Centaurus Energy Inc V.CTA

M&A activity picking up

[yycblackgold]

GeoPark (GPRK, SO, US$17.35 cl / $17 TP). Argentine bolt-on acquisition appears to be another logical deal for GPRK (exploration optionality for limited capital outlay).  
GeoPark announced further expansion into the Neuquen Basin in Argentina with the acquisition of the Los Parlamentos block (50/50 WI with YPF) providing the company with low-cost exploration optionality. The acquisition builds on the three blocks GeoPark previously acquired in December 2017 (~2,700 boe/d) in the same Basin and further solidifies their position in the area. While the exploration in the block is high risk in nature we recognize that GeoPark has teamed up with a strong/experienced partner and has gained access to exploration upside with minimal capital exposure.

The Deal. Per the partnership established between GeoPark and YPF, GeoPark will earn a 50% WI in the block for their contribution of 50% of the initial exploration well and 3D seismic costs which are forecasted at $6 MM over three years with seismic work expected to start up late-2018 / 2019. The block was initially acquired by YPF in the bidding round held by the Argentine province of Mendoza on May 31, 2018 and contains 366,000 acres (1,480 sq km) covered by 100 / 800 sq km of 3D and 2D seismic, respectively.

Building out their position in Argentina. Including their 2017 acquisition, GeoPark already holds six blocks in Argentina (12-15 mmboe) and discovered the Rio Grande Oeste oil field in the CN-V block (50% WI) during 2017. Their current 2018 work program consists of $6M-9M in capex to drill an exploration well in the CN-V block and 6 gross exploration wells in the Sierra del Nevado / Puelen blocks (non-op, 18% WI). Capex from their 2017 acquisition is expected to pick up in 2019E (~$40M) once they have fully integrated the assets.