Optimized Drilling In Colombia Will Lower Costs And Build Resilience

Key Takeaways

• Focus on new technologies, efficient capital allocation, and asset optimization is strengthening cost control, earnings resilience, and potential for top-line growth.
  
• Accelerated exploration and targeted M&A support long-term production increases and position the company to benefit from favorable regional energy trends.
  
• Heavy reliance on Colombian assets, M&A execution risks, concentrated portfolio, and global energy transition pressures all threaten sustainable growth, reserve replacement, and future profitability.

Catalysts

Operates as an oil and natural gas exploration and production company in Chile, Colombia, Brazil, Argentina, Ecuador, and other Latin American countries.

• GeoPark is actively implementing new drilling and extraction technologies, optimized well interventions, and modular field developments that are significantly reducing operating costs (e.g., >30% cut in average well costs, energy-saving interventions, innovative water management). These initiatives are expected to enhance net margins and improve free cash flow resilience in the face of oil price volatility.
  
• The company is focusing capital allocation on short-cycle, high-return projects in proven Colombian assets and is maintaining a disciplined cost structure, which positions GeoPark to better withstand external shocks and improve earnings even at mid-cycle oil prices, as reflected in their stable production guidance and increased EBITDA margins.
  
• Robust exploration and reserves replacement efforts, such as the promising results at Toritos Sur-3 and Currucutu-1, coupled with increased CapEx guidance to accelerate development, point to long-term production and revenue growth, countering broader industry concerns about under-investment and natural production declines.
  
• Ongoing strategic portfolio optimization-including divestment of non-core assets and active M&A engagement (especially targeting Vaca Muerta unconventionals in Argentina)-aligns GeoPark to capitalize on potential regional industry consolidation, scale economies, and improved asset quality, supporting future top-line expansion and operating leverage.
  
• Persistent underinvestment by major oil companies globally and growing geopolitical focus on energy security, particularly in Latin America, are likely to favor well-positioned, agile independents like GeoPark with strong regional relationships, opening up opportunities for higher realized oil prices and underpinning future revenue and earnings stability.

GeoPark Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming GeoPark's revenue will decrease by 5.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 7.7% today to 15.6% in 3 years time.
• Analysts expect earnings to reach $72.8 million (and earnings per share of $1.41) by about September 2028, up from $43.2 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $91 million in earnings, and the most bearish expecting $24 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 10.7x on those 2028 earnings, up from 7.5x today. This future PE is lower than the current PE for the US Oil and Gas industry at 12.6x.
• Analysts expect the number of shares outstanding to grow by 0.73% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 14.01%, as per the Simply Wall St company report.

GeoPark Future Earnings Per Share Growth

Risks

• GeoPark's asset base remains heavily concentrated in Colombia, which exposes the company to significant political, regulatory, and taxation risks-especially given the current government's stance against new oil exploration licenses; this may create long-term headwinds for production growth and compress both revenue and earnings.
  
• GeoPark is actively pursuing inorganic growth through M&A (notably in Argentina's Vaca Muerta), but competition for attractive assets is high, valuations remain volatile, and execution risks (including management of unconventional resources and foreign regulatory environments) could constrain returns and increase capital requirements, negatively impacting net margins and future profitability.
  
• The company's recent divestments of non-core assets (Ecuador, Brazil/Manati) have resulted in a more concentrated portfolio while increasing reliance on a smaller number of fields for reserve replacement and cash flow; if exploration and development in these core assets fail to yield sufficient reserves, future production and revenue could decline.
  
• GeoPark is boosting CapEx in response to identified organic opportunities, but ongoing production decline in maturing fields, dependence on successful short-cycle drilling, and risks of exploration underperformance could result in reduced top-line revenue and long-term earnings pressure if reserves are not adequately replaced.
  
• Although GeoPark has active cost reduction and hedging initiatives, it faces structural industry risks from the global energy transition to renewables, increasing ESG-linked capital restrictions, and the potential for higher carbon pricing or environmental regulation-all of which could decrease long-run oil demand, raise operating costs, limit capital availability, and reduce both revenue and net margins.

Valuation

• The analysts have a consensus price target of $10.083 for GeoPark based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $18.0, and the most bearish reporting a price target of just $6.5.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $466.4 million, earnings will come to $72.8 million, and it would be trading on a PE ratio of 10.7x, assuming you use a discount rate of 14.0%.
• Given the current share price of $6.25, the analyst price target of $10.08 is 38.0% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.