GeoPark Ltd. (GPRK:NYSE) announced positive exploration results that could significantly expand production from its assets in Colombia and Ecuador, noted Auctus Advisors analyst Stephane Foucaud in a November 10 research report.
The analyst reiterated a Buy rating and US$25 price target on GeoPark.
New Production Areas Opened Up
According to Foucaud, GeoPark encountered strong shows at both its Halcon-1 exploration well on the CPO-5 block and Zorzal Este 1 well on Llanos-87 in Colombia.
While testing is still required, the company now has "multiple new areas of material production growth" to appraise and develop.
The analyst expects Llanos-87, Llanos-123, and Ecuador's Perico block to potentially become material contributors by year-end 2024 based on exploration success.
Multiple Catalysts Over Next 12-18 Months
GeoPark has an extensive appraisal drilling campaign planned for 2023-2024 across Llanos-87, Llanos-123, and Ecuador.
Foucaud sees "multiple drilling catalysts" over the next 12-18 months as the company looks to prove up resources.
2024 Guidance Points to Production Growth
While GeoPark's 2024 production guidance of 37,000-40,000 boepd missed the analyst's expectations, it reflects declining output from non-core assets.
With appraisal drilling, Foucaud believes 2024 exit production could substantially exceed guidance as new discoveries are shown.
Valuation Reflects Exploration Potential
The analyst's unchanged US$25 price target is based on a 2024 EV/DACF multiple of 7.9x, in line with E&P peers. The multiple could expand further if exploration success is demonstrated.
In summary, the Auctus analyst believes GeoPark offers an attractive risk/reward profile driven by near-term appraisal catalysts that could unlock substantial value from newly found oil resources across Latin America.
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Disclosures for Auctus Advisors, GeoPark Ltd., November 10, 2023
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