GeoPark Cites 241% Revenue Increase in 2008
GeoPark Holdings Limited has announced its interim results for the six months ended June 30, 2008.
First Half 2008 Results
- 241% Revenue Increase: Revenues increased by 241% to US $15.6 Million in the six months ended June 30, 2008 compared to the six months ended June 30, 2007.
- 109% Production Increase: Oil and gas production in Chile and Argentina increased by 109% from an average of 1,216 barrels of oil per day equivalent (boepd) in the first half of 2007 to an average of 2,553 boepd during the first half of 2008. Current production is approximately 4,200 boepd.
- Oil and Gas DiscoverySuccess: During 2008, the Group's geoscience team has led an exploration and development drilling program in Chile with the following successful results:
- Selknam 1: Tested water and oil and requires further operations.
- Cerro Sutlej 1: New Gas Field Discovery / On Production 2Q08
- Bump Hill 1: New Gas Field Discovery / On Production 3Q08
- Aonikenk 1: New Oil Field Discovery / Targeted for Production 4Q08
- Nika Oeste 3: New Gas Field Discovery / On Production 3Q08
- SantiagoNorte5: New Gas Development Well / On Production 3Q08
- Estancia Zunilda 1: New Gas Field Discovery / On Production 3Q08
- Ovejero 2: Currently being tested
- 123% Growth in 3P Oil and Gas Reserves: An independent appraisal of GEOPARK's oil and gas reserves by engineering consultants DeGolyer & MacNaughton date March 31, 2008 (conducted principally on 2007 activities and results) showed a 41% increase in proved reserves to 16.8 million barrels of oil equivalent (mmboe); a 9% increase in probable reserves to 18.8 mmboe; and a 231% increase in possible reserves to 91.9 mmboe. Recent drilling successes are not included in this appraisal.
New Attractive Blocks Acquired:
In Chile, GEOPARK has acquired a 30% interest in the Tranquilo Block (with Pluspetrol, IPR and Manas); and has been awarded, following the Chilean bidding round, an interest in the Otway Block (with Wintershall and Methanex). GEOPARK's participations in these blocks are subject to final approval by the Chilean Ministry of Mining. The Otway and Tranquilo blocks are located in southern Chile near GEOPARK's Fell Block and contain both short term well workover production opportunities and attractive exploration targets. These new blocks, which comprise over 12,000 square kilometers, represent a major growth step for GEOPARK and confirm the strategic logic of GEOPARK's expansion strategy in the Southern Cone.
Balance Sheet Strengthened by Strategic Equity Placing:
GEOPARK raised US $23.6 Million from the Chilean institutional investor community, the International Finance Corporation of the World Bank and certain London financial institutions. The strong interest from the Chilean investment community provides an important regional foundation for the Group’s activities and growth plans.
Market Access Infrastructure Expanded:
The Group expanded the Kimiri Aike Gas Treatment and Compression Plant in Chile during the First Half 2008, which resulted in increasing GEOPARK's gas processing and selling capacity to over 35 million cubic feet per day (mmcfpd). This plant permits access for Fell Block gas to the regional gas pipeline infrastructure and rapid commercialization of any new discovery wells. To date in 2008, the Group has also constructed new production facilities and 33 kilometers of new gas pipelines in Chile.
Reservoir Production Enhancement Program Initiated:
On the Fell Block in Chile, GEOPARK began a long term hydraulic fracture stimulation effort on the Santiago Norte gas field and other Fell Block gas fields to increase gas production and recovery. A large hydraulic fracture test was carried out in the Santiago Norte 4 well in August 2008 and clean-up of this well is currently underway. Frac consultants working on this project for GEOPARK have recommended a 30 to 60 day clean-up period. The Santiago Norte field contains over 60 million boe of possible gas reserves which could be upgraded and developed in the event of a successful reservoir stimulation program.
Positive Operating Income and Negative Net Result:
The Group had a positive operating income of US $1.2 Million in the six months ended June 30, 2008 compared to an operating income loss of US $4.5 Million in the six months ended June 30, 2007. The Group's net loss of US $2.5 Million in the six months ended June 30, 2008 also represented an improvement compared to a net loss of US $4.6 Million in the six months ended June 30, 2007. The First Half 2008 net loss includes a non-cash loss of US $2.7 million generated by Chilean currency exchange adjustments. The Company's cash and available facilities on June 30, 2008 amounted to US $31.6 Million.
78% Gas Price Increase:
The Group sold its Fell Block gas production at an average price of US $5.26 per thousand cubic feet (mcf) during the six months ended June 30, 2008, compared to an average gas sales price of US $2.95 per mcf for the six months ended June 30, 2007 as a result of its new long term gas contract with the Methanex Corporation and the prevailing high global methanol prices. Methanex also provided a US $40 Million gas pre-sale funding to GEOPARK to help accelerate the Fell Block investment program. As of June 30, 2008, US $25 Million had been drawn down from this facility.
Outlook of Increased Activity:
GEOPARK contracted for a second drilling rig which began drilling on the Fell Block in Chile in the Third Quarter 2008. The Group currently has three rigs (2 drilling and 1 workover) in operation in Chile, all under long term contracts. The Group is also now importing a second workover rig to begin operation in the Fourth Quarter 2008. GEOPARK's current program envisages drilling 14-16 wells in 2008 and 20 wells in 2009. Additionally, the Tranquilo and Otway blocks increase GEOPARK's gross acreage to over 3.8 million acres and significantly expand the opportunity portfolio of the Group. Joint venture operations on these new blocks are expected to begin during Fourth Quarter 2008.
Commenting on the First Half 2008 results, Gerald E. O'Shaughnessy, GEOPARK's Chairman said, "After laying the groundwork in 2006-7 with important investments in people, equipment, 3D seismic, infrastructure and gas markets, we are now beginning to realize success from our technical work and drilling program and the resulting steady growth in the fundamental value drivers of our business: increases in oil and gas production, increases in revenues and increases in reserves. The addition of new large block acquisitions in the region where we operate presents a significantly larger scale of opportunities to build on our know-how, repeat our success in new areas and significantly grow GEOPARK."
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