GeoPark's Strategic Divestments: A Path to Enhanced Efficiency and Growth

In the ever-evolving landscape of the energy sector, geopark limited has made a bold move to streamline its operations and focus on sustainable long-term growth. The company recently announced the divestment of its non-core assets in Colombia and Brazil, marking a significant shift in its strategic direction. This move is not just about shedding underperforming assets; it's about optimizing the company's portfolio to maximize value for shareholders and enhance operational efficiency.

The divestment includes the Llanos 32 block in Colombia and the Manati gas field in Brazil, which together fetched a total consideration of $20 million. This amount is net of $12 million in liabilities associated with decommissioning or retirement obligations for the Manati gas field. The Llanos 32 Block was sold for $19 million, without a working capital adjustment of $3.7 million, while the Manati gas field was divested for $1 million, along with adjustments for working capital and a contingent payment linked to the field’s future cash flow or its possible conversion into a natural gas storage facility.



The immediate financial gain from these divestments will bolster GeoPark's cash position, providing liquidity for other strategic initiatives. The company has already received the net proceeds from the Llanos 32 Block transaction, which are pending final settlement, and expects to complete the Manati gas field divestment during the third quarter of 2025. This influx of cash will allow geopark to pursue accretive growth opportunities and return value to shareholders.

The divestment of these non-core assets will also reduce operational complexity, allowing GeoPark to focus its resources on more profitable and strategic operations. The divested assets had an average production of 712 barrels of oil equivalent per day (boepd) last year and represented around 1,500 boepd in this year’s plan, with an associated adjusted EBITDA of $10–13 million at $70–80 per barrel (bbl) Brent. By shedding these assets, GeoPark can streamline its operations and improve efficiency, freeing up resources to invest in higher-growth opportunities.

Looking ahead, the divestment is part of GeoPark's strategy to achieve sustainable long-term growth. By focusing on its core assets, GeoPark can allocate more resources to operations with higher growth potential and better returns. This will help the company achieve its goal of a 100% Reserves Replacement Ratio (RRR) and drive organic and inorganic growth opportunities.

The divestment will also improve GeoPark's financial metrics, such as its debt-to-equity ratio and return on assets (ROA). As of 2024, GeoPark's total long-term debt is $486.7 million, and its total debt is $616 million, with a debt-to-equity ratio of 1.42. The divestment will reduce GeoPark's debt burden and improve its financial flexibility, allowing it to pursue accretive growth opportunities and return value to shareholders.



In addition to the divestments, GeoPark is actively pursuing targeted cost reduction and efficiency measures, which are expected to yield annual savings of around $5–7 million in operational and general and administrative expenses. These initiatives involve immediate structural adjustments, including workforce reductions as well as cuts to consultants, contractors, and various administrative costs. By reducing costs and improving operational efficiency, GeoPark can enhance its competitive position in the Latin American energy market.

GeoPark's strategic focus on core assets provides several advantages that enhance its competitive position in the Latin American energy market. By divesting non-core assets such as the Llanos 32 Block in Colombia and the Manati gas field in Brazil, GeoPark aims to streamline operations and concentrate on sustainable long-term growth. This shift allows the company to allocate resources more efficiently, reducing operational costs and increasing profitability.

The divestment of the Llanos 32 Block and the Manati gas field for a total consideration of $20 million, which includes net liabilities of $12 million, enables GeoPark to focus on more productive and profitable assets. This move is expected to yield annual savings of around $5–7 million in operational and general and administrative expenses, which can be reinvested into core operations to drive growth and innovation.

Furthermore, GeoPark's strategic options for its assets in Ecuador and its targeted cost reduction measures further support this focus. By pursuing cost efficiency initiatives, GeoPark can maintain a competitive edge in the market. For example, the company has already received the net proceeds from the Llanos 32 Block transaction, which are pending final settlement, and is expected to complete the Manati gas field divestment during the third quarter of 2025. These actions demonstrate GeoPark's commitment to optimizing its asset portfolio and enhancing its financial health.

GeoPark's 2025 Work Program outlines a strategic approach to leverage its existing assets and resources to achieve significant milestones. The program emphasizes enhancing shareholder value through efficient resource allocation and bolstering operational capabilities across its Latin American projects. This focus on core assets aligns with GeoPark's "North Star" strategy, which aims to generate more than $400 million of annual EBITDA with an EBITDA margin of over 50% and a ROACE of over 30%. This strategy is underpinned by operational excellence and a comprehensive sustainability plan, including a 35-40% carbon intensity reduction compared to 2020 levels.

By concentrating on core assets, GeoPark can better navigate the complexities of the energy market, adapt to regulatory changes, and capitalize on growth opportunities. This strategic shift positions GeoPark as a leader in the Latin American energy sector, capable of delivering sustainable growth and value creation for its shareholders.