Good morning, and welcome to the GeoPark Limited conference call, following the results announcement for the third quarter, ended September 30, 2023, and the 2024 work program and investment guidelines. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at this time, please press star one on your telephone keypad. If you would like to withdraw your question, please press star two. If you do not have a copy of the press release, it is available at the Invest With Us section on the company's corporate website at www.geopark.com. A replay of today's call may be accessed through this webcast in the Invest With Us section of the GeoPark corporate website.
Before we continue, please note that certain statements contained in the results press release and on this conference call are forward-looking statements rather than historical facts, and are subject to risks and uncertainties that could cause actual results to differ materially from those described. With respect to such forward-looking statements, the company seeks protections afforded by the Private Securities Litigation Reform Act of 1995. These risks include a variety of factors, including competitive developments and risk factors listed from time to time in the company's SEC reports and public releases. Those lists are intended to identify certain principal factors that could cause actual results to differ materially from those described in the forward-looking statements, but are not intended to represent a complete list of the company's business. All financial figures included herein were prepared in accordance with the IFRS and are stated in U.S. dollars, unless otherwise noted.
Reserves figures correspond to PRMS standards. On the call today from GeoPark is Andrés Ocampo, Chief Executive Officer, Verónica Dávila, Chief Financial Officer, Augusto Zubillaga, Chief Technical Officer, Martín Terrado, Chief Operating Officer, James Deckelman, Chief Exploration Officer, and Stacy Steimel, Shareholder Value Director. And now, I'll turn the call to Mr. Andrés Ocampo. Mr. Ocampo, you may begin.
Good morning, everyone, and thank you for joining our call. We are here today in Bogotá with our team to report our third quarter results and next year's work program and budget guidelines. During the third quarter, GeoPark invested $44 million, drilled 14 wells, and produced approximately 35,000 barrels a day equivalent, impacted by temporary production shut-ins in CPO-5, which were restored in late September. Production is today at approximately 39,000 barrels a day equivalent. The company recorded revenues of $192 million and Adjusted EBITDA of $115 million, a margin of 60%, which means that for every dollar invested, GeoPark generated approximately $2.60. As a result, net profits reached $25 million or $0.44 per share. Over the last 12 months, our return on capital employed was 42%.
In 2023, GeoPark continues to return value to its shareholders, between share buybacks and dividends, expects to exceed $50 million, including the announced dividend of $7.5 million to be paid in December. This should be above the target of 40%-50% of free cash flow for the year. After investing in our assets, servicing our debt and taxes, as well as distributing cash back to shareholders, GeoPark ended the quarter with $160 million in cash on the balance sheet and a net leverage ratio of less than 1x. Our 2023 drilling campaign continues to deliver positive results, particularly from our accelerated activity during the second half of the year, with 12 rigs working.
Multiple new plays are being opened by our team and portfolio, which are adding new, exciting appraisal and delineation activity for the remainder of this year and next. The horizontal well campaign in Llanos 34, with the most recent well producing over 3,400 barrels a day, currently has two full-time rigs executing back-to-back wells and is expected to continue. The Toritos discovery in the Llanos Basin is flowing 1,300 barrels of oil per day and represents a new exciting stratigraphic play in the Paleocene, which we will continue to appraise and delineate. Zorzal Este, another Paleocene prospect, is showing positive preliminary logging information and will be tested in the next couple of weeks, may also open more drilling opportunities.
The Halcón 1 well in CPO-5, which is showing positive preliminary logging information, will be tested in the next couple of weeks and will be followed by Perico 1 well in the same Paleocene play and trend. The U-san new play in Ecuador, developed by our exploration team with 3 successful wells already, flowing 2,700 barrels of oil per day and more to come. Our 2024 drilling campaign will be focused on continuing the development in Llanos 34 with water flooding project and horizontal wells campaign, as well as on appraising and delineating the new plays being opened by the 2023 program. As always, the work program and guidelines are flexible and can be adapted based on changes in oil prices or other conditions, as well as drilling results.
We expect to invest $150-$200 million to drill 35-45 wells and produce between 37,000 and 40,000 barrels per day, with production growth expected to come from Colombia and Ecuador, partially offset by Brazil and Chile, which have no capital allocated. We expect to generate $420-$550 million in Adjusted EBITDA at $80-$90 Brent. Approximately 20%-30% of our CapEx will be allocated to exploration, and the rest will be allocated to appraisal, delineation, and development activities, as well as facilities. We are also executing the third-largest 3-D seismic acquisition program in Colombia across two blocks adjacent to CPO-5, complemented also by an additional seismic program within the CPO-5 block.
We expect this large, new seismic information will allow our subsurface team to define and map new potential prospective areas in place.
As always, after fully funding our CapEx program, we will continue to allocate our cash flow to return value to shareholders and continue to strengthen our balance sheet. We expect to return approximately 40%-50% of our free cash flow after taxes and debt service back to shareholders through a combination of our base dividends, share buybacks, and/or extraordinary dividends. We're finishing the year with great results, which are positioning GeoPark for an even better 2024. We look forward to continue delivering and reporting on our progress in the incoming quarters. Thank you, and we will now take your questions.
As a reminder, if you'd like to ask a question today, that's star followed by one on your telephone keypad now. First question comes from Alejandro Demichelis from Jefferies. Alejandro, your line is open. Please go ahead.
Yes, good morning. Thank you very much for taking my questions. A couple of questions, please. The first one is on production. Could you please give us some granularity on how you see that production into next year evolving? Because you have given us quite a wide range of production. Then the second one is, your production costs have been a little bit high this quarter. Maybe you can give us some kind of indication of how you see that production cost evolving over time, say, over the next twelve months. And then on the exploration side, you have made some good progress.
Maybe you can give us some more detail on how you're seeing Zorzal, how you're seeing Halcón, and what excites you in the program that you have for the next 12 months, please?
Hi, good morning, Alejandro. Thanks for the question. This is Martin. I'll start with the first question that you asked around production for 2024 and more granularity, and then I'll pass it on to Andrés and Verónica. For 2024, our average for the year will be between 37,000 and 40,000 barrels of oil equivalent per day. That's around 1%-10% increase from 2023. And when we look at each of the assets, Platanillo and Chile, they will be declining around 10%-30%. As Andrés mentioned, there's no development capital allocated to these two assets. If we move to Brazil, in Brazil, we expect flat production. Llanos 34, it will be flat to slightly decline. And then in CPO-5 and Llanos exploration blocks, we expect growing.
Overall, Colombia and Ecuador production, we expect an increase of 3%-11%.
Thank you. Thank you, Alejandro. Good morning. Moving on. Oh, how are you? Moving on to your question on production cost. We've seen an increase in the production cost over the past quarters. A few significant drivers of this, on the one side, energy costs in Colombia that have risen given El Niño weather pattern. We saw a significant increase in the third quarter. It has since receded a bit and is starting to stabilize, but that accounted for about 50% of the increase that we saw in the third quarter 2023 alone. Additionally, the peso has appreciated, the Colombian peso has appreciated about 10%, in the third quarter, also affecting our local currency, the denominated costs, which are about 70% of production costs.
One factor that is particular to the third quarter has to do with the composition of sales. So we have a drop in inventories for Putumayo and Oriente assets. Those have higher overall production costs than our Llanos Basin assets, and, and so they move the averages, but those are, you know, factors that tend to even over time. All in all, for 2023, we still expect the consolidated production cost to be about $10-$11 per BOE, in line with the guidance that we previously provided. If we look to 2024, we still expect to see pressure both from energy costs in Colombia and from inflation. The guidance that we provided yesterday within the work program includes $160 million-$170 million worth of OpEx.
That equates to about $12 per BOE, considering volumes produced. I have to say, our team will continue to focus on implementing cost efficiency initiatives, and we look forward to doing that over the next year.
That's it. Thank you.
Hey, Alejandro. Good morning, Andrés here. So to comment on your question about which, you know, which excites us from these new activities or this new place, we really believe these are, you know, more or less the four or five we mentioned in the introduction and in the release are really exciting new opportunities. I'll start with the horizontal well campaign in Llanos 34. That is really delivering great results with the last horizontal well having been drilled and completed at more than 35% cost saving to the first one, and it was put on production a lot faster. It's also flowing 3,500 barrels a day. That's really exciting and having two rigs working on that play back-to-back also makes us really excited about that.
In terms of the things that, you know, exploration opportunities have been opened up this year, all of them are slightly different and exciting for different reasons. The Toritos oil play is Guadalupe Paleocene Formation stratigraphic type of trap. So as you know, like it happened in Tigana and Jacana, which are mostly stratigraphic plays in that same formation, stratigraphic traps tend to be more risky or difficult to find, but once you find them, usually are associated with bigger volumes. So we expect to add more wells before the end of the year, and the campaign for next year also has some significant appraisal and development drilling in that new opportunity. All of these plays, you know, we're getting results as we speak.
Some of them have been testing for a couple of weeks, some of them are going to be testing for the next few weeks. So obviously, it's very preliminary everything we can say now, but we look forward over the course of the next few months as we add more activity to this and have more information to them. Hopefully, we can be more precise and give more details on what does it mean in terms of volumes and activity. Zorzal is an active well from the discovery earlier this year in the Zorzal 1 well, so we just drilled Zorzal Este 1 well. It encountered about 40 feet of net pay, net oil pay in the Guadalupe Formation. It's a downthrown structural trap.
If you remember, back in 2012, when we discovered the Tua field in the Llanos Basin, it was the first, the Tua field was the first downthrown field in the basin that was discovered, and that opened a new play, and following that, we had a number of discoveries in the basin. So Zorzal is exciting because it's, it's another downthrown structural trap that we discovered. So right now, as I said, the logging information is showing more or less 40 feet of oil pay with no upper oil water contact in that formation. So looking forward to test this well. I mean, so far the result looks encouraging, but obviously, as always, we need to put the barrels on the tank before we celebrate.
But if the testing is successful, we see a lot more activity coming from that field. Halcón is very important for us because it is in CPO-5, it is in the northern part of the block. And if you remember, when we purchased Amerisur some years ago, we had multiple reasons for that acquisition, but one of those reasons was because we saw there was a lot of potential in the Guadalupe Formation up in the northern part of the block. Halcón 1 was the well to that we were drilling to hopefully prove that thesis. So again, this is a well that we are going to be testing in the next couple of weeks, but the logging information today is showing that there is an oil pay with no oil-water contact in that area.
Also, given these results, we have already agreed with the operator that there's going to be a second well drilled back-to-back to it. So once Halcón is tested and completed, we're going to move to Perico 1, to continue delineating this new play that is open in the northern part of the block. So also very excited about that. And the last one is Ecuador. And in Ecuador, our geoscience team developed a new geological model to track the trapping mechanism of the Usan inside of some of our blocks. And we've drilled already three wells, three successful wells following this model, producing 2,700 barrels a day of gross oil. Today, the production in Ecuador is three times what it was last quarter.
So we also think this opens up a lot of activity and opportunities for us to continue delineating and operating this new play. So again, I'm sorry I didn't give you a short answer or which ones we are excited most, but I think these five are the biggest highlights from what we can say. And also, I would like to take the opportunity that we're talking about exploration. I would like to introduce James Deckelman, who's our new CXO, who recently joined the management team. He's with us on the call, and will probably in the future be taking these questions. But James, if you wanna add anything that I may have missed.
Excellent. Thanks, Andrés. Thank you so much for the introduction. Alejandro, my thanks to you for the question. We appreciate that, very, very much. You know, I'd like to begin by first saying that I'm very pleased to be a part of this, this leadership team, one of very, very high caliber, working assets of such high quality and basins that are so very prolific. These are basins that I worked earlier in my career and just very pleased to now be levering that experience and success here at GeoPark, principally in three areas. One is organic and inorganic growth. Secondly, to expand our organizational capabilities, and the third thing is to develop some differential technologies. So again, very, very pleased to be here.
You know, since I joined the company quite recently, with respect to your question regarding, you know, what we're very excited about, I would reinforce some of the comments that were made by Andrés. And what's really of interest to me are the high- volume stratigraphic concepts that we're now developing both in Colombia and in Ecuador. What's germane here are two key points. One is the volume potential of these traps and also the play repeatability. And what we're seeing in the Toritos play, for example, is clear repeatability within Block 123, you know, therefore, significant scope for additional volume potential, as well as possible extension into CPO-4 .
Okay, that's, that's great. As a small follow-up, because Andrés, you mentioned the pay at Zorzal, but you didn't mention the pay at Halcón. Could you give us some kind of range on the pay on Halcón? Hmm?
Yes, it's more or less 25-30 feet, which is similar to what we've seen in other parts of, in that formation, in other parts of that, that area. So it's more or less within what we expected.
And just adding to that, you know, that well also intersected no water contact, which is very, very important as well.
That's great. Thank you very much, guys.
Thank you. The next question comes from Stephane Foucaud. Excuse me. The next question comes from Stephane Foucaud from Auctus Advisors. Stephane, your line is open. Please go ahead.
Yes. Hi, guys. Thanks for taking my questions. I've got a few. First, looking at 2024 production guidance. Given the level of activities and the new field entering production, it looks a bit conservative. So I was wondering whether you could give us a sense of where you would expect production to be at the end of 2024 when Llanos 123, Llanos 87, and Ecuador are in full production. That would help us, I think me, to have a view on where 2025 could be in production. So that's my first question.
Second, on 123 and 87, what do you think from what you see so far, and the development program, what do you see being the production capacity of each of each of these fields? But I'm pretty a bit early stage, but you maybe have some sense of that. And lastly, what do you expect to pay any cash tax in Colombia in Q4 2023? And if yes, how much? Thank you.
Hello, Stephane, this is Martín Terrado. Thanks for your question. I'll cover the first one around production exit for 2024, and then I'll pass it on to Andrés and Verónica again. So, for 2024, as Andrés mentioned in the initial remarks, the average will be 37,000-40,000 barrels of oil equivalent per day. And as you can imagine, next year is gonna have significant appraisal activity in discovered fields. So the exit will depend on the learnings and the results of these fairways that we will be appraising. In Ecuador, we're gonna be drilling between two and seven appraisal wells, in Llanos Exploration, three to nine wells. So, at this point, that's as much as we can share.
So I think, Stephane, both the first and second question, this, what is different about next year's program is that it has a, maybe a more significant component of delineation and appraisal than, than maybe in the past couple of years. I think in the past couple of years, it was either development or new exploration, and it was very easy. Development, we, you know, we associate production and exploration, we don't. In delineation and appraisal, there's some risking associated with it, and you can see that the range of activity on each one of these, delineation plays is pretty wide. I mean, some of it goes to... I think in Ecuador, we're going to do something like two to seven wells. And I think in Llanos Exploration goes from three to nine wells. So that's a pretty wide range.
The reason for that is because we're in early stages, we are seeing what we're seeing. It's encouraging. We hope we can be on the upper side of the range, and if we are there, then yes, you know, we would be on the de-risking side of the play, and hopefully that what that brings is a lot more upside on the production side than what we're showing in our guidance. So probably that is the main reason why it sounds a little odd, the level of activity compared with the level of production that we're showing.
Also, part of the production, as it was mentioned by Martin, it is offset by three assets that we have that are producing today, collectively, something around 4,000 barrels a day, that are not getting any capital associated, that are going to be declining. So that offsets a little bit the corporate production growth. Sorry, on the cash taxes, Vero, you wanna make-
Hi, Stephane. Good morning and thank you for your question. So as you, as you well know, income taxes in Colombia are paid primarily in the second quarter. So the bulk of our cash taxes, we have already paid for this year. Now, on every quarter, we do have withholding taxes that are part of that cash tax payments. And so if we look at the fourth quarter, we would expect on and about $10 million-$20 million of those to be paid for during the quarter, and that is included and in line with the guidance we've provided previously.
Great. Thank you very much.
As a reminder, that's star followed by one on your telephone keypad to enter the queue today. I'll now hand the call back to Mr. Andrés Ocampo for any concluding remarks.
Thank you, everybody, for your interest and your support, and we're always here to answer any questions you may have. Please reach out, and we encourage you to visit in our fields and our operations, or call us anytime for further information. Thank you and have a good day.