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GPRK Geopark Limited

Filed: 4 Nov 20, 7:00pm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of November 2020


Commission File Number: 001-36298

GeoPark Limited

(Exact name of registrant as specified in its charter)

Calle 94 N° 11-30 8° piso

Bogota, Colombia

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F

X

 

Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes

 

No

X

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes

 

No

X


GEOPARK LIMITED

TABLE OF CONTENTS

ITEM

1.

Interim Condensed Consolidated Financial Statements and Explanatory Notes for the three-months and nine-months period ended September 30, 2019 and 2020.


Item 1

GEOPARK LIMITED

INTERIM CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

AND EXPLANATORY NOTES

For the three-months and nine-months period ended September 30, 2019 and 2020



Table of Contents

GEOPARK LIMITED

SEPTEMBER 30, 2020

CONDENSED CONSOLIDATED STATEMENT OF INCOME

    

    

Three-months

    

Three-months

Nine-months

Nine-months

 

period ended

 

period ended

period ended

period ended

September 30, 

September 30, 

September 30, 

September 30, 

2020

 

2019

2020

 

2019

Amounts in US$ ´000

Note

 

(Unaudited)

 

(Unaudited)

(Unaudited)

(Unaudited)

REVENUE

 

3

 

98,147

 

151,202

287,036

470,851

Commodity risk management contracts

 

4

 

2,722

 

4,438

25,602

(16,015)

Production and operating costs

 

5

 

(28,404)

 

(41,734)

(90,193)

(126,666)

Geological and geophysical expenses

 

6

 

(2,777)

 

(4,256)

(10,186)

(12,861)

Administrative expenses

 

7

 

(10,361)

 

(14,467)

(34,364)

(39,526)

Selling expenses

 

8

 

(1,294)

 

(2,412)

(4,894)

(11,271)

Depreciation

 

  

 

(26,695)

 

(26,544)

(89,318)

(76,816)

Write-off of unsuccessful exploration efforts

 

10

 

(575)

 

(8,405)

(3,780)

(9,268)

Impairment loss recognized for non-financial assets

19

(1,007)

(98,488)

Other (expenses) income

 

  

 

(1,278)

 

(1,437)

(8,939)

578

OPERATING PROFIT (LOSS)

 

  

 

28,478

 

56,385

(27,524)

179,006

Financial expenses

 

9

 

(16,637)

 

(9,341)

(47,936)

(28,690)

Financial income

 

9

 

814

 

700

2,911

2,140

Foreign exchange (loss) gain

 

9

 

(674)

 

770

(6,735)

(671)

PROFIT (LOSS) BEFORE INCOME TAX

 

  

 

11,981

 

48,514

(79,284)

151,785

Income tax expense

 

  

 

(16,332)

 

(41,757)

(34,463)

(93,859)

(LOSS) PROFIT FOR THE PERIOD

 

  

 

(4,351)

6,757

(113,747)

57,926

(Losses) Earnings per share (in US$) for (loss) profit attributable to owners of the Company. Basic

 

  

 

(0.07)

 

0.11

(1.88)

0.96

(Losses) Earnings per share (in US$) for (loss) profit attributable to owners of the Company. Diluted

 

  

 

(0.07)

 

0.11

(1.88)

0.93

The above condensed consolidated statement of income should be read in conjunction with the accompanying notes.

3


Table of Contents

GEOPARK LIMITED

SEPTEMBER 30, 2020

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

    

Three-months

    

Three-months

Nine-months

    

Nine-months

 

period ended

 

period ended

period ended

 

period ended

September 30, 

September 30, 

September 30, 

September 30, 

 

2020

 

2019

2020

 

2019

Amounts in US$ ´000

 

(Unaudited)

 

(Unaudited)

(Unaudited)

 

(Unaudited)

(Loss) Profit for the period

 

(4,351)

 

6,757

(113,747)

 

57,926

Other comprehensive income

 

  

 

  

 

Items that may be subsequently reclassified to profit or loss:

 

  

 

  

 

Currency translation differences

 

(778)

 

(2,455)

(10,960)

 

(2,104)

Losses on cash flow hedges

 

(6,770)

 

Income tax relating to losses on cash flow hedges

 

 

2,166

 

Other comprehensive loss for the period

 

(778)

 

(2,455)

(15,564)

 

(2,104)

Total comprehensive (loss) profit for the period

 

(5,129)

 

4,302

(129,311)

 

55,822

The above condensed consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

4


Table of Contents

GEOPARK LIMITED

SEPTEMBER 30, 2020

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

    

Note

    

At September 30, 2020

    

Year ended

Amounts in US$ ´000

 

(Unaudited)

 

December 31, 2019

ASSETS

 

  

 

  

 

  

NON CURRENT ASSETS

 

  

 

  

 

  

Property, plant and equipment

 

10

 

716,850

 

567,788

Right-of-use assets

 

  

 

20,368

 

13,462

Prepayments and other receivables

 

  

 

1,142

 

7,031

Other financial assets

 

  

 

11,130

 

10,985

Deferred income tax asset

 

  

 

27,723

 

26,934

TOTAL NON CURRENT ASSETS

 

  

 

777,213

 

626,200

CURRENT ASSETS

 

  

 

  

 

  

Inventories

 

  

 

11,920

 

11,447

Trade receivables

 

  

 

37,064

 

44,178

Prepayments and other receivables

 

  

 

42,750

 

51,016

Derivative financial instrument assets

 

15

 

11,807

 

8,097

Other financial assets

 

  

 

5,765

 

14

Cash and cash equivalents

 

  

 

163,747

 

111,180

Asset held for sale

17

1,862

TOTAL CURRENT ASSETS

 

  

 

274,915

 

225,932

TOTAL ASSETS

 

  

 

1,052,128

 

852,132

EQUITY

 

  

 

  

 

  

Equity attributable to owners of the Company

 

  

 

  

 

  

Share capital

 

11

 

61

 

59

Share premium

 

  

 

175,816

 

173,716

Reserves

 

  

 

92,221

 

112,471

Accumulated losses

 

  

 

(264,099)

 

(153,361)

TOTAL EQUITY

 

  

 

3,999

 

132,885

LIABILITIES

 

  

 

  

 

  

NON CURRENT LIABILITIES

 

  

 

  

 

  

Borrowings

 

12

 

767,392

 

420,138

Lease liabilities

 

  

 

10,501

 

5,801

Provisions and other long-term liabilities

 

13

 

76,727

 

62,062

Deferred income tax liability

 

  

 

26,852

 

10,850

Trade and other payables

 

14

 

5,251

 

5,475

TOTAL NON CURRENT LIABILITIES

 

  

 

886,723

 

504,326

CURRENT LIABILITIES

 

  

 

  

 

  

Borrowings

 

12

 

4,782

 

17,281

Lease liabilities

 

  

 

11,019

 

7,442

Derivative financial instrument liabilities

 

15

 

1,328

 

952

Current income tax liability

 

  

 

52,007

 

57,901

Trade and other payables

 

14

 

92,218

 

131,345

Liabilities associated with assets held for sale

17

52

TOTAL CURRENT LIABILITIES

 

  

 

161,406

 

214,921

TOTAL LIABILITIES

 

  

 

1,048,129

 

719,247

TOTAL EQUITY AND LIABILITIES

 

  

 

1,052,128

 

852,132

The above condensed consolidated statement of financial position should be read in conjunction with the accompanying notes.

5


Table of Contents

GEOPARK LIMITED

SEPTEMBER 30, 2020

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

Attributable to owners of the Company

 

Share

 

Share

 

Other

 

Translation

 

Accumulated

 

Amount in US$ '000

 

Capital

 

Premium

 

Reserve

 

Reserve

 

losses

Total

Equity at January 1, 2019

    

60

    

237,840

    

114,131

    

(2,322)

    

(206,688)

    

143,021

Comprehensive income:

 

  

 

  

 

  

 

  

 

  

 

  

Profit for the nine-months period

 

 

 

 

 

57,926

 

57,926

Other comprehensive loss for the period

 

 

 

 

(2,104)

 

 

(2,104)

Total comprehensive income for the period ended September 30, 2019

 

 

 

 

(2,104)

 

57,926

 

55,822

Transactions with owners:

 

  

 

  

 

  

 

  

 

  

 

  

Share-based payment

 

3

7,020

 

 

(5,581)

 

1,442

Repurchase of shares

 

(4)

(68,996)

 

 

 

 

(69,000)

Total transactions with owners for the period ended September 30, 2019

 

(1)

 

(61,976)

 

 

 

(5,581)

 

(67,558)

Balance at September 30, 2019 (Unaudited)

 

59

 

175,864

 

114,131

 

(4,426)

 

(154,343)

 

131,285

Balance at January 1, 2020

 

59

 

173,716

 

116,291

 

(3,820)

 

(153,361)

 

132,885

Comprehensive income:

 

  

 

  

 

  

 

  

 

  

 

  

Loss for the nine-months period

 

 

 

 

 

(113,747)

 

(113,747)

Other comprehensive loss for the period

 

 

 

(4,604)

 

(10,960)

 

 

(15,564)

Total comprehensive income for the period ended September 30, 2020

 

 

 

(4,604)

 

(10,960)

 

(113,747)

 

(129,311)

Transactions with owners:

 

  

 

  

 

  

 

  

 

  

 

  

Share-based payment

 

2

 

2,828

 

 

 

3,009

 

5,839

Repurchase of shares

 

(1)

 

(3,070)

 

 

 

 

(3,071)

Stock distribution

1

2,342

(2,343)

Cash distribution

(2,343)

(2,343)

Total transactions with owners for the period ended September 30, 2020

 

2

 

2,100

 

(4,686)

 

 

3,009

 

425

Balance at September 30, 2020 (Unaudited)

 

61

175,816

 

107,001

 

(14,780)

 

(264,099)

 

3,999

The above condensed consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

6


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW

    

Nine-months

    

Nine-months

 

period ended

 

period ended

September 30, 

September 30, 

 

2020

 

2019

Amounts in US$ ’000

 

(Unaudited)

 

(Unaudited)

Cash flows from operating activities

 

  

 

  

(Loss) Profit for the period

 

(113,747)

 

57,926

Adjustments for:

 

  

 

Income tax expense

 

34,463

 

93,859

Depreciation

 

89,318

 

76,816

Loss on disposal of property, plant and equipment

229

7

Write-off of unsuccessful exploration efforts

 

3,780

 

9,268

Impairment loss for non-financial assets

98,488

Amortization of other long-term liabilities

 

(319)

 

(428)

Accrual of borrowing interests

 

36,251

 

22,541

Unwinding of long-term liabilities

 

4,424

 

3,492

Accrual of share-based payment

 

5,839

 

1,442

Foreign exchange (gain) loss

 

(2,679)

 

3,514

Unrealized (gain) loss on commodity risk management contracts

 

(9,862)

 

19,902

Income tax paid

 

(22,857)

 

(88,638)

Change in working capital

 

(31,702)

 

(42,813)

Cash flows from operating activities – net

 

91,626

 

156,888

Cash flows from investing activities

 

  

 

  

Purchase of property, plant and equipment

 

(49,289)

 

(88,162)

Proceeds from disposal of long-term assets

7,066

Acquisition of business, net of cash acquired (Note 17)

 

(272,335)

 

Cash flows used in investing activities – net

 

(321,624)

 

(81,096)

Cash flows from financing activities

 

  

 

  

Proceeds from borrowings

 

350,000

 

Debt issuance costs paid

 

(7,507)

 

Principal paid

 

(3,575)

 

(4,932)

Interest paid

 

(37,483)

 

(28,483)

Lease payments

 

(7,319)

 

(4,317)

Repurchase of shares

 

(3,071)

 

(69,000)

Cash distribution

(2,343)

Payments for transactions with former non-controlling interest

(4,500)

(15,000)

Cash flows from (used in) financing activities - net

 

284,202

 

(121,732)

Net increase in cash and cash equivalents

 

54,204

 

(45,940)

Cash and cash equivalents at January 1

 

111,180

 

127,727

Currency translation differences

 

(1,637)

 

(188)

Cash and cash equivalents at the end of the period

 

163,747

 

81,599

Ending Cash and cash equivalents are specified as follows:

 

  

 

  

Cash at bank and bank deposits

 

163,725

 

81,575

Cash in hand

 

22

 

24

Cash and cash equivalents

 

163,747

 

81,599

The above condensed consolidated statement of cash flow should be read in conjunction with the accompanying notes.

7


EXPLANATORY NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1

General information

GeoPark Limited (the “Company”) is a company incorporated under the law of Bermuda. The Registered Office address is Clarendon House, 2 Church Street, Hamilton HM11, Bermuda.

The principal activity of the Company and its subsidiaries (the “Group” or “GeoPark”) is the exploration, development and production for oil and gas reserves in Colombia, Chile, Brazil, Argentina, Peru and Ecuador.

This condensed consolidated interim financial statements were authorized for issue by the Board of Directors on November 4, 2020.

Basis of Preparation

The condensed consolidated interim financial statements of GeoPark Limited are presented in accordance with IAS 34 “Interim Financial Reporting”. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the annual consolidated financial statements as of and for the year ended December 31, 2019, which have been prepared in accordance with IFRS.

The condensed consolidated interim financial statements have been prepared in accordance with the accounting policies applied in the most recent annual consolidated financial statements. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective. Several amendments and interpretations apply for the first time in 2020, but do not have an impact on the condensed consolidated interim financial statements of the Group.

Whenever necessary, certain comparative amounts have been reclassified to conform to changes in presentation in the current period.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual profit or loss.

The activities of the Group are not subject to significant seasonal changes.

Estimates

The preparation of interim financial information requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the annual consolidated financial statements as of and for the year ended December 31, 2019.

8


Note 1 (Continued)

Financial risk management

The Group’s activities expose it to a variety of financial risks: currency risk, price risk, credit risk- concentration, funding and liquidity risk, interest risk and capital risk. The condensed consolidated interim financial statements do not include all financial risk management information and disclosures required in the annual consolidated financial statements, and should be read in conjunction with the Group’s annual consolidated financial statements as of and for the year ended December 31, 2019.

The 2019 coronavirus (“COVID 19”) outbreak is currently having an indeterminable adverse impact on the world economy. While the COVID 19 has begun to have numerous worldwide effects on general commercial activity, one such effect is that the price of crude oil dropped. At this time, given the uncertainty of the lasting effect of the COVID 19 outbreak, its impact on the Group’s business cannot be completely determined.

The Group is continually reviewing its exposure to the current market conditions and adjusting the 2020 capital expenditures program which remains flexible, quickly adaptable and expandable if prices recover. The Group also continues to add new oil hedges, increasing its price risk protection within the next fifteen months. GeoPark maintained a strong cash position of US$ 163,747,000, has signed a prepayment agreement with Trafigura for up to US$ 75,000,000 and has available US$ 132,933,000 in uncommitted credit lines as of September 30, 2020. For more detailed information, see Note 18.

Subsidiary undertakings

The following chart illustrates the main companies of the Group structure as of September 30, 2020:

Graphic

In January 2020, Amerisur Resources Limited and its subsidiaries were acquired by GeoPark Colombia S.A.S. Also during 2020, GeoPark Chile S.p.A. and GeoPark Argentina S.A.U. were contributed to GeoPark Latin America S.L.U.

9


Note 1 (Continued)

Subsidiary undertakings (Continued)

Details of the subsidiaries and joint operations of the Group are set out below:

    

Name and registered office

    

Ownership interest

Subsidiaries

 

GeoPark Argentina S.A.U. (Argentina)

 

100% (a)

 

GeoPark Latin America Limited (Bermuda)

 

100%

 

GeoPark Latin America Limited – Agencia en Chile (Chile)

 

100% (a)

 

GeoPark Brasil Exploração y Produção de Petróleo e Gás Ltda. (Brazil)

 

100% (a)

 

GeoPark Chile S.p.A. (Chile)

 

100% (a)

 

GeoPark Fell S.p.A. (Chile)

 

100% (a)

 

GeoPark Magallanes Limitada (Chile)

 

100% (a)

 

GeoPark TdF S.p.A. (Chile)

 

100% (a)

 

GeoPark Colombia S.A.S. (Colombia)

 

100% (a)

 

GeoPark Latin America S.L.U. (Spain)

 

100% (a)

 

GeoPark Colombia S.L.U. (Spain)

 

100% (a)

 

GeoPark S.A.C. (Peru)

 

100% (a)

 

GeoPark Perú S.A.C. (Peru)

 

100% (a)

 

GeoPark Operadora del Perú S.A.C. (Peru)

 

100% (a)

 

GeoPark Colombia E&P S.A. (Panama)

 

100% (a)

 

GeoPark Colombia E&P Sucursal Colombia (Colombia)

 

100% (a)

 

GeoPark Mexico S.A.P.I. de C.V. (Mexico)

 

100% (a) (b)

 

GeoPark E&P S.A.P.I. de C.V. (Mexico)

 

100% (a) (b)

 

GeoPark (UK) Limited (United Kingdom)

 

100%

 

GeoPark Perú S.A.C. Sucursal Ecuador (Ecuador)

 

100% (a)

 

Amerisur Resources Limited (United Kingdom)

 

100% (a)

 

Amerisur Exploración Colombia Limited (British Virgin Islands)

 

100% (a)

 

Amerisur Exploración Colombia Limited Colombian Branch (Colombia)

 

100% (a)

 

Yarumal S.A.S. (Colombia)

 

100% (a) (b)

 

Petrodorado South America S.A. (Panama)

 

100% (a)

 

Petrodorado South America S.A. Sucursal Colombia (Colombia)

 

100% (a)

 

Fenix Oil & Gas Limited (British Virgin Islands)

 

100% (a) (b)

 

Fenix Oil & Gas Limited Sucursal Colombia (Colombia)

 

100% (a) (b)

 

Amerisurexplor Ecuador S.A. (Ecuador)

 

100% (a) (b)

 

Amerisur S.A. (Paraguay)

 

100% (a) (b)

(a)Indirectly owned.
(b)Dormant companies.

10


Note 1 (Continued)

Subsidiary undertakings (Continued)

    

Name and registered office

    

Ownership interest

Joint operations

 

Flamenco Block (Chile)

 

50% (a)

 

Campanario Block (Chile)

 

50% (a)

 

Isla Norte Block (Chile)

 

60% (a)

 

Llanos 34 Block (Colombia)

 

45% (a)

 

Llanos 32 Block (Colombia)

 

12.5%

 

Puelen Block (Argentina)

 

18% (b)

 

Sierra del Nevado Block (Argentina)

 

18% (b)

 

CN-V Block (Argentina)

 

50%

 

Los Parlamentos (Argentina)

 

50%

 

Manati Field (Brazil)

 

10%

 

REC-T-128 Block (Brazil)

 

70% (a) (c)

 

POT-T-785 Block (Brazil)

 

70% (a)

 

Morona Block (Peru)

 

75% (a) (c)

 

Espejo Block (Ecuador)

 

50% (a)

 

Perico Block (Ecuador)

 

50%

 

Llanos 86 Block (Colombia)

 

50% (a)

 

Llanos 87 Block (Colombia)

 

50% (a)

 

Llanos 104 Block (Colombia)

 

50% (a)

 

Llanos 123 Block (Colombia)

 

50% (a)

 

Llanos 124 Block (Colombia)

 

50% (a)

 

CPO-5 Block (Colombia)

 

30%

 

Coati Block (Colombia)

 

60% (a)

 

Mecaya Block (Colombia)

 

50% (a)

 

PUT-8 Block (Colombia)

 

50% (a)

 

PUT-9 Block (Colombia)

 

50% (a)

 

PUT-12 Block (Colombia)

 

60% (a)

 

Tacacho Block (Colombia)

 

50% (a)

Terecay Block (Colombia)

 

50% (a)

Llanos 94 Block (Colombia)

 

50%

 

PUT-36 Block (Colombia)

 

50% (a)

(a)GeoPark is the operator.
(b)In process of relinquishment.
(c)See Note 17.

Note 2

Segment Information

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Executive Committee. This committee is integrated by the CEO, COO, CFO and managers in charge of the Geoscience, Operations, Legal and Corporate Governance, People and Sustainability departments. This committee reviews the Group’s internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports. The committee considers the business from a geographic perspective.

11


Note 2 (Continued)

Segment Information (Continued)

The Executive Committee assesses the performance of the operating segments based on a measure of Adjusted EBITDA. Adjusted EBITDA is defined as profit for the period (determined as if IFRS 16 Leases had not been adopted), before net finance cost, income tax, depreciation, amortization, certain non-cash items such as impairments and write-offs of unsuccessful exploration efforts, accrual of share-based payment, unrealized result on commodity risk management contracts and other items (such as geological and geophysical expenses allocated to capitalized projects and other expenses). Operating Netback is equivalent to Adjusted EBITDA before cash expenses included in Administrative, Geological and Geophysical and Other operating expenses. Other information provided to the Executive Committee is measured in a manner consistent with that in the financial statements.

Nine-months period ended September 30, 2020:

Amounts in US$ '000

    

Total

    

Colombia

    

Chile

    

Brazil

    

Argentina

    

Peru

    

Ecuador

    

Corporate

Revenue

 

287,036

 

242,409

 

16,895

 

8,194

 

19,538

 

 

 

Sale of crude oil

 

262,163

 

240,855

 

3,770

 

774

 

16,764

 

 

 

Sale of gas

 

24,873

 

1,554

 

13,125

 

7,420

 

2,774

 

 

 

Production and operating costs

 

(90,193)

 

(65,384)

 

(7,440)

 

(2,639)

 

(14,730)

 

 

 

Royalties

 

(24,312)

 

(20,195)

 

(582)

 

(686)

 

(2,849)

 

 

 

Share-based payment

 

(192)

 

(130)

 

(34)

 

 

(28)

 

 

 

Operating costs

 

(65,689)

 

(45,059)

 

(6,824)

 

(1,953)

 

(11,853)

 

 

 

Depreciation

 

(89,318)

 

(47,885)

 

(25,228)

 

(2,533)

 

(13,253)

 

(336)

 

(21)

 

(62)

Operating (loss) profit

 

(27,524)

 

124,626

 

(71,273)

 

(219)

 

(27,858)

 

(39,273)

 

(567)

 

(12,960)

Operating Netback

 

201,750

 

184,834

9,268

3,998

3,650

Adjusted EBITDA

 

161,557

 

158,083

7,890

2,544

2,883

(1,864)

(521)

(7,458)

Nine-months period ended September 30, 2019:

Amounts in US$ '000

    

Total

    

Colombia

    

Chile

    

Brazil

    

Argentina

    

Peru

    

Corporate

Revenue

 

470,851

 

403,839

 

24,499

 

15,533

 

26,980

 

 

Sale of crude oil

 

434,634

 

402,406

8,076

663

23,489

 

 

Sale of gas

 

36,217

 

1,433

16,423

14,870

3,491

 

 

Production and operating costs

 

(126,666)

 

(86,917)

 

(15,546)

 

(4,015)

 

(20,188)

 

 

Royalties

 

(47,943)

 

(41,879)

(897)

(1,193)

(3,974)

 

 

Share-based payment

 

(329)

 

(231)

(31)

(29)

(38)

 

 

Operating costs

 

(78,394)

 

(44,807)

(14,618)

(2,793)

(16,176)

 

 

Depreciation

 

(76,816)

 

(34,270)

(25,737)

(5,097)

(11,163)

(436)

(113)

Operating profit (loss)

 

179,006

 

230,892

(20,747)

4,463

(16,615)

(3,888)

(15,099)

Operating Netback

 

334,558

 

310,364

8,705

9,993

5,496

Adjusted EBITDA

 

277,679

 

281,519

5,780

7,496

2,813

(5,323)

(14,606)

Total Assets

    

Total

    

Colombia

    

Chile

    

Brazil

    

Argentina

    

Peru

    

Ecuador

    

Corporate

September 30, 2020

 

1,052,128

 

747,750

 

184,124

 

45,709

 

51,060

 

8,164

 

1,096

 

14,225

December 31, 2019

 

852,132

 

357,125

 

249,207

 

68,480

 

79,062

 

53,993

 

1,119

 

43,146

12


Note 2 (Continued)

Segment Information (Continued)

A reconciliation of total Operating Netback to total profit (loss) before income tax is provided as follows:

    

Three-months

    

Three-months

Nine-months

    

Nine-months

 

period ended

 

period ended

period ended

 

period ended

September 30, 

September 30, 

September 30, 

September 30, 

2020

2019

2020

 

2019

Operating Netback

 

67,674

 

107,498

201,750

 

334,558

Geological and geophysical expenses

 

(2,834)

 

(6,290)

(10,450)

 

(16,831)

Administrative expenses

 

(8,737)

 

(14,490)

(29,743)

 

(40,048)

Adjusted EBITDA for reportable segments

 

56,103

 

86,718

161,557

 

277,679

Unrealized gain (loss) on commodity risk management contracts

 

1,290

 

3,038

9,862

 

(19,902)

Depreciation (a)

 

(26,695)

 

(26,544)

(89,318)

 

(76,816)

Write-off of unsuccessful exploration efforts

 

(575)

 

(8,405)

(3,780)

 

(9,268)

Impairment loss recognized for non-financial assets

(1,007)

(98,488)

Share-based payment

 

(1,904)

 

(325)

(5,839)

 

(1,442)

Lease accounting - IFRS 16

 

2,544

 

1,480

7,319

 

4,317

Others (b)

 

(1,278)

 

423

(8,837)

 

4,438

Operating profit (loss)

 

28,478

 

56,385

(27,524)

 

179,006

Financial expenses

 

(16,637)

 

(9,341)

(47,936)

 

(28,690)

Financial income

 

814

 

700

2,911

 

2,140

Foreign exchange (loss) gain

 

(674)

 

770

(6,735)

 

(671)

Profit (Loss) before tax

 

11,981

 

48,514

(79,284)

 

151,785

(a)Net of capitalized costs for oil stock included in Inventories. Depreciation includes US$ 2,114,000 (US$ 2,238,000 in 2019) generated by assets not related to production activities. For the three-months period ended September 30, 2020 the amount included in depreciation is US$ 708,000 (US$ 774,000 in 2019).
(b)Includes allocation to capitalized projects, termination costs (see Note 18) and write-down of VAT credits in Peru (see Note 17).

13


Note 2 (Continued)

Segment Information (Continued)

The following table presents a reconciliation of Adjusted EBITDA to operating profit (loss) for the nine-month periods ended September 30, 2020 and 2019:

 

Nine-months period ended September 30, 2020

 

Colombia

 

Chile

 

Brazil

 

Argentina

 

Other (a)

 

Total

Adjusted EBITDA for reportable segments

    

158,083

7,890

2,544

2,883

(9,843)

161,557

Depreciation

 

(47,885)

(25,228)

(2,533)

(13,253)

(419)

(89,318)

Unrealized gain on commodity risk management contracts

 

9,862

9,862

Write-off of unsuccessful exploration efforts

 

(3,205)

(575)

(3,780)

Impairment loss recognized for non-financial assets

(50,281)

(1,007)

(16,205)

(30,995)

(98,488)

Share-based payment

 

(261)

(65)

(10)

(117)

(5,386)

(5,839)

Lease accounting - IFRS 16

 

4,589

78

1,647

682

323

7,319

Others

 

238

(462)

(285)

(1,848)

(6,480)

(8,837)

Operating profit (loss)

 

124,626

 

(71,273)

 

(219)

 

(27,858)

 

(52,800)

 

(27,524)

 

Nine-months period ended September 30, 2019

 

Colombia

 

Chile

 

Brazil

 

Argentina

 

Other (a)

 

Total

Adjusted EBITDA for reportable segments

    

281,519

5,780

7,496

2,813

(19,929)

    

277,679

Depreciation

 

(34,270)

(25,737)

(5,097)

(11,163)

(549)

 

(76,816)

Unrealized loss on commodity risk management contracts

 

(19,902)

 

(19,902)

Write-off of unsuccessful exploration efforts

 

(241)

(9,027)

 

(9,268)

Share-based payment

 

(433)

(46)

(51)

(50)

(862)

 

(1,442)

Lease accounting - IFRS 16

 

1,463

126

1,643

710

375

 

4,317

Others

 

2,756

(870)

472

102

1,978

 

4,438

Operating profit (loss)

 

230,892

 

(20,747)

 

4,463

 

(16,615)

 

(18,987)

 

179,006

(a)Includes Peru, Ecuador and Corporate.

Note 3

Revenue

    

Three-months

    

Three-months

Nine-months

    

Nine-months

period ended

 

period ended

period ended

 

period ended

 

September 30, 

 

September 30, 

September 30, 

 

September 30, 

Amounts in US$ '000

 

2020

 

2019

2020

 

2019

Sale of crude oil

 

89,326

 

138,245

262,163

 

434,634

Sale of gas

 

8,821

 

12,957

24,873

 

36,217

98,147

 

151,202

287,036

 

470,851

14


Note 4

Commodity risk management contracts

The Group entered into derivative financial instruments to manage its exposure to oil price risk. These derivatives are zero-premium collars, fixed price or zero-premium 3 ways (put spread plus call), and were placed with major financial institutions and commodity traders. The Group entered into the derivatives under ISDA Master Agreements and Credit Support Annexes, which provide credit lines for collateral posting thus alleviating possible liquidity needs under the instruments and protect the Group from potential non-performance risk by its counterparties. The Group’s derivatives are accounted for as non-hedge derivatives and therefore all changes in the fair values of its derivative contracts are recognized as gains or losses in the results of the periods in which they occur.

The following table summarizes the Group’s production hedged during the nine-months period ending September 30, 2020 and for the following periods as a consequence of the derivative contracts in force as of September 30, 2020:

    

    

    

Volume 

    

Average

Period

Reference

Type

bbl/d

price US$/bbl

January 1, 2020 - March 31, 2020

ICE BRENT

Zero Premium 3 Ways

18,000

45.00-55.00 Put 74.45 Call

18,000

April 1, 2020 - June 30, 2020

ICE BRENT

Zero Premium 3 Ways

11,000

45.00-55.00 Put 70.00 Call

April 1, 2020 - June 30, 2020

ICE BRENT

Zero Premium Collars

7,500

32.33 Put 34.54 Call

April 1, 2020 - June 30, 2020

ICE BRENT

Fixed Price

7,500

31.67

26,000

July 1, 2020 - September 30, 2020

ICE BRENT

Zero Premium 3 Ways

11,000

45.00-55.00 Put 70.00 Call

July 1, 2020 - September 30, 2020

ICE BRENT

Zero Premium Collars

14,500

31.34 Put 38.66 Call

July 1, 2020 - September 30, 2020

ICE BRENT

Fixed Price

2,000

32.00

27,500

October 1, 2020 - December 31, 2020

ICE BRENT

Zero Premium 3 Ways

11,000

45.00-55.00 Put 70.00 Call

October 1, 2020 - December 31, 2020

ICE BRENT

Zero Premium Collars

12,500

33.76 Put 45.38 Call

October 1, 2020 - December 31, 2020

VASCONIA CRUDE (ICE BRENT – VASCONIA DIFFERENTIAL)

Zero Premium Collars

2,000

30.00 Put 44.25 Call

25,500

January 1, 2021 - March 31, 2021

ICE BRENT

Zero Premium Collars

15,500

36.90 Put 51.35 Call

15,500

April 1, 2021 - June 30, 2021

ICE BRENT

Zero Premium Collars

13,000

37.54 Put 52.07 Call

13,000

July 1, 2021 - September 30, 2021

ICE BRENT

Zero Premium Collars

2,000

40.00 Put 56.00 Call

2,000

October 1, 2021 - December 31, 2021

ICE BRENT

Zero Premium Collars

2,000

40.00 Put 56.00 Call

2,000

Since July 1, 2020, the Group entered into a new instrument within its hedging portfolio, adding 2,000 bbl/d of Vasconia-based derivative contract for the three-months period ending December 31, 2020. This derivative protects both the overall crude price exposure to ICE Brent as well as the Vasconia diferential, which reflects the quality adjustment for the GeoPark’s Llanos Basin crude production in Colombia.

15


Note 4 (Continued)

Commodity risk management contracts (Continued)

The table below summarizes the gain (loss) on the commodity risk management contracts:

    

Three-months

    

Three-months

Nine-months

    

Nine-months

 

period ended

 

period ended

period ended

 

period ended

September 30, 

September 30, 

September 30, 

September 30, 

 

2020

 

2019

2020

 

2019

Realized gain on commodity risk management contracts

 

1,432

 

1,400

15,740

 

3,887

Unrealized gain (loss) on commodity risk management contracts

 

1,290

 

3,038

9,862

 

(19,902)

Total

 

2,722

 

4,438

25,602

 

(16,015)

The following table presents the Group’s derivative contracts agreed after the balance sheet date:

Volume

Period

    

Reference

    

Type

    

bbl/d

    

Price US$/bbl

July 1, 2021 - December 31, 2021

ICE BRENT

Zero Premium Collars

1,000

40.00 Put 50.52 Call

July 1, 2021 - December 31, 2021

ICE BRENT

Zero Premium Collars

1,500

40.00 Put 50.40 Call

Note 5

Production and operating costs

    

Three-months

    

Three-months

    

Nine-months

    

Nine-months

period ended

period ended

period ended

period ended

September 30, 

September 30, 

September 30, 

September 30, 

Amounts in US$ '000

 

2020

 

2019

 

2020

 

2019

Staff costs

 

2,678

 

3,759

 

9,948

 

10,909

Share-based payment

 

60

 

 

192

 

329

Royalties

 

8,398

 

15,136

 

24,312

 

47,943

Well and facilities maintenance

 

3,426

 

7,752

 

11,321

 

21,032

Operation and maintenance

 

1,672

 

1,643

 

5,257

 

5,939

Consumables

 

3,685

 

3,967

 

12,420

 

13,481

Equipment rental

 

1,514

 

2,568

 

5,939

 

7,282

Transportation costs

 

560

 

585

 

4,085

 

2,088

Gas plant costs

 

27

 

741

 

1,021

 

2,717

Safety and insurance costs

 

1,139

 

1,188

 

3,060

 

3,019

Field camp

 

787

 

527

 

2,134

 

1,977

Non operated blocks costs

 

739

 

371

 

2,079

 

973

Crude oil stock variation

 

2,363

 

220

 

2,431

 

(1)

Other costs

 

1,356

 

3,277

 

5,994

 

8,978

28,404

 

41,734

90,193

 

126,666

16


Note 6

Geological and geophysical expenses

    

Three-months

    

Three-months

    

Nine-months

    

Nine-months

period ended

period ended

period ended

period ended

September 30, 

September 30, 

September 30, 

September 30, 

Amounts in US$ '000

 

2020

 

2019

 

2020

 

2019

Staff costs

 

2,527

 

4,457

 

8,608

 

12,332

Share-based payment

 

21

 

 

87

 

136

Other services

 

229

 

1,659

 

1,593

 

4,253

Allocation to capitalized project

 

 

(1,860)

 

(102)

 

(3,860)

2,777

 

4,256

10,186

 

12,861

Note 7

Administrative expenses

    

Three-months

    

Three-months

    

Nine-months

    

Nine-months

period ended

period ended

period ended

period ended

September 30, 

September 30, 

September 30, 

September 30, 

Amounts in US$ '000

 

2020

 

2019

 

2020

 

2019

Staff costs

 

5,676

 

6,854

 

16,922

 

21,803

Share-based payment

 

1,823

 

325

 

5,560

 

977

Consultant fees

 

2,097

 

4,435

 

6,734

 

9,193

Travel expenses

 

17

 

1,018

 

884

 

3,533

Director fees and allowance

 

397

 

756

 

1,481

 

2,435

Communication and IT costs

 

642

 

948

 

2,080

 

2,465

Allocation to joint operations

 

(1,317)

 

(1,842)

 

(4,580)

 

(5,689)

Other administrative expenses

 

1,026

 

1,973

 

5,283

 

4,809

10,361

 

14,467

34,364

 

39,526

Note 8

Selling expenses

    

Three-months

    

Three-months

    

Nine-months

    

Nine-months

 

period ended

 

period ended

 

period ended

 

period ended

September 30, 

September 30, 

September 30, 

September 30, 

Amounts in US$ '000

 

2020

 

2019

 

2020

 

2019

Transportation

 

1,090

 

2,132

 

4,017

 

10,361

Selling taxes and other

 

204

 

280

 

877

 

910

1,294

 

2,412

4,894

 

11,271

17


Note 9

Financial results

    

Three-months

    

Three-months

    

Nine-months

    

Nine-months

 

period ended

 

period ended

 

period ended

 

period ended

September 30, 

September 30, 

September 30, 

September 30, 

Amounts in US$ '000

 

2020

 

2019

 

2020

 

2019

Financial expenses

 

  

 

  

 

  

 

  

Bank charges and other financial costs

 

(2,393)

 

(698)

 

(7,157)

 

(2,904)

Interest and amortization of debt issue costs

 

(12,693)

 

(7,448)

 

(36,355)

 

(22,625)

Unwinding of long-term liabilities

 

(1,551)

 

(1,259)

 

(4,424)

 

(3,492)

Less: amounts capitalized on qualifying assets

 

 

64

 

 

331

(16,637)

 

(9,341)

(47,936)

 

(28,690)

Financial income

 

  

 

  

 

  

 

Interest received

 

814

 

700

 

2,911

 

2,140

814

 

700

2,911

 

2,140

Foreign exchange gains and losses

 

  

 

  

 

  

 

  

Foreign exchange (loss) gain

 

(674)

 

770

 

3,553

 

(3,514)

Result on currency risk management contracts (a)

 

��

 

 

(10,288)

 

2,843

(674)

 

770

(6,735)

 

(671)

Total financial results

 

(16,497)

 

(7,871)

 

(51,760)

 

(27,221)

(a)GeoPark manages its exposure to local currency fluctuation with respect to income tax balances in Colombia by entering into derivative financial instruments with local banks in Colombia. The realized result on these contracts was US$ 9,414,000 (loss) and US$ 2,843,000 (gain) for the nine-months period ended September 30, 2020 and 2019, respectively.

18


Note 10

Property, plant and equipment

    

    

Furniture,

    

    

    

    

Exploration

    

equipment

Production

Buildings

and

Oil & gas

and

facilities and

and

Construction 

evaluation

Amounts in US$'000

properties

 

vehicles

machinery

improvements

in progress

 

assets

TOTAL

Cost at January 1, 2019

 

717,510

 

17,748

 

172,094

 

11,554

 

60,597

 

59,992

 

1,039,495

Additions

 

1,763

(a)

1,566

362

27

73,629

16,237

 

93,584

Disposals

(41)

(41)

Write-off of unsuccessful exploration efforts

 

(9,268)

(b)

(9,268)

Transfers

 

56,825

255

21,663

65

(67,124)

(11,684)

 

Currency translation differences

 

(4,623)

(53)

(158)

(11)

(492)

 

(5,337)

Reclassification

26,302

(23,489)

2,813

Cost at September 30, 2019

 

797,777

 

19,475

 

170,472

 

11,635

 

67,102

 

54,785

 

1,121,246

Cost at January 1, 2020

 

830,937

 

19,549

 

172,507

 

11,770

 

69,587

 

48,036

 

1,152,386

Additions

 

(479)

(a)

918

423

36,155

12,320

49,337

Disposals

(399)

(115)

(514)

Acquisitions

 

174,984

617

34,613

1,199

79,693

291,106

Write-off / Impairment

 

(67,493)

(c)

(30,995)

(c)

(3,780)

(d)

(102,268)

Transfers

 

30,069

174

14,078

78

(38,798)

(5,601)

Currency translation differences

 

(24,191)

(334)

(2,293)

(85)

(88)

(80)

(27,071)

Assets held for sale (Note 17)

(1,996)

(1,996)

Cost at September 30, 2020

 

941,831

20,525

218,905

12,071

37,060

130,588

1,360,980

Depreciation and write-down at January 1, 2019

 

(359,358)

 

(13,361)

 

(103,704)

 

(5,902)

 

 

 

(482,325)

Depreciation

 

(59,066)

(1,561)

(13,217)

(677)

 

(74,521)

Disposals

34

34

Currency translation differences

 

2,292

45

817

12

 

3,166

Reclassification

(27,664)

24,851

(2,813)

Depreciation and write-down at September 30, 2019

 

(443,796)

 

(14,843)

 

(91,253)

 

(6,567)

 

 

 

(556,459)

Depreciation and write-down at January 1, 2020

 

(467,806)

 

(15,149)

 

(95,047)

 

(6,596)

 

 

 

(584,598)

Depreciation

 

(66,063)

(1,743)

(12,103)

(371)

(80,280)

Disposals

213

72

285

Currency translation differences

 

17,193

311

2,802

23

20,329

Assets held for sale (Note 17)

134

134

Depreciation and write-down at September 30, 2020

 

(516,542)

 

(16,368)

 

(104,348)

 

(6,872)

 

 

 

(644,130)

Carrying amount at September 30, 2019

 

353,981

 

4,632

 

79,219

 

5,068

 

67,102

 

54,785

 

564,787

Carrying amount at September 30, 2020

 

425,289

 

4,157

 

114,557

 

5,199

 

37,060

 

130,588

 

716,850

(a)Corresponds to the effect of change in estimate of assets retirement obligations.
(b)Corresponds to five unsuccessful exploratory wells drilled and other exploration costs incurred in Argentina (CN-V, Sierra del Nevado and Puelen Blocks) and other exploration costs in Colombia.
(c)See Note 19.
(d)Corresponds to an unsuccessful exploratory well drilled in the Isla Norte Block (Chile) and exploration costs incurred in previous years in the POT-T-619 Block (Brazil) for which no additional work would be performed.

19


Note 11

Equity

Share capital

    

At

    

Year ended

Issued share capital

 

September 30, 2020

 

December 31, 2019

Common stock (US$ ´000)

 

61

 

59

The share capital is distributed as follows:

 

  

 

  

Common shares, of nominal US$ 0.001

 

60,612,258

 

59,167,584

Total common shares in issue

 

60,612,258

 

59,167,584

Authorized share capital

 

  

 

  

US$ per share

 

0.001

 

0.001

Number of common shares (US$ 0.001 each)

 

5,171,949,000

 

5,171,949,000

Amount in US$

 

5,171,949

 

5,171,949

GeoPark’s share capital only consists of common shares. The authorized share capital consists of 5,171,949,000 common shares of par value US$ 0.001 per share. All of the Company issued and outstanding common shares are fully paid and nonassessable.

Cash distribution

On November 6, 2019, the Company’s Board of Directors declared the initiation of a quarterly cash distribution of US$ 0.0413 per share that was paid on December 10, 2019. On March 4, 2020, declared a quarterly cash distribution of US$ 0.0413 per share that was paid on April 8, 2020.

Buyback Program

On February 10, 2020, the Company’s Board of Directors approved a program to repurchase up to 10% of its shares outstanding or approximately 5,930,000 shares. The repurchase program begun on February 11, 2020 and will expire on December 31, 2020. These transactions have no impact on the Group’s results.

However, both the quarterly cash distribution and the share buyback program were suspended after the April 8, 2020 distribution, as part of the revised work program for 2020 to help address the recent decline in oil prices.

Stock distribution

On February 10, 2020, the Company’s Board of Directors declared a special stock distribution of 0.004 shares per share. Consequently, on March 11, 2020, 242,650 common shares were distributed to the shareholders of record at the close of business on February 25, 2020.

20


Note 12

Borrowings

The outstanding amounts are as follows:

    

At

    

Year ended

Amounts in US$ '000

 

September 30, 2020

 

December 31, 2019

2024 Notes (a)

 

421,600

 

427,812

2027 Notes (b)

 

347,075

 

Banco Santander (c)

 

3,499

 

9,607

772,174

 

437,419

Classified as follows:

Current

    

4,782

    

17,281

Non-Current

 

767,392

 

420,138

(a)On September 21, 2017, the Company successfully placed US$ 425,000,000 notes, which were offered to qualified institutional buyers in accordance with Rule 144A under the United States Securities Act, and outside the United States to non-U.S. persons in accordance with Regulation S under the United States Securities Act.

The Notes carry a coupon of 6.50% per annum. Final maturity of the Notes will be September 21, 2024. The Notes are secured with a guarantee granted by GeoPark Colombia S.L.U. and GeoPark Chile S.p.A. The debt issuance cost for this transaction amounted to US$ 6,683,000 (debt issuance effective rate: 6.90%). The indenture governing the Notes due 2024 includes incurrence test covenants that provide, among other things, that during the two-years period between September 22, 2019 and September 21, 2021, the Net Debt to Adjusted EBITDA ratio should not exceed 3.25 times and the Adjusted EBITDA to Interest ratio should exceed 2.25 times. Failure to comply with the incurrence test covenants does not trigger an event of default. However, this situation may limit the Company’s capacity to incur additional indebtedness, as specified in the indenture governing the Notes. Incurrence covenants as opposed to maintenance covenants must be tested by the Company before incurring additional debt or performing certain corporate actions including but not limited to dividend payments, restricted payments and others. As of the date of these interim condensed consolidated financial statements, the Company is in compliance of all the indenture’s provisions and covenants.

(b)On January 17, 2020, the Company successfully placed US$ 350,000,000 Notes, which were offered in a private placement to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and outside the United States to non U.S. persons in accordance with Regulation S under the Securities Act. The Notes are fully and unconditionally guaranteed jointly and severally by GeoPark Chile S.p.A. and GeoPark Colombia S.L.U.

21


Note 12 (Continued)

Borrowings (Continued)

The Notes were priced at 99.285% and carry a coupon of 5.50% per annum (yield 5.625% per annum). The debt issuance cost for this transaction amounted to US$ 5,004,000 (debt issuance effective rate: 5.88%). Final maturity of the Notes will be January 17, 2027. The indenture governing the Notes due 2027 includes incurrence test covenants that provides among other things, that, the Net Debt to Adjusted EBITDA ratio should not exceed 3.25 times and the Adjusted EBITDA to Interest ratio should exceed 2.5 times. Failure to comply with the incurrence test covenants does not trigger an event of default. However, this situation may limit the Company’s capacity to incur additional indebtedness, as specified in the indenture governing the Notes. Incurrence covenants as opposed to maintenance covenants must be tested by the Company before incurring additional debt or performing certain corporate actions including but not limited to dividend payments, restricted payments and others. As of the date of these interim condensed consolidated financial statements, the Company is in compliance of all the indenture’s provisions and covenants.

The net proceeds from the Notes were used by the Company (i) to make an intercompany loan to its wholly-owned subsidiary, GeoPark Colombia S.A.S., providing it with sufficient funds to pay the total consideration for the acquisition of Amerisur (see Note 17) and to pay any related fees and expenses, and (ii) for general corporate purposes.

(c)In October 2018, GeoPark Brazil Exploração y Produção de Petróleo e Gás Ltda. executed a loan agreement with Banco Santander for Brazilian Real 77,640,000 (equivalent to US$ 20,000,000 at the moment of the loan execution) to repay an existing US$-denominated intercompany loan to GeoPark Latin America Limited - Agencia en Chile. The interest rate applicable to this loan is CDI plus 2.25% per annum. “CDI” (Interbank certificate of deposit) represents the average rate of all inter-bank overnight transactions in Brazil. The principal and the interest are paid semi-annually, with final maturity in October 2020.

In September 2020, GeoPark Brazil Exploração y Produção de Petróleo e Gás Ltda. executed the refinancing of the outstanding principal loan with Banco Santander for a total amount of Brazilian Real 19,410,000 (equivalent to US$ 3,441,000 as of September 30, 2020). The interest rate applicable is CDI plus 3.55% per annum. Interests will be paid on a monthly basis, and principal will be paid semi-annually in three equal instalments in October 2021, April 2022 and October 2022.

As of the date of these interim condensed consolidated financial statements, the Group has available credit lines for over US$ 132,933,000.

Note 13

Provisions and other long-term liabilities

The outstanding amounts are as follows:

    

At

    

Year ended

Amounts in US$ '000

 

September 30, 2020

 

December 31, 2019

Assets retirement obligation

 

64,211

 

56,113

Deferred income

 

3,682

 

2,267

Other

 

8,834

 

3,682

76,727

 

62,062

22


Note 14

Trade and other payables

The outstanding amounts are as follows:

    

At

    

Year ended

Amounts in US$ '000

 

September 30, 2020

 

December 31, 2019

Trade payables

 

57,876

 

83,991

To be paid to co-venturers

 

4,464

 

4,803

Payables to LGI (a)

 

10,755

 

15,000

Staff costs to be paid

 

11,568

 

13,219

Royalties to be paid

 

4,696

 

6,294

V.A.T.

 

4,150

 

6,718

Taxes and other debts to be paid

 

3,960

 

6,795

97,469

 

136,820

Classified as follows:

Current

    

92,218

131,345

Non-Current

 

5,251

5,475

(a)Payables related to the acquisition of Non-controlling interest in Colombia and Chile’s business from LG International in November 2018 (see Note 36.1 to the annual consolidated financial statements as of and for the year ended December 31, 2019).

Note 15

Fair value measurement of financial instruments

Fair value hierarchy

The following table presents the Group’s financial assets and financial liabilities measured and recognized at fair value at September 30, 2020 and December 31, 2019 on a recurring basis:

    

    

    

At

Amounts in US$ '000

Level 1

Level 2

 

September 30, 2020

Assets

 

  

 

  

 

  

Cash and cash equivalents

 

  

 

  

 

Money market funds

 

73,500

 

 

73,500

Derivative financial instrument assets

 

  

 

  

 

Commodity risk management contracts

 

 

11,807

 

11,807

Total Assets

 

73,500

 

11,807

 

85,307

23


Note 15 (Continued)

Fair value measurement of financial instruments (Continued)

Fair value hierarchy (Continued)

    

    

    

At

Amounts in US$ '000

Level 1

Level 2

 

September 30, 2020

Liabilities

 

  

 

  

 

  

Derivative financial instrument liabilities

 

  

 

  

 

Commodity risk management contracts

 

 

1,328

 

1,328

Total Liabilities

 

 

1,328

 

1,328

    

    

    

Year ended

Amounts in US$ '000

Level 1

Level 2

 

December 31, 2019

Assets

 

  

 

  

 

  

Cash and cash equivalents

 

  

 

  

 

  

Money market funds

 

42,212

 

 

42,212

Derivative financial instrument assets

 

  

 

  

 

  

Commodity risk management contracts

 

 

444

 

444

Currency risk management contracts

 

 

874

 

874

Forward contracts relating to forecast transactions

 

 

6,779

 

6,779

Total Assets

 

42,212

 

8,097

 

50,309

Liabilities

 

  

 

  

 

  

Derivative financial instrument liabilities

 

  

 

  

 

  

Commodity risk management contracts

 

 

952

 

952

Total Liabilities

 

 

952

 

952

There were no transfers between Level 2 and 3 during the period.

The Group did not measure any financial assets or financial liabilities at fair value on a non-recurring basis as of September 30, 2020.

Fair values of other financial instruments (unrecognized)

The Group also has a number of financial instruments which are not measured at fair value in the balance sheet. For the majority of these instruments, the fair values are not materially different to their carrying amounts, since the interest receivable/payable is either close to current market rates or the instruments are short-term in nature.

Borrowings are comprised primarily of fixed rate debt and variable rate debt with a short term portion where interest has already been fixed. They are measured at their amortized cost. The Group estimates that the fair value of its main financial liabilities is approximately 93% of its carrying amount including interests accrued as of September 30, 2020. Fair values were calculated based on market price for the Notes and cash flows discounted for other borrowings using a rate based on the borrowing rate and are within Level 1 and Level 2 of the fair value hierarchy, respectively.

24


Note 16

Capital commitments

Capital commitments are detailed in Note 33.2 to the audited Consolidated Financial Statements as of December 31, 2019. The following updates have taken place during the nine-month period ended September 30, 2020:

Colombia

The Colombian National Hydrocarbons Agency (“ANH”) approved the termination of the E&P Contract related to the VIM-3 Block requested by GeoPark in 2018, with a remaining commitment for an amount of US$ 9,290,800, which can be transferred as investment to another block in Colombia.

The Group has committed to drill 2 exploratory wells in the Llanos 32 Block, which amount to US$ 3,350,000 at GeoPark’s working interest, before February 20, 2022.

The investment commitment for the Llanos 94 Block, which is in Preliminary Phase, will be to acquire and reprocess existing 3D seismic and to drill three exploratory wells for US$ 8,048,000, at GeoPark’s working interest, over the three-years term of Phase 1.

The following investment commitments were assumed by the Group, at its working interest, as a consequence of the acquisition of Amerisur (see Note 17):

CPO-5 Block: 3D seismic acquisition, processing and interpretation (US$ 2,542,000) before July 9, 2021.
Coati Block: 3D seismic and 2D seismic acquisition (US$ 4,500,000). The exploratory period is currently suspended.
Mecaya Block: 3D seismic or 1 exploratory well (US$ 600,000). The exploratory period is currently suspended.
PUT-8 Block: 3D seismic acquisition and 3 exploratory wells (US$ 13,107,000) before March 1, 2022.
PUT-9 Block: 3D seismic acquisition and 2 exploratory wells (US$ 4,365,000) before October 14, 2020. On March 18, 2020, GeoPark requested the ANH to suspend the exploratory period.
PUT-12 Block: 2D seismic acquisition, reprocessing and interpretation, geochemistry and 1 exploratory well (US$ 17,920,000) before November 29, 2021. On April 7, 2020, GeoPark requested the ANH to suspend the exploratory period.
PUT-30 Block: 2D seismic acquisition and 1 exploratory well (US$ 26,929,000) before May 2, 2022.
Tacacho Block: 2D seismic acquisition, processing and interpretation (US$ 1,224,000). The exploratory period is currently suspended.
Terecay Block: 2D seismic acquisition, processing and interpretation (US$ 2,856,000). The exploratory period is currently suspended.
The PUT-14 and PUT-36 Blocks are in Preliminary Phase as of the date of these interim condensed consolidated financial statements. During this Preliminary Phase, GeoPark must request the Ministry of Interior to certify the presence or absence of indigenous communities and engage in a previous consultation process, if applicable. Only when this process has been completed and the corresponding regulatory approvals have been obtained, the blocks will enter into Phase 1, where the exploratory commitments are mandatory. The investment commitments for the blocks over the three-years term of Phase 1 would be up to US$ 16,122,000 and US$ 8,344,000, respectively.

25


Note 16 (Continued)

Capital commitments (Continued)

Chile

During the three-months period ended March 31, 2020, GeoPark drilled the exploratory well committed in the Flamenco Block and one of the two exploratory wells committed in the Isla Norte Block. Consequently, the capital commitment in the Flamenco Block was fulfilled and the minimum remaining commitment in the Isla Norte Block of drilling one exploratory well amounts to US$ 867,100.

On March 17, 2020, the Chilean Ministry approved the GeoPark’s proposal to modify the outstanding commitments in the Campanario Block to two deeper exploratory wells, for an amount of US$ 5,002,000.

On July 24, 2020, the Chilean Ministry approved the GeoPark’s proposal to suspend the exploratory periods in the Campanario and Isla Norte Blocks due to force majeure in relation with the COVID 19 outbreak.

On October 6, 2020, the Chilean Ministry approved the GeoPark’s proposal to extend the second exploratory phase in the Flamenco Block until November 7, 2021.

Brazil

GeoPark fulfilled the commitments that were remaining as of December 31, 2019 in the REC-T-128 Block.

Note 17

Business transactions

Acquisition of Amerisur Resources Plc

On January 16, 2020, GeoPark acquired the 100% share capital of Amerisur Resources Plc, a company listed on the Alternative Investment Market (“AIM”) of the London Stock Exchange. After the acquisition the company was delisted and the name changed to Amerisur Resources Limited. The principal activities of Amerisur Resources Limited and its subsidiaries (“Amerisur”) are exploration, development and production for oil and gas reserves in Latin America. Amerisur owns thirteen production, development and exploration blocks in Colombia (twelve operated blocks in the Putumayo basin and one non-operated block in the Llanos basin) and an export oil pipeline from Colombia to Ecuador named Oleoducto Binacional Amerisur (“OBA”).

GeoPark paid a cash consideration of British Pound Sterling (“GBP”) 241,682,496 (equivalent to US$ 314,163,077) at closing date.

Before closing the transaction, the Group decided to manage its exposure to GBP fluctuation with respect to the abovementioned cash consideration. Consequently, on November 25, 2019, GeoPark entered into a “Deal Contingent Forward” (DCF) with a UK Bank, in order to anticipate any currency fluctuation in respect to the cash consideration payable in GBP. This forward contract was accounted for as a cash flow hedge and therefore all changes in its fair value until closing date were recognized in Other Reserve within Equity. At closing date, GeoPark removed that amount from the cash flow hedge reserve and included it directly in the initial cost of the acquired business.

26


Note 17 (Continued)

Business transactions (Continued)

Acquisition of Amerisur Resources Plc (Continued)

On January 8, 2020, Amerisur announced that it had received a copy of a claim form issued in the High Court of England and Wales (the “Court”) by Leigh Day solicitors on behalf of a group of claimants (the “Claimants”) described as members of a farming community in the department of Putumayo in Colombia. The claim states that the Claimants seek compensation for economic and non-economic damages said to be caused by alleged environmental contamination and pollution caused by Amerisur’s operations in Colombia. Amerisur stated that the accusations of environmental damage referenced in the claim are being investigated by Colombian authorities and to-date have been deemed to be without merit. Amerisur further stated that it viewed the substance of the claim to be without merit. Following court hearings held in January and February 2020, an interim freezing order was imposed on Amerisur in respect to GBP 4,465,600 (equivalent to US$ 5,738,000 as of September 30, 2020) of its assets located in the United Kingdom. Amerisur has been negotiating with the Claimants in order to file a bank guarantee that will enable the Court to lift the freezing order. On May 7, 2020, Amerisur served a substantive letter of response, responding to Leigh Day´s letter of claim. In June 2020, both parties (Amerisur and Leigh Day) filed their case summaries with the Court. The Court must now schedule the case management hearing, where it will decide on the timetable, disclosure and costs for the proceedings.

In accordance with the acquisition method of accounting, the acquisition cost was allocated to the underlying assets acquired and liabilities assumed based primarily upon their estimated fair values at the date of acquisition. An income approach (being the net present value of expected future cash flows) was adopted to determine the fair values of the mineral interest. Estimates of expected future cash flows reflect estimates of projected future revenues, production costs and capital expenditures based on our business model. The excess of acquisition cost, if any, over the net identifiable assets acquired represents goodwill.

The following table summarises the combined consideration paid for the acquired business, and a preliminary allocation of fair value of the assets acquired and liabilities assumed for this transaction:

Amounts in US$ '000

    

Total

Cash

 

314,163

Total consideration

 

314,163

Property, plant and equipment (including mineral interest)

 

291,106

Right-of-use assets

17,360

Prepayments and other receivables

25,344

Trade receivables

11,502

Other assets

 

12,189

Cash and cash equivalents

41,828

Lease liabilities

(17,851)

Provision for other long-term liabilities

 

(14,284)

Deferred income tax liabilities

 

(15,975)

Trade and other payables

 

(37,056)

Total identifiable net assets

 

314,163

Considering that Amerisur issues financial information on a monthly basis, the Group has considered the identified assets and liabilities as of December 31, 2019. If the purchase price allocation exercise had been carried out as of January 16, 2020, it would not have deferred significantly.

The purchase price allocation detailed above is preliminary, since the valuation process is ongoing. This process will be completed during 2020.

27


Note 17 (Continued)

Business transactions (Continued)

Retirement from Morona Block (Block 64) in Peru

On July 15, 2020, GeoPark notified its irrevocable decision to retire from the non-producing Morona Block (Block 64) in Peru, due to extended force majeure, which allows for the termination of the license contract. On January 10, 2020, Perupetro (the Peruvian petroleum licensing agency) declared the project in force majeure effective retroactively to June 15, 2019. This force majeure has remained for a period exceeding the contract’s terms, entitling GeoPark to legally initiate the formal process to retire from the license contract, as well as from the joint operation agreement executed with Petroperu.

As a result of the abovementioned decision, the Group performed an analysis of the recoverability of its related assets in Peru as of June 30, 2020 and decided to write-down VAT credits for US$ 6,017,000 and Deferred income tax asset for US$ 8,353,000, recognizing those charges within Other expenses and Income tax expenses, respectively, in the Condensed Consolidated Statement of Income.

Farm-out REC-T-128 Block in Brazil

In July 2020, GeoPark initiated a farm-out process to sell its 70% interest in the currently non-producing REC-T-128 Block in Brazil. Various local companies participated in the process during July and August 2020. As of the date of these condensed consolidated interim financial statements, the farm-out process is still ongoing and under negotiations. Consequently, the amount of Property, plant and equipment related to the block was impaired to its fair value less cost to sale (see Note 19) and classified as held for sale as of September 30, 2020.

Note 18

Coronavirus and oil price crisis

Starting in March 2020, the oil market experienced a significant over-supply condition that resulted in a sharp drop in prices, with Brent falling from over US$ 50 per barrel at the beginning of March 2020 up to US$ 16 per barrel in late April 2020. There were two key drivers for this market scenario. On the demand side, the sustained impact of the COVID-19 pandemic across the world and the associated containment measures, resulted in a sharp and sudden drop in fuel demand and hence on crude demand as well. This impact had been felt since early 2020 but accelerated significantly in March and April.

Concurrently, on the supply side, during the first week of March 2020, OPEC and non-OPEC producers (sometimes referred to as OPEC+) met to discuss the prospect of extending or increasing oil production cuts that had been first put in place in late 2016 and had been renewed and expanded ever since.  No consensus was reached among the 24 participating countries, effectively eliminating output reduction targets as of April 1, 2020. As a consequence, OPEC+ countries and especially Saudi Arabia, significantly increased production during April 2020.

The combined impact of sharply lower demand and growing supply led the market into an oil significant surplus with inventories building around the world and prices dropping to levels last seen in the early 2000s.

28


Note 18 (Continued)

Coronavirus and oil price crisis (Continued)

In mid-April, in the midst of significant demand destruction, OPEC+ agreed to a historical 9.7 MMbbl/d output cut. They were joined by other G-20 countries, which indicated they would add 3 to 5 MMbbl/d production reductions. Since then, global production has dropped significantly with high compliance from OPEC+ countries and economic-driven shut-ins in other regions, especially the United States of America (U.S.A.) and Canada. Over these months, COVID-19 related restrictions started to be slowly lifted in some key consuming markets such as China, Europe and the U.S.A., generating a slow but steady crude demand recovery and taking the market from that significantly over-supplied condition to a more balanced status with prices rising to trade in the low forties and inventories stabilizing or drawing around the world. During the three-months period ended September 30, 2020, resurgence of COVID-19 cases in key markets, such as the U.S.A and Europe, increased concerns about the demand recovery process.

The crude price trajectory is highly uncertain for the months to come, as the economic impact of COVID-19 materializes and resurgence of the pandemic may hinder energy demand around the globe while, on the supply side, OPEC+ is set to increase production in January 2021 for about ~2 MMbbl/d. Further supply increases are planned for 2021. The relative pace of demand and supply growth will be a key driver of prices in the short term.

Although there are no specific tax benefits granted to the oil and gas sector in the jurisdictions where the Group has its business, in response to the Covid-19 crisis, many governments have granted extensions to file and pay tax duties. The Group has applied and used any extension granted, specifically in Colombia, Brazil, Argentina, Peru and Spain. In Colombia, GeoPark entered into an agreement with the tax authority to cancel the 2019 income tax in twelve instalments from August 2020 to July 2021. Likewise, certain social security charges on payroll have been also allowed to be reduced. Tax audits and procedures before fiscal authorities have been suspended until further governmental notice.

Specifically, GeoPark’s program and strategy are guided by the following principles and priorities:

Keep Team Healthy: Protect workforce and families from the pandemic and its interruptions
Continuity of Field Operations: Ensure backup plans and teams in place to guarantee continuity of operations and business
Preserve Cash: Adjust the work program to maintain flexibility and balance sheet strength
Capital Allocation Discipline: Prioritize lower-risk, higher netback, and quick cash flow generating projects
Do More for Less: Implement operating, administrative and capital cost reduction measures
Stay Agile: Continuous monitoring of work programs and adjustment, up or down, as necessary
Build for the Long-Term: Protect critical tools and capabilities necessary for the long-term

29


Note 18 (Continued)

Coronavirus and oil price crisis (Continued)

Examples of the ongoing cost-cutting initiatives already implemented and providing results include:

Renegotiation of all service contracts, as well as any other type of contract
Improvements in operational efficiency
Temporary suspension of certain marginal fields
Overall reduction of administrative and structure costs, starting with a voluntary salary and bonus reduction by our management team and Board of Directors, as well as a general renegotiation of fees and expenses
Temporary suspension of quarterly cash dividends and share buybacks

Effective immediately, GeoPark adjusted the 2020 capital expenditures program to US$ 65-75 million, approximately a 60% reduction from prior preliminary estimates (approximately US$ 180-200 million including capital expenditures for Amerisur assets). For the whole year 2020, GeoPark has continued to secure oil production, with a minimum price of US$30 per barrel. Also, the current scenario has not impacted the approved credit lines and both Fitch and Standard & Poor’s maintained their credit ratings on our outstanding series of Notes due 2024 and 2027.

During July and August 2020, the Group implemented a plan to reduce its workforce. This reduction streamlined certain internal functions and departments for creating a more efficient workforce in the current economic environment. As a result, the Group achieved cost savings associated with the reduction of full-time and temporary employees, excluding one-time termination costs. Continuous efforts and actions to reduce costs and preserve liquidity have continued throughout the year and will continue in the future.

Note 19

Impairment test on Property, plant and equipment

As of September 30, 2020, there were no new impairment indicators nor enough evidence to reverse the impairment charges previously recorded, except for the farm-out process related to the REC-T-128 Block in Brazil (see Note 17). As of March 31, 2020, considering the scenario described in Note 18, the Group addressed the process of evaluating the recoverability of its property, plant and equipment affected by oil price drop.

The Group’s management considers as Cash Generating Unit (CGU) each of the blocks or group of blocks in which the Group has working or economic interests. The blocks with no material investment on fixed assets or with operations that are not linked to oil prices were not subject to the impairment test.

The main assumptions taken into account for the impairment tests performed as of March 31, 2020 are the ones described in Note 37 of the annual consolidated financial statements as of and for the year ended December 31, 2019. Only the following assumption were revised: i) the future oil prices have been calculated taking into consideration the updated oil price curves available in the market, provided by international advisory companies, weighted through internal estimations; and ii) the production and structure costs were estimated considering the adjusted 2020 approved budget.

30


Note 19 (Continued)

Impairment test on Property, plant and equipment (Continued)

The oil price curves considered Brent of prices of US$ 34.8, US$ 46.0, US$ 53.8 and US$ 59.5 per barrel for 2020 to 2023, respectively.

The following table summarizes the impairment tests performed by the Group as of March 31, 2020:

    

Amounts in US$ '000

Carrying amount (a)

    

Impairment loss

Colombia (b)

 

412,200

 

Chile

 

183,822

 

(50,281)

Brazil (c)

 

17,329

 

Argentina

 

50,948

 

(16,205)

Peru

 

37,165

 

(30,995)

 

701,464

 

(97,481)

(a)Before recognition of impairment loss.
(b)Includes Property, plant and equipment related to the recently acquired business of Amerisur (see Note 17), which valuation process is ongoing.
(c)Mainly includes Property, plant and equipment related to the Manati Block, which did not present any impairment indicator as it produces mainly gas, which price is established by a supply agreement.

If the weighted market oil prices used for the impairment test had been 5% lower in each of the future years, with all other variables held constant, the impairment loss would have been higher by approximately US$ 21,986,000.

In addition to that, as of September 30, 2020, the Group recognized an impairment loss in the REC-T-128 Block in Brazil of US$ 1,007,000, due to the fair value less cost to sale determined in the context of the farm-out process described in Note 17.

Note 20

Subsequent events

Cash distributions

On November 4, 2020, the Company’s Board of Directors declared an extraordinary cash distribution of US$ 0.0206 per share for 2020 and a quarterly cash distribution of US$ 0.0206 per share, both payable on December 9, 2020 to the shareholders of record at the close of business on November 20, 2020.

Buyback program

On November 4, 2020, the Company’s Board of Directors approved a program to repurchase up to 10% of its shares outstanding or approximately 6,062,000 shares. The repurchase program will begin on November 5, 2020 and will expire on November 15, 2021.

These transactions have no impact on the Group’s results.

31


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GeoPark Limited

By:

/s/ Andrés Ocampo

Name:   Andrés Ocampo

Title:      Chief Financial Officer

Date: November 4, 2020

32