ANNUAL REPORT 2016
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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
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2016
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Oil and Gas Reserves
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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
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ANNUAL REPORT 2016
WWW.GEO-PARK.COM
EXPLORER
OPERATOR
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