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GeoPark Sells 10% Stake in its Chile Upstream Business

Source: 9/19/2011, Location: South America

GeoPark Holdings Limited, the Latin American oil and gas explorer and producer, is pleased to announce an in-principle agreement with LG International Corporation (LGI), the Korean conglomerate, for LGI to acquire an additional 10% interest in GeoPark's Chile business for US$78 million in cash (the ”Transaction”).

The Transaction, which is subject to approval from both GeoPark’s and LGI’s Board of Directors, is expected to be completed in mid October 2011, and follows on from the sale of an initial 10% interest in GeoPark’s Chilean business to LGI for US$70 million in cash, which completed in May 2011. The Transaction comprises a package of commercial arrangements agreed between GeoPark and LGI that includes:

- LGI taking a 14% direct interest in GeoPark TdF, the subsidiary of GeoPark Chile which is currently applying with ENAP, the State Oil Company of Chile, for three new hydrocarbon blocks in Tierra del Fuego and which is subject to regulatory approval.
- As a result of regulatory delays in Kazakhstan, GeoPark will no longer make a US$10 million investment into the drilling of the LGI-operated Sholkara prospect in Block 8 in Kazakhstan, as previously announced. GeoPark will instead earn a 1% net profits interest for a period of ten years in the event of a successful discovery and development in exchange for providing certain technical services.

In 2010, GeoPark and LGI entered into a strategic partnership to acquire a portfolio of oil and gas upstream assets throughout Latin America. LGI is the energy, natural resource and trading affiliate of LG Corporation, the large international Korean company with 147 subsidiaries operating in over 50 countries and with annual sales exceeding US$100 billion. LGI has successfully invested and operated in the oil and gas exploration and production business for over twenty years including current upstream oil and gas projects in Oman, Vietnam and Kazakhstan. LGI has adopted a long term strategy of investing in oil and gas upstream investments in emerging resource-rich countries and has targeted Latin America as a new growth region.

Commenting on today’s announcement, James F. Park, Chief Executive Officer of GeoPark, said: “GeoPark views its strategic partnership with LGI as a key element of its future expansion in Latin America. The opportunity to cement this relationship by a direct investment of LGI into GeoPark underscores LGI’s confidence in our Chilean business and builds a solid base for a long term partnership. It also demonstrates the value of the business that GeoPark has developed since 2006. The additional cash proceeds generated from these transactions will enable us to pursue asset and corporate acquisitions in our targeted markets and we look forward with excitement to growing our business further across Latin America in partnership with LGI."

The Transaction is deemed to be a Related Party Transaction under Rule 13 of the AIM Rules for Companies. The Directors of GeoPark consider, having consulted with Oriel Securities Limited, the Company’s nominated adviser, that the terms of the transaction are fair and reasonable insofar as the Company’s shareholders are concerned. In providing advice to the Directors, Oriel Securities Limited has taken into account the commercial assessment of the Directors.

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Related Categories: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Industrial Development  Insurance  Investment  Mergers and Acquisitions  Risk Management 

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