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GeoPark Reports 2nd Quarter 2020 Results

Source: 8/5/2020, Location: South America

GeoPark Limited, a leading independent Latin American oil and gas explorer, operator and consolidator with operations and growth platforms in Colombia, Peru, Argentina, Brazil, Chile and Ecuador reports its consolidated financial results for the three-month period ended June 30, 2020 (“Second Quarter” or “2Q2020”). A conference call to discuss 2Q2020 financial results will be held on August 6, 2020 at 10:00 am (Eastern Time).

All figures are expressed in US Dollars and growth comparisons refer to the same period of the prior year, except when specified. Definitions and terms used herein are provided in the Glossary at the end of this document.

Second Quarter 2020 Highlights

- Production and Drilling Response and Actions
- At the beginning of the quarter, all drilling and workover operations were suspended – including the shutdown of 8 rigs
- In consideration of health and safety, cost, reservoir and mechanical factors, approximately 6,500-7,500 boepd were temporarily shut in during lowest price period
- As prices strengthened, most of these fields and wells were reopened recovering approximately 5,000-5,500 boepd (70-80% of shut-in production) with current production of approximately 40,000 boepd and a quarterly average of 36,912 boepd (6% decrease from 2Q2019)
- Now drilling has been resumed with a revised program of 6-8 gross wells in the Llanos 34 block (GeoPark operated, 45% WI) and 1-2 gross wells in the CPO-5 block (GeoPark non-operated, 30% WI). Workover and well maintenance operations have also been resumed

Cost and Investment Response and Actions
- Capital expenditures were halted with a reduction of 80% to $5.8 million
- Production and operating costs were reduced by 55% to $20.7 million
- Operating costs per boe[1] were reduced by 26% to $6.0 per boe (24% lower vs 1Q2020)
- G&A/G&G costs were reduced by 19% to $14.3 million
- Combination of cost and investment reductions totaled over $290 million across regional platform
- With strengthening prices, full year 2020 budget has been revised upward to $65-75 million (from prior $45-50 million) targeting 40,000-42,000 boepd average production and operating netbacks of $230-260 million at Brent of $35-$40 per bbl[2]

Cash Preservation and Risk Management Response and Actions
- $157.5 million of cash and cash equivalents (compared to $165.5 million at beginning of quarter)
- Adjusted EBITDA of $27.8 million (or $8.9 per boe), with net loss of $19.9 million, including write-down of tax credits in Peru of $14.4 million
- $75 million oil prepayment ‘safety-net’ facility, with $50 million committed and no amounts drawn
- $140.3 million in uncommitted credit lines
- Long-term financial debt maturity profile with no principal payments until September 2024
- S&P and Fitch reaffirmed GeoPark’s long-term corporate credit rating at B+
- Hedging program successfully protected base oil price and provided a $14.3 million realized gain in 1H2020
– with new hedges added for the next 12 month

SPEED / ESG Response and Actions

- SPEED is GeoPark’s successful integrated value system which incorporates health and safety and employee well-being with ESG criteria
- Protocols, preventive measures and crisis response plans in place across 6-country regional platform
- Field teams sharply reduced to a minimum with back-up teams and contingencies in place to keep people - working safely and production flowing
- First company in the E&P sector in Colombia to obtain Bureau Veritas certification on biosecurity protocols to mitigate and manage the impact of Covid-19 in GeoPark Colombia operations
- GeoPark closely engaged with local communities implementing extraordinary range of measures to fight Covid-19 with efforts coordinated at local, regional and federal levels to support and compensate for limited local resources
- Connecting the Llanos 34 block to the regional energy grid and initiating renewable energy projects for additional costs savings and further improving carbon footprint performance
- Appointment of Sylvia Escovar of Bogota, Colombia and Somit Varma of Washington DC as new independent members of GeoPark’s Board of Directors (filling vacancies and bringing Board total to 8 members)

Creating a Better and Stronger Business
- Streamlining business across portfolio to improve overall cost structure and take advantage of available synergies and new innovative technology
- Top to bottom review in all departments and capabilities – with reorganization of asset management team and reduction of offices across region
- Initiated formal process to retire from the non-producing Morona block[3] in Peru due to extended force majeure which allows for the termination of the license contract
- Received regulatory approvals to reclassify the flowline connecting the Llanos 34 block to regional infrastructure into a pipeline contributing to reduced operational risk, further cost savings and reduced carbon footprint

James F. Park, Chief Executive Officer of GeoPark, said: “Huge respect and appreciation for the GeoPark team for successfully managing through one of the ugliest and most severe and complex collapses in the history of our volatile industry – all the while dealing with a global pandemic, extensive lockdowns, market swings and unpredictable government actions. It is difficult to capture the dynamics and incredible efforts undertaken operationally and financially during this period by showing the customary quarterly metrics and comparisons since so much happened at the same time. We first responded to an extreme and uncertain period that needed to be handled rapidly and decisively – and then to a strengthening which provided an opportunity to start conservatively rebalancing and recovering. We also believe this storm is not over yet and are prepared for however long its full duration might be. Our Company was born in a crisis in 2002 and showed, once again, we can keep focused and navigate through these upheavals. And, as much as these times hurt, GeoPark has always adapted to come out better and stronger on the other side – as we are on the move to do so again. We also are pleased to welcome Sylvia Escovar and Somit Varma to our Board – two respected and proven executives who will help drive GeoPark to our exciting energy future.”

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