.1 0.4 production test resulted in a production rate of approximately 1,000 bopd. • Tigana Sur 6 development well was drilled to a total depth of 11,645 feet. A production test resulted in a production rate of approximately 1,600 bopd. • Jacana 11 appraisal well was drilled to a total depth of 11,618 feet. A production test resulted in a production rate of approximately 2,100 bopd. Also, during the first quarter of 2017 we started drilling an exploratory well in Brazil in the Reconcavo Basin, which as of the date of this Annual Report, we decided to plug and abandon following an in-depth geological and geophysical analysis. Drilling costs for this exploratory well amounted to $2.3 million. (1) Defined as acreage assignable to productive wells. Net acreage based on our working interest. Additional production history is required to determine stabilized flow rates of the above mentioned wells. Productive wells As of December 31, 2016, there were two exploratory wells that have been The following table sets forth our total gross and net productive wells as of capitalized for a period of less than one year amounting to US$8.2 million. See March 31, 2017. Productive wells consist of producing wells and wells capable Note 19 to our Consolidated Financial Statements. of producing, including natural gas wells awaiting pipeline connections to commence deliveries and oil wells awaiting connection to production facilities. Marketing and delivery commitments Gross wells are the total number of producing wells in which we have an Colombia interest, and net wells are the sum of our fractional working interests owned in Our production in Colombia consists primarily of crude oil. Sales for the year gross wells. Oil wells Gross Net Gas wells Gross Net ended December 31, 2016 were made under a combination of short-term agreements and long term sales agreements as described below. Productive wells(1) Colombia(2) Chile Brazil Peru Argentina and pipeline. For wellhead sales, delivery point is at the loading station at fields. Evacuation of the oil produced is structured under two types of sales: wellhead 63.0 36.0 - - 59.0 51.3 29.0 27.5 - - 6.0 0.6 - - - - - - - - For pipeline sales, delivery point is at the uploading station that discharges to the national pipeline network. In Colombia, pipelines have minimum quality conditions that restrict access to the system. Consequently, and because we are mid to heavy oil producers, our entrance to the pipeline requires the use of diluents which are blended into our crude. For the year ended December 31, 2016, we sold approximately 89% of our production directly at the wellhead and approximately (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 11% to the major oil companies that own capacity in the pipelines. Since 2014, access to the pipeline network has improved due to the commencement of the Bicentenario pipeline, which added transportation capacity and opened up an exploratory, development, or extension well that is not a dry well. additional supply opportunities involving reduced trucking costs. (2) We acquired Winchester and Luna in February 2012 and Cuerva in March 2012. Figures include wells drilled by Winchester, Luna and Cuerva prior to Oil sales are structured under a price formula based on a market reference Index (Brent or Vasconia) and discounts that consider market fees, quality, their acquisition by us. handling fees and transportation among other associated costs. 84 GeoPark 20F For the year ended December 31, 2016, we made 90% of our oil sales to In March 2017, we executed a new gas supply agreement with Methanex Trafigura, accounting for 59% of our consolidated revenues for the same period. effective from May 1, 2017 to December 31, 2026. Under the agreement, Under the Trafigura Agreement, we followed agreed priorities for the We also hold an option to deliver up to 15% above this volume. volumes to be transported through the ODL Pipeline. For the period from March 1, 2016 to September 1, 2016, Trafigura received 10,000 bopd of On April 1, 2016, we executed a seventh amendment to the Gas Supply our production. In 2016 and 2017, the Trafigura Agreement was amended Agreement with Methanex, valid until April 30, 2017, which modified some setting the current volumes to be delivered to Trafigura to 12,000 bopd terms of sixth amendment and defined new conditions for September 2015 to Methanex commits to purchase up to 400,000 SCM/d of gas produced by us. until December 2018. August 2016 and for September 2016 to April 2017. The seventh amendment left required reasonable efforts to take and deliver and giving our gas first Nonperformance of our obligations of delivery in terms, amounts and quality priority over any third party supplies to Methanex. of the crude to Trafigura may require us to pay Trafigura’s fare commitments in ODL Pipeline for the transport, dilution and download of crude, and may lead We gather the gas we produce in several wells through our own flow lines to early termination of the crude sales agreement as well as the immediate and inject it into several gas pipelines owned by ENAP. The transportation of repayment of any amounts outstanding under the prepayment agreement, as the gas we sell to Methanex through these pipelines is pursuant to a private well as compensation for other damages. contract between Methanex and ENAP. We do not own any principal natural If we were to lose our key customers, the loss could temporarily delay production and sale of our oil in the corresponding block. However, given If we were to lose any one of our key customers in Chile, the loss could the wide availability of customers for Colombian crude, we believe we could temporarily delay production and sale of our oil and gas in Chile. For a identify a substitute customer to purchase the impacted production volumes. discussion of the risks associated with the loss of key customers, See “Item gas pipelines for the transportation of natural gas. Chile 3. Key Information—D. Risk factors—Risks relating to our business—We sell almost all of our natural gas in Chile to a single customer, who has in the past Our customer base in Chile is limited in number and primarily consists of ENAP temporarily idled its principal facility” and “—We derive a significant portion of and Methanex. For the year ended December 31, 2016 we sold 100% of our oil our revenues from sales to a few key customers.” production in Chile to ENAP and 95% of our gas production to Methanex, with sales to ENAP and Methanex accounting for 10% and 9%, respectively, of our Brazil total revenues in the same period. Our production in Brazil consists of natural gas and condensate oil. Natural gas production is sold through a long-term, extendable agreement with Petrobras, Under our oil sales agreement with ENAP, or the ENAP Oil Sales Agreement, which provides for the delivery and transportation of the gas produced in the ENAP has committed to purchase our oil production in the Fell Block, Manati Field to the EVF gas treatment plant in the State of Bahia. The contract in the amounts that we produce, and with the limitation being storage is in effect until delivery of the maximum committed volume or June 2030, capacity at the Gregorio Terminal. The sales contract with ENAP is whichever occurs first. The contract allows for sales above the maximum commonly revised every year to reflect changes in the global oil market committed volume if mutually agreed by both seller and buyer. The price and to adjust to logistics costs of ENAP in the Gregorio oil terminal. As of for the gas is fixed in reais and is adjusted annually in accordance with the the date of this annual report, we are negotiating a new agreement, that Brazilian inflation index. In July 2015, we signed an amendment to the existing we expect will take effect in April 2017, which allows for sales to ENAP to Gas Sales Agreement with Petrobras that covers 100% of the remaining gas be periodically interrupted if conditions in the export markets allow for reserves in the Manati Field. more competitive price levels. Commercial conditions of the new agreement are similar to the previous connected to the Estação Vandemir Ferreira, or EVF, gas treatment plant one in effect. We deliver the oil we produce in the Fell Block to ENAP at the through an offshore and onshore pipeline with a capacity of 335.5 mmcfpd Gregorio Terminal, where ENAP assumes responsibility for the oil transferred. (9.5 mm3 per day). The existing pipeline connects the field’s platform ENAP owns two refineries in Chile in the north central part of the country and to the EVF gas treatment plant, which is owned by the field’s current must ship any oil from the Gregorio Terminal to these refineries unless it is concession holders. During 2015, in order to improve the field gas recovery The Manati Field is developed via a PMNT-1 production platform, which is consumed locally. and production, Manatì’s consortium built an onshore compression plant that started operating in August 2015, which allowed us to classify We signed the Methanex Gas Supply Agreement in Chile in 2009, which all existing proved undeveloped reserves as proved developed as of expires in April 30, 2017. December 31, 2016. GeoPark 85 The BCAM-40 Concession, which includes the Manati Field, also benefits from completion of a specified evaluation program or as otherwise agreed by the the advantages of Petrobras’ size. As the largest onshore and offshore operator parties to the relevant E&P Contract. The exploitation period for an area may in Brazil, Petrobras has the ability to mobilize the resources necessary to be extended until such time as such area is no longer commercially viable support its activities in the concession. and certain other conditions are met. The condensate produced in the Manati Field is subject to a condensate Pursuant to our E&P Contracts, we are required, as are all oil and gas purchase agreement with Petrobras, pursuant to which Petrobras has committed companies undertaking exploratory and production activities in Colombia, to purchase all of our condensate production in the Manati Field, but only in to pay a royalty to the Colombian government based on our production of the amounts that we produce, without any minimum or maximum deliverable hydrocarbons, as of the time a field begins to produce. Under Law 756 of 2002, commitment from us. The agreement is valid through December 31, 2017, but as modified by Law 1530 of 2012, the royalties we must pay in connection with can be renewed upon an amendment signed by Petrobras and the seller. our production of light and medium oil are calculated on a field-by-field basis. See Note 31 (a) to our Consolidated Financial Statements. Peru In Peru, oil production is generally traded on a free market basis and Additionally, in the event that an exploitation area has produced amounts in commercial conditions generally follow international markers, normally WTI excess of an aggregate amount established in the E&P Contract governing and Brent. As per the Petroperu SPA, Petroperu has the first option to acquire such area, the ANH is entitled to receive a “windfall profit,” to be paid oil produced by us in the Morona Block by matching any offer received by periodically, calculated pursuant to such E&P Contract. third parties regarding such production. In each of the exploration and exploitation periods, we are also obligated to If we are not able to sell our production share at the block or in Morona pay the ANH a subsoil use fee. During the exploration period, this fee is scaled Station, we will have to use the North Peruvian Pipeline. This transportation depending on the contracted acreage. During the exploitation period, the fee system is owned and operated by Petroperu, and regulated and supervised by is assessed on the amount of hydrocarbons produced, multiplied by a specified OSINERGMIN, the regulatory body in the hydrocarbons sector. Transportation dollar amount per barrel of oil produced or thousand cubic feet of gas produced. rates are negotiated with Petroperu. However, if an agreement cannot be Further, the ANH has the right to receive an additional fee when prices for oil or reached between Petroperu and us, transportation rates will be determined gas, as the case may be, exceed the prices set forth in the relevant E&P Contract. by OSINERGMIN. The North Peruvian pipeline is currently out of service due to technical issues. The Peruvian government has enacted a law declaring Our E&P Contracts are generally subject to early termination for a breach that resuming the pipeline’s operation is a matter of national interest, and is by the parties, a default declaration, application of any of the contract’s implementing a maintenance program accordingly. See “Item 3. Risk factors— unilateral termination clauses or termination clauses mandated by Risks relating to our business—Our inability to access needed equipment and Colombian law. Anticipated termination declared by the ANH results in infrastructure in a timely manner may hinder our access to oil and natural gas the immediate enforcement of monetary guaranties against us and may markets and generate significant incremental costs or delays in our oil and result in an action for damages by the ANH. Pursuant to Colombian law, if natural gas production.” Argentina certain conditions are met, the anticipated termination declared by the ANH may also result in a restriction on the ability to engage contracts with the Colombian government during a certain period of time. See “Item 3. Key In Argentina, we currently do not have any producing blocks as of the date of Information—D. Risk factors—Risks relating to our business—Our contracts this Annual Report. Significant Agreements Colombia E&P Contracts in obtaining rights to explore and 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.” We have entered into E&P Contracts granting us the right to explore Llanos 34 Block E&P Contract . Pursuant to an E&P Contract between Unión and operate, as well as working interests in, eight blocks in Colombia. Temporal Llanos 34 (a consortium between Ramshorn and Winchester Oil and Additionally, we have applied to the ANH to recognize our economic interest Gas - now GeoPark Colombia SAS) and the ANH that became effective as of in a ninth Colombian block as a working interest. These E&P Contracts are March 13, 2009 (“Llanos 34 Block E&P Contract”), Unión Temporal Llanos 34 generally divided into two periods: (1) the exploration period, which may be was granted the right to explore and operate the Llanos 34 Block, and we and subdivided into various exploration phases and (2) the exploitation period, Ramshorn were granted a 40% and a 60% working interest, respectively, in the determined on a per-area basis and beginning on the date we declare an Llanos 34 Block. We were also granted the right to operate the Llanos 34 Block. area to be commercially viable. Commercial viability is determined upon the On December 16, 2009, Winchester Oil and Gas (now GeoPark Colombia) 86 GeoPark 20F entered into a joint operating agreement with Ramshorn and P1 Energy with of our Colombian crude oil production to Trafigura. This benefits us by (i) respect to our operations in the block. As of the date of this annual report, the improving crude oil sales prices; (ii) improving operating netbacks by reducing members of the Union Temporal Llanos 34 are GeoPark Colombia SAS with transportation costs; (iii) simplifying logistics and reducing risks; and (iv) 45%, and Parex Verano Limited with 55% working interest. improving working capital. Pricing is determined at future spot market prices, net of transportation costs. The agreement has given us access to funding up We are currently in an additional exploration period (the contract provides to US$100 million from Trafigura, subject to applicable volumes corresponding for two optional exploratory phases of 18 months each, in which the operator to the terms of the agreement, in the form of prepaid future oil sales. Funds carries out exploratory activities in order to retain areas to explore) of the committed by Trafigura will be made available to us upon request and will be Llanos 34 Block E&P Contract with an exploitation program in execution repaid by us through future oil deliveries over the period of the contract, until over certain areas. The contract also provides for a six-year exploration December 31, 2018, with a 6-month grace period. period consisting of two three-year phases. It also provides for a 24-year exploitation period for each commercial area, which begins on the date on During 2016 and 2017 we executed successive amendments to the Trafigura which such area is declared commercially viable. The exploitation period may offtake and prepayment agreement which increased volumes delivered, be extended for periods of up to 10 years at a time until such time as the area improved pricing and extended the availability period for funding. is no longer commercially viable and certain conditions are met. We have presented evaluation programs to the ANH for the Tilo Field. We presented the declaration of commerciality of Max, Túa, Tarotaro, Tigana, Jacana and Chile CEOPs Chachalaca, respectively. We have entered into six CEOPs with Chile, one for each of the blocks in which we operate, which grant us the right to explore and exploit Pursuant to the Llanos 34 Block E&P Contract and applicable law, we are hydrocarbons in these blocks, determine our working interests in the required to pay a royalty to the ANH based on hydrocarbons produced in the blocks and appoint the operator of the blocks. These CEOPs are divided into Llanos 34 Block. See Note 31 (a) to our Consolidated Financial Statements. two phases: (1) an exploration phase, which is divided into two or more Additionally, we are required to pay a subsoil use fee to the ANH. ANH also has relevant CEOP, and (2) an exploitation phase, which is determined on a per- the right to receive an additional fee when prices for oil or gas, as the case may field basis, commencing on the date we declare a field to be commercially be, exceed the prices set forth in the Llanos 34 Block E&P Contract. The ANH also viable and ending with the term of the relevant CEOP. In order to transition has an additional economic right equivalent to 1% of production, net of royalties. from the exploration phase to an exploitation phase, we must declare a exploration periods, and which begins on the effectiveness date of the discovery of hydrocarbons to the Ministry of Energy. This is a unilateral In accordance with the Llanos 34 Block operation contract, when the declaration, which grants us the right to test a field for a limited period of accumulated production of each field, including the royalties’ volume, exceeds time for commercial viability. If the field proves commercially viable, we 5 million barrels and the WTI exceeds a defined base price, the Company should must make a further unilateral declaration to the Ministry of Energy. In the deliver to ANH a share of the production net of royalties in accordance with an exploration phase, we are obligated to fulfill a minimum work commitment, established formula. See Note 31 (a) to our Consolidated Financial Statements. which generally includes the drilling of wells, the performance of 2D or 3D seismic surveys, minimum capital commitments and guaranties or letters Winchester and Luna Stock Purchase Agreement of credit, as set forth in the relevant CEOP. We also have relinquishment Pursuant to the stock purchase agreement entered into on February 10, 2012 obligations at the end of each period in the exploration phase in respect (the “Winchester Stock Purchase Agreement”), we agreed to pay the Sellers a of those areas in which we have not made a declaration of discovery. total consideration of US$30.0 million, adjusted for working capital. Additionally, We can also voluntarily relinquish areas in which we have not declared under the terms of the Winchester Stock Purchase Agreement, we are obligated discoveries of hydrocarbons at any time, at no cost to us. In the exploitation to make certain payments to the Sellers based on the production and sale of phase, we generally do not face formal work commitments, other than the hydrocarbons discovered by exploration wells drilled after October 25, 2011. development plans we file with the Chilean Ministry of Energy for each field Once the maximum earn-out amount is reached, we pay the Sellers quarterly declared to be commercially viable. overriding royalties in an amount equal to 4% of our net revenues from any new discoveries of oil. For the year ended December 31, 2016, we accrued and paid Our CEOPs provide us with the right to receive a monthly remuneration from US$5.4 million and US$3.8 million with regards to this agreement. Chile, payable in petroleum and gas, based either on the amount of petroleum Trafigura offtake and prepayment agreement the ratio of hydrocarbon sales to total cost of production (capital expenditures In December 2015, we entered into an offtake and prepayment agreement plus operating expenses). Pursuant to Chilean law, the rights contained in a with Trafigura. The agreement provides that we sell and deliver a portion CEOP cannot be modified without consent of the parties. and gas production per field or according to Recovery Factor, which considers GeoPark 87 Our CEOPs are subject to early termination in certain circumstances, which ENAP, signed 3 new CEOPs for the Isla Norte, Campanario and Flamenco vary depending upon the phase of the CEOP. During the exploration Blocks, all of them located in Tierra del Fuego (“TDF”), Magallanes region. phase, Chile may terminate a CEOP in circumstances including a failure Our working interest is 60% in Isla Norte and 50% in Campanario and by us to comply with minimum work commitments at the termination Flamenco Blocks. The CEOPs have a term of 32 years, with an initial of any exploration period, or a failure to communicate our intention to exploration phase which last for 7 years, including a first exploration period proceed with the next exploration period 30 days prior to its termination, of 3 years in which we are committed to developing several exploration a failure to provide the Chilean Ministry of Energy the performance bonds activities including 1,500 square kilometers of 3D seismic registration, and required under the CEOP, a voluntary relinquishment by us of all areas the drilling of 21 exploratory wells. under the CEOP or a failure by us to meet the requirements to enter into the exploitation phase upon the termination of the exploration phase. In The hydrocarbon discoveries opened up an exploitation phase that lasts up the exploitation phase, Chile may terminate a CEOP if we stop performing to 32 years. We discovered hydrocarbon fields in the 3 blocks, starting 2013 in any of the substantial obligations assumed under the CEOP without the Flamenco Block, and in 2014 in both Campanario and Isla Norte Blocks. The cause and do not cure such nonperformance pursuant to the terms of CEOPs provide us with a right to receive a remuneration payable by means of a the concession, following notice of breach from the Chilean Ministry of fraction of the production sold, which in the TDF Blocks is based on a formula Energy. Additionally, Chile may terminate the CEOP due to force majeure depending on the recovery of the total accumulated expenses incurred (capital circumstances (as defined in the relevant CEOP). If Chile terminates a CEOP expenditure plus operational expenditure plus administrative and general in the exploitation phase, we must transfer to Chile, free of charge, any expenses). While the recovery factor is less than 1.0, the remuneration is 95% of productive wells and related facilities, provided that such transfer does not the hydrocarbons produced, either oil or gas. If the recovery factor surpasses 1.0, interfere with our abandonment obligations and excluding certain pipelines a formula applies reducing gradually the remuneration fraction to a minimum of and other assets. Other than as provided in the relevant CEOP, Chile cannot 75% when the recovery factor is 2.5 times the total accumulated expenses . unilaterally terminate a CEOP without due compensation. See “Item 3. Key Information—D. Risk factors—Risks relating to our business—Our contracts Brazil in obtaining rights to explore and develop oil and natural gas reserves Rio das Contas Quota Purchase Agreement are subject to contractual expiration dates and operating conditions, and Pursuant to the Rio das Contas Quota Purchase Agreement we entered into our CEOPs, E&P Contracts and concession agreements are subject to early on May 14, 2013, we agreed to acquire from Panoro all of the quotas issued termination in certain circumstances.” by Rio das Contas for a purchase price of US$140 million (subject to working capital adjustments at closing and further earn-out payments, if any) upon Fell Block CEOP . On November 5, 2002, we acquired a percentage of rights and satisfaction of certain conditions. With respect to the earn-out payments, the interests of the CEOP for the Fell Block with Chile, or the Fell Block CEOP, and Rio das Contas Quota Purchase Agreement provides that during the calendar on May 10, 2006, we became the sole owners, with 100% of the rights and periods beginning on January 1, 2013 and ending as late as December 31, interest in the Fell Block CEOP. Chile had originally entered into a CEOP for the 2017, we will make annual earn-out payments to Panoro in an amount equal Fell Block with ENAP and Cordex Petroleum Inc., or Cordex, on April 29, 1997, to 45% of “net cash flow,” calculated as EBITDA less the aggregate of capital which had an effective date of August 25, 1997. The Fell Block CEOP grants us expenditures and corporate income taxes, with respect to the BCAM-40 the exclusive right to explore and exploit hydrocarbons in the Fell Block and Concession of any amounts in excess of US$25.0 million, up to a maximum has a term of 35 years, beginning on the effective date. The Fell Block CEOP cumulative earn-out amount of US$20.0 million in a five-year period. Once the provided for a 14-year exploration period, composed of numerous phases that maximum earn-out amount is reached or the five-year period has elapsed, no ended in 2011, and an up-to-35-year exploitation phase for each field. further earn-out amounts will be payable. For the year ended December 31, 2016, there were no earn-out payments with regards to this agreement. The Fell Block CEOP provides us with a right to receive a monthly retribution from Chile payable in petroleum and gas, based on the following per- We financed our Rio das Contas acquisition in part through our Brazilian field formula: 95% of the oil produced in the field, for production of up to subsidiary’s entrance into a US$70.5 million credit facility (the “Rio das Contas 5,000 bopd, ring fenced by field, and 97% of gas produced in the field, for Credit Facility”) with Itaú BBA International plc, which is secured by the production of up to 882.9 mmcfpd. In the event that we exceed these levels benefits we receive under the Purchase and Sale Agreement for Natural Gas of production, our monthly retribution from Chile will decrease based on a with Petrobras. See “Item 5. Operating and Financial Review and Prospects—B. sliding scale set forth under the Fell Block CEOP to a maximum of 50% of the Liquidity and capital resources—Indebtedness—Rio das Contas Credit Facility.” oil and 60% of the gas that we produce per field. TDF Blocks CEOPs . After an international bidding process led by ENAP and The Brazilian oil and gas industry is governed mainly by the Brazilian the Chilean Ministry of Energy, in March and April, 2012, we, together with Petroleum Law, which provides for the granting of concessions to operate Overview of concession agreements 88 GeoPark 20F petroleum and gas fields in Brazil, subject to oversight by the ANP. A with the deactivation and abandonment of the facilities in accordance with concession agreement is divided into two phases: (1) exploration and (2) Brazilian law and best practices in the oil industry. development and production. The exploration phase, which is further divided into two subsequent exploratory periods, the first of which begins on the date A concessionaire is required to pay to the Brazilian government the following: of execution of the concession agreement, can last from three to eight years • a license fee; (subject to earlier termination upon the total return of the concession area • rent for the occupation or retention of areas; or the declaration of commercial viability with respect to a given area), while • a special participation fee; the development and production phase, which begins for each field on the • royalties; and date a declaration of commercial viability is submitted to the ANP, can last up • taxes. to 27 years. Upon each declaration of commercial viability, a concessionaire must submit to the ANP a development plan for the field within 180 days. The Rental fees for the occupation and maintenance of the concession areas are concessions may be renewed for an additional period equal to their original payable annually. For purposes of calculating these fees, the ANP takes into term if renewal is requested with at least 12 months’ notice, and provided consideration factors such as the location and size of the relevant concession, the that a default under the concession agreement has not occurred and is then sedimentary basin and the geological characteristics of the relevant concession. continuing. Even if obligations have been fulfilled under the concession agreement and the renewal request was appropriately filed, renewal of the A special participation fee is an extraordinary charge that concessionaires concession is subject to the discretion of the ANP. must pay in the event of obtaining high production volumes and/or profitability from oil fields, according to criteria established by applicable The main terms and conditions of a concession agreement are set forth regulations, and is payable on a quarterly basis for each field from the date in Article 43 of the Brazilian Petroleum Law, and include: (1) definition of on which extraordinary production occurs. This participation fee, whenever the concession area; (2) validity and terms for exploration and production due, varies between 0% and 40% of net revenues depending on (1) the activities; (3) conditions for the return of concession areas; (4) guarantees to volume of production and (2) whether the concession is onshore or in shallow be provided by the concessionaire to ensure compliance with the concession water or deep water. Under the Brazilian Petroleum Law and applicable agreement, including required investments during each phase; (5) penalties regulations issued by the ANP, the special participation fee is calculated in the event of noncompliance with the terms of the concession agreement; based on the quarterly net revenues of each field, which consist of gross (6) procedures related to the assignment of the agreement; and (7) rules for revenues calculated using reference prices established by the ANP (reflecting the return and vacancy of areas, including removal of equipment and facilities international prices and the exchange rate for the period) less: and the return of assets. Assignments of participation interests in a concession • royalties paid; are subject to the approval of the ANP, and the replacement of a performance • investment in exploration; guarantee is treated as an assignment. • operational costs; and • depreciation adjustments and applicable taxes. The main rights of the concessionaires (including us in our concession agreements) are: (1) the exclusive right of drilling and production in the The Brazilian Petroleum Law also requires that the concessionaire of onshore concession area; (2) the ownership of the hydrocarbons produced; (3) the fields pay to the landowners a special participation fee that varies between right to sell the hydrocarbons produced; and (4) the right to export the 0.5% to 1.0% of the net operational income originated by the field production. hydrocarbons produced. However, a concession agreement set forth that, in the event of a risk of a fuel supply shortage in Brazil, the concessionaire BCAM-40 Concession Agreement . On August 6, 1998, the ANP and Petrobras must fulfill the needs of the domestic market. In order to ensure the domestic executed the concession agreement governing the BCAM-40 Concession, or supply, the Brazilian Petroleum Law granted the ANP the power to control the the BCAM-40 Concession Agreement, following the first round of bidding, export of oil, natural gas and oil products. referred to as Bid Round Zero, under the regime established by the Brazilian Petroleum Law. The exploitation phase will end in November 2029. On Among the main obligations of the concessionaire are: (1) the assumption of September 11, 2009, Petrobras announced the termination of BCAM-40 costs and risks related to the exploration and production of hydrocarbons, Concession’s exploration phase and the return of the exploratory area of the including responsibility for environmental damages; (2) compliance with the concession to the ANP, except for the Manati Field and the Camarão Norte Field. requirements relating to acquisition of assets and services from domestic suppliers; (3) compliance with the requirements relating to execution of the Under the BCAM-40 Concession Agreement, the ANP is entitled to a monthly minimum exploration program proposed in the winning bid; (4) activities for royalty payment equal to 7.5% of the production of oil and natural gas in the the conservation of reservoirs; (5) periodic reporting to the ANP; (6) payments concession area. In addition, in case the special participation fee of 10% shall for government participation; and (7) responsibility for the costs associated be applicable for a field in any quarter of the calendar year, the concessionaire GeoPark 89 is obliged to make qualified research and development investments Petrobras Natural Gas Purchase Agreement equivalent to one percent of the field’s gross revenue. Area retention QGEP, GeoPark Brasil, Brasoil and Petrobras are party to a natural gas purchase payments are also applicable under the concession agreement. We acquired agreement providing for the sale of natural gas by QGEP, GeoPark Brasil and Rio das Contas’s 10% participation interest in the BCAM-40 Concession on Brasoil to Petrobras, in an amount of 812 billion cubic feet (“bcf”) over the March 31, 2014. term of agreement. The Petrobras Natural Gas Purchase Agreement is valid until the earlier of Petrobras’ receipt of this total contractual quantity or June Rounds 11, 12 and 13 Concession Agreements . 30, 2030. The agreement may not be fully or partially assigned except upon Under the Rounds 11, 12 and 13 Concession Agreements, the ANP is entitled execution of an assignment agreement with the written consent of the other to a monthly royalty corresponding to 10% of the production of oil and parties, which consent may not be unreasonably withheld provided that natural gas in the concession area, in addition to the special participation fee certain prerequisites have been met. described above, the payment for the occupation of the concession area of approximately R$7,600 per year and the payment to the owners of the land of The agreement provides for the provision of “daily contractual quantities” to the concession equivalent to one percent of the oil and natural gas produced Petrobras peaking at 170.3 mmcfd in 2016 and progressively dropping until in the concession area. 2030. The parties may agree to lower volumes as dictated by Manati Field’s depletion. Pursuant to the agreement, the base price is denominated in reais During bidding, a work program offer is made in the form of work units and the and is adjusted annually for inflation pursuant to the general index of market ANP asks for a guarantee of a monetary amount proportional to the offered prices (IGPM). Additionally, the gas price applicable on a given day is subject units. However, depending on the work performed by the operator, the actual to reduction as a result of the gas quantity acquired by Petrobras above the work program investment might have a different value to the guaranteed value. volume of the annual TOP commitment (85% of the daily contracted quantity) in effect on such day. The Petrobras Natural Gas Purchase Agreement provides Overview of consortium agreements that all of the Manati Field’s daily production be sold to Petrobras. A consortium agreement is a standard document describing consortium members’ respective percentages of participation and appointment of Peru the operator. It generally provides for joint execution of oil and natural Morona Block gas exploration, development and production activities in each of the On October 1, 2014, we entered into an agreement with Petroperu to acquire concession areas. These agreements set forth the allocation of expenses for an interest in and operate the Morona Block, located in Northern Peru. We will each of the parties with respect to their respective participation interests assume a 75% working interest of the Morona Block, with Petroperu retaining in the concession. The agreements are supplemented by joint operating a 25% working interest. On December 1, 2016, through Supreme Decree N° agreements, which are private instruments that typically regulate the 031-2016-MEN the Peruvian government approved the amendment to the aggregation of funds, the sharing of costs, mitigation of operational risks, License Contract of Block 64 (Morona Block) appointing GeoPark as operator preemptive rights and the operator’s activities. and holder of 75% of the Contract. An important characteristic of the consortia for exploration and production In Peru, there is a 5-20% sliding scale royalty rate, depending on production of oil and natural gas that differs from other consortia (Article 278, paragraph levels. Production less than 5,000 bopd is assessed at a royalty rate of 5%. For 1, of the Brazilian Corporate Law) is the joint liability among consortium production between 5,000 and 100,000 bopd there is a linear sliding scale members as established in the Brazilian Petroleum Law (Article 38, item II). between 5% and 20%. Production over 100,000 bopd has a flat royalty of 20%. BCAM-40 Consortium Agreement See “Item 4. Information on the Company—B. Business Overview—Our On January 14, 2000, Petrobras, QG Perfurações and Petroserv entered operations—Operations in Peru—Morona Block.” into a consortium agreement, or the BCAM-40 Consortium Agreement, for the performance of the BCAM-40 Concession Agreement. Petrobras is the Argentina operator of the BCAM-40 concession, with a 35% participation interest. QGEP, Overview of exploration permits Brasoil and Rio das Contas have a 45%, 10% and 10% participation interest, Our exploration permits grant to us and our partners the exclusive right to respectively. The BCAM-40 Consortium Agreement has a specified term of explore for hydrocarbons and declare a commercial discovery within the acreage 40 years, terminating on January 14, 2040 and, at the time the obligations of our permits. Our exploration permits are made up of three subperiods, each undertaken in the agreement are fully completed, the parties will have the lasting 3, 2 and 1 year(s), respectively, plus an extension period of up to 5 years. right to terminate it. The BCAM-40 Concession consortium has also entered into a joint operating agreement, which sets out the rights and obligations of We are bound to pursue specific minimum work or investment commitments the parties in respect of the operations in the concession. during each of the subperiods of each exploration permit. Such exploration 90 GeoPark 20F works are valued in work units assigned to each particular type of work under America. On December 18, 2012, LGI agreed to acquire a 20% equity interest the applicable bidding conditions. in GeoPark Colombia SAS for a total consideration of US$20.1 million composed of a US$14.9 million capital contribution, a US$4.9 million loan to Work and investment programs for the permits are required to be assured by GeoPark Colombia SAS and miscellaneous reimbursements. Concurrently, issuing a performance bond for the value of the committed work plan. we entered into a shareholders’ agreement with LGI (“LGI Colombia Shareholders’ Agreement”) setting forth LGI’s and our respective obligations Under the terms of our exploration permits and concession agreements, we in connection with LGI’s investment in our Colombian oil and gas business are entitled to our proportionate share of the hydrocarbons production lifted through GeoPark Colombia SAS. Furthermore, LGI and Winchester (now from each block. The Province of Mendoza’s state owned company, EMESA, GeoPark Colombia SAS) entered into a loan agreement, whereby, upon the has a 10% carried interest in each of the Puelen and Sierra del Nevado permits closing of LGI’s subscription of shares in GeoPark Colombia SAS, LGI granted and any future exploitation concessions, while there is no governmental a credit line (of which US$4.9 million was drawn at closing) to Winchester participation in the CN-V Block. During the term of our exploration permits, we of up to US$12.0 million, to be used for the acquisition, development and are also required, under Argentine law, to pay a 15% royalty to the province on operation of oil and gas assets in Colombia. Further, on January 8, 2014, both oil and gas sales. In case we progress to an exploitation concession, the following an internal corporate reorganization of our Colombian operations, applicable royalty rate will reduce to a 12% royalty. We also pay annual surface GeoPark Colombia Coöperatie U.A. and GeoPark Latin America entered rental fees established under Hydrocarbons Law 17,319 (“Hydrocarbons Law”) into a new members’ agreement with LGI, or the LGI Colombia Members’ and Resolution 588/98 of the Argentine Secretariat of Energy and Decree Agreement, that sets out substantially similar rights and obligations to 1454/2007, and certain landowner fees. the LGI Colombia Shareholders’ Agreement in respect of our oil and gas business through GeoPark Colombia SAS only. We refer to the LGI Colombia Our Argentine exploration permits have no change of control provisions, Shareholders’ Agreement and the LGI Colombia Members’ Agreement though any assignment of these concessions is subject to the prior collectively as the LGI Colombia Agreements. authorization by the executive branch of the Province of Mendoza and rights of first refusal in favor of our partners and EMESA, in the case of the Puelen Under the LGI Colombia Agreements, LGI agreed to assume its share of the and Sierra del Nevado permits. Each of these permits or future concessions existing debt of GeoPark Colombia SAS and to provide additional funding can be terminated for default in payment obligations and/or breach of to cover LGI’s share of required future investments in Colombia through material statutory or regulatory obligations. We are subject to the obligation GeoPark Colombia SAS. In addition, we can earn back up to 12% additional to relinquish at least 50% of the acreage of each exploration permit at the end equity interests in GeoPark Colombia depending on the success of our of each exploration subperiod. We may also voluntarily relinquish acreage to Colombian operations. the provincial authorities. Our Argentine exploration permits are governed by the laws of Argentina and Director is elected by LGI. The LGI Colombia Agreements require the consent the resolution of any disputes must be sought in the Mendoza Provincial Courts. of LGI or the LGI-appointed director for GeoPark Colombia SAS to take certain Currently, GeoPark Colombia Coöperatie has four directors, out of which one actions, including, among others: If and when we make a commercial discovery in one or more of our • making any decision to terminate or permanently or indefinitely suspend exploration permits, we will have the right to request and obtain an operations in or surrender our blocks in Colombia (other than as required exploitation concession to produce hydrocarbons in the block for 25 years, under the terms of the relevant concessions for such blocks); with an optional extension of up to 10 years. We also receive the right to be • creating of a security interest over our blocks in Colombia; granted a 35-year oil transport concession to build and make use of pipelines • approving of GeoPark Colombia’s annual budget and work programs and the or other transport facilities beyond the boundaries of the concession. mechanisms for funding any such budget or program; • entering into of any borrowings other than those provided in an approved Additionally, oil and gas producers in Argentina must grant a privilege budget or incurred in the ordinary course of business to finance working to the domestic market to the detriment of the export market, including capital needs; hydrocarbon export restrictions, domestic price controls, export duties and • granting any guarantee or indemnity to secure liabilities of parties other than domestic market supplier obligations. those of our Colombian subsidiaries; Agreements with LGI LGI Colombia Agreements • changing the dividend, voting or other rights that would give preference to or discriminate against the shareholders of GeoPark Colombia; • entering into certain related party transactions; and In December 2012, we agreed with LGI to extend our strategic partnership • disposing of any material assets other than those provided for in an approved to build a portfolio of upstream oil and gas assets throughout Latin budget and work program. GeoPark 91 We have also agreed to ensure that the board of directors and rules and The LGI Chile Shareholders’ Agreements require the consent of LGI or the LGI management of our other subsidiaries engaged in our Colombian oil and gas appointed director in order for GeoPark Chile and GeoPark TdF, as the case business are subject to the same principles and restrictions outlined above. may be, to take certain actions, including, among others: • making any decision to terminate or permanently or indefinitely suspend The LGI Colombia Agreements provide that if either we or LGI decide to operations in or surrender our blocks in Chile (other than as required under sell our respective participation in GeoPark Colombia Coöperatie, the the terms of the relevant CEOP for such blocks or required by law); transferring party must make an offer to sell its participation to the other • selling our blocks in Chile to our affiliates; party before selling those shares to a third party. In addition, any sale to a • any change to the dividend, voting or other rights that would give preference third party is subject to tag-along and drag-along rights, and the non- to or discriminate against the shareholders of GeoPark Chile and GeoPark TdF; transferring party has the right to object to a sale to the third-party if it • entering into certain related party transactions; and considers such third-party to be not of a good reputation or one of our • creating a security interest over our blocks in Chile (other than in connection direct competitors. with a financing that benefits our Chilean subsidiaries). Under the LGI Colombia Agreements, we have agreed, along with LGI, to The LGI Chile Shareholders’ Agreements provide that if LGI or either Agencia vote or otherwise cause GeoPark Colombia SAS to declare dividends only or GeoPark Chile decides to sell its shares in GeoPark Chile or GeoPark TdF, as after allowing for retentions for approved work programs and budgets and the case may be, the transferring shareholder must make an offer to sell those capital adequacy requirements of GeoPark Colombia Coöperatie, working shares to the other shareholder before selling those shares to a third party. In capital requirements, banking covenants associated with any loan entered addition, any sale to a third party is subject to tag-along and drag-along rights, into by GeoPark Colombia Coöperatie and its subsidiary. See “Item 3. Key and the non-transferring shareholder has the right to object to a sale to the Information—D. Risk factors—Risks relating to our business—LGI, our third-party if it considers such third-party to be not of a good reputation or strategic partner in Chile and Colombia, may not consent to our taking one of our direct competitors. Under the LGI Chile Shareholders’ Agreements, certain actions or may eventually decide to sell its interest in our Chilean and we and LGI have also agreed to vote our common shares or otherwise cause Colombian operations to a third party.” LGI Chile Shareholders’ Agreements 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. Risk factors—Risks relating In 2010, we formed a strategic partnership with LGI to jointly acquire and to our business—LGI, our strategic partner in Chile and Colombia, may not develop upstream oil and gas projects in Latin America. In 2011, LGI acquired consent to our taking certain actions or may eventually decide to sell its a 20% equity interest in GeoPark Chile and a 14% equity interest in GeoPark interest in our Chilean and Colombian operations to a third party.” TdF, for a total consideration of US$148.0 million, plus additional equity funding of US$18.0 million over the following three years. On May 20, 2011, Title to properties in connection with LGI’s investment in GeoPark Chile, we entered into a In each of the countries in which we operate, the state is the exclusive owner shareholders’ agreement with LGI (as amended on July 4, 2011 and October of all hydrocarbon resources located in such country and has full authority 4, 2011, the “GeoPark Chile Shareholders’ Agreement”) and a subscription to determine the rights, royalties or compensation to be paid by private agreement (as amended on July 4, 2011 and October 4, 2011), On October investors for the exploration or production of any hydrocarbon reserves. In 2011, in connection with LGI’s investment in GeoPark TdF, we entered Chile, the Republic of Chile grants such rights through a CEOP. In Colombia, into a shareholder´s agreement with LGI (the “GeoPark TdF Shareholders the Republic of Colombia grants such rights through E&P Contracts or Agreement”, and together with the GeoPark Chile Shareholders’ Agreement, contracts of association. In Argentina, the Argentine Republic grants such the “LGI Chile Shareholders’ Agreements”), setting forth LGI’s and our rights through exploitation concessions. In Brazil, the Federative Republic respective rights and obligations in connection with LGI’s investment in our of Brazil grants such rights pursuant to concession agreements. See “Item 3. Chilean oil and gas business. Key Information—D. Risk factors—Risks relating to the countries in which we operate—Oil and natural gas companies in Colombia, Chile, Brazil, Peru The respective boards of each of GeoPark Chile and GeoPark TdF supervise and Argentina do not own any of the oil and natural gas reserves in such their day-to-day operations. Each of these boards has four directors. As long countries.” Other than as specified in this annual report, we believe that we as LGI holds at least 5% of the voting shares of GeoPark Chile, LGI has the have satisfactory rights to exploit or benefit economically from the oil and right to elect one director and such director’s alternate, and the remaining gas reserves in the blocks in which we have an interest in accordance with directors, and alternates, are elected by us. As long as LGI holds at least 5% standards generally accepted in the international oil and gas industry. Our of the voting shares of GeoPark TdF, LGI has the right to elect one director CEOPs, E&P Contracts, contracts of association, exploitation concessions and such director’s alternate, and the remaining directors, and alternates, are and concession agreements are subject to customary royalty and other elected by GeoPark Chile. interests, liens under operating agreements and other burdens, restrictions 92 GeoPark 20F and encumbrances customary in the oil and gas industry that we believe of volatility in financial and commodities markets and generally adverse do not materially interfere with the use of or affect the carrying value of our global and industry-wide economic conditions, and may be better able to interests. See “Item 3. Key Information—D. Risk factors—Risks relating to absorb the burdens resulting from changes in relevant laws and regulations, our business—We are not, and may not be in the future, the sole owner or which may adversely affect our competitive position. See “Item 3. Key operator of all of our licensed areas and do not, and may not in the future, Information—D. Risk factors—Risks relating to our business—Competition hold all of the working interests in certain of our licensed areas. Therefore, we in the oil and natural gas industry is intense, which makes it difficult for us to may not be able to control the timing of exploration or development efforts, attract capital, acquire properties and prospects, market oil and natural gas associated costs, or the rate of production of any non-operated and, to an and secure trained personnel.” extent, any non-wholly-owned, assets.” Our customers We may also be affected by competition for drilling rigs and the availability of related equipment. Higher commodity prices generally increase the In Colombia, our primary customer is Trafigura, and who represented 59%, demand for drilling rigs, supplies, services, equipment and crews, and can of our total revenues for the year ended December 31, 2016. In Chile, our lead to shortages of, and increasing costs for, drilling equipment, services primary customers are ENAP and Methanex. As of December 31, 2016, ENAP and personnel. Shortages of, or increasing costs for, experienced drilling purchased all of our oil and condensate production and Methanex purchased crews and equipment and services could restrict our ability to drill wells and almost all of our natural gas production in Chile, and represented 10% and conduct our operations. 9%, respectively, of our total revenues for the year ended December 31, 2016. In Brazil, all of our hydrocarbons in Manati are sold to Petrobras. In Peru, our Health, safety and environmental matters primary customer may be Petroperu, has the first option to acquire the oil General produced by us in the Morona Block by matching any offer received by third Our operations are subject to various stringent and complex international, parties regarding such production. Seasonality federal, state and local environmental, health and safety laws and regulations in the countries in which we operate. These laws and regulations govern matters including the emission and discharge of pollutants into the ground, Although there is some historical seasonality to the prices that we receive air or water; the generation, storage, handling, use and transportation of for our production, the impact of such seasonality has not been material. regulated materials; and human health and safety. These laws and regulations Seasonality has also not played a significant role in our ability to conduct our may, among other things: operations, including drilling and completion activities. • require the acquisition of various permits or other authorizations or the However, as the Morona Block is located in a remote area, the development closure plans) before seismic or drilling activity commences; of the project depends on significant infrastructure being built which can • enjoin some or all of the operations of facilities deemed not in compliance be impacted by seasonal weather patterns, including rain. Since there are with permits; no roads available in the surrounding area, logistics will be performed by • restrict the types, quantities or concentration of various substances that helicopters or barges during specific seasons of the year. can be released into the environment related to oil and natural gas drilling, preparation of environmental assessments, studies or plans (such as well production and transportation activities; We take such seasonality into account in planning for and conducting our • require establishing and maintaining bonds, reserves or other commitments operations, such that the impact on our overall business is not material. to plug and abandon wells; Our competition • limit or prohibit seismic and drilling activities in certain locations lying within or near protected or environmentally sensitive areas; The oil and gas industry is competitive, and we may encounter strong • require preventative measures to mitigate pollution from our operations, competition from other independent operators and from major state-owned which, if not undertaken, could subject us to substantial penalties; and oil companies in acquiring and developing licenses in the countries where we • require us to maintain a safe and healthy working environment for all operate or plan to operate. employees, contractors and visitors in accordance with applicable regulations Many of these competitors have financial and technical resources and personnel substantially larger than ours. As a result, our competitors may be These laws and regulations may also restrict the rate of oil and natural gas able to pay more for desirable oil and natural gas assets, or to evaluate, bid production below the rate that would otherwise be possible. Compliance for and purchase a greater number of licenses than our financial or personnel with these laws can be costly. The regulatory burden on the oil and resources will permit. Furthermore, these companies may also be better able gas industry increases the cost of doing business in the industry and to withstand the financial pressures of unsuccessful wells, sustained periods consequently affects profitability. and industry best practices. GeoPark 93 Public interest in the protection of the environment continues to increase. operations in 2016 has significantly contributed to control and minimizing Drilling in some areas has been opposed by certain community and risks in our operations. Actions taken by us included the development of a environmental groups and, in other areas, has been restricted. new Proactive Observation Program, HSE training, permits to work, internal Climate change audits, drills, pre-job meetings and job safety analysis, among others. As of December 31, 2016, on the last 12-month basis, our HSE development Both our operations and the combustion of oil and natural gas-based statistics workforce shows that Lost Time Injury Frequency (LTIF) was 0.63 (out products results in the emission of greenhouse gases, which may contribute of every 1,000,000 worked hours), our Total Recordable Incident Rate (TRIR) to global climate change. Climate change regulation has gained momentum was 1.89 (out of every 1,000,000 worked hours) and we had no fatal incidents in recent years internationally and at the federal, regional, state and local related to operations in 2016 (workforce). levels. On the international level, various nations have committed to reducing their greenhouse gas emissions pursuant to the Kyoto Protocol. The Kyoto In 2016, we subscribed to the International Association of Oil and Gas Protocol was set to expire in 2012. In late 2011, an international climate Producers in order to align our Management System and policies with the best change conference in Durban, South Africa resulted in, among other things, international standards. an agreement to negotiate a new climate change regime by 2015 that would aim to cover all major greenhouse gas emitters worldwide, including Certain Bermuda law considerations the U.S., and take effect by 2020. In November and December 2012, at an As a Bermuda exempted company, we and our Bermuda subsidiaries are international meeting held in Doha, Qatar, the Kyoto Protocol was extended subject to regulation in Bermuda. We have been designated by the BMA as a by amendment until 2020. In addition, the Durban agreement to develop the non-resident for Bermuda exchange control purposes. This designation allows protocol’s successor by 2015 and implement it by 2020 was reinforced. We are us to engage in transactions in currencies other than the Bermuda dollar, committed to controling the emission of greenhouse gases and implementing and there are no restrictions on our ability to transfer funds (other than funds available technologies to reduce the impact caused by our operations. For denominated in Bermuda dollars) in and out of Bermuda. example, during 2016 we began a migration plan to replace diesel with natural gas and electric generation. Our HSE Management System Under Bermuda’s law, “exempted” companies are companies formed for the purpose of conducting business outside Bermuda from a principal place of business in Bermuda. As exempted companies, we and our Bermuda Our health, safety and environmental management plan is focused on subsidiaries may not, without a license or consent granted by the Minister of undertaking realistic and practical programs based on recognized world Finance of Bermuda, participate in certain business transactions, including practices. Our emphasis is on building key principles and company-wide transactions involving Bermuda landholding rights and the carrying on ownership and then expanding programs as we continue growing. Our of business of any kind for which we or our Bermuda subsidiaries are not S.P.E.E.D. philosophy and our HSE Plan have been developed with reference licensed in Bermuda. to ISO 14001 for environmental management issues, OHSAS 18001 for occupational health and safety management issues, SA 8000 for social Insurance accountability and workers’ rights issues and applicable World Bank Standards. We maintain insurance coverage of types and amounts that we believe to Our Environmental Policy be customary and reasonable for companies of our size and with similar operations in the oil and gas industry. However, as is customary in the Our policy looks forward to meet or exceed environmental regulations industry, we do not insure fully against all risks associated with our business, in the countries in which we operate. We believe that oil and gas can be either because such insurance is not available or because premium costs are produced in an environmentally-responsible manner with proper care, considered prohibitive. understanding and management. Within our S.P.E.E.D. philosophy we have a team that is exclusively focused on securing the environmental Currently, our insurance program includes, among other things, authorizations and permits for the projects we undertake. This professional construction, fire, vehicle, technical, umbrella liability, director’s and and trained team, specialized in environmental issues, is also responsible officer’s liability and employer’s liability coverage. Our insurance includes for the achievement of the environmental standards set by our Board various limits and deductibles or retentions, which must be met prior to or of Directors and for training and supporting our personnel. Our senior in conjunction with recovery. A loss not fully covered by insurance could executives, personnel in the field, visitors and contractors have also received have a materially adverse effect on our business, financial condition and training in proper environmental management. results of operations. See “Item 3. Key Information—D. Risk factors— Our Health and Safety Policy 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 We believe that the implementation of additional safety tools in our our business.” 94 GeoPark 20F Industry and regulatory framework Colombia Regulation of the oil and gas industry production, less the participation of the ANH, which participation may differ for each E&P Contract and depends on the percentage that each company has offered to the ANH in order to be granted with a block, subject to an initial The ANH is responsible for managing all exploration lands not subject to royalty payment of 8% and the payment of income taxes of 33%. In addition, previously existing association contracts with Ecopetrol. The ANH began the Colombian government also introduced TEAs, in which companies that offering all undeveloped and unlicensed exploration areas in the country enter into TEAs are the only ones to have the right to explore, evaluate and under E&P Contracts and Technical Evaluation Agreements, or TEAs, which select desirable exploration areas and to propose work commitments on resulted in a significant increase in Colombian exploration activity and those areas, and have a preemptive right to enter into an E&P Contract, competition, according to the ANH. The ANH is also in charge of negotiating thereby providing companies with low-cost access to larger areas for and executing contracts through “direct negotiation” mechanisms with preliminary evaluation prior to committing to broader exploration programs. attention to special conditions in the areas to be explored. A preemptive right is granted to convert the TEA into an E&P Contract. Exploration activities can only be carried out by the TEA contractor. Regulatory framework Regulation of exploration and production activities Pursuant to Colombian law, companies are obligated to pay a percentage Pursuant to Colombian law, the state is the exclusive owner of all hydrocarbon of their production to the ANH as royalties and an economic right as ANH’s resources located in Colombia and has full authority to determine the rights, participating interest in the production. Producing fields pay royalties in royalties or compensation to be paid by private investors for the exploration or accordance with the applicable royalty program at the time of the discovery. production of any hydrocarbon reserves. The Ministry of Mines and Energy is the authority responsible for regulating all activities related to the exploration Taxation and production of hydrocarbons in Colombia. The Tax Statute and Law 9 of 1991 provide the primary features of the oil and gas industry’s tax and exchange system in Colombia. Generally, national taxes Decree Law 1056 of 1953 ( Código de Petróleos ), or the Petroleum Code, under the general tax statute apply to all taxpayers, regardless of industry. The establishes the general procedures and requirements that must be completed main taxes currently in effect—after the December 2016 tax reform discussed by a private investor and disclosure procedures that need to be followed below—are the income tax (40% for 2017, 37% for 2018 and 33% for 2019 during the performance of these activities. onwards), sales or value added tax (19%), and the tax on financial transaction (0.4%). Additional regional taxes also apply. Colombia has entered into a Exploration and production activities were governed by Decree 1895 of 1973 number of international tax treaties to avoid double taxation and prevent tax until September 2009. Decree Law 2310 of 1974 (as complemented by Decree evasion in matters of income tax and net asset tax. 743 of 1975) governed the contracts and contracting processes carried out by Ecopetrol and the rules applicable to such contracts, and also provided that Decree 2080 of 2000 (amended by Decree 4800 of 2010), or the international Ecopetrol was responsible for administering the hydrocarbons resources in the investment regime, regulates foreign capital investment in Colombia. Country. Decree 2310 of 1974 was replaced by Decree Law 1760 of 2003, but Resolution 8 of the board of the Colombian Central Bank, or the Exchange all agreements entered into by us prior to 2003 with other oil companies are Statute, and its amendments contain provisions governing exchange still regulated by Decree 2310 of 1974. operations. Articles 48 to 52 of Resolution 8 provide for a special exchange regime for the oil industry that removes the obligation of repayment to the The regime for the ANH’s contracts is set forth in Agreement 008 of 2004 and foreign exchange market currency from foreign currency sales made by foreign Agreement 004 of 2012. Accord 008 of 2004, as repealed and replaced by oil companies. Such companies may not acquire foreign currency in the Accord 004 of 2012, issued by the Directive Council of the ANH, sets forth the exchange market under any circumstances and must reinstate in the foreign necessary steps for entering into E&P Contracts with the ANH. This Agreement exchange market the capital required in order to meet expenses in Colombian only regulates the contracts entered into as of May 4, 2012. Prior contracts are legal currency. Companies can avoid participating in this special oil and gas still ruled by Agreement 008 of 2004. Due to the oil prices crisis of 2015, the exchange regime, however, by informing the Colombian Central Bank, in which ANH implemented transitory measures through Agreements 002, 003, 004 and case they will be subject to the general exchange regime of Resolution 8 and 005 of 2015, which are still in place. The ANH is working on a new Agreement may not be able to access the special exchange regime for a period of 10 years. that compiles the relevant rulings in one document. Resolution 18-1495 of 2009 establishes a series of regulations regarding of 2016). The main aspects of the reform are summarized below. hydrocarbon exploration and exploitation. In the E&P Contracts, operators are • The enterprise contribution on equality (“CREE” for its Spanish acronym) tax is afforded access to non-contracted blocks by committing to an exploration eliminated, but a carry forward of CREE receivables and losses for income tax work program. These E&P Contracts provide companies with 100% of new purposes will be permitted. In December 2016, the Colombian Congress approved a tax reform (Law 1819 GeoPark 95 • Income tax rates will be 34% plus a 6% surcharge for fiscal year 2017, 33% plus Chile a 4% surcharge for fiscal year 2018 and 33% for fiscal year 2019 and beyond. Regulation of the oil and gas industry • A dividend tax is included on distributions from Colombian corporations Under the Chilean Constitution, the state is the exclusive owner of all mineral for non-resident shareholders, with tax rates of 5%, for dividends which and fossil substances, including hydrocarbons, regardless of who owns the were taxed at the corporate level and 35% and then a 5% on the remaining land on which the reserves are located. The exploration and exploitation amount for dividends which were not taxed at the corporate level. of hydrocarbons may be carried out by the state, companies owned by the • Grandfather rules avoid the application of the 5% tax for profits obtained state or private entities through administrative concessions granted by the before fiscal year 2017. While it is unclear what the rate is today for profits President of Chile by Supreme Decree or CEOPs executed by the Minister of obtained before that date which were not taxed at the corporate level, a Energy. Exploitation rights granted to private companies are subject to special conservative approach would be to tax them at 35%. taxes and/or royalty payments. The hydrocarbon exploration and exploitation • Tax losses to be carried forward up to 12 years, losses generated before 2017 industry is supervised by the Chilean Ministry of Energy. are grandfathered. • Presumptive taxable base increases to 3.5% of the net equity at the end of In Chile, a participant is granted rights to explore and exploit certain assets the prior year. under a CEOP. If a participant breaches certain obligations under a CEOP, the • Cross border payments withholding tax suffered modifications. The general participant may lose the right to exploit certain areas or may be required rule on services is that there will be a 15% withholding tax, which includes to return all or a portion of the awarded areas to Chile with no right of management fees, even if the service is rendered form abroad. Additionally, compensation. Although the government of Chile cannot unilaterally modify services rendered from abroad will be subject to VAT if the beneficiary is in the rights granted in the CEOP once it is signed, exploration and exploitation are Colombia (for example services rendered to Geopark Colombia from abroad nonetheless subject to significant government regulations, such as regulations would be subject to such treatment). concerning the environment, tort liability, health and safety and labor. • The net wealth tax is still set to expire in fiscal year 2017 for corporations, but it remains unclear if its term will be extended. Regulatory framework IFRS will become the basis for tax purposes with certain exceptions, such as: Regulation of exploration and production activities – Depreciation: The general rule is that the term of depreciation is Oil and gas exploration and development is governed by the Political determined according to IFRS, but with a depreciation percentage cap Constitution of the Republic of Chile and Decree with Law Force No 2 of per year for tax purposes. Assets held before 2017 will be depreciated 1986 of the Ministry of Mines, which set forth the revised text of the Decree according to the previous rules. Law 1089 of 1975, on CEOPS. However, the right to explore and develop – Amortization: Amortization of investments in the oil and gas industry to be fields is granted for each area under a CEOP between Chile and the relevant depleted according to the “units of production method” beginning 2028. contractors. The CEOP establishes the legal framework for hydrocarbon Beginning in fiscal year 2017 and until 2027 , exploratory investments will be activities, including, among other things, minimum investment commitments, amortized by the straight line method in a period of 5 years. Grandfather rule exploration and exploitation phase durations, compensation for the private was established for undepleted investments held before fiscal year 2017. company (either in cash or in kind) and the applicable tax regime. Accordingly, – Goodwill in the acquisition of shares is no longer subject to amortization. all the provisions governing the exploitation and development of our Chilean Goodwill generated before 2017 will be subject to amortization according to operations are contained in our CEOPs and the CEOPs constitute all the the rules enforceable at the moment of generation of the goodwill, however licenses that we need in order to own, operate, import and export any of amortization of the undepleted values as of January 1, 2017 may not take the equipment used in our business and to conduct our gas and petroleum more than five years, and must be done through the straight line method. operations in Chile. – VAT modifications: (a) general rate increased to 19%; (b) eight month window period to credit input tax; (c) input tax, on the acquisition or Under Chilean law, the surface landowners have no property rights over importation of fixed assets may be deductible for income tax purposes, the minerals found under the surface of their land. Subsurface rights do not unless it is to be treated as creditable, or as part of the tax cost of the asset; generate any surface rights, except the right to impose legal easements or and (d) sale of crude oil to refineries subject to VAT at a rate of 19%. rights of way. Easements or rights of way can be individually negotiated with – Banking tax (4x1000), to become permanent. individual surface land owners or can be granted without the consent of the – Benefits for the oil and gas industry: taxpayers that increase investments landowner through judicial process. Pursuant to the Chilean Code of Mines, a in exploration of new hydrocarbon reserves, incorporation of new judge can permit a party to use an easement pending final adjudication and recoverable reserves, and the addition of proven reserves, would have the settlement of compensation for the affected landowner. right to a Tax Refund Certificate (CERT), which could be used to pay taxes administered by the Colombian Tax Office or sold in the market to Taxation other taxpayers. With regard to indirect taxes on hydrocarbon exploitation, the general rule is 96 GeoPark 20F that hydrocarbons are transferred to the contractor (its retribution under the Regulatory framework CEOP), and those re-acquisitions from the contractor performed by Chile or Pricing policy its enterprises, as well as their corresponding acts, contracts and documents, Until the enactment of the Brazilian Petroleum Law, the Brazilian government are tax exempt. In addition, hydrocarbon exports by the contractor are also regulated all aspects of the pricing of oil and oil products in Brazil, from the tax exempt. With regard to income taxes, as provided by article 5 of Decree cost of oil imported for use in refineries to the price of refined oil products Law No. 1,089, the contractor is subject either to a single tax calculated on charged to the consumer. Under the rules adopted following the Brazilian its retribution, equal to 50% of such retribution, or to the general income tax Petroleum Law, the Brazilian government changed its price regulation policies. regime established in the Income Tax Law (Decree Law No. 824 of 1974), in force Under these regulations, the Brazilian government: (1) introduced a new at the time of the execution of the public deed which contains CEOPs, terms of methodology for determining the price of oil products designed to track which will be applicable and invariable throughout the duration of the contract. prevailing international prices denominated in U.S. dollars, and (2) gradually Income in Chile is subject to corporate tax on an accrual basis and has a current eliminated controls on wholesale prices. rate of 24% for fiscal year 2016. The applicable and invariable corporate income tax rates of our CEOPs range between 15% and 18.5%, as follows: the Fell Block Concessions is subject to a rate of 15%, the Otway and Tranquilo Blocks are subject to a In addition to opening the Brazilian oil and natural gas industry to private rate of 17% and the Flamenco, Isla Norte and Campanario Blocks are subject investment, the Brazilian Petroleum Law created new institutions, including to a rate of 18.5% for the income accrued or received during 2012 and 17% for the ANP, to regulate and control activities in the sector. As part of this the income accrued or received during 2013 and onward. Dividends or profits mandate, the ANP is responsible for licensing concession rights for the distributed to the foreign shareholders of the contractors are subject to 35% exploration, development and production of oil and natural gas in Brazil’s Additional Withholding Tax with a tax credit for the corporate income tax paid sedimentary basins through a transparent and competitive bidding process. by the contractor. With regard to the value added tax, contractors may obtain The ANP has conducted 13 bidding rounds for exploration concessions since as a refund the value added tax (which is 19% according to the Sales and 1999. Our PN-T-597 is still subject to the entry into the concession agreement. Services Tax Law contained in Decree Law No. 825 of 1974) supported or paid See “—Our operations—Operations in Brazil” and “Item 3. Key information—D. on the import or purchase of goods or services used in connection with the Risk factors—Risks relating to our business—The PN-T-597 concession is exploration and exploitation activities. The applicable tax regime for each CEOP subject to an injunction and may not close” for more information. remains unchanged throughout the duration of the CEOP. Taxation The Chilean Congress approved a reform to the income tax law in The Brazilian Petroleum Law introduced significant modifications and benefits September 2014 which was amended in February 2016. Under this reform to the taxation of oil and natural gas activities. The main component of the income tax rate will increase from 20% in 2013 to: 21% in 2014, 22.5% petroleum taxation is the government take, comprised of license fees, fees in 2015, 24% in 2016, 25.5% in 2017 and 27% in 2018. The operating payable in connection with the occupation or title of areas, royalties and a subsidiaries that we control in Chile, which are GeoPark TdF S.A., GeoPark special participation fee. The introduction of the Brazilian Petroleum Law Fell S.p.A. and GeoPark Magallanes Limitada, are not affected by the presents certain tax benefits primarily with respect to indirect taxes. Such income tax reform mentioned since they are covered by the tax treatment indirect taxes are very complex and can add significantly to project costs. Direct established in the CEOPs. The above has been confirmed by the Chilean IRS taxes are mainly corporate income tax and social contribution on net profit. through ruling N°2478/2016. Brazil Government take . With the effectiveness of the Brazilian Petroleum Law and the regulations promulgated by the ANP, concessionaires are required to pay Regulation of the oil and gas industry the Brazilian federal government the following: Article 177 of the Brazilian Federal Constitution of 1988 provides for the • license fees; Federal Government’s monopoly over the prospecting and exploration of oil, • rent for the occupation or retention of areas; natural gas resources and other fluid hydrocarbon deposits, as well as over • special participation fee; and the refining, importation, exportation and sea or pipeline transportation of • royalties on production. crude oil and natural gas. Initially, paragraph one of article 177 barred the assignment or concession of any kind of involvement in the exploration The minimum value of the license fees is established in the bidding rules for of oil or natural gas deposits to private industry. On November 9, 1995, the concessions, and the amount is based on the assessment of the potential, however, Constitutional Amendment Number 9 altered paragraph one of as conducted by the ANP. The license fees must be paid upon the execution article 177 so as to allow private or state-owned companies to engage in the of the concession contract. Additionally, concessionaires are required to exploration and production of oil and natural gas, subject to the conditions pay a rental fee to landowners varying from 0.5% to 1.0% of the respective to be set forth by legislation. hydrocarbon production. GeoPark 97 The special participation fee is an extraordinary charge that concessionaires the recoverability of credits) and production of oil and gas (generating a must pay in the event of obtaining high production volumes and/or tax burden of 1.5%, without the recoverability of credits). For production profitability from oil fields, according to criteria established by applicable activities, the legislation previously granted an exemption of ICMS, which regulation, and is payable on a quarterly basis for each field from the date on was changed to a tax calculation basis reduction, according to Resolution which extraordinary production occurs. This participation rate, whenever due, Sefaz No. 631, dated May 14, 2013. Taxpayers, however, have challenged this may reach up to 40% of net revenues depending on (i) volume of production change and received favorable decisions in court in order to avoid collecting and (ii) whether the block is onshore, shallow water or deep water. Under the ICMS on REPETRO imports as, according to STF (Supreme Court of Justice), the Brazilian Petroleum Law and applicable regulations issued by the ANP, the temporary imports on REPETRO do not constitute an ICMS triggering event. special participation fee is calculated based upon quarterly net revenues of each field, which consist of gross revenues calculated using reference prices It is important to mention that before the enactment of the Convention published by the ANP (reflecting international prices and the exchange rate No. 130/2007, the State of Rio de Janeiro has attempted to impose ICMS on for the period) less: royalties paid; investment in exploration; operational costs; production activities, based on State Law No. 4,117, dated June, 27, 2003, and depreciation adjustments and applicable taxes. which was regulated by Decree No. 34,761, dated February 3, 2004, and was The ANP is responsible for determining monthly minimum prices for undetermined period of time. This legislation has been revoked in 2015 when petroleum produced in concessions for purposes of royalties payable with Rio de Janeiro State created Law No. 7,183/2015 aiming to collect ICMS on respect to production. Royalties generally correspond to a percentage the extraction of oil and Law No. 7,182/2015 creating a new fee per barrel ranging between 5% and 10% applied to reference prices for oil or natural of oil produced in the state. The constitutionality of these laws is currently gas, as established in the relevant bidding guidelines ( edital de licitação ) and being challenged by taxpayers. It is important to highlight that, while such concession agreement. In determining the percentage of royalties applicable legislation applies for oil fields operated in the State of Rio de Janeiro, subsequently suspended by Decree No. 34,783 of February 4, 2004 for an to a particular concession, the ANP takes into consideration, among other legislation may vary in other states. factors, the geological risks involved and the production levels expected. Pursuant to the Brazilian Petroleum Law and subsequent legislation, the Relevant Tax Aspects on Upstream Activities . The special customs regime for federal government enacted Law No. 10,336/01, to impose the Contribution goods to be used in the oil and gas activities in Brazil, REPETRO, aims primarily for Intervention in the Economic Sector, or CIDE, an excise tax payable by at reducing the tax burden on companies involved in exploring and extracting producers, blenders and importers on transactions with some oil and fuel oil and natural gas, through the total suspension of federal taxes due on the products, which is imposed at a flat rate based on the specific quantities of each importation of equipment (platforms, subsea equipment, among others), product. Currently, the CIDE rates are zero, based on Decree No. 7,764/2012. under leasing agreements, subject to the compliance with applicable legal requirements. The period in which the goods are allowed to remain in Brazil Brazil has enacted a corporate tax reform, Law 12.973 of 13 May 2014. On under the REPETRO regime may vary depending on the importer, but usually upstream operations, as from 2015 fiscal year, the new tax law may generate corresponds to the duration of the contract executed between the Brazilian timing effects for income tax purposes on the deduction of pre-operational company and the foreign entity, or the period for which the company was costs as well as depreciation of fixed assets and amortization of intangibles. The authorized to exploit or produce oil and gas. new law imposes restrictions for the tax deduction of goodwill arising from in- house operations, and brings several changes to the Brazilian CFC rules. In 2007, the legislation regarding the State Value Added Tax—ICMS imposed taxation on the import of equipment into Brazil under the REPETRO regime Peru was significantly changed by ICMS Convention No. 130/2007. This regulation Regulation of the oil and gas industry allows each State to grant the ICMS tax calculation basis reduction (generating The hydrocarbons activities in Peru are mainly regulated by the General a tax burden of 7.5% with the recoverability of credits or 3%, without the Hydrocarbons Law (Law 26,221), and several regulations enacted in order to recoverability of credits) for goods purchased under the REPETRO regime for develop the provisions included in such law. the production phase and the total exemption or ICMS tax calculation basis reduction (generating a tax burden of 1.5%, without the recoverability of According to the Hydrocarbons Law, oil and gas exploration and production credits) for the exploration phase. In order to be in force, the ICMS Convention activities are carried out under license or service contracts granted by the No. 130/07 must be included in each state’s legislation. government. Under a license contract, the investor pays a royalty, whereas For example, currently, based on Convention No. 130/2007, the state of Rio de As stated by the Peruvian Constitution and the Organic Law for Hydrocarbons, Janeiro grants tax calculation basis reduction for the exploitation (generating a license contract does not imply a transfer or lease of property over the a tax burden of 7.5%, with the recoverability of credits or 3%, without area of exploration or exploitation. By virtue of the license contract, the under a service contract, the government pays remuneration to the contractor. 98 GeoPark 20F contractor acquires the authorization to explore or to exploit hydrocarbons With respect to the Morona Agreement, in which we take part, the applicable in a determined area, and Perupetro (the entity that holds the Peruvian state income tax stabilized regime is from 1995, which is the year of subscription interest) transfers the property right in the extracted hydrocarbons to the of the original License Agreement. The income tax rate in 1995 was 30% and contractor, who must pay a royalty to the state. there was no withholding income tax for dividends. Additionally, in 1995 Regulatory framework it was stated that the income tax should not be lower than 2% of the net assets of the Company (the “Minimum Income Tax”). The Minimum Income License and service contracts are approved by a supreme decree issued by Tax was later declared unconstitutional, which is why, even when there was a the Peruvian Ministry of Economy and Finance, and the Peruvian Ministry of tax stability contract, the Minimum Income Tax has been understood as not Energy and Mining, and can only be modified by a written agreement signed applicable or enforceable. by the parties. Before initiating any negotiation, every oil and gas company must be duly qualified by Perupetro, in order to determine if it fulfills all the Taxable income is generally computed by reducing gross revenue by cost of requirements needed to develop exploration and production activities under goods sold and all expenses necessary to produce the income or maintain the contract form requirements mentioned above. the source of income. Certain types of revenue, however, must be computed as specified in the tax law and some expenses are not fully deductible for License and services agreements may be granted for just an exploitation tax purposes. Business transactions must be recorded in legally authorized stage -when a commercial discovery has been made- or for an exploration accounting records that are in full compliance with the International and exploitation stage –when such discovery has not been made yet. In this Accounting Standards (IAS). Contractors in a license or services contract for case, the exploration phase will last no more than 7 years, counted from the the exploration or exploitation of hydrocarbons (Peruvian corporations and effective date of the contract (60 days after the signing date). This term can be branches) are entitled to keep their accounting records in foreign currency, divided into several periods as agreed in the contract, and all of them with a but taxes must be paid in Peruvian Nuevos Soles (“PEN”). minimum work obligation that should be fulfilled by a contractor in order to access the next exploration period. The exploitation phase will last 40 years Any investments in a contract area that did not reach the commercial from the effective date of the contract in case of natural gas discoveries and 30 extraction stage and that were totally released, can be accumulated with the years from the effective date in case of oil discoveries. same type of investments made in another contract area that has reached the stage of commercial extraction. The Ministry of Energy and Mines may exceptionally authorize an extension of three years for the exploration stage, if the contractor has fulfilled with the These investments are amortized in accordance with the amortization method minimum work program established in the contract, and also commits to fulfill chosen in the letter contract. If the contractor has entered into a single an additional work program that justifies such extension. The contractor shall contract, the accumulated investments are charged as a loss against the results be responsible for providing the technical and economic resources required of the contract for the year of total release of the area for any contract that did for the execution of the operations of this phase. not reach the commercial extraction stage, with the exception of investments The Peruvian regulations also established the roles of the Peruvian government equipment and other goods that the contractor keeps or recovers to use in the agencies that regulate, promote and supervise the oil and gas industry, same operations or in other operations of a different nature. consisting of buildings, power installations, camps, means of communication, including the Ministry of Energy and Mines, Perupetro and OSINERGMIN. Taxation The contractor determines the tax base and the amount of the tax, separately and for each contract. If the contractor carries out related activities (i.e., The fiscal regime that applies in Peru to the oil and gas industry consists of a activities related to oil and gas, but not carried out under the terms of the combination of corporate income tax, royalties and other levies. contract) or other activities (i.e., activities not related to oil and gas), the contractor is obligated to determine the tax base and the amount of tax, In general terms, oil and gas companies are subject to the general corporate separately, and for each activity. The corresponding tax is determined based income tax regime that is stabilized in the applicable regime on the date of on the income tax provisions that apply in each case (subject to the tax subscription of the original License Agreement (due to a tax stability contract); stability provisions for contract activities and based on the regular regime for nevertheless, there are certain special tax provisions for the oil and gas sector. the related activities or other activities). The total income tax amount that the contractor must pay is the sum of the amounts calculated for each contract, Resident companies (incorporated in Peru), are subject to income tax on for both the related activities and for the other activities. The forms to be used their worldwide taxable income. Branches and permanent establishments of for tax statements and payments are determined by the tax administration. foreign companies that are located in Peru and non-resident entities are taxed If the contractor has more than one contract, it may offset the tax losses on Peruvian source income only. generated by one or more contracts against the profits resulting from other GeoPark 99 contracts or related activities. Moreover, the tax losses resulting from related prices of oil and petroleum products were also deregulated. In 1992, Law No. activities may be offset against the profits from one or more contracts. 24,145, referred to as the Privatization Law, privatized YPF and provided for It is possible to choose the allocation of tax losses to one or more of the provinces, subject to the existing rights of the holders of exploration permits transfer of hydrocarbon reservoirs from the Argentine government to the contracts or related activities that have generated the profits, provided that and production concessions. the losses are depleted or compensated to the limit of the profits available. This means that if there is another contract or related activity, the taxpayer In October 2004, the Argentine Congress enacted Law No. 25,943, creating can continue compensating tax losses until they are completely offset. A a new state-owned energy company, Energía Argentina S.A. (“ENARSA”). contractor with tax losses from one or more contracts or related activities may The corporate purpose of ENARSA is the exploration and exploitation of not offset them against profits generated by the other activities. Furthermore, solid, liquid and gaseous hydrocarbons; the transport, storage, distribution, in no case may tax losses generated by the other activities be offset against commercialization and industrialization of these products; as well as the profits resulting from the contracts or the related activities. the transportation and distribution of natural gas, and the generation, transportation, distribution and sale of electricity. Moreover, Law No. 25,943 During the exploration phase, operators are exempt from import duties and granted ENARSA all offshore areas located beyond 12 nautical miles from the other forms of taxation applicable to goods intended for exploration activities. coastline up to the outer boundary of the continental shelf that were vacant at Exemptions are withdrawn at the production phase, but exceptions are made the time of the effectiveness of this law (i.e. November 3, 2004). in certain instances, and the operator may be entitled to temporarily import goods tax-free for a two-year period (“Temporary Import”). A temporary On May 3, 2012, the Argentine Congress passed the Hydrocarbons Import may be extended for additional one year periods for up to two times Sovereignty Act. This law declared achieving self-sufficiency in the upon the request of an operator, approval of the Ministry of Energy and supply of hydrocarbons, as well as in the exploitation, industrialization, Mines and authorization of the Superintendencia Nacional de Aduanas y de transportation and sale of hydrocarbons, a national public interest and a Administracion Tributaria (Peruvian Customs Agency). priority for Argentina. In addition, the law expropriated 51% of the share capital of YPF, the largest Argentine oil company, from Repsol, the largest Environmental Regulation Spanish oil company. Before initiating any hydrocarbon activity (e.g. seismic exploration, drilling of exploration wells, etc.) the contractor must file and obtain an approval for On July 28, 2012, Presidential Decree 1277/2012, which regulated the an Environmental Impact Study (EIS), which is the most important permit Hydrocarbon Sovereignty Law, was released, creating a Strategic Planning and related to HSE for any hydrocarbon project. This study includes technical, Coordination Committee for the National Hydrocarbon Investment Plan and environmental and social evaluations of the project to be executed in order vesting it with the power to set the sector’s reference prices and to develop to define the activities that should be required for preventing, minimizing, investment plans for the country to increase production and reserves. The mitigating and remediation of the possible negative environmental and social decree introduced important changes to the rules governing Argentina’s impacts that the hydrocarbon project may generate. oil and gas industry, including the repeal of certain articles of Deregulation There are general environmental regulations for the protection of water, soils, air, at negotiated prices, the deregulation of the oil and gas industry, freedom to endangered species, biodiversity, natural protected areas, etc. In addition, there import and export hydrocarbons and the ability to keep proceeds from export are specific environmental regulations applicable to the hydrocarbon industry. sales in foreign bank accounts. Decrees passed during 1989 relating to free marketability of hydrocarbons Argentina Regulatory framework On January 4, 2016, immediately after the new national administration took office, Presidential Decree 272/2015 was released. This Decree abrogated From the 1920s to 1989, the Argentine public sector dominated the upstream the provisions of the Presidential Decree 1277/2012 which had repealed the segment of the Argentine oil and gas industry and the midstream and Deregulation Decrees. Thus, the Deregulation Decrees were reinstated. downstream segment of the business. In 1989, Argentina enacted certain laws aimed at privatizing the majority aimed at reducing government intervention and reestablishing market forces Other measures have also been taken by the new presidential administration of its state-owned companies and issued a series of presidential decrees in the oil & gas industry. (namely, Decrees No. 1055/89, 1212/89 and 1589/89 (“Oil Deregulation Decrees”), relating specifically to deregulation of energy activities). The Oil Domain and Jurisdiction of hydrocarbons resources Deregulation Decrees eliminated restrictions on imports and exports of crude After a constitutional reform enacted in 1994, eminent domain over oil, deregulated the domestic oil industry, and effective January 1, 1991, the hydrocarbon resources lying in the territory of a provincial state is now vested 100 GeoPark 20F Operating and financial review and prospects in such provincial state, while eminent domain over hydrocarbon resources turnover tax (1% to 3%) and stamp tax. In 2002, in response to the economic lying offshore on the continental platform beyond the jurisdiction of the crisis, the federal government adopted new taxes on oil and gas products, coastal provincial states is vested in the federal state including export taxes ranging from 5% for by-products to 45% for crude oil. Such export taxes lapsed and terminated on January 6, 2016 on the 15th Thus, oil and gas exploration permits and exploitation concessions are now anniversary of their enactment. granted by each provincial government. A majority of the existing concessions were granted by the federal government prior to the enactment of Law C. Organizational structure No.26,197 and were thereafter transferred to the provincial states. We are an exempted company incorporated pursuant to the laws of Bermuda. We operate and own our assets directly and indirectly through a number Regulation of exploration and production activities of subsidiaries. See an illustration of our corporate structure in Note 20 New Hydrocarbon Act: (“Subsidiary undertakings”) to our Consolidated Financial Statements. In October 31, 2014 the Argentine Republic Official Gazette published the text of Law No. 27,007, amending the Hydrocarbon Law No. 17,319. D. Property, plant and equipment The most relevant aspects of the new law are as follows: • With regards to concessions, three types of concessions are provided, namely, ITEM 4A. UNRESOLVED STAFF COMMENTS conventional exploitation, unconventional exploitation, and exploitation in Not applicable. the continental shelf and territorial waters, establishing the respective terms See “—B. Business Overview—Title to properties.” for each type. ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS • The terms for hydrocarbon transportation concessions were adjusted in order to comply with the exploitation concessions terms. A. Operating results • With regards to royalties, a maximum of 12% is established, which may reach 18% in the case of granted extensions, where the law also establishes the The following discussion of our financial condition and results of operations payment of an extension bond for a maximum amount equal to the amount should be read in conjunction with our Consolidated Financial Statements resulting from multiplying the remaining proven reserves at the end of and the notes thereto as well as the information presented under “Item 3. Key effective term of the concession by 2% of the average basin price applicable Information— A. Selected financial data.” to the respective hydrocarbons over the 2 years preceding the time on which the extension was granted. The following discussion contains forward-looking statements that involve • The extension of the Investment Promotion Regime for the Exploitation of risks and uncertainties. Our actual results may differ materially from those Hydrocarbons (Decree No. 929/2013) is established for projects representing discussed in the forward-looking statements as a result of various factors, a direct investment in foreign currency of at least 250 million dollars, including those set forth in “Item 3. Key Information—D. Risk factors” and increasing the benefits for other type of projects. “Forward-looking statements.” Regulation of transportation activities Factors affecting our results of operations Exploitation concessionaires have the exclusive right to obtain a We describe below the year-to-year comparisons of our historical results and transportation concession for the transport of oil and gas from the provincial the analysis of our financial condition. Our future results could differ materially states or the federal government, depending on the applicable jurisdiction. from our historical results due to a variety of factors, including the following: Such transportation concessions include storage, ports, pipelines and other fixed facilities necessary for the transportation of oil, gas and by-products. Discovery and exploitation of reserves Transportation facilities with surplus capacity must transport third parties’ Our results of operations depend on our level of success in finding, acquiring hydrocarbons on an open-access basis, for a fee which is the same for all users (including through bidding rounds) or gaining access to oil and natural on similar terms. As a result of the privatizations of YPF and Gas del Estado, a gas reserves. While we have geological reports evaluating certain proved, few common carriers of crude oil and natural gas were chartered and continue contingent and prospective resources in our blocks, there is no assurance that to operate to date. Taxation we will continue to be successful in the exploration, appraisal, development and commercial production of oil and natural gas. The calculation of our geological and petrophysical estimates is complex and imprecise, and it is Exploitation concessionaires are subject to the general federal and provincial possible that our future exploration will not result in additional discoveries, tax regime. The most relevant federal taxes are the income tax (35%), the value and, even if we are able to successfully make such discoveries, there is no added tax (21%) and a tax on assets. The most relevant provincial taxes are the certainty that the discoveries will be commercially viable to produce. GeoPark 101 For the year ended December 31, 2016, we made total capital expenditures of From January 1, 2011 to December 31, 2016, Brent spot prices ranged from a US$39.3 million (US$26.2 million, US$7.8 million, US$1.7 million and US$3.6 low of US$30.7 per barrel to a high of US$125.5 per barrel, NYMEX West Texas million in Colombia, Chile, Argentina and Brazil, respectively) for the year 2016, International (“WTI”) crude oil contracts prices ranged from a low of US$30.3 consisting of US$18.2 million related to exploration. per bbl to a high of US$109.5 per bbl, Henry Hub natural gas average spot Oil prices were volatile since the end of 2014. In preparation for continued US Gulf methanol spot barge prices ranged from a low of US$250 per metric volatility, we have developed multiple scenarios for our 2017 capital ton to a high of US$635 per metric ton. Furthermore, oil, natural gas and expenditure program. See “Item 4. Information on the Company –B. Business methanol prices do not necessarily fluctuate in direct relationship to each other. prices ranged from a low of US$1.7 per mmbtu to a high of US$6.0 per mmbtu, Overview—2017 Strategy and Outlook.” As a consequence of the oil price crisis which started in the second half of Funding for our capital expenditures relies in part on oil prices remaining close 2014 (WTI and Brent, the main international oil price markers, fell more than to our estimates or higher levels and other factors to generate sufficient cash 60% between August 2014 and March 2016), we took decisive steps in 2015 flow. Low oil prices affect our revenues, which in turn affect our debt capacity and 2016 to adapt to the new oil price environment. We reduced our capital and the covenants in our financing agreements, as well as the amount of cash expenditure program from US$238 million in 2014 to US$48 million in 2015 we can borrow using our oil reserves as collateral, the amount of cash we and US$39 million in 2016 and implemented significant cost reduction are able to generate from current operations and the amount of cash we can initiatives that resulted in production and operating costs being reduced by obtain from prepayment agreements such as the Trafigura Agreement, which 49% (2016 versus 2014), and administrative expenses being reduced by 26% is our offtake and prepayment agreement. If we are not able to generate (2016 versus 2014), while increasing average production to approximately 22.4 the sales which, together with our current cash resources, are sufficient to mboepd and increasing our proved reserves to 73.6 mmboe. fund our capital program, we will not be able to efficiently execute our work program which would cause us to further decrease our work program, which In October 2016, we decided to manage part of our exposure to the could harm our business outlook, investor confidence and our share price. volatile crude oil price using derivatives. For further information related to Commodity Risk Management Contracts, please see Note 36 to our If oil prices average higher than the base budget price, we have the ability Consolidated Financial Statements. to allocate additional capital to more projects and increase its work and investment program and thereby further increase oil and gas production. Additionally, the oil and gas we sell may be subject to certain discounts. For example, in Colombia, the price of oil we sell is based on Vasconia, a marker Our results of operations will be adversely affected in the event that our broadly used in the Llanos Basin, adjusted for certain marketing and quality estimated oil and natural gas asset base does not result in additional reserves discounts based on, among other things, API, viscosity, sulfur, delivery point that may eventually be commercially developed. In addition, there can be and water content, as well as on certain transportation costs (including no assurance that we will acquire new exploration blocks or gain access to pipeline costs and trucking costs). The delivery points for our production exploration blocks that contain reserves. Unless we succeed in exploration and range from the well head to the port of export (Coveñas). development activities, or acquire properties that contain new reserves, our anticipated reserves will continually decrease, which would have a material In Chile, the price of oil we sell to ENAP is based on Brent minus certain adverse effect on our business, results of operations and financial condition. marketing and quality discounts. We have a long-term gas supply contract with Methanex. The price of the gas sold under this contract is determined based Oil and gas revenue and international prices on a formula that takes into account various international prices of methanol, Our revenues are derived from the sale of our oil and natural gas production, including US Gulf methanol spot barge prices, methanol spot Rotterdam prices as well as of condensate derived from the production of natural gas. and spot prices in Asia. See “Item 3. Key Information—D. Risk factors—Risks Our oil and natural gas prices are driven by the international prices of oil relating to our business—A substantial or extended decline in oil, natural gas and methanol (for our Chilean gas production), respectively, which are and methanol prices may materially adversely affect our business, financial denominated in US$. The price realized for the oil we produce is generally condition or results of operations.” As of the date of this annual report, we had linked to WTI, Brent or Vasconia. The price realized for the natural gas we not entered into any derivative arrangements or contracts to mitigate the produce in Chile is linked to the international price of methanol, which impact on our results of operations of fluctuations in commodity prices. is settled in the international markets in US$. The market price of these commodities is subject to significant fluctuation and has historically If the market prices of oil and methanol had fallen by 10% as compared to fluctuated widely in response to relatively minor changes in the global supply actual prices during the year, with all other variables held constant, after- and demand for oil and natural gas, market uncertainty, economic conditions tax loss for the year ended December 31, 2016 would have been higher by and a variety of additional factors. US$23.7 million (US$23.9 million in 2015). 102 GeoPark 20F In Brazil, prices for gas produced in the Manati Field are based on a long-term agreements. The costs to maintain or operate our license areas may fluctuate off-take contract with Petrobras. The price of gas sold under this contract is or increase significantly, and we may not be able to meet our commitments denominated in reais and is adjusted annually for inflation pursuant to the under these agreements on commercially reasonable terms or at all, which Brazilian General Market Price Index ( Índice Geral de Preços—Mercado ) may force us to forfeit our interests in such areas. If we do not succeed in (“IGPM”). See Note 3 to our Consolidated Financial Statements. renewing these agreements, or in securing new ones, our ability to grow Production and operating costs our business may be materially impaired. See “Item 3. Key Information—D. Risk factors—Risks relating to our business—Under the terms of some of our Our production and operating costs consist primarily of expenses associated various CEOPs, E&P Contracts and concession agreements, we are obligated with the production of oil and gas, the most significant of which are gas to drill wells, declare any discoveries and file periodic reports in order to plant leasing, facilities and wells maintenance (including pulling works), retain our rights and establish development areas. Failure to meet these labor costs, contractor and consultant fees, chemical analysis, royalties and obligations may result in the loss of our interests in the undeveloped parts products, among others. As commodity prices increase or decrease, our of our blocks or concession areas.” production costs may vary. We have historically not hedged our costs to protect against fluctuations. Administrative expenses Availability and reliability of infrastructure by US$3.3 million, or (9)%, compared to the year ended December 31, 2015 Our business depends on the availability and reliability of operating and resulting from financial discipline and cost reduction initiatives. However, transportation infrastructure in the areas in which we operate. Prices and administrative costs may increase as a result of our Peruvian operations, availability for equipment and infrastructure, and the maintenance thereof, other acquisitions, increased activity or the impact of appreciation of local affect our ability to make the investments necessary to operate our business, currencies in the countries where we operate. Our administrative expenses for the year ended December 31, 2016 decreased and thus our results of operations and financial condition. See “Item 3. Key Information—D. Risk factors—Risks relating to our business—Our inability to Acquisitions access needed equipment and infrastructure in a timely manner may hinder Our results of operations are significantly affected by our past acquisitions. We our access to oil and natural gas markets and generate significant incremental generally incorporate our acquired business into our results of operations at costs or delays in our oil and natural gas production.” or around the date of closing, such as our Colombian acquisitions in 2012 and In order to mitigate the risk of unavailability of operating and transportation period including such acquisitions with prior or future periods. infrastructure, we have invested in the construction of plant and pipeline infrastructure to produce, process and store hydrocarbon reserves and to As described above, part of our strategy is to acquire and consolidate assets our Rio das Contas acquisition in 2014, which limits the comparability of the transport them to market. Production levels in Latin America. We intend to continue to selectively acquire companies, producing properties and concessions. As with our historical acquisitions, any future acquisitions could make year-to-year comparisons of our results of Our oil and gas production levels are heavily influenced by our drilling results, operations difficult. We may also incur additional debt, issue equity securities our acquisitions and to oil and natural gas prices. or use other funding sources to fund future acquisitions. We expect that fluctuations in our financial condition and results of operations Functional and presentational currency will be driven by the rate at which production volumes from our wells decline. Our Consolidated Financial Statements are presented in US$, which is our As initial reservoir pressures are depleted, oil and gas production from a given functional and presentational currency. Items included in the financial well will decline over time. See “Item 3. Key Information—D. Risk factors— information of each of our entities are measured using the currency of the Risks relating to our business—Unless we replace our oil and natural gas primary economic environment in which the entity operates, or the functional reserves, our reserves and production will decline over time. Our business is currency, which is the US$ in each case, except for our Brazil operations, where dependent on our continued successful identification of productive fields and the functional currency is the real . prospects and the identified locations in which we drill in the future may not yield oil or natural gas in commercial quantities.” Geographical segment reporting Contractual obligations In the description of our results of operations that follow, our “Other” operations reflect our non-Colombian, non-Chilean and non-Brazilian In order to protect our exploration and production rights in our license operations, primarily consisting of our Argentine, Peruvian (mainly related to areas, we must make and declare discoveries within certain time periods the start-up of our operations in such country) and corporate head specified in our various special contracts, E&P Contracts and concession office operations. GeoPark 103 We divide our business into five geographical segments—Colombia, Chile, including wages and salaries and share-based compensation not subject to Brazil, Peru and Argentina—that correspond to our principal jurisdictions of capitalization, geological consultancy costs and costs relating to independent operation. Activities not falling into these four geographical segments are reservoir engineer studies. reported under a separate corporate segment that primarily includes certain corporate administrative costs not attributable to another segment. Administrative expenses Description of principal line items Administrative costs consist of corporate costs such as director fees and travel expenses, new project evaluations and back-office expenses The following is a brief description of the principal line items of our statement principally comprised of wages and salaries, share-based compensation, of income. Revenue consultant fees and other administrative costs, including certain costs relating to acquisitions. Revenue includes the sale of crude oil, condensate and natural gas net of Selling expenses value-added tax (“VAT”), and discounts related to the sale (such as API and Selling expenses consist primarily of transportation and storage costs. mercury adjustments) and overriding royalties due to the ex-owners of oil and gas properties where the royalty arrangements represent a retained Impairment of non-financial assets working interest in the property. Revenue is recognized when the significant Assets that are not subject to depreciation and/or amortization (such as risks and rewards of ownership have been transferred to the buyer, the exploration and evaluation assets) are tested annually for impairment. associated costs and amount of revenue can be estimated reliably, recovery Assets that are subject to depreciation and/or amortization are reviewed for of the consideration is probable, and there is no continuing management impairment whenever events or changes in circumstances indicate that the involvement with the goods. carrying amount may not be recoverable. Commodity risk management contracts An impairment loss is recognized for the amount by which the asset’s carrying Includes realized and unrealized gains and losses arising from commodity risk amount exceeds its recoverable amount. The recoverable amount is the higher management contracts. of an asset’s fair value minus costs to sell and value in use. Production and operating costs During 2016, we recognized a reversal of impairment losses amounting to For a description of our production and operating costs, see “—Factors US$5.7 million, while in 2015 and 2014 we recognized impairment losses affecting our results of operations.” amounting to US$149.6 million and US$9.4 million. See Note 35 to our Depreciation and write-off of unsuccessful efforts Capitalized costs of proved oil and natural gas properties are depreciated on Financial costs Consolidated Financial Statements. a licensed-area-by-licensed-area basis, using the unit of production method, Financial costs consist of financial income offset by financial expenses. based on commercial proved and probable reserves as calculated under the Financial income includes interest received from bank time deposits. Financial Petroleum Resources Management System methodology promulgated by the expenses principally include interest expense not subject to capitalization, Society of Petroleum Engineers and the World Petroleum Council (“PRMS”), bank charges and the unwinding of long-term liabilities. which differs from SEC reporting guidelines pursuant to which certain information in the forepart of this annual report is presented. The calculation Foreign exchange gain or loss of the “unit of production” depreciation takes into account estimated future Foreign exchange gain or loss represents the effect of exchange rate differences. discovery and development costs. Changes in reserves and cost estimates are recognized prospectively. Reserves are converted to equivalent units on the Loss or profit for the period attributable to owners of the Company basis of approximate relative energy content. Loss or profit for the period attributable to owners of the Company consists of losses or profit for the year less non-controlling interest. In particular, upon completion of the evaluation phase, a prospect is either transferred to oil and gas properties if it contains reserves, or is charged to Critical accounting policies and estimates profit and loss in the period in which the determination is made. See “— We prepare our Consolidated Financial Statements in accordance with IFRS Critical accounting policies and estimates—Oil and gas accounting.” and the interpretations of the IFRS Interpretations Committee (“IFRIC”), as Geological and geophysical expenses adopted by the IASB. The preparation of the financial statements requires us to make judgments, estimates and assumptions that affect the reported Geological and geophysical expenses consist of geosciences costs, amounts of assets, liabilities, revenue and expenses, and related disclosure 104 GeoPark 20F of contingent assets and liabilities. We continually evaluate these estimates The process of estimating reserves requires significant judgments and and assumptions based on the most recently available information, our own decisions based on available geological, geophysical, engineering and historical experience and various other assumptions that we believe to be economic data. The estimation of economically recoverable oil and natural gas reasonable under the circumstances. Since the use of estimates is an integral reserves and related future net cash flows was performed based on the D&M component of the financial reporting process, actual results could differ Reserves Report. Such estimates incorporate many factors and assumptions from those estimates. including: • expected reservoir characteristics based on geological, geophysical and An accounting policy is considered critical if it requires an accounting estimate engineering assessments; to be made based on assumptions about matters that are highly uncertain • future production rates based on historical performance and expected future at the time such estimate is made, and if different accounting estimates that operating and investment activities; reasonably could have been used, or changes in the accounting estimates that • future oil and natural gas prices and quality differentials; are reasonably likely to occur periodically, could materially impact the financial • anticipated effects of regulation by governmental agencies; and statements. We believe that the following accounting policies represent • future development and operating costs. critical accounting policies as they involve a higher degree of judgment and complexity in their application and require us to make significant accounting Our management believes these factors and assumptions are reasonable estimates. The following descriptions of critical accounting policies and based on the information available at the time we prepare our estimates. estimates should be read in conjunction with our Consolidated Financial However, these estimates may change substantially as additional data from Statements and the accompanying notes and other disclosures. ongoing development activities and production performance becomes available and as economic conditions impacting oil and natural gas prices Business combinations and costs change. Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the fair market value of the assets For further information related to impairment of property, plant and acquired, equity instruments issued and liabilities incurred or assumed on the equipment, please see Note 35 to our Consolidated Financial Statements. date of completion of the acquisition. Acquisition costs incurred are expensed and included in administrative expenses. Identifiable assets acquired and Oil and gas accounting liabilities and contingent liabilities assumed in a business combination are Oil and gas exploration and production activities are accounted for in measured initially at their fair market values at the acquisition date. The accordance with the successful efforts method on a field by field basis. excess of the cost of acquisitions over fair market value of a company’s share We account for exploration and evaluation activities in accordance with of the identifiable net assets acquired is recorded as goodwill. If the cost of IFRS 6, Exploration for and Evaluation of Mineral Resources, capitalizing the acquisition is less than a company’s share of the net assets required, the exploration and evaluation costs until such time as the economic viability difference is recognized directly in the statement of income. of producing the underlying resources is determined. Costs incurred prior to obtaining legal rights to explore are expensed immediately to the The determination of fair value of identifiable acquired assets and assumed income statement. liabilities means that we are to make estimates and use valuation techniques, including independent appraisers. The valuation assumptions underlying Exploration and evaluation costs may include: license acquisition, geological each of these valuation methods are based on available updated information, and geophysical studies (i.e., seismic), direct labor costs and drilling costs of including discount rates, estimated cash flows, market risk rates and other exploratory wells. No depreciation and/or amortization are charged during the data. As a result, the process of identification and the related determination of exploration and evaluation phase. Upon completion of the evaluation phase, fair values require complex judgments and significant estimates. the prospects are either transferred to oil and gas properties or charged to expense in the period in which the determination is made, depending whether Cash flow estimates for impairment assessments they have found reserves. If not developed, exploration and evaluation assets Cash flow estimates for impairment assessments require assumptions are written off after three years, unless it can be clearly demonstrated that the about two primary elements: future prices and reserves. Estimates of carrying value of the investment is recoverable. All field development costs future prices require significant judgments about highly uncertain future are considered construction in progress until they are finished and capitalized events. Historically, oil and natural gas prices have exhibited significant within oil and gas properties, and are subject to depreciation once completed. volatility. Our forecasts for oil and natural gas revenues are based on prices Such costs may include the acquisition and installation of production facilities, derived from future price forecasts among industry analysts, as well as our development drilling costs (including dry holes, service wells and seismic own assessments. Estimates of future cash flows are generally based on surveys for development purposes), project-related engineering and the assumptions of long-term prices and operating and development costs. acquisition costs of rights and concessions related to proved properties. GeoPark 105 Workovers of wells made to develop reserves and/or increase production Fair value of the stock option plans for employee or contractor services received are capitalized as development costs. Maintenance costs are charged to in exchange for the grant of the options is recognized as an expense. The total income when incurred. amount to be expensed over the vesting period, which is the period over which all specified vesting conditions are to be satisfied, is determined by reference to Capitalized costs of proved oil and gas properties and production facilities the fair value of the options granted calculated using the Geometric Brownian and machinery are depreciated on a licensed area by licensed area basis, using Motion method. Determining the total value of our share-based payments the unit of production method, based on commercial proved and probable requires the use of highly subjective assumptions, including the expected reserves. The calculation of the “unit of production” depreciation takes into life of the stock options, estimated forfeitures and the price volatility of the account estimated future finding and development costs, and is based on underlying shares. The assumptions used in calculating the fair value of share- current year-end un-escalated price levels. Changes in reserves and cost based payment represent management’s best estimates, but these estimates estimates are recognized prospectively. Reserves are converted to equivalent involve inherent uncertainties and the application of management’s judgment. units on the basis of approximate relative energy content. Oil and gas reserves for purposes of our Consolidated Financial Statements are the number of options that are expected to vest. At each balance sheet date, determined in accordance with PRMS, and were estimated by DeGolyer and we revise our estimates of the number of options that are expected to vest. MacNaughton, independent reserves engineers. We recognize the impact of the revision to original estimates, if any, in the Non-market vesting conditions are included in assumptions in respect of statement of income, with a corresponding adjustment to equity. Depreciation of the remaining property, plant and equipment assets (i.e., furniture and vehicles) not directly associated with oil and gas activities has The fair value of the share awards payments is determined at the grant date by been calculated by means of the straight line method by applying such annual reference of the market value of the shares and recognized as an expense over rates as required to write-off their value at the end of their estimated useful the vesting period. lives. The useful lives range between three and 10 years. Asset retirement obligations When options are exercised, we issue new common shares. The proceeds received net of any directly attributable transaction costs are credited to share Obligations related to the plugging and abandonment of wells once operations capital (nominal value) and share premium when the options are exercised. are terminated may result in the recognition of significant liabilities. We record the fair value of the liability for asset retirement obligations in the period in Taxation which the wells are drilled. When the liability is initially recognized, the cost is The computation of our income tax expense involves the interpretation of also capitalized by increasing the carrying amount of the related asset. Over applicable tax laws and regulations in many jurisdictions. The resolution of tax time, the liability is accreted to its present value at each reporting date, and the positions taken by us, through negotiations with relevant tax authorities or capitalized cost is depreciated over the estimated useful life of the related asset. through litigation, can take several years to complete and in some cases it is Estimating the future abandonment costs is difficult and requires management difficult to predict the ultimate outcome. to make assumptions and judgments because most of the obligations will be settled after many years. Technologies and costs are constantly changing, as In addition, we have tax-loss carry-forwards in certain taxing jurisdictions are political, environmental, health, safety and public relations considerations. that are available to offset against future taxable profit. However, deferred Consequently, the timing and future cost of dismantling and abandonment tax assets are recognized only to the extent that it is probable that taxable are subject to significant modification. Any change in the variables underlying profit will be available against which the unused tax losses can be utilized. our assumptions and estimates can have a significant effect on the liability Management judgment is exercised in assessing whether this is the case. and the related capitalized asset and future charges related to the retirement obligations. The present value of future costs necessary for well plugging and To the extent that actual outcomes differ from management’s estimates, abandonment is calculated for each area at the present value of the estimated taxation charges or credits may arise in future periods. future expenditure. The liability recognized is based upon estimated future abandonment costs, wells subject to abandonment, time to abandonment, and Contingencies future inflation rates. Share-based payments From time to time, we may be subject to various lawsuits, claims and proceedings that arise in the normal course of business, including employment, commercial, environmental and health & safety matters. For example, from We provide several equity-settled, share-based compensation plans to certain time to time, the Company receives notices of environmental, health and safety employees and third-party contractors, composed of payments in the form of violations. Based on what our Management currently knows, such claims are share awards and stock options plans. not expected to have a material impact on the financial statements. 106 GeoPark 20F Recent accounting pronouncements Year ended December 31, 2016 compared to year ended December 31, 2015 See Note 2.1.1 to our Consolidated Financial Statements. The following table summarizes certain of our financial and operating data for the years ended December 31, 2016 and 2015. 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 Consolidated Financial Statements and the accompanying notes. We closed the acquisition of Brazilian Rio das Contas on March 31, 2014 and began consolidating its financials beginning on March 31, 2014. Accordingly, our results of operations for the year ended December 31, Revenue 2014, are not fully comparable with prior periods. See Note 34 to our Consolidated Financial Statements. Net oil sales Net gas sales Revenue As a consequence of the oil price crisis which started in the second half of Commodity risk management contracts 2014 (WTI and Brent, the main international oil price markers, fell more than Geological and geophysical expenses 60% between August 2014 and March 2016), we have undertaken decisive Administrative expenses measures to ensure our ability to both maximize the work program and Selling expenses preserve our cash. Depreciation Write-off of unsuccessful efforts During 2015 and 2016, we took decisive steps to adapt to the new oil Impairment loss reversed (recognized) price environment. We reduced our capital expenditure program from for non-financial assets US$238 million in 2014 to US$48 million in 2015 and US$39 million in 2016 Other operating expense and implemented significant cost reduction initiatives that resulted in Operating loss production and operating costs being reduced by 49% (2016 versus 2014), Financial costs and administrative expenses being reduced by 26% (2016 versus 2014), while Foreign exchange gain (loss) increasing average production to approximately 22.4 mboepd and increasing Loss before income tax our proved reserves to 73.6 mmboe. Income tax (expense) benefit Loss for the year For the year ended December 31 (in thousands of US$, except for percentages) % Change from 2016 2015 prior year 145,193 47,477 162,629 47,061 192,670 209,690 (2,554) (10,282) (34,170) (4,222) (75,774) (31,366) - (13,831) (37,471) (5,211) (105,557) (30,084) 5,664 (149,574) (1,344) (13,711) (28,613) (232,491) (34,101) 13,872 (35,655) (33,474) (48,842) (301,620) (11,804) 17,054 (60,646) (284,566) (11)% 1% (8)% 100% (26)% (9)% (19)% (28)% 4% (104)% (90)% (88)% (4)% (141)% (84)% (169)% (79)% In preparation for continued volatility, we have developed multiple scenarios Non-controlling interest (11,554) (50,535) (77)% for our 2017 capital expenditure program. See “Item 4. Information on the Loss for the year attributable Company –B. Business Overview—2017 Strategy and Outlook.” to owners of the Company (49,092) (234,031) (79)% 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$) Operating cost Royalties and other Production costs(1) Geological and geophysical expenses Administrative expenses Selling expenses (1) Calculated pursuant to FASB ASC 932. 6,189 11,911 8,174 22,394 5,518 11,493 7,434 20,367 25.6 4.5 7.3 1.5 8.8 1.3 4.5 0.6 32.1 4.6 10.5 1.9 12.4 2.0 5.4 0.7 12% 4% 10% 10% (20)% (2)% (30)% (21)% (29)% (35)% (17)% (14)% GeoPark 107 The following table summarizes certain financial and operating data. Chile Colombia 36,723 (31,355) (19,389) 126,228 (31,148) (1,730) Brazil 29,719 (12,974) (4,583) Other - (297) - 2016 Total 192,670 (75,774) (25,702) For the year ended December 31, (in thousands of US$) 2015 Chile Colombia 44,808 (39,227) (130,266) 131,897 (52,434) (49,392) Brazil 32,388 (13,568) — Other 597 (328) Total 209,690 (105,557) — (179,658) Revenue Depreciation Impairment and writeoff Revenue For the year ended December 31, 2016, crude oil sales were our principal The decrease in 2016 net revenue of US$17.0 million is mainly explained by: source of revenue, with 75% and 25% of our total revenue from crude oil • a decrease of US$5.7 million in oil sales in Colombia and gas sales, respectively. The following chart shows the change in oil and • a decrease of US$8.1 million in sales in Chile, including US$10.4 million in oil natural gas sales from the year ended December 31, 2015 to the year ended sales partially offset by an increase of US$2.3 million of gas December 31, 2016. • sales. • a decrease of US$2.7 million in sales in Brazil, related to our Manati operations For the year ended December 31, and including US$0.3 million of oil sales and US$2.4 (in thousands of US$) • million of gas sales, 2016 2015 described below. • all of which was due principally to lower oil and gas prices, as further Consolidated Sale of crude oil Sale of gas Total By country Colombia Chile Brazil Other Total Revenue attributable to our operations in Colombia for the year ended 145,193 47,477 162,629 December 31, 2016 was US$126.2 million, compared to US$131.9 million 47,061 for the year ended December 31, 2015, representing 66% and 63% of our 192,670 209,690 total consolidated sales. The decrease is related to a decrease in the average realized prices per barrel of crude oil from US$28.8 per barrel to US$24.4 per barrel, primarily due to lower reference international prices. This was partially Year ended December 31 Change from prior year offset by an increased sales of crude oil, from 4.6 mmbbl for the year ended (in thousands of US$, except for percentages) December 31, 2015 to 5.4 mmbbl for the year ended December 31, 2016, an 2016 2015 % increase of 17%. This increase resulted mainly from the development and 126,228 131,897 36,723 29,719 - 44,808 32,388 597 (5,669) (8,085) (2,669) (597) appraisal of the Jacana and Tigana fields in the Llanos 34 Block. (4)% (18)% Revenue attributable to our operations in Chile for the year ended December (8)% 31, 2016 was US$36.7 million, a 18% decrease from US$44.8 million for the (100)% year ended December 31, 2015, principally due to (1) decreased sales of 192,670 209,690 (17,020) (8)% crude oil of 0.5 mmbbl for the year ended December 31, 2016 compared to 0.7 mmbbl for the year ended December 31, 2015 (a decrease of 29%) due to Revenue decreased 8%, from US$209.7 million for the year ended December the decline in oil base production, (2) decreased average realized prices per 31, 2015 to US$192.7 million for the year ended December 31, 2016, barrel of crude oil from US$42.2 per barrel for the year December 31, 2015 primarily as a result of lower prices. Sales of crude oil increased to 5.9 mmbbl to US$37.0 per barrel for the year ended December 31, 2016 (a decrease of in the year ended December 31, 2016 compared to 5.3 mmbbl in the year US$5.2 per barrel or a total of 12%). The decrease in the average realized ended December 31, 2015, and resulted in net revenue of US$145.2 million for price per barrel was attributable to lower international reference prices. the year ended December 31, 2016 compared to US$162.6 for the year This was partially offset by an increase in gas sales by US$2.3 million, due ended December 31, 2015. In addition, sales of gas increased from US$47.1 to increased gas production levels as compared to the previous year. The million for the year ended December 31, 2015 to US$47.5 million for the year contribution to our revenue during such years from our operations in Chile ended December 31, 2016 due to higher production. was 19% and 21%, respectively. 108 GeoPark 20F Revenue attributable to our operations in Brazil for the year ended December 31, 2016 was US$29.7 million, a 8% decrease from US$32.4 million for the year ended December 31, 2015, principally due to decreased sales of gas of 5.8 mmcf for the year ended December 31, 2016 compared to 6.7 mmcf for the year ended December 31, 2015 (a decrease of 13%) due to lower industrial demand. The contribution to our revenue during such years from our operations in Brazil was 15%. Production and operating costs The following table summarizes our production and operating costs for the years ended December 31, 2016 and 2015. For the year ended December 31 (in thousands of US$, except for percentages) % Change from prior 2016 2015 year Consolidated (including Colombia, Chile, Argentina, Peru and Brazil) Royalties Staff costs Transportation costs Well and facilities maintenance Consumables Equipment rental Other costs Total (11,497) (10,859) (2,281) (13,160) (8,283) (3,868) (13,155) (18,562) (4,511) (19,974) (8,591) (3,517) (17,287) (18,432) (13)% (41)% (49)% (34)% (4)% 10% (6)% (67,235) (86,742) (22)% Year ended December 31 (in thousands of US$) 2016 2015 Chile Brazil Colombia Chile Brazil Colombia By country Royalties Staff costs Transportation costs Well and facilities maintenance Consumables Equipment rental Other costs Total (1,495) (5,866) (1,170) (6,122) (1,405) (42) (6,069) (22,169) (2,721) (85) - (1,419) - - (4,234) (8,459) Consolidated production and operating costs decreased 22%, from US$86.7 million for the year ended December 31, 2015 to US$67.2 million for the year ended December 31, 2016, primarily due to cost reduction efforts and efficiencies, partially offset by increased volume sold. (7,281) (5,530) (1,111) (5,619) (6,878) (3,826) (6,362) (1,973) (7,680) (2,441) (2,998) — — (10,628) (1,651) (1,851) (101) (4,030) — — (36,607) (28,704) (8,150) (9,322) (2,068) (7,611) (6,726) (3,404) (3,407) (8,056) 11,253) (48,534) GeoPark 109 Production and operating costs in Colombia decreased 25%, to US$36.6 Selling expenses million for the year ended December 31, 2016, as compared to the year ended December 31, 2015, primarily due to cost reduction efforts. In addition, operating costs per boe in Colombia decreased to US$5 per boe for the year ended December 31, 2016 from US$9 per boe for the year ended December 31, 2015. Production and operating costs in Chile decreased by 23%, due to cost reduction initiatives and operating costs per boe decreased to US$16 per boe from US$21 per boe in 2015. In the year ended December 31, 2016, the revenue mix for Chile was 51.1% oil and 48.9% gas, whereas for the same Colombia Chile Brazil Other Total Year ended December 31, Change from prior year (in thousands of US$, except for percentages) 2016 (2,830) (994) (20) (378) 2015 (3,658) (1,085) — (468) (4,222) (5,211) 828 91 (20) 90 989 % (23)% (8)% 100% (19)% (19)% period in 2015 it was 65.1% oil and 34.9% gas. Selling expenses decreased 19%, from US$5.2 million for year ended December 31, 2015 to US$4.2 million for the year ended December 31, 2016, primarily due Production and operating costs in Brazil increased by 5%, to US$8.4 million for to a change in the commercialization mix increasing sales at wellhead in our the year ended December 31, 2016, as compared to the year ended December Colombian operations. In our Chilean operations, selling expenses were 8% 31, 2015, primarily due to decrease in production. Operating costs per boe lower compared to prior year, primarily as a result of lower oil production levels. increased to US$6 for the year ended December 31, 2016 from US$4 per boe for the year ended December 31, 2015. Operating (loss) profit Geological and geophysical expenses Year ended December 31 Change from prior year (in thousands of US$, except for percentages) Colombia Colombia Chile Brazil Other Total 2016 (4,296) (1,671) (1,053) (3,262) 2015 (2,798) (4,749) (1,103) (5,181) (10,282) (13,831) (1,498) 3,078 50 1,919 3,549 Chile Brazil Other Total % 54% (65)% (5)% (37)% Year ended December 31, Change from prior year (in thousands of US$, except for percentages) 2016 31,464 2015 (37,227) (44,969) (180,264) (644) 6,639 (14,464) (21,639) 68,691 135,295 (7,283) 7,175 (28,613) (232,491) 203,878 % (185)% (75)% (110)% (33)% (88)% (26)% We recorded an operating loss of US$28.6 million for the year ended December 31, 2016, an 88% improvement from the operating loss of Geological and geophysical expenses decreased 26%, from US$13.8 million US$232.5 million for the year ended December 31, 2015, primarily due to for the year ended December 31, 2015 to US$10.3 million for the year ended the recognition in 2015 of non-cash impairments of non-financial assets December 31, 2016, primarily as the result of higher allocation to capitalized amounting to US$149.6 million (US$104.5 million recorded in Chile and projects and lower staff costs. Administrative costs US$45.1 million in Colombia). In 2016, we recorded a gain on non-cash impairments reversal of non-financial assets amounting to US$5.7 million in Colombia, resulting from an improved oil price environment and improvements in cost structure. Year ended December 31 Change from prior year (in thousands of US$, except for percentages) Financial costs Colombia Chile Brazil Other Total 2016 (14,715) (7,153) (3,085) (9,217) 2015 (10,579) (10,978) (2,936) (12,978) (34,170) (37,471) (4,136) 3,825 (149) 3,761 3,301 % Financial costs decreased 4% to US$34.1 million for the year ended December 39% 31, 2016 as compared to US$35.7 million for the year ended December 31, (35)% 2015, mainly due to the impact of lower bank charges and higher interest gains. 5% (29)% Foreign exchange gain (loss) (9)% Foreign exchange variation was 141% to a gain of US$13.9 million for the year ended December 31, 2016 as compared to US$33.5 million loss for the year Administrative costs decreased 9%, from US$37.5 million for the year ended ended December 31, 2015, mainly because of the appreciation of the real over December 31, 2015 to US$34.2 million for the year ended December 31, 2016, US$ denominated net debt incurred at the local subsidiary level, where the primarily as a result of continuing financial discipline. functional currency is the real. 110 GeoPark 20F (Loss) Profit before income tax Year ended December 31, 2015 compared to year ended December 31, 2014 The following table summarizes certain of our financial and operating data for Year ended December 31 Change from prior year the years ended December 31, 2015 and 2014. Colombia Chile Brazil Other Total (in thousands of US$, except for percentages) 2016 25,845 2015 (38,339) (58,017) (193,683) 8,762 (25,432) (37,980) (31,618) 64,184 135,666 46,742 6,186 (48,842) (301,620) 252,778 % (167)% (70)% (123)% (20)% (84)% For the year ended December 31 (in thousands of US$, except for percentages) % Change from 2016 2015 prior year For the year ended December 31, 2016, we recorded a loss before income tax of Revenue Net oil sales US$48.8 million, compared to a loss of US$301.6 million for the year ended December Net gas sales 31, 2015, primarily due to decreased losses from our Chilean and Other operations Net revenue and profits recorded in our Colombian and Brazilian operations. Production and operating costs Income tax (expense) benefit Geological and geophysical expenses Administrative expenses Selling expenses Year ended December 31 Change from prior year Depreciation 162,629 47,061 367,102 61,632 209,690 428,734 (86,742) (13,831) (37,471) (5,211) (131,419) (13,002) (45,867) (24,428) (105,557) (100,528) Colombia Chile Brazil Other Total (in thousands of US$, except for percentages) Write-off of unsuccessful efforts (30,084) (30,367) 2016 (11,969) 2,155 (2,764) 774 2015 (620) 16,893 8,357 (7,576) % Impairment loss for non-financial assets (149,574) (11,349) (14,738) (11,121) 1,830% Other operating expense (87)% Operating (loss)/profit (133)% Financial costs 8,350 (110)% Foreign exchange loss (13,711) (232,491) (35,655) (33,474) (11,804) 17,054 (28,858) (169)% (Loss) Profit before income tax (301,620) Income tax benefit (expense) 17,054 (9,430) (1,849) 71,844 (27,622) (23,097) 21,125 (5,195) (56)% (24)% (51)% (34)% 6% (18)% (79)% 5% (1)% 1,486% 642% (424)% 29% 45% (1,528)% (428)% Income tax expense decreased 169%, from US$17.1 million for the year ended (Loss) Profit for the year (284,566) 15,930 (1,886)% December 31, 2015 to a loss of US$11.8 million for the year ended December 31, 2016, Non-controlling interest (50,535) 7,845 (744)% as a result of increased results of operations, mainly related to Colombia and Brazil. (Loss) Profit for the year attributable to owners of the Company (234,031) 8,085 (2,995)% (Loss) Profit for the year Net production volumes Oil (mbbl) Colombia Chile Brazil Other Total Year ended December 31 Change from prior year Gas (mcf ) (in thousands of US$, except for percentages) Total net production (mboe) 2016 13,876 2015 (38,959) (55,862) (176,789) 5,998 (24,658) (29,623) (39,195) 52,835 120,927 35,621 14,537 % Average net production (boepd) (136)% Average realized sales price (68)% Oil (US$ per bbl) (120)% Gas (US$ per mmcf ) (37)% Average unit costs per boe (US$) (60,646) (284,566) 223,920 (79)% Operating cost Royalties and other For the year ended December 31, 2016, we recorded a loss of US$60.6 million Production costs(1) as a result of the reasons described above. Geological and geophysical expenses (Loss) Profit for the year attributable to owners of the Company Loss for the year attributable to owners of the Company decreased by 79% Administrative expenses Selling expenses to US$49.1 million, for the reasons described above. Loss attributable to (1) Calculated pursuant to FASB ASC 932. non-controlling interest decreased by 77% to US$11.6 million for the year ended December 31, 2016 as compared to the prior year. 5,518 11,493 7,434 20,367 5,307 11,197 7,173 19,653 32.1 4.6 10.5 1.9 12.4 2.0 5.4 0.7 77.5 6.4 16.2 3.3 19.5 1.9 6.9 3.7 4% 3% 4% 4% (59)% (28)% (35)% (42)% (36)% 5% (22)% (81)% GeoPark 111 The following table summarizes certain financial information and operating data. Chile Colombia Net revenue Depreciation 44,808 (39,227) Impairment and write-off (130,266) 131,897 (52,434) (49,392) Brazil 32,388 (13,568) — 2015 Total Chile Colombia 145,720 (37,077) (28,772) 246,085 (51,584) (10,994) Other 597 (328) 209,690 (105,557) — (179,658) Year ended December 31 (in thousands of US$) Brazil 35,621 (11,613) — Other 1,308 (254) (31) 2014 Total 428,734 (100,528) (39,797) Net revenue US$61.6 million for the year ended December 31, 2014 to US$47.1 million for For the year ended December 31, 2015, crude oil sales were our principal the year ended December 31, 2015 due to lower prices. The decrease in 2015 source of revenue, with 78% and 22% of our total revenue from crude oil net revenue of US$219.0 million is mainly explained by: and gas sales, respectively. The following chart shows the change in oil and • a decrease of US$114.2 million in oil sales in Colombia natural gas sales from the year ended December 31, 2014 to the year ended • a decrease of US$100.9 million in sales in Chile, including US$89.0 million in December 31, 2015. oil sales and US$11.9 million of gas sales. For the year ended December 31 operations and including US$0.6 million of oil sales and US$2.6 million of • a decrease of US$3.2 million in sales in Brazil, related to our Rio das Contas (in thousands of US$) gas sales, 2015 2014 escribed below. all of which was due principally to lower oil and gas prices, as further 162,629 47,061 367,102 Net revenue attributable to our operations in Colombia for the year ended 61,632 December 31, 2015 was US$131.9 million, compared to US$246.1 million 209,690 428,734 for the year ended December 31, 2014, representing 63% and 57% of our total consolidated sales. The decrease is related to a decrease in the average realized prices per barrel of crude oil from US$73.0 per barrel to US$28.8 per Year ended December 31 barrel, primarily due to lower reference international prices. This was partially (in thousands of US$, except for percentages) offset by an increased sales of crude oil, from 3.7 mmbbl for the year ended % Change December 31, 2014 to 4.6 mmbbl for the year ended December 31, 2015, an from prior increase of 24%. This increase resulted mainly from the development of the 2015 2014 year Tigana field in the Llanos 34 Block. 131,897 44,808 32,388 597 246,085 145,720 35,621 1,308 (114,188) (100,912) (3,233) (711) (46)% (69)% Net revenue attributable to our operations in Chile for the year ended December 31, 2015 was US$44.8 million, a 69% decrease from US$145.7 (9)% million for the year ended December 31, 2014, principally due to (1) (54)% decreased sales of crude oil of 0.7 mmbbl for the year ended December 209,690 428,734 (219,044) (51)% 31, 2015 compared to 1.3 mmbbl for the year ended December 31, 2014 (a decrease of 46%) due to the decline in base production, (2) decreased Consolidated Sale of crude oil Sale of gas Total By country Colombia Chile Brazil Other Total Net revenue decreased 51%, from US$428.7 million for the year ended average realized prices per barrel of crude oil from US$89.4 per barrel for the December 31, 2014 to US$209.7 million for the year ended December 31, year December 31, 2014 to US$42.2 per barrel for the year ended December 2015, primarily as a result of lower prices. Sales of crude oil increased to 5.3 31, 2015 (a decrease of US$47.2 per barrel or a total of 53%). The decrease in mmbbl in the year ended December 31, 2015 compared to 5.0 mmbbl in the the average realized price per barrel was attributable to lower international year ended December 31, 2014, and resulted in net revenue of US$162.6 reference prices. In addition, gas sales decreased by US$11.9 million. The million for the year ended December 31, 2015 compared to US$367.1 for the contribution to our net revenue during such years from our operations in year ended December 31, 2014. In addition, sales of gas decreased from Chile was 21% and 34%, respectively. 112 GeoPark 20F Net revenue attributable to our operations in Brazil for the year ended December 31, 2015 was US$32.4 million, representing 15% of our total consolidated sales, were related to our Rio das Contas operations and were composed of 97% gas sales, amounting to US$31.4 million. Production and operating costs The following table summarizes our production and operating costs for the years ended December 31, 2015 and 2014. For the year ended December 31 (in thousands of US$, except for percentages) % Change from prior 2015 2014 year Consolidated (including Colombia, Chile, Argentina and Brazil) Royalties Staff costs Transportation costs Well and facilities maintenance Consumables Equipment rental Other costs Total (13,155) (18,562) (4,511) (19,974) (8,591) (3,517) (18,432) (22,166) (17,731) (11,534) (25,475) (16,157) (7,563) (30,793) (41)% 5% (61)% (22)% (47)% (53)% (40)% (86,742) (131,419) (34)% By country Royalties Staff costs Transportation costs Well and facilities maintenance Consumables Equipment rental Other costs Total Year ended December 31 (in thousands of US$) 2015 2014 Chile Brazil Colombia Chile Brazil Colombia (1,973) (7,680) (2,441) (2,998) — — (10,628) (1,651) (1,851) (101) (4,030) (28,704) — — (3,407) (8,056) (8,150) (9,322) (2,068) (7,611) (6,726) (3,404) (11,253) (6,777) (4,026) (6,784) (14,157) (2,111) (97) (7,816) (48,534) (41,768) (2,794) — — — — — (5,354) (8,148) (12,353) (13,962) (4,663) (10,969) (13,974) (7,433) (17,599) (80,953) GeoPark 113 Consolidated production and operating costs decreased 34%, from US$131.4 Administrative costs million for the year ended December 31, 2014 to US$86.7 million for the year ended December 31, 2015, primarily due to cost reduction initiatives and the impact of the depreciation of the local currencies against the US$. Production and operating costs in Colombia decreased 40%, to US$48.5 million for the year ended December 31, 2015 as compared to the year ended December 31, 2014, primarily due to cost reduction initiatives and the impact of the depreciation of the Col$ against the US$. In addition, operating costs Colombia per boe in Colombia decreased to US$9 per boe for the year ended December 31, 2015 from US$18 per boe for the year ended December 31, 2014, due to the fact that increased production generated improved fixed cost absorption, which positively impacted production costs per boe. Chile Brazil Other Total For the year ended December 31 (in thousands of US$, except for percentages) 2015 (10,579) (10,978) (2,936) (12,978) 2014 (11,108) (18,181) (2,760) (13,818) (37,471) (45,867) % Change from prior year (5)% (40)% 6% (6)% (18)% 529 7,203 (176) 840 8,396 Production and operating costs in Chile decreased by 31%, due to cost Administrative costs decreased 18%, from US$45.9 million for the year ended reduction initiatives and the impact of the depreciation of the Ch$ against the December 31, 2014 to US$37.5 million for the year ended December US$. In the year ended December 31, 2015, in Chile, operating costs per boe 31, 2015, primarily as a result of a decrease in costs due to continuing financial increased to US$21.0 per boe from US$16.7 per boe in 2014. In the year ended discipline and cost reduction initiatives impacting consultant fees, office December 31, 2015, the revenue mix for Chile was 65.1% oil and 34.9% gas, expenses, directors fees and others. The reduction was achieved despite new whereas for the same period in 2014 it was 81.1% oil and 18.9% gas. start-up costs related to operations in Peru. Production and operating costs in Brazil amounted to US$8.1 million for Selling expenses the year ended December 31, 2015 corresponding to our Rio das Contas operations. Operating costs per boe decreased to US$4 for the year ended December 31, 2015 from US$6 per boe for the year ended December 31, 2014. For the year ended December 31 (in thousands of US$, except for percentages) Geological and geophysical expenses For the year ended December 31 Colombia (in thousands of US$, except for percentages) Chile % Change Brazil from prior Other 2014 (3,658) (1,085) — (468) 2013 (21,456) (2,470) — (502) 17,798 1,385 — 34 Total (5,211) (24,428) 19,217 % Change from prior year (83)% (56)% — (7)% (79)% Selling expenses decreased 79%, from US$24.4 million for year ended December 31, 2014 to US$5.2 million for the year ended December 31, 2015, primarily due to a change in the commercialization mix increasing sales at 6% wellhead in our Colombian operations. In our Chilean operations, selling expenses were 56% lower compared to prior year, primarily as a result of lower production and deliveries in Chile. Colombia Chile Brazil Other Total 2015 (2,798) (4,749) (1,103) (5,181) 2014 (3,003) (6,241) (2,164) (1,594) (13,831) (13,002) 205 1,492 1,061 (3,587) (829) year (7)% (24)% (49)% 225% Geological and geophysical expenses increased 6%, from US$13.0 million for the year ended December 31, 2014 to US$13.8 million for the year ended December 31, 2015, primarily as the result of a lower allocation to capitalized projects generated by the reduction of the capital expenditures program in 2015. 114 GeoPark 20F Operating (loss) profit For the year ended December 31, 2015, we recorded a loss before income tax of US$301.6 million, compared to a profit of US$21.1 million for the year For the year ended December 31 ended December 31, 2014, primarily due to losses from our Chilean, Colombian (in thousands of US$, except for percentages) and Brazilian operations amounting to US$206.8 million, US$99.9 million and % Change US$28.3 million, respectively, partially offset by lower losses from our Other from prior operations amounting to US$12.3 million. year (155)% Income tax benefit (expense) Colombia Chile Brazil Other Total 2015 (37,227) (180,264) 6,639 2014 67,212 11,733 10,658 (21,639) (17,759) (104,439) (191,997) (4,019) (3,880) (1,636)% (38)% 22% (232,491) 71,844 (304,335) (424)% We recorded an operating loss of US$232.5 million for the year ended December 31, 2015, a 424% decrease from the operating profit of US$71.8 million for Colombia the year ended December 31, 2014, primarily due to non-cash impairments of non-financial assets, which amounted to US$149.6 million (US$104.5 million recorded in Chile and US$45.1 million in Colombia), resulting from the continuing low oil price environment and lower sales. Chile Brazil Other Total For the year ended December 31 (in thousands of US$, except for percentages) 2015 (620) 16,893 8,357 (7,576) 17,054 2014 (21,415) 4,080 7,446 4,694 (5,195) 20,795 12,813 911 (12,270) 22,249 % Change from prior year (97)% 314% 12% (261)% (428)% Financial costs Income tax expense decreased 428%, from US$5.2 million for the year ended Financial costs increased 29% to US$35.7 million for the year ended December December 31, 2014 to a benefit of US$17.1 million for the year ended 31, 2015 as compared to US$27.6 million for the year ended December 31, 2014, December 31, 2015, as a result of our decreased results of operations, partially mainly due to the impact of lower capitalized interest costs and, to a lesser offset by non-recoverable tax loss carry-forwards amounting to US$15.5 extent, the increase of other financial costs. million. Our effective tax rate for the year ended December 31, 2015 was 6% as compared to 25% in the year ended December 31, 2014. Foreign exchange loss Foreign exchange loss increased 45% to US$33.5 million for the year ended (Loss) Profit for the year December 31, 2015 as compared to US$23.1 million for the year ended December 31, 2014, mainly because of the depreciation of the real over US$ denominated net debt incurred at the local subsidiary level, where the functional currency is the real. (Loss) Profit before income tax For the year ended December 31 Colombia Chile Brazil (in thousands of US$, except for percentages) Other % Change Total from prior For the year ended December 31 (in thousands of US$, except for percentages) 2015 (38,959) (176,789) (29,623) (39,195) 2014 40,194 17,231 (2,252) (39,243) % Change from prior year (197)% (79,153) (194,020) (1,126)% (27,371) 1,215% 48 — (284,566) 15,930 (300,496) (1,886)% Colombia Chile Brazil Other Total 2015 (38,339) (193,683) (37,980) (31,618) 2014 61,609 13,151 (9,698) (43,937) year For the year ended December 31, 2015, we recorded a loss of US$384.6 million (99,948) (162)% as a result of the reasons described above. (206,834) (1,573)% (28,282) 12,319 292% (28)% (Loss) Profit for the year attributable to owners of the Company (301,620) 21,125 (322,745) (1,528)% Loss for the year attributable to owners of the Company decreased by 2,995% to US$234.0 million, for the reasons described above. Loss attributable to non- controlling interest decreased by 744% to US$50.5 million for the year ended December 31, 2015 as compared to the prior year. GeoPark 115 B. Liquidity and capital resources 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 Overview rate equal to the 6-month LIBOR + 4.0%. Our financial condition and liquidity is and will continue to be influenced by a variety of factors, including: In February, 2013, we issued US$300.0 million aggregate principal amount • changes in oil and natural gas prices and our ability to generate cash flows of senior secured notes due 2020. The Notes due 2020 mature on February from our operations; • our capital expenditure requirements; 11, 2020 and bear interest at a fixed rate of 7.50% and a yield of 7.625% per year. Interest on the Notes due 2020 is payable semi-annually in arrears • the level of our outstanding indebtedness and the interest we are obligated on February 11 and August 11 of each year. The Indenture governing our to pay on this indebtedness; and Notes due 2020 contain incurrence-based limitations on the amount of • changes in exchange rates which will impact our generation of cash flows indebtedness we can incur. During 2015, and impacted by the current low from operations when measured in US$, and the real. oil price environment, our leverage ratio (as defined in the Indenture) and • Our principal sources of liquidity have historically been contributed the interest coverage (as defined in the Indenture) did not meet certain shareholder equity, debt financings and cash generated by our operations. thresholds included in the 2020 Bond Indenture. This situation may limit our capacity to incur additional indebtedness, other than permitted debt, as Since 2005 to 2016, we have raised approximately US$200 million in specified in the indenture governing the Notes. equity offerings at the holding company level and more than US$500 million through debt arrangements with multilateral agencies such as In December 2015, we entered into an offtake and prepayment agreement the IFC, gas prepayment facilities with Methanex, international bond with Trafigura under which we will sell a portion of our Colombian crude issuances and bank financings, described further below, which have been oil production to Trafigura in exchange for advance payments of up to used to fund our capital expenditures program and acquisitions and to US$100 million, subject to applicable volumes corresponding to the terms increase our liquidity. of the agreement. Funds committed by Trafigura were available to us upon request until September 2016. We have also raised US$180.9 million to date through our strategic partnership with LGI following the sale of minority interests in our Colombian In February 2017, the availability period under the prepayment agreement and Chilean operations. with Trafigura was extended until June 30, 2017. This extension provides us with available funds upon request from Trafigura to be repaid by us on a We initially funded our 2012 expansion into Colombia through a US$37.5 monthly basis through future oil deliveries over the period between January million loan, cash on hand and a subsequent sale of a minority interest in our 2017 and December 2018. Colombian operations to LGI. We subsequently restructured our outstanding debt in February 2013, by issuing US$300.0 million aggregate principal We believe that our current operations and 2017 capital expenditures amount of Notes due 2020, a portion of the proceeds of which we used to program can be funded from cash flow from existing operations and cash prepay the US$37.5 million loan and to redeem all of our outstanding Notes on hand. Should our operating cash flow decline due to unforeseen events, due 2015. See “Item 4. Information on the Company—B. Business Overview— including delivery restrictions or a protracted downturn in oil and gas Significant Agreements—Agreements with LGI.” prices, we would examine measures such as further capital expenditure program reductions, pre-sale agreements, disposition of assets, or issuance In February 2014, we commenced trading on the NYSE and raised US$98 of equity, among others. million (before underwriting commissions and expenses), including the over- allotment option granted to and exercised by the underwriters, through the Capital expenditures issuance of 13,999,700 common shares. In the past, we have funded our capital expenditures with proceeds from equity offerings, credit facilities, debt issuances and pre-sale agreements, In March 2014, we borrowed US$70.5 million pursuant to a five-year term as well as through cash generated from our operations. We expect to incur (including annual principal amortization in March and September of each substantial expenses and capital expenditures as we develop our oil and year starting in 2015) variable interest secured loan, secured by the benefits natural gas prospects and acquire additional assets. See “Item 4. Information we receive under the Purchase and Sale Agreement for Natural Gas with on the Company –B. Business Overview—2017 Strategy and Outlook.” Petrobras, equal to 6-month LIBOR + 3.9% to finance part of the purchase price of our Rio das Contas acquisition, and funded the remaining amount In the year ended December 31, 2016, we made total capital expenditures of with cash on hand. In March 2015, we reached an agreement to: (i) extend US$39.3 million (US$26.2 million, US$7.8 million, US$1.7 million and US$3.6 the principal payments that were due in 2015 (amounting to approximately million in Colombia, Chile, Argentina and Brazil, respectively). 116 GeoPark 20F In the year ended December 31, 2015, we made total capital expenditures of Cash used in financing activities was US$18.0 million for the year ended US$48.8 million (US$30.7 million, US$12.4 million, US$0.1 million and US$5.6 December 31, 2015, compared to cash provided by financing activities of million in Colombia, Chile, Argentina and Brazil, respectively). US$124.7 million for the year ended December 31, 2014. This change was Cash flows principally the result of cash received in the 2014 period from the funds recovered from our initial public offering and listing of our common shares The following table sets forth our cash flows for the periods indicated: on the NYSE in February 2014 amounting to US$90.9 million and the US$70.5 Cash flows provided by (used in) Operating activities Investing activities Financing activities Net (decrease) increase 2016 82,884 (39,306) (51,136) million loan entered into with Itaú BBA International plc used to fund the Rio Year ended December 31, das Contas acquisition. Cash used in financing activities in 2015 is composed (in thousands of US$) mainly of interest payments amounting to US$25.8 million, partially offset by 2015 2014 US$7.0 million of proceeds from borrowings. 25,895 (48,842) (18,022) 230,746 (344,041) Indebtedness 124,716 As of December 31, 2016 and 2015, we had total outstanding indebtedness of US$358.7 million and US$378.7 million, respectively, as set forth in the in cash and cash equivalents (7,558) (40,969) 11,421 table below. Cash flows provided by operating activities For the year ended December 31, 2016, cash provided by operating activities BCI Loans was US$82.9 million, a 220% increase from US$25.9 million for the year ended Bond GeoPark Latin America Agencia December 31, 2015, resulting from cost reduction efforts, lower income tax en Chile (Notes due 2020) paid and increased funds from working capital, including customer advance Banco de Chile payments from Trafigura. Rio das Contas Credit Facility Total As of December 31, (in thousands of US$) 2016 141 2015 — 304,059 302,495 4,709 49,763 7,036 69,142 358,672 378,673 For the year ended December 31, 2015, cash provided by operating activities was US$25.9 million, a 88.8% decrease from US$230.7 million for the year Our material outstanding indebtedness as of December 31, 2016 is ended December 31, 2014, resulting from the decline in oil and natural gas described below. prices in 2015 as compared to 2014. Cash flows used in investing activities Notes due 2020 For the year ended December 31, 2016, cash used in investing activities was General US$39.3 million, a 20% decrease from US$48.8 million for the year ended On February 11, 2013, we issued US$300.0 million aggregate principal amount December 31, 2015. This decrease was related to lower capital expenditures of senior secured notes due 2020. The Notes due 2020 mature on February 11, in Colombia, Chile and Brazil in 2016 as compared to 2015, despite having 2020 and bear interest at a fixed rate of 7.50% and a yield of 7.625% per year. similar activity levels. Interest on the Notes due 2020 is payable semi-annually in arrears on February For the year ended December 31, 2015, cash used in investing activities was US$48.8 million, a 85.8% decrease from US$344.0 million for the year ended Ranking 11 and August 11 of each year. December 31, 2014. This decrease was related to our Brazilian acquisitions, The Notes due 2020 constitute senior obligations of Agencia, secured by a first which occurred in the first quarter of 2014. This amount was complemented lien on certain collateral (as described below). The Notes due 2020 rank equally in by a decrease of US$189.2 million in capital expenditures mainly resulting right of payment with all senior existing and future obligations of Agencia (except from lower wells drilled in 2015 as compared to 2014 (7 wells drilled in 2015 those obligations preferred by operation of Bermuda and Chilean law, including, compared to 53 wells drilled in 2014). Cash flows used in financing activities without limitation, labor and tax claims); effectively senior to all unsecured debt of Agencia and GeoPark Latin America, to the extent of the value of the collateral; senior in right of payment to all existing and future subordinated indebtedness of Cash used in financing activities was US$51.1 million for the year ended Agencia and GeoPark Latin America; and effectively junior to any future secured December 31, 2016, compared to US$18.0 million for the year ended obligations of Agencia and its subsidiaries (other than additional notes issued December 31, 2015. This change was principally the result of principal pursuant to the indenture governing the Notes due 2020) to the extent secured payments related to Itau Loan and dividends distribution to non- by assets constituting with a security interest on assets not constituting collateral, controlling interest. in each case to the extent of the value of the collateral securing such obligations. GeoPark 117 Guarantees limitations on incurrence of debt and disqualified or preferred stock, restricted The Notes due 2020 are guaranteed unconditionally on an unsecured basis by payments (including restrictions on our ability to pay dividends), the ability of us, all of our wholly-owned subsidiaries, and any subsidiary that guarantees certain subsidiaries to pay dividends, asset sales and certain transactions with any of our debt, subject to certain exceptions. affiliates will no longer be applicable. Collateral The indenture governing our Notes due 2020 includes incurrence test The notes are secured by a first-priority perfected security interest in certain covenants that provide, among other things, that, the debt to EBITDA ratio collateral, which consists of: 80% of the equity interests of each of GeoPark should not exceed 2.5 and the EBITDA to Interest ratio should exceed 3.5. As Chile and GeoPark Colombia held by Agencia, and loans of the net proceeds of the date of this annual report, the Company’s debt to EBITDA ratio was 4.6 of the Notes due 2020 made by Agencia to each of GeoPark Fell and GeoPark and the EBITDA to interest ratio was 2.7, primarily due to the lower oil prices Llanos SAS. Except for certain immaterial subsidiaries and other exceptions, we that impacted the Company’s EBITDA generation. Failure to comply with and Agencia are also required to pledge the equity interests of our subsidiaries. the incurrence test covenants does not trigger an event of default. However, this situation may limit our capacity to incur additional indebtedness, as The Notes due 2020 are also secured on a first-priority basis by intercompany specified in the indenture governing the Notes, other than certain categories loans, disbursed to subsidiaries, in an aggregate amount at any one time that of permitted debt. We must test incurrence covenants before incurring does not exceed US$300.0 million. Optional redemption additional debt or performing certain corporate actions including but not limited to making dividend payments, restricted payments and others (in each case with certain specific exceptions). As of the date of this annual report, we We may, at our option, redeem all or part of the Notes due 2020, at the are in compliance with all indenture provisions. redemption prices, expressed as percentages of principal amount, set forth below, plus accrued and unpaid interest thereon (including additional Events of default amounts), if any, to the applicable redemption date, if redeemed during the Events of default under the indenture governing the Notes due 2020 include: 12-month period beginning on February 11 of the years indicated belo the nonpayment of principal when due; default in the payment of interest, Year Percentage 2017 2018 2019 and after Change of control which continues for a period of 30 days; failure to make an offer to purchase Percentage and thereafter accept tendered notes following the occurrence of a change 103.750% of control or as required by certain covenants in the indenture governing 101.875% the Notes due 2020; the notes, or the security documents in relation thereto 100.000% 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 Upon the occurrence of certain events constituting a change of control, we for US$15.0 million or more; bankruptcy and insolvency events; invalidity or are required to make an offer to repurchase all outstanding Notes due 2020, denial or disaffirmation of a guarantee of the notes; and failure to maintain a at a purchase price equal to 101% of the principal amount thereof plus any perfected security interest in any collateral having a fair market value in excess accrued and unpaid interest (including any additional amounts payable in of US$15.0 million, among others. The occurrence of an event of default would respect thereof ) thereon to the date of purchase. permit or require the principal of and accrued interest on the Notes due 2020 to become or to be declared due and payable. Covenants The Notes due 2020 contain customary covenants, which include, among Banco de Chile others, limitations on the incurrence of debt and disqualified or preferred stock, During December 2015, we entered into a loan agreement with Banco de restricted payments (including restrictions on our ability to pay dividends), Chile for US$7.0 million to finance the start-up of the new Ache gas field in the incurrence of liens, transfer, prepayment or modification of certain collateral, Fell Block. The interest rate applicable to this loan is LIBOR plus 2.35% per year. guarantees of additional indebtedness, the ability of certain subsidiaries to The interest and the principal will be paid on a monthly basis with a 6-month pay dividends, asset sales, transactions with affiliates, engaging in certain grace period and final maturity on December 2017. businesses and merger or consolidation with or into another company. BCI Loan In the event the Notes due 2020 receive investment-grade ratings from at least During February 2016, we executed a loan agreement with Banco de Crédito e two of the following rating agencies, Standard & Poor’s, Moody’s and Fitch, Inversiones (BCI) to finance the acquisition of vehicles for our Chilean operations. and no default has occurred or is continuing under the indenture governing The interest rate applicable to this loan is 4.14% per annum. The interest and the the Notes due 2020, certain of these restrictions, including, among others, the principal will be paid on monthly basis, with final maturity on February 2019. 118 GeoPark 20F LGI Line of Credit C. Research and development, patents and licenses, etc. As of December 31, 2016, the aggregate outstanding amount under the LGI See “Item 4. Information on the Company——B. Business Overview” and “Item Line of Credit was US$27.8 million. This corresponds to a loan granted by LGI to 4. Information on the Company—B. Business Overview—Title to Properties.” GeoPark Chile for financing Chilean operations in our Tierra del Fuego blocks. The maturity of this loan is July 2020 and the applicable interest rate is 8% per year. D. Trend information See “Item 4. Information on the Company—B. Business Overview—Significant affecting our results of operations” and “Item 4. Information on the Company Agreements—Agreements with LGI.” –B. Business Overview—2017 Strategy and Outlook.” For a discussion of Trend information, see “—A. Operating Results—Factors Rio das Contas Credit Facility E. Off-balance sheet arrangements We financed our Rio das Contas acquisition in part through our Brazilian We did not have any off-balance sheet arrangements as of December 31, 2016 subsidiary’s entrance into a US$70.5 million credit facility (the “Rio das Contas or as of December 31, 2015. Credit Facility”) with Itaú BBA International plc, which is secured by the benefits GeoPark receives under the Purchase and Sale Agreement for Natural F. Tabular disclosure of contractual obligations Gas with Petrobras. The facility matures five years from March 28, 2014, which In accordance with the terms of our concessions, we are required to pay was the date of disbursement and bears interest at a variable interest rate royalties in connection with our crude oil and natural gas production. See equal to the 6-month LIBOR + 3.9%. The facility agreement includes customary Note 31 to our Consolidated Financial Statements. events of default, and subject our Brazilian subsidiary to customary 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 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 in whole or in part, at any time, subject to a pre-payment fee to be determined under the contract. In March 2015, we reached an agreement to: (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 6-month LIBOR + 4.0%. As a result of the above, in March 2016, September 2016 and March 2017 we paid US$30 million in aggregate corresponding to principal payments under the current principal amortization schedule. Other Agreements In December 2015, we entered into an offtake and prepayment agreement with Trafigura under which we sell and deliver a portion of our Colombian crude oil production. Pricing will be determined by future spot market prices, net of transportation costs. The agreement also provides us with prepayment of up to US$100 million from Trafigura. Funds committed will be made available to us upon request and will be repaid by us on a monthly basis through future oil deliveries over the period of the contract, which is 2.5 years, including a 6-month grace period. According to the terms of the prepayment agreement, we are required to pay interest of LIBOR plus 5% per year on outstanding amounts. In addition, under the prepayment agreement, we are required to maintain certain coverage ratios linking: (i) future payments to the value of estimated future oil deliveries (net of transportation discounts) during the term of the offtake agreement and (ii) collections to payments within specified periods, with the possibility of delivering additional volumes to meet such ratios in the upcoming 3-month period. As of March 31, 2017, outstanding amounts related to the prepayment agreement amount to US$20 million. GeoPark 119 Directors, senior management and employees The table below sets forth our committed cash payment obligations as of December 31, 2016. Debt obligations(1) Operating lease obligations(2) Pending investment commitments(3) Asset retirement obligations Total contractual obligations Total 447,326 86,963 69,756 29,862 633,907 Less than one year (in thousands of US$) Three to five years More thanfive years One to three years 48,958 67,752 4,630 306 121,646 75,868 14,031 65,126 - 155,025 322,500 5,066 - - 327,566 - 114 - 29,556 29,670 (1) Refers to principal and interest undiscounted cash flows. Interest payment breakdown included in Debt Obligations is as follows (i) less than one year: US$24.3 million; one to three years: US$45.9 million and three to five years: US$22.5 million. At December 31, 2016 the outstanding long- term borrowing affected by variable rates amounted to US$54.5 million representing 15% of total borrowings, which was composed of the loan from Itaú International BBA plc and the loan from Banco de Chile that has a floating interest rate based on LIBOR. See Note 3: “Interest rate risk” to our Consolidated Financial Statements. (2) Reflects the future aggregate minimum lease payments under non- cancellable operating lease agreements. (3) Includes capital commitments in Isla Norte, Campanario and Flamenco Blocks in Chile, rounds 11, 12 and 13 concessions in Brazil, three blocks in Argentina and the Llanos 32, VIM-3, and Llanos 34 Blocks in Colombia. See “Item 4. Information on the Company—B. Business Overview—Our operations” and Note 31(b) to our Consolidated Financial Statements. G. Safe harbor See “Forward-Looking Statements.” ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES A. Directors and senior management Board of directors Our Board of Directors is composed of eight members. At every annual general meeting, one-third of the Directors retire from office. Our Directors can 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 Directors whose term has expired may offer themselves for re-election at each election of Directors. The term for the current Directors expires on the date of our next annual shareholders’ meeting, to be held in 2017. The current members of the Board of Directors were appointed at our annual general meeting held on June 30, 2016. The table below sets forth certain information concerning our current board of directors. All ages are as of March 31, 2017. 120 GeoPark 20F Name Position Gerald E. O’Shaughnessy Chairman and Director James F. Park Carlos A. Gulisano (3) Juan Cristóbal Pavez (1)(2) Peter Ryalls (1)(2) Robert Bedingfield (1)(2) Pedro Aylwin Chiorrini Michael D. Dingman Chief Executive Officer, Deputy Chairman and Director Director Director Director Director Director of Legal and Governance, Corporate Secretary Director Director Age At the Company since 68 61 66 46 66 68 57 85 2002 2002 2010 2008 2006 2015 2003 2017 (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. California at Berkeley and has worked as a research scientist in earthquake and tectonic at the University of Texas. 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. Biographical information of the current members of our Board of Directors is As a senior executive of Basic Resources International Limited, Mr. Park was set forth below. Unless otherwise indicated, the current business addresses for closely involved in the development of grass-roots exploration activities, our directors is Nuestra Señora de los Ángeles 179, Las Condes, Santiago, Chile. drilling and production operations, surface and pipeline construction and crude oil marketing and transportation, and with legal and regulatory issues, Gerald E. O’Shaughnessy has been our Chairman and a member of our and raising substantial investment funds. He remained a member of the board board of directors since he co-founded the company in 2002. Following his of directors of Basic Resources International Limited until the company was graduation from the University of Notre Dame with degrees in government sold in 1997. Mr. Park is also a member of the board of directors of Energy (1970) and law (1973), Mr. O’Shaughnessy was engaged in the practice of Holdings and has also been involved in oil and gas projects in California, law in Minnesota. Mr. O’Shaughnessy has been active in the oil and gas Louisiana, Argentina, Yemen and China. Mr. Park is a member of the AAPG and business over his entire business career, starting in 1976 with Lario Oil and SPE and has lived in Latin America since 2002. Gas Company, where he served as Senior Vice President and General Counsel. He later formed The Globe Resources Group, a private venture firm whose Carlos Gulisano has been a member of our board of directors since June subsidiaries provided seismic acquisition and processing, well rehabilitation 2010. Dr. Gulisano holds a bachelor’s degree in geology, a post-graduate services, sophisticated logistical operations and submersible pump works degree in petroleum engineering and a PhD in geology from the University for Lukoil and other companies active in Russia during the 1990s. Mr. of Buenos Aires and has authored or co-authored over 40 technical papers. O’Shaughnessy is also founder and owner of BOE Midstream, LLC, which owns He is a former adjunct professor at the Universidad del Sur, a former thesis and operates the Bakken Oil Express, a crude by rail transloading and storage director at the University of La Plata, and a former scholarship director at terminal in North Dakota, serving oil producers and marketing companies in CONICET, the national technology research council, in Argentina. Dr. Gulisano the Bakken Shale Oil play. Over the past 25 years, Mr. O’Shaughnessy has also is a respected leader in the fields of petroleum geology and geophysics in founded and operated companies engaged in banking, wealth management South America and has over 35 years of successful exploration, development products and services, investment desktop software, computer and network and management experience in the oil and gas industry. In addition to security, and green clean technology, as well as other venture investments, Mr. serving as an advisor to GeoPark since 2002 and as Managing Director from O’Shaughnessy has also served on a number of non-profit boards of directors, February 2008 until June 2010, Dr. Gulisano has worked for YPF, Petrolera including the Board of Economic Advisors to the Governor of Kansas, the I.A. Argentina San Jorge S.A. and Chevron San Jorge S.A. and has led teams O’Shaughnessy Family Foundation, the Wichita Collegiate School, the Institute credited with significant oil and gas discoveries, including those in the for Humane Studies, The East West Institute and The Bill of Rights Institute, the Trapial field in Argentina. He has worked in Argentina, Bolivia, Peru, Ecuador, Timothy P. O’Shaughnessy Foundation and is a member of the Intercontinental Colombia, Venezuela, Brazil, Chile and the United States. Mr. Gulisano is also an Chapter of Young Presidents Organization and World Presidents’ Organization. independent consultant on oil and gas exploration and production. James F. Park has served as our Chief Executive Officer and as a member Juan Cristóbal Pavez has been a member of our board of directors since of our board of directors since co-founding the Company in 2002. He has August 2008. He holds a degree in commercial engineering from the Pontifical extensive experience in all phases of the upstream oil and gas business, with Catholic University of Chile and an MBA from the Massachusetts Institute of a strong background in the acquisition, implementation and management Technology. He has worked as a research analyst at Grupo CB and later as a of international joint ventures in North America, South America, Asia, Europe portfolio analyst at Moneda Asset Management. In 1998, he joined Santana, and the Middle East. He holds a degree in geophysics from the University of an investment company, as Chief Executive Officer, where he focused mainly GeoPark 121 on investments in capital markets and real estate. While at Santana, he was Mr. Aylwin holds a degree in law from the Universidad de Chile and an LLM appointed Chief Executive Officer of Laboratorios Andrómaco, one of Santana’s from the University of Notre Dame. Mr. Aylwin has extensive experience in the main assets. In 1999, Mr. Pavez co-founded Eventures, an internet company. natural resources sector. Mr. Aylwin is also a partner at the law firm Aylwin, Since 2001, he has served as Chief Executive Officer at Centinela, a company Mendoza, Luksic, Valencia Abogados in Santiago, Chile, where he represented with a diversified global portfolio of investments, with a special focus in the mining, chemical and oil and gas companies in numerous transactions. energy industry, through the development of wind parks and run-of-the-river From 2006 until 2011, he served as Lead Manager and General Counsel at hydropower plants. Mr. Pavez is also a board member of Grupo Security, Vida BHP Billiton, Base Metals, where he was in charge of legal and corporate Security and Hidroelétrica Totoral. Over the last few years he has been a board governance matters on BHP Billiton’s projects, operations and natural resource member of several companies, including Quintec, Enaex, CTI and Frimetal. assets in South America, North America, Asia, Africa and Australia. Peter Ryalls has been a member of our board of directors since April 2006. Michael D. Dingman is a successful international investor, businessman Mr. Ryalls started his career working as a wireline engineer for Schlumberger and philanthropist, with more than 50 years of experience. Mr. Dingman in West Africa, returning to the UK in 1976 to study for his Master’s degree has an extensive and successful career on Wall Street as partner of Butnham in Petroleum Engineering at Imperial College, London following which he & Company, and he also was Chairman and Chief Director of industrial joined Mobil North Sea. He moved to Unocal Corporation in 1979 where he corporations including Wheelabrator-Frye, Signal, AlliedSignal, the Henley held increasingly senior positions, including as Managing Director of Unocal Group and Fisher-Scientific. His wide experience in the energy industry UK in Aberdeen, Scotland, and where he developed extensive experience in includes working with the Liedtke family of Pennzoil at Pogo Producing offshore production and drilling operations. In 1994, Mr. Ryalls represented Company and as an early investor of Sidanco, one of Russia’s largest oil Unocal Corporation in the Azerbaijan International Operating Company as Vice companies. Currently, he is Founder, President and CEO of the Shipston Group. President of Operations and was responsible for production, drilling, reservoir Mr. Dingman is a former director of Ford Motor Company (21 years), Time engineering and logistics. In 1998, Mr. Ryalls became General Manager for and then Time Warner (24 years), and the Mellon Bank, Temple Industries, Unocal in Argentina. He also served as Vice President of Unocal’s Gulf of Mexico Temple-Inland, Continental Telephone and Teekay Shipping. He is the founder onshore oil and gas business and as Vice President of Global Engineering and of the “Michael D. Dingman Center for Entrepreneurship” at the University of Construction, where he was responsible for the implementation of all major Maryland and he is a benefactor and former member of the Boston Museum capital projects ranging from deep water developments in Indonesia and the of Fine Arts and the John A. Hartford Foundation. 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. He holds a degree in Accounting from the University of Maryland and is a Certified Public Accountant. 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, and at times 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. Since 2013, Mr. Bedingfield has also served as Board Member and Chairman of the Audit Committee of NYSE-listed Science Applications International Corp (SAIC). 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 2003 to 2006, Mr. Aylwin worked for us as an advisor on governance and legal matters. 122 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. All ages are as of March 31, 2017. Name James F. Park Andrés Ocampo Pedro Aylwin Chiorrini Augusto Zubillaga Alberto Matamoros Marcela Vaca Carlos Murut Salvador Minniti Horacio Fontana Agustina Wisky Guillermo Portnoi Stacy Steimel Position Chief Executive Officer and Director Chief Financial Officer Director, Director of Legal and Governance, and Corporate Secretary Chief Operating Officer Director for Argentina, Brazil, Chile and Peru Director for Colombia Director of Development Director of Exploration Director of Drilling Director of Business Management Director of New Business Director of Shareholder Value Age At the Company since 61 39 57 47 45 48 60 62 59 40 41 57 2002 2010 2003 2006 2014 2012 2006 2007 2008 2002 2006 2017 Biographical information of the members of our executive officers is set practices. He has authored several industry papers, including papers on forth below. Unless otherwise indicated, the current business addresses electrical submersible pump optimization, corrosion control, water handling for our executive officers is Nuestra Señora de los Ángeles 179, Las Condes, and intelligent production systems. Santiago, Chile. Alberto Matamoros has been our Director for Argentina, Brazil, Chile and Andrés Ocampo has served as our Chief Financial Officer since November Peru since March 2016 and Director for Chile since January 2015. He is an 2013. He previously served as our Director of Growth and Capital (from industrial engineer and has an MBA, with more than 20 years of experience January 2011 through October 2013), and has been with our company since in the Oil & Gas industry. He started his career in the Argentinian oil July 2010. Mr. Ocampo graduated with a degree in Economics from the company ASTRA, as a Production Engineer of La Ventana-Vizcacheras Block Universidad Católica Argentina. He has more than 16 years of experience in in the province of Mendoza (1997-2000). He then joined Chevron, where business and finance. Before joining our company, Mr. Ocampo worked at he worked as a Production Engineer in El Trapial Block in the province of Citigroup and served as Vice President Oil & Gas and Soft Commodities at Neuquén for three years. Later, he became a Field Engineering Manager, Crédit Agricole Corporate & Investment Bank. also for three years, in Buenos Aires, and then moved to Kern County, California, to lead the production team. His experience in Chevron enabled Augusto Zubillaga has served as our Chief Operating Officer since May him to manage different technical and administrative teams, designing and 2015. He previously served in other management positions throughout executing working plans focused in the optimization of resources. In 2014, the Company including as Operations Director, Argentina Director and he joined GeoPark to be part of the Corporate Operation team before being Production Director. He previously served as our Production Director. He is selected as the new Country Manager of GeoPark in Chile. Matamoros a petroleum engineer with more than 23 years of experience in production, holds a degree in Industrial Engineering from the Universidad Nacional del engineering, well completions, corrosion control, reservoir management Sur and an MBA in IAE, from the Business School of Universidad Austral of and field development. He has a degree in petroleum engineering from Buenos Aires, Argentina. the Instituto Tecnológico de Buenos Aires. Prior to joining our company, Mr. Zubillaga worked for Petrolera Argentina San Jorge S.A. and Chevron Marcela Vaca has been our Director for Colombia since August 2012. Ms. San Jorge S.A. At Chevron San Jorge S.A., he led multi-disciplinary teams Vaca holds a degree in law from Pontificia Universidad Javeriana in Bogotá, focused on improving production, costs and safety, and was the leader of Colombia, a Master’s Degree in commercial law from the same university and the Asset Development Team, which was responsible for creating the field an LLM from Georgetown University. She has served in the legal departments development plan and estimating and auditing the oil and gas reserves of of a number of companies in Colombia, including Empresa Colombiana de the Trapial field in Argentina. Mr. Zubillaga was also part of a Chevron San Carbon Ltda (which later merged with INGEOMINAS), and from 2000 to 2003, Jorge S.A. team that was responsible for identifying business opportunities she served as Legal and Administrative Manager at GHK Company Colombia. and working with the head office on the establishment of best business Prior to joining our company in 2012, Ms. Vaca served for nine years as General GeoPark 123 Manager of the Hupecol Group where she was responsible for supervising Stacy Steimel joined GeoPark in February 2017 as our Shareholder Value all areas of the company as well as managing relationships with Ecopetrol, Director. Mrs. Steimel has more than 20 years of experience in the financial ANH, the Colombian Ministry of Mines and Energy, the Colombian Ministry sector as Fund Manager and subsequently as regional CEO for PineBridge of Environment and other governmental agencies. At the Hupecol Group, Investments, ex-AIG Investments in Latin America. Before AIG, Mrs. Steimel Ms. Vaca was also involved in the structuring of the Hupecol Group’s asset held positions in the US Treasury Department and at the InterAmerican development and sales strategy. Development Bank. She holds an MBA from the Pontificia Universidad Católica de Chile, an MA in Latin American Studies from the University of Texas at Carlos Murut has been our Director of Development since January 2012. He Austin and a BA from the College of William and Mary. previously served as our Development Manager. Mr. Murut holds a master’s degree in petroleum geology from the University of Buenos Aires where he B. Compensation also undertook postgraduate studies in reservoir engineering, specializing in field exploitation. He also completed a Business Management Development Executive compensation Program at Austral University. Mr. Murut has over 40 years of experience For the year ended December 31, 2016, we accrued or paid approximately working for international and major oil companies, including YPF S.A., US$2.6 million, in the aggregate, to the members of our board of directors Tecpetrol S.A., Petrolera Argentina San Jorge S.A. and Chevron San Jorge S.A. (including our executive directors) for their services in all capacities. During Salvador Minniti has been our Director of Exploration since January 2012. He the aggregate, to the members of our senior management (excluding previously served as our Exploration Manager. He holds a bachelor degree our executive directors) for their services in all capacities. An amount of in geology from National University of La Plata and has a graduate degree US$0.8 million corresponds to the accrual or payment for discretionary from the Argentine Oil and Gas Institute in oil geology. Mr. Minniti has over 35 bonus payments granted to the Company’s executive directors based on years of experience in oil exploration and has worked with YPF S.A., Petrolera the Company’s performance in 2016. Recipients of such bonuses were Argentina San Jorge S.A. and Chevron Argentina. given the opportunity to receive their bonus payments in shares, cash or this same period, we accrued or paid approximately US$6.0 million, in a combination of both. Gerald E. O’Shaughnessy, James F. Park and Pedro Horacio Fontana has been our Corporate Drilling Manager since March 2012. Aylwin are our executive directors. He previously served as our Engineer Manager. He holds a degree in civil engineering from Rosario National University and is also a graduate from Director Contracts the Argentine Oil and Gas Institute, National University of Buenos Aires, with It is our current policy that executive directors enter into indefinite term a specialty in oilfield exploitation and an extensive background in drilling contracts with the Company that may be terminated at any time by either operations. He has recently taken part in a Management Development party subject to certain notice requirements. Program at IAE Business School of Austral University. Mr. Fontana has over 31 years of drilling experience in major Argentine companies such as YPF S.A., Gerald E. O’Shaughnessy has entered into a service contract with the Company Petrolera Argentina San Jorge and Chevron. to act as Chairman at an annual salary of US$250,000. James F. Park has entered into a service contract with the Company to act as Chief Executive Officer at an Agustina Wisky has worked with our Company since it was founded in annual salary of US$500,000. The payment of a bonus to Mr. O’Shaughnessy or November 2002, and has served as our Director of People since 2012 until Mr. Park is at our discretion. They each also received equity awards described December 2016 and is currently our Director of Business Management. Mrs. below under “Equity Incentive Compensation.” Our agreements with Mr. Wisky is a public accountant, and also holds a degree in human resources O’Shaughnessy and Mr. Park contain covenants that restrict them, for a from the Universidad Austral—IAE. She has 15 years of experience in the oil period of 12 months following termination of employment, from soliciting industry. Before joining our company, Mrs. Wisky worked at AES Gener and senior employees of the Company and, for a period of six months following a PricewaterhouseCoopers. termination of employment, from competing with the Company. Guillermo Portnoi has worked with our Company since June 2006 and has Pedro Aylwin, who was appointed as an executive director in July 2013, has been our Director of Business Management since May 2015 until December entered into a service contract with the Company to act as Director of Legal 2016 and is currently our Director of New Business. Previously, he also and Governance, and as such has decided to forego his director fees. He served as our Director of Administration and Finance. Mr. Portnoi is a public instead received in 2016 a salary of approximately US$246,000 and bonus of accountant and holds an MBA from Universidad Austral—IAE. He has more US$125,000 for his services as a member of senior management. than 14 years of experience in the oil industry. Before joining our company, Mr. Portnoi worked at Pluspetrol, Río Alto and PricewaterhouseCoopers, where he The following chart summarizes payments made to our executive directors for counted several major oil companies as his clients. the year ended December 31, 2016: 124 GeoPark 20F Executive Directors’ Fees Bonus shareholders also authorized the board of directors to adopt programs for this Cash payment of granting equity awards to our employees and other service providers. The Gerald E. O’Shaughnessy US$250,000 US$150,000 purpose and to determine specific conditions and broadly defined guidelines James F. Park US$500,000 US$500,000 for such programs. Pursuant to this authorization, we established the Stock Bonus payments above were approved by the Compensation Committee in September 2016 and reflect awards for previous years’ performance including Stock Awards Plan Awards Plan and the Value Creation Plan. the discretionary bonus payments made based on our performance in 2015. The purpose of the Stock Awards Plan is to align the interests of our Non-Executive Director Contracts management, employees and key advisors with those of shareholders. Under the Stock Awards Plan, the board of directors, or its designee, may The current annual fees paid to our non-executive Directors correspond to award options or performance shares. An option confers the right to acquire US$80,000 to be settled in cash and US$100,000 to be settled in stock, paid a specified number of common shares of the Company at an exercise price quarterly in equal installments. In the event that a non-executive Director equal to the par value of the common shares subject to such an option. A serves as Chairman of any Board Committees, an additional annual fee performance share confers a conditional right to acquire a specified number of of US$20,000 applies. A Director who serves as a member of any Board common shares for zero or nominal consideration, subject to the achievement Committees receives an annual fee of US$10,000. Total payment due shall of performance conditions and other vesting terms. be calculated on an aggregate basis for Directors serving in more than one Committee. The Chairman fee is not added to the member’s fee while serving On December 17, 2014, we registered 3,435,600 shares with the U.S. SEC for for the same Committee. Payments of Chairmen and Committee members’ shares to be issued under the Stock Awards Plan. The following table sets forth fees are made quarterly in arrears and settled in cash only. the common share awards granted to our executive directors, management and key employees under the Stock Awards Plan commencing in 2008 The following chart summarizes payments made to our non-executive through March 2017. directors for the year ended December 31, 2016. Non-Executive Director Juan Cristóbal Pavez(2) Peter Ryalls (3) Carlos Gulisano (4) Robert Bedingfield (5) Non-Executive Directors’ Fees in US$ 110.000 120.000 110.000 100.000 Fees paid in Common Shares (1) 32,403 32,403 32,403 32,403 (1) The numbers in this column are equal to 129,612 Common Shares (which amount equals to US$400,000). (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 Pension and retirement benefits Number of underlying common shares outstanding 976,211(1) 817,600(1) 478,000(1) 720,000(2) 379,500 500,000 1,619,105 (3) Grant date 12/15/2008 12/15/2010 12/15/2011 11/23/2012 12/15/2012 12/31/2014 06/30/2016 Vesting date Expiration date 12/15/2012 12/15/2014 12/15/2015 11/23/2015 12/15/2016 12/31/2017 06/30/2019 12/15/2018 12/15/2020 12/15/2021 11/23/2016 12/15/2022 12/31/2022 06/30/2026 (1) Pedro Aylwin holds 40,000 shares of the 2008 award, 25,000 shares of the 2010 award and 12,000 shares of the 2011 award. (2) James F. Park received 450,000 shares of such awards, and Gerald E. O’Shaughnessy received 270,000 shares of such awards. (3) Vesting of these common share awards was subject to the achievement of certain minimum financial and operational targets during a performance period We do not maintain any defined benefit pension plans or any other retirement that runs through 2016 to 2018. If such conditions are not achieved as of the programs for our employees or directors. vesting date, only the equivalent of one monthly salary will be issued in shares. Equity Incentive Compensation Our executive directors, senior management and key employees who have received option awards or common share awards under the Stock Awards Performance-Based Employee Long-Term Incentive Program Plan authorize the Company to deposit any common shares they have received under this plan in our Employee Benefit Trust (“EBT”). The EBT is In November 2007, our shareholders voted to authorize the board of directors held to facilitate holdings and dispositions of those common shares by the to use up to a maximum of 12% of our issued share capital for the purposes participants thereof. Under the terms of the EBT, each participant is entitled to GeoPark 125 receive any dividends we may pay which correspond to their common shares purposes, regulatory, and other relevant factors. The shares repurchased will held by the trust, according to instructions sent by the Company to the trust be used to offset, in part, any expected dilution effects resulting from our administrator. The trust provides that Mr. James F. Park is entitled to vote all employee incentive schemes, including grants under our Stock Award Plan the common shares held in the trust. and the Non-Executive Director Plan. Value Creation Plan C. Board practices On December 10, 2015, the Board of Directors approved a renewal of the VCP for a new period of three years, with new rewards granted on January 1, Overview 2016. Under the current VCP, if as of December 31, 2018, our share price has Our Board of Directors is responsible for establishing our strategic goals, increased by 12% per year according to the plan conditions, VCP participants ensuring that the necessary resources are in place to achieve these goals will receive awards with an aggregate value equal to 10% of the excess above and reviewing our management and financial performance. Our board the market capitalization threshold generated by this share price (assuming of directors directs and monitors the company in accordance with a that the share capital of the Company had remained at the same level as framework of controls, which enable risks to be assessed and managed applicable at the time of establishment of the VCP: 59,535,614 shares). The through clear procedures, lines of responsibility and delegated authority. awards will vest and be paid in common shares 50% on December 31, 2018, Our board of directors also has responsibility for establishing our core and the remaining 50% on December 31, 2019. As in the previous VCP, the values and standards of business conduct and for ensuring that these, total number of common shares granted pursuant to this plan shall not together with our obligations to our shareholders, are understood exceed 5% of the issued share capital of the Company. throughout the company. Non-Executive Director Plan Board composition In August 2014, our Board of Directors adopted the Non-Executive Director Our bye-laws and board resolutions provide that the board of directors consist Plan in order to grant shares to non-executive directors as part of their of a minimum of three and a maximum of nine members. All of our directors compensation program for serving as directors. In accordance with the were elected at our annual shareholders’ meeting held on June 30, 2016. Their resolutions adopted by our board of directors on May 20, 2014, our non- term expires on the date of our next annual shareholders’ meeting, to be held executive directors are paid their quarterly fees in the form of equity awards in 2017. The board of directors meets at least on a quarterly basis. granted under the Non-Executive Director Plan. Under the Non-Executive Director Plan, the compensation committee may award common shares, Committees of our board of directors restricted share units and other share-based awards that may be denominated Our board of directors has established an Audit Committee, a Compensation or payable in common shares or factors that influence the value of common Committee, a Nomination Committee, a Technical Committee and a Disclosure shares. The maximum number of common shares available for issuance under Committee. The composition and responsibilities of each committee are the Non-Executive Director Plan is 1,000,000 common shares. described below. Members serve on the Audit Committee for a period of three Potential dilution resulting from Equity Incentive Compensation Plans a period of one year. For the Technical Committee and Disclosures Committee, The percentage of total share capital that could be awarded to our members serve on these committees until their resignation or until otherwise directors, management and key employees under the Stock Awards Plan determined by our board of directors. In the future, our board of directors may and the Non-Executive Director Plan described above would represent establish other committees to assist with its responsibilities. years. For the Compensation and Nomination Committees, members serve for approximately 12% of our issued common shares. In accordance with existing equity compensation plans as of the date of this annual report, there are Audit Committee approximately 0.49 million shares that could vest until December 31, 2017, The Audit Committee is composed of three directors: Mr. Peter Ryalls, Mr. Juan representing approximately 0.82% of our current total issued share capital. Cristóbal Pavez and Mr. Robert Bedingfield (who currently serves as Chairman Share Repurchase Program of the committee). We have determined that Mr. Peter Ryalls and Mr. Juan Cristóbal Pavez and Robert Bedingfield are independent, as such term is On April 5, 2016, we announced that we would resume our Share Repurchase defined under SEC rules applicable to foreign private issuers. Program of up to US$10 million of common shares, par value US$0.001 per share. The Share Repurchase Program began on April 5, 2016 and expired at The Audit Committee’s responsibilities include: (a) approving our financial the close of business on November 11, 2016. The share repurchases may be statements; (b) reviewing financial statements and formal announcements made from time-to-time through open market transactions, block trades, relating to our performance; (c) assessing the independence, objectivity privately negotiated transactions or otherwise, and are subject to market and and effectiveness of our external auditors; (d) making recommendations for business conditions, levels of available liquidity, cash requirements for other the appointment, re-appointment and removal of our external auditors and 126 GeoPark 20F approving their remuneration and terms of engagement; (e) implementing Technical Committee and monitoring policy on the engagement of external auditors supplying The Technical Committee is composed of three directors along with the Chief non-audit services to us; (f ) obtaining, at our expense, outside legal or Operating Officer. The members of the Technical Committee are Mr. Peter other professional advice on any matters within its terms of reference Ryalls (who serves as Chairman of the committee), Mr. Carlos Gulisano, Mr. and securing the attendance at its meetings of outsiders with relevant James Park and Mr. Augusto Zubillaga. experience and expertise if it considers it necessary; and (g) reviewing our arrangements for our employees to raise concerns about possible The Technical Committee’s responsibilities include: (a) overseeing the wrongdoing in financial reporting or other matters and the procedures technical studies and evaluations of the Company’s properties and proposals for handling such allegations, and ensuring that these arrangements to acquire new properties and/or relinquish existing ones as well as reviewing allow proportionate and independent investigation of such matters and project plans; (b) reviewing the Annual Reserve Report, the Company’s appropriate follow-up action. Compensation Committee environmental programs and their effectiveness and the Company’s health and safety program and its effectiveness; and (c) providing a forum for ideas and solutions for the key technical people within the Company. The Compensation Committee is composed of three directors. The current members of the compensation committee are Mr. Juan Cristóbal Pavez Disclosure Committee (who serves as Chairman of the committee) and Mr. Peter Ryalls. Currently The Disclosure Committee is composed of Mr. James Park, Mr. Andrés Ocampo, there is a vacancy created by the resignation of Mr. Steve J. Quamme and certain other officers or managers per request. effective March 19, 2015. The Compensation Committee meets at least twice a year, and its specific of filings with the SEC and press releases, (b) review of presentations to responsibilities include: (a) recommending to the board of directors, the analysts, investors and rating agencies and (c) establishment of disclosure The Disclosure Committee’s responsibilities include (a) review and approval remuneration policy for the Chief Executive Officer, the Chairman, our controls and procedures. executive directors and other members of executive management; (b) reviewing the performance of our executive directors and members of Liability insurance executive management; and (c) reviewing all incentive compensation We maintain liability insurance coverage for all of our directors and officers, plans, equity-based plans, and all modifications to such plans as well as the level of which is reviewed annually. administering and granting awards under all such plans and approving plan payouts; and (d) reviewing and making recommendations to the Board with D. Employees respect to the adoption or modification of executive officer and director share ownership guidelines and monitor compliance with any adopted As of December 31, 2016, we had approximately 345 employees, representing share ownership guidelines. a decrease of 2% from December 31, 2015. Nomination Committee The following table sets forth a breakdown of our employees by geographic The Nomination Committee is composed of three directors. The members segment for the periods indicated. of the Nomination Committee are Mr. Gerald E. O’Shaughnessy, Mr. Carlos Gulisano (who serves as Chairman of the committee) and Mr. Pedro Aylwin. The Nomination Committee meets at least twice a year and its responsibilities include: (a) reviewing the structure, size and composition of the board of directors and making recommendations to the board of Colombia Chile Brazil directors in respect of any required changes; (b) identifying, nominating Argentina and submitting for approval by the board of directors candidates to fill vacancies on the board of directors as and when they arise; (c) making Peru Total recommendations to the board of directors with respect to the membership Year ended December 31, 2016 146 102 10 77 10 345 2015 133 106 12 90 11 352 2014 133 197 12 100 14 456 of the Audit Committee and Compensation Committee in consultation with From time to time, we also utilize the services of independent contractors the chairman of each committee, and with respect to the appointment of to perform various field and other services as needed. As of December 31, any director or executive officer or other officer other than the position of 2016, 35 of our employees were represented by labor unions or covered the Chairman and Chief Executive Officer and (d) succession planning for by collective bargaining agreements. We believe that relations with our directors and senior executives. employees are satisfactory. GeoPark 127 Major shareholders and related party transactions E. Share ownership Pavez. The common shares reflected as being held by Mr. Pavez include 73,706 As of March 15, 2017, members of our board of directors and our senior common shares held by him personally. management held as a group 19,706,042 of our common shares and 33% of our outstanding share capital. ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS The following table shows the share ownership of each member of our board A. Major shareholders of directors and senior management as of March 15, 2017. The following table presents the beneficial ownership of our common shares Common Percentage of outstanding as of March 15, 2017: Shareholder Gerald E. O’Shaughnessy(1) James F. Park(2) Juan Cristóbal Pavez(3) Carlos Gulisano Michael D. Dingman 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 shares 7,276,649 7,891,269 2,951,510 179,923 1,800 220,859 109,831 69,843 * * * * * * * * * * * * Sub-total senior management ownership of less than 1% Total 1,004,358 19,706,042 common shares Common Percentage of outstanding 12.1% 13.2% 4.9% 0.3% 0.0% 0.4% 0.2% 0.1% Shareholder James F. Park(1) Gerald E. O’Shaughnessy(2) Manchester Financial Group, L.P.(3) IFC Equity Investments(4) Juan Cristóbal Pavez(5) Other shareholders Total shares 7,891,269 7,276,649 5,080,661 3,456,594 2,951,510 33,284,198 59,940,881 common shares 13.2% 12.1% 8.5% 5.8% 4.9% 55.5% 100.0% * * * * * * * * * * * * 1.7% (1) Held by Energy Holdings, LLC, which is controlled by James F. Park, a member of our Board of Directors. The number of common shares held by Mr. Park does not reflect the 1,575,315 common shares held as of March 14, 2017 in the employee benefit trust described under “Item 6. Directors, Senior Management and Employees—B. Compensation— Stock Awards Plan.” 1,073,201 of these common shares have been pledged pursuant to lending arrangements. The information set forth above and listed in the table is based solely on the disclosure set forth in Mr. Park’s most recent Schedule 13G filed with the SEC prior to March 31, 2017. (2) Held directly and indirectly through GP Investments LLP, GPK Holdings LLC and The Globe Resources Group Inc., and other investment vehicles. 6,705,947 of these common shares have been pledged pursuant to lending arrangements. (3) Held directly and indirectly through Manchester Financial Group, L.P., Manchester Financial Group, Inc., Douglas F. Manchester and Papa Doug Trust 33.0% u/t/d/ January 11, 2010. The information set forth above and listed in the table * Indicates ownership of less than 1% of outstanding common shares. (1) Beneficially owned by Mr. O’Shaughnessy directly and indirectly through GP Investments LLP, The Globe Resources Group Inc., and other investment vehicles. 6,705,947 of these common shares have been pledged pursuant to lending arrangements. (2) Held by Energy Holdings, LLC, which is controlled by James F. Park, a member of our Board of Directors. The number of common shares held by is based solely on the disclosure set forth in Manchester Financial Group, L.P.’s most recent Schedule 13G filed with the SEC prior to March 31, 2017. (4) IFC Equity Investments voting decisions are made through a portfolio management process which involves consultation from investment officers, credit officers, managers and legal staff. (5) Held through Socoservin Overseas Ltd, which is controlled by Juan Cristóbal Pavez. The common shares reflected as being held by Mr. Pavez include 73,706 common shares held by him personally. Mr. Park does not reflect the 1,575,315 common shares held as of March 14, Principal shareholders do not have any different or special voting rights in 2017 in the EBT described under “Item 6. Directors, Senior Management and comparison to any other common shareholder. Employees—B. Compensation—Stock Awards Plan.” Although Mr. Park has voting rights with respect to all the common shares held in the trust, Mr. Park According to our transfer agent, as of March 27, 2017, we had 35 shareholders disclaims beneficial ownership over those common shares. 1,073,201 of these registered in the U.S. and there were a total of 19 shareholders of record. common shares have been pledged pursuant to lending arrangements. (3) Held through Socoservin Overseas Ltd, which is controlled by Juan Cristóbal Since some of the shares are held by nominees, the number of shareholders may not be representative of the number of beneficial owners. 128 GeoPark 20F B. Related party transactions similar rights and obligations to the LGI Colombia Shareholders’ Agreement in We have entered into the following transactions with related parties: respect of our oil and gas business in Colombia. We refer to the LGI Colombia LGI Chile Shareholders’ Agreements Shareholders’ Agreement and the LGI Colombia Members’ Agreement collectively as the LGI Colombia Agreements. The LGI Colombia Agreements In 2010, we formed a strategic partnership with LGI to acquire and develop provide that the board of GeoPark Colombia SAS will consist of four directors; jointly upstream oil and gas projects in Latin America. In 2011, LGI acquired as long as LGI holds at least 14% of GeoPark Colombia SAS, LGI has the right to a 20% equity interest in GeoPark Chile and a 14% equity interest in GeoPark elect one director and such director’s alternate, while the remaining directors, TdF, for a total consideration of US$148.0 million, plus additional equity and alternates, are elected by us. Additionally, the LGI Colombia Agreements funding of US$18.0 million through 2014. On May 20, 2011, in connection require the consent of LGI or the LGI appointed director for GeoPark Colombia with LGI’s investment in GeoPark Chile, we and LGI entered into the LGI Chile SAS to be able to take certain actions, including, among others: making any Shareholders’ Agreements, setting forth our and LGI’s respective rights and decision to terminate or permanently or indefinitely suspend operations in obligations in connection with LGI’s investment in our Chilean oil and gas or surrender our blocks in Colombia (other than as required under the terms business. Specifically, the LGI Chile Shareholders’ Agreements provide that of the relevant concessions for such blocks); creating a security interest the boards of each of GeoPark Chile and GeoPark TdF will consist of four over our blocks in Colombia; approving of GeoPark Colombia SAS’s annual directors; as long as LGI holds at least 5% of the voting shares of GeoPark Chile budget and work programs and the mechanisms for funding any such or GeoPark TdF, as applicable, LGI has the right to elect one director and such budget or program; entering into any borrowings other than those provided director’s alternate, while the remaining directors, and alternates, are elected in an approved budget or incurred in the ordinary course of business to by us. Additionally, the agreements require the consent of LGI or its appointed finance working capital needs; granting any guarantee or indemnity to director in order for GeoPark Chile or GeoPark TdF, as applicable, to be able secure liabilities of parties other than those of our Colombian subsidiaries; to take certain actions, including, among others: making any decision to changing the dividend, voting or other rights that would give preference to or terminate or permanently or indefinitely suspend operations in or surrender discriminate against the shareholders of GeoPark Colombia SAS; entering into our blocks in Chile (other than as required under the terms of the relevant certain related party transactions; and disposing of any material assets other CEOP for such blocks); selling our blocks in Chile to our affiliates; making any than those provided for in an approved budget and work program. The LGI change to the dividend, voting or other rights that would give preference to Colombia Agreements also provide that: (i) if either we or LGI decide to sell our or discriminate against the shareholders of these companies; entering into respective shares in GeoPark Colombia SAS, the transferring shareholder must certain related party transactions; and creating a security interest over our make an offer to sell those shares to the other shareholder before selling those blocks in Chile (other than in connection with a financing that benefits our shares to a third party; and (ii) any sale to a third party is subject to tag-along Chilean subsidiaries). The LGI Chile Shareholders’ Agreements also provide and drag-along rights, and the non-transferring shareholder has the right to that: (i) if LGI or either Agencia or GeoPark Chile decides to sell its shares in object to a sale to the third-party if it considers such third-party to be not of GeoPark Chile or GeoPark TdF, as applicable, the transferring shareholder a good reputation or one of our direct competitors. We and LGI also agreed must make an offer to sell those shares to the other shareholder before selling to vote our common shares or otherwise cause GeoPark Colombia to declare them to a third party; and (ii) any sale to a third party is subject to tag-along dividends only after allowing for retentions for approved work programs and drag-along rights, and the non-transferring shareholder has the right to and budgets, capital adequacy and tied surplus requirements of GeoPark object to a sale to the third-party if it considers such third-party to be not of Colombia, working capital requirements, banking covenants associated a good reputation or one of our direct competitors. We and LGI also agreed with any loan entered into by GeoPark Colombia or our other Colombian to vote our common shares or otherwise cause GeoPark Chile or GeoPark TdF, subsidiaries and operational requirements. as applicable, to declare dividends only after allowing for retentions to meet anticipated future investments, costs and obligations. See “Item 4. Information In addition, our agreement with LGI in Colombia allows us to earn back up on the Company—B. Business Overview—Significant Agreements— to 12% of our equity participation in GeoPark Colombia, following certain Agreements with LGI—LGI Chile Shareholders’ Agreements.” recovery factors of LGI `s initial investments as follows: (i) if the recovery LGI Colombia Agreements factor is between one and two times, our incremental equity share is 4%; if the recovery factor is between two to three, three to four, four to five, and On December 18, 2012, we, Agencia, GeoPark Colombia and LGI entered above five, our incremental equity increases by an additional 2% each time, into the LGI Colombia Shareholders’ Agreement and a subscription share for up to a 12%, so that LGI participation could be reduced from current 20% agreement, pursuant to which LGI acquired a 20% interest in GeoPark to 8%. Recovery factor is measured considering realized dividends or other Colombia SAS. Further, on January 8, 2014, following an internal corporate distributions over the original investments reorganization of our Colombian operations, GeoPark Colombia Coöperatie U.A. and GeoPark Latin America entered into a new members’ agreement See “Item 4. Information on the Company—B. Business Overview—Significant with LGI (“LGI Colombia Members’ Agreement”), that sets out substantially Agreements—Agreements with LGI—LGI Colombia Agreements.” GeoPark 129 IFC Subscription and Shareholders’ Agreement Executive Directors’ Service Agreements On February 7, 2006, in order to finance the exploration, development and We have entered into service contracts with certain of our executive exploitation of our blocks in Chile and Argentina and the acquisition of directors. See “Item 6. Directors, Senior Management and Employees—B. additional exploration, development and exploitation blocks in Latin America, Compensation—Executive compensation—Director Contracts.” we, IFC and Gerald E. O’Shaughnessy and James F. Park, as Lead Investors, entered into an agreement (“IFC Subscription and Shareholders’ Agreement”), For further information relating to our related party transactions and balances pursuant to which IFC agreed to subscribe and pay for 2,507,161 of our outstanding as of December 31, 2016, 2015 and 2014, please see Note 32 to common shares, representing approximately 10.5% of our then-outstanding our Consolidated Financial Statements. common shares, at an aggregate subscription price of US$10.0 million (or approximately US$3.99 per common share). C. Interests of Experts and Counsel 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 ITEM 8. FINANCIAL INFORMATION environmental and social guidelines; appoint and maintain a technically Not applicable. qualified individual to be responsible for the environmental and social A. Consolidated statements and other financial information management of our activities; maintain certain forms of insurance coverage, including coverage for public liability and director’s and officer’s Financial statements liability reasonably acceptable to IFC, and in respect of certain of our See “Item 18. Financial Statements,” which contains our audited financial operations; not undertake certain prohibited activities; and ensure that no statements prepared in accordance with IFRS. prohibited payments are made by us or on our or the Lead Investors’ behalf, in respect of our operations. Legal proceedings We also agreed to provide to IFC, within 30 days of the end of the first half of the proceedings that arise in the normal course of business, including year, copies of our unaudited consolidated financial statements for the period employment, commercial, environmental, safety and health matters. For (prepared under IFRS), a report on our capital expenditures for the period, a example, from time to time, we receive notice of environmental, health and comprehensive report on the progress of the exploration, development and safety violations. It is not presently possible to determine whether any such exploitation of our blocks in Latin America and a statement of all related party matters will have a material adverse effect on our consolidated financial From time to time, we may be subject to various lawsuits, claims and transactions during the period, with a certification by a company officer that position and results of operations. these were on an arm’s-length basis; within 90 days of the end of our fiscal year, copies of our audited consolidated financial statements for the year (prepared In Brazil, GeoPark Brasil is a party to a class action filed by the Federal under IFRS), a management letter from our auditors in respect of our financial Prosecutor’s Office regarding a concession agreement of exploratory Block control procedures, accounting and management information systems and PN-T-597, which the ANP initially awarded GeoPark Brasil in the 12th oil and any litigation, an annual monitoring report confirming compliance with gas bidding round held in November 2013. The Brazilian Federal Court issued national or local requirements and the environmental and social requirements an injunction against the ANP and GeoPark Brasil in December 2013 that mandated by the agreement, a report indicating any payments in the year to prohibited GeoPark Brasil’s execution of the concession agreement until the any governmental authority in connection with the documents governing our ANP conducted studies on whether drilling for unconventional resources would Chilean and Argentine blocks and certificates of insurance, with a certificate contaminate the dams and aquifers in the region. On July 17, 2015, GeoPark of our insurer confirming that effectiveness of our policies and payment of all Brasil, at the instruction of the ANP, signed the concession agreement, which applicable premiums; within 45 days before each fiscal year begins, a proposed included a clause prohibiting GeoPark Brasil from conducting unconventional annual business plan and budget for the upcoming year; within 3 days after exploration activity in the area. Despite the clause containing the prohibition, its occurrence, notification of any incident that had or may reasonably be the judge in the case concluded that the concession agreement should not expected to have an adverse effect on the environment, health or safety; be executed. Thus, GeoPark Brasil requested that the ANP comply with the copies of notices, reports or other communications between us and our board decision and annul the concession agreement, which the ANP´s Board did on of directors or shareholders; and, within five days of receipt thereof, copies of October 9, 2015. The annulment reverted the status of all parties to the status any reports, correspondence, documentation or notices from any third-party, quo ante , which maintains GeoPark Brasil’s right to the block. governmental authority or state-owned company that could reasonably be expected to materially impact our operations. Mr. O’Shaughnessy and Mr. Park Dividends and dividend policy have also agreed to procure that shareholders holding 51% of our common Holders of common shares will be entitled to receive dividends, if any, paid on shares cause us to comply with the covenants above. the common shares. 130 GeoPark 20F We have never declared or paid any cash dividends on our common shares. C. Markets We intend to retain all of our future earnings, if any, generated by our On February 6, 2014 we completed our initial public offering and listed our operations for the development and growth of our business. Accordingly, common shares on the NYSE. we do not expect to pay cash dividends on our common shares in the foreseeable future. Because we are a holding company with no direct Our common shares have been listed on the NYSE under the symbol “GPRK” operations, we will only be able to pay dividends from our available cash since February 7, 2014. They were previously listed on the AIM under the on hand and any funds we receive from our subsidiaries. The terms of our symbol “GPK” until February 19, 2014, and, from 2009 to 2015 had been indebtedness may restrict us from paying dividends. Mainly resulting from admitted to trade on the Santiago Offshore Stock Exchange ( Bolsa Offshore de the impact of the decline in oil prices, we have recorded accumulated losses la Bolsa de Comercio de Santiago ). amounting to US$260.5 million as of December 31, 2016, which further limits our ability to pay dividends in the foreseeable future. The table below presents, for the periods indicated, the annual, quarterly and monthly high and low closing prices (in US$) of our common shares on Under the Bermuda Companies Act, we may not declare or pay a dividend the NYSE. 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 realizable value of our assets would thereafter be less than our liabilities. We do not presently have any reasonable grounds for believing that, if we were to declare or pay a dividend on our common shares outstanding, we would thereafter be unable to pay our liabilities as they became due or that the Annual price history realizable value of our assets would thereafter be less than our liabilities. 2014 (from February 7 High Low (US$ per share) Common shares Average daily trading volume (in shares) through December 31, 2014) 11.00 Additionally, any decision to pay dividends in the future, and the amount of any distributions, is at the discretion of our board of directors and our 2015 2016 shareholders, and will depend on many factors, such as our results of 2017 (through April 6, 2017) operations, financial condition, cash requirements, prospects and other Quarterly price history factors. See “Item 3. Key Information—D. Risk factors—Risks related to 1st Quarter 2016 our common shares—We have never declared or paid, and do not intend 2nd Quarter 2016 to pay in the foreseeable future, cash dividends on our common shares, 3rd Quarter 2016 and, consequently, your only opportunity to achieve a return on your 4th Quarter 2016 investment is if the price of our stock appreciates” and “—We are a holding 1st Quarter 2017 company dependent upon dividends from our subsidiaries, which may 2nd Quarter 2017 be limited by law and by contract from making distributions to us, which (through April 6, 2017) would affect our financial condition, including the ability to pay dividends Monthly price history on the common shares,” as well as “Item 10. Additional Information—B. Memorandum of association and bye-laws.” B. Significant changes A discussion of the significant changes in our business can be found under November 2016 December 2016 January 2017 February 2017 March 2017 April 2017 “Item 4. Information on the Company—B. Business Overview.” (through April 6, 2017) 5.59 5.06 7.30 3.60 3.29 3.50 5.06 7.18 7.30 4.98 5.06 4.98 5.35 7.18 7.30 ITEM 9. THE OFFER AND LISTING Source: NYSE Connect 4.92 2.70 2.25 4.50 2.60 2.25 3.19 3.29 4.50 7.01 4.30 4.23 4.50 4.77 5.86 7.01 A. Offering and listing details Not applicable. B. Plan of distribution Not applicable. D. Selling shareholders Not applicable. E. Dilution Not applicable. 47,795 23,838 103,283 146,639 6,736 210,894 31,093 154,729 149,187 107,142 248,606 115,397 191,848 81,330 168,146 107,142 GeoPark 131 F. Expenses of the issue Not applicable. Common shares Holders of our common shares are entitled to one vote per share on all matters submitted to a vote of holders of common shares. Subject to ITEM 10. ADDITIONAL INFORMATION preferences that may be applicable to any issued and outstanding preference A. Share capital Not applicable. shares, holders of common shares are entitled to receive such dividends, if any, as may be declared from time to time by our board of directors out of funds legally available for dividend payments. Holders of common shares have no redemption, sinking fund, conversion, exchange or other B. Memorandum of association and bye-laws subscription rights. In the event of our liquidation, the holders of common The following description of our memorandum of association and bye-laws shares are entitled to share equally and ratably in our assets, if any, remaining does not purport to be complete and is subject to, and qualified by reference after the payment of all of our debts and liabilities, subject to any liquidation to, all of the provisions of our memorandum of association and bye-laws. preference on any outstanding preference shares. General Board composition We are an exempted company with limited liability incorporated under the laws Our bye-laws provide that our board of directors will determine the of Bermuda with registration number 33273 from the Registrar of Companies. maximum size of the board, provided that it shall be not be composed of The rights of our shareholders will be governed by Bermuda law and by our fewer than three directors. The maximum number of directors currently memorandum of association and bye-laws. Bermuda company law differs allowed is nine directors and our board of directors currently consists of in some material respects from the laws generally applicable to Delaware eight directors. corporations. Below is a summary of some of those material differences. Election and removal of directors Because the following statements are summaries, they do not discuss all Our bye-laws provide that our directors shall hold office for such term as aspects of Bermuda law that may be relevant to us and to our shareholders. the shareholders shall determine or, in the absence of such determination, Share capital and bye-laws until the next annual general meeting or until their successors are elected or appointed or their office is otherwise vacated. Directors whose term has Our share capital consists of common shares only. Our authorized share capital expired may offer themselves for re-election at each election of the directors. consists of 5,171,949,000 common shares of par value US$0.001 per share. As of the date of this annual report, there are 60,028,985 common shares Under our bye-laws, a director may be removed by a resolution adopted by outstanding. All of our issued and outstanding common shares are fully paid 65% or more of the votes cast by shareholders who (being entitled to do and non-assessable. We also have an employee incentive program, pursuant to so) vote in person or by proxy at any general meeting of the shareholders which we have granted share awards to our senior management and certain in accordance with the provisions of our bye-laws. Notice convened for the key employees. See “Item 6. Directors, Senior Management and Employees.” purpose of removing the director, containing a statement of the intention to do so, must be served on such director not less than 14 days before the meeting. 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 Any vacancy created by the removal of a director at a special general meeting may of issue of the shares of that class) may, whether or not the Company is being be filled at that meeting by the election of another director in his or her place or, wound-up, be varied with the consent in writing of the holders of at least two- in the absence of any such election, by the board of directors. Any other vacancy, thirds of the issued shares of that class or with the sanction of a resolution passed including a newly created directorship, may be filled by our board of directors. 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 Proceedings of board of directors at least, in person or by proxy, holding or representing one-third of the issued Our bye-laws provide that our business shall be managed by or under the shares of the class. The rights conferred upon the holders of the shares of any direction of our board of directors. Our board of directors may act by the class issued with preferred or other rights shall not, unless otherwise expressly affirmative vote of a majority of the directors present at a meeting at which provided by the terms of issue of the shares of that class, be deemed to be varied a quorum is present. The quorum necessary for the transaction of business by the creation or issue of further shares ranking pari passu therewith. at meetings of the board of directors shall be the presence of a majority of the board of directors from time to time. Our bye-laws also provide that Our bye-laws give our board of directors the power to issue any unissued shares resolutions unanimously signed by all directors are valid as if they had been of the company on such terms and conditions as it may determine, subject to passed at a meeting of the board duly called and constituted. the terms of the bye-laws and any resolution of the shareholders to the contrary. 132 GeoPark 20F Duties of directors Companies Act. A director so interested shall not, except in particular Under Bermuda common law, members of a board of directors owe a fiduciary circumstances set out in our bye-laws, be entitled to vote or be counted in the duty to the Company to act in good faith in their dealings with or on behalf quorum at a meeting in relation to any resolution in which he has an interest, of the company, and to exercise their powers and fulfill the duties of their which is to his knowledge, a material interest (otherwise than by virtue of office honestly. This duty has the following essential elements: (1) a duty to his interest in shares or debentures or other securities of or otherwise in or act in good faith in the best interests of the company; (2) a duty not to make through the company). A director will be liable to us for any secret profit a personal profit from opportunities that arise from the office of director; (3) realized from the transaction. In contrast, under Delaware law, such a contract a duty to avoid conflicts of interest; and (4) a duty to exercise powers for the or arrangement is voidable unless it is approved by a majority of disinterested purpose for which such powers were intended. The Bermuda Companies directors or by a vote of shareholders, in each case if the material facts as to Act also imposes a duty on directors of a Bermuda company, to act honestly the interested director’s relationship or interests are disclosed or are known to and in good faith, with a view to the best interests of the company, and to the disinterested directors or shareholders, or such contract or arrangement exercise the care, diligence and skill that a reasonably prudent person would is fair to the corporation as of the time it is approved or ratified. Additionally, exercise in comparable circumstances. In addition, the Bermuda Companies such interested director could be held liable for a transaction in which such Act imposes various duties on directors with respect to certain matters of director derived an improper personal benefit. management and administration of the company. Indemnification of directors and officers The Bermuda Companies Act provides that in any proceedings for Bermuda law provides generally that a Bermuda company may indemnify its negligence, default, breach of duty or breach of trust against any director, directors and officers against any loss arising from or liability which by virtue if it appears to a court that such officer is or may be liable in respect of the of any rule of law would otherwise be imposed on them in respect of any negligence, default, breach of duty or breach of trust, but that he has acted negligence, default, breach of duty or breach of trust except in cases where honestly and reasonably, and that, having regard to all the circumstances of such liability arises from fraud or dishonesty of which such director or officer the case, including those connected with his appointment, he ought fairly to may be guilty in relation to the company. be excused for the negligence, default, breach of duty or breach of trust, that court may relieve him, either wholly or partly, from any liability on such terms Our bye-laws provide that we shall indemnify our officers and directors in as the court may think fit. This provision has been interpreted to apply only to respect of their actions and omissions, except in respect of their fraud or actions brought by or on behalf of the company against the directors. dishonesty, or to recover any gain, personal profit or advantage to which such director is not legally entitled, and (by incorporation of the provisions By comparison, under Delaware law, the business and affairs of a corporation of the Bermuda Companies Act) that we may advance monies to our officers are managed by or under the direction of its board of directors. In exercising and directors for costs, charges and expenses incurred by our officers and their powers, directors are charged with a duty of care and a duty of loyalty. The directors in defending any civil or criminal proceeding against them on the duty of care requires that directors act in an informed and deliberate manner condition that the officers and directors repay the monies if any allegation and to inform themselves, prior to making a business decision, of all relevant of fraud or dishonesty is proved against them provided, however, that, if material information reasonably available to them. The duty of care also requires the Bermuda Companies Act requires, an advancement of expenses shall be that directors exercise care in overseeing the conduct of corporate employees. made only upon delivery to the Company of an undertaking ,by or on behalf The duty of loyalty is the duty to act in good faith, not out of self-interest, and of such indemnitee, to repay all amounts so advanced if it shall ultimately in a manner which the director reasonably believes to be in the best interests be determined by final judicial decision from which there is no further of the shareholders. A party challenging the propriety of a decision of a board right to appeal that such indemnitee is not entitled to be indemnified for of directors bears the burden of rebutting the presumptions afforded to such expenses under this Bye-law or otherwise. Our bye-laws provide that directors by the “business judgment rule.” If the presumption is not rebutted, the company and the shareholders waive all claims or rights of action that the business judgment rule attaches to protect the directors and their decisions. they might have, individually or in right of the company, against any of the Where, however, the presumption is rebutted, the directors bear the burden company’s directors or officers for any act or failure to act in the performance of demonstrating the fairness of the relevant transaction. Notwithstanding the of such director’s or officers’ duties, except with respect to any fraud or foregoing, Delaware courts subject directors’ conduct to enhanced scrutiny in dishonesty, or to recover any gain, personal profit or advantage to which such respect of defensive actions taken in response to a threat to corporate control director is not legally entitled. and approval of a transaction resulting in a sale of control of the corporation. Meetings of shareholders Interested directors Under Bermuda law, a company is required to convene the annual general 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 any contract or arrangement with the company as required by the Bermuda a general meeting, elect to dispense with the holding of annual general GeoPark 133 meetings. Under Bermuda law and our bye-laws, a special general meeting of amalgamations”), unless a company’s bye-laws provide otherwise, the shareholders may be called by the board of directors and may be called upon approval of 75% of the shareholders voting at a meeting is required to pass the requisition of shareholders holding not less than 10% of the paid-up capital a resolution to approve the amalgamation or merger agreement, and the of the company carrying the right to vote at general meetings of shareholders. quorum for such meeting must be two persons holding or representing more than one-third of the issued shares of the company. Our bye-laws Our bye-laws provide that, at any general meeting of the shareholders, the provide that an amalgamation or merger will require the approval of our presence in person or by proxy of two or more shareholders representing in board of directors and of our shareholders by a resolution adopted by 65% excess of 50% of the total issued voting shares of the company shall constitute or more of the votes cast by shareholders who (being entitled to do so) a quorum for the transaction of business unless the company only has one vote in person or by proxy at any general meeting of the shareholders in shareholder, in which case such shareholder shall constitute a quorum. Unless accordance with the provisions of the bye-laws. Under Bermuda law, in the otherwise required by law or by our bye-laws, shareholder action requires a event of an amalgamation or merger of a Bermuda company with another resolution adopted by a majority of votes cast by shareholders at a general company or corporation, a shareholder who did not vote in favor of the meeting at which a quorum is present. Shareholder proposals amalgamation or merger and who is not satisfied that fair value has been offered for such shareholder’s shares may, within one month of the notice of the shareholders meeting, apply to the Supreme Court of Bermuda to Under Bermuda law, shareholders holding at least 5% of the total voting rights appraise the value of those shares. 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 composed of at Under the Bermuda Companies Act, we are not required to seek the least 100 or more shareholders may require a proposal to be submitted to an approval of our shareholders for the sale of all or substantially all of our annual general meeting of shareholders. Under our bye-laws, any shareholders assets. However, Bermuda courts will view decisions of the English courts wishing to nominate a person for election as a director or propose business to as highly persuasive and English authorities suggest that such sales do be transacted at a meeting of shareholders must provide (among other things) require shareholder approval. Our bye-laws provide that the directors shall advance notice, as set out in our bye-laws. Shareholders may only propose a manage the business of the Company and may exercise all such powers as person for election as a director at an annual general meeting. are not, by the Bermuda Companies Act or by these Bye-laws, required to Shareholder action by written consent be exercised by the Company in general meeting and may pay all expenses incurred in promoting and incorporating the company and may exercise Our bye-laws provide that, except for the removal of auditors and all the powers of the Company including, but not by way of limitation, the directors, any actions which shareholders may take at a general meeting power to borrow money and to mortgage or charge all or any part of the of shareholders may be taken by the shareholders through the unanimous undertaking property and assets (present and future) and uncalled capital written consent of the shareholders who would be entitled to vote on the of the Company and to issue debentures and other securities, whether matter at the general meeting. outright or as collateral security for any debt, liability or obligation of the Company or any other persons. Amendment of memorandum of association and bye-laws Our memorandum of association and bye-laws may be amended with the Under Bermuda law, where an offer is made for shares of a company approval of a majority of our board of directors and by a resolution by a and, within four months of the offer, the holders of not less than 90% of majority of the votes cast by shareholders who (being entitled to do so) vote in the shares not owned by the offeror, its subsidiaries or their nominees person or by proxy at any general meeting of the shareholders in accordance accept such offer, the offeror may by notice require the non-tendering with the provisions of the bye-laws. Business combinations shareholders to transfer their shares on the terms of the offer. Dissenting shareholders do not have express appraisal rights but are entitled to seek relief (within one month of the compulsory acquisition notice) from the A Bermuda company may engage in a business combination pursuant to a court, which has power to make such orders as it thinks fit. Additionally, tender offer, amalgamation, merger or sale of assets. The amalgamation or where one or more parties hold not less than 95% of the shares of a merger of a Bermuda company with another company generally requires company, such parties may, pursuant to a notice given to the remaining the amalgamation or merger agreement to be approved by the company’s shareholders, acquire the shares of such remaining shareholders. Dissenting board of directors and by its shareholders. Shareholder approval is not shareholders have a right to apply to the court for appraisal of the value required where (a) a holding company and one or more of its wholly-owned of their shares within one month of the compulsory acquisition notice. subsidiary companies amalgamate or merge or (b) two or more wholly- If a dissenting shareholder is successful in obtaining a higher valuation, owned subsidiary companies of the same holding company amalgamate that valuation must be paid to all shareholders being squeezed out or the or merge. Under the Bermuda Companies Act (save for such “short-form purchaser may cancel the purchase notice sent. 134 GeoPark 20F Dividends and repurchase of shares interested directors, mergers and acquisitions, takeovers, shareholder Pursuant to our bye-laws, our board of directors has the authority to declare lawsuits and indemnification of directors. Set forth below is a summary of dividends and authorize the repurchase of shares subject to applicable law. these provisions, as well as modifications adopted pursuant to our bye-laws, Under Bermuda law, a company may not declare or pay a dividend if there which differ in certain respects from provisions of Delaware corporate law. are reasonable grounds for believing that the company is, or would after the Our shareholders approved the adoption of new bye-laws which came into payment be, unable to pay its liabilities as they become due or the realizable effect on February 19, 2014, being the date on which the company cancelled value of its assets would thereby be less than its liabilities. Under Bermuda law, admission of its common shares on AIM. Because the following statements a company cannot purchase its own shares if there are reasonable grounds for are summaries, they do not discuss all aspects of Bermuda law that may be believing that the company is, or after the repurchase would be, unable to pay relevant to us and our shareholders. its liabilities as they become due. Shareholder suits Interested Directors . Under our bye-laws and the Bermuda Companies Act, a director shall declare the nature of his interest in any contract or arrangement Class actions and derivative actions are generally not available to with the company. Our bye-laws further provide that a director so interested shareholders under Bermuda law. The Bermuda courts, however, would shall not, except in particular circumstances, be entitled to vote or be counted ordinarily be expected to permit a shareholder to commence an action in the quorum at a meeting in relation to any resolution in which he has an in the name of a company to remedy a wrong to the company where interest, which is to his knowledge, a material interest (otherwise than by the act complained of is alleged to be beyond the corporate power of virtue of his interest in shares or debentures or other securities of or otherwise the company or illegal, or would result in the violation of the company’s in or through the company). A director will be liable to us for any secret profit memorandum of association or bye-laws. Furthermore, consideration realized from the transaction. See “Item 10—B. Memorandum of association would be given by a Bermuda court to acts that are alleged to constitute and bye-laws—Interested Directors.” a fraud against the minority shareholders or where an act requires the approval of a greater percentage of the company’s shareholders than that Amalgamations, Mergers and Similar Arrangements . Pursuant to the Bermuda which actually approved it. Companies Act, the amalgamation or merger of a Bermuda company with another company or corporation requires the amalgamation or merger When the affairs of a company are being conducted in a manner which is agreement to be approved by the company’s board of directors and, oppressive or prejudicial to the interests of some part of the shareholders, under certain circumstances, by its shareholders. Under our bye-laws, an one or more shareholders may apply under the Bermuda Companies Act for amalgamation or merger will require the approval of our board of directors an order of the Supreme Court of Bermuda, which may make such order as it and our shareholders by Special Resolution, which is a resolution adopted sees fit, including an order regulating the conduct of the company’s affairs in by 65% of more of the votes cast by shareholders who (being entitled to do the future or ordering the purchase of the shares of any shareholders by other so) vote in person or by proxy at any general meeting of the shareholders shareholders or by the company. in accordance with the provisions of the bye-laws and the quorum for any general meeting must be two or more persons, in person or by proxy, Our bye-laws contain a provision through which we and our shareholders representing in excess of 50% of the total of our issued voting shares. Under waive any claim or right of action that we or they have, both individually and Bermuda law, in the event of an amalgamation or merger of a Bermuda on our behalf, against any director or officer in relation to any action or failure company with another company or corporation, a shareholder of the Bermuda to take action by such director or officer, including the breach of any fiduciary company who did not vote in favor of the amalgamation or merger and who is duty, except in respect of any fraud or dishonesty of such director or officer. not satisfied that he has been offered fair value for his shares may, within one month of notice of the shareholders meeting, apply to the Supreme Court of Comparison of Bermuda law to Delaware corporate law Bermuda to appraise the fair value of those shares. Bermuda law differs from the laws in effect in the United States and might Under Delaware law, with certain exceptions, a merger, consolidation or afford less protection to shareholders. sale of all or substantially all the assets of a corporation must be approved Our shareholders could have more difficulty protecting their interests by the board of directors and a majority of the issued and outstanding than would shareholders of a corporation incorporated in a jurisdiction shares entitled to vote thereon. Under Delaware law, a shareholder of a of the United States. As a Bermuda company, we are governed by our corporation participating in certain major corporate transactions may, under memorandum of association and bye-laws and Bermuda company certain circumstances, be entitled to appraisal rights pursuant to which law. The provisions of the Bermuda Companies Act, which applies to such shareholder may receive cash in the amount of the fair value of the us, differs in some material respects from laws generally applicable to shares held by such shareholder (as determined by a court) in lieu of the U.S. corporations and shareholders, including the provisions relating to consideration such shareholder would otherwise receive in the transaction. GeoPark 135 Shareholders’ Suit . Class actions and derivative actions are generally not (including attorneys’ fees), judgments, fines and amounts paid in settlement available to shareholders under Bermuda law. The Bermuda courts, however, actually and reasonably incurred in defense of an action, suit or proceeding would ordinarily be expected to permit a shareholder to commence an by reason of such position if such director or officer acted in good faith and action in the name of a company to remedy a wrong to the company in a manner he or she reasonably believed to be in or not opposed to the where the act complained of is alleged to be beyond the corporate power best interests of the corporation and, with respect to any criminal action or of the company or illegal, or would result in the violation of the company’s proceeding, such director or officer had no reasonable cause to believe his memorandum of association or bye-laws. When the affairs of a company or her conduct was unlawful. In addition, we have entered into customary are being conducted in a manner which is oppressive or prejudicial to the indemnification agreements with our directors. interests of some part of the shareholders, one or more shareholders may apply for an order of the Supreme Court of Bermuda regulating the conduct As a result of these differences, investors could have more difficulty of the company’s affairs in the future or an order to purchase the shares of protecting their interests than would shareholders of a corporation any shareholders by other shareholders or by the company and, in the case of incorporated in the United States. a purchase by the company, for the reduction accordingly of the company’s capital, or otherwise. See “Item 10—B. Memorandum of association and bye- Tax matters . Under current Bermuda law, we are not subject to tax on laws—Shareholder Suits.” income or capital gains. We have received from the Minister of Finance under The Exempted Undertaking Tax Protection Act 1966, as amended, Our bye-laws contain a provision by virtue of which we and our shareholders an assurance that, in the event that Bermuda enacts legislation imposing waive any claim or right of action that they have, both individually and on tax computed on profits, income, any capital asset, gain or appreciation, our behalf, against any director or officer in relation to any action or failure to or any tax in the nature of estate duty or inheritance, then the imposition take action by such director or officer, including the breach of any fiduciary of any such tax shall not be applicable to us or to any of our operations or duty, except in respect of any fraud or dishonesty of such director or officer. shares, debentures or other obligations, until March 31, 2035. We could be Class actions and derivative actions generally are available to shareholders subject to taxes in Bermuda after that date. This assurance is subject to the under Delaware law for, among other things, breach of fiduciary duty, provision that it is not to be construed to prevent the application of any tax corporate waste and actions not taken in accordance with applicable law. In or duty to such persons as are ordinarily resident in Bermuda or to prevent such actions, the court has discretion to permit the winning party to recover the application of any tax payable in accordance with the provisions of the attorneys’ fees incurred in connection with such action. Land Tax Act 1967 or otherwise payable in relation to any property leased Indemnification of Directors . We may indemnify our directors and officers in pay annual Bermuda government fees. In addition, all entities employing their capacity as directors or officers for any loss arising or liability attaching individuals in Bermuda are required to pay a payroll tax and there are other to them by virtue of any rule of law in respect of any negligence, default, sundry taxes payable, directly or indirectly, to the Bermuda government. breach of duty or breach of trust of which a director or officer may be Neither we nor our Bermuda subsidiaries employ individuals in Bermuda as to us. We are incorporated in Bermuda as an exempted company and guilty in relation to the company other than in respect of his own fraud or at the date of this annual report. dishonesty. See “Item 10—B. Memorandum of association and bye-laws— Enforcement of Judgments.” Our bye-laws provide that we shall indemnify Access to books and records and dissemination of information our officers and directors in respect of their acts and omissions, except Members of the general public have a right to inspect the public documents in respect of their fraud or dishonesty, or to recover any gain, personal of a company available at the office of the Registrar of Companies in profit or advantage to which such Director is not legally entitled, and (by Bermuda. These documents include the company’s memorandum of incorporation of the provisions of the Bermuda Companies Act) that we association and any amendments thereto. The shareholders have the may advance money to our officers and directors for the costs, charges additional right to inspect the bye-laws of the company, minutes of general and expenses incurred by our officers and directors in defending any civil meetings of shareholders and the company’s audited financial statements. or criminal proceedings against them on condition that the directors and The company’s audited financial statements must be presented at the officers repay the money if any allegations of fraud or dishonesty is proved annual general meeting of shareholders, unless the board and all the against them provided, however, that, if the Bermuda Companies Act shareholders agree to the waiving of the audited financials. The company’s requires, an advancement of expenses shall be made only upon delivery share register is open to inspection by shareholders and by members of to the Company of an undertaking, by or on behalf of such indemnitee, the general public without charge. A company is required to maintain its to repay all amounts if it shall ultimately be determined by final decision share register in Bermuda but may, subject to the provisions of the Bermuda that such indemnitee is not entitled to be indemnified for such expenses Companies Act, establish a branch register outside of Bermuda. Bermuda under our Bye-laws or otherwise. Under Delaware law, a corporation law does not, however, provide a general right for shareholders to inspect or may indemnify a director or officer of the corporation against expenses obtain copies of any other corporate records. 136 GeoPark 20F Registrar or transfer agent which by virtue of any rule of law would otherwise be imposed on them in A register of holders of the common shares is maintained by Coson Corporate respect of any negligence, default, breach of duty or breach of trust, except Services Limited in Bermuda, and a branch register is maintained in the in cases where such liability arises from fraud or dishonesty of which such United States by Computershare Trust Company, N.A., who serves as branch director, officer or auditor may be guilty in relation to the company. Section registrar and transfer agent. Enforcement of Judgments 98 further provides that a Bermuda company may indemnify its directors, officers and auditors against any liability incurred by them in defending any proceedings, whether civil or criminal, in which judgment is awarded in their We are incorporated as an exempted company with limited liability favor or in which they are acquitted or granted relief by the Supreme Court of under the laws of Bermuda, and substantially all of our assets are located Bermuda pursuant to Section 281 of the Bermuda Companies Act. in Colombia, Chile, Brazil, Peru and Argentina. In addition, most of our directors and executive officers reside outside the United States, and all or Our bye-laws contain provisions whereby we and our shareholders waive a substantial portion of the assets of such persons are located outside the any claim or right of action that we have, both individually and on our behalf, United States. As a result, it may be difficult for investors to effect service of against any director or officer in relation to any action or failure to take action process on those persons in the United States or to enforce in the United by such director or officer, except in respect of any fraud or dishonesty of such States judgments obtained in U.S. courts against us or those persons based director or officer. We may also indemnify our directors and officers in their on the civil liability provisions of the U.S. securities laws. capacity as directors and officers for any loss arising or liability attaching to There is no treaty in force between the United States and Bermuda providing of trust of which a director or officer may be guilty in relation to the company for the reciprocal recognition and enforcement of judgments in civil and other than in respect of his own fraud or dishonesty. We have entered into commercial matters. As a result, whether a U.S. judgment would be enforceable customary indemnification agreements with our directors. them by virtue of any rule of law in respect of any negligence, default, breach in Bermuda against us or our directors and officers depends on whether the U.S. court that entered the judgment is recognized by the Bermuda court No treaty exists between the United States and Chile for the reciprocal as having jurisdiction over us or our directors and officers, as determined by recognition and enforcement of foreign judgments. Chilean courts, reference to Bermuda conflict of law rules and the judgment is not contrary however, have enforced valid and conclusive judgments for the payment of to public policy in Bermuda, has not been obtained by fraud in proceedings money rendered by competent U.S. courts by virtue of the legal principles contrary to natural justice and is not based on an error in Bermuda law. A of reciprocity and comity, subject to review in Chile of the U.S. judgment judgment debt from a U.S. court that is final and for a sum certain based on U.S. in order to ascertain whether certain basic principles of due process and federal securities laws will not be enforceable in Bermuda unless the judgment public policy have been respected, without retrial or review of the merits of debtor had submitted to the jurisdiction of the U.S. court, and the issue of the subject matter. If a U.S. court grants a final judgment, enforceability of submission and jurisdiction is a matter of Bermuda (not U.S.) law. this judgment in Chile will be subject to obtaining the relevant exequatur (i.e., recognition and enforcement of the foreign judgment) according to An action brought pursuant to a public or penal law, the purpose of which is Chilean civil procedure law in effect at that time, and depending on certain the enforcement of a sanction, power or right at the instance of the state in factors (the satisfaction or non-satisfaction of which would be determined its sovereign capacity, may not be entertained by a Bermuda court. Certain by the Supreme Court of Chile). Currently, the most important of such remedies available under the laws of U.S. jurisdictions, including certain factors are: the existence of reciprocity (if it can be proved that there is no remedies under U.S. federal securities laws, may not be available under Bermuda reciprocity in the recognition and enforcement of the foreign judgment law or enforceable in a Bermuda court, as they may be contrary to Bermuda between the United States and Chile, that judgment would not be enforced public policy. Further, no claim may be brought in Bermuda against us or our in Chile); the absence of any conflict between the foreign judgment and directors and officers in the first instance for violations of U.S. federal securities Chilean laws (excluding for this purpose the laws of civil procedure) and laws because these laws have no extraterritorial jurisdiction under Bermuda Chilean public policy; the absence of a conflicting judgment by a Chilean law and do not have force of law in Bermuda. A Bermuda court may, however, court relating to the same parties and arising from the same facts and impose civil liability on us or our directors and officers if the facts alleged in circumstances; the Chilean court’s determination that the U.S. courts had a complaint constitute or give rise to a cause of action under Bermuda law. jurisdiction, that process was appropriately served on the defendant and However, section 281 of the Bermuda Companies Act allows a Bermuda court, in that the defendant was afforded a real opportunity to appear before the certain circumstances, to relieve officers and directors of Bermuda companies of court and defend its case; and the judgment being final under the laws of liability for acts of negligence, breach of duty or trust or other defaults. the country in which it was rendered. Nonetheless, we have been advised Section 98 of the Bermuda Companies Act provides generally that a Bermuda original actions in Chilean courts of liabilities predicated solely upon U.S. company may indemnify its directors, officers and auditors against any liability federal or state securities laws. by our Chilean counsel that there is doubt as to the enforceability in GeoPark 137 C. Material contracts • a tax-exempt entity, including an “individual retirement account” or “Roth IRA;” See “Item 4. Information on the Company—B. Business Overview—Significant • a person that owns or is deemed to own 10% or more of our voting stock; Agreements.” D. Exchange controls Not applicable. E. Taxation • 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. If an entity that is classified as a partnership for U.S. federal income tax The following summary contains a description of certain Bermudian, U.S. purposes holds common shares, the U.S. federal income tax treatment of a federal income, and Chilean tax consequences of ownership and disposition partner will generally depend on the status of the partner and the activities of our common shares. The summary is based upon the tax laws of Bermuda, of the partnership. Partnerships holding common shares and partners in such the United States, and Chile, and regulations thereunder as of the date hereof, partnerships should consult their tax advisers as to the particular U.S. federal which are subject to change. income tax consequences of their investment in our common shares. Bermuda tax consideration This discussion is based on the Internal Revenue Code of 1986, as amended At the date of this annual report, there is no Bermuda income or profits tax, (the “Code”), administrative pronouncements, judicial decisions, and final, withholding tax, capital gains tax, capital transfer tax, estate duty or inheritance temporary and proposed Treasury regulations, all as of the date hereof, any tax payable by us or by our shareholders in respect of our common shares. We of which is subject to change, possibly with retroactive effect. U.S. Holders have obtained an assurance from the Minister of Finance of Bermuda under should consult their tax advisers concerning the U.S. federal, state, local and the Exempted Undertakings Tax Protection Act 1966 that, in the event that foreign tax consequences of owning and disposing of our common shares in any legislation is enacted in Bermuda imposing any tax computed on profits their particular circumstances. or income, or computed on any capital asset, gain or appreciation or any tax in the nature of estate duty or inheritance tax, such tax shall not, until March 31, A “U.S. Holder” is a beneficial owner of our common shares for U.S. federal 2035, be applicable to us or to any of our operations or to our common shares, income tax purposes that is: debentures or other obligations except insofar as such tax applies to persons • a citizen or individual resident of the United States; ordinarily resident in Bermuda or is payable by us in respect of real property • a corporation, or other entity taxable as a corporation, created or organized owned or leased by us in Bermuda. We pay annual Bermuda government fees. in or under the laws of the United States, any state therein or the District of Columbia; or Material U.S. federal income tax considerations • an estate or trust the income of which is subject to U.S. federal income The following is a description of the material U.S. federal income tax taxation regardless of its source. consequences to U.S. Holders (as defined below) of owning and disposing of our common shares. This discussion is not a comprehensive description of This discussion assumes that we are not, and will not become, a passive all tax considerations that may be relevant to a particular person’s decision foreign investment company, as described below. to hold our common shares. This discussion applies only to a U.S. Holder that holds our common shares as capital assets for tax purposes. In addition, it Taxation of distributions does not describe all of the tax consequences that may be relevant in light of Distributions paid on our common shares, other than certain pro rata the U.S. Holder’s particular circumstances, including alternative minimum tax distributions of common shares, will generally be treated as dividends to and Medicare contribution tax consequences and differing tax consequences the extent paid out of our current or accumulated earnings and profits (as applicable to a U.S. Holder subject to special rules, such as: determined under U.S. federal income tax principles). Because we do not • certain financial institutions; maintain calculations of our earnings and profits under U.S. federal income • a dealer or trader in securities who uses a mark-to-market method of tax tax principles, it is expected that distributions will generally be reported to accounting; U.S. Holders as dividends. Dividends paid by qualified foreign corporations to • a person holding common shares as part of a straddle, wash sale or certain non-corporate U.S. Holders may be taxable at favorable rates. A foreign conversion transaction or entering into a constructive sale with respect to the corporation is treated as a qualified foreign corporation with respect to dividends common shares; paid on stock that is readily tradable on a securities market in the United States, • a person whose functional currency for U.S. federal income tax purposes is such as the NYSE where our common shares are traded. Non-corporate U.S. not the US$; Holders should consult their tax advisers to determine whether the favorable rate • a partnership or other entities classified as partnerships for U.S. federal will apply to dividends they receive and whether they are subject to any special income tax purposes; rules that limit their ability to be taxed at this favorable rate. 138 GeoPark 20F A dividend generally will be included in a U.S. Holder’s income when received, shares. U.S. Holders should consult their tax advisers to determine whether will be treated as foreign-source income to U.S. Holders and will not be eligible any of these elections would be available and, if so, what the consequences for the dividends-received deduction generally available to U.S. corporations of the alternative treatments would be in their particular circumstances. under the Code with respect to dividends paid by domestic corporations. Information reporting and backup withholding Sale or other taxable disposition of common shares Payments of dividends and sales proceeds that are made within the United Gain or loss realized on the sale or other taxable disposition of our common States or through certain U.S.-related financial intermediaries generally are shares will be capital gain or loss, and will be long-term capital gain or loss if subject to information reporting, and may be subject to backup withholding, the U.S. Holder held our common shares for more than one year. Long-term unless (1) the U.S. Holder is a corporation or other exempt recipient or capital gain of a non-corporate U.S. Holder is generally taxed at preferential (2) in the case of backup withholding, the U.S. Holder provides a correct rates. The deductibility of capital losses is subject to limitations. The amount taxpayer identification number and certifies that it is not subject to backup of the gain or loss will equal the difference between the U.S. Holder’s tax withholding. The amount of any backup withholding from a payment to a basis in the common shares disposed of and the amount realized on the U.S. Holder will be allowed as a credit against the U.S. Holder’s U.S. federal disposition. If a Chilean tax is withheld on the sale or disposition of the income tax liability and may entitle it to a refund, provided that the required common shares, a U.S. Holder’s amount realized will include the gross information is timely furnished to the Internal Revenue Service. amount of the proceeds of the sale or disposition before deduction of the Chilean tax. See “—Chilean tax on transfers of shares” for a description of Chilean tax on transfers of shares when a disposition may be subject to taxation by Chile. This gain or loss In September 2012, Article 10 of the Chilean Income Tax Law Decree Law No. will generally be U.S.-source gain or loss for foreign tax credit purposes. U.S. 824 of 1974, or the indirect transfer rules, were enacted, and impose taxes on Holders should consult their tax advisers as to whether the Chilean tax on the indirect transfer of shares, equity rights, interests or other rights in the gains may be creditable against the U.S. Holder’s U.S. federal income tax on equity, control or profits of a Chilean entity as well as transfers of other assets foreign-source income from other sources. and property of permanent establishments or other businesses in Chile. The Passive foreign investment company rules 2014 tax reform introduced a measure which obliges the company from which shares are transferred to pay taxes if the entity which undertakes the transfer We believe that we were not a “passive foreign investment company,” or PFIC, of shares fails to do so. for U.S. federal income tax purposes for 2016, and we do not expect to be a PFIC in the foreseeable future. However, because the composition of our The indirect transfer rules apply to sales of shares of an entity: income and assets will vary over time, there can be no assurance that we will • If such entity is an offshore holding company located in a black-listed not be a PFIC for any taxable year. The determination of whether we are a PFIC tax haven jurisdiction as determined by Chilean tax law, or a black-listed is made annually and is based upon the composition of our income and assets jurisdiction, (such as Bermuda) that holds Chilean Assets; and either a Chilean (including the income and assets of, among others, entities in which we hold resident holds 5% or more of such entity, or such entity’s rights to equity, at least a 25% interest), and the nature of our activities. control or profits, or 50% or more of such entity’s rights to equity or profits are held by residents in black-listed jurisdictions; or If we were a PFIC for any taxable year during which a U.S. Holder held • the shares or rights transferred represent 10% or more of the offshore our common shares, gain recognized by a U.S. Holder on a sale or other holding company (considering dispositions by related persons and over the disposition (including certain pledges) of our common shares would preceding 12-month period) and the underlying Chilean Assets indirectly generally be allocated ratably over the U.S. Holder’s holding period for the transferred, in the proportion indirectly owned by the seller, (a) are valued common shares. The amounts allocated to the taxable year of the sale or in an amount equal to or higher than UTA 210,000 (approximately US$200 other disposition and to any year before we became a PFIC would be taxed million) (adjusted by the Chilean inflation unit of reference) or (b) represent as ordinary income. The amount allocated to each other taxable year would 20% or more of the market value of the interest held by such seller in such be subject to tax at the highest rate in effect for individuals or corporations offshore holding company. for that year, as appropriate, and an interest charge would be imposed on the tax on such amount. Further, to the extent that any distribution received As a result of these rules, a capital gain tax of 35% will be applied by the by a U.S. Holder on its common shares exceeds 125% of the average of the Chilean tax authorities to the sale of any of our common shares if either of the annual distributions on the shares received during the preceding three years above alternatives are met. This rate might be subject to change in the short or the U.S. Holder’s holding period, whichever is shorter, that distribution term, as discussed herein. would be subject to taxation in the same manner as gain, as described immediately above. Certain elections may be available that would result in The 35% rate is calculated pursuant to one of the following methods, as alternative treatments (such as mark-to-market treatment) of our common determined by the seller: GeoPark 139 • the sale price of the shares minus the acquisition cost of such shares, multiplied G. Statement by experts by the percentage or proportion of the part of the underlying Chilean Assets’ Not applicable. 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 H. Documents on display • the portion of the sales price of the shares equal to the proportion We are subject to the informational requirements of the Exchange Act. of the fair market value of the underlying Chilean Assets, minus the Accordingly, we are required to file reports and other information with the corresponding proportion in the tax cost of such Chilean Assets for the SEC, including annual reports on Form 20-F and reports on Form 6-K. You may corresponding holding entity. 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. Information on However, the seller may opt to be taxed as if the underlying Chilean Assets the operation of the Public Reference Room may be obtained by calling the had been sold directly in which case a different set of tax rules may apply. SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet website The tax is payable by the seller of the shares; however, the buyer shall make a electronically with the SEC. The address of that website is www.sec.gov. that contains reports and other information about issuers, like us, that file provisional withholding unless the seller declares and pays the tax within the month following the sale, payment, remittance or it is credited into its account I. Subsidiary information or is put at its disposal. Also, if the seller fails to declare and pay this tax, and Not applicable. the buyer has not complied with its withholding obligations, the Chilean tax authority ( Servicio de Impuestos Internos ) may charge such tax directly to ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT any of them. In addition, the Chilean tax authority may require us, the seller, MARKET RISK the buyer, or its representative in Chile, to file an affidavit with the information necessary to assess this tax. We are exposed to a variety of market risks, including commodity price risk, interest rate risk, currency risk and credit (counterparty and customer) risk. Based on information available to us, (i) no Chilean resident holds 5% or The term “market risk” refers to the risk of loss arising from adverse changes in more of our rights to equity, control or profits; or (ii) residents in black- interest rates, oil and natural gas prices and foreign currency exchange rates. listed jurisdictions hold 50% or more of our rights to equity, control or profits. Therefore, we do not believe the indirect transfer rules will apply For further information on our market risks, please see Note 3 to our to transfers of our common shares, unless the shares or rights transferred Consolidated Financial Statements. represent 10% or more of the company and the other conditions described above are met (considering dispositions by related persons and over the ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES preceding 12-month period). A. Debt securities However, there can be no assurance that, at any time in the future, a Chilean Not applicable. resident will not hold 5% or more of our rights to equity, control or profits or that residents in black-listed jurisdictions will not hold 50% or more of our B. Warrants and rights rights to equity, control or profits. If this were to occur, all sales of our common Not applicable. shares would be subject to the indirect transfer tax referred to above. C. Other securities Our expectations regarding the indirect transfer rules are based on our Not applicable. understandings, analysis and interpretation of these enacted indirect transfer rules, which are subject to additional interpretation and rule-making by the D. American Depositary Shares Chilean authorities. As such, there is uncertainty relating to the application by Not applicable. Chilean authorities of the indirect transfer rules on us. See “Item 3. Key Information—D. Risk Factors—Risks related to our common shares—The transfer of our common shares may be subject to capital gains taxes pursuant to indirect transfer rules in Chile.” F. Dividends and paying agents Not applicable. 140 GeoPark 20F PART II ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES • provide reasonable assurance that transactions are recorded as necessary to A. Defaults No matters to report. B. Arrears and delinquencies No matters to report. 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 of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY Because of its inherent limitations, internal control over financial reporting HOLDERS AND USE OF PROCEEDS Not applicable. ITEM 15. CONTROLS AND PROCEDURES A. Disclosure Controls and Procedures may not prevent or detect misstatements. Therefore, effective control over financial reporting cannot, and does not, provide absolute assurance of 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, or that the degree of compliance with the policies or procedures may deteriorate. As of December 31, 2016, under the supervision and with the participation Under the supervision and with the participation of our management, including of our management, including our Chief Executive Officer and Chief Financial our Chief Executive Officer, our Chief Financial Officer, and our Director of Officer, we performed an evaluation of the effectiveness of the design and Legal and Governance, we conducted an evaluation of the effectiveness of our operation of our disclosure controls and procedures (as defined in Rule internal control over financial reporting as of December 31, 2016, based on the 13a-15(e) under the Exchange Act). There are inherent limitations to the criteria established in Internal Control - Integrated Framework of the Committee effectiveness of any disclosure controls and procedures system, including of Sponsoring Organizations of the Treadway Commission (2013). the possibility of human error and circumventing or overriding them. Even if effective, disclosure controls and procedures can provide only reasonable Based on this assessment, management believes that, as of December 31, 2016, assurance of achieving their control objectives. its internal control over financial reporting was effective based on those criteria. Based on such evaluation, our Chief Executive Officer and Chief Financial C. Attestation Report of the Registered Public Accounting Firm Officer concluded that our disclosure controls and procedures are Not applicable. effective to provide reasonable assurance that the information we are required to disclose in the reports we file or submit under the Exchange D. Changes in Internal Control over Financial Reporting Act is (1) recorded, processed, summarized and reported within the time There have been no changes in our internal control over financial reporting periods specified in the SEC’s rules and forms and (2) accumulated and during the period covered by this annual report on Form 20-F that have communicated to our management to allow timely decisions regarding materially affected or reasonably likely to materially affect our internal control required disclosures. over financial reporting. B. Management’s Annual Report on Internal Control over Financial ITEM 16. RESERVED Reporting Our management is responsible for establishing and maintaining an ITEM 16A. Audit committee financial expert adequate internal control over financial reporting as defined in Rule 13a-15(f ) under the Exchange Act. 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 Our internal control over financial reporting is a process designed by, or under applicable to foreign private issuers. In addition, Mr. Robert Bedingfield and the supervision of, our principal executive and principal financial officers, Mr. Juan Cristobal Pavez are regarded as audit committee financial experts. management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial ITEM 16B. Code of Conduct statements for external reporting purposes, in accordance with generally accepted accounting principles. These include those policies and procedures that: We have adopted a code of conduct applicable to the board of directors and • pertain to the maintenance of records that, in reasonable detail, accurately all employees. Since its effective date on September 24, 2012, we have not and fairly reflect transactions and dispositions of our assets; waived compliance with or amended the code of conduct. GeoPark 141 ITEM 16C. Principal Accountant Fees and Services Tax Fees Amounts billed by PwC for audit and other services were as follows: and tax planning. Tax fees are fees billed for professional services for tax compliance, tax advice Audit fees Tax fees Other fees paid Total Audit Fees 2016 2015 Pre-Approval Policies and Procedures (in millions of US$) Following the listing of our common shares on the NYSE, the Audit 0.49 0.13 — 0.62 0.56 0.13 Committee proposes the appointment of the independent auditor to the Board to be put to shareholders for approval at the Annual General meeting. — The committee oversees the auditor selection process for new auditors 0.69 and ensures key partners in the appointed firm are rotated in accordance with best practices. Also, following our NYSE listing, the Audit Committee is required to pre-approve the audit and non-audit fees and services Audit fees are fees billed for professional services rendered by the principal performed by the Company’s auditors in order to be sure that the provision accountant for the audit of the registrant’s annual financial statements or of such services does not impair the audit firm’s independence. services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. It includes All of the audit fees, audit-related fees and tax fees described in this item 16C the audit of our Consolidated Financial Statements and other services that have been approved by the Audit Committee. generally only the independent accountant reasonably can provide, such as comfort letters, statutory audits, consents and assistance with and review of ITEM 16D. Exemptions from the listing standards for audit committees documents filed with the SEC. Audit-Related Fees None. 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 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. 142 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 2016. 2016 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 September30 October 1 to October 31 November 1 to November30 December 1 to December31 Total Maximum number (or Total number of approximate dollar common shares value) of common Total number of purchased as part of shares that may yet be common shares Average price paid per publicly announced purchased under the purchased common share (US$) plans or programs plans or programs - - - 7,432 6,179 257,528 136,360 29,780 35,100 86,489 30,000 - 588,868 - - - 2.89 2.66 3.02 3.40 3.43 3.39 3.90 4.46 - 3.40 - - - 7,432 6,179 257,528 136,360 29,780 35,100 86,489 30,000 - 588,868 - - - US$10 million US$10 million US$10 million US$10 million US$10 million US$10 million US$10 million US$10 million - In December 2015, the Board of Directors approved a program to repurchase ITEM 16F. Change in registrant’s certifying accountant up to US$10 million of common shares, par value US$0.001 per share of the Company. This Repurchase Program began on December 19, 2014 and expired Not applicable. on August 18, 2015. The Shares repurchased are used to offset, in part, any expected dilution effects resulting from the Company’s employee incentive ITEM 16G. Corporate governance schemes, including grants under the Company’s Stock Award Plan and the Limited Non-Executive Director Plan. Our common shares are listed on the NYSE. We are therefore required to comply with certain of the NYSE’s corporate governance listing standards On April 5, 2016, we announced that we would resume our repurchase (“NYSE Standards”). As a foreign private issuer, we may follow our home program of up to US$10 million of common shares, par value US$0.001 country’s corporate governance practices in lieu of most of the NYSE per share. The Repurchase Program resumed on April 5, 2016 and expired Standards. Our corporate governance practices differ in certain significant on August 10, 2016. The shares repurchased were used to offset, in part, respects from those that U.S. companies must adopt in order to maintain any dilution effects resulting from our employee incentive schemes, NYSE listing and, in accordance with Section 303A.11 of the NYSE Listed including grants under our Stock Award Plan and the Limited Non- Company Manual, a brief, general summary of those differences is Executive Director Plan. provided as follows. On September 19, 2016, we announced that we would resume our Director independence repurchase program of up to US$10 million of common shares, par value The NYSE Standards require a majority of the membership of NYSE-listed US$0.001 per share. The Repurchase Program resumed on September 19, company boards to be composed of independent directors. Neither 2016 and expired on November 13, 2016. The shares repurchased were used Bermuda law, the law of our country of incorporation, nor our memorandum for grants from our employee incentive schemes, including grants under our of association or bye-laws require a majority of our board to consist of Stock Award Plan and the Limited Non-Executive Director Plan. independent directors. GeoPark 143 Non-management directors’ executive sessions Foreign private issuers such as us are exempt from these additional The NYSE Standards require non-management directors of NYSE-listed requirements if home country practice is followed. Bermuda law does not companies to meet at regularly scheduled executive sessions without impose similar requirements, and consequently, our audit committee does management. Our memorandum of association and bye-laws do not require not perform these additional functions. Our Audit Committee is composed our non-management directors to hold such meetings. exclusively of independent auditors. Committee member composition Miscellaneous The NYSE Standards require domestic NYSE-listed domestic companies to In addition to the above differences, we are not required to: make our audit have a nominating/corporate governance committee and a compensation and compensation committees prepare a written charter that addresses either committee that are composed entirely of independent directors. Bermuda law, purposes and responsibilities or performance evaluations in a manner that the law of our country of incorporation, does not impose similar requirements. would satisfy the NYSE’s requirements; acquire shareholder approval of equity compensation plans in certain cases; or adopt and make publicly available Independence of the compensation committee and its advisers corporate governance guidelines. On January 11, 2013, the SEC approved NYSE listing standards that require that the board of directors of a domestic listed company consider two factors We are incorporated under, and are governed by, the laws of Bermuda. (in addition to the existing general independence tests) in the evaluation of For a summary of some of the differences between provisions of Bermuda the independence of compensation committee members: (i) the source of law applicable to us and the laws applicable to companies incorporated in compensation of the director, including any consulting, advisory or other Delaware and their shareholders, See “Item 10. Additional Information—B. compensatory fees paid by the listed company, and (ii) whether the director Memorandum of association and bye-laws.” 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, ITEM 16H. Mine safety disclosure before selecting or receiving advice from a compensation consultant or other adviser, the compensation committee of a listed company will be Not applicable. required to take into consideration six specific factors, as well as all other factors relevant to an adviser’s independence. Foreign private issuers such as us will be exempt from these requirements if home country practice is followed. Bermuda law does not impose similar requirements, so we will not be required to implement the 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 compensation committee to consider the independence of any advisers that assist them in fulfilling their duties. Additional audit committee functions The NYSE standards require that audit committees of domestic companies to serve a number of functions in addition to reviewing and approving the company’s financial statements, engaging auditors and assessing their independence, and obtaining the legal and other professional advice of experts when necessary. For instance, the NYSE Standards require that the audit committee meet independently with management in a separate session in order to maximize the effectiveness of the committee’s oversight function. In addition, audit committees must obtain and review a report by the independent auditors describing the firm’s internal quality-control procedures and any issues raised by these procedures. Finally, audit committees are responsible for designing and implementing an internal audit function that assesses the company’s risk management processes and systems of internal control on an ongoing basis. 144 GeoPark 20F PART III ITEM 17. Financial statements No. Description We have responded to Item 18 in lieu of this item. 4.2 Exploration and Production Contract regarding exploration for and ITEM 18. Financial statements exploitation of hydrocarbons in the La Cuerva Block, dated April 16, 2008, between the Colombian Agencia Nacional de Hidrocarburos Financial Statements are filed as part of this annual report, see pages F-1 to and Hupecol Caracara LLC (incorporated herein by reference to Exhibit F-76 to this annual report. ITEM 19. Exhibits No. Description 10.12 to the Company’s Registration Statement on Form F-1 (File No. 333-191068) filed with the SEC on September 9, 2013). 4.3 Exploration and Production Contract regarding exploration for and exploitation of hydrocarbons in the Llanos 34 Block, dated March 13, 2009, between the Colombian Agencia Nacional de Hidrocarburos and 1.1 Certificate of Incorporation (incorporated herein by reference to Exhibit Unión Temporal Llanos 34 (incorporated herein by reference to Exhibit 3.1 to the Company’s Registration Statement on Form F-1 (File No. 333- 10.3 to the Company’s Registration Statement on Form F-1 (File No. 191068) filed with the SEC on September 9, 2013). 333-191068) filed with the SEC on September 9, 2013). 1.2 Memorandum of Association (incorporated herein by reference to 4.4 Subscription and Shareholders Agreement, dated February 7, 2006, Exhibit 3.2 to the Company’s Registration Statement on Form F-1 (File among the International Finance Corporation, GeoPark Holdings No. 333-191068) filed with the SEC on September 9, 2013). Limited, Gerald O’Shaughnessy and James F. Park (incorporated herein 1.3 Current bye-laws (incorporated herein by reference to Exhibit 3.3 to the by reference to Exhibit 10.4 to the Company’s Registration Statement Company’s Registration Statement on Form F-1 (File No. 333-191068) on Form F-1 (File No. 333-191068) filed with the SEC on September 9, filed with the SEC on September 9, 2013). 2013). 1.4 Form of amended and restated bye-laws (incorporated herein by 4.5 Subscription Agreement, dated May 20, 2011, among LG International reference to Exhibit 3.4 to the Company’s Registration Statement on Corporation, GeoPark Chile Limited Agencia en Chile, GeoPark Chile Form F-1 (File No. 333-191068) filed with the SEC on September 9, 2013). S.A. and GeoPark Holdings Limited (incorporated herein by reference to 2.2 Indenture, dated February 11, 2013, among GeoPark Chile Limited Exhibit 10.6 to the Company’s Registration Statement on Form F-1 (File Agencia en Chile, GeoPark Limited, GeoPark Latin America Limited No. 333-191068) filed with the SEC on September 9, 2013). and Deutsche Bank Trust Company Americas (incorporated herein by 4.6 Shareholders’ Agreement, dated May 20, 2011, among LG International reference to Exhibit 4.2 to the Company’s Registration Statement on Corporation, GeoPark Chile Limited Agencia en Chile and GeoPark Chile Form F-1 (File No. 333-191068) filed with the SEC on September 9, 2013). S.A. (incorporated herein by reference to Exhibit 10.7 to the Company’s 2.3 Share Pledge Agreement, dated February 11, 2013, among GeoPark Registration Statement on Form F-1 (File No. 333-191068) filed with the Chile Limited Agencia en Chile, GeoPark Chile S.A., GeoPark Colombia SEC on September 9, 2013). S.A. and Deutsche Bank Trust Company Americas (incorporated herein 4.7 Subscription Agreement, dated December 18, 2012, among LG by reference to Exhibit 4.3 to the Company’s Registration Statement on International Corporation, GeoPark Chile Limited Agencia en Chile, Form F-1 (File No. 333-191068) filed with the SEC on September 9, 2013). GeoPark Colombia S.A. and GeoPark Holdings Limited (incorporated 2.4 Intercompany Loan Pledge Agreement, dated February 11, 2013, among herein by reference to Exhibit 10.8 to the Company’s Registration GeoPark Chile Limited Agencia en Chile, GeoPark Fell S.p.A., GeoPark Llanos Statement on Form F-1 (File No. 333-191068) filed with the SEC on SAS and Deutsche Bank Trust Company Americas (incorporated herein by September 9, 2013). reference to Exhibit 4.4 to the Company’s Registration Statement on Form 4.8 Shareholders’ Agreement, dated December 18, 2012, among LG F-1 (File No. 333-191068) filed with the SEC on September 9, 2013). International Corporation, GeoPark Chile Limited Agencia en Chile and 2.5 Supplemental Indenture, dated December 20, 2013, among GeoPark GeoPark Colombia S.A. (incorporated herein by reference to Exhibit 10.9 Latin America Limited Agencia en Chile, GeoPark Latin America Limited, to the Company’s Registration Statement on Form F-1 (File No. 333- GeoPark Limited, GeoPark Latin America Coöperatie U.A. and Deutsche 191068) filed with the SEC on September 9, 2013). Bank Trust Company Americas (incorporated herein by reference to 4.9 Subordinated Loan Agreement, dated December 18, 2012, between LG Exhibit 4.5 to the Company’s Registration Statement on Form F-1/A (File International Corporation and Winchester Oil & Gas S.A. (incorporated No. 333-191068) filed with the SEC on January 21, 2014). herein by reference to Exhibit 10.10 to the Company’s Registration 4.1 Special Contract for the Exploration and Exploitation of Statement on Form F-1 (File No. 333-191068) filed with the SEC on Hydrocarbons, Fell Block, dated April 29, 1997, among the Republic September 9, 2013). of Chile, the Chilean Empresa Nacional de Petróleo (ENAP) and 4.10 Subscription Agreement, dated October 18, 2011, among LG Cordex Petroleums Inc. (incorporated herein by reference to Exhibit International Corporation and GeoPark TdF S.A. (incorporated herein by 10.1 to the Company’s Registration Statement on Form F-1 (File No. reference to Exhibit 10.11 to the Company’s Registration Statement on 333-191068) filed with the SEC on September 9, 2013). Form F-1 (File No. 333-191068) filed with the SEC on September 9, 2013). GeoPark 145 No. Description No. Description 4.11 Shareholders’ Agreement, dated October 4, 2011, among LG International 4.21 Seventh Addendum and Amendment to Purchase and Sale Agreement Corporation, GeoPark TdF S.A. and GeoPark Chile S.A. (incorporated herein for Natural Gas between GeoPark Chile Limited Agencia en Chile and by reference to Exhibit 10.12 to the Company’s Registration Statement on Methanex Chile S.A. dated April 1, 2016.* † Form F-1 (File No. 333-191068) filed with the SEC on September 9, 2013). 4.22 Contract for the sale and Purchase of Natural Gas 2017-2027 between 4.12 Quota Purchase Agreement, dated May 14, 2013, between Panoro GeoPark Fell SpA and Methanex Chile SpA dated March 31, 2017. *† Energy do Brasil Ltda. and GeoPark Brasil Exploracão e Producão de 4.23 Members’ Agreement, dated January 8, 2014, among GeoPark Latin Petróleo e Gás Ltda (incorporated herein by reference to Exhibit 10.13 America Coöperatie U.A., GeoPark Colombia Coöperatie U.A. and LG to the Company’s Registration Statement on Form F-1 (File No. 333- International Corporation (incorporated herein by reference to Exhibit 191068) filed with the SEC on September 9, 2013). 10.20 to the Company’s Registration Statement on Form F-1/A (File No. 4.13 Purchase and Sale Agreement for Crude Oil and Condensate of Fell 333-191068) filed with the SEC on January 21, 2014). Block between Empresa Nacional del Petróleo (ENAP) and GeoPark 4.24 Loan Agreement no. 4131, dated March 28, 2014, between Itaú BBA Fell S.p.A. (incorporated herein by reference to Exhibit 10.14 to the International plc and GeoPark Brasil Exploracão e Produção de Petróleo e Company’s Registration Statement on Form F-1 (File No. 333-191068) Gás Ltda. (incorporated herein by reference to Exhibit 4.21 to the Company’s filed with the SEC on September 9, 2013). Annual Report on Form 20-F filed with the SEC on April 30, 2014). 4.14 Purchase and Sale Agreement for Natural Gas between GeoPark Chile 4.25 Addendum and Amendment to Loan Agreement no. 4131, dated Limited Agencia en Chile and Methanex Chile S.A. (incorporated herein March 12, 2015, between Itaú BBA International plc and GeoPark Brasil by reference to Exhibit 10.15 to the Company’s Registration Statement on Exploracão e Produção de Petróleo e Gás Ltda. (incorporated herein by Form F-1/A (File No. 333-191068) filed with the SEC on October 10, 2013).† reference to Exhibit 4.22 to the Company’s Annual Report on Form 20-F 4.15 First Addendum and Amendment to Purchase and Sale Agreement filed with the SEC on April 30, 2015) for Natural Gas between GeoPark Chile Limited Agencia en Chile and 4.26 Prepayment Agreement for an Amount of up to US$100,000,000, Methanex Chile S.A. (incorporated herein by reference to Exhibit 10.16 dated December 18, 2015, among C.I. Trafigura Petroleum Colombia to the Company’s Registration Statement on Form F-1/A (File No. 333- SAS, GeoPark Colombia SAS and GeoPark Ltd. (incorporated herein by 191068) filed with the SEC on October 10, 2013).† reference to Exhibit 4.25 to the Company’s Annual Report on Form 20-F 4.16 Second Addendum and Amendment to Purchase and Sale Agreement filed with the SEC on April 15, 2016. for Natural Gas between GeoPark Chile Limited Agencia en Chile and 4.27 Amendment Agreement No. 1 among GeoPark Colombia SAS, C.I. Methanex Chile S.A. (incorporated herein by reference to Exhibit 10.7 Trafigura Petroleum Colombia SAS and GeoPark Ltd. dated September 1, to the Company’s Registration Statement on Form F-1/A (File No. 333- 2016 relating to the Prepayment Agreement dated December 18, 2015.* 191068) filed with the SEC on September 26, 2013). 4.28 Amendment Agreement No. 2 among GeoPark Colombia SAS, C.I. 4.17 Third Addendum and Amendment to Purchase and Sale Agreement Trafigura Petroleum Colombia SAS and GeoPark Ltd. dated December 16, for Natural Gas between GeoPark Chile Limited Agencia en Chile and 2016 relating to the Prepayment Agreement dated December 18, 2015.* Methanex Chile S.A. (incorporated herein by reference to Exhibit 10.18 4.29 Amendment Agreement No. 3 among GeoPark Colombia SAS, C.I. to the Company’s Registration Statement on Form F-1/A (File No. 333- Trafigura Petroleum Colombia SAS and GeoPark Ltd. dated February 13, 191068) filed with the SEC on October 10, 2013).† 2017 relating to the Prepayment Agreement dated December 18, 2015.* 4.18 Fourth Addendum and Amendment to Purchase and Sale Agreement 8.1 Subsidiaries of GeoPark Limited.* for Natural Gas between GeoPark Chile Limited Agencia en Chile and 12.1 Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002.* Methanex Chile S.A. (incorporated herein by reference to Exhibit 10.19 12.2 Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002.* to the Company’s Registration Statement on Form F-1/A (File No. 333- 13.1 Certification pursuant to 18 U.S.C. section 1350, as adopted pursuant to 191068) filed with the SEC on October 10, 2013).† section 906 of the Sarbanes-Oxley Act of 2002.* 4.19 Fifth Addendum and Amendment to Purchase and Sale Agreement 13.2 Certification pursuant to 18 U.S.C. section 1350, as adopted pursuant to for Natural Gas between GeoPark Chile Limited Agencia en Chile section 906 of the Sarbanes-Oxley Act of 2002.* and Methanex Chile S.A. dated April 1, 2014. (incorporated herein by 15.1 Consent of Price Waterhouse & Co. S.R.L., Argentina.* reference to Exhibit 4.23 to the Company’s Annual Report on Form 20-F 15.2 Consents of DeGolyer and MacNaughton to use its report.* filed with the SEC on April 30, 2015)† 99.1 Reserves Report of DeGolyer and MacNaughton dated March 11, 2017, 4.20 Sixth Addendum and Amendment to Purchase and Sale Agreement for reserves in Chile, Colombia, Peru, Brazil as of December 31, 2016.* for Natural Gas between GeoPark Chile Limited Agencia en Chile and Methanex Chile S.A. dated May 1, 2015 (incorporated herein by * † Filed with this Annual Report on Form 20-F. Confidential treatment of certain provisions of these exhibits has reference to Exhibit 4.21 to the Company’s Annual Report on Form 20-F been requested with the SEC. Omitted material for which confidential filed with the SEC on April 15, 2016). † treatment has been requested has been filed separately with the SEC. 146 GeoPark 20F Glossary of Oil and Natural Gas Terms The terms defined in this section are used throughout this annual report: local geologic barriers, or by both. Reservoirs that are associated by being “appraisal well” means a well drilled to further confirm and evaluate the in overlapping or adjacent fields may be treated as a single or common presence of hydrocarbons in a reservoir that has been discovered. operational field. The geological terms structural feature and stratigraphic “API” means the American Petroleum Institute’s inverted scale for denoting the condition are intended to identify localized geological features as opposed to “light” or “heaviness” of crude oils and other liquid hydrocarbons. the broader terms of basins, trends, provinces, plays, areas-of-interest, etc. “bbl” means one stock tank barrel, of 42 U.S. gallons liquid volume, used herein “formation” means a layer of rock which has distinct characteristics that differ in reference to crude oil, condensate or natural gas liquids. from nearby rock. “bcf” means one billion cubic feet of natural gas. “mbbl” means one thousand barrels of crude oil, condensate or natural gas “bcm” means billion cubic meters. liquids. “boe” means barrels of oil equivalent, with 6,000 cubic feet of natural gas being “mboe” means one thousand barrels of oil equivalent. equivalent to one barrel of oil. “boepd” means barrels of oil equivalent per day. “mcf” means one thousand cubic feet of natural gas. “bopd” means barrels of oil per day. “Measurements” include: “British thermal unit” or “btu” means the heat required to raise the temperature “m” or “meter” means one meter, which equals approximately 3.28084 feet; of a one-pound mass of water from 58.5 to 59.5 degrees Fahrenheit. “km” means one kilometer, which equals approximately 0.621371 miles; “basin” means a large natural depression on the earth’s surface in which “sq. km” means one square kilometer, which equals approximately 247.1 acres; sediments generally brought by water accumulate. “bbl” “bo,” or “barrel of oil” means one stock tank barrel, which is equivalent to “CEOP” ( Contrato Especial de Operación ) means a special operating contract approximately 0.15898 cubic meters; the Chilean signs with a company or a consortium of companies for the “boe” means one barrel of oil equivalent, which equals approximately exploration and exploitation of hydrocarbon wells 160.2167 cubic meters, determined using the ratio of 6,000 cubic feet of “completion” means the process of treating a drilled well followed by the natural gas to one barrel of oil; installation of permanent equipment for the production of natural gas or oil, or in “cf” means one cubic foot; the case of a dry hole, the reporting of abandonment to the appropriate agency. “m,” when used before bbl, boe or cf, means one thousand bbl, boe or cf, “developed acreage” means the number of acres that are allocated or respectively; assignable to productive wells or wells capable of production. “mm,” when used before bbl, boe or cf, means one million bbl, boe or cf, “developed reserves” are expected quantities to be recovered from existing respectively; wells and facilities. Reserves are considered developed only after the necessary “b,” when used before bbl, boe or cf, means one billion bbl, boe or cf, equipment has been installed or when the costs to do so are relatively minor respectively; and compared to the cost of a well. Where required facilities become unavailable, it “pd” means per day. may be necessary to reclassify developed reserves as undeveloped. “metric ton” or “MT” means one thousand kilograms. Assuming standard “development well” means a well drilled within the proved area of an oil or gas quality oil, one metric ton equals 7.9 bbl. reservoir to the depth of a stratigraphic horizon known to be productive. “mmbbl” means one million barrels of crude oil, condensate or natural gas liquids. “dry hole” means a well found to be incapable of producing hydrocarbons “mmboe” means one million barrels of oil equivalent. in sufficient quantities such that proceeds from the sale of such production “mmbtu” means one million British thermal units. exceed production expenses and taxes. “NYMEX” means The New York Mercantile Exchange. “E&P Contract” means exploration and production contract “net acres” means the percentage of total acres an owner has out of a “economic interest” means an indirect participation interest in the net particular number of acres, or a specified tract. An owner who has a 50% revenues from a given block based on bilateral agreements with the interest in 100 acres owns 50 net acres. concessionaires. “productive well” means a well that is found to be capable of producing “economically producible” means a resource that generates revenue that hydrocarbons in sufficient quantities such that proceeds from the sale of the exceeds, or is reasonably expected to exceed, the costs of the operation. production exceed production expenses and taxes. “exploratory well” means a well drilled to find and produce oil or gas in “prospect” means a potential trap which may contain hydrocarbons and is an unproved area, to find a new reservoir in a field previously found to be supported by the necessary amount and quality of geologic and geophysical productive of oil or gas in another reservoir, or to extend a known reservoir. data to indicate a probability of oil and/or natural gas accumulation ready to Generally, an exploratory well is any well that is not a development well, a be drilled. The five required elements (generation, migration, reservoir, seal service well, or a stratigraphic test well as those items are defined below. and trap) must be present for a prospect to work and if any of them fail neither “field” means an area consisting of a single reservoir or multiple reservoirs all oil nor natural gas will be present, at least not in commercial volumes. grouped on or related to the same individual geological structural feature “proved developed reserves” means those proved reserves that can be and/or stratigraphic condition. There may be two or more reservoirs in a field expected to be recovered through existing wells and facilities and by that are separated vertically by intervening impervious strata, or laterally by existing operating methods. GeoPark 147 “proved reserves” means estimated quantities of crude oil, natural gas, and types of expendable holes related to hydrocarbon exploration. Stratigraphic natural gas liquids which geological and engineering data demonstrate with test wells are classified as (i) exploratory-type, if not drilled in a proved area, or reasonable certainty to be economically recoverable in future years from (ii) development-type, if drilled in a proved area. known reservoirs under existing economic and operating conditions, as well “tcm” means trillion cubic meters. as additional reserves expected to be obtained through confirmed improved “undeveloped reserves” are quantities expected to be recovered through recovery techniques, as defined in SEC Regulation S-X 4-10(a)(2). future investments: (1) from new wells on undrilled acreage in known “proved undeveloped reserves” means are those proved reserves that are accumulation, (2) from deepening existing wells to a different (but known) expected to be recovered from future wells and facilities, including future reservoir, (3) from infill wells that will increase recover, or (4) where a relatively improved recovery projects which are anticipated with a high degree of large expenditure ( e.g. , when compared to the cost of drilling a new well) certainty in reservoirs which have previously shown favorable response to is required to (a) recomplete an existing well or (b) install production or improved recovery projects. 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 or “recompletion” means the process of re-entering an existing wellbore that field, rather than a single tract, to provide for development and operation is either producing or not producing and completing new reservoirs in an without regard to separate property interests. Also, the area covered by a 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, by production on a completed well. Also called well or borehole. 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 will explore for and to produce and own oil, gas, or other minerals. The working exist, a revenue interest in the production, installed means of delivering oil, interest owners bear the exploration, development, and operating costs on gas, or related substances to market, and all permits and financing required either a cash, penalty, or carried basis. 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 reservoir. Spacing is often expressed in terms of acres ( e.g. , 40-acre spacing, and is often established by regulatory agencies). “spud” means the very beginning of drilling operations of a new well, occurring when the drilling bit penetrates the surface utilizing a drilling rig capable of drilling the well to the authorized total depth. “stratigraphic test well” means a drilling effort, geologically directed, to obtain information pertaining to a specific geologic condition. Such wells customarily are drilled without the intention of being completed for hydrocarbon production. This classification also includes tests identified as core tests and all 148 GeoPark 20F Signatures The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf. GEOPARK LIMITED By: /s/ James F. Park Name: James F. Park Title: Chief Executive Officer and Deputy Chairman Date: April 11, 2017 GeoPark 149 Consolidated Financial Statements As of and for the year ended 31 December 2016 150 GeoPark 20F Casanare Department, Colombia Contents Report of Independent Registered Public Accounting Firm Consolidated Statement of Income Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flow Notes to the Consolidated Financial Statements 152 153 153 154 155 156 157 GeoPark 151 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, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, 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. PRICE WATERHOUSE & CO. S.R.L. By (Partner) Ezequiel L. Mirazon Autonomous City of Buenos Aires, Argentina March 6, 2017 152 GeoPark 20F Consolidated Statement of Income Amounts in US$ ´000 Note 2016 2015 2014 REVENUE Commodity risk management contracts Production and operating costs Geological and geophysical expenses Administrative expenses Selling expenses Depreciation Write-off of unsuccessful efforts Impairment loss reversed (recognised) for non-financial assets Other expenses OPERATING (LOSS) PROFIT Financial costs Foreign exchange gain (loss) (LOSS) PROFIT BEFORE INCOME TAX Income tax (expense) benefit (LOSS) PROFIT FOR THE YEAR Attributable to: Owners of the Company Non-controlling interest (Losses) Earnings per share (in US$) for (loss) profit attributable to owners of the Company. Basic (Losses) Earnings per share (in US$) for (loss) profit attributable to owners of the Company. Diluted Consolidated Statement of Comprehensive Income Amounts in US$ ´000 (Loss) Profit for the year Other comprehensive income: Items that may be subsequently reclassified to (loss) profit Currency translation difference Total comprehensive (Loss) Income for the year Attributable to: Owners of the Company Non-controlling interest The notes on pages 157 to 200 are an integral part of these consolidated financial statements. 7 36 8 11 12 13 19 192,670 (2,554) (67,235) (10,282) (34,170) (4,222) (75,774) (31,366) 209,690 428,734 - (86,742) (13,831) (37,471) (5,211) - (131,419) (13,002) (45,867) (24,428) (105,557) (100,528) (30,084) (30,367) 19-35 5,664 (149,574) (1,344) (13,711) (28,613) (232,491) 14 (34,101) 13,872 (35,655) (33,474) (48,842) (301,620) 16 (11,804) 17,054 (60,646) (284,566) (9,430) (1,849) 71,844 (27,622) (23,097) 21,125 (5,195) 15,930 (49,092) (11,554) (234,031) (50,535) 8,085 7,845 18 18 (0.82) (4.05) 0.14 (0.82) (4.05) 0.14 2016 2015 (60,646) (284,566) 2014 15,930 7,102 (1,001) (53,544) (285,567) (2,448) 13,482 (41,990) (11,554) (235,032) (50,535) 5,637 7,845 GeoPark 153 Consolidated Statement of Financial Position Amounts in US$ ´000 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 Other financial assets Cash at bank and in hand TOTAL CURRENT ASSETS TOTAL ASSETS TOTAL EQUITY Equity attributable to owners of the Company Share capital Share premium Reserves Accumulated losses Attributable to owners of the Company Non-controlling interest TOTAL EQUITY LIABILITIES NON CURRENT LIABILITIES Borrowings Provisions and other long-term liabilities Deferred income tax liability Trade and other payables TOTAL NON CURRENT LIABILITIES CURRENT LIABILITIES Borrowings Derivative financial instrument liabilities Current income tax liabilities Trade and other payables TOTAL CURRENT LIABILITIES TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES The consolidated financial statements were approved by the Board of Directors on 6 March 2017. The notes on pages 157 to 200 are an integral part of these consolidated financial statements. 154 GeoPark 20F Note 2016 2015 19 21 24 17 23 22 23 23 21 24 24 25 26 27 17 28 26 28 473,646 522,611 2,852 19,547 23,053 241 1,172 13,306 34,646 220 519,339 571,955 3,515 18,426 7,402 15,815 2,480 73,563 4,264 13,480 11,057 19,195 1,118 82,730 121,201 640,540 131,844 703,799 60 236,046 130,118 59 232,005 123,016 (260,459) (208,428) 105,765 146,652 35,828 53,515 141,593 200,167 319,389 343,248 42,509 2,770 34,766 42,450 16,955 19,556 399,434 422,209 39,283 3,067 5,155 52,008 99,513 498,947 640,540 35,425 - 208 45,790 81,423 503,632 703,799 Consolidated Statement of Changes in Equity Attributable to owners of the Company Share Share Other Translation Retained controlling (Accumulated Losses) Non- Capital(1) Premium Reserve 44 120,426 127,527 Amount in US$ ‘000 Equity at 1 January 2014 Comprehensive income: Profit for the year Currency translation differences Total Comprehensive Income for the Year 2014 Transactions with owners: Proceeds from issue of shares (Note 25) Proceeds from transaction with Non-controlling interest Share-based payment (Note 29) Repurchase of shares (Note 25) Total 2014 Balances at 31 December 2014 Comprehensive income: Loss for the year Currency translation differences Total Comprehensive Loss for the Year 2015 Transactions with owners: Share-based payment (Note 29) Repurchase of shares (Note 25) Total 2015 Balances at 31 December 2015 Comprehensive income: Loss for the year Currency translation differences Total Comprehensive Loss for the Year 2016 Transactions with owners: Share-based payment (Note 29) Repurchase of shares (Note 25) Dividends distribution to non-controlling interest Total 2016 Balances at 31 December 2016 - - - - - - 14 90,848 - - (388) 90,460 - - - 14 58 - - - 1 - 1 Reserve (1,062) - (2,448) (2,448) - - - - - - - - - - - - - Earnings Interest 95,116 Total 365,957 23,906 8,085 - 8,085 - - 8,605 - 8,605 40,596 7,845 - 7,845 - 35 573 - 608 15,930 (2,448) 13,482 90,862 35 9,178 (388) 99,687 103,569 479,126 210,886 127,527 (3,510) - - - 22,734 (1,615) 21,119 - - - - - - - (50,535) (284,566) (1,001) (234,031) - (1,001) (1,001) - (50,535) (285,567) (234,031) (14,993) - - - - 481 - 481 8,223 (1,615) 6,608 59 232,005 127,527 (4,511) (14,993) 53,515 200,167 (208,428) - 7,102 7,102 (11,554) (60,646) (49,092) - 7,102 - (11,554) (53,544) - - - 1 - 1 - - - 6,032 (1,991) - 4,041 - - - - - - - (49,092) (2,939) - - - - - - 60 236,046 127,527 2,591 (2,939) (260,459) The notes on pages 157 to 200 are an integral part of these consolidated financial statements. 273 - (6,406) (6,133) 35,828 3,367 (1,991) (6,406) (5,030) 141,593 GeoPark 155 Consolidated Statement of Cash Flow Amounts in US$ ‘000 Note 2016 2015 2014 Cash flows from operating activities (Loss) Profit for the year Adjustments for: Income tax expense (benefit) Depreciation Allowance for doubtful accounts Loss on disposal of property, plant and equipment Impairment loss (reversed) recognised for non-financial assets Write-off of unsuccessful efforts Accrual of borrowing’s interests Amortisation of other long-term liabilities Unwinding of long-term liabilities Accrual of share-based payment Foreign exchange (gain) loss Unrealized loss on commodity risk management contracts 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 Cash flows used in investing activities – net Cash flows from financing activities Proceeds from borrowings Proceeds from cash calls from related parties Proceeds from transaction with non-controlling interest Proceeds from issuance of shares Repurchase of shares Principal paid Interest paid Dividends distribution to non-controlling interest Principal paid to related parties Cash flows (used in) / from financing activities - net 16 13-23 19-35 19 27 27 36 5 (60,646) (284,566) 15,930 11,804 75,774 - 14 (5,664) 31,366 27,940 (2,924) 2,693 3,367 (17,054) 105,557 - 2,000 149,574 30,084 28,460 (703) 2,575 8,223 5,195 100,528 741 590 9,430 30,367 25,754 (468) 1,972 8,373 (13,872) 33,474 23,097 3,068 (1,956) 11,920 82,884 - (7,625) (24,104) 25,895 - (1,306) 10,543 230,746 (39,306) (48,842) (238,047) - - - - (114,967) 8,973 (39,306) (48,842) (344,041) 186 5,210 - - (1,991) (22,645) (25,490) (6,406) - 7,036 2,400 - - (1,615) (89) (25,754) - - 67,633 16,563 35 90,862 (388) (17,087) (24,558) - (8,344) (51,136) (18,022) 124,716 Net (decrease) increase in cash and cash equivalents (7,558) (40,969) 11,421 Cash and cash equivalents at 1 January Currency translation differences Cash and cash equivalents at the end of the year Ending Cash and cash equivalents are specified as follows: Cash in bank Cash in hand Cash and cash equivalents The notes on pages 157 to 200 are an integral part of these consolidated financial statements. 156 GeoPark 20F 82,730 (1,609) 73,563 127,672 (3,973) 82,730 121,105 (4,854) 127,672 73,551 82,720 127,560 12 10 112 73,563 82,730 127,672 Notes to the Consolidated Financial Statements Note 1 General Information Annual Improvements to IFRSs – 2010-2012 Cycle and 2012 – 2014 Cycle Disclosure Initiative - Amendments to IAS 1 GeoPark Limited (the Company) is a company incorporated under the law of Bermuda. The Registered Office address is Cumberland House, 9th Floor, 1 Investment entities: Applying the consolidation exception – Amendments to Victoria Street, Hamilton HM11, Bermuda. IFRS 10, IFRS 12 and IAS 28 The principal activity of the Company and its subsidiaries (“the Group”) are The adoption of these amendments did not have any impact on the current exploration, development and production for oil and gas reserves in Chile, period or any prior period and is not likely to affect future periods. Colombia, Brazil, Peru and Argentina. These consolidated financial statements were authorised for issue by the financial year beginning 1 January 2016 and not early adopted. New standards, amendments and interpretations issued but not effective for the Board of Directors on 6 March 2017. Note 2 IFRS 2 “Share based payments”: amended in June 2016 to clarify the measurement basis for cash-settled share-based payments and the accounting for modifications that change an award from cash-settled to Summary of significant accounting policies equity-settled. It also introduces an exception to IFRS 2 principles by requiring an award to be treated as if it was wholly equity-settled, where an employer is The principal accounting policies applied in the preparation of these obliged to withhold an amount for the employee’s tax obligation associated consolidated financial statements are set out below. These policies have been with a share-based payment and pay that amount to the tax authority. It consistently applied to the years presented, unless otherwise stated. is effective for annual periods beginning on or after January 1, 2018. The Company is currently analyzing the impact of its application on the Company’s 2.1 Basis of preparation operating results or financial position. The consolidated financial statements of GeoPark Limited have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as IFRS 9 Financial Instruments and associated amendments to various other issued by the International Accounting Standards Board (“IASB”). standards: IFRS 9 replaces the multiple classification and measurement models in IAS 39. Classification of debt assets will be driven by the entity’s The consolidated financial statements are presented in thousands (US$’000) business model for managing the financial assets and the contractual cash of United States Dollars and all values are rounded to the nearest thousand flow characteristics of the financial assets. A debt instrument is measured (US$’000), except in the footnotes and where otherwise indicated. at amortised cost if: a) the objective of the business model is to hold the The consolidated financial statements have been prepared on a historical cost basis. contractual cash flows under the instrument solely represent payments financial asset for the collection of the contractual cash flows, and b) the of principal and interest. All other debt and equity instruments, including The preparation of financial statements in conformity with IFRS requires the use investments in complex debt instruments and equity investments, must be of certain critical accounting estimates. It also requires management to exercise recognised at fair value. its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where All fair value movements on financial assets are taken through the statement assumptions and estimates are significant to the consolidated financial statements of profit or loss, except for equity investments that are not held for trading, are disclosed in this note under the title “Accounting estimates and assumptions”. which may be recorded in the statement of profit or loss or in reserves (without subsequent recycling to profit or loss). All the information included in these consolidated financial statements corresponds to the Group, except where otherwise indicated. For financial liabilities that are measured under the fair value option entities will 2.1.1 Changes in accounting policy and disclosure their own credit risk in other comprehensive income rather than profit or loss. need to recognise the part of the fair value change that is due to changes in New and amended standards adopted by the Group The new hedge accounting rules (released in December 2013) align hedge The following standards have been adopted by the Group for the first time for general rule, it will be easier to apply hedge accounting going forward. the financial year beginning on or after 1 January 2016: The new standard also introduces expanded disclosure requirements and accounting more closely with common risk management practices. As a GeoPark 157 changes in presentation. In July 2014, the IASB made further changes Recognition of Deferred Tax Assets for Unrealised Losses – Amendments to to the classification and measurement rules and also introduced a new IAS 12: made in January 2016 clarify the accounting for deferred tax where an impairment model. asset is measured at fair value and that fair value is below the asset’s tax base. IFRS 15 Revenue from contracts with customers and associated amendments Disclosure Initiative – Amendments to IAS 7: Going forward, entities will be to various other standards: The IASB has issued a new standard for the required to explain changes in their liabilities arising from financing activities. recognition of revenue. This will replace IAS 18 which covers contracts for This includes changes arising from cash flows and non-cash changes. Changes goods and services and IAS 11 which covers construction contracts. The new in financial assets must be included in this disclosure if the cash flows were, or standard is based on the principle that revenue is recognised when control of will be, included in cash flows from financing activities. Entities may include a good or service transfers to a customer so the notion of control replaces the changes in other items as part of this disclosure. However, in this case the existing notion of risks and rewards. changes in the other items must be disclosed separately from the changes in liabilities arising from financing activities. The information may be disclosed These accounting changes may have flow-on effects on the entity’s business in tabular format as a reconciliation from opening and closing balances, but a practices regarding systems, processes and controls, compensation and bonus specific format is not mandated. plans, contracts, tax planning and investor communications. Entities will have a choice of full retrospective application, or prospective application with Sale or contribution of assets between an investor and its associate or joint additional disclosures. venture – Amendments to IFRS 10 and IAS 28: The amendments clarify the accounting treatment for sales or contribution of assets between an investor Management is evaluating the potential impact of the new rules on the and its associates or joint ventures. Group’s financial statements. Improvements to IFRSs – 2014-2016 Cycle: amendments issued in December IFRS 16 Leases: will affect primarily the accounting by lessees and will result in 2016 that are effective for periods beginning on or after January 1, 2018. The the recognition of almost all leases on balance sheet. The standard removes Company estimates that these amendments will not have an impact on the the current distinction between operating and financing leases and requires Company’s operating results or financial position. recognition of an asset (the right to use the leased item) and a financial liability to pay rentals for virtually all lease contracts. An optional exemption There are no other standards that are not yet effective and that would be exists for short-term and low-value leases. The accounting by lessors will expected to have a material impact on the entity in the current or future not significantly change. Some differences may arise as a result of the new reporting periods and on foreseeable future transactions. guidance on the definition of a lease. 2.2 Going concern The Group has not yet determined to what extent its commitments will result The Directors regularly monitor the Group’s cash position and liquidity risks in the recognition of an asset and a liability for future payments and how throughout the year to ensure that it has sufficient funds to meet forecast this will affect the Group’s profit and classification of cash flows. Some of the operational and investment funding requirements. Sensitivities are run to commitments may be covered by the exception for short-term and low-value reflect latest expectations of expenditures, oil and gas prices and other factors leases and some commitments may relate to arrangements that will not to enable the Group to manage the risk of any funding short falls and/or qualify as leases under IFRS 16. At this stage, the Group does not intend to potential debt covenant breaches. adopt the standard before its effective date. Considering macroeconomic environment conditions, the performance of the IFRIC 22 “Foreign Currency Transactions and Advance Consideration”: operations, Group’s cash position, the offtake and the prepayment agreement issued in December 2016. The interpretation addresses how to determine signed with Trafigura (see Note 3) and over 80% of its total indebtedness the date of the transaction for the purpose of determining the exchange maturing in 2020, the Directors have formed a judgement, at the time of rate to use on initial recognition of the related asset, expense or income approving the financial statements, that there is a reasonable expectation related to an entity that has received or paid an advance consideration that the Group has adequate resources to meet all its obligations for the in a foreign currency. The date of the transaction is the date on which an foreseeable future.  For this reason, the Directors have continued to adopt the entity initially recognises the non-monetary asset or non-monetary liability going concern basis in preparing the consolidated financial statements. arising from the payment or receipt of advance consideration. It is effective for annual periods beginning on January 1, 2018. The Company is currently 2.3 Consolidation analysing the impact of its application on the Company’s operating results Subsidiaries are all entities (including structured entities) over which the group or financial position. has control. The Group controls an entity when the Group is exposed to, or 158 GeoPark 20F has rights to, variable returns from its involvement with the entity and has the the entity operates (the “functional currency”). The functional currency of ability to affect those returns through its power over the entity. Subsidiaries Group companies incorporated in Chile, Colombia, Peru and Argentina is the are fully consolidated from the date on which control is transferred to the US Dollar, meanwhile for the Group Brazilian company the functional currency Group. They are deconsolidated from the date that control ceases. is the local currency, which is the Brazilian Real. The Group applies the acquisition method to account for business b) Transactions and balances combinations. The consideration transferred for the acquisition of a subsidiary Foreign currency transactions are translated into the functional currency is the fair values of the assets transferred, the liabilities incurred to the using the exchange rates prevailing at the dates of the transactions. Foreign former owners of the acquiree and the equity interests issued by the Group. exchange gains and losses resulting from the settlement of such transactions The consideration transferred includes the fair value of any asset or liability and from the translation at period end exchange rates of monetary assets resulting from a contingent consideration arrangement. Identifiable assets and liabilities denominated in foreign currencies are recognised in the acquired and liabilities and contingent liabilities assumed in a business Consolidated Statement of Income. combination are measured initially at their fair values at the acquisition date. Acquisition-related costs are expensed as incurred. 2.6 Joint arrangements The excess of the consideration transferred the amount of any non-controlling joint operations or joint ventures depending on the contractual rights and Under IFRS 11 investments in joint arrangements are classified as either interest in the acquiree and the acquisition-date fair value of any previous obligations each investor. equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If the total of consideration transferred, non- The Company has assessed the nature of its joint arrangements and controlling interest recognized and previously held interest measured is less determined them to be joint operations. The company combines its share in than the fair value of the net assets of the subsidiary acquired in the case of a the joint operations individual assets, liabilities, results and cash flows on a bargain purchase, the difference is recognized directly in the income statement. line-by-line basis with similar items in its financial statements. Intercompany transactions, balances and unrealised gains on transactions 2.7 Revenue recognition between the Group and its subsidiaries are eliminated. Unrealised losses are Revenue from the sale of crude oil and gas is recognised in the also eliminated unless the transaction provides evidence of an impairment Statement of Income when risk transferred to the purchaser, and if of the asset transferred. Amounts reported in the financial statements of the revenue can be measured reliably and is expected to be received. subsidiaries have been adjusted where necessary to ensure consistency with Revenue is shown net of VAT, discounts related to the sale and overriding the accounting policies adopted by the Group. royalties due to the ex-owners of oil and gas properties where the royalty arrangements represent a retained working interest in the 2.4 Segment reporting property. See Note 31 (a). Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating 2.8 Production and operating costs decision-maker, who is responsible for allocating resources and assessing Production costs include wages and salaries incurred to achieve the revenue performance of the operating segments, has been identified as the Executive for the year. Direct and indirect costs of raw materials and consumables, Committee. This committee is integrated by the CEO, COO, CFO and managers rentals, leasing and royalties are also included within this account. in charge of the Geoscience, Operations, Corporate Governance, Finance and People departments. This committee reviews the Group’s internal reporting 2.9 Financial costs in order to assess performance and allocate resources. Management has Financial costs include interest expenses, bank charges and the amortisation determined the operating segments based on these reports. of financial assets and liabilities. The Company has capitalised borrowing 2.5 Foreign currency translation a) Functional and presentation currency cost for wells and facilities that were initiated after 1 January 2009. Amounts capitalised during the year totalled US$ 254,950 (US$ 637,390 in 2015 and US$ 3,112,317 in 2014). The consolidated financial statements are presented in US Dollars, which is the 2.10 Property, plant and equipment Group’s presentation currency. Property, plant and equipment are stated at historical cost less depreciation and impairment charge, if applicable. Historical cost includes expenditure that Items included in the financial statements of each of the Group’s entities are is directly attributable to the acquisition of the items; including provisions for measured using the currency of the primary economic environment in which asset retirement obligation. GeoPark 159 Oil and gas exploration and production activities are accounted for in Depreciation is allocated in the Consolidated Statement of Income as a accordance with the successful efforts method on a field by field basis. The separate line to better follow up the performance of the business. Group accounts for exploration and evaluation activities in accordance with IFRS 6, Exploration for and Evaluation of Mineral Resources, capitalizing An asset’s carrying amount is written down immediately to its recoverable exploration and evaluation costs until such time as the economic viability amount if the asset’s carrying amount is greater than its estimated recoverable of producing the underlying resources is determined. Costs incurred amount (see Impairment of non-financial assets in Note 2.12). prior to obtaining legal rights to explore are expensed immediately to the Consolidated Statement of Income. 2.11 Provisions and other long-term liabilities Exploration and evaluation costs may include: license acquisition, geological obligations and legal claims are recognised when the Group has a present and geophysical studies (i.e.: seismic), direct labour costs and drilling costs of legal or constructive obligation as a result of past events; it is probable that exploratory wells. No depreciation and/or amortisation are charged during an outflow of resources will be required to settle the obligation; and the the exploration and evaluation phase. Upon completion of the evaluation amount has been reliably estimated. Restructuring provisions comprise lease phase, the prospects are either transferred to oil and gas properties or charged termination penalties and employee termination payments. Provisions for asset retirement obligations, deferred income, restructuring to expense (exploration costs) in the period in which the determination is made depending whether they have found reserves or not. If not developed, Provisions are measured at the present value of the expenditures expected to exploration and evaluation assets are written off after three years, unless it can be required to settle the obligation using a pre-tax rate that reflects current be clearly demonstrated that the carrying value of the investment is recoverable. market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised A charge of US$ 31,366,000 has been recognised in the Consolidated as financial expense. Statement of Income within Write-off of unsuccessful efforts (US$ 30,084,000 in 2015 and US$ 30,367,000 in 2014). See Note 19. 2.11.1 Asset Retirement Obligation All field development costs are considered construction in progress until they in the period in which the wells are drilled. When the liability is initially are finished and capitalised within oil and gas properties, and are subject recorded, the Group capitalises the cost by increasing the carrying amount of to depreciation once complete. Such costs may include the acquisition and the related long-lived asset. Over time, the liability is accreted to its present installation of production facilities, development drilling costs (including dry value at each reporting period, and the capitalized cost is depreciated over holes, service wells and seismic surveys for development purposes), project- the estimated useful life of the related asset. According to interpretations related engineering and the acquisition costs of rights and concessions related and application of current legislation and on the basis of the changes in The Group records the fair value of the liability for asset retirement obligations to proved properties. technology and the variations in the costs of restoration necessary to protect the environment, the Group has considered it appropriate to periodically Workovers of wells made to develop reserves and/or increase production are re-evaluate future costs of well-capping. The effects of this recalculation are capitalized as development costs. Maintenance costs are charged to income included in the financial statements in the period in which this recalculation when incurred. is determined and reflected as an adjustment to the provision and the corresponding property, plant and equipment asset. Capitalised costs of proved oil and gas properties and production facilities and machinery are depreciated on a licensed area by the licensed area basis, using 2.11.2 Deferred Income the unit of production method, based on commercial proved and probable Relates to contributions received in cash from the Group’s clients to improve reserves. The calculation of the “unit of production” depreciation takes into the project economics of gas wells. The amounts collected are reflected as account estimated future finding and development costs and is based on a deferred income in the balance sheet and recognised in the Consolidated current year end unescalated price levels. Changes in reserves and cost Statement of Income over the productive life of the associated wells. The estimates are recognised prospectively. Reserves are converted to equivalent depreciation of the gas wells that generated the deferred income is charged to units on the basis of approximate relative energy content. the Consolidated Statement of Income simultaneously with the amortisation Depreciation of the remaining property, plant and equipment assets (i.e. income related to the take or pay provision associated to gas sales in Brazil, furniture and vehicles) not directly associated with oil and gas activities has that Petrobras will make up in the future. been calculated by means of the straight line method by applying such annual rates as required to write-off their value at the end of their estimated useful 2.12 Impairment of non-financial assets lives. The useful lives range between 3 years and 10 years. Assets that are not subject to depreciation and/or amortisation (i.e.: of the deferred income. The addition in 2016 corresponds to the deferred 160 GeoPark 20F exploration and evaluation assets) are tested annually for impairment. The current income tax charge is calculated on the basis of the tax laws Assets that are subject to depreciation and/or amortisation are reviewed for enacted or substantially enacted at the balance sheet date in the countries impairment whenever events or changes in circumstances indicate that the where the Company’s subsidiaries operate and generate taxable income. carrying amount may not be recoverable. The computation of the income tax expense involves the interpretation of applicable tax laws and regulations in many jurisdictions. The resolution of An impairment loss is recognised for the amount by which the asset’s carrying tax positions taken by the Group, through negotiations with relevant tax amount exceeds its recoverable amount. The recoverable amount is the higher authorities or through litigation, can take several years to complete and in of an asset’s fair value less costs to sell and value in use. For the purposes some cases it is difficult to predict the ultimate outcome. of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units), generally Deferred income tax is recognised, using the liability method, on temporary a licensed area. Non-financial assets other than goodwill that suffered differences arising between the tax bases of assets and liabilities and their impairment are reviewed for possible reversal of the impairment at each carrying amounts in the consolidated financial statements. Deferred income reporting date. 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 No asset should be kept as an exploration and evaluation asset for a period when the related deferred income tax asset is realised or the deferred income of more than three years, except if it can be clearly demonstrated that the tax liability is settled. carrying value of the investment will be recoverable. During 2016 impairment loss was reversed for an amount of US$ 5,664,000 jurisdictions that are available to offset against future taxable profit. However, (impairment loss recognised for US$ 149,574,000 in 2015 and US$ 9,430,000 in deferred tax assets are recognized only to the extent that it is probable that 2014). See Note 35. The write-offs are detailed in Note 19. taxable profit will be available against which the unused tax losses can be In addition, the Group has tax-loss carry-forwards in certain taxing 2.13 Lease contracts utilized. Management judgment is exercised in assessing whether this is the case. To the extent that actual outcomes differ from management’s estimates, All current lease contracts are considered to be operating leases on the basis taxation charges or credits may arise in future periods. that the lessor retains substantially all the risks and rewards related to the ownership of the leased asset. Payments related to operating leases and other Deferred income tax liabilities are provided on taxable temporary differences rental agreements are recognised in the Consolidated Income Statement arising from investments in subsidiaries and joint arrangements, except on a straight line basis over the term of the contract. The Group’s total for deferred income tax liability where the timing of the reversal of the commitment relating to operating leases and rental agreements is disclosed temporary difference is controlled by the Group and it is probable that the in Note 31. temporary difference will not reverse in the foreseeable future. The Group is able to control the timing of dividends from its subsidiaries and hence does Leases in which substantially all of the risks and rewards of ownership are not expect taxable profit. Hence deferred tax is recognized in respect of the transferred to the lessee are classified as finance leases. Under a finance lease, retained earnings of overseas subsidiaries only if at the date of the statements the Company as lessor has to recognize an amount receivable equal to the of financial position, dividends have been accrued as receivable or a binding aggregate of the minimum lease payments plus any unguaranteed residual agreement to distribute past earnings in future has been entered into by value accruing to the lessor, discounted at the interest rate implicit in the lease. the subsidiary. As mentioned above the Company does not expect that the 2.14 Inventories temporary differences will revert in the foreseeable future. In the event that these differences revert in total (e.g. dividends are declared and paid), the Inventories comprise crude oil and materials. deferred tax liability which the Company would have to recognize amounts to approximately US$ 11,200,000. Crude oil is measured at the lower of cost and net realisable value. Materials are measured at the lower of cost and recoverable amount. The cost of Deferred tax balances are provided in full, with no discounting. materials and consumables is calculated at acquisition price with the addition of transportation and similar costs. Cost is determined using the first-in, first- 2.16 Financial assets out (FIFO) method. 2.15 Current and deferred income tax Financial assets are divided into the following categories: loans and receivables; financial assets at fair value through the profit or loss; available- for-sale financial assets; and held-to-maturity investments. Financial assets The tax expense for the year comprises current and deferred tax. Tax is are assigned to the different categories by management on initial recognition, recognised in the Consolidated Statement of Income. depending on the purpose for which the investments were acquired. The GeoPark 161 designation of financial assets is re-evaluated at every reporting date at which 2.20 Trade and other payables a choice of classification or accounting treatment is available. Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of the business from suppliers. Accounts All financial assets are recognised when the Group becomes a party to the payable are classified as current liabilities if payment is due within one year or contractual provisions of the instrument. All financial assets are initially less (or in the normal operating cycle of the business if longer). If not, they are recognised at fair value, plus transaction costs. presented as non-current liabilities. Derecognition of financial assets occurs when the rights to receive cash flows Trade payables are recognised initially at fair value and subsequently from the investments expire or are transferred and substantially all of the measured at amortised cost using the effective interest method. risks and rewards of ownership have been transferred. An assessment for impairment is undertaken at each balance sheet date. 2.21 Derivatives Interest and other cash flows resulting from holding financial assets are position as assets or liabilities and initially and subsequently measured at fair value recognised in the Consolidated Income Statement when receivable, regardless through profit and loss. They are presented as current assets or liabilities if they are of how the related carrying amount of financial assets is measured. expected to be settled within 12 months after the end of the reporting period. Derivatives financial instruments are recognised in the statement of financial Loans and receivables are non-derivative financial assets with fixed or The market-to-market fair value of the Company’s outstanding derivative determinable payments that are not quoted in an active market. They are instruments is based on independently provided market rates and determined included in current assets, except for maturities greater than twelve months using standard valuation techniques, including the impact of counterparty after the balance sheet date. These are classified as non-current assets. The credit risk and are within level 2 of the fair value hierarchy. Gains and losses Group’s loans and receivables comprise trade receivables, prepayments arising from changes in fair value are recognised in the statement of income in and other receivables and cash at bank and in hand in the balance sheet. Commodity risk management contracts. They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the receivables. Loans and receivables are For more information about derivatives please refer to Note 36. subsequently measured at amortised cost using the effective interest method, less provision for impairment. Any change in their value through impairment 2.22 Borrowings or reversal of impairment is recognised in the Consolidated Statement of Borrowings are obligations to pay cash and are recognised when the Group Income. All of the Group’s financial assets are classified as loan and receivables. becomes a party to the contractual provisions of the instrument. 2.17 Other financial assets Borrowings are recognised initially at fair value, net of transaction costs Non current other financial assets include contributions made for incurred. Borrowings are subsequently stated at amortised cost; any difference environmental obligations according to a Colombian and Brazilian between the proceeds (net of transaction costs) and the redemption value is government request and are restricted for those purposes. Current financial recognised in the Consolidated Statement of Income over the period of the assets correspond to short term investments with original maturities up to borrowings using the effective interest method. twelve months and over three months. Direct issue costs are charged to the Consolidated Statement of Income on an 2.18 Impairment of financial assets accruals basis using the effective interest method. Provision against trade receivables is made when objective evidence is received that the Group will not be able to collect all amounts due to it in 2.23 Share capital accordance with the original terms of those receivables. The amount of the Equity comprises the following: write-down is determined as the difference between the asset’s carrying • “Share capital” representing the nominal value of equity shares. amount and the present value of estimated future cash flows. • “Share premium” representing the excess over nominal value of the fair value 2.19 Cash and cash equivalents • “Other reserve” representing: Cash and cash equivalents includes cash in hand, deposits held at call with – the equity element attributable to shares granted according to IFRS 2 but banks, other short-term highly liquid investments with original maturities not issued at year end or, of three months or less, and bank overdrafts. Bank overdrafts, if any, are – the difference between the proceeds from the transaction with non- shown within borrowings in the current liabilities section of the Consolidated controlling interests received against the book value of the shares acquired Statement of Financial Position. in the Chilean and Colombian subsidiaries. of consideration received for equity shares, net of expenses of the share issue. 162 GeoPark 20F • “Translation reserve” representing the differences arising from translation of The policy for managing these risks is set by the Board. Certain risks are investments in overseas subsidiaries. managed centrally, while others are managed locally following guidelines • “(Accumulated losses) Retained earnings” representing accumulated communicated from the corporate office. The policy for each of the above risks earnings and losses. is described in more detail below. 2.24 Share-based payment Currency risk The Group operates a number of equity-settled and cash-settled share-based In Argentina, Colombia, Chile and Peru the functional currency is the US Dollar. compensation plans comprising share awards payments and stock options The fluctuation of the local currencies of these countries against the US Dollar plans to certain employees and other third party contractors. Share-based does not impact the loans, costs and revenues held in US Dollars; but it does payment transactions are measured in accordance with IFRS 2. impact the balances denominated in local currencies. Such is the case of the Fair value of the stock option plan for employee or contractors services prepaid taxes. received in exchange for the grant of the options is recognised as an expense. In Chile, Colombia and Argentina subsidiaries most of the balances are The total amount to be expensed over the vesting period is determined denominated in US Dollars, and since it is the functional currency of the by reference to the fair value of the options granted calculated using the subsidiaries, there is no exposure to currency fluctuation except from Geometric Brownian Motion method. receivables or payables originated in local currency mainly corresponding Non-market vesting conditions are included in assumptions about the number to VAT. of options that are expected to vest. At each balance sheet date, the entity The Group minimises the local currency positions in Argentina, Colombia and revises its estimates of the number of options that are expected to vest. Chile by seeking to equilibrate local and foreign currency assets and liabilities. It recognises the impact of the revision to original estimates, if any, in the However, tax receivables (VAT) seldom match with local currency liabilities. Consolidated Statement of Income, with a corresponding adjustment to equity. Therefore the Group maintains a net exposure to them. The fair value of the share awards payments is determined at the grant date Most of the Group’s assets held in those countries are associated with oil and by reference of the market value of the shares and recognised as an expense gas productive assets. Those assets, even in the local markets, are generally over the vesting period. When the options are exercised, the Company issues settled in US Dollar equivalents. new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when During 2016, the Argentine Peso devaluated by 22% (52% and 31% in the options are exercised. 2015 and 2014) against the US Dollar, the Chilean Peso revaluated by 6% (devaluated by 16% in 2015 and 2014) and the Colombian Peso revaluated by For cash-settled share-based payment transactions, the Company measures 5% (devaluated by 32% and 24% in 2015 and 2014). the services acquired for amounts that are based on the price of the Company’s shares. The fair value of the liability incurred is measured using If the Argentine Peso, the Chilean Peso and the Colombian Peso had Geometric Brownian Motion method. Until the liability is settled, the Company each devaluated an additional 10% against the US dollar, with all other is required to remeasure the fair value of the liability at each reporting date variables held constant, post-tax loss for the year would have been higher and at the date of settlement, with any changes in value recognized in profit by US$ 2,683,400 (US$ 1,003,300 in 2015 and post – tax profit lower by US$ or loss for the period. 621,400 in 2014). Note 3 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 Financial Instruments-risk management impact the loans, costs and revenues held in Brazilian Real; but it does The Group is exposed through its operations to the following financial risks: impact the balances denominated in US Dollars. Such is the case of the Itaú • Currency risk • Price risk • Credit risk – concentration • Funding and liquidity risk • Interest rate risk • Capital risk management and intercompany loans. Most of the balances are denominated in Brazilian Real, and since it is the functional currency of the Brazilian subsidiary, there is no exposure to currency fluctuation except from cash at bank held in US Dollars and for the intercompany loan and Itaú loan described in Note 26. The exchange gain generated by the Brazilian subsidiary during 2016 amounted to US$ 14,542,000 (loss of US$ 35,605,000 in 2015 and loss of US$ 17,573,000 in 2014). GeoPark 163 During 2016, the Brazilian Real revaluated by 17% against the US Dollar Company considers these derivative contracts to be an effective manner (devaluated by 47% and 13% in 2015 and 2014, respectively). If the Brazilian of properly managing commodity price risk. The Company has also Real had devaluated 10% against the US dollar, with all other variables held obtained credit lines from related counterparties associated to these constant, post-tax loss for the year would have been higher by US$ 5,300,000 contracts which are available to minimize the Company’s cash exposure, (post – tax loss higher by US$ 7,400,000 in 2015 and post – tax profit lower by in case necessary (see Note 36). US$ 5,660,000 in 2014). Credit risk – concentration As of 31 December 2016, the balances denominated in the Peruvian local The Group’s credit risk relates mainly to accounts receivable where the currency (Peruvian Soles) are not material. credit risks correspond to the recognised values. There is not considered to be any significant risk in respect of the Group’s major customers and As currency rate changes between the US Dollar and the local currencies, the hedging counterparties. Group recognizes gains and losses in the Consolidated Statement of Income. Price risk In Colombia, during 2016, the Colombian subsidiary made 90% of the oil sales to Trafigura (one of the world’s leading independent commodity trading and The price realised for the oil produced by the Group is linked to WTI (West logistics houses), with Trafigura accounting for 59% of consolidated revenues Texas Intermediate) and Brent, US dollar denominated international for the same period. benchmarks. The market price of these commodities is subject to significant fluctuation and has historically fluctuated widely in response All the oil produced in Chile as well as the gas produced by TdF Blocks (10% of to relatively minor changes in the global supply and demand for oil and total revenue, 15% in 2015 and 28% in 2014) is sold to ENAP, the State owned natural gas, market uncertainty, economic conditions and a variety of oil and gas company. In Chile, most of gas production is sold to the local additional factors. subsidiary of the Methanex, a Canadian public company (9% of consolidated In Colombia, the price of oil is based on Vasconia, a marker broadly used in the Llanos basin, adjusted for certain marketing and quality discounts In Brazil, all the hydrocarbons from Manati Field are sold to Petrobras, the based on, among other things, API, viscosity, sulphur, delivery point and operator of the Manati Field and the State owned company. revenues, 7% in 2015 and 6% in 2014). water content. In Chile, the oil price is based on Brent minus certain marketing and quality concentration of the credit risk, the Directors do not consider there to be a discounts such as, inter alia, API quality and others. significant collection risk. The mentioned companies all have good credit standing and despite the The Company has signed a long-term Gas Supply Contract with Methanex in In 2016, the Group executed oil prices hedges via over-the-counter derivatives. Chile. The price of the gas sold under this contract is determined based on a Should oil prices drop, the Group could stand to collect from its counterparties formula that considers various international prices of methanol, including US under the derivative contracts. The Group’s hedging counterparties are Gulf methanol spot barge prices, methanol spot Rotterdam prices and spot leading financial institutions and trading companies, therefore the Directors prices in Asia. do not consider there to be a significant collection risk. In Brazil, prices for gas produced in the Manati Field are based on a long-term See disclosure in Notes 24 and 36. 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 Funding and Liquidity risk to the Brazilian General Market Price Index (Indice Geral de Preços do In the past, the Group was able to raise capital through different sources of Mercado), or IGPM. funding including equity, strategic partnerships and financial debt. If oil and methanol prices had fallen by 10% compared to actual prices during The Group is positioned at the end of 2016 with a cash balance of US$ the year, with all other variables held constant, post-tax loss for the year would 73,563,000 and over 80% of its total indebtedness maturing in 2020. In have been higher by US$ 23,655,000 (US$ 23,940,000 in 2015 and post tax addition, the Group has a large portfolio of attractive and largely discretional profit lower by US$ 29,186,000 in 2014). projects - both oil and gas - in multiple countries with over 24,000 boepd in production. This scale and positioning permit GeoPark to protect its financial During October 2016, it was considered appropriate to manage part condition and selectively allocate capital to the optimal projects subject to of the exposure to the volatile crude oil price using derivatives. The prevailing macroeconomic conditions. 164 GeoPark 20F Since 2015, and impacted by the low oil price environment, the Company’s At 31 December 2016, if 1% is added to interest rates on currency- Leverage Ratio and the Interest Coverage did not meet certain thresholds denominated borrowings with all other variables held constant, post-tax loss included in the 2020 Bond Indenture. This situation may limit the Company’s for the year would have been US$ 467,000 higher (post-tax loss higher by US$ capacity to incur additional indebtedness, other than permitted debt, as 507,000 in 2015 and post-tax profit lower by US$ 312,000 in 2014). specified in the indenture governing the Notes (Note 26). Capital risk management The most significant funding transactions executed in 2016 and 2015 include: The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for On December 2015, the Group announced the execution of an offtake and shareholders and benefits for other stakeholders and to maintain an optimal prepayment agreement with Trafigura, one of its customers. The prepayment capital structure to reduce the cost of capital. agreement provides GeoPark with access to up to US$ 100,000,000 in the form of prepaid future oil sales. Funds committed by Trafigura were available to GeoPark Consistent with others in the industry, the Group monitors capital on the basis upon request until September 2016 and are to be repaid by the Company of the gearing ratio. This ratio is calculated as net debt divided by total capital. through future oil deliveries over 2.5 years with a six-month grace period. Net debt is calculated as total borrowings (including ‘current and non-current On February 2017, the availability period under the prepayment agreement and in hand. Total capital is calculated as ‘equity’ as shown in the consolidated borrowings’ as shown in the consolidated balance sheet) less cash at bank with Trafigura was extended until 30 June 2017. This extension provides balance sheet plus net debt. GeoPark with available funds upon request from Trafigura and will repaid by the Company on a monthly basis through future oil deliveries over the period The Group’s strategy is to keep the gearing ratio within a 30% to 45% range, between January 2017 and December 2018. As of the date of these Financial in normal market conditions. Due to the market conditions prevailing during Statements, outstanding balances related to the prepayment agreement 2016 and 2015 the gearing ratio at year end is above such range. Measures amount to US$ 20,000,000. taken by the Company in this connection are described in Note 35. On March 2015, the Group reached an agreement with Itau to: (i) extend The gearing ratios at 31 December 2016 and 2015 were as follows:  the principal payments that were originally due in 2015 (amounting to approximately US$ 15,000,000), which were divided pro-rata during the Amounts in US$ ‘000 remaining principal instalments, starting in March 2016 and (ii) increase the Net Debt variable interest rate equal to the six-month LIBOR + 4.0%. Interest rate risk The Group’s interest rate risk arises from long-term borrowings issued at variable rates, which expose the Group to cash flow to interest rate risk. Total Equity Total Capital Gearing Ratio Note 4 2016 285,109 141,593 426,702 67% 2015 295,943 200,167 496,110 60% The Group does not face interest rate risk on its US$ 300,000,000 Notes which Accounting estimates and assumptions carry a fixed rate coupon of 7.50% per annum. As consequence, the accruals and Estimates and assumptions are used in preparing the financial statements. interest payment are no substantially affected to the market interest rate changes. Although these estimates are based on management’s best knowledge of At 31 December 2016, the outstanding long-term borrowing affected by and judgements are continually evaluated and are based on historical variable rates amounted to US$ 54,472,000, representing 15% of total experience and other factors, including expectations of future events that borrowings, which was composed by the loans from Itaú Bank and Banco de are believed to be reasonable under the circumstances. current events and actions, actual results may differ from them. Estimates Chile that have a floating interest rate based on LIBOR. The key estimates and assumptions used in these consolidated financial The Group analyses its interest rate exposure on a dynamic basis. Various statements are noted below: scenarios are simulated taking into consideration refinancing, renewal of existing positions, alternative financing and hedging. Based on these • Cash flow estimates for impairment assessments of non-financial scenarios, the Group calculates the impact on profit and loss of a defined assets require assumptions about two primary elements - future prices interest rate shift. For each simulation, the same interest rate shift is used for and reserves. Estimates of future prices require significant judgments all currencies. The scenarios are run only for liabilities that represent the major about highly uncertain future events. Historically, oil and gas prices interest-bearing positions. have exhibited significant volatility. The Group’s forecasts for oil and gas GeoPark 165 revenues are based on prices derived from future price forecasts amongst obligations are many years in the future. Technologies and costs are industry analysts and own assessments. Estimates of future cash flows are constantly changing as well as political, environmental, safety and public generally based on assumptions of long-term prices and operating and relations considerations. The Company has adopted the following criterion development costs. for recognising well plugging and abandonment related costs: The present value of future costs necessary for well plugging and abandonment is Given the significant assumptions required and the possibility that actual calculated for each area at the present value of the estimated future conditions will differ, management considers the assessment of impairment to expenditure. The liabilities recognised are based upon estimated future be a critical accounting estimate (see Note 35). abandonment costs, wells subject to abandonment, time to abandonment, and future inflation rates. The process of estimating reserves is complex. It requires significant judgements and decisions based on available geological, geophysical, • From time to time, the Company may be subject to various lawsuits, claims and engineering and economic data. The estimation of economically recoverable proceedings that arise in the normal course of business, including employment, oil and natural gas reserves and related future net cash flows was performed commercial, environmental, safety and health matters. For example, from time based on the Reserve Report as of 31 December 2016 prepared by DeGolyer to time, the Company receives notice of environmental, health and safety and MacNaughton, an international consultancy to the oil and gas industry violations. Based on what the Management of the Company currently knows, it based in Dallas. It incorporates many factors and assumptions including: is not expected any material impact on the financial statements. – expected reservoir characteristics based on geological, geophysical and engineering assessments; Note 5 – future production rates based on historical performance and expected Consolidated Statement of Cash Flow future operating and investment activities; – future oil and gas prices and quality differentials; The Consolidated Statement of Cash Flow shows the Group’s cash flows for the – assumed effects of regulation by governmental agencies; and year for operating, investing and financing activities and the change in cash – future development and operating costs. and cash equivalents during the year. Management believes these factors and assumptions are reasonable based Cash flows from operating activities are computed from the results for the year on the information available to them at the time of preparing the estimates. adjusted for non-cash operating items, changes in net working capital, and However, these estimates may change substantially as additional data from corporation tax. Tax paid is presented as a separate item under operating activities. ongoing development activities and production performance becomes available and as economic conditions impacting oil and gas prices and costs change. The following chart describes non-cash transactions related to the Consolidated Statement of Cash Flow: • The Group adopts the successful efforts method of accounting. The Management of the Company makes assessments and estimates regarding Amounts in US$ ‘000 whether an exploration asset should continue to be carried forward as an Increase in asset retirement obligation exploration and evaluation asset not yet determined or when insufficient Increase in provisions for other l information exists for this type of cost to remain as an asset. In making this ong-term liabilities assessment the Management takes professional advice from qualified experts. Purchase of property, 2016 1,195 3,468 2015 985 2014 1,603 - 5,636 plant and equipment (4,657) 830 1,382 • Oil and gas assets held in property plant and equipment are mainly depreciated on a unit of production basis at a rate calculated by reference to Cash flows from investing activities include payments in connection with the proven and probable reserves and incorporating the estimated future cost purchase and sale of property, plant and equipment, cash flows relating to the of developing and extracting those reserves. Future development costs are purchase and sale of enterprises to third parties and cash flows from financial estimated using assumptions as to the numbers of wells required to produce lease transactions. those reserves, the cost of the wells and future production facilities. • Obligations related to the abandonment of wells once operations from borrowings and repayment of loans. are terminated may result in the recognition of significant obligations. Estimating the future abandonment costs is difficult and requires Cash and cash equivalents include bank overdraft and liquid funds with a term management to make estimates and judgments because most of the of less than three months. Cash flows from financing activities include changes in equity, and proceeds 166 GeoPark 20F Changes in working capital shown in the Consolidated Statement of Cash decision-maker, who is responsible for allocating resources and assessing Flow are disclosed as follows: Amounts in US$ ‘000 Increase in Prepaid taxes Decrease / (Increase) in Inventories 2016 (2,351) 466 (Increase) / Decrease in Trade receivables (4,811) (1,758) 20,000 (Increase) / Decrease in Prepayments and other receivables and Other assets Customer advance payments Increase / (Decrease) in Trade and other payables Note 6 Segment information performance of the operating segments, has been identified as the Executive Committee. This committee is integrated by the CEO, COO, CFO and managers 2015 2014 in charge of the Geoscience, Operations, Corporate Governance, Finance and (16,611) (3,310) People departments. This committee reviews the Group’s internal reporting 2,752 22,470 405 - (410) in order to assess performance and allocate resources. Management has 13,791 determined the operating segments based on these reports. The committee considers the business from a geographic perspective. 12,569 - The Executive Committee assesses the performance of the operating segments based on a measure of Adjusted EBITDA. Adjusted EBITDA 374 (33,120) (12,097) is defined as profit for the period before net finance cost, income tax, 11,920 (24,104) 10,543 depreciation, amortization, certain non-cash items such as impairments and write-offs of unsuccessful efforts, accrual of share-based payment, unrealized result on commodity risk management contracts and other non recurring events. Operating Netback is equivalent to Adjusted EBITDA before cash expenses included in Administrative, Geological and Geophysical and Other operating expenses. Other information provided, except as noted Operating segments are reported in a manner consistent with the internal below, to the Executive Committee is measured in a manner consistent with reporting provided to the chief operating decision-maker. The chief operating that in the financial statements. Amounts in US$ ‘000 2016 Revenue Sale of crude oil Sale of gas Realized gain on commodity risk management contracts Production and operating costs Royalties Transportation costs Share-based payment Other costs Operating (loss) / profit Adjusted EBITDA Depreciation Reversal of impairment losses Write-off Total assets Employees (average) Employees at year end Chile Brazil Colombia Peru Argentina Corporate Total 36,723 18,774 17,949 - (22,169) (1,495) (1,170) (138) (19,366) (44,969) 5,159 29,719 126,228 688 125,731 29,031 - (8,459) (2,721) - (71) (5,667) (645) 17,487 497 514 (36,607) (7,281) (1,111) (413) (27,802) 31,463 66,921 - - - - - - - - - - - - - - - - - - - - - - - - - - - (3,147) (2,607) 370 1,848 (11,685) (10,487) 192,670 145,193 47,477 514 (67,235) (11,497) (2,281) (622) (52,835) (28,613) 78,321 (31,355) (12,974) (31,148) (130) (150) (17) (75,774) - (19,389) 317,969 102 102 - (4,583) 99,904 5,664 (7,394) 182,784 - - - - - - 5,020 6,071 28,792 5,664 (31,366) 640,540 10 10 138 146 11 10 80 77 - - 341 345 GeoPark 167 Amounts in US$ ‘000 2015 Revenue Sale of crude oil Sale of gas Production costs Royalties Transportation costs Share-based payment Other costs Operating (loss) / profit Adjusted EBITDA Depreciation Impairment loss Write-off Total assets Employees (average) Employees at year end Amounts in US$ ‘000 2014 Revenue Sale of crude oil Sale of gas Production costs Royalties Transportation costs Share-based payment Other costs Operating (loss) / profit Adjusted EBITDA Depreciation Impairment loss Write-off Total assets Employees (average) Employees at year end Chile Brazil Colombia Peru Argentina Corporate Total 32,388 131,897 955 131,897 44,808 29,180 15,628 (28,704) (1,973) (2,441) (132) (24,158) (180,264) (183) 31,433 (8,056) (2,998) - - (5,058) 6,639 20,460 (39,227) (13,568) (104,515) (25,751) 381,143 - - 114,974 - (48,534) (8,150) (2,068) (234) (38,082) (37,227) 66,736 (52,434) (45,059) (4,333) 153,071 - - - - - - - - (6,719) (6,520) 597 597 - (1,448) (34) (2) (197) (1,215) (2,350) (684) - - - - - - - - 209,690 162,629 47,061 (86,742) (13,155) (4,511) (563) (68,513) (12,570) (232,491) (6,022) 73,787 (129) (199) - - - - - - - 4,287 3,181 47,143 (105,557) (149,574) (30,084) 703,799 153 106 11 12 130 133 16 11 93 90 - - 403 352 Chile Brazil Colombia Peru Argentina Corporate Total 145,720 118,203 27,517 (41,768) (6,777) (6,784) (763) (27,444) 11,733 76,420 35,621 246,085 1,541 246,054 34,080 (8,148) (2,794) - - (5,354) 10,658 22,637 31 (80,953) (12,354) (4,663) (423) (63,513) 67,212 130,209 (37,077) (11,613) (51,584) - (28,772) 541,481 208 197 - - (9,430) (1,564) 151,770 263,070 4,813 10 12 121 133 4 14 - - - - - - - - (2,419) (2,425) - - - 1,308 1,304 4 (550) (241) (87) (433) 211 - - - - - - - - (4,321) (11,019) 428,734 367,102 61,632 (131,419) (22,166) (11,534) (1,619) (96,100) 71,844 (816) (5,948) 220,077 (229) - (31) 3,839 100 100 (25) (100,528) - - (9,430) (30,367) 74,143 1,039,116 - - 443 456 Approximately 20% of capital expenditure was incurred by Chile (22% in 2015 and 66% in 2014), 67% was incurred by Colombia (66% in 2015 and 29% in 2014), 9% was incurred by Brazil (12% in 2015, 5% in 2014) and 4% was incurred by Argentina (nil in 2015 and 2014). The capital expenditure referred does not include total consideration for M&A activities. A reconciliation of total Operating netback to total (loss) profit before income tax is provided as follows: 168 GeoPark 20F A reconciliation of total Operating netback to total (loss) profit before income Note 8 tax is provided as follows: Amounts in US$ ‘000 Operating netback Administrative expenses Geological and geophysical expenses Adjusted EBITDA Production and operating costs 2016 2015 2014 Amounts in US$ ‘000 122,147 118,027 274,509 Well and facilities maintenance (32,323) (11,503) (30,590) (13,650) (40,340) Staff costs (Note 10) (14,092) Share-based payment (Notes 10 and 29) Royalties for reportable segments 78,321 73,787 220,077 Consumables Unrealized loss on commodity risk management contracts Depreciation (a) Share-based payment Impairment and write-off of unsuccessful efforts Others (b) Operating (loss) profit Financial costs Foreign exchange profit (loss) Transportation costs (3,068) - - Equipment rental (75,774) (105,557) (100,528) Safety and Insurance costs (3,367) (8,223) (8,373) Gas plant costs Field camp (25,702) (179,658) (39,797) Non operated blocks costs 977 (12,840) 465 Other costs (28,613) (34,101) 13,872 (232,491) (35,655) (33,474) 71,844 (27,622) (23,097) (Loss) Profit before tax (48,842) (301,620) 21,125 Note 9 Depreciation 2016 13,160 10,859 622 11,497 8,283 2,281 3,868 2,222 6,300 1,687 1,082 5,374 2015 19,974 17,999 563 13,155 8,591 4,511 3,517 3,239 2,878 2,645 2,127 7,543 2014 25,475 16,112 1,619 22,166 16,157 11,534 7,563 5,733 3,277 5,932 9,730 6,121 67,235 86,742 131,419 (a) Net of capitalised costs for oil stock included in Inventories. (b) In 2015 includes termination costs (see Note 35). Also includes internally capitalised costs. Amounts in US$ ‘000 Oil and gas properties Production facilities and machinery Furniture, equipment and vehicles Buildings and improvements Depreciation of property, plant and equipment (a) 2016 61,080 10,788 2,702 920 2015 84,849 15,467 2,850 874 2014 89,651 9,621 1,862 523 75,490 104,040 101,657 Note 7 Revenue Amounts in US$ ‘000 Sale of crude oil Sale of gas 2016 145,193 47,477 2015 162,629 47,061 2014 367,102 Related to: 61,632 Productive assets 192,670 209,690 428,734 Administrative assets Depreciation total (a) 71,868 3,622 100,316 3,724 99,360 2,297 75,490 104,040 101,657 (a) Depreciation without considering capitalised costs for oil stock included in Inventories. GeoPark 169 Note 10 Staff costs and Directors Remuneration Number of employees at year end Amounts in US$ ‘000 Wages and salaries Share-based payments (Note 29) Share-based payments – Cash awards Social security charges Director’s fees and allowance 2016 345 36,059 3,367 - 3,792 2,088 2015 352 40,574 8,223 - 6,197 1,238 2014 456 41,593 9,178 (805) 6,597 1,998 45,306 56,232 58,561 Recognised as follows: Production and operating costs Geological and geophysical expenses Administrative expenses 11,481 10,439 23,386 45,306 18,562 11,336 26,334 56,232 17,731 12,939 27,891 58,561 Board of Directors’ and key managers’ remuneration Salaries and fees Share-based payments Other benefits in kind Directors’ Remuneration 7,337 1,211 112 8,660 6,549 6,544 167 11,003 3,314 130 13,260 14,447 Executive Directors’ Executive Directors’ Non-Executive Director Fees Paid in Cash Equivalent Fees Bonus Directors’ Fees (in US$) Shares No. of Shares Total Remuneration Gerald O’Shaughnessy James F. Park Pedro Aylwin (a) Peter Ryalls(b) Juan Cristóbal Pavez(c) Carlos Gulisano(d) Robert Bedingfield(e) US$ 250,000 US$ 500,000 US$ 150,000 US$ 500,000 - - - - - - - - - - - - - US$ 120,000 US$ 110,000 US$ 110,000 US$ 100,000 - - - 32,403 32,403 32,403 32,403 US$ 400,000 US$ 1,000,000 - US$ 220,002 US$ 210,002 US$ 210,002 US$ 200,002 a Pedro Aylwin has a service contract that provides for him to act as Manager of Corporate Governance so he resigned his fees as Director. b Technical Committee Chairman. c Compensation Committee Chairman. d Nomination Committee Chairman. e Audit Committee Chairman. 170 GeoPark 20F The non-executive Directors annual fees correspond to US$ 80,000 to be Note 14 settled in cash and US$ 100,000 to be settled in stocks, paid quarterly in equal Financial costs installments. In the event that a non-executive Director serves as Chairman of any Board Committees, an additional annual fee of US$ 20,000 shall apply. Amounts in US$ ‘000 2016 2015 2014 A Director who serves as a member of any Board Committees shall receive Financial expenses an annual fee of US$ 10,000. Total payment due shall be calculated in an Interest and amortisation aggregate basis for Directors serving in more than one Committee. The of debt issue costs 30,571 30,543 29,466 Chairman fee shall not be added to the member’s fee for the same Committee. Less: amounts capitalised Payments of Chairmen and Committee members’ fees shall be made quarterly on qualifying assets in arrears and settled in cash only. Note 11 Geological and geophysical expenses Amounts in US$ ‘000 Staff costs (Note 10) Share-based payment (Notes 10 and 29) Allocation to capitalised project Other services Note 12 Administrative expenses Amounts in US$ ‘000 Staff costs (Note 10) Share-based payment (Notes 10 and 29) Consultant fees Office expenses Travel expenses Director’s fees and allowance (Note 10) New projects Other administrative expenses 2016 9,541 898 (2,119) 1,962 10,282 2016 19,451 1,847 3,894 2,217 1,717 2,088 885 2,071 Bank charges and other financial costs Unwinding of long-term liabilities (Note 27) Financial income Interest received 2015 10,557 779 (598) 3,093 2014 11,712 1,227 Note 15 (2,317) Tax reforms in Colombia 2,380 (255) 3,220 (637) 4,443 (3,112) 2,672 2,693 2,575 1,972 (2,128) 34,101 (1,269) 35,655 (3,376) 27,622 13,831 13,002 A new tax reform has been enacted in Colombia. The legislation includes significant changes to certain corporate income tax and statutory income tax provisions, including rate reductions and the repeal of certain corporate-level taxes. The legislation also aims to raise tax revenue mostly by increasing the rate of the value added tax (VAT) to 19% (from 16%) and through a variety of excise taxes. Most of the tax provisions are effective 1 2015 18,215 6,881 4,115 2,535 1,497 1,238 559 2,431 2014 January 2017. 20,366 5,527 6,791 3,190 2,052 1,998 2,798 3,145 The legislation also includes the following provisions that are intended to simplify the corporate income tax system by: • Eliminating the “CREE” tax on corporations and the CREE surtax (CREE is the Spanish acronym for the “fairness tax”). • Introducing a temporary income surtax of 6% for 2017 and 4% for 2018. Accordingly, with this tax reform, the corporate income tax will have the Note 13 Selling expenses Amounts in US$ ‘000 Transportation Selling taxes Storage Allowance for doubtful accounts 34,170 37,471 45,867 following rate schedule (applied beyond a limited profit threshold): – 40% in 2017 (34% income tax plus 6% income surtax) – 37% in 2018 (33% income tax plus 4% income surtax) – 33% in 2019. 2016 3,559 663 - - 2015 4,760 440 11 - There is an increase in the tax rate on deemed income relating to increases in 2014 a taxpayer’s net worth (i.e., the increase in the value of a taxpayer’s assets); the 23,106 rate is increased from 3% to 3.5%. 433 148 741 Other changes to the income tax law are the following: • New withholding tax on dividends—with the applicable rates for non- 4,222 5,211 24,428 resident shareholders of: (1) 5% for dividends distributed out of the distributing entity’s previously taxed profits; and (2) 35% for dividends distributed out of the distributing entity’s previously untaxed profits, plus an GeoPark 171 additional 5% after having applied and deducted the initial 35% withholding. undertaking from the Minister of Finance in Bermuda that, in the event of • A general 15% withholding tax rate for taxable income accrued by non- any taxes being imposed, they will be exempt from taxation in Bermuda until residents without a permanent establishment (certain special rates may apply). March 2035. Income tax rates in those countries where the Group operates • Lengthen the statute of limitations with respect to tax returns and assessments. (Argentina, Brazil, Colombia, Peru and Chile) ranges from 15% to 40%. • Limit loss carryforwards to 12 years. • Allow for a deduction of VAT paid on certain acquisitions or imports of capital The Group has significant tax losses available which can be utilised against goods when calculating the taxpayer’s income tax liability. future taxable profit in the following countries: • Retain the tax on long-term capital gains at 10% for both corporations and non-residents. The legislation also revises and refines tax accounting standards based on IFRS rules. Note 16 Income tax Amounts in US$ ‘000 Argentina Chile (a) Brazil (a) Total tax losses at 31 December 2016 2,908 280,290 16,057 2015 3,834 2014 6,707 209,910 105,293 - 3,191 299,255 213,744 115,191 (a) Taxable losses have no expiration date. Amounts in US$ ‘000 Current tax Deferred income tax (Note 17) 2016 12,359 (555) At the balance sheet date deferred tax assets in respect of tax losses in 2015 7,262 2014 Argentina and in certain Companies in Chile have not been recognised as 23,574 there is insufficient evidence of future taxable profits before the statute of (24,316) (18,379) limitation of these tax losses causes them to expire. 11,804 (17,054) 5,195 Expiring dates for tax losses accumulated at 31 December 2016 are: The tax on the Group’s (loss) profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to Expiring date Amounts in US$ ‘000 profits of the consolidated entities as follows: Amounts in US$ ‘000 (Loss) Profit before tax Tax losses 2016 2015 (48,842) (301,620) 2014 21,125 2017 2020 2021 from non-taxable jurisdictions 12,318 15,852 5,010 Note 17 Taxable (loss) profit (36,524) (285,768) 26,135 Deferred income tax 1,053 873 982 The gross movement on the deferred income tax account is as follows: Income tax calculated at domestic tax rates applicable to Profit (Losses) in the respective countries Tax losses where no deferred income tax is recognised Effect of currency translation on tax base Changes in the income tax rate (Note 15) Non recoverable tax loss carry-forwards Non-taxable results (a) Income tax 6,616 2,840 (220) - 1,759 16,325 6,776 625 15,537 6,272 11,804 (17,054) 809 (62,589) 7,606 Amounts in US$ ‘000 148 (8,128) Deferred tax at 1 January Reclassification (a) Currency translation differences Income statement credit 691 Deferred tax at 31 December 2016 17,691 574 1,463 555 20,283 2015 3,130 (6,061) (3,694) 24,316 17,691 - 4,878 5,195 (a) Corresponds to differences between income tax provision and the final tax return presented. (a) Includes non-deductible expenses in each jurisdiction and changes in the estimation of deferred tax assets and liabilities. The breakdown and movement of deferred tax assets and liabilities as of 31 December 2016 and 2015 are as follows: Under current Bermuda law, the Company is not required to pay any taxes in Bermuda on income or capital gains. The Company has received an 172 GeoPark 20F Amounts in US$ ‘000 Deferred tax assets Difference in depreciation rates and other Taxable losses Total 2016 Total 2015 Amounts in US$ ‘000 Deferred tax liabilities Difference in depreciation rates and other Taxable losses Total 2016 Total 2015 At the beginning Currency translation (Charged) / At end of year of year 31,748 2,898 34,646 33,195 differences credited to net profit - 1,463 1,463 (3,694) (12,523) (533) (13,056) 5,145 19,225 3,828 23,053 34,646 At the beginning Credited to net profit Reclassification (a) At end of year of year (26,016) 9,061 (16,955) (30,065) 8,708 4,903 13,611 19,171 - 574 574 (6,061) (17,308) 14,538 (2,770) (16,955) (a) Corresponds to differences between income tax provision and the final tax return presented. Note 18 Earnings per share Amounts in US$ ‘000 except for shares 2016 2015 2014 Numerator: (Loss) Profit for the year attributable to owners Denominator: Weighted average number of shares (49,092) (234,031) 8,085 used in basic EPS 59,777,145 57,759,001 56,396,812 (Losses) Earnings after tax per share (US$) – basic (0.82) (4.05) 0.14 Amounts in US$ ‘000 except for shares 2016 (a) 2015 2014 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 59,777,145 57,759,001 56,396,812 - 2,443,600 per shares 59,777,145 57,759,001 58,840,412 (Losses) Earnings after tax per share (US$) – diluted (0.82) (4.05) 0.14 (a) For the year ended 31 December 2016, there were 1,390,706 (1,032,279 in 2015) of potential shares that could have a dilutive impact but were considered antidilutive due to negative earnings. GeoPark 173 Note 19 Property, plant and equipment Amounts in US$ ‘000 Cost at 1 January 2014 Additions Acquisition of subsidiaries Currency translation differences Disposals Write-off / Impairment loss Transfers Cost at 31 December 2014 Additions Currency translation differences Disposals Write-off / Impairment loss Transfers Cost at 31 December 2015 Additions Currency translation differences Disposals Write-off / Impairment reversal Transfers Cost at 31 December 2016 Depreciation and write-down at 1 January 2013 Depreciation Disposals Currency translation differences 493,260 3,013 112,646 (21,941) - (9,430) 172,399 749,947 (4,640)(a) (27,522) (241) (128,956) 60,404 648,992 (3,531) (a) 16,132 - 5,664 24,984 692,241 (157,390) (89,651) - 6,602 Depreciation and write-down at 31 December 2014 (240,439) Depreciation Disposals Currency translation differences (84,849) - 4,115 Depreciation and write-down at 31 December 2015 (321,173) Depreciation Disposals Currency translation differences (61,080) - (2,486) Oil & gas Furniture, Production Buildings and Construction Exploration Total properties equipment facilities and improvements in progress and vehicles machinery 7,018 490 40,429 136,232 5,731 3,367 201 (122) (353) - 3,233 12,057 954 (182) (13) 98,837 11 - - (666) - 13,464 111,646 - (2,577) (1,685) - (13,242) 929 30,690 - - - - 2,019 9,527 272 (92) (84) - 895 13,745 124,832 10,518 406 126 (22) - 102 14,357 (2,800) (1,862) 278 (65) (4,449) (2,850) 8 (26) (7,317) (2,702) 8 (38) 466 2,077 - - 5,038 132,413 (35,677) (9,621) 151 - (45,147) (15,467) - - (60,614) (10,788) - (296) - 35 - - - 10,553 (1,721) (523) - - (2,244) (874) 15 (92) (3,195) (920) - (16) and evaluation assets(b) 147,759 97,919 - (988) - (30,367) (c) (73,879) 793,034 241,032 112,847 (23,051) (1,019) (39,797) - 140,444 1,083,046 12,299 (1,510) - 45,428 (31,883) (2,023) - - - - (117,236) 59,425 36,543 - - (7,376) (30,084) (d) (179,658) (58,769) 29,823 20,322 73 - - (17,292) 32,926 (34,149) 87,000 18,181 790 - (31,366) (e) (12,832) - 914,910 35,844 19,233 (22) (25,702) - 61,773 944,263 - - - - - - - - - - - - - - - - - - - - - - - - - - (197,588) (101,657) 429 6,537 (292,279) (104,040) 23 3,997 (392,299) (75,490) 8 (2,836) (470,617) 790,767 522,611 473,646 Depreciation and write-down at 31 December 2016 (384,739) (10,049) (71,698) (4,131) Carrying amount at 31 December 2014 Carrying amount at 31 December 2015 Carrying amount at 31 December 2016 509,508 327,819 307,502 7,608 6,428 4,308 66,499 64,218 60,715 7,283 7,323 6,422 59,425 29,823 32,926 140,444 87,000 61,773 (a) Corresponds to the effect of change in estimate of assets retirement obligations in Colombia. (b) Exploration wells movement and balances are shown in the table below; seismic and other exploratory assets amount to US$ 53,523,000 (US$ 64,094,000 in 2015 and US$ 99,939,000 in 2014). 174 GeoPark 20F Amounts in US$ ‘000 Exploration wells at 31 December 2014 Additions Write-offs Transfers Exploration wells at 31 December 2015 Additions Write-offs Transfers Exploration wells at 31 December 2016 Total 40,505 16,067 (6,280) (27,386) 22,906 15,088 (19,949) (9,795) 8,250 As of 31 December 2016, there were two exploratory wells that have been capitalised for a period less than a year amounting to US$ 8,250,000. (c) Corresponds to the cost of ten unsuccessful exploratory wells: eight of them in Chile (three in Flamenco Block, two in Fell Block, two in Tranquilo Block and one in Campanario Block) and two of them in Colombia (two in the non-operated Arrendajo Block). The charge also includes the loss generated by the write-off of the remaining seismic cost for Otway and Tranquilo Blocks, registered in previous years. (d) Corresponds to the cost of two unsuccessful exploratory wells in Colombia (one well in CPO4 Block and one well in Llanos 32). The charge also includes the loss generated by the write-off of the seismic cost for Flamenco Block in Chile generated by the relinquishment of 143 sq km in November 2015 and the write off of two wells drilled in previous years in the same block for which no additional work would be performed. (e) Corresponds to the write-off of five wells drilled in previous years in the Chilean blocks for which no additional work would be performed, the loss generated by the write-off of the seismic cost for Llanos 62 Block in Colombia generated by the relinquishment of the area in September 2016. In addition, during September 2016, five blocks in Brazil were relinquished so the associated investment was written off. GeoPark 175 Note 20 Subsidiary undertakings The following chart illustrates main companies of the Group structure as of 31 December 2016 (a): 100% GeoPark Latin America Limited 100% GeoPark Latin America Limited Agencia en Chile GeoPark Limited (Bermuda) 100% 1% 99.9% 99.9% 99.9% GeoPark Argentina Limited – Bermuda GeoPark Latin America Coöperatie U.A. (The Netherlands) GeoPark Peru Coöperatie U.A. (The Netherlands) GeoPark Brazil Coöperatie U.A. (The Netherlands) 100% 80% GeoPark Argentina Limited - Argentinean Branch GeoPark Colombia Coöperatie U.A. (The Netherlands) 20% LG International 99.9% GeoPark Brazil Exploração e Produção de Petróleo e Gás Ltda. (Brazil) 100% GeoPark Colombia SAS (Colombia) 80% 99.9% 100% LG International 20% GeoPark Chile S.A. (Chile) GeoPark S.A. (Chile) GeoPark Colombia S.A. (Chile) 99.9% GeoPark S.A.C. (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) (a) LGI is not a subsidiary, it is Non-controlling interest. 176 GeoPark 20F Details of the subsidiaries and joint operations of the Company are set out below: Subsidiaries GeoPark Argentina Limited – Bermuda Name and registered office 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) 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 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 Peru Coöperatie U.A. (The Netherlands) GeoPark Brazil Coöperatie U.A. (The Netherlands) GeoPark Colombia E&P S.A.(Panama) GeoPark Colombia E&P Sucursal Colombia(Colombia) Joint operations Tranquilo Block (Chile) Flamenco Block (Chile) Campanario Block (Chile) Isla Norte Block (Chile) Yamu/Carupana Block (Colombia) Llanos 34 Block (Colombia) Llanos 32 Block (Colombia) CPO-4 Block (Colombia) Puelen Block (Argentina) Sierra del Nevado Block (Argentina) CN-V Block (Argentina) Manati Field (Brazil) (a) Indirectly owned. (b) Dormant companies. (c) LG International has 20% interest. (d) LG International has 20% interest through GeoPark Chile S.A. and a 14% direct interest, totaling 31.2%. (e) GeoPark is the operator in all blocks. Ownership interest 100% 100% (a) 100% 100% (a) 100% (a) (b) 100% (a) 80% (a) (c) 80% (a) (c) 80% (a) (c) 68.8% (a) (d) 100% (a) 80% (a) (c) 100% 80% (a) (c) 100% (a) 100% (a) 100% (a) 100% 100% 100% (b) 100% (b) 50% (e) 50% (e) 50% (e) 60% (e) 89.5%/100% (e) 45% (e) 10% 50% (e) 18% 18% 50% (e) 10% GeoPark 177 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 Amounts in US$ ‘000 At 1 January Foreign exchange loss / (income) 2016 596 145 741 2015 774 (178) 596 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. 2016 14,052 4,517 98 2015 14,486 4,844 1,037 18,667 20,367 The Group does not hold any collateral as security related to trade receivables. 15,815 2,852 18,667 19,195 The carrying value of trade receivables is considered to represent a reasonable 1,172 approximation of its fair value due to their short-term nature. 20,367 2016 1,521 1,994 3,515 2015 2,120 2,144 4,264 Note 24 Financial instruments by category Amounts in US$ ‘000 Assets as per statement of financial position Trade receivables To be recovered from co-venturers (Note 32) Other financial assets (a) Cash at bank and in hand Loans and receivables 2016 2015 18,426 3,311 22,027 73,563 13,480 4,634 14,424 82,730 117,327 115,268 Other financial liabilities at amortised cost 2016 2015 23,650 27,801 1,614 25,906 21,045 113 358,672 378,673 411,737 425,737 Note 23 Trade receivables and Prepayments and other receivables Amounts in US$ ‘000 Trade receivables To be recovered from co-venturers (Note 32) Related parties receivables (Note 32) Prepayments and other receivables 2016 18,426 18,426 3,311 42 4,290 7,643 (a) Other financial assets relate to contributions made for environmental obligations according to Colombian and Brazilian government regulations. 2015 13,480 Non current financial assets also include a non current account receivable. 13,480 Current financial assets corresponds to short term investments with original 4,634 maturities up to three months. 38 6,605 11,277 Amounts in US$ ‘000 Total 26,069 24,757 Classified as follows: Current Non current Total Liabilities as per statement of financial position Trade payables 25,828 241 26,069 24,537 Payables to related parties (Note 32) 220 To be paid to co-venturers (Note 32) 24,757 Borrowings Trade receivables that are aged by less than three months are not considered impaired. As of 31 December 2016, there are no balances (US$ 51,000 in Credit quality of financial assets 2015) that were aged by more than 3 months, but not impaired. These relate The credit quality of financial assets that are neither past due nor impaired can to customers for whom there is no recent history of default. There are no be assessed by reference to external credit ratings (if available) or to historical balances due between 31 days and 90 days as of 31 December 2016 and 2015. information about counterparty default rates: Movements on the Group provision for impairment are as follows: 178 GeoPark 20F Amounts in US$ ‘000 Trade receivables 2016 2015 Amounts in US$ ‘000 Less than Between 1 Between 2 Counterparties with an external credit rating (Moody’s) At 31 December 2016 B2 B3 Baa3 Counterparties without an external credit rating Group1 (a) Total trade receivables 7,056 - 3,729 7,641 18,426 - Borrowings Trade payables Payables to related parties 5,834 6,315 1,331 13,480 At 31 December 2015 (a) 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. Borrowings Trade payables Payables to related parties 1 year and 2 years and 5 years 48,958 23,650 43,304 355,064 - - 1,561 74,169 1,561 22,018 44,865 377,082 42,865 25,906 44,419 391,988 - - 1,561 70,332 1,561 25,094 45,980 417,082 Over 5 years - - - - - - - - Cash at bank and other financial assets (a) Amounts in US$ ‘000 Counterparties with an external credit rating (Moody’s, S&P, Fitch, BRC Investor Services) A1 A2 Aa2 Aa3 A3 AAA Baa2 Ba1 Baa1 Ba3 B3 Baa3 Caa2 BBB- Counterparties without an external credit rating Total 2016 2015 Note 25 Share capital 862 46,272 Issued share capital 460 Common stock (amounts in US$ ‘000) 813 - - 42,798 - The share capital is distributed as follows: 2016 60 2015 59 - 14 4,094 - 100 3,497 10 - - - 44,252 95,578 1,675 Common shares, of nominal US$ 0.001 59,940,881 59,535,614 Total common shares in issue 59,940,881 59,535,614 - - 3,705 Authorised share capital 105 US$ per share - - Number of common shares 29,425 (US$ 0.001 each) 160 Amount in US$ 56 0.001 0.001 5,171,949,000 5,171,949,000 5,171,949 5,171,949 14,424 Details regarding the share capital of the Company are set out below: 97,144 Common shares (a) The remaining balance sheet item ‘cash at bank and in hand’ corresponds to cash on hand amounting to US$ 12,000 (US$ 10,000 in 2015). As of 31 December 2016, the outstanding common shares confer the following rights on the holder: • the right to one vote per share; Financial liabilities - contractual undiscounted cash flows • ranking pari passu, the right to any dividend declared and payable The table below analyses the Group’s financial liabilities into relevant on common shares; 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. GeoPark 179 GeoPark common shares history Date (millions) (millions) Closing to US$ 10,000,000 of common shares, par value US$ 0.001 per share of the Shares issued Shares Buyback Program closing US$(`000) On 19 December 2014, the Company approved a program to repurchase up Shares outstanding at the end of 2014 Stock awards Stock awards Stock awards Buyback program Shares outstanding at the end of 2015 Stock awards Stock awards Stock awards Buyback program Shares outstanding at the end of 2016 Nov 2015 Dec 2015 Dec 2015 Dec 2015 Feb 2016 Dec 2016 Dec 2016 Dec 2016 1.5 0.5 0.1 (0.4) 0.3 0.5 0.1 (0.6) 57.8 59.3 59.8 59.9 59.5 59.5 59.8 60.3 60.4 59.8 59.8 Company (the “Repurchase Program”). The Repurchase Program began on 19 December 2014 and was resumed on 14 April 2015 and then on 10 June 2015, expiring on 18 August 2015. During 2016, the Repurchase Program began on 6 April 2016 and then was resumed during the year until November 2016. The Shares repurchased will be used to offset, in part, any expected dilution effects resulting from the Company’s employee incentive schemes, including grants under the Company’s Stock Award Plan and the Limited Non-Executive Director Plan. During 2016, 2015 and 2014, the Company purchased 588,868, 370,074 and 73,082 common shares for a total amount of US$ 1,991,000, US$ 1,615,000 and US$ 388,000, respectively. These transactions had no impact on the Company’s results. 58 59 60 60 59 59 59 60 60 60 60 Note 26 Borrowings Stock Award Program and Other Share Based Payments On 15 December 2016, 379,500 common shares were allotted to the trustee Amounts in US$ ‘000 2016 2015 of the Employee Beneficiary Trust (“EBT”), generating a share premium of US$ 3,940,000. On 12 November 2015 and 22 December 2015, 817,600 and 478,000 common shares were allotted to the trustee of the Employee Beneficiary Trust (“EBT”), generating a share premium of US$ 11,359,000 and US$ 3,577,000, respectively. Outstanding amounts as of 31 December Notes GeoPark Latin America Agencia en Chile (a) Banco Itaú (b) Banco de Chile (c) Banco de Crédito e Inversiones (d) Classified as follows: On 8 February 2016, 468,405 shares were issued to Executive Directors and Current key management as bonus compensation, generating a share premium of Non current US$ 1,512,000. 304,059 49,763 4,709 141 302,495 69,142 7,036 - 358,672 378,673 39,283 319,389 35,425 343,248 On 6 September 2016, 8,333 shares were issued pursuant to a consulting US$ 346,180,000 (US$ 352,410,000 in 2015). The fair values are based on cash agreement for services rendered to GeoPark Limited generating a share flows discounted using a rate based on the borrowing rate of 7.60% (2015: premium of US$ 38,000. 7.51%) and are within level 2 of the fair value hierarchy. The fair value of these financial instruments at 31 December 2016 amounts to On 30 November 2015, 720,000 new common shares were issued to the Executive Directors, generating a share premium of US$ 7,309,000. (a) During February 2013, the Company successfully placed US$ 300 million notes which were offered under Rule 144A and Regulation S exemptions of the United States Securities laws. During 2016, the Company issued 137,897 (99,555 in 2015 and 2,301 in 2014) shares to Non-Executive Directors in accordance with contracts as compensation, The Notes, issued by the Company’s wholly-owned subsidiary GeoPark Latin generating a share premium of US$ 541,848 (US$ 486,692 in 2015 and US$ 22,413 America Limited Agencia en Chile (“the Issuer”), were priced at 99.332% in 2014). The amount of shares issued is determined considering the contractual and carry a coupon of 7.50% per annum (yield 7.625% per annum). Final compensation and the fair value of the shares for each relevant period. maturity of the notes will be 11 February 2020. The Notes are guaranteed by IPO GeoPark Limited and GeoPark Latin America Cooperatie U.A. and are secured with a pledge of all of the equity interests of the Issuer in GeoPark Chile S.A., On 7 February 2014, the SEC declared effective the Company’s registration GeoPark Colombia Cooperatie U.A. and GeoPark Colombia S.A. and a pledge statement upon which 13,999,700 shares were issued at a price of US$ 7 per of certain intercompany loans. The debt issuance cost for this transaction share, including over-allotment option. Gross proceeds from the offering amounted to US$ 7,637,000. The indenture governing the Notes due 2020 totalled US$ 98,000,000. includes incurrence test covenants that provides among other things, that, 180 GeoPark 20F the Debt to EBITDA ratio should not exceed 2.5 times and the EBITDA to As of the date of these consolidated financial statements, the Group has Interest ratio should exceed 3.5 times. As of the date of these consolidat-ed available credit lines for over US$ 31,000,000. financial statements, the Company’s Debt to EBITDA ratio was 4.6 times and the EBITDA to Interest ratio was 2.7 times, primarily due to the lower oil prices that impacted the Company’s EBITDA generation. Failure to comply with the Note 27 incurrence test covenants does not trigger an event of default. However, this Provisions and other long-term liabilities situation may limit the Com-pany’s capacity to incur additional indebtedness, as specified in the indenture governing the Notes. Incurrence covenants as Amounts in US$ ‘000 Asset opposed to maintenance covenants must be tested by the Company before retirement Deferred incurring additional debt or performing certain corporate actions including but not limited to dividend payments, restricted payments and others, At 1 January 2015 (other than in each case, certain specific exceptions). As of the date of these Addition to provision consolidated financial state-ments, the Company is in compliance of all the Recovery of obligation 33,286 985 indenture’s provisions. abandonments costs (5,229) (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% working interest in the Manatí field in Brazil. Foreign currency translation Exchange difference Amortisation Unwinding of discount The interest will be paid semi-annually; principal will be cancelled semi- At 31 December 2015 annually with a year grace period. The debt issuance cost for this transaction Addition to provision amounted to US$ 3,295,000. In March 2015, the Company reached an Recovery of (2,469) 2,469 - 2,575 31,617 1,195 agreement to: (i) extend the principal payments that were due in 2015 abandonments costs (5,504) (amounting to approximately US$ 15,000,000), which will be divided pro-rata Foreign currency during the remaining principal installments, starting in March 2016 and (ii) translation to increase the variable interest rate to six-month LIBOR + 4.0%. As a result of Exchange difference 1,614 (1,614) Income 5,736 - - - - (703) - 5,033 1,375 - - - the above, in March and September 2016 the Company paid US$ 10,000,000 Amortisation - (2,924) Other 7,888 293 - - (2,381) - - 5,800 2,686 - - 538 - 139 Total 46,910 1,278 (5,229) (2,469) 88 (703) 2,575 42,450 5,256 (5,504) 1,614 (1,076) (2,924) 2,693 respectively corresponding to principal payments under the current principal Unwinding of discount amortization schedule. At 31 December 2016 2,554 29,862 - 3,484 9,163 42,509 The facility agreement includes customary events of default, and requires The provision for asset retirement obligation relates to the estimation of future the Brazilian subsidiary to comply with customary covenants, including the disbursements related to the abandonment and decommissioning of oil and maintenance of a ratio of net debt to EBITDA of up to 3.5x for the first two gas wells (see Note 4). ye-ars and up to 3.0x thereafter. The credit facility also limits the borrower’s ability to pay dividends if the ratio of net debt to EBITDA is greater than 2.5x. Deferred income relates to contributions received to improve the project As of the date of these consolidated financial statements, the Company has economics of the gas wells. The amortisation is in line with the related asset. complied with these covenants. The addition in 2016 corresponds to the deferred income related to the take or pay provision associated to gas sales in Brazil, that Petrobras will make up in (c) During December 2015, GeoPark executed a loan agreement with Banco de Chile for US$ 7,028,000 to finance the start-up of new Ache gas field in the future. GeoPark-operated Fell Block. The interest rate applicable to this loan is LI-BOR Other mainly relates to fiscal controversies associated to income taxes in one plus 2.35% per annum. The interest and the principal will be paid on monthly of the Colombian subsidiaries. These controversies relate to fiscal periods basis; with a six months grace period, with final maturity on December 2017. prior to the acquisition of these subsidiaries by the Company. In connection to (d) During February 2016, GeoPark executed a loan agreement with Banco de Crédito e Inversiones for US$ 186,000 to finance the acquisition of vehicles this, the Company has recorded an account receivable for an amount of US$ 5,636,000, with the previous owners for the same amount, which is recognized under other financial assets in the balance sheet. In addition, actions taken for the Chilean operation. The interest rate applicable to this loan is 4.14% per by the Company to maximize ongoing work projects and to reduce expenses, annum. The interest and the principal will be paid on monthly basis, with final including renegotiations and reduction of oil and gas service contracts and maturity on Febru-ary 2019. other initiatives included in the cost cutting program adopted may expose the GeoPark 181 Company to claims and contingencies from interested parties that may have a During 2016, the Company has approved a new share-based compensation negative impact on its business, financial condition, results of operations and program for 1,619,105 shares. Main characteristics of the Stock Awards cash flows. So, the additions in 2016 reflects the future contingent payments Programs are: in connection with claims of third parties. • All employees are eligible. Note 28 Trade and other payables Amounts in US$ ‘000 V.A.T Trade payables Payables to related parties(a) (Note 32) Customer advance payments (Note 3) Staff costs to be paid Royalties to be paid Taxes and other debts to be paid To be paid to co-venturers (Note 32) Classified as follows: Current Non current • Exercise price is equal to the nominal value of shares. • Vesting period is three years. • Each employee could receive up to three salaries by achieving the following conditions: continue to be an employee, the stock market price at the date of vesting should be above US$ 3 and obtain the Company minimum 2015 production, adjusted EBITDA and reserves target for the year of vesting. 908 25,906 21,045 Also during 2016, the Company approved a plan named Value Creation Plan (“VCP”) oriented to Top Management. The VCP establishes awards payables in - a variable number of shares with some limitation, subject to certain market conditions, among others, reach certain stock market price for the Company share at vesting date. VCP has been classified as an equity-settled plan. 6,702 2,475 8,197 113 On 19 December 2014, the Company has approved a new share-based 2016 1,102 23,650 27,801 20,000 7,749 1,503 3,355 1,614 86,774 65,346 compensation program for 500,000 shares oriented to new employees. This new program, which was granted on 31 December 2014, has a vesting period 52,008 34,766 45,790 19,556 of three years. Details of these costs and the characteristics of the different stock awards programs and other share based payments are described in the following table and explanations: (a)The outstanding amount corresponds to advanced cash call payments granted by LGI to GeoPark Chile S.A. for financing Chilean operations in TdF’s blocks. The expected maturity of these balances is July 2020 and the applicable interest rate is 8% per annum. The average credit period (expressed as creditor days) during the year ended 31 December 2016 was 44 days (2015: 38 days) The fair value of these short-term financial instruments is not individually determined as the carrying amount is a reasonable approximation of fair value. Note 29 Share-based payment IPO Award Program and Executive Stock Option plan The Group has established different stock awards programs and other share- based payment plans to incentivise the Directors, senior management and employees, enabling them to benefit from the increased market capitalization of the Company. Stock Award Program 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 the purposes of the Performance-based Employee Long-Term Incentive Plan. 182 GeoPark 20F Note 29 Share-based payment Year of issuance beginning in the year forfeited exercised at year end 2016 Awards at the Awards granted Awards Awards Awards Charged to net loss / profit 2014 2015 2016 2014 2013 2012 2011 2010 Subtotal Stock options to Executive Directors Shares granted to Non-Executive Directors VCP 2013 VCP 2016 Executive Directors Bonus Key Management Bonus Stock awards for service contracts - 1,619,105 500,000 - 379,500 - - - - - - - - - 8,285 129,612 - - 123,839 445,185 - - - - 82,306 8,333 - 10,000 - - - - - - - - 100,619 - - - - - 379,500 - - - 137,897 - - 23,220 445,185 8,333 1,619,105 490,000 - - - - - - - - - 82,306 - 400 - 934 (325) 202 35 The awards that are forfeited correspond to employees that had left the Group before vesting date. 1,456,809 1,839,356 110,619 994,135 2,191,411 3,367 445 821 - 855 - - - 898 594 636 879 - 2,121 3,007 - - 1,291 1,102 848 2,623 5,864 - 2,390 2,474 371 617 - 400 1,438 - 8,223 223 617 - - - - 9,178 GeoPark 183 Note 30 Interests in Joint operations The Group has interests in joint operations, which are engaged 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 recognized in the consolidated statement of financial position and statement of income: Subsidiary / Joint operation 2016 GeoPark Magallanes Ltda. Tranquilo Block GeoPark TdF S.A. Flamenco Block Campanario Block Isla Norte Block Colombia SAS Yamu/Carupana Block Llanos 34 Block Llanos 32 Block Manati Field 2015 GeoPark Magallanes Ltda. Tranquilo Block GeoPark TdF S.A. Flamenco Block Campanario Block Isla Norte Block Colombia SAS Llanos 17 Block Yamu/Carupana Block Llanos 34 Block Llanos 32 Block 50% 50% 50% 60% 89,5% 45% 10% 50% 50% 50% 60% PP&E Interest E&E Assets Other Assets Total Total NET ASSETS/ Operating Assets Liabilities (LIABILITIES) Revenue (loss) profit - 55 55 (424) (369) - (40) 15,108 29,718 9,920 3,418 79,811 3,819 - - - - 693 - 15,108 29,718 9,920 3,418 80,504 3,819 (93) (1) (1) (2,289) (3,943) (211) 15,015 29,717 9,919 1,129 1,004 (1,988) - 5 18 (399) (438) (307) 83,193 1,043 76,561 125,400 3,608 2,303 - 45 45 14,932 27,570 8,583 36.84% - 89,5% 45% 10% 3,569 76,667 3,106 2,061 429 96 (2) (53) (10) (16) (93) 43 - (69) 14,879 27,560 8,567 1,810 (51,411) 13 355 (7,267) (5,661) (93) 3 (6,325) (2,235) (3,295) (213) 3,395 1,409 (16,552) 73,801 114,276 2,989 8,258 53,049 (1,343) - - - - 14,932 27,570 8,583 - 5,630 77,096 3,202 GeoPark Brazil Exploração y Produção de Petróleo e Gas Ltda. 10% 54,166 15,791 69,957 (8,442) 61,515 29,719 20,945 GeoPark Brazil Exploração y Produção de Petróleo e Gas Ltda. Manati Field 10% 50,801 12,930 63,731 (10,395) 53,336 32,388 20,354 184 GeoPark 20F Subsidiary / Joint operation 2014 GeoPark Magallanes Ltda. Tranquilo Block GeoPark TdF S.A. Flamenco Block Campanario Block Isla Norte Block Colombia SAS Llanos 17 Block Yamu/Carupana Block Llanos 34 Block Llanos 32 Block PP&E Interest E&E Assets Other Assets Total Total NET ASSETS/ Operating Assets Liabilities (LIABILITIES) Revenue (loss) profit 50% 109 50% 50% 60% 35,110 34,309 12,208 36.84% 6,037 - - - - - 109 (125) (16) - (220) 35,110 34,309 12,208 (1,653) (7,086) (241) 33,457 27,223 11,967 4,385 216 901 (6,278) (6,151) (283) 6,037 (122) 5,915 1,292 (160) 90% - 79.5% 45% 10% 16,590 76,726 8,909 2,211 1,514 27 18,801 78,240 8,936 (2,727) (3,380) (122) 16,074 74,860 8,814 10,560 176,624 11,024 (2,916) 96,889 4,041 GeoPark Brazil Exploração y Produção de Petróleo e Gas Ltda. Manati Field 10% 46,382 43,891 90,273 (11,587) 78,686 35,621 18,935 Capital commitments are disclosed in Note 31 (b). table A, the Company should deliver to ANH a share of the production net of Note 31 Commitments (a) Royalty commitments In Colombia, royalties on production are payable to the Colombian Government and are determined on a field-by-field basis using a level of production sliding scale at a rate which ranges between 6%-8%. The Colombian National Hydrocarbons Agency (“ANH”) also has an additional economic right equivalent to 1% of production, net of royalties. 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). °API >29° >22°<29° >15°<22° >10°<15° Po (US$/barrel) 30.22 31.39 32.56 46.50 Table A Table B WTI (P) Po < P < 2Po 2Po < P < 3Po 3Po < P < 4Po 4Po < P < 5Po 5Po < P S 30% 35% 40% 45% 50% Under Law 756 of 2002, as modified by Law 1530 of 2012, the royalties on GeoPark is obligated to make certain payments to the previous owners of Colombian production of light and medium oil are calculated on a field-by- Winchester based on the production and sale of hydrocarbons discovered field basis, using the following sliding scale: by exploration wells drilled after 25 October 2011. These payments involve Additionally, under the terms of the Winchester Stock Purchase Agreement, Average daily production in barrels Production Royalty rate the vendor. As at the balance sheet date and based on preliminary internal an overriding royalty equal to an estimated 4% carried interest on the part of Up to 5,000 5,000 to 125,000 125,000 to 400,000 400,000 to 600,000 Greater than 600,000 8% estimates of additions of 2P reserves since acquisition, the Company’s best 8% + (production - 5,000)*0.1 estimate of the total commitment over the remaining life of the concession 20% is in a range between US$ 80,000,000 and US$ 90,000,000. During 2016, the 20% + (production - 400,000)*0.025 Company has accrued and paid US$ 5,414,000 (US$ 7,100,000 in 2015 and 25% US$ 24,600,000 in 2014) and US$ 3,772,000 (US$ 9,200,000 in 2015 and US$ 21,000,000 in 2014), respectively. When the API is lower than 15°, the payment is reduced to the 75% of the total calculation. In Chile, royalties are payable to the Chilean Government. In the Fell Block, royalties are calculated at 5% of crude oil production and 3% of gas In accordance with Llanos 34 Block operation contract, when the production. In the Flamenco Block, Campanario Block and Isla Norte Block, accumulated production of each field, including the royalties’ volume, royalties are calculated at 5% of gas and oil production. exceeds 5,000,000 of barrels and the WTI exceeds the base price settled in GeoPark 185 In Brazil, the Brazilian National Petroleum, Natural Gas and Biofuels Agency (ANP) is exploratory phase and receive a 50% working interest in the CN-V Block in responsible for determining monthly minimum prices for petroleum produced in exchange for its commitment to drill two exploratory wells, for a total of concessions for purposes of royalties payable with respect to production. Royalties US$ 10,000,000. generally correspond to a percentage ranging between 5% and 10% applied to reference prices for oil or natural gas, as established in the relevant bidding Chile guidelines (edital de licitação) and concession agreement. In determining the On 6 January 2016, the Chilean Ministry accepted the Company’s proposal for percentage of royalties applicable to a concession, the ANP takes into consideration, the commitments related to the second exploratory phase in the Flamenco among other factors, the geological risks involved and the production levels Block which commenced on 8 November 2015. The investment related to the expected. In the Manatí Block, royalties are calculated at 7.5% of gas production. drilling of one exploratory well will be assumed 100% by GeoPark and shall In Argentina, crude oil production accrues royalties payable to the Provinces US$ 2,100,000. On 6 January 2017, GeoPark proposed to extend the second of Mendoza equivalent to 12% on estimated value at well head of those exploratory period for an additional period of 18 months. As of the date of products. This value is equivalent to final sales price less transport, storage these consolidated financial statements the Chilean Ministry has not replied. be made before 6 November 2017. The remaining commitment amounts to and treatment costs. (b) Capital commitments Colombia On 29 September 2016, the Campanario Block and Isla Norte Block’s CEOP were modified so the investment commitment for the first exploratory period has already been fulfilled. The investments to be made in the second exploratory period will be assumed 100% by GeoPark. The future The VIM 3 Block minimum investment program consists of 200 sq km of 2D investment commitments assumed by GeoPark for the second exploratory seismic and drilling one exploratory well, with a total estimated investment period are up to: of US$ 22,290,800 during the initial three year exploratory period ending 2 • Campanario Block: 3 exploratory wells before 10 July 2019 (US$ 10,963,000) September 2018. • Isla Norte Block: 2 exploratory wells before 7 May 2019 (US$ 6,595,000) As of 31 December 2016, the Company has established a guarantee for its The Llanos 34 Block (45% working interest) has committed to drill two commitments that amounts to US$ 19,300,000. exploratory wells, one before 15 March 2017 and the other before 14 September 2019. The remaining commitment amounts to US$ 6,255,000 at Brazil GeoPark’s working interest. As of the date of these consolidated financial The future investment commitments assumed by GeoPark are up to: statements, GeoPark is awaiting the ANH’s approval of US$ 3,555,000 related • SEAL-T-268 Block: before 15 May 2017 (US$ 230,000) to one well already drilled that was presented as fulfilment of the commitment • REC-T-94 Block: 2 exploratory wells before 12 July 2017 (US$ 2,300,000) to be performed before 14 September 2019. • REC-T-93 Block: 3D seismic before 20 December 2018 (US$ 50,000) • REC-T-128 Block: 1 exploratory well before 20 December 2018 (US$ The Llanos 32 Block (10% working interest) has committed to drill one 2,690,000) exploratory well before 20 August 2018. The remaining commitment amounts • POT-T-747 Block: 1 exploratory well before 20 December 2018 (US$ to US$ 617,100 at GeoPark’s working interest. 1,840,000) • POT-T-882 Block: 35 sq km of 2D seismic before 20 December 2018 (US$ Argentina 480,000) On 20 August 2014, the consortium of GeoPark and Pluspetrol was awarded • POT-T-619 Block: 1 well before 16 September 2018 (US$ 700,000) 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 (c) Operating lease commitments – Group company as lessee Mendocina de Energia S.A. (“EMESA”). The consortium consists of Pluspetrol (Operator with a 72% working inter-est (“WI”), EMESA (Non-operated with a The Group leases various plant and machinery under non-cancellable 10% WI) and GeoPark (Non-operated with an 18% WI). operating lease agreements. GeoPark has committed to a minimum aggregate investment of US$ The Group also leases offices under non-cancellable operating lease 6,200,000 for its WI, which includes the work program commitment on both agreements. The lease terms are between 2 and 3 years, and most of lease blocks during the first three years of the exploratory period. agreements are renewable at the end of the lease period at market rate. On 22 July 2015, the Company signed a farm-in agreement with Wintershall During 2016 a total amount of US$ 47,871,000 (US$ 16,731,000 in 2015 for the CN-V Block in Argentina. Ge-oPark will operate during the and US$ 19,409,000 in 2014) was charged to the income statement and 186 GeoPark 20F US$ 32,058,000 of operating leases were capitalised as Property, plant and equipment related to rental of drilling equipment and machinery (US$ 7,102,000 in 2015 and US$ 51,341,000 in 2014). The future aggregate minimum lease payments under non-cancellable operating leases are as follows: Amounts in US$ ‘000 2016 2015 2014 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 67,752 14,031 5,066 114 12,878 8,257 2,456 309 37,926 33,949 16,109 505 Total minimum lease payments 86,963 23,900 88,489 Note 32 Related parties Controlling interest The main shareholders of GeoPark Limited, a company registered in Bermuda, as of 31 December 2016, are: Shareholder James F. Park (a) Gerald E. O’Shaughnessy (b) Manchester Financial Group, LP IFC Equity Investments(c) Juan Cristóbal Pavez(d) Moneda A.F.I. (e) Other shareholders Common shares 7,891,269 7,344,741 7,080,661 3,456,594 2,946,112 1,683,571 29,537,933 59,940,881 Percentage of outstanding common shares 13.17% 12.25% 11.81% 5.77% 4.92% 2.81% 49.27% 100.00% (a) Held by Energy Holdings, LLC, which is controlled by James F. Park, a member of our Board of Directors. (b) Beneficially owned by Mr. O’Shaughnessy directly and indirectly through GP Investments LLP, The Globe Resources Group Inc., and other investment vehicles. (c) IFC Equity Investments voting decisions are made through a portfolio management process which involves consultation from investment officers, credit officers, managers and legal staff. (d) Held through Socoservin Overseas Ltd, which is controlled by Juan Cristóbal Pavez. The common shares reflected as being held by Mr. Pavez include 68,308 common shares held by him personally. (e) Held through various funds managed by Moneda A.F.I. (Administradora de Fondos de Inversión), an asset manager. GeoPark 187 Balances outstanding and transactions with related parties Account (Amounts in ´000) Transaction in the year Balances at year end Related Party Relationship 2016 To be recovered from co-venturers Prepayments and other receivables Payables account To be paid to co-venturers Financial costs Geological and geophysical expenses Administrative expenses 2015 To be recovered from co-venturers Prepayments and other receivables Payables account To be paid to co-venturers Financial costs Geological and geophysical expenses Administrative expenses Administrative expenses 2014 To be recovered from co-venturers Payables account To be paid to co-venturers Financial costs Geological and geophysical expenses Administrative expenses Administrative expenses - - - - 1,587 113 371 - - - - 1,560 101 66 377 - - - 592 16 114 568 3,311 42 (27,801) (1,614) - - - 4,634 38 (21,045) (113) - - - - 5,931 (16,591) (1,335) - - - - Joint Operations Joint Operations LGI LGI Joint Operations LGI Carlos Gulisano Pedro Aylwin Partner Partner Joint Operations Partner Non-Executive Director (a) Executive Director (b) Joint Operations Joint Operations LGI LGI Joint Operations LGI Carlos Gulisano Carlos Gulisano Pedro Aylwin Joint Operations LGI Joint Operations LGI Carlos Gulisano Carlos Gulisano Pedro Aylwin Partner Partner Joint Operations Partner Non-Executive Director (a) Non-Executive Director (a) Executive Director (b) Joint Operations Partner Joint Operations Partner Non-Executive Director (a) Non-Executive Director (a) Executive Director (b) (a) Corresponding to consultancy services. (b) Corresponding to wages and salaries for US$ 246,000 (US$ 317,000 in 2015) and bonus for US$ 125,000 (US$ 60,000 in 2015). 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. 188 GeoPark 20F Note 33 Fees paid to Auditors Amounts in US$ ‘000 Audit fees Tax services fees Non-audit services fees Fees paid to auditors interests held by Trayectoria, the counterpart in the Yamú Block, operated by GeoPark, that includes a 10% economic interest in all of the Yamú fields. According to the terms of the swap oper-ation, GeoPark had written off a 2014 receivable with Trayectoria. 620 281 540 Following this transaction, GeoPark continued to be the operator and have an 89.5% interest in the Carupana Field and 100% in Yamú and Potrillo Fields. The 1,441 Company recognized, during 2015, a loss of US$ 296,000 generated by this 2016 487 134 - 621 2015 557 129 - 686 Non-audit services fees relate to due diligence, consultancy and other services for 2014. Note 34 Business transactions a. Peru Entry in Peru transaction. c. Brazil Acquisition in Brazil GeoPark entered into Brazil with the acquisition of a 10% working interest in the offshore Manati gas field (“Manati Field”), the largest natural gas producing field in Brazil. GeoPark has paid a cash consideration of US$ 140,100,000 at 31 March 2014 or The Company has executed a Joint Investment Agreement and Joint the closing date, which was adjusted for working capital with an effective date Operating Agreement with Petróleos del Peru S.A. (“Petroperu”) to acquire an of 30 April 2013. The agreement also provides for possible future contingent interest in and operate the Morona Block located in northern Peru. GeoPark payments by GeoPark over the next five years, depending on the economic will assume a 75% working interest (“WI”) of the Morona Block, with Petroperu performance and cash generation of the Block. The Company has estimated retaining a 25% WI. The transaction has been approved by the Board of that there are no any future contingent payments at the acquisition date and Directors of both Petroperu and GeoPark. as of the date of these consolidated financial statements either. The agreement was subject to Peru regulatory approval, which was The Manati Field is operated by Petrobras (35% working interest), the Brazilian completed on 1 December 2016 following the issuance of Supreme Decree national company, largest oil and gas operator in Brazil and internationally- 031-2016-MEM. respected offshore operator. Other partners in the Block include Queiroz Galvao Exploração e Produção (45% working interest) and Brasoil Manati The Morona Block, also known as Lote 64, covers an area of 1.9 million Exploração Petrolífera S.A. (10% working interest). acres on the western side of the Marañón Basin, one of the most prolific hydrocarbon basins in Peru. In accordance with the acquisition method of accounting, the acquisition cost was allocated to the underlying assets acquired and liabilities assumed The Morona Block contains the Situche Central oil field, which has been based primarily upon their estimated fair values at the date of acquisition. An delineated by two wells (with short term tests of approximately 2,400 and income approach (being the net present value of expected future cash flows) 5,200 bopd of 35-36° API oil each) and by 3D seismic. was adopted to determine the fair values of the mineral interest. Estimates of expected future cash flows reflect estimates of projected future revenues, In accordance with the terms of the agreement, GeoPark has committed production costs and capital expenditures based on our business model. to carry Petroperu on a work program that provides for testing and start- up production of one of the existing wells in the field, subject to certain The following table summarises the consideration paid, the fair value of assets technical and economic conditions being met. Expected capital expenditures acquired and liabilities assumed for the abovementioned transaction: in 2017 for the Morona Block are mainly related to facility maintenance and environmental and engineering studies. b. Colombia Swap operation On 19 November 2015, GeoPark’s Colombian subsidiary agreed to exchange its 10% non-operating economic in-terest in Cerrito Block for additional GeoPark 189 Amounts in US$ ‘000 Total As a result of the situation described, the Company recognized an impairment Cash (including working capital adjustments) 140,100 loss of US$ 149,574,000 in 2015 after evaluating the recoverability of its fixed Total consideration Cash and cash equivalents 140,100 assets affected by oil price drop, as such situation constitutes an impairment 25,133 indicator according to IAS 36 and, consequently, it triggers the need of Property, plant and equipment (including mineral interest) 112,847 assessing fair value of the assets involved against their carrying amount. 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 The Management of the Company considers as Cash Generating Unit (CGU) 950 each of the blocks in which the Group has working or economic interests. The blocks with no material investment on fixed assets or with operations that are not linked to oil prices were not subject to impairment test. (3,132) (4,538) (6,862) 140,100 During 2016 the impairment tests were reviewed. The main assumptions taken into account for the impairment tests for the blocks below mentioned were: The purchase price allocation above mentioned is final. The revenue included in the consolidated statement of comprehensive income curves prices available in the market, provided by international advisory since acquisition date contributed by the acquired company was US$ 35,621,000 companies, weighted through internal estimations in accordance with for the year 2014. The acquired company also contributed profit of US$ price curves used by D&M; 18,952,000 over the same period. Had Rio das Contas been consolidated from – Three price scenarios were projected and weighted in order to minimize 1 January 2014 the consolidated statement of income would show pro-forma misleading: low price, middle price and high price (see below table “Oil revenue of US$ 440,298,000 and profit of US$ 23,139,000 for the year 2014. price scenarios”); – The future oil prices have been calculated taking into consideration the oil Note 35 – The table “Oil price scenarios” was based on WTI future price estimations; the Company adjusted this marker price on its model valuation to reflect Impairment test on Property, plant and equipment the effective price applicable in each location (see Note 3 “Price risk”); – The model valuation was based on the expected cash flow approach; Oil price crisis started in the second half of 2014 and prices fell dramatically, – The revenues were calculated linking price curves with levels of production WTI and Brent, the main international oil price markers, fell more than according to certified reserves (see below table “Oil price scenarios”); 60% between October 2014 and February 2016. Because of those market – The levels of production have been linked to certified risked 1P, 2P and 3P conditions, during 2015, the Company undertook a decisive cost cutting reserves (see Note 4); program to ensure its ability to both maximize the work program and preserve – Production and structure costs were estimated considering internal its liquidity. The main decisions included: historical data according to GeoPark’s own records and aligned to 2017 approved budget; – Reduction of its capital investment taking advantage of the discretionary – The capital expenditures were estimated considering the drilling campaign work program. necessary to develop the certified reserves; – Deferment of capital projects by regulatory authority and partner – The assets subject to impairment test are the ones classified as Oil and Gas agreement. properties and Production facilities and machinery; – Renegotiation and reduction of oil and gas service contracts, including – The carrying amount subject to impairment test includes mineral drilling and civil work contractors, as well as transportation trucking and interest, if any; pipeline costs. – The income tax charges have considered future changes in the applicable – Operating cost improved efficiencies and temporary suspension of certain income tax rates (see Note 15). marginal producing oil and gas fields. During February 2015, the Company reduced its workforce significantly. This reduction streamlined certain internal functions and departments for creating a more efficient workforce in the current economic environment. As a result, the Company achieved cost savings associated with the reduction of full-time and temporary employees, excluding one-time termination costs. Continuous efforts and actions to reduce costs and preserve liquidity have Table Oil price scenarios (a): continued since. 190 GeoPark 20F Low price Middle price High price Weighted market (15%) (60%) (25%) price used for the Amounts in US$ per Bbl. impairment test 45.1 49.2 54.7 58.5 58.3 57.9 54.1 59.0 65.7 70.2 70.0 69.5 66.1 72.1 80.3 85.8 85.5 85.0 55.8 60.8 67.7 72.3 72.1 71.6 Year 2017 2018 2019 2020 2021 Over 2022 (a) The percentages indicated between brackets represent the Company estimation regarding each price scenario. As a consequence of the evaluation no additional impairment loss was recognized but part of the impairment recorded in Colombia was reversed for an amount of US$ 5,664,000 due to increase in estimated market prices for 2017 and 2018 and improvements in cost structure. Peru and Argentina segments have no associated assets subject to impairment. 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 reversal would have been lower by approximately US$ 2,100,000. Note 36 Commodity risk management contracts During 2016, the Group entered into derivative financial instruments to manage its exposure to oil price risk. These derivatives were zero-premium collars and were placed with major financial institutions and commodity traders. The Group entered into the derivatives under ISDA Master Agreements and Credit Support Annexes, which provide credit lines for collateral posting thus alleviating possible liquidity needs under the instruments and protect the Group from potential non-performance risk by its counterparties. The Group’s derivatives are accounted for as non-hedge derivatives as of 31 December 2016 and therefore all changes in the fair values of its derivative contracts are recognized as gains or losses in the earnings of the periods in which they occur. Period Hedged 1 November 2016 – 30 June 2017 1 November 2016 – 30 June 2017 1 January 2017 – 30 September 2017 1 January 2017 – 30 September 2017 1 January 2017 – 30 September 2017 Reference ICE BRENT ICE BRENT ICE BRENT ICE BRENT ICE BRENT Type Volume bbl/d Price US$/bbl Zero Premium Collar Zero Premium Collar Zero Premium Collar Zero Premium Collar Zero Premium Collar 4,000 2,000 3,000 1,000 2,000 50.0 Put 57.0 Call 50.0 Put 57.1 Call 54.0 Put 61.1 Call 54.0 Put 61.0 Call 53.0 Put 60.1 Call The table below summarizes the (gain) loss on the commodity risk management contracts: GeoPark 191 Realized gain on commodity risk management contracts Unrealized loss on commodity risk management contracts Total Note 37 2016 2015 2014 (514) 3,068 2,554 - - - - - - Supplemental information on oil and gas activities (unaudited) The following information is presented in accordance with ASC No. 932 “Extractive Activities - Oil and Gas”, as amended by ASU 2010 - 03 “Oil and Gas Reserves. Estimation and Disclosures”, issued by FASB in January 2010 in order to align the current estimation and disclosure requirements with the requirements set in the SEC final rules and interpretations, published on 31 December 2008. This information includes the Company’s oil and gas production activities carried out in Chile, Colombia, Brazil and Argentina and the incorporation of Peru. Table 1 - Costs incurred in exploration, property acquisitions and development (a) The following table presents those costs capitalized as well as expensed that were incurred during each of the years ended as of 31 December 2016, 2015 and 2014. The acquisition of properties includes the cost of acquisition of proved or unproved oil and gas properties. Exploration costs include geological and geophysical costs, costs necessary for retaining undeveloped properties, drilling costs and exploratory wells equipment. Development costs include drilling costs and equipment for developmental wells, the construction of facilities for extraction, treatment and storage of hydrocarbons and all necessary costs to maintain facilities for the existing developed reserves. Amounts in US$ ‘000 Year ended 31 December 2016 Acquisition of properties Proved Unproved Total property acquisition Exploration Development Total costs incurred Year ended 31 December 2015 Acquisition of properties Proved Unproved Total property acquisition Exploration Development Total costs incurred 192 GeoPark 20F Chile Colombia Argentina Brazil Total - - - - 5,519 4,566 10,085 15,233 12,500 27,733 - - - - 3,598 13,315 16,913 14,845 14,752 29,597 - - 1,894 - 1,894 - - 1,103 56 1,159 - - 2,555 191 2,746 - - 2,562 3,780 6,342 - - 25,201 17,257 42,458 - - 22,108 31,903 54,011 Amounts in US$ ‘000 Year ended 31 December 2014 Acquisition of properties Proved Unproved Total property acquisition Exploration Development Total costs incurred (a) Includes capitalised amounts related to asset retirement obligations. Table 2 - Capitalised costs related to oil and gas producing activities The following table presents the capitalized costs as at 31 December 2016, 2015 and 2014, for proved and unproved oil and gas properties, and the related accumulated depreciation as of those dates. Amounts in US$ ‘000 At 31 December 2016 Proved properties Equipment, camps and other facilities (a) Mineral interest and wells (a) Other uncompleted projects (a) Unproved properties Gross capitalised costs Accumulated depreciation Total net capitalised costs Chile Colombia Argentina Brazil Total - - - - - - 84,251 82,742 166,993 14,114 55,336 69,450 - - - (123) 126 112,646 112,646 - 112,646 12,004 1,052 - 112,646 110,246 139,256 3 125,702 362,148 Chile Colombia Argentina Brazil Total 80,611 380,037 18,274 48,908 46,785 230,100 12,534 4,503 527,830 293,922 (230,917) (190,025) 296,913 103,897 843 4,849 36 1,894 7,622 (5,692) 1,930 4,174 77,255 2,082 6,468 132,413 692,241 32,926 61,773 89,979 919,353 (29,803) (456,437) 60,176 462,916 (a) Includes capitalised amounts related to asset retirement obligations and impairment loss reversal in Colombia for US$ 5,664,000. Amounts in US$ ‘000 At 31 December 2015 Proved properties Equipment, camps and other facilities (a) Mineral interest and wells (a) Other uncompleted projects (a) Unproved properties Gross capitalised costs Accumulated depreciation Total net capitalised costs Chile Colombia Argentina Brazil Total 79,040 367,722 21,830 70,062 42,852 213,480 7,703 8,180 538,654 272,215 (201,138) (160,759) 337,516 111,456 843 4,849 290 - 5,982 (5,654) 328 2,097 62,941 - 8,758 124,832 648,992 29,823 87,000 73,796 890,647 (14,236) (381,787) 59,560 508,860 (a) Includes capitalised amounts related to asset retirement obligations and impairment loss in Chile and Colombia for US$ 104,515,000 and US$ 45,059,000, respectively. GeoPark 193 Amounts in US$ ‘000 At 31 December 2014 Proved properties Equipment, camps and other facilities Mineral interest and wells (a) Other uncompleted projects Unproved properties Gross capitalised costs Accumulated depreciation Total net capitalised costs (a) Includes capitalised amounts related to asset retirement obligations and impairment loss in Colombia for US$ 9,430,000. Table 3 - Results of operations for oil and gas producing activities The breakdown of results of the operations shown below summarizes revenues and expenses directly associated with oil and gas producing activities for the years ended 31 December 2016, 2015 and 2014. Income tax for the years presented was calculated utilizing the statutory tax rates. Amounts in US$ ‘000 Year ended 31 December 2016 Revenue Production costs, excluding depreciation Operating costs Royalties Total production costs Exploration expenses (a) Accretion expense (b) Impairment loss reversal for non-financial assets Depreciation, depletion and amortization Results of operations before income tax Income tax benefit (expense) Results of oil and gas operations Amounts in US$ ‘000 Year ended 31 December 2015 Revenue Production costs, excluding depreciation Operating costs Royalties Total production costs Exploration expenses (a) Accretion expense (b) Impairment loss for non-financial assets Depreciation, depletion and amortization Results of operations before income tax Income tax benefit (expense) Results of oil and gas operations 194 GeoPark 20F Chile Colombia Argentina Brazil Total 81,998 426,638 37,902 113,403 28,805 227,755 20,204 18,176 659,941 294,940 (163,217) (111,855) 496,724 183,085 843 4,849 - - 5,692 (5,562) 130 - 90,705 1,053 8,865 111,646 749,947 59,159 140,444 100,623 1,061,196 (4,951) 95,672 (285,585) 775,611 Chile Colombia Argentina Brazil Total 36,723 126,228 (20,674) (1,495) (29,326) (7,281) (22,169) (36,607) (21,060) (11,690) (897) - (29,890) (37,293) 5,594 (31,699) (459) 5,664 (29,439) 53,697 (21,479) 32,218 - - - - - - - - - - - 29,719 192,670 (5,738) (2,721) (55,738) (11,497) (8,459) (67,235) (5,636) (1,198) - (12,785) 1,641 (558) 1,083 (38,386) (2,554) 5,664 (72,114) 18,045 (16,443) 1,602 Chile Colombia Argentina Brazil Total 44,808 131,897 597 32,388 209,690 (26,731) (1,973) (40,384) (8,150) (28,704) (48,534) (30,499) (789) (104,515) (37,664) (7,132) (890) (45,059) (50,675) (1,414) (34) (1,448) (1,159) - - (5,058) (2,998) (8,056) (1,103) (896) (73,587) (13,155) (86,742) (39,893) (2,575) - (149,574) (91) (13,401) (101,831) (157,363) (20,393) (2,101) 8,932 (170,925) 23,604 7,953 735 (3,037) 29,255 (133,759) (12,440) (1,366) 5,895 (141,670) Amounts in US$ ‘000 Year ended 31 December 2014 Revenue Production costs, excluding depreciation Operating costs Royalties Total production costs Exploration expenses (a) Accretion expense (b) Impairment loss for non-financial assets Depreciation, depletion and amortization Results of operations before income tax Income tax expense Results of oil and gas operations (a) Do not include Peru costs. (b) Represents accretion of ARO liability. Table 4 - Reserve quantity information Estimated oil and gas reserves Chile Colombia Argentina Brazil Total 145,720 246,085 1,308 35,621 428,734 (34,991) (6,777) (67,470) (12,354) (41,768) (79,824) (36,057) (816) - (35,856) 31,223 (4,684) 26,539 (4,567) (547) (9,430) (51,856) 99,861 (33,953) 65,908 (309) (241) (550) 123 - - (94) 787 (275) 512 (5,354) (2,794) (108,124) (22,166) (8,148) (130,290) (2,164) (609) - (11,554) 13,146 (4,470) 8,676 (42,665) (1,972) (9,430) (99,360) 145,017 (43,382) 101,635 estimation depends on the quality of available information and the interpretation and judgment of the engineers and geologists. Therefore, the reserves estimations, as well as future production profiles, are often Proved reserves represent estimated quantities of oil (including crude different than the quantities of hydrocarbons which are finally recovered. oil and condensate) and natural gas, which available geological and The accuracy of such estimations depends, in general, on the assumptions engineering data demonstrates with reasonable certainty to be recoverable on which they are based. in the future from known reservoirs under existing economic and operating conditions. Proved developed reserves are proved reserves that can The estimated GeoPark net proved reserves for the properties evaluated as of reasonably be expected to be recovered through existing wells with existing 31 December 2016, 2015 and 2014 are summarised as follows, expressed in equipment and operating methods. The choice of method or combination thousands of barrels (Mbbl) and millions of cubic feet (MMcf ): of methods employed in the analysis of each reservoir was determined by the stage of development, quality and reliability of basic data, and production history. The Company believes that its estimates of remaining proved recoverable oil and gas reserve volumes are reasonable and such estimates have been prepared in accordance with the SEC Modernization of Oil and Gas Reporting rules, which were issued by the SEC at the end of 2008. The Company estimates its reserves at least once a year. The Company’s reserves estimation as of 31 December 2016, 2015 and 2014 was based on the DeGolyer and MacNaughton Reserves Report (the “D&M Reserves Report”). DeGolyer and MacNaughton prepared its proved oil and natural gas reserve estimates in accordance with Rule 4-10 of Regulation S–X, promulgated by the SEC, and in accordance with the oil and gas reserves disclosure provisions of ASC 932 of the FASB Accounting Standards Codification (ASC) relating to Extractive Activities - Oil and Gas (formerly SFAS no. 69 Disclosures about Oil and Gas Producing Activities). Reserves engineering is a subjective process of estimation of hydrocarbon accumulation, which cannot be accurately measured, and the reserve GeoPark 195 Net proved developed Chile (a) Colombia (b) Brazil (c) Peru (d) Total consolidated Net proved undeveloped Chile (e) Colombia (f ) Brazil (c) Peru (d) Total consolidated Total proved reserves As of 31 December 2016 As of 31 December 2015 As of 31 December 2014 Oil and Oil and Oil and condensate Natural gas condensate Natural gas condensate Natural gas (Mbbl) (MMcf ) (Mbbl) (MMcf ) (Mbbl) (MMcf ) 547.0 9,502.0 72.0 9,316.0 19,437.0 6,052 27,838.0 - 9,305.0 43,195.0 62,632.0 6,610.0 - 29,525.0 - 36,135.0 29,690.0 - - - 498.0 8,177.8 120.0 - 8,795.8 5,455.8 22,245.5 - - 4,922.0 - 36,158.0 - 41,080.0 31,593.0 - - - 29,690.0 65,825.0 27,701.3 36,497.1 31,593.0 72,673.0 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 (a) Fell Block accounts for 99% of the reserves (91% in 2015 and 92% in 2014) (LGI owns a 20% interest) and Flamenco Block accounts for 1% (9% in 2015 and 8% in 2014) (LGI owns 31.2% interest). (b) Llanos 34 Block and Llanos 32 Block account for 99% and 1% (Llanos 34 Block and Cuerva Block account for 94% and 3% in 2015 and 79% and 17% in 2014) of the proved developed reserves, respectively (LGI owns a 20% interest). (c) BCAM-40 Block accounts for 100% of the reserves. (d) Morona Block accounts for 100% of the reserves. (e) Fell Block accounts for 99% of the reserves (100% in 2015 and 96% in 2014) (LGI owns a 20% interest), (Flamenco Block accounts for 1% in 2016 and 3% in 2014 and Isla Norte accounts for 1% 2014) (LGI owns 31.2% interest). (f ) Llanos 34 Block accounts for 100% (Llanos 34 Block and Cuerva Block account for 95% and 4% in 2015 and 91% and 7% in 2014) of the proved undeveloped reserves, respectively (LGI owns a 20% interest). 196 GeoPark 20F 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 2013 Increase (decrease) attributable to: Revisions (a) Extensions and discoveries (b) Purchases of minerals in place Production Reserves as of 31 December 2014 Increase (decrease) attributable to: Revisions Extensions and discoveries (c) Production Reserves as of 31 December 2015 Increase (decrease) attributable to: Revisions (d) Extensions and discoveries (e) Incorporation Production Reserves as of 31 December 2016 (a) 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. (b) 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. (c) In Colombia, the extensions and discoveries are primarily due to the Tilo, Jacana, and Chachalaca field discoveries in the Llanos 34 Block. (d) In Colombia, the revisions are mainly due to the performance and development of Tigana and Jacana fields and secondly to the performance of others Fields in Llanos 34 Block. (e) In Colombia, the extensions and discoveries are primarily due to the Jacana field appraisal wells in the Llanos 34 Block. Chile Colombia Brazil Peru Total 5,375.0 9,426.6 124.9 2,489.7 2,314.0 16,477.0 - - (1,372.0) (3,658.0) 6,441.9 24,735.3 119.0 100.0 (707.1) (1.0) 10,489.0 (4,800.0) 5,953.8 30,423.3 1,148.0 - - 5,779.0 6,311.0 - (502.8) (5,173.3) 6,599.0 37,340.0 - - - 150.0 (20.0) 130.0 7.6 - (17.6) 120.0 (34.0) - - (14.0) 72.0 - - - - - - - - - - - - 18,621.0 - 14,801.6 2,614.6 18,791.0 150.0 (5,050.0) 31,307.2 125.6 10,589.0 (5,524.7) 36,497.1 6,893.0 6,311.0 18,621.0 (5,690.1) 18,621.0 62,632.0 GeoPark 197 Net proved reserves (developed and undeveloped) of natural gas: abandonment costs. These future development costs were estimated based on Millions of cubic feet Chile Brazil Total applying the statutory tax rates in effect in the respective countries in which evaluations made by the Company. The future income tax was calculated by Reserves as of 31 December 2013 32,159.0 Increase (decrease) attributable to: Revisions (a) Extensions and discoveries (b) Purchases of minerals in place 3,312.0 3,014.0 - - - 32,159.0 we have interests, as of the date this supplementary information was filed. 3,312.0 This standardized measure is not intended to be and should not be 3,014.0 interpreted as an estimate of the market value of the Company’s reserves. The - 47,680.0 47,680.0 purpose of this information is to give standardized data to help the users of Production (4,515.0) (7,216.0) (11,731.0) the financial statements to compare different companies and make certain Reserves as of 31 December 2014 33,970.0 40,464.0 74,434.0 projections. It is important to point out that this information does not include, Increase (decrease) attributable to: Revisions (c) Extensions and discoveries (d) Production among other items, the effect of future changes in prices, costs and tax rates, (2,680.0) 9,378.0 2,907.0 227.0 which past experience indicates that are likely to occur, as well as the effect of - 9,378.0 future cash flows from reserves which have not yet been classified as proved (4,153.0) (7,213.0) (11,366.0) reserves, of a discount factor more representative of the value of money Reserves as of 31 December 2015 36,515.0 36,158.0 72,673.0 over the lapse of time and of the risks inherent to the production of oil and Increase (decrease) attributable to: Revisions (e) Production 5,078.0 (319.0) 4,759.0 cash flows disclosed below. For all these reasons, this information does not (5,293.0) (6,314.0) (11,607.0) necessarily indicate the perception the Company has on the discounted future gas. These future changes may have a significant impact on the future net Reserves as of 31 December 2016 36,300.0 29,525.0 65,825.0 net cash flows derived from the reserves of hydrocarbons. (a) The revisions are mainly due to Chercán Field development in TdF Block and gas and associated gas performance/development in Fields of Fell Block. (b) Mainly due to the Ache Field discovery and the associated gas from Konawentru extension well. (c) In Brazil, the revisions are primary due to the production performance of Manati field. (d) In Chile, the extensions and discoveries are primary due to the Ache Field discovery and from the extension well in the Fell Block. (e) The revisions are mainly due to Ache Field and Pampa Larga development in Fell Block and gas and associated gas performance/development in others Fields of Fell Block. Revisions refer to changes in interpretation of discovered accumulations and some technical and logistical needs in the area obliged to modify the timing and development plan of certain fields under appraisal and development phases. Table 6 - Standardized measure of discounted future net cash flows related to proved oil and gas reserves The following table discloses estimated future net cash flows from future production of proved developed and undeveloped reserves of crude oil, condensate and natural gas. As prescribed by SEC Modernization of Oil and Gas Reporting rules and ASC 932 of the FASB Accounting Standards Codification (ASC) relating to Extractive Activities – Oil and Gas (formerly SFAS no. 69 Disclosures about Oil and Gas Producing Activities), such future net cash flows were estimated using the average first day- of-the-month price during the 12-month period for 2016, 2015 and 2014 and using a 10% annual discount factor. Future development and abandonment costs include estimated drilling costs, development and exploitation installations and 198 GeoPark 20F Amounts in US$ ‘000 At 31 December 2016 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 2015 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 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 Chile Colombia Brazil Peru Total 394,993 873,771 (186,700) (229,593) (149,785) (69,996) (8,344) 50,164 (191,096) 383,086 200,713 (74,116) (16,352) (21,041) 89,204 941,463 2,410,940 (497,187) (987,596) (234,328) (470,461) (69,698) (290,179) 140,250 662,704 (14,709) (113,584) (15,688) (109,321) (253,302) 35,455 269,502 73,516 30,929 409,402 403,199 1,032,339 (186,933) (309,394) (112,312) (99,305) (17,904) (195,957) 86,050 427,683 (17,895) (127,586) 68,155 300,097 221,206 (99,832) (16,360) (16,837) 88,177 (15,861) 72,316 778,820 1,732,395 307,535 (250,529) (587,096) (124,265) (184,352) (100,036) (54,442) (303,090) 289,497 742,173 (61,839) (158,102) 227,658 584,071 (19,965) (19,566) 143,739 (31,594) 112,145 - - - - - - - - - - - - - - 1,656,744 (596,159) (227,977) (230,698) 601,910 (161,342) 440,568 2,818,750 (961,890) (304,353) (377,098) 1,175,409 (251,535) 923,874 GeoPark 199 Chile Colombia 163,860 173,792 Brazil - (110,451) (208,337) (39,414) Peru Total 18,310 (134,272) 96,614 157,988 25,114 (9,751) - 20,246 227,658 (20,948) 19,215 (51,176) 600,391 59,272 103,411 (141,687) - 29,190 584,071 (97,152) (256,828) (547,379) 28,227 23,595 15,093 (5,463) 28,611 28,210 68,155 (15,127) (16,854) (49,763) - 9,417 22,765 - 8,256 8,606 (20,123) 174,951 29,965 (14,528) 101,576 88,716 300,097 (91,163) (171,131) 14,941 76,641 17,302 70,180 - 3,030 49,605 35,455 269,502 7,409 (22,143) - 1,340 1,559 4,156 142,423 16,815 112,145 (37,428) (27,404) 542 - 4,872 4,845 1,573 13,171 72,316 (20,945) 16,366 542 - 2,214 (1,872) (4,020) 8,915 73,516 - - - - - - - - - - - - - - - - - - - - - - - - - - - - 337,652 (358,202) 44,934 (207,591) 697,005 218,600 130,084 (147,282) 142,423 66,251 923,874 (155,528) (831,611) 8,646 198,546 49,930 (15,146) 131,760 130,097 440,568 (127,235) (171,619) (34,280) 76,641 28,933 91,073 30,929 7,266 67,126 - 30,929 30,929 409,402 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 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 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 2015 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 Incorporation Net changes in income taxes Accretion of discount Present value at 31 December 2016 200 GeoPark 20F Other Certification by the principal executive officer pursuant to Section 302 of a. All significant deficiencies and material weaknesses in the design or the sarbanes-oxley act of 2002 I, James F. Park, certify that: 1. I have reviewed this annual report on Form 20-F of GeoPark Limited; operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other 2. Based on my knowledge, this report does not contain any untrue statement employees who have a significant role in the company’s internal control over of a material fact or omit to state a material fact necessary to make the financial reporting. statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; Date: April 11, 2017 James F. Park 3. Based on my knowledge, the financial statements, and other financial Chief Executive Officer information included in this report, fairly present in all material respects the (Principal Executive Officer) financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; 4. The company’s other certifying officer(s) and I are responsible for Pursuant to section 302 of the sarbanes-oxley act of 2002 establishing and maintaining disclosure controls and procedures (as defined I, Andrés Ocampo, certify that: 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 )) 1. I have reviewed this annual report on Form 20-F of GeoPark Limited; Certification by the principal financial officer for the company and have: 2. Based on my knowledge, this report does not contain any untrue statement a. Designed such disclosure controls and procedures, or caused such of a material fact or omit to state a material fact necessary to make the disclosure controls and procedures to be designed under our supervision, statements made, in light of the circumstances under which such statements to ensure that material information relating to the company, including its were made, not misleading with respect to the period covered by this report; consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the b. Designed such internal control over financial reporting, or caused such financial condition, results of operations and cash flows of the company as of, internal control over financial reporting to be designed under our supervision, and for, the periods presented in this report; to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in 4. The company’s other certifying officer(s) and I are responsible for accordance with generally accepted accounting principles; establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over c. Evaluated the effectiveness of the company’s disclosure controls and financial reporting (as defined in Exchange Act Rules 13a 15(f ) and 15d 15(f )) procedures and presented in this report our conclusions about the for the company and have: effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, d. Disclosed in this report any change in the company’s internal control over to ensure that material information relating to the company, including its financial reporting that occurred during the period covered by the annual consolidated subsidiaries, is made known to us by others within those entities, report that has materially affected, or is reasonably likely to materially affect, particularly during the period in which this report is being prepared; the company’s internal control over financial reporting; and 5. The company’s other certifying officer(s) and I have disclosed, based on internal control over financial reporting to be designed under our supervision, our most recent evaluation of internal control over financial reporting, to to provide reasonable assurance regarding the reliability of financial the company’s auditors and the audit committee of the company’s board of reporting and the preparation of financial statements for external purposes in directors (or persons performing the equivalent functions): accordance with generally accepted accounting principles; b. Designed such internal control over financial reporting, or caused such GeoPark 201 c. Evaluated the effectiveness of the company’s disclosure controls and Certification by the principal financial officer pursuant to 18 u.S.C. procedures and presented in this report our conclusions about the Section 1350, as adopted pursuant to section 906 of the sarbanes-oxley effectiveness of the disclosure controls and procedures, as of the end of the act of 2002 period covered by this report based on such evaluation; and 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 d. Disclosed in this report any change in the company’s internal control over fiscal year ended December 31, 2016 (the “Report”), I, Andrés Ocampo, certify financial reporting that occurred during the period covered by the annual pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the report that has materially affected, or is reasonably likely to materially affect, Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: the company’s internal control over financial reporting; and 1. the Report fully complies with the requirements of Section 13(a) or 15(d) of 5. The company’s other certifying officer(s) and I have disclosed, based on the Securities Exchange Act of 1934; and our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of 2. the information contained in the Report fairly presents, in all material directors (or persons performing the equivalent functions): respects, the financial condition and results of operations of the Company. a. All significant deficiencies and material weaknesses in the design or Date: April 11, 2017 operation of internal control over financial reporting which are reasonably Andrés Ocampo likely to adversely affect the company’s ability to record, process, summarize Chief Financial Officer and report financial information; and (Principal Financial Officer) 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 Consent of independent registered public accounting firm financial reporting. Date: April 11, 2017 Andrés Ocampo Chief Financial Officer (Principal Financial Officer) We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No 333-201016 and No.333-214291) of GeoPark Limited of our report dated March 6, 2017 relating to the financial statements, which appears in this Form 20-F. We also consent to the reference to us under the heading “Presentation of Financial and Other Information” in this Form 20-F. PRICE WATERHOUSE & CO S.R.L By: Ezequiel Luis Mirazón (Partner) Certification by the principal executive officer pursuant to18 U.S.C. Ezequiel Luis Mirazón Section 1350, as adopted pursuant toSection 906 of the sarbanes-oxley Autonomous City of Buenos Aires, Argentina act of 2002 April 11, 2017 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 fiscal year ended December 31, 2016 (the “Report”), I, James F. Park, certify pursuant DeGolyer and MacNaughton to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- 5001 Spring Valley Road 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) of Dallas, Texas 75244 Suite 800 East the Securities Exchange Act of 1934; and April 11, 2017 GeoPark Limited 2. the information contained in the Report fairly presents, in all material Nuestra Señora de los Ángeles 179 respects, the financial condition and results of operations of the Company. Las Condes, Santiago, Chile Date: April 11, 2017 James F. Park Chief Executive Officer (Principal Executive Officer) 202 GeoPark 20F Ladies and Gentlemen: As an independent petroleum consulting firm, we hereby consent to the incorporation by reference to our year-end 2016 third-party letter report dated April 11, 2017, and to our audit letter to Price-Waterhouse & Co. S.R.L. dated March 4, 2017, to be used under certain headings contained in the Annual Report of Geopark Limited on Form 20-F for the year ended December 31, 2016, and specified in our consent letter dated April 11, 2017, to GeoPark Limited, which is referenced in the previously filed Registration Statement on Form S-8 (File Nos. 333-201016 and 33-214291) under “PART II,” “Item 3. Incorporation of Documents by Reference.” Very truly yours, DeGolyer and MacNaughton DeGOLYER and MacNAUGHTON Texas Registered Engineering Firm F-716 GeoPark 203 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 entire business career, starting in 1976 with Lario oil and Gas company. He later formed the Globe resources Group, a private venture firm whose subsidiaries provided seismic acquisition and processing, well rehabilitation services, logistical operations and submersible pump works for Lukoil and other companies active in russia during the 1990s.  Mr. o’shaughnessy is also founder of Boe Midstream, which owns and operates the Bakken oil express, a crude by rail transloading and storage terminal in North dakota, serving oil producers and marketing companies in the Bakken shale oil play. 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, the timothy P. o’shaughnessy foundation and is a member of the intercontinental chapter of Young Presidents organization and World Presidents’ organization. Pedro E. 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 us 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 aylwin, Mendoza, Luksic, Valencia 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. Carlos A. 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 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 35 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. 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 an 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, where 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. 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 Hidroelétrica totoral and founder board member of several companies, including Quintec, enaex, cti and frimetal. Peter Ryalls | Non-Executive Director Mr. 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 in West africa, returning to the UK in 1976 to study for his Master’s degree in Petroleum engineering at imperial college, London following which he joined Mobil North sea. He moved to Unocal corporation in 1979 where he held increasingly senior positions, including as Managing director of Unocal UK 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. 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. 204 annual report 2016 / Board of directors Robert A. Bedingfield | Non-Executive Director Mr. Bedignfield has been a member of our board of directors since March 2015. He holds a degree in accounting from the University of Maryland and is a certified Public accountant. 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, and at times 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. since 2013, Mr. Bedingfield has also served as Board Member and chairman of the audit committee of NYse-listed science applications international corp (saic). Michael D. Dingman | Non-Executive Director Mr. dingman has been a member of our board of directors since January 2017. He is a successful international investor, businessman and philanthropist, with more than 50 years of experience. Mr. dingman has an extensive and successful career in Wall street as partner of Butnham & company, he also was chairman and/or ceo of Wheelabrator-fryre, signal, alliedsignal, the Henley Group and fisher-scientific. His wide experience in the energy industry includes working with the Liedtke family of Pennzoil at Pogo Producing company and as an early investor of sidanco, one of russia´s largest oil companies. currently, he is founder, President and ceo of the shipston Group. Mr. dingman is a former director of ford Motor company (21 years), time and then time Warner (24 years), and the Mellon Bank, temple industries, temple-inland, continental telephone and teekay shipping. He is the founder of the “Michael d. dingman center for entrepreneurship” at the University of Maryland and he is benefactor and former member of the Boston Museum of fine arts and the John a. Hartford foundation. Jamie B. Coulter | Non-Executive Director Mr. coulter has been a member of our board of directors since May 2017. He currently serves as chairman and ceo of coulter enterprises inc., a private investment firm and has been an investor in and supporter of GeoPark since 2006. He built and became the ceo of Lone star steakhouse & saloon, a company that was awarded iPo of the year and forbes Magazine #1 Best small company in america for 3 consecutive years. He developed and operated Pizza Hut and Kentucky fried chicken restaurants and became the largest Pizza Hut franchisee, was inducted to the Pizza Hut Hall of fame, and was named the restaurants & institutions ceo of the year. Mr. coulter has both operating and investment experience in the oil and gas business, including, the founding of sunburst exploration, a Us upstream oil and gas company and also has a successful track record as an oil and gas investor in the North american shale plays. Mr. coulter currently serves as a director of the federal Law enforcement foundation; director of Jimmy Johns, LLc; director of realm cellars; director of cirq estates, LLc; director of KB Wines, LLc; Member of the Board of trustee for Hca Wesley Medical center and Member of the texas Heart institute foundation Board. 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 and has led the company´s expansion into chile, argentina, colombia, Brazil and Peru. 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 studies at the University of texas. Mr. Park helped pioneer the development of commercial oil and gas production in central america, as a senior executive of Basic resources international where he remained as a board member until the company was successfully sold in 1997. Mr. Park has experience 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. Mr. Park is also a member of the board of directors of energy Holdings and has served on various non-profit organizations, including as a board member of s.e.e. international. Mr. Park is a member of the aaPG and sPe and has lived in Latin america since 2002. CORPORATE MANAGEMENT TEAM JAMES F. PARK Chief Executive Officer AUGUSTO ZUBILLAGA Chief Operating Officer ANDRÉS OCAMPO Chief Financial Officer PEDRO E. AyLWIN Legal & Governance MARCELA vACA Colombia ALBERTO MATAMOROS Argentina, Brazil & Chile BARBARA BRUCE Peru SALvADOR MINNITI Exploration CARLOS MURUT Reserves & Development JUAN CARLOS FERRERO Operations HORACIO FONTANA Drilling & Workovers AGUSTINA WISKy Performance GUILLERMO PORTNOI New Business STACy STEIMEL Shareholder value SECRETARy & ADvISORS Registered Office Cumberland House 9th floor, Counsel to the Company Davis Polk & Wardwell LLP Corporate Offices 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 Las Condes, Santiago Chile | + 56 2 242 9600 Bogota Office Street 94 N° 11-30, 8, 9, 10th floor Colombia | +57 1 743 2337 Corporate Secretary Pedro E. Aylwin as to New York Law 450 Lexington Avenue New york, Ny 10017 USA Solicitors to the Company Cox Hallett Wilkinson as to Bermuda Law Cumberland House 9th floor, 1 victoria Street Hamilton HM11 - Bermuda P.O. Box HM 1561 Hamilton HMFX - Bermuda Independent Auditors Price Waterhouse & Co. S.R.L. Bouchard 557, floor 8 Buenos Aires Argentina Petroleum Consultant DeGolyer and MacNaughton 5001 Spring valley Road Suite 800 East Dallas, Texas 75244 USA Registrar Computershare Investor Services Queensway House 480 Washington Blvd. Jersey City, NJ 07310 CONTENTS 4 12 18 20 22 24 Letter to Shareholders Business Approach and Guidelines 2016 Performance Our Strengths Our Approach Our value System 27 Form 20-F 150 Consolidated Financial Statements 204 Board of Directors 205 Corporate Management Team, Secretary & Advisors Casanare Department, Colombia ANNUAL REPORT 2016 6 1 0 2 T R O P E R L A U N N A k r a P o e G ANNUAL REPORT 2016 WWW.GEO-PARK.COM EXPLORER OPERATOR CONSOLIDATOR

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