GeoPark's Colombian assets face regulatory risk from the May 29 election, while its Vaca Muerta ramp carries execution and balance-sheet pressure. The stock's 3.8x EBITDA discount to peers reflects the dual uncertainty.
GeoPark's near-term value depends on Colombia's May 29 presidential election, not the Vaca Muerta story alone. The Bogota-based oil and gas producer generates roughly 80% of its production from Colombian blocks. Several key permits come up for renewal in 2023 and 2024. Leftist candidate Gustavo Petro, leading in polls, has proposed halting new oil and gas exploration licenses. A Petro victory would put those renewals under direct political scrutiny.
GeoPark's Argentina position offers a counterweight. The company holds 30,000 net acres in Vaca Muerta through its 50% stake in the Fenix block, operated by YPF. First production from the pilot program is expected by mid-2023, with a full development decision likely in 2024. GeoPark estimates the play holds 300 million barrels of recoverable resource, scale that Colombia's mature fields cannot match.
The Argentina ramp carries execution risk. Vaca Muerta is a high-decline basin where operators drill continuously to hold production flat. GeoPark's balance sheet, net debt of $280 million as of Q1, leaves limited room for the capital required. The company spent $45 million on Argentina capex in 2021. Pure-play operator Vista Oil & Gas deploys more than $200 million annually in the same basin.
The election is the nearer catalyst. Polls show Petro with a narrow lead over conservative candidate Federico Gutierrez. A runoff is likely. A Gutierrez win would remove the regulatory overhang and allow GeoPark's steady-state Colombian production of roughly 38,000 barrels of oil equivalent per day to continue. A Petro win would force the company to accelerate its Argentina timeline, potentially straining its balance sheet.
GeoPark's valuation reflects the uncertainty. The stock trades at 3.8x trailing EBITDA, a discount to LatAm E&P peers that average 5.2x. The gap narrows or widens depending on the election outcome.
GeoPark management said it can fund the Argentina program from operating cash flow if oil stays above $60 a barrel. Brent crude at $110 provides a comfortable cushion. The risk is that a Petro victory triggers a capital allocation shift. More money would go to defending the Colombian asset base, less to Vaca Muerta, just as the Argentina pilot needs funding. That tension defines the stock's risk through mid-2022. The first round of voting is May 29. A runoff would follow in June.
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