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GeoPark enters Peru with Petroperu joint-venture agreement

02nd October 2014

GeoPark has executed a Joint Investment Agreement and Joint Operating Agreement with Petróleos del Perú S.A. (Petroperu) to acquire an interest in and operate the Morona Block located in northern Peru

GeoPark enters Peru with Petroperu joint-venture agreement
The Morona Block, also known as Lote 64, covers an area of 1.9 million acres on the western side of the Marañón Basin, one of the most prolific hydrocarbon basins in Peru

GeoPark will assume a 75 per cent working interest of the Morona Block, with Petroperu retaining a 25 per cent working interest. The transaction has been approved by the board of directors of both Petroperu and GeoPark.

“This is a potentially transformational acquisition for GeoPark – and a great strategic fit for our existing Latin American project portfolio,” said James F. Park, chief executive officer of GeoPark.

“We are excited to be entering into Peru – a culturally-rich country with immense hydrocarbon potential and a secure and attractive economic and political environment. The Morona Block has all the attributes we look for; a discovered oil field with the opportunity to establish production and cash flow in the near term, an agreed work program that is technically-sound and fits our budget, a big exploration upside within a proven hydrocarbon system in a prolific oil region and a great partner, Petroperu, who has a strong presence throughout the region.”

“The Marañón Basin is a priority target for us in Latin America and we see this as a unique opportunity to enter into a potentially high value-generating project and to approach it in a new way – both below and above ground. In addition to our oil-finding and operating track-record, one of GeoPark’s strengths is our commitment to building long term mutuallybeneficial relationships, based on transparency, dialogue and respect, with the communities where we operate.”

The Morona Block, also known as Lote 64, covers an area of 1.9 million acres on the western side of the Marañón Basin, one of the most prolific hydrocarbon basins in Peru. More than one billion barrels of oil have been produced from the surrounding blocks in this basin. The Morona Block contains the Situche Central oil field, which has been delineated by two wells (with short term tests of approximately 2,400 and 5,200 bopd of 35-36° API oil each) and by 3D seismic.

The independent reservoir engineering firm, Ryder Scott, has certified proven and probable (2P) reserves of 55 million barrels of oil (mmbo) and 3P reserves of 85 mmbo for the Situche Central field for Petroperu. GeoPark used a 2P reserve estimate of 30-40 mmbo for its internal evaluation of this project.

In addition to the Situche Central field, the Morona Block has a large exploration potential with several high impact prospects and plays – with exploration resources currently estimated to range from 200 to 600 mmbo. This important component of the project will significantly increase GeoPark’s overall inventory of exploration resources and complement GeoPark’s growing reserve and cash flow base already established in Colombia, Chile and Brazil. The Morona Block includes geophysical surveys of 2,783 kilometres (2D seismic) and 465 square kilometres (3D seismic), and an operating field camp and logistics infrastructure. The area has undergone oil and gas exploration activities for the past 40 years, and there exist ongoing association agreements and cooperation projects with the local communities.

The expected work programme and development plan for the Situche Central oil field is to be completed in three stages. The goal of the initial stage will be to put the field into production through a long term test to help determine the most effective overall development plan and to begin to generate cash flow.

This initial stage requires an investment of approximately USD 140m to USD 160m and is expected to be completed within 18 to 24 months after closing. GeoPark has committed to carry Petroperu during this initial phase and has the funds and cash flow to support this program.

The subsequent work program stages, which will be initiated once production hasbeen established, are focused on carrying out the full development of the Situche Central field, including transportation infrastructure, and new exploration drilling of the block. Petroperu will also have the right to increase its WI in the block up to 50 per cent, subject to GeoPark recovering its investments in the block by certain agreed factors.

 

 

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