GeoPark Wades into Argentina's Lucrative Vaca Muerta Shale Basin

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Latin American-focused GeoPark Limited (NYSE:GPRK) (Bogota, Colombia) said it put down nearly a quarter million dollars to take on a working interest in the lucrative Vaca Muerta shale deposit in Argentina.

GeoPark said it submitted a binding offer of about US$200 million to take a non-operating interest in the shale basins located in Neuquen province from an undisclosed company.

"The potential acquisition is consistent with GeoPark's strategy of continued expansion in the leading proven oil and gas basins in Latin America," the company stated.

Gross production would be minor at around 5,000 barrels of oil equivalent per day (BOE/d), though Vaca Muerta is the second-largest shale gas formation and the fourth-largest oil reservoir in the world.

Reports show oil production hit a new record-high at 381,570 barrels per day (BBL/d) in February, a 17.6% increase year-over-year and a nearly 2% increase from January.

During the first two months of the year, provincial oil output was 20.29% higher than the same period in 2023, data show.

In natural gas, Neuquen province recorded output at 89.35 million cubic meters per day, about 9.13% more than in January and 8.55% higher year-over-year.

GeoPark's portfolio is centered around operations in Brazil, Colombia and Ecuador. The company reported a net profit for 2023 of US$111 million, which was 51% lower than the prior year.

The company attributed the slump to impairments tied to divestments, currency fluctuations and higher tax rates.

"Nonetheless, GeoPark ended 2023 with a stronger balance sheet illustrating its sustained commitment to financial discipline," the company said in its latest earnings release.

Annual production for GeoPark averaged 36,563 BOE/d, though fourth quarter output ticked up to 38,315 BOE/d. The latter represented a 10% increase compared to the third quarter, driven in large part by operations in Colombia and Ecuador.

GeoPark's move in Argentina, meanwhile, is emblematic of the broader rush into the Vaca Muerta Shale. The play is expected to reach peak capacity of about 1 million BBL/d in the foreseeable future, though the lack of midstream capacity could create headwinds.

That said, Argentine energy company YPF (NYSE:YPF) (Buenos Ares, Argentina) recently reopened a pipeline transporting oil from Vaca Muerta to Chile and is seeking permits for the construction of a 370-mile pipeline that could connect Neuquen with planned port facilities on the South Pacific coast.

GeoPark added that the offer was accepted by the undisclosed seller, though the transaction was contingent on regulatory approval. Should the deal move forward as planned, it would close sometime during the third quarter.

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