Earnings Call Transcript - GPRK Q4 2025

Operator, Operator

Good morning, and welcome to the GeoPark Limited conference call following the results announcement for the fourth quarter ended December 31, 2025. Operator Instructions: If you do not have a copy of the press release, it is available at the Invest with Us section on the company's corporate website at www.geopark.com. A replay of today's call may be accessed through this webcast in the Invest with Us section of the GeoPark corporate website. Before we continue, please note that certain statements contained in the results press release and on this conference call are forward-looking statements rather than historical facts and are subject to risks and uncertainties that could cause actual results to differ materially from those described. With respect to such forward-looking statements, the company seeks protections afforded by the Private Securities Litigation Reform Act of 1995. These risks include a variety of factors, including competitive developments and risk factors listed from time to time in the company's SEC reports and public releases. Those lists are intended to identify certain principal factors that could cause actual results to differ materially from those described in the forward-looking statements, but are not intended to represent a complete list of the company's business risks. All financial figures included herein were prepared in accordance with IFRS and are stated in U.S. dollars unless otherwise noted. Reserve figures correspond to PRMS standards. On the call today from GeoPark are Felipe Bayon, Chief Executive Officer; Jaime Caballero Uribe, Chief Financial Officer; Martin Terrado, Chief Operating Officer; Rodrigo Dalle Fiore, Chief Exploration and Development Officer; and Maria Catalina Escobar, Shareholder Value and Capital Markets Director. And now I'll turn the call over to Mr. Felipe Bayon. Mr. Bayon, you may begin.

Felipe Bayon Pardo, Chief Executive Officer

Good morning, everyone, and thank you for joining GeoPark's Fourth Quarter and Full Year 2025 Results Call. 2025 marked a turning point for GeoPark, defined by strategic clarity, operational discipline, and a decisive portfolio reset well underway. We strengthened our foundation through an anticipated inflection point in production and continued financial discipline, repositioning the company for long-term value creation. Importantly, we delivered or exceeded our full year guidance across all key metrics despite a materially lower oil price environment. Production averaged 28,233 barrels of oil equivalent per day for the full year 2025, above the upper end of our guidance, reflecting a platform in both Colombia and Argentina that is executing and evolving while staying grounded in operational discipline. In Colombia, we achieved an earlier-than-anticipated production stabilization supported by resilient base production in Llanos 34, sustained contribution from CPO-5 and successful drilling in Llanos 123. We also launched a polymer injection recovery project in Llanos 34 that delivered solid results. Argentina began contributing production ahead of plan and assets were integrated safely to our operations. Fourth quarter volumes averaged 28,351 barrels of oil equivalent per day, broadly in line with the prior quarter and reflecting the fresh production of our Vaca Muerta assets. Full year financial results primarily reflect lower realized prices, which averaged $58.1 per boe in 2025 versus $65.6 per boe in 2024. Adjusted EBITDA reached $277 million within our guidance range, while margins remained resilient. Fourth quarter adjusted EBITDA was USD 46 million, reflecting lower realized prices and the impact of specific nonrecurring items, including deferred sales volumes, logistics-related adjustments and start-up costs in Vaca Muerta. These are timing-related effects, some of which will be reversed in our first quarter 2026 results. Even in a lower price environment and with temporary quarterly impacts, our operational platform remained resilient and capital allocation disciplined. We invested $98 million during the year, in line with our plan and delivered a 2.8x adjusted EBITDA to CapEx ratio and achieved an 18% ROACE, underscoring disciplined returns-based capital allocation. We delivered meaningful structural efficiencies in 2025. Operating costs averaged $13.4 per barrel for the year and G&A stood at an average of $4.8 per barrel, both within guidance. We also achieved $32 million in structural cash savings, setting a lower cost base expected to generate a run rate of some $45 million in annualized savings in 2026 and beyond. Our balance sheet and risk management remain strong. Cash stood at over $100 million and net leverage closed at 1.6x, and we have no material debt maturities until 2027. During the year, we repurchased over $100 million of our 2030 notes below par, capturing a $10 million gain and a $9.5 million annual interest saving. Over 84% of our 2026 production is now hedged through three-way collars and hedging has already started for our 2027 production, ensuring continued cash flow protection. Our portfolio reset is well underway, reinforcing our Colombian foundation while establishing a new unconventional growth platform in Argentina. In October, we successfully closed the acquisition of Loma Jarillosa Este and Puesto Silva Oeste blocks in Vaca Muerta, securing full operational control of two high-quality blocks in one of the most attractive unconventional plays in the world. Production is already online and development is underway with a clear path towards the 20,000 barrels of oil equivalent per day plateau production by 2028 that we have shared with the market. In January 2026, we announced the agreed acquisition of Frontera Energy's Colombian upstream assets, a transaction that more than doubles our resource base and that brings an expected pro forma production of approximately 40,000 barrels of oil equivalent per day net to GeoPark, which significantly expands our scale, diversification, and operating leverage. This is a transformative deal that consolidates our position as the leading private operator in Colombia and strengthens our platform for disciplined long-term growth. On a pro forma basis, this acquisition can take production to exceed 90,000 barrels of oil equivalent per day by 2028 and adjusted EBITDA of approximately USD 950 million, doubling our previously communicated stand-alone outlook. Together, these two transactions reshape the company, materially increasing production, improving cash flow durability, and enhancing our ability to reinvest efficiently across the cycle. Our strategy remains clear: protecting and maximizing our cash-generating base in Colombia and scaling a transformational unconventional platform in Argentina. By year 2028, we're targeting 44,000 to 46,000 barrels of oil equivalent per day and an adjusted EBITDA of $490 million to $520 million with additional upside as the Frontera acquisition is integrated. In line with this road map, we reached a production inflection point in Colombia earlier than expected, anticipating the time we had originally outlined to the market. Execution remains disciplined and focused as we balance financial strength with long-term growth. To support the strategy, the Board declared a quarterly dividend of $0.03 per share. As previously communicated, the Board will reassess shareholder distributions following the normalization of free cash flow after peak investments in Vaca Muerta. Before closing, I would like to briefly address the recent announcement by Parex regarding directors' nominations to GeoPark's Board. Our Board remains fully committed to strong governance, disciplined capital allocation, and long-term value creation. All nominations will be reviewed through our established governance processes as we remain focused on executing our strategy and delivering results for all shareholders. GeoPark shareholders do not need to take any action at this time. Regarding Parex's proposal to acquire Frontera's upstream assets, GeoPark remains fully committed to our agreement, which we believe creates a leading independent E&P platform across Colombia and Argentina. We have a strong conviction in the merits of the transaction and believe that, among other reasons, our strong operating expertise, deep local presence, and longstanding relationships in Colombia make us the strongest strategic fit for Frontera's assets. Our agreement follows more than a year of detailed evaluation, technical diligence, and structure discussions with Frontera, supported by comprehensive operational, financial and contractual analysis. This depth of preparation underpins our confidence in the integration plan and value creation road map. We believe the transaction delivers immediate and certain value to Frontera shareholders, while enhancing long-term value for GeoPark shareholders through greater scale, reserve depth and cash flow durability. Our full field development approach is also expected to sustain production and investment in Colombia, supporting royalties, taxes and employment while strengthening the country's energy platform. In summary, 2025 was a pivotal year for GeoPark. We protected and optimized what we have while continuing to deliver results with consistency and focus. In parallel, we launched a new growth engine in Argentina and secured a transformational acquisition in Colombia that will improve scale, competitiveness, long-term optionality, and value for the company and our shareholders. We have entered 2026 with momentum. We have a stronger, more diversified portfolio that has a leaner cost base and a clearer path forward to continue building long-term value for all of our shareholders. With that, let me open the floor for your questions.

Operator, Operator

Operator Instructions: Our first question will be from the line of Alejandro Demichelis with Jefferies.

Alejandro Anibal Demichelis, Analyst (Jefferies)

I have a couple of questions, if I may, please. The first one is on your cost base. Obviously, we have seen, and you mentioned one-offs in the fourth quarter. So can you give us some indication of how do you expect costs for the whole of the year to develop? What kind of range we can expect? That's the first question. And then the second question is, you mentioned the bid — the offer for Frontera. There is a competing offer now on the table. So how do you see that situation? And maybe you can comment on any kind of more recent discussions you have had with Frontera and how you see that situation, please.

Felipe Bayon Pardo, Chief Executive Officer

Alejandro, good morning, and thanks for being here today. We always value your interest in the company. Let me start in terms of giving some context around the cost evolution, and then I'll hand over to both Jaime and Martin to give us a bit more color. One thing I would say is that we met or exceeded all of the guidelines that we had given to the market, which I think is very important. Remember that — and you would probably acknowledge this — it's only my third results call in the company. It's been eight months, an intense eight months with the reset that I mentioned in my intro words, and this stabilization of the operation inflection point that we reached in 2025. We've managed to work on defined activity and all of the technical work that has been done by the team. From that point of view, Alejandro, I am very excited with the performance of the company and very pleased with the team, the operations, the technical teams and the people that support those operational teams. In terms of cost specifically, if you recall, we had given guidance of $12 to $14 per barrel. In terms of lifting, we're in the midpoint of that, $13.2 with an increase in 4Q. But most of those one-offs have been reversed or will not be present in 1Q, and we've managed to bring the cost back down, which is great news. Some of those had to do with some very specific activities that we were conducting. With that, Alejandro, I'll ask Jaime and Martin to give us more color.

Jaime Caballero Uribe, Chief Financial Officer

Good morning, Alejandro, and thanks Felipe. A few data points that are relevant. When we think about the one-offs, we can split them into two categories, and they have an effect both on OpEx per barrel and on G&A. On one hand, we had very particular start-up costs associated with the reinitiation of the Platanillo operation in Putumayo and the Vaca Muerta operations in Argentina. Looking at them on a full basis, the impact of that is in the order of $7 million in the quarter, which are not recurrent. They're split roughly two-thirds in OpEx and one-third in G&A. These costs are not expected to recur. Importantly, these costs will generate production down the road; Platanillo is being reactivated in a context of production, and Vaca Muerta is the same case. So it's a cost but also an investment that we're making to mobilize production in those areas. The other component is typical seasonality. We had seasonal effects in 4Q in the order of $2 million to $3 million. These are specific to labor-related provisions that we decided to take in the context of anticipated labor effects that were related to 2025. There's also the typical year-end projects like reserve certification costs associated with the year-end. On a relative scale they're not particularly material, but they affect the per-barrel metrics. The OpEx once normalized would probably be at about $13 per barrel. The G&A would be at about $4.5 per barrel, which is what we signaled in our announcement. As we look to 2026, our guidance is unchanged: lifting costs in the $13 to $15 per barrel area and a G&A that we expect to deliver in the area of $4 per barrel.

Martin Terrado, Chief Operating Officer

Yes. Thank you, Jaime. Good morning, Alejandro. Just a few additional data points. I want to stress again what Felipe was mentioning: our guideline for 2025 was $12 to $14 per barrel, and we finished the year at $13.4. I'm proud of the team and the efforts that have been done. We identified items last year that are already underway. For 2026, reiterating what Jaime said, our guideline for OpEx 2026 is $13 to $15 per barrel, and we feel confident around those values. We already have January and February numbers, and part of those things that hit us in the fourth quarter are gone, so we feel good about that. A few items: when we took over the operation in Argentina, OpEx were about $32 per barrel. We have brought it down to the order of $22 to $27 per barrel by doing workovers on six wells and working on transportation optimization, activities and others. We expect to be by the end of the year around $10 to $12 per barrel, which is part of our guideline, driven by incremental production as we mobilize a rig that is about to start moving and increase production. Regarding Putumayo, we started in the last quarter of the year restarting the field. As we were starting, OpEx were about $45 per barrel; we are now under $40 per barrel. With the recent announcement from the Ecuador government, we are reviewing because we are not transporting crude through Ecuador anymore, so we will decide in the next weeks the future of Putumayo. Finally, in Llanos 34, OpEx went up in the last quarter because of well interventions and reliability activities for the energy system. We ensured we were entering 2026 with good energy reliability in the field, and we are already back at third-quarter levels. We know risks and challenges exist, especially around the exchange rate, and we're working on additional initiatives. Some are around rigs for doing workovers and well services; we have pilots and ideas to implement. We're bringing a fourth workover rig in March to Llanos 34, and we're already working in Llanos 123 to eliminate most facility rentals as we move from temporary to final facilities in that block.

Felipe Bayon Pardo, Chief Executive Officer

Thanks, Martin. Alejandro, on your second question regarding the Frontera situation: when we announced in January the acquisition of Frontera's assets in Colombia, it was a transformational transaction that doubles reserves, brings additional production, and provides an opportunity for long-term commitment to the country. We will always keep in mind financial discipline and protect shareholder value in every decision we make. We have worked closely with Frontera; the work so far has been exceptional in terms of integration and preparation for closing. We've evaluated this opportunity over the last year with detailed conversations and technical diligence. We are fully convinced it's not only the capability of Frontera's people but also that their portfolio is very complementary to ours. In terms of process, we are progressing with Frontera. A few days ago we received formal approval from the Superintendencia de Industria y Comercio, the Colombian antitrust agency, which is a major milestone. Frontera scheduled its AGM for April 10. Regarding the new offer from Parex, the Board will continue to assess all options directed at creating long-term value for our shareholders. We will evaluate opportunities within a frame of financial discipline and the best interest of shareholders. We are pleased with the interest in these assets; the new offer demonstrates that our strategy is sound. Thank you for the questions.

Operator, Operator

The next question today will be from the line of Stephane Foucaud with Auctus Advisors.

Stephane Guy Foucaud, Analyst (Auctus Advisors)

I've got three. First, on Frontera, what are the various steps until closing? Are there things increasing your offer that you could do to prevent Frontera from going with Parex, thinking about break fees or similar measures? Second, on the nomination by Parex of a Director for GeoPark: given Parex is making an offer on the Frontera asset and nominating a director, do you see any conflict of interest? I would be interested in your thoughts on that. Lastly, where are we on Argentina with regard to production?

Felipe Bayon Pardo, Chief Executive Officer

Stephane, thanks. Regarding Frontera, it is in Frontera's camp to assess the new offer they received. Our arrangement agreement is in place, and as I mentioned, we received local approvals which are very important. It's up to Frontera to decide what they want to do with the new offer. From GeoPark's perspective, the Board will assess options that create long-term shareholder value, maintaining financial discipline. We will not lose that discipline in pursuit of something specific. In terms of the nomination by Parex, I do believe there's a conflict of interest: nominating a control slate for the Board without an offer that appropriately values GeoPark provides Parex optionality at the expense of GeoPark's shareholders. It appears to be a deliberate and hostile strategy directed at GeoPark. Regarding Argentina, we are extremely pleased with our entry to Vaca Muerta. We received keys to the operation on October 16. We've done two workover campaigns. As early as next week we will start mobilizing a neighbor's rig that has an open window from a third-party operation. We will mobilize the rig to start a limited drilling campaign of five wells plus ancillary work, and we will begin fracking operations. This is a major milestone. We have signaled market that we will see an uplift in production by the end of the year. With these wells and facilities and commercial agreements with neighbors, we will see uplift by the end of the year. There are additional opportunities in Argentina and potential to transfer expertise back to Colombia and look at unconventionals there. Martin, if you want to add color on Argentina?

Martin Terrado, Chief Operating Officer

Absolutely. Good morning, Stephane. Vaca Muerta is going very well and we're advancing on key milestones. 2025 was about taking over, finalizing the team and putting together contracts. For 2026 we focused on four things: production optimization, environmental permits, facilities and drilling. First, production optimization: we did two workover campaigns; the second campaign was 37% cheaper than the first. Second, environmental permits: we submitted the critical environmental permits in mid-January, notably the pipeline permit. We do not need an environmental permit for drilling activity or upgrades to existing facilities. Third, facilities: we've awarded the contract for the Loma Jarillosa Este upgrade at slightly below our planned $16 million. We finalized an agreement with a neighbor operator to connect to spare pipeline capacity to optimize flows and avoid trucking oil. Last, drilling: we are starting drilling. We arranged with a neighboring operator to use a hot rig. We are mobilizing that rig in early March. There is a pad with five wells; two are fully drilled and the remaining three need horizontal branches: two branches of 2,100 meters and one branch of 3,000 meters. That drilling will take around 45 days. We have locked the frac set, and we will frac all five wells: around 220 fracs total over approximately 60 days. We expect an exit rate in Vaca Muerta for the year of 5,000 to 6,000 barrels of oil per day, within our guidance.

Operator, Operator

Next question will be from the line of Oriana Covault with Balanz Capital.

Oriana Covault, Analyst (Balanz Capital)

This is Oriana Covault with Balanz. I have one brief question regarding your 2026 work program. What is the status of negotiations with your Llanos partners? I believe there was a discrepancy between the guidance you had provided and your partners in the area. Should we expect any changes in activities versus the previously shared plan?

Felipe Bayon Pardo, Chief Executive Officer

Oriana, thanks. With most partners we already have agreement on work programs and budgets that support our guidance. Specifically in Llanos 34 we have 21 workovers that have been approved technically and from a budget perspective. Some facilities upgrades and works have been approved. Technically, 14 wells have been approved by both teams, but our partner has approved only eight of those wells. We continue to work with them constructively to ensure they have the data to understand these are value-accretive operations. We will continue dialogue to ensure the partner can fully support the budget. If we cannot reach agreement, we have optionality; we can deploy the rig in other areas that will be beneficial for GeoPark and shareholders. Thanks, Oriana.

Operator, Operator

We will now move to text questions submitted from the webcast, first question being from Eduardo Muniz with Santander, who asks: 'If the Frontera deal does not close, how does that change your Colombia growth outlook?' and second: 'Could you give us an update on the polymer injection project, which started in December, including incremental production impact, if any? And how this project could influence 2026 output and recovery factors?'

Felipe Bayon Pardo, Chief Executive Officer

Eduardo, good morning and thanks. We'll start with the polymer question and I'll ask Rodrigo to give an update. Regarding the deal: first, our arrangement agreement is in place and we are pursuing it diligently with Frontera. The Board will assess all options within a framework of financial discipline and prioritize shareholder value. We will continue to keep the market appraised.

Rodrigo Dalle Fiore, Chief Exploration and Development Officer

Thank you, Felipe. Good morning, Eduardo. Polymer injection is an important element in our Llanos 34 development plan. We started in December with two initial wells. We expect to incorporate another two wells next month or in April. So far operational performance has been very good. We are waiting for results in the second part of this year; we do not expect material results in the very early stages. Operationally the polymer concentration in the injection water is working well. The plan is not to stay small: we plan to add five more wells in the second part of the year, and we are aiming to accelerate that and bring them forward to the first half of the year if possible. We are also looking to expand in the north of the block, particularly Tigana, where simulations show promising results. In terms of recovery factor, our simulation indicates between 3% in a pessimistic scenario and 7% in an optimistic scenario for the areas where we are injecting. Our experience in neighborhood projects suggests an average recovery uplift of about 5%. That's the expectation we have for the injection areas.

Felipe Bayon Pardo, Chief Executive Officer

Thanks, Rodrigo. Eduardo, regarding the outlook if the Frontera deal does not close: as I said, we have an arrangement agreement and are working diligently toward closing. The Board will always evaluate opportunities within a disciplined financial framework and in the best interests of our shareholders. Should circumstances change, we will provide updates to the market as appropriate.

Operator, Operator

The next question has been submitted by Isabella Pacheco with Bank of America, who asks: 'When does the limited duration shareholders' rights plan expire? And is the Board discussing renewing it?'

Felipe Bayon Pardo, Chief Executive Officer

Thanks, Isabella. The rights plan has a duration of one year and it expires on June 3. The Board will discuss the nature, conditions and specifics of the shareholders' rights plan in due course. When those discussions are final and the company is ready to announce a decision, we will communicate that promptly to the market.

Operator, Operator

The next question has been submitted by Vicente Falanga with Bradesco, who asks: 'Have you seen any impacts on your business from the formalization of the Venezuelan market?'

Felipe Bayon Pardo, Chief Executive Officer

Thanks, Vicente. There's the volume and price impact angle, and there's an opportunity angle. The company and Board will continue to assess optionality and opportunities in Venezuela given our operating track record. Jaime, I'll ask you to address the immediate market impacts.

Jaime Caballero Uribe, Chief Financial Officer

Vicente, the most immediate impact we've seen relates to heavy oil markets, particularly the Vasconia and Castilla references in Colombia. Vasconia is relevant for Llanos 34 and CPO-5 crudes as a benchmark. Our crudes generally have better quality and less sulfur than Vasconia, but as a commercial benchmark we are somewhat connected. Vasconia differentials have widened: mid-2024 we saw discounts of about $3 to $4; today those discounts are about $7 to $8, largely influenced by developments in Venezuela. Essentially, about one million barrels per day of new Venezuelan barrels have entered the market, particularly to the U.S. Gulf Coast. That increased supply coincided with the first quarter seasonal refinery maintenance and lower runs, which reduces demand. We believe this is temporary: the market should adapt and refinery runs typically increase toward summer, which should absorb the new supply. Additionally, we are taking actions to mitigate impact, such as decoupling from the Vasconia reference by doing FOB exports. For CPO-5, the bulk of volumes — about 6,000 barrels per day — are being sold via Covenas for export, which ties us more to Brent rather than the Vasconia reference. From a new business standpoint, Venezuela is opening up and there may be opportunities for operators with capabilities to restart or improve fields; we are actively evaluating this potential.

Felipe Bayon Pardo, Chief Executive Officer

Thanks, Jaime, and thanks, Vicente.

Operator, Operator

We will now close Q&A, and I would like to hand the call back to Mr. Felipe Bayon for closing remarks.

Felipe Bayon Pardo, Chief Executive Officer

Thanks. Very briefly, a few remarks. First, 2025 closed at a strong operational point. We met or beat the guidelines we gave the market, achieved an inflection point and stabilized operations and production in Colombia, and entered Vaca Muerta. Strategy is in place and we are executing and deploying capital in a disciplined way to protect assets and operations while pursuing growth. Vaca Muerta and the Frontera transaction underpin that road map. We are very happy with the start of 2026 and have shared some highlights. We will continue to work with Frontera on the arrangement agreement and toward closing. We are thankful to the Frontera team and our team for diligent work; SIC approval was a major milestone. We will remain disciplined in our decisions and financial framework as we assess any available options. Thank you everyone for joining today's call, for the great questions, and for your interest in GeoPark. Please stay safe and have a great day.

Operator, Operator

This concludes the GeoPark 4Q 2025 Results Conference Call. You may now disconnect your lines.