CONSOLIDATED STATEMENT OF CASH FLOW

 

Amounts in US$ '000	Six-months period ended 30 June 2012	Six-months period ended 30 June 2011	Year ended  31 December, 2011
Cash flows from operating activities
Profit for the period/year	22,032	378	5,062
Adjustments for:
Income tax for the period/year	9,487	1,749	7,206
Depreciation of the period/year	22,013	10,040	26,408
Loss on disposal of property, plant and equipment	125	414	2,010
Write-off of unsuccessful efforts	8,564	-	5,919
Impairment loss	-	-	1,344
Accrual of borrowing's interests	5,796	5,465	11,130
Unwinding of discount	298	166	350
Accrual of stock awards	2,415	3,060	5,298
Exchange difference generated by borrowings	20	24	(15)
Changes in working capital	795	(4,615)	89
Cash flows from operating activities - net	71,545	16,681	63,763
Cash flows from investing activities
Purchase of property, plant and equipment	(88,056)	(33,728)	(98,651)
Acquisitions of subsidiaries, net of cash acquired (Note 9)	(104,965)	-	-
Purchase of financial assets	-	-	(2,625)
Deferred income	2,850	-	5,000
Sale of financial assets	-	314	-
Cash flows used in investing activities - net	(190,171)	(33,414)	(96,276)
Cash flows from financing activities
Proceeds from borrowings	3,923	1,237	9,668
Proceeds from transaction with Non-controlling interest	8,869	70,000	142,000
Principal paid	(16,297)	(8,850)	(9,150)
Interest paid	(5,259)	(5,575)	(10,779)
Cash flows (used in) from financing activities - net	(8,764)	56,812	131,739
Net (decrease) increase in cash and cash equivalents	(127,390)	40,079	99,226
Cash and cash equivalents at 1 January	183,622	84,396	84,396
Cash and cash equivalents at the end of the period/year	56,232	124,475	183,622
Ending Cash and cash equivalents are specified as follows:
Cash in banks	66,324	143,958	193,642
Cash in hand	22	3	8
Bank overdrafts	(10,114)	(19,486)	(10,028)
Cash and cash equivalents	56,232	124,475	183,622

SELECTED EXPLANATORY NOTES

 

Note 1

 

General information

 

GeoPark Holdings Limited (the Company) is a company incorporated under the law of Bermuda. The Registered Office address is Cumberland House, 9th Floor, 1 Victoria Street, Hamilton HM11, Bermuda. The Company is quoted on the AIM market of London Stock Exchange plc.

 

This consolidated interim financial report has neither been audited nor reviewed by the Company's auditors. It was authorised for issue by the Board of Directors on 24 September 2012.

 

The consolidated interim financial report of GeoPark Holdings Limited is presented in accordance with IAS 34 "Interim Financial Reporting". It does not include all of the information required for full annual financial statements, and should be read in conjunction with the annual financial statements as at and for the year ended 31 December 2011, which have been prepared in accordance with IFRSs.

 

The consolidated interim financial report has been prepared in accordance with the accounting policies applied in the most recent annual financial statements. For further information please refer to GeoPark Holdings Limited's consolidated financial statements for the year ended 31 December 2011.

 

Subsidiary undertakings

 

The following chart illustrates the Group structure:

 

 

Details of the subsidiaries and jointly controlled assets of the Company are set out below:

 

	Name and registered office			Ownership interest
Subsidiaries	GeoPark Argentina Ltd. - Bermuda			100%
	GeoPark Argentina Ltd. - Argentine Branch			100% (a)
	Servicios Southern Cross Limitada (Chile)			100% (b)
	GeoPark Chile Ltd. - Bermuda			100%
	GeoPark Chile Ltd. - Chilean Branch			100% (a)
	GeoPark S.A. (Chile)			100% (a) (b)
	GeoPark Chile S.A. (Chile)			80% (a) (c)
	GeoPark Fell S.p.A. (Chile)			80% (a) (c)
	GeoPark Magallanes Limitada (Chile)			80% (a) (c)
	GeoPark TdF S.A. (Chile)			69% (a) (d)
	GeoPark Colombia S.p.A. (Chile)			100% (a) (e)
	GeoPark Luna SAS (Colombia)			100% (a) (e)
	GeoPark Colombia SAS (Colombia)			100% (a) (e)
	GeoPark Llanos SAS (Colombia)			100% (a) (e)
	La Luna Oil Co. Ltd. (Panama)			100% (a) (e)
	Winchester Oil and Gas S.A. (Panama)			100% (a) (e)
	GeoPark Cuerva LLC (United States)			100% (a) (e)
	Sucursal La Luna Oil Co. Ltd. (Colombia)			100% (a) (e)
	Sucursal Winchester Oil and Gas S.A. (Colombia)			100% (a) (e)
	Sucursal GeoPark Cuerva LLC (Colombia)			100% (a) (e)
	GeoPark Brazil S.p.A. (Chile)			100% (a) (b)
Jointly controlled assets	Tranquilo Block (Chile)			29% (f)
	Otway Block (Chile)			25%
	Flamenco (Chile)			50% (g)
	Isla Norte (Chile)			60% (g)
	Campanario (Chile)			50% (g)

 

(a)  Indirectly owned.

(b)  Dormant companies.

(c)  Since 20 May 2011, LG International acquired 20% interest.

(d)  LG International has 20% interest through GeoPark Chile S.A. and a 14%
  direct interest.

(e)  During the first quarter of 2012, the Company entered into a business
  combination acquiring 100% interest  in each entity (see Note 10).

(f)  On 14 April 2011 following Governmental approval the new ownership of the
  Tranquilo Block was confirmed. The other partners in the JVs are Pluspetrol
  (29%), Methanex (17%) and Wintershall (25%).

(g)  After participating in a farm-in process organized by ENAP, GeoPark was awarded
  3 blocks in Tierra del Fuego, Chile (Isla Norte Block, Flamenco Block and
  Campanario Block). GeoPark will be the operator in all blocks with a share of
  60% for Isla Norte Block and 50% for the other 2 blocks.

 

 

Note 2

 

Net revenue

 

Amounts in US$ '000	Six-months period ended 30 June 2012	Six-months period ended 30 June 2011	Year ended 31 December  2011
Sale of crude oil	105,590	24,656	73,508
Sale of gas	17,098	17,109	38,072
	122,688	41,765	111,580

 

 

Note 3

 

Segment Information

 

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the strategic steering committee. This committee is integrated by the CEO, Managing Director, CFO and managers in charge of the Geoscience, Drilling, Operations and SPEED departments. This committee reviews the Group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports.

 

The committee considers the business from a geographic perspective.

 

The strategic steering committee assesses the performance of the operating segments based on a measure of adjusted earnings before interest, tax, depreciation, amortisation and certain non cash items such as write offs and share based payments (Adjusted EBITDA). This measurement basis excludes the effects of non-recurring expenditure from the operating segments, such as impairments when it is result of an isolated, non-recurring event. Interest income and expenditure are not included in the result for each operating segment that is reviewed by the strategic steering committee. Other information provided, except as noted below, to the strategic steering committee is measured in a manner consistent with that in the financial statements.

 

Six-months period ended 30 June 2012

 

Amounts in US$ '000		Total		Argentina		Chile	Colombia		Corporate
NET REVENUE	122,688		664		85,320			36,704		-
GROSS PROFIT	71,018		146		52,135			18,583		154
OPERATING PROFIT / (LOSS)	38,863		(2,714)		36,572			8,320		(3,315)
Adjusted EBITDA	72,586		(808)		59,028			17,622		(3,256)

 

 

Six-months period ended 30 June 2011

 

Amounts in US$ '000	Total	Argentina	Chile	Colombia	Corporate
NET REVENUE	41,765	725	41,040	-	-
GROSS PROFIT	19,471	884	18,587	-	-
OPERATING PROFIT / (LOSS)	8,770	(1,991)	14,977	-	(4,216)
Adjusted  EBITDA	21,287	(453)	25,580	-	(3,840)

 

 

Total Assets	Total	Argentina	Chile	Colombia	Corporate
30 June 2012	547,877	10,448	377,165	157,923	2,341
31 December 2011	472,269	10,895	453,384	-	7,990
30 June 2011	365,880	10,287	351,724	-	3,869

 

 

A reconciliation of total Adjusted EBITDA to total profit before income tax is provided as follows:

	Six-months period ended 30 June 2012	Six-months period ended 30 June 2011
Adjusted EBITDA for reportable segments	72,586	21,287
Depreciation	(22,013)	(10,040)
Accrual of stock awards	(2,415)	(3,060)
Write-off of unsuccessful efforts	(8,564)	-
Others	(731)	583
Operating profit	38,863	8,770
Financial results	(7,344)	(6,643)
Profit before tax	31,519	2,127

 

Note 4

 

Financial income

 

Amounts in US$ '000	Six-months period ended 30 June 2012	Six-months period ended 30 June 2011	Year ended 31 December  2011
Exchange difference	70	-	32
Bank interest	248	84	130
	318	84	162

 

 

Note 5

 

Financial expenses

 

Amounts in US$ '000	Six-months period ended 30 June 2012	Six-months period ended 30 June 2011	Year ended 31 December  2011
Bank charges and other financial costs	838	471	1,856
Exchange difference	1,045	280	496
Unwinding of long-term liabilities	298	166	350
Interest and amortisation of debt issue costs	6,132	5,919	11,573
Less: amounts capitalised on qualifying assets	(651)	(109)	(597)
	7,662	6,727	13,678

 

 

Note 6

 

Property, plant and equipment

 

Amounts in US$'000	Oil & gas properties	Furniture, equipment and vehicles	Production facilities and machinery	Buildings and improve-ments		Construction in progress		Exploration and evaluation assets		TOTAL
Cost at 1 July 2011	140,908	1,600	42,192	2,281		18,622		36,627		242,230
Additions	1,287	648	955	156		43,389		19,178		65,613
Disposals	(227)	(155)	(1,220)	-		(272)		-		(1,874)
Write-off and impairment	-	-	-	-		-		(7,263)		(7,263)
Transfers	29,988	82	5,175	-		(28,843)		(6,402)		-
Cost at 31 December 2011	171,956	2,175	47,102	2,437		32,896		42,140		298,706
Additions	675	548	645	-		31,040		55,556		88,464
Disposals	(48)	(60)	(17)	-		-		-		(125)
Write-off	-	-	-	-		-		(8,564)		(8,564)
Transfers	51,679	-	5,482	466		(35,795)		(21,832)		-
Acquisitions of subsidiaries	62,842	481	15,404	-		6,976		13,234		98,937
Cost at 30 June 2012	287,104	3,144	68,616	2,903		35,117		80,534		477,418
Depreciation and write-down at 1 July 2011	(41,036)	(958)	(15,394)	(593)		-		-		(57,981)
Depreciation	(12,568)	(221)	(3,456)	(123)		-		-		(16,368)
Disposals	-	56	222	-		-		-		278
Depreciation and write-down at 31 December 2011	(53,604)	(1,123)	(18,628)	(716)		-		-		(74,071)
Depreciation	(17,859)	(319)	(3,698)	(137)		-		-		(22,013)
Depreciation and write-down at 30 June 2012	(71,463)	(1,442)	(22,326)	(853)		-		-		(96,084)
Carrying amount at 31 December 2011	118,352	1,052	28,474	1,721		32,896		42,140		224,635
Carrying amount at 30 June 2012	215,641	1,702	46,290	2,050		35,117		80,534		381,334

 

Note 7

 

Share capital

 

Issued share capital	Six-months period ended 30 June 2012		Six-months period ended 30 June 2011		Year ended 31 December 2011
Common stock	43		42		43
The share capital is distributed as follows:
Common shares, of nominal US$ 0.001	42,474,274		41,765,559		42,474,274
Total common shares in issue	42,474,274		41,765,559		42,474,274
Authorised share capital
US$ per share	0.001		0.001		0.001
Number of common shares (US$ 0.001 each)	5,171,969,000		5,171,969,000		5,171,969,000
Amount in US$	5,171,969		5,171,969		5,171,969

 

 

Note 8

 

Borrowings

 

The outstanding amounts are as follows:

Amounts in US$ '000	Six-months period ended 30 June 2012	Six-months period ended 30 June 2011	Year ended 31 December  2011
Bond (a)	128,838	127,859	128,315
Methanex Corporation (b)	8,041	18,316	18,068
Banco de Crédito e Inversiones (c)	7,899	499	8,845
Overdrafts (d)	10,114	19,486	10,028
	154,892	166,160	165,256

 

Classified as follows:

 

Current	27,488	31,435	30,613
Non Current	127,404	134,725	134,643

 

 

(a) Private placement of US$ 133,000,000 of Reg S Notes on 2 December 2010. The Notes carry a coupon of 7.75% per annum and mature on 15 December 2015. The Notes are guaranteed by the Company and secured with the pledge of 51% of the shares of GeoPark Fell. In addition, the Note agreement allows for the placement of up to an additional US$ 27,000,000 of Notes under the same indenture, subject to the maintenance of certain financial ratios.

 

(b) The financing obtained in 2007, for development and investing activities on the Fell Block, is structured as a gas pre-sale agreement with a six year pay-back period and an interest rate of LIBOR flat. In each year, the Group will repay principal up to an amount equal to the loan amount multiplied by a specified percentage. Subject to that annual maximum principal repayment amount, the Group will repay principal and interest in an amount equal to the amount of gas specified in the contract at the effective selling price.

In addition on 30 October 2009 another financing agreement was signed with Methanex Corporation under which Methanex have funded GeoPark's portions of cash calls for the Otway Joint Venture for US$ 3,100,000. The loan has been fully repaid during the current period. The purpose was to finance the exploration, development and production of natural gas from the Otway Block. This financing did not bear interest.

 

(c) Facility to establish the operational base in the Fell Block. This facility was acquired through a mortgage loan granted by the Banco de Crédito e Inversiones (BCI), a Chilean private bank. The loan was granted in Chilean pesos and is repayable over a period of 8 years. The interest rate applicable to this loan is 6.6%. The outstanding amount at 30 June 2012 is US$ 378,000.

 

During the last quarter of 2011, GeoPark TdF obtained short-term financing from BCI. This financing is structured as letter of credit with a pledge of the seismic equipment acquired to start the operations in the new blocks. The maturity is May 2013 and the applicable interest rate ranging from 4.45% to 5.45%. The outstanding amount at 30 June 2012 is US$ 7,521,000.

 

(d) The Group has been granted with credit lines for approximately US$ 28,000,000.

 

Note 9

 

Acquisitions in Colombia

 

 

In February 2012, GeoPark acquired two privately-held exploration and production companies operating in Colombia, Winchester Oil and Gas S.A. and La Luna Oil Company Limited S.A. ("Winchester Luna").

 

In March 2012, a second acquisition occurred with the purchase of Hupecol Cuerva LLC ("Hupecol"), a privately-held company with two exploration and production blocks in Colombia.

 

The combined Hupecol and Winchester Luna purchases (acquired for a total consideration of US$ 105,000,000, adjusted for working capital, plus certain possible contingent payments) provide GeoPark with the following in Colombia:

 

Interests in 10 blocks (ranging from 5% to 100%), with license operations in four of them, located in the Llanos, Magdalena and Catatumbo Basins, covering an area of approximately 220,000 gross acres.

Risk-balanced asset portfolio of existing reserves, low risk development potential and attractive exploration upside.

2P oil reserves of approximately 10 million barrels and prospective oil resources (unrisked) of 25+ million barrels (Company estimates).

Successful Colombian operating and administrative team to support a smooth transition and start-up in Colombia together with Associations and JVs with principal Colombian operators.

 

The purchase price allocation performed is preliminary as we have not had sufficient time to complete the valuation process. There will be adjustments to the estimated fair values as the valuation work is finalised, which we expect to complete by the end of 2012.

 

In accordance with the acquisition method of accounting, the acquisition cost was allocated to the underlying assets acquired and liabilities assumed based primarily upon their estimated fair values at the date of acquisition. We used an income approach (being the net present value of expected future cash flows) to determine the fair values of the mineral interest. Estimates of expected future cash flows reflect estimates of projected future revenues, production costs and capital expenditures based on our business model. The excess of acquisition cost, if any, over the net identifiable assets acquired represents goodwill.

 

The following table summarises the combined consideration paid for Winchester Luna and Hupecol, the preliminary fair value of assets acquired and liabilities assumed for these transactions:

 

Amounts in US$ '000	Total
Cash (including working capital adjustments)	111,584
Total consideration	111,584
Cash and cash equivalents	6,619
Property, plant and equipment (including mineral interest)	98,872
Trade receivables	9,981
Prepayments and other receivables	10,904
Deferred income tax assets	6,893
Inventories	8,838
Trade payables	(16,003)
Borrowings	(1,368)
Provision for other long-term liabilities	(13,152)
Total identifiable net assets	111,584

 

 

Note 10

 

Agreement with Methanex

 

 

In March 2012, the Company and Methanex signed a third addendum and amendment to the Gas Supply Agreement to incentivise the development of gas reserves. Through this new agreement, the Company is undertaking a programme consisting of drilling a minimum of five new gas wells during 2012. Methanex will contribute to the cost of drilling the wells in order to improve the project economics. As of 30 June, the Company has already fulfilled the minimum drilling commitment for 2012.

 

Nota 11

 

Subsequent events

 

GeoPark Holdings Limited has executed a loan agreement with Banco Itaú BBA S.A., Nassau Branch for US$ 37,500,000. GeoPark will use the proceeds to finance the acquisition and development of the La Cuerva and Llanos 62 blocks. These blocks represent two of the ten production, development and exploration blocks, which GeoPark currently owns in Colombia (see Note 9).

 

The loan, which will have a maturity of five years, amortising from month 21 in 14 equal quarterly instalments, is ring-fenced by and secured against 100% of the capital of GeoPark Llanos SAS, the owner of the La Cuerva and Llanos 62 blocks. Interest on the loan is accrued at market rates.