Fitch Ratings has revised GeoPark Limited’s outlook to positive from stable and maintained its long-term foreign- and local-currency issuer default ratings at 'B+'. The agency also affirmed GeoPark’s unsecured notes at 'B+' and assigned a recovery rating of 'RR4'.
The improved outlook reflects Fitch’s view that GeoPark’s business profile will strengthen after the company completes its planned purchase of Frontera Energy Corporation’s upstream assets in Colombia for up to $400 million. Fitch says the acquisition should increase GeoPark’s scale and support more resilient cash flow generation.
The transaction, as described to Fitch, comprises Frontera’s Colombian exploration and production business plus the assets SAARA and Proagrollanos. The purchase price structure calls for $375 million at closing, with an additional contingent payment of $25 million. The agreement remains subject to regulatory approvals and is expected to close in the second half of 2026.
GeoPark intends to finance the deal using a prepayment with Vitol, available cash and other liquidity sources. The company will also assume certain Frontera liabilities, including Frontera’s $310 million in 2028 senior unsecured notes and an $80 million Chevron prepayment facility.
On a pro forma basis, Fitch expects GeoPark’s production to reach 78,000 barrels of oil equivalent per day (boed) by 2027, a level Fitch notes aligns with the production threshold of the 'BB' rating category. The agency projects post-acquisition production averaging 69,000 boed in 2026 and 85,000 boed in 2027-2028. Fitch estimates GeoPark’s 1P reserve life at approximately seven years following the transaction.
Fitch anticipates negative free cash flow across 2026-2028 as GeoPark implements a capital expenditure programme of nearly $1.5 billion designed to support growth in Colombia and Argentina. In light of those expected cash flows, the agency does not expect dividends to be paid between 2027-2028.
The rating agency highlighted GeoPark’s cost profile. Fitch noted 2024 half-cycle costs at $20.8 per barrel of oil equivalent (boe) and full-cycle costs at $36.5/boe. Lifting costs, excluding transportation, were reported at $11.9/boe.
Regarding leverage, Fitch projects GeoPark’s EBITDA leverage will be close to 3.0x in 2026 and 2027, declining to 2.0x or below thereafter. The agency expects the acquisition to accelerate deleveraging because the added assets are forecast to generate proven cash flows.
Fitch compared GeoPark’s credit profile to those of other small independent oil producers in Latin America, explicitly naming SierraCol Energy Limited, Frontera Energy Corporation and Gran Tierra Energy Inc. The agency pointed out that GeoPark’s expected production of 69,000 boed in 2026 would be larger than SierraCol’s 45,000 boed and Gran Tierra’s 50,000 boed.
Fitch also outlined factors that could support a future rating upgrade. These include successful completion of the Frontera acquisition; a consistent rise in net production to 75,000 boed while maintaining a 1P reserves life of at least 10 years; maintaining gross leverage at 2.5x or below; and evidence of diversification of operations.
Contextual notes and forward-looking elements included in Fitch’s assessment:
- Affirmed issuer default ratings at 'B+' and unsecured notes at 'B+' with recovery rating 'RR4'.
- Transaction structure: $375 million at closing, plus $25 million contingent payment; subject to regulatory approval; expected close in H2 2026.
- Planned funding: prepayment with Vitol, cash and other liquidity; assumption of Frontera’s $310 million 2028 senior unsecured notes and an $80 million Chevron prepayment facility.
- Production forecasts: 69,000 boed in 2026; 85,000 boed in 2027-2028; pro forma 78,000 boed by 2027; 1P reserve life approx. seven years.
- Financial implications: nearly $1.5 billion capex across 2026-2028, expected negative free cash flow in that period, no dividends expected in 2027-2028.
- Costs: 2024 half-cycle costs $20.8/boe, full-cycle costs $36.5/boe, lifting costs excluding transportation $11.9/boe.
- Leverage path: EBITDA leverage close to 3.0x in 2026-2027, falling to 2.0x or below thereafter if forecasts hold.
Fitch’s outlook change signals that the rating agency views the planned acquisition as a material step toward strengthening GeoPark’s scale, production profile and cash flow potential, while also noting the near-term financial pressures associated with the integration and a significant capex programme.