Good morning, and welcome to the GeoPark Limited conference call following the results announcement for the fourth quarter ended December 31st, 2019. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at this time, press star one on your telephone keypad. If you would like to withdraw your question, press the pound key. If you do not have a copy of the press release, please call Sard Verbinnen & Co. in New York at 1-212-687-8080, and we will have one sent to you. Alternatively, you may obtain a copy of the release at the investor support 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 investor support 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 risk 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 James F. Park, Chief Executive Officer, Augusto Zubillaga, Chief Operating Officer, Andres Ocampo, Chief Financial Officer, and Stacy Steimel, Shareholder Value Director. Now I'll turn the call over to Mr. James Park. Mr. Park, you may begin.
Thank you, and welcome, everyone. We are joining you this morning with our executive team, united as ever in our efforts, but currently physically separated and calling in from our respective homes and locations in Bogotá, Santiago, and Buenos Aires. At the outset, we would first like to express our profound gratitude and admiration for the GeoPark women and men who are working day and night, pushing us through this downturn and continuously making our company perform, protecting our shareholders, and positioning us for the new world on the other side. Across six countries, our team moved with quickness and agility to protect the health and safety of our employees, contractors, and communities and ensure that our hydrocarbons keep flowing to the markets.
With creative logistical support, our office staff could be moved to work from home. Our field operations require men and women to be on-site and have their hands on the iron. Our field teams again proved why they are the backbone of our company. Before opening up to questions, let's please look at four elements of our business during this first quarter. Firstly, our team continued to drive performance with solid results, including record production of 45,700 barrels per day, representing 16% growth compared to last year. Strong cash generation with an Adjusted EBITDA of $78 million and leading capital efficiency with $2.30 generated for every $1 invested. On certain higher-cost mature projects within our portfolio, we took non-cash accounting impairments of $97.5 million, which made us record a net loss of $89.5 million for the quarter.
Secondly, our team moved lightning fast into battle mode for the arrival of a global pandemic, the collapse in the world economy, and the flooding of the oil markets with unneeded and unwanted barrels. In addition to quickly protecting the health and safety of our teams and contractors, we worked with our neighbors and communities to keep them informed of operations and risks and provide them with safety, medical, and food supplies, particularly for the most vulnerable. Following our tested business model and track record, our seasoned team simultaneously attacked every component and dimension of our business. So far, more than $280 million of capital and cost savings have been implemented across the board, with more coming.
This included reducing our self-funded work program by 75% to $45 million-$50 million, focusing on our most strategic assets like the Llanos 34 and CPO-5 blocks in Colombia and other savings, such as voluntary salary and bonus cuts by our team and board. We also temporarily shut in 6,500-7,500 barrels per day at higher cost production to preserve cash and shareholder value. Resulting in higher cash flow with less CapEx. This also helps us minimize activity and the potential spread of the virus in the field and in our surrounding communities. It is expected that this production can be readily brought back on stream without suffering mechanical delays or reservoir damage. Thirdly, the underlying strength of our assets and key characteristics of our company provide a foundation to protect against and endure through this and other crises.
Additional tools at hand include a strong balance sheet with $165.5 million of cash and safety net funding alternatives, such as a $75 million oil prepayment with $50 million committed and $130 million in uncommitted credit lines, providing us with financial flexibility and liquidity if needed. GeoPark's long-term debt profile has no principal payments until September 2024, and Standard & Poor's and Fitch both recently reaffirmed our long-term corporate credit rating at B-plus. We are also aggressively protecting our base oil price by effectively using hedges. With approximately 26,000 barrels per day, nearly 70% of our oil production hedged in the second quarter, and so far, approximately 17,500 barrels per day and 11,000 barrels per day in the third and fourth quarters respectively.
Fourthly, as a long-term, opportunity-driven company working in the most attractive hydrocarbon region today, we are looking ahead with excitement to the recovery and taking this opportunity to streamline and improve our overall business, and more strongly position GeoPark for continued economic growth and success. As always, we are protecting critical people, tools, and capabilities for the short, medium, and long term. Our flexible work programs, operational agility, and big inventory of organic projects allow us to quickly expand our investment plan as prices begin to recover, with a first step up at $35 plus Brent. We got a head start in this recovery effort by already closing on and integrating into GeoPark the Amerisur Resources acquisition during January.
This gave us additional important low-cost production, reserves, and high-potential acreage adjacent to and on trend with the Llanos 34 block, and a new entry into the Putumayo Basin, with production reserves, a pipeline, attractive exploration acreage, and a new partnership with Oxy. We went to the capital markets in January and raised a $350 million bond, which was oversubscribed more than six times by top-tier investors and achieved the lowest interest rate ever for a single B-rated company in Latin America. Thank you. We would be pleased to answer any questions you may have. Please be patient as we try to coordinate our question answering with our teams located across the continent today.
At this time, I would like to remind everyone that if you would like to ask a question, to press star one on your telephone keypad now. Again, that's star one for any questions. We'll pause for just a moment to compile the Q&A roster. The first question will come from Robin Haworth with Stifel. Please go ahead.
Hello there. Thank you very much for taking my question. Just a couple of questions, if I may. Just on the CapEx budget, I should be interested to know what was the last thing that came out of the capital budget. That is to say, what is the highest returning opportunity in your portfolio that you're not able to do in the current environment? Secondly, I guess from the capital budget implies that you've ceased pretty much all drilling programs from now on, given that you spent a large proportion of the 2020 budget. When should we start expecting to see underlying declines in the portfolio? Ignoring the shut-in barrels or risk. Thirdly and finally, and a bit more strategically, in terms of taking advantage of this downturn, you do have a wide footprint.
Would you be expecting to use this downturn to add to the footprint, or would you be expecting to use it to slim down to your core Colombia asset base? Thank you.
Thanks very much, Robin. Thanks for the questions. Can you hear me okay? This is Andres.
I can hear you fine. Yeah. Thanks. Yeah.
Great. The first question about our CapEx. I'm not sure if I got it right, but we're estimating roughly our CapEx now for the year to be more or less $45, $50 million.
As you saw in our release, as you pointed out, most of that has already been invested. Really what is remaining is very limited, around $5 million per quarter. Maybe in some quarters we may go up to $8 million. In this context of high volatility, in some cases, we are not even lifting some wells that go down because of either pump failure or things like that, which are pretty common in day-to-day business. I would say our CapEx has been compressed down to below what we would call a maintenance CapEx. There's just one workover rig in Jacana field working today, putting back one well on stream, and we'll release that rig even after that job is done. Particularly, or mainly because of the high volatility in oil prices. Brent was probably in the 20s less than 10 days ago. Today it's at 30.
The swings are pretty significant. It is uncertain how fast or how well we could achieve any returns on any of those investments. To when we could be thinking of starting to invest again, luckily, we don't need levels over $40 or anything like that. I think Jim mentioned in the introduction, with oil prices firmly above $35 or higher, we're ready to go back to work. Hopefully, as soon as that happens, or there's some clarity in the market that that will happen and will be sustained, then we're ready to start putting or adding back investments into our portfolio. I don't know if that answers your question about CapEx?
Yeah, it does. Just, I guess, to clarify, I was also asking about the difference between your old CapEx guidance of $70 and now sort of $45, $50. That $20 million or $25 million, what was it that's come out of there? What's the first thing that you'd do in the event of a slightly higher oil price?
Some of those were some activities that we have, like facilities, building facilities, some workovers we have planned. We have around six or seven workovers that we postponed or delayed. There were some seismic works that were still in the budget. We also had some other activity for licensing, things like that. The previous budget, or the $30 million budget, already having no additional wells on it. Only maybe one or two wells in CPO-5. In this case, we're just having no new wells, and also some activities in Putumayo.
[inaudible]
the type of things. Most of them, with the exception of the workovers, most of them have no immediate production associated to them.
Okay. Thank you.
With respect to the declines, as you pointed out, we have shut in production, and we expect that shut in production to counterbalance the impact of potential declines. Really, the production we're seeing is more or less flat throughout the year. It will depend on oil prices. If you assume a $30 Brent for the year, the production, with the exception of the second quarter, will remain more or less in the levels of 40,000 barrels a day per quarter. You shouldn't be seeing declines because the shut-in wells would compensate for that. In the second quarter in particular, today we have more or less 6,500 barrels a day-7,500 barrels a day shut in. In the guidance we gave in our release, we are estimating that those are put back on in July, at the beginning of July.
That means that those barrels are out for the full quarter. That is not what we expect. Hopefully, we will be able to bring those wells back on. Actually, at today's prices, it is very economic to put those wells back. By that, I mean this 30 Brent with a $6 differential on Vasconia. That means $24 effective price in Colombia. Most of those barrels that are shut in generate quite some cash flow at those levels. More than, let me see, almost $10 per barrel could be generated from those. At this price, we could consider bringing them back. As you probably know, it's not so easy. We cannot be shutting in and shutting down wells every day. We would need some more clarity on how sustainable these prices are.
If we feel comfortable that those will remain, be sure that we'll bring those barrels back on production. If you assume that those barrels are not back on stream until the end of June, then production for the second quarter will be in the levels of 35,000, 36,000 barrels a day. If you assume that they are put back on production at the beginning of June, it would be more closer to 38. Then for the rest of the year, would be around 40,000 barrels a day, fourth quarter. Slightly flat. I don't know if that covers your decline point.
That's very clear.
For the strategic aspect, obviously, the most profitable and the biggest cash flow generation for the company, even particularly in this market, is Colombia. We're concentrating our little activity in Colombia, particularly, mainly in Llanos 34 and CPO-5. We expect that to be the case. We are significantly reducing or basically not investing in Peru. As you saw in the impairment in this environment is not economic. In particular, in Chile and Argentina, we also did some impairments related to the oil assets because of this scenario. We still believe this is the right time to be looking for opportunities. We keep our eyes open, and we look at the market. Obviously, raising capital in this market is very tough as well. We're probably concentrating more in Colombia at this time.
Never close the door to any opportunity that may show up in such an attractive market for asset prices. I don't know if that's the point you were referring to.
Yeah. That's very clear. Thank you very much.
Thank you very much, Robin.
Once again, if you would like to ask a question, please press star one on your telephone keypad now. Again, ladies and gentlemen, that's star one for any questions. We'll pause for just a moment. Okay, the next question will come from Stephane Foucaud with Auctus Advisors. Please go ahead.
Hi, guys. Two questions from me. One, just a clarification. From what you said, that if oil price remains at $30 a barrel until the end of the year, there won't be really any additional exploration wells in Colombia at CPO-8. My second question is around, I was surprised by the netback, which is basically the operating netback, which basically production is lower, but operating netback is basically unchanged or even a bit up. My question really is, what has changed? The G&A has gone down. It's probably not improving your netback. Is it that you're forecasting lower OpEx, lower transport costs, or is it simply because you're seeing better differential? Thank you.
Hi. Good morning, Stephane. Could you please repeat the first question? I have the second clear, but can you repeat the first one? I did not understand. The line is a little noisy.
It was just a clarification that at $30 a barrel, we should not expect any further exploration drilling, which I think was the question for you, but just make sure I got that clear. No more exploration drilling at $30 a barrel until the end of the year. Is that correct?
Yes, that is correct. In our $30 case, we're not anticipating any exploration drilling. There may be something in CPO-5, and it wouldn't be a significant amount of capital. For CPO-5, we're keeping maybe one appraisal well, one disposal well to increase production, and maybe one exploration well. All those together wouldn't account for more than $3 million net to GeoPark. Still, it's unlikely that we would do them. I wouldn't consider those, unfortunately, at least until the end of the year. To your second point, you're right.
To your netback.
Sorry. Yeah, the netback, your point is right. Basically, even in a scenario where we're shutting in production or that the production is lower, the netback is higher. Also, if you take the actual, the operating cash flow, if you factor in the CapEx, where it's also lower than the actual operating free cash flow, it's also much higher still. The main impact there is OpEx. It's a reduction in OpEx, where not only our G&A has been cut down by almost 40%, also you need to include the fact in that analysis that we also took over a new company with its own G&A. If you factor in that we are comparing to 2019 numbers, where we didn't have that company in, the cut would be much higher. In any case, in the operating netback, as you pointed out, the G&A is not included.
The main item there is OpEx. We're cutting down our OpEx significantly. In the new assets we acquired, for example, in Putumayo or in CPO-5, consolidated, Amerisur was reporting $18-$20 per barrel OpEx. We're cutting those down to $10 per barrel in those group of assets. In Argentina, in Chile, our OpEx is down 50%. We're targeting around $9.50 per barrel. Last year, I think we reported something closer to $20. In Argentina, we're cutting down around 40% of OpEx. In Colombia, in the other assets in Colombia, it's down by around 20%-25%. All those reductions are generating the better impact on the netbacks.
As a follow-on, do you say some of those OpEx reductions have been structural, or would you see that coming back as soon as the price comes back?
Some of them are just less pulling jobs and things like that. Most of them are structural changes, either renegotiating contracts or redesigning operations or things that are in that sense. Most of the reactions are permanent. Efficiency is what we achieve.
Thank you.
Thank you, Stephane.
Once again, if you would like to ask a question, please press star one. Again, that's star one for any questions over the phone line. We do have a question from Ian Macqueen with Eight Capital. Please go ahead. Ian, your line is open.
Oh, sorry about that. Was on mute. I'm just wanting to know about shut-ins and where they're occurring. I know you have 100% operated production in Chile and Argentina, but you have partners in Brazil and Colombia. Can you give us an idea of the BOEs per day that are going to be shut in Brazil, Chile, Argentina, and then in Colombia, where there would be shut-ins, whether it be Llanos 34, CPO-5, or Platanillo? Thank you.
Hi, Ian. Good morning. Absolutely. The shut-ins, more or less, the breakdown of those roughly 7,000 or so barrels a day. In Chile, it's around 500 barrels a day related mainly to the oil production. The gas wells are still flowing with some small condensate that comes along with that. In Argentina, it's roughly 200 barrels a day, related to also the oil assets. In Brazil, on the oil, it's 150 barrels a day, which is the one oil field that we have there and some small oil that is produced by Manati. In Colombia, it's more or less 1,000 barrels a day or so related to Platanillo. That's the typical major production. In LLA-34, net to GeoPark, it's something around 5,000 to 6,000 barrels a day, more or less.
That is related to mainly the smaller fields, the higher water cut fields like Max, Taro, and those types of fields. Then the most recent ones, which we did this quarter, were related to Tua and the higher water cut wells in Tigana and Jacana. Those are mainly the wells that are shutting right now in LLA-34. Total net to GeoPark is around, as I said, 5,000-6,000 barrels a day.
That's great. Thank you very much, Andres.
To give you an idea of the impact, Ian, those are maybe on a worst case, it's around 10,000 barrels a day or so. In water, that represents almost 100,000 barrels a day of water. That's why the impact of these wells on the netbacks is much better because it's almost on average, we shut in production with a 90% water cut.
Great. Thank you.
Okay. Thank you.
At this time, I would like to turn the conference back over to James Park for any closing comments.
Thank you everybody for your interest in GeoPark and your continued support of our company. Once the world's borders begin to open again, we encourage you to please visit us at our operations in each country and call us at any time for more information or comments. Thank you, and please stay healthy and strong.
Ladies and gentlemen, thank you for participating. You may all disconnect.