Geopark Q3 2024 Earnings Call Transcript

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Provided by Quartr
November 7, 2024

Key Takeaways

  • GeoPark delivered Q3 net revenue of $159 million, down 16% quarter-on-quarter, but achieved adjusted EBITDA of $100 million (63% margin) and a net profit of $25 million, both exceeding the prior year.
  • The company generated strong cash flow, growing liquidity from $66 million in June to $140 million in October, maintained a low net leverage ratio of 0.8×, and declared quarterly dividends of $7.5 million (18% yield YTD).
  • In Colombia, GeoPark advanced its core Llanos 34 block with water-flooding and facility expansions, drilled two wells in CPO-5, and produced ~4,000 bbl/d gross from the Genos acreage with two rigs active.
  • Its July 1 acquisition in Argentina’s Vaca Muerta ramped up with PADD 4 delivering 12,600 bbl/d in Q3 (peaking at 15,400 boe/d in August), PADD 9 drilling through December, and three Confluencia exploration wells now testing.
  • GeoPark secured an AA+ Argentine credit rating with authorization to issue $500 million in local debt and will publish its 2025 work program and capital allocation plan by year-end, emphasizing Vaca Muerta development and core asset optimization.
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Earnings Conference Call
Geopark Q3 2024
00:00 / 00:00

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Operator

Good morning and welcome to the GeoPark Limited conference call following the results announcement for the third quarter ending September 30th, 2024. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question at this time, press star one on your telephone keypad. If you would like to withdraw your question, you can do so by pressing star followed by two. 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 website in the Invest with Us section of the GeoPark corporate website.

Operator

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. All financial figures included herein were prepared in accordance with the IFRS and are stated in US dollars unless otherwise noted.

Operator

Reserved figures correspond to PRMS standards. On today's call from GeoPark is Andrés Ocampo, Chief Executive Officer; Jaime Caballero, Chief Financial Officer; Agustín Zubillaga, Chief Technical Officer; Martín Terrado, Chief Operating Officer; and María Catalina Escobar, Shareholder Value and Capital Markets Director. Now I'll turn the call over to Mr. Andrés Ocampo. Mr. Ocampo, you may begin.

Andrés Ocampo
CEO at GeoPark Limited

Good morning, everyone, and thank you for joining us to review together our third quarter 2024 operational and financial performance. Our net revenue for the quarter was $159 million, down 16% from the second quarter, impacted mainly by lower realized oil prices and production. Despite these factors, our financial discipline allowed us to maintain robust margins and profitability. Our adjusted EBITDA for the quarter was close to $100 million, representing a strong 63% margin. In addition, the adjusted EBITDA for the first nine months of 2024 amounted to $339 million, representing approximately a 2% increase compared to the same period of 2023. Bottom line net profits for the quarter of $25 million also exceeded the same period of last year. This quarter was also marked by a significant cash flow generation, which translated into a cash build of more than two times compared to three months before.

Andrés Ocampo
CEO at GeoPark Limited

From $66 million of cash on June 30 up to $123 million on September and $140 million in October, what reinforces a strong liquidity and solid balance sheet. Our net leverage ratio remains low at 0.8 times, and we have no principal debt maturities until 2027. This position provides us with financial flexibility to manage through market volatility while continuing to invest in high-value projects. We have also continued to use our cash flow to return value to shareholders and maintain our quarterly dividends of $7.5 million announced yesterday. With this, our total cash distributed to shareholders during this year will amount to $73 million, which represents approximately an 18% capital return yield. With respect to some of our key operational highlights, in Colombia, we focused on development and appraisal activities in the Llanos 34 block, which remains one of our core assets.

Andrés Ocampo
CEO at GeoPark Limited

We advanced our water flooding campaign and expanded facilities, both critical steps to enhance production and improve recovery rates. In CPO-5 block, we drilled two wells, further advancing our exploration and development goals. In our Llanos exploration acreage, we continued with the appraisal and delineation of the Toritos and Bisbita fields. The entire complex is currently producing approximately 4,000 barrels a day gross. We have currently two drilling rigs on site and expect further activity before year-end and into 2025. Also, in Colombia, we are looking forward to spud our first exploration well in the Putumayo Basin later in November this year, when we will drill the Bienparado Norte 1 exploration well. Our recent acquisition in the Vaca Muerta and conventional oil play, which became effective on July 1st, has marked a key milestone in GeoPark's expansion in Latin America.

Andrés Ocampo
CEO at GeoPark Limited

Vaca Muerta is today the most attractive hydrocarbon play in the entire region. During the third quarter, the Path 4, which included four horizontal wells, was drilled, completed, and was put on production in October. The block achieved a gross average production of 12,600 barrels of oil per day during the quarter and reached 15,400 barrels a day equivalent, its all-time record in August. The operator is currently drilling the four wells in Path 9, which is expected to finish in December. In addition to the reserves development activities in Mata Mora, GeoPark and Phoenix have also finished the drilling and completion of the first exploration pad in the Confluencia Norte block in the province of Río Negro. This pad includes three horizontal exploration wells. These wells are currently testing and cleaning up, expecting results in the upcoming days.

Andrés Ocampo
CEO at GeoPark Limited

It is also important to mention that production and cash flow from GeoPark's working interest in the Vaca Muerta blocks belong to our company since July 1st. However, such production and cash flow will not be consolidated into our financial statements until the transaction is closed, which is expected to happen before year-end. Therefore, none of these results have been included in our reported 3Q financial statements. As anticipated and to support the capital needs of our new assets, GeoPark has secured important local capital market approvals in Argentina, including a AA plus Argentinian credit rating and an authorization to issue up to $500 million in local debt securities. This provides financial optimization and flexibility to continue developing these high-potential assets. Looking ahead, we're on track to release our 2025 work program and investment guidelines before year-end.

Andrés Ocampo
CEO at GeoPark Limited

This framework will outline our strategic priorities for sustainable growth and capital allocation across our newly expanded and upgraded portfolio. We see particular promise in our new assets in Vaca Muerta, coupled with ongoing focus on optimizing our core operations to maximize long-term value. Thank you for your continued support and confidence in our company. We're now ready to take any questions you may have.

Operator

Thank you. If you'd like to register a question, please press star followed by one on your telephone keypad, ensuring you are unmuted locally. If you'd like to withdraw your question, you can do so at any time by pressing star followed by two on your telephone keypad. Our first question comes from the line of Vicente Falanga of Bradesco BBI. Your line is now open. Please go ahead.

Vicente Falanga
Senior Equity Analyst at Bradesco BBI

Hi, Andrés. I'm in the GeoPark team. Thank you very much for your time and taking my questions. I basically have two questions regarding the Phoenix GP. You commented that Confluencia will likely put out flow results soon. Up to what you can comment, how do you see the results so far? Do you see these as encouraging? Do you think that you will be able to communicate the production results to the market before December? And my second question is on Mata Mora Norte. We were looking at the Secretaría de Energía website, and we saw that you produced 13.7 barrels of oil equivalent per day in the month of September. You also mentioned that Pad 9 will start to produce at the end of December. So what should we expect for output there in Mata Mora Norte until the end of the year?

Vicente Falanga
Senior Equity Analyst at Bradesco BBI

It should stay about close to 14,000 barrels of oil equivalent per day. Thank you very much.

Martín Terrado
COO at GeoPark Limited

Good morning, Vicente. This is Martín Terrado. Nice to hear from you. When we go over Confluencia Norte 1, yeah, Confluencia Norte 1, the results so far look encouraging. It was on track, and according to the plan, the drilling, the completion of the wells, this pad has three wells. Some of the pads in the Mata Mora have four. This one has three wells. The drilling had around 3,000 meters of each horizontal section drilled according to plan. And one of the things that the operator did differently and we agreed was to be doing fracks with more intensity. The numbers are basically from 2,300-3,000 pounds per frack. As you know, and we are sharing and learning unconventionals, it takes about 45-60 days for the flow back and the cleaning of the wells, and it's been about a little bit over two weeks.

Martín Terrado
COO at GeoPark Limited

So far, the results are encouraging, and we will share the results before December for sure, so that's about the recent pad that has been completed. As Andrés mentioned, right now we're drilling pad number nine. That's back into Mata Mora. This pad has four wells expected to finish drilling all four wells by December. Again, we are on track as we already drilled. The operator already drilled two of the four wells, and when you asked the question around the average production for September, what was the production for October? It was similar values, around 13,600 barrels of oil equivalent per day. In October, it was basically no new wells stabilizing, and so that's what we had. We will see increased production as Confluencia Norte kicks in and Mata Mora wells continue to stabilize.

Martín Terrado
COO at GeoPark Limited

But overall, like we mentioned in the past, we are excited about it, and we expect to be around 13,500-14,500 barrels of oil equivalent by the end of this year.

Vicente Falanga
Senior Equity Analyst at Bradesco BBI

Great. That's very helpful. Thank you so much. Nice talking to you guys again. Thank you.

Operator

Thank you. The next question comes from Alejandro Demichelis. Alejandro, Jefferies, your line is now open. Please go ahead.

Alejandro Demichelis
Alejandro Demichelis
Managing Director at Jefferies

Yes, good morning, guys. Thank you very much for taking my questions. Two questions, if I may, please. The first one is a bit of a follow-up on Confluencia. Martín, when we look at Mata Mora, we have seen a lot of variability in terms of the initial production from the different wells. So what would you expect to be a good flow for Confluencia, and what kind of gas levels can we expect from there? That's the first question. And then the second question is, how should we think about, say, production and Capex required for Llanos 34 into next year?

Andrés Ocampo
CEO at GeoPark Limited

Hi, Alejandro. Nice talking to you again. So when we look at Confluencia, the IPs that we have overall for Vaca Muerta are in the order of 750-1,500 barrels of oil per day. So this is exploration. We will see where within that range they fall, but that's the order of magnitude where we expect to be on IPs. We had some wells in Mata Mora that Rodrigo mentioned in the past that were beyond that range. We have two wells that produce 2,000-3,000 barrels of oil per day. So we have some wells that are on the top percentile of oil of Vaca Muerta in Argentina, and that's in Mata Mora. But order of magnitude, that's what we have in our business plan, and usually we are within the P50-P10 range. So more to come on that pretty soon.

Martín Terrado
COO at GeoPark Limited

Then the question related to production and Capex.

Vicente Falanga
Senior Equity Analyst at Bradesco BBI

Sorry, the gas component in Confluencia, the core.

Martín Terrado
COO at GeoPark Limited

The gas component for Confluencia, for now, we expect to be similar to what we have in Mata Mora. It's usually when we go from barrels of oil per day and we take it to barrels of oil equivalent, order of magnitude add about 5%.

Alejandro Demichelis
Alejandro Demichelis
Managing Director at Jefferies

Okay. Thank you.

Martín Terrado
COO at GeoPark Limited

Does that help, Alejandro?

Alejandro Demichelis
Alejandro Demichelis
Managing Director at Jefferies

Yeah, that's very helpful. Thank you.

Martín Terrado
COO at GeoPark Limited

Okay. And I think that your second question was around Llanos 34, production and CapEx. So like Andrés mentioned, we will post our work program for all of GeoPark in the next weeks. But what we can share with you is where we are aligned with our partner, and you have seen throughout the year that we went to one rig. We have one rig running right now in Llanos 34. We're in agreement that we will continue that rig all of next year, mainly drilling infill wells, some appraisal wells, follow-ups to good wells that we drilled recently, especially in the Curucucú field. And concerning production, we should expect slight declines as the field is getting more mature, and with the level of activity of infill drilling, the focus that we have on water flooding and workovers, order of magnitude around 15% decline.

Alejandro Demichelis
Alejandro Demichelis
Managing Director at Jefferies

For the whole of Llanos 34?

Martín Terrado
COO at GeoPark Limited

For Llanos 34, yes.

Alejandro Demichelis
Alejandro Demichelis
Managing Director at Jefferies

Okay. That's clear. And as a bit of a follow-up there, because your partner has been talking more about polymers into Llanos 34 and so on, so is that something that we can see in 2025, or is that a more medium-term plan?

Martín Terrado
COO at GeoPark Limited

No, it's something that we will be seeing in 2025. So we're working the details to perform a pilot in the second half of the year. That's basically adding polymer to the water so that we get better conformance 2025.

Alejandro Demichelis
Alejandro Demichelis
Managing Director at Jefferies

Thank you.

Martín Terrado
COO at GeoPark Limited

Yes.

Operator

Thank you. The next question comes from Daniel Guardiola of BTG. Your line is now open. Please go ahead.

Daniel Guardiola
Equity Research at BTG

Thank you. Good morning, Andrés, Jaime, and the entire team. I have a couple of questions. The first one, I would like to touch on costs. Looking at the quarter, we saw once again a deterioration of your OpEx per barrel to levels close to $16, $17 per barrel. And if we look at the last two years, the OpEx has almost doubled. And I wanted to know, first of all, if you can share with us what is driving this deterioration in costs. And two, what is the company planning to do to basically tackle this significant increase in costs? So that would be my first question. And if you want, you can answer it, and then I can follow up with the second one if that's okay with you guys.

Martín Terrado
COO at GeoPark Limited

Absolutely, Daniel. This is Martín again. So when we look at our OpEx on a dollar per barrel, a couple of comments. One is our goal is to stay on the main assets in the order of $10-$12 per barrel range. What has happened in the past two years and what you are referring to? If we look at 2022 in Llanos 34, we were producing about 350,000 barrels of fluid per day, and our consumption of energy was 50 megawatts. Right now, our total fluid has increased 40% from those 350, and our megawatt requirements have increased by 20%, so clearly, when we look at our OpEx, around 40% of the OpEx is energy cost. Since we connected to the national grid, one of the visions and the objectives that we had was to tie and lock fixed-price energy cost.

Martín Terrado
COO at GeoPark Limited

Unfortunately, the first couple of years and where we are today, we are with a spot price, and in Colombia, we had El Niño, so the energy prices have gone up. In addition to that, of course, we have inflation and the exchange rate, but those are, you want to say, excuses or the things that have happened. What have we done, and I'm going to let Jaime comment later on, but we're working and we're locking energy prices so that this volatility and paying more than $900 per kilowatt-hour doesn't happen now that we have windows and we can lock that. We have also looked and we're looking at reviewing where we have OpEx in places where we can purchase facilities. For example, in Llanos 123, we had zero production about a year and a half ago. We got 4,000 barrels on production right now.

Martín Terrado
COO at GeoPark Limited

All of those facilities were rented, and we're purchasing those sections of the facilities that have quick payouts, and they make sense to keep, and of course, we're reviewing also with our supply chain group our contracts and looking at opportunities, so again, I want to make sure that you take it that the goal is to stay between $10 and $12 per barrel range in the next years, and to complement on that, good morning, everybody. This is Jaime. Daniel, on the energy side, I think it's clearly one of the biggest levers. One of the things that we're seeing is that the market is evolving. Following El Niño and all the kind of crisis that we had at the middle of this year, the market is stabilizing.

Andrés Ocampo
CEO at GeoPark Limited

And when you look at energy rates that can be secured for the next number of years, actually, long-term contracts are becoming very attractive, right? And they are significantly under what we expected. So the possibility of locking in rates that secure the clean energy for our fields, particularly for Llanos 34, is something that we're looking into and that is going to help us a lot to mitigate that increasing trend of energy costs associated to the enhanced recovery of the field. I think the other angle that we need to take into account when you see the evolution of lifting costs is that there is a component associated to what I would call immature operations, which is all the exploration fronts that we have open currently.

Andrés Ocampo
CEO at GeoPark Limited

Those exploration fronts that we have in the periphery of Llanos, in Putumayo, and in Ecuador are operations that don't benefit from economies of scale and from the sorts of systematic supply chain approach that you can have in Llanos 34, and they are affecting the consolidated OpEx per barrel. To the extent that those operations mature into appraisal and development, we should expect to capture the economies of scale associated to a mature operation, and that's going to help as well, so those are the two things to consider as we look at the long-term prognosis of OpEx per barrel. Thanks, Daniel.

Alejandro Demichelis
Alejandro Demichelis
Managing Director at Jefferies

Thank you, Martín, Jaime. My second question is on Brazil. I mean, this is the second consecutive quarter where you're posting zero production from Brazil. And I wanted to know if you can provide us an update on what's going on in Brazil and what are your expectations going forward?

Andrés Ocampo
CEO at GeoPark Limited

Yes, Daniel. So latest, we have been communicated by the operator. The date that we had to restart operations was late October, and two weeks ago, they shared with us that the firefighting and additional maintenance is required. So the new date is late February. And as you mentioned, this is 1,100 barrels of oil equivalent per day that we had in our plan for all of 2024, and it's been shutting since middle of March. So the new date that we're expecting is restart early March.

Alejandro Demichelis
Alejandro Demichelis
Managing Director at Jefferies

Thank you, Martín. If I may just squeeze a last question on Argentina, I would like to know your thoughts on the Duplicar project, which is eagerly expected or anticipated by most of the producers. It would be great if you can share with us how do you see this project progressing and when do you expect the project to be fully online for you guys to start shipping additional barrels of oil. Also, it would be great if you can share with us what is the total capacity that you have secured in this project. Do you foresee any potential to use additional spare capacity in 2025?

Jaime Caballero
CFO at GeoPark Limited

Sure, Daniel. This is Jaime. So I guess let's start from the baseline. Our exploration efforts around Vaca Muerta are going well. You see that we're having production that is very much in line, if not even better than what we expected a few months ago with the sort of results that we're getting from the different wells. Currently, where we are is we're in a place that around 50% of our volumes currently are being transported through our own contracted capacity with Oldelval. That's around currently, that available capacity is at around 7,500 barrels a day. The remainder, the bulk of it, we are using Oldelval as well, but through third-party capacity that make them available to us. And there's a little bit of surplus that at times we use through trucking.

Jaime Caballero
CFO at GeoPark Limited

And actually, it's a good problem to have because it actually means that production levels are higher than what we anticipated, right? So it's good. That in total means that we have secured currently through those different mechanisms our own capacity in Oldelval, third-party capacity in Oldelval, and trucking capacity, basically what is about 15,000 barrels of evacuation available. Oldelval, the Duplicar component, is expected to come online around March. That's kind of where we are. There's been no change to that. We go back and forth around this. And as you say, I know you have other industry sources, but there's a broad consensus that it's still around that time, March. If there are delays, eventually it could go into April, but it's in that timeframe. And we feel pretty confident that that's going to be the case.

Jaime Caballero
CFO at GeoPark Limited

In our case, it brings an additional 9,000 barrels a day of evacuation capacity that's net to GeoPark, to our own barrels, which puts us at 24 MBD, which is significantly more than what we expect to be producing at that time. So all in all, our midstream efforts are going well and are ahead of kind of our production volumes as they need to be. Thanks.

Alejandro Demichelis
Alejandro Demichelis
Managing Director at Jefferies

Thank you, guys.

Operator

Thank you. We now have a written question from Stefan Borkud of Arctos. What is the current production? How do you see 2P reserves at Llanos 34 at year 24 directionally? Is this about 2P reserves at year 23 minus production, or could there be technical revision impacting reserves '23? Do you see potential production growth in Ecuador in 2025? And any update on the Biopagán Norte #1 exploration well, Canto Flamenco at CPO-5, and Toritos and Curucucú? Thank you.

Martín Terrado
COO at GeoPark Limited

Thank you, Stephane, for the questions. I think I wrote them all. And if I miss any, we'll make sure to come back. The first one for sure, we took it. What's the current production in Llanos 34, and where do we expect to be on reserves? For the full year for Llanos 34, net to us, we expect to be in the order of 22,000-23,000 barrels of oil per day. That is basically along what we had in mind on a field that is getting more mature. A couple of data points that are worth mentioning. This was a very successful year 2024 on horizontal well drilling, more intense than previous years on water flooding, good results on workovers. And as many of you know, we went down from three rigs to one rig.

Martín Terrado
COO at GeoPark Limited

So what we've seen this year is a decline in the order of what we mentioned before, around 15%. And when we think about reserves, it's too early to tell. As you all know, we communicate reserves in the first quarter of next year. What we can say is that we already started our reserves certification. And based on what we've been discussing throughout the year, we have some positives like water flooding and horizontal wells, and also some things that we're getting some quicker water cuts and some things that are not as good. So we will see. Outside of Llanos 34, we have good results on the Llanos exploration wells and encouraging results on the follow-up appraisals that we have. So from a reserve, Stephane, you can probably understand that there's not much that we can share at this point.

Martín Terrado
COO at GeoPark Limited

If we move to the next question around production potential growth in Ecuador, in Ecuador, with the two blocks that we have overall, we have around 4,000 barrels of oil per day on production. We did drilling and workovers. We finished the campaign. The production growth that we see for now in the Perico block is around water flooding. Some of the wells, we can see that they need some pressure support. That's coming as a discussion with our partner for next year. In the Espejo block, we're looking at the recent wells that we drilled, and we'll see what we propose for next year. When we move to Bienparado Norte, again, it's a well in Putumayo 8. Like Andrés mentioned a few minutes ago, that's to Platanillo, to the west of Platanillo. Civil works have been completed.

Martín Terrado
COO at GeoPark Limited

The rig is right now mobilizing, and we expect to spot this well in the second half of November, so pretty quick, we will be spotting that well, and we have a second well that we're finishing the platform, so for sure, two wells. Bienparado Norte is a stratigraphic/structural play. We're targeting the N Sand. I'm very excited about that, so again, more news to come by the end of the year for sure in the next call, and I think, let me see, Canto Flamenco 2. Canto Flamenco 2 is an exploration well that we drilled and completed in the CPO-5 block. The target for that well was Mirador. This is in the northern part of the block. It's a, as you all remember, a big block, 500,000 acres. The main target was Mirador. Secondary target, Ubaque.

Martín Terrado
COO at GeoPark Limited

Ubaque is the same formation that we have in Indico producing 40 API gravity flowing wells. The results of the drilling were really encouraging in Ubaque. Ubaque found oil with the water oil contact. This is the first time that we find Ubaque on the east side of the Alto de Metica. We tested that Ubaque. It gave us around 34 API crude. Water oil contact was very close. So right now, the well is shutting, waiting on a workover. The most encouraging thing is that it opens our geologist and engineer's eyes to look at, okay, what other opportunities are because clearly oil was flowing through and moving there millions of years ago. The next step on Canto Flamenco 2 is a workover program is coming before the end of the year. We're going to isolate the Ubaque and test the Mirador.

Martín Terrado
COO at GeoPark Limited

Mirador, again, was the primary target where order of magnitude we found 10 feet of net pay. I think you asked us about Curucucú. Curucucú 2 is, sorry, Curucucú 4. We drilled first the well number 4. It's an appraisal or follow-up well in the Llanos 34 to Curucucú. The well is producing with very good rates in the order of 800 barrels of oil per day with 40% water cut. We are aligned with our partner and working so that before the end of the year, we go back to this platform and drill another Curucucú. Let me see. You asked us also around Toritos Sur. Before I jump into Toritos Sur, I want to share a little bit overall where we are in Llanos 123. Andrés also mentioned it.

Martín Terrado
COO at GeoPark Limited

Just reinforce that Llanos 123 exploration block where we had zero production about 18 months ago. Right now, we're producing in the order of 4,000 barrels of oil per day. We have two rigs running, two platforms. One is Toritos, and the other one is where we have Bisbita and Saltador. This is one of the blocks where, going back to previous questions, we're purchasing fund facilities to reduce our OpEx. And the ones that we drilled recently have performed really well. Toritos 2, Toritos Sur 1, and Bisbita Este. All three of them are giving us around 1,500 barrels of oil per day. We continue appraising these discoveries. And for next year, we will continue with drilling activity.

Martín Terrado
COO at GeoPark Limited

If you want to know specifically how Toritos Sur 1 is doing, that well right now, it's producing in the order of 450 barrels of oil per day with less than 10% water cut. I think that we covered all the questions, but please, if we miss any of them, let us know.

Andrés Ocampo
CEO at GeoPark Limited

Operator, are you there? Are there any more questions?

Operator

If you'd like to register a question, please press star followed by 1 on your telephone keypad. We have another written question which says, "Update on the surcharge of the non-dilutables of royalties on Colombia.

Martín Terrado
COO at GeoPark Limited

Sorry, can you repeat the question, please?

Andrés Ocampo
CEO at GeoPark Limited

Operator, can you hear us here? Can you repeat the question, please?

Operator

If you'd like to register a question, please press star followed by 1 on your telephone keypad.

Andrés Ocampo
CEO at GeoPark Limited

Hi, Operator. Can you hear us okay?

Operator

If you'd like to register a question, please press star followed by 1 on your telephone keypad.

Andrés Ocampo
CEO at GeoPark Limited

Okay. So I think we have a technical problem. The operator cannot hear us, but we understand that investors.

Operator

Yes, it's Sandy here in the.

Andrés Ocampo
CEO at GeoPark Limited

So there seems to be a problem with the operator. She cannot hear us, but apparently, investors can hear us. We received messages from people confirming they can hear us. So we'll try to answer the last question. We understand was about the surcharge in Colombia. Miguel, you have it in writing.

Vicente Falanga
Senior Equity Analyst at Bradesco BBI

Let's see. An update on the surcharge.

Andrés Ocampo
CEO at GeoPark Limited

An update on the surcharge. Jaime?

Jaime Caballero
CFO at GeoPark Limited

Great. So on the tax front, the surcharge estimate that we're having for this year is of 10%. And remember, the context around this is that with the tax reform, there is a scale depending on the oil price average for the year. You end up classifying under a different kind of surcharge bracket. Given oil price evolution over the last quarter and the expectation that we have for the year, we believe we're going to end up on that 10% bracket. And that's kind of unchanged versus where we were a few months ago. I understand that part of the question is also around the treatment of royalties. And as we've said before, the courts in Colombia have pronounced themselves on that. And the project that the tax reform included didn't pass through the courts. So the treatment of royalties is unchanged versus what we had in the past.

Jaime Caballero
CFO at GeoPark Limited

The only component of the tax reform that applies to us is the surcharge, and it's at 10%. Thanks.

Operator

We have no further questions, so I'll pass back to the management team for any closing remarks.

Andrés Ocampo
CEO at GeoPark Limited

Thanks, everybody. And we apologize for the technical difficulties. Hopefully, all of the answers, all of the questions were answered. If anybody had any pending questions that were not completed, please feel free to reach out to us directly. So thanks very much for joining and your support of our company. And have a good day.

Operator

Thank you all for joining. That concludes the GeoPark's conference call. You may now disconnect your lines.

Analysts
    • Andrés Ocampo
      CEO at GeoPark Limited
    • Vicente Falanga
      Senior Equity Analyst at Bradesco BBI
    • Jaime Caballero
      CFO at GeoPark Limited
    • Alejandro Demichelis
      Managing Director at Jefferies
    • Daniel Guardiola
      Equity Research at BTG
    • Martín Terrado
      COO at GeoPark Limited
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