GeoPark's Strategic Pivot to Vaca Muerta: A Path to Production Growth and Free Cash Flow Generation
Tuesday, Jan 21, 2025 6:11 am ET
3min read GeoPark Limited (NYSE: GPRK), a leading independent energy company with over 20 years of successful operations across Latin America, recently announced its operational update for the three-month period ended December 31, 2024. The update highlights GeoPark's strategic pivot towards unconventional assets in Vaca Muerta, Argentina, which is poised to offset mature asset declines in Colombia and drive production growth and free cash flow generation.
GeoPark's 4Q2024 consolidated average oil and gas production of 31,489 boepd was 5% lower than the previous quarter, primarily due to blockades affecting operations in the Llanos 34 and CPO-5 blocks in Colombia. However, the company's annual average production reached 33,937 boepd, demonstrating its commitment to maintaining production levels despite operational challenges. With 10 rigs in operation at the end of 2024, including one drilling rig in Vaca Muerta, GeoPark is well-positioned to execute its strategic initiatives and capitalize on growth opportunities.
Vaca Muerta: A Key Driver of Production Growth
GeoPark's strategic pivot towards Vaca Muerta unconventional assets has proven to be a successful growth driver. The company's 4Q2024 average production in Vaca Muerta reached a record of 16,060 boepd gross during November, a 19% increase from the previous quarter. This strong performance was driven by steady growth in the Mata Mora Norte Block and put-on production from the first exploration pad in the Confluencia Norte Block.
The successful Confluencia Norte pad, which peaked at 4,700 boepd gross, demonstrated strong execution and comparable per-well performance to four-well pads in the Mata Mora Norte block. This suggests that GeoPark's unconventional development strategy in Vaca Muerta is effective and can be replicated in other areas to maximize production and cost efficiencies.
Reserves Growth and Capital Discipline
DeGolyer & MacNaughton (D&M) has prepared an interim reserves report as of June 30, 2024, showing net 1P reserves of 39.1 million barrels of oil equivalent (mmboe), net 2P reserves of 75.2 mmboe, and net 3P reserves of 142.8 mmboe in the Mata Mora Norte block. GeoPark will issue a release on the full D&M 2024 report in February, and the company expects that increased reserves in Vaca Muerta will help compensate for potential declines in reserves in Colombia.
GeoPark's measured approach to capital expenditure, targeting 3-6 gross wells in Colombia and 4 gross wells in Argentina in the first quarter of 2025, demonstrates the company's commitment to balancing growth opportunities with capital discipline. This strategic pivot towards Vaca Muerta unconventional assets, coupled with effective reservoir management and exploration success in Colombia, positions GeoPark to maintain production levels and generate free cash flow in the long term.
In conclusion, GeoPark's strategic pivot towards Vaca Muerta unconventional assets has proven to be a successful growth driver, with strong production performance and reserves growth in the fourth quarter of 2024. The company's measured approach to capital expenditure and commitment to balancing growth opportunities with capital discipline position GeoPark to maintain production levels and generate free cash flow in the long term. As GeoPark continues to execute its strategic initiatives and capitalize on growth opportunities, investors can expect the company to deliver strong performance and create value for shareholders.
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