GeoPark raises capital budget, eyes Colombia 'cash machine'

Latin America-focused oil and gas company GeoPark has raised its 2021 capital guidance by 25-30% amid an improving international energy market outlook. 

Capital expenditure is expected to reach US$130-150mn, considering an average Brent price of US$50-55/b, executives said in an earnings call on Thursday. 

In November, the Bogotá-based company forecast 2021 capital spending of US$100-120mn, when it projected an average Brent price of US$40-45/b. 

GeoPark said it outlaid US$75.3mn for its 2020 work program compared to US$126mn the previous year. 

"Resulting from a sustained increase in oil prices since early November 2020, GeoPark is expanding its 2021 work program and investment plan to US$130-150mn, maintaining full flexibility to expand or adjust depending on prevailing oil prices," chief financial officer Andrés Ocampo said. 

At least half of total spending – an estimated US$75mn-90mn – will be pumped into development projects, according to Ocampo.

The company expects to drill 30-34 development and appraisal wells in 2021 and seven or eight exploration prospects.

Production is seen averaging 41,000-43,000boe/d compared to 40,192boe/d in 2020.

"By the end of the year we probably shouldn't be far from the 44,000 to 45,000boe/d that we were producing before the pandemic," Ocampo said. 

In Colombia, GeoPark expects production to double on the CPO-5 block while output from the Llanos-34 and Platanillo areas is expected to grow by up to 5%. 

Production is forecast to remain stable at the company's operations in Chile, Brazil and Argentina. 

COLOMBIA 'CASH MACHINE'

Ocampo pointed out that the bulk of GeoPark's 2021 development capital would be allocated to Llanos-34 in Colombia's eastern department of Casanare. 

"Historically that has been a huge growth asset for the company and now it is entering a new phase," he said. "It's going to be a significant cash machine that will require a lot of capex but will also spit out a lot of cash. At this stage we're more focused on cash and profits than shiny growth figures."

Rising production at Llanos-34, in which GeoPark holds a 45% operating stake, coincides with key infrastructure developments in the area. 

In the fourth quarter, GeoPark signed a contract to connect the block to the national power grid by 2022. It also linked the block's Tigana field to the ODCA pipeline in December, reducing road tanker traffic by 50 trucks a day, the company said.