GeoPark Signs New Offtake Agreement With Vitol for the Llanos 34 Block in Colombia

Rhea-AI Summary

GeoPark announced a new offtake agreement with Vitol, providing improved price realizations and up to $500 million in funding. The agreement allows GeoPark to sell a minimum of 20,000 bopd of production from the Llanos 34 Block, starting on July 1, 2024. GeoPark will receive immediate access to $300 million in funding, with an option to increase to $500 million, for prepaid future oil sales. The agreement offers competitive financing with a SOFR risk-free rate plus a margin of 3.75% per annum, enhancing GeoPark's commercial performance and growth prospects.

Positive

• Improved price realizations by 15 cents per barrel vs. the current agreement

• Immediate access to up to $500 million in funding from Vitol

• Flexible financing options with the ability to repay through future oil deliveries

• Provides immediate value and growth optionality for GeoPark

Negative

• None.

Insights

Energy Sector Analyst

The agreement between GeoPark and Vitol signifies an increase in price realizations for GeoPark's oil production from the Llanos 34 Block, which should contribute to enhanced revenue streams. The $0.15 improvement per barrel could be perceived as marginal; however, over the volume of 20,000 bopd, this increment could lead to substantial financial gains over the duration of the contract. Furthermore, the access to up to $500 million in funding provides GeoPark with a significant capital infusion for potential expansion or debt reduction. The flexibility of repayment and the relatively modest interest rate pegged to the SOFR plus 3.75% margin indicate a favorable borrowing cost in the current interest rate environment. The oil and gas sector is subject to volatility and such agreements can offer stability in cash flows and assist in capital planning. This deal could be seen as a strategic move to solidify GeoPark's financial position and support its growth initiatives in the Latin American market.

Financial Analyst

Analyzing the prepayment aspect of the deal, GeoPark gains immediate liquidity which is essential for its operations and potential growth investments. This agreement effectively leverages GeoPark’s future oil production as collateral, which could indicate confidence in GeoPark's reserves and production capabilities. Investors should note the conditions tied to the funding availability, which could potentially impact GeoPark’s financial flexibility. The option to increase the funding by an additional $200 million suggests that Vitol has a vested interest in GeoPark's performance and may provide a vote of confidence to the market. The strategic significance of locking in a sales price and pre-financing in an industry with fluctuating oil prices should not be underestimated, as it could mitigate risks associated with commodity price swings. GeoPark’s decision to enter into this agreement will likely be closely monitored by investors for its impact on the company's balance sheet and capital expenditure programs.

Improved Price Realizations & up to $500 Million Funding

BOGOTA, Colombia--(BUSINESS WIRE)-- GeoPark Limited (“GeoPark” or the “Company”) (NYSE: GPRK), a leading independent Latin American oil and gas explorer, operator and consolidator, today announces the execution of an offtake and prepayment agreement with Vitol, one of the world’s leading energy and commodity companies.

The offtake agreement provides for GeoPark to sell and deliver to Vitol a minimum of 20,000 bopd of production from the Llanos 34 Block (GeoPark operated, 45% WI). The agreement improves GeoPark’s price realizations by 15 cents (USD) per barrel vs the current agreement, or by 60 cents (USD) per barrel vs the average price realizations from January 2021 to date. The offtake agreement will start on July 1, 2024, for a minimum of 20 months and up to 36 months.

As part of this transaction, GeoPark will obtain immediate access to committed funding from Vitol for up to $300 million, with an option to increase by another $200 million for a total of $500 million, in prepaid future oil sales over the period of the offtake contract. Funds committed by Vitol will be made available until June 30, 2025, subject to certain conditions. Amounts drawn on this prepayment facility can be repaid through future oil deliveries or prepaid at any time without penalty. The interest cost is based on a SOFR risk-free rate plus a margin of 3.75% per annum.

The improved commercial performance and access to competitive and flexible financing secured by this transaction provides GeoPark with immediate value and optionality for future growth.

Vitol is one of the world’s leading energy and commodity companies with a history of over 55 years and strong presence and operations in Colombia and Latin America.

NOTICE

Additional information about GeoPark can be found in the “Invest with Us” section on the website at www.geo-park.com.

Rounding amounts and percentages: Certain amounts and percentages included in this press release have been rounded for ease of presentation. Percentages included in this press release have not in all cases been calculated on the basis of such rounded amounts, but on the basis of such amounts prior to rounding. For this reason, certain percentages in this press release may vary from those obtained by performing the same calculations on the basis of the amounts in the financial statements. Similarly, certain other amounts included in this press release may not sum due to rounding.

CAUTIONARY STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION

This press release contains statements that constitute forward-looking statements. Many of the forward-looking statements contained in this press release can be identified by the use of forward-looking words such as ‘‘anticipate,’’ ‘‘believe,’’ ‘‘could,’’ ‘‘expect,’’ ‘‘should,’’ ‘‘plan,’’ ‘‘intend,’’ ‘‘will,’’ ‘‘estimate’’ and ‘‘potential,’’ among others.

Forward-looking statements that appear in a number of places in this press release include, but are not limited to, statements regarding the intent, belief or current expectations, regarding various matters, including the availability of committed funding. Forward-looking statements are based on management’s beliefs and assumptions, and on information currently available to the management. Such statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors.

Forward-looking statements speak only as of the date they are made, and the Company does not undertake any obligation to update them in light of new information or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances, or to reflect the occurrence of unanticipated events. For a discussion of the risks facing the Company which could affect whether these forward-looking statements are realized, see filings with the U.S. Securities and Exchange Commission (SEC).

View source version on businesswire.com: https://www.businesswire.com/news/home/20240509086120/en/

INVESTORS:

Stacy Steimel

Shareholder Value Director

T: +562 2242 9600

ssteimel@geo-park.com



Miguel Bello

Market Access Director

T: +562 2242 9600

mbello@geo-park.com



Diego Gully

Capital Markets Director

T: +55 21 99636 9658

dgully@geo-park.com



MEDIA:

Communications Department

communications@geo-park.com

Source: GeoPark Limited

FAQ

What is the new agreement between GeoPark and Vitol about?

The new agreement between GeoPark and Vitol is an offtake and prepayment agreement allowing GeoPark to sell a minimum of 20,000 bopd of production from the Llanos 34 Block in Colombia.

When will the offtake agreement start?

The offtake agreement will start on July 1, 2024, for a minimum of 20 months and up to 36 months.

How much funding will GeoPark have access to through this agreement?

GeoPark will have immediate access to $300 million in funding, with an option to increase it to a total of $500 million, for prepaid future oil sales.

What is the interest cost for the funding obtained from Vitol?

The interest cost is based on a SOFR risk-free rate plus a margin of 3.75% per annum.

Who is Vitol?

Vitol is one of the world's leading energy and commodity companies with a strong presence in Colombia and Latin America.