GEOPARK HOLDINGS LIMITED 2014-04-01 T-13:14

ma

Eos el
GEOPARK

Santiago, 01 de abril de 2014

Geopark Limited
Inscrito en el Registro de Valores Extranjeros bajo N* 045

Señor

Fernando Coloma Correa

Superintendente de Valores y Seguros

Av. Libertador Bernardo O’Higgins N* 1449, piso 1
PRESENTE

REF.: Adjunta información relevante que se
publicó el día de hoy en el U.S.
Securities and Exchange Commission
(SEC).

Señor Superintendente:

En virtud de lo establecido en la Norma de Carácter General
N*352, por medio de la presente adjunto información considerada como relevante para
la empresa, que ha sido entregada el día de hoy, en el U.S. Securities and Exchange
Commission (“SEC”), en donde mediante un comunicado de prensa se informa los
estados financieros de la Compañía correspondientes al ejercicio finalizado el 31 de
diciembre de 2013.

La información adjunta consiste en un comunicado de prensa
de sesenta y cuatro páginas en idioma inglés. Con respecto a la traducción del
comunicado al idioma español, se informa que la misma será publicada en esta
Superintendencia dentro de los próximos días.

Sin otro particular, saluda atentamente a Usted,

Í Pedro Aylwin ChiorFíni
pp. GEOPARK LIMITED

Nuestra Señora de los Ángeles 179 – Las Condes, Santiago – Chile
Tel. (+56 2) 2429600 – infoWgeo-park.com – www.geo-park.com

GEOPARK LIMITED

CONSOLIDATED
FINANCIAL STATEMENTS

As of and for the year ended 31 December 2013

Contents

NO 0M0xx=xxOo0oQo mn

Report of Independent Registered Public Accounting Firm
Consolidated Statement of Income

Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flow

Notes to the Consolidated Financial Statements

GEOPARK LIMITED
31 DECEMBER 2013

GEOPARK LIMITED
31 DECEMBER 2013

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of
GeoPark Limited

In our opinion, the accompanying consolidated statement of financial position and the related consolidat-
ed statements of income, comprehensive income, changes in equity, and cash flow present fairly, in all
material respects, the financial position of GeoPark Limited and its subsidiaries at December 31, 2013 and
2012, and the results of its operations and its cash flows for each of the two years in the periods ended De-
cember 31, 2013 and 2012 in conformity with International Financial Reporting Standards as issued by
the International Accounting Standards Board. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material mis-
statement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We believe that our audits pro-
vide a reasonable basis for our opinion.

PRICE WATERHOUSE € CO. S.R.L.

By (Partner)

Carlos Martín Barbafina

Ciudad Autónoma de Buenos Aires, Argentina
March 28, 2014

GEOPARK LIMITED
31 DECEMBER 2013

CONSOLIDATED STATEMENT OF INCOME

Amounts in US$ “000 Note 2013 2012
NET REVENUE 7 338,353 250,478
Production costs 8 (179,643) (129,235)
GROSS PROFIT 158,710 121,243
Exploration costs 11 (16,254) (27,890)
Administrative costs 12 (46,584) (28,798)
Selling expenses 13 (17,252) (24,631)
Other operating income 5,344 823
OPERATING PROFIT 83,964 40,747
Financial income 14 4,893 892
Financial expenses 15 (38,769) (17,200)
Bargain purchase gain on acquisition of subsidiaries 34 – 8,401
PROFIT BEFORE INCOME TAX 50,088 32,840
Income tax 16 (15,154) (14,394)
PROFIT FOR THE YEAR 34,934 18,446

Attributable to:

Owners of the Company 22,012 11,879
Non-controlling interest 12,922 6,567
Earnings per share (in US$) for

profit attributable to owners of the Company. Basic 18 0.50 0.28
Earnings per share (in US$) for

profit attributable to owners of the Company. Di- 18 0.47 0.27
luted

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Amounts in US$ 000 2013 2012
Income for the year 34,934 18,446
Other comprehensive income:
Items that may be subsequently reclassified to profit
Currency translation difference (1,956) –
Total comprehensive Income for year 32,978 18,446
Attributable to:
Owners of the Company 20,056 11,879
Non-controlling interest 12,922 6,567

The notes on pages 7 to 63 are an integral part of these consolidated financial statements.

GEOPARK LIMITED
31 DECEMBER 2013

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Amounts in US$ “000 Note 2013 2012
ASSETS

NON CURRENT ASSETS

Property, plant and equipment 19 595,446 457,837
Prepaid taxes 21 11,454 10,707
Other financial assets 24 5,168 7,791
Deferred income tax asset 17 13,358 13,591
Prepayments and other receivables 23 6,361 510
TOTAL NON CURRENT ASSETS 631,787 490,436
CURRENT ASSETS

Inventories 22 8,122 3,955
Trade receivables 23 42,628 32,271
Prepayments and other receivables 23 35,764 49,620
Prepaid taxes 21 6,979 3,443
Cash at bank and in hand 24 121,135 48,292
TOTAL CURRENT ASSETS 214,628 137,581
TOTAL ASSETS 846,415 628,017
TOTAL EQUITY

Equity attributable to owners of the

Company

Share capital 25 44 43
Share premium 120,426 116,817
Reserves 126,465 128,421
Retained earnings (accumulated losses) 23,906 (5,860)
Attributable to owners of the Company 270,841 239,421
Non-controlling interest 95,116 72,665
TOTAL EQUITY 365,957 312,086
LIABILITIES

NON CURRENT LIABILITIES

Borrowings 26 290,457 165,046
Provisions and other long-term liabilities 27 33,076 25,991
Deferred income tax liability 17 23,087 17,502
Trade and other payables 28 8,344 –
TOTAL NON CURRENT LIABILITIES 354,964 208,539
CURRENT LIABILITIES

Borrowings 26 26,630 27,986
Current income tax liabilities 7,231 7,315
Trade and other payables 28 91,633 72,091
TOTAL CURRENT LIABILITIES 125,494 107,392
TOTAL LIABILITIES 480,458 315,931
TOTAL EQUITY AND LIABILITIES 846,415 628,017

The financial statements were approved by the Board of Directors on 28 March 2014.

The notes on pages 7 to 63 are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

GEOPARK LIMITED
31 DECEMBER 2013

Attributable to owners of the Company

Retained
earnings Non-
Transla- (accumu- control-
Share Share Other tion Re- lated loss- ling In-
Amount in US$ ‘000 Capital (M- Premium Reserve serve es) terest Total
Equity at 1 January 2012 43 112,231 114,270 894 (18,549) 41,763 250,652
Comprehensive income:
Profit for the year – – – – 11,879 6,567 18,446
Total Comprehensive Income for . . . –
the Year 2012 11,879 6,567 18,446
Transactions with owners:
Proceeds from transaction with Non-
controlling interest (Notes 25 and 34) – 13,257 24,335 37,592
Share-based payment (Note 29) – 4,586 – – 810 – 5,396
Total 2012 – 4,586 13,257 – 810 24,335 42,988
Balances at 31 December 2012 43 116,817 127,527 894 (5,860) 72,665 312,086
Comprehensive income:
Profit for the year – – – – 22,012 12,922 34,934
Currency translation differences – – – (1,956) – – (1,956)
Total Comprehensive Income for
the Year 2013 – – – (1,956) 22,012 12,922 32,978
Transactions with owners:
Proceeds from transaction with Non-
controlling interest (Notes 25 and 34) – 9,529 9,529
Share-based payment (Note 29) 1 4,049 – – 7,754 – 11,804
Repurchase of shares (Note 25) – (440) – – – – (440)
Total 2013 1 3,609 – – 7,754 9,529 20,893
Balances at 31 December 2013 44 120,426 127,527 (1,062) 23,906 95,116 365,957

(0 See Note 1.

The notes on pages 7 to 63 are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENT OF CASH FLOW

GEOPARK LIMITED
31 DECEMBER 2013

Amounts in US$ ‘000 Note 2013 2012
Cash flows from operating activities

Income for the year 34,934 18,446
Adjustments for:

Income tax for the year 16 15,154 14,394
Depreciation of the year 9 70,200 53,317
Loss on disposal of property, plant and equipment 575 546
Write-off of unsuccessful efforts 11 10,962 25,552
Accrual of interest on borrowings 22,085 12,513
Amortisation of other long-term liabilities 27 (1,165) (2,143)
Unwinding of long-term liabilities 27 1,523 1,262
Accrual of share-based payment 10 9,167 5,396
Bargain purchase gain on acquisition of subsidiaries 34 – (8,401)
Deferred income 27 – 5,550
Income tax paid (4,040) (408)
Changes in working capital 5 (19,301) 5,778
Cash flows from operating activities – net 140,094 131,802
Cash flows from investing activities

Purchase of property, plant and equipment (228,033) (198,204)
Acquisitions of companies, net of cash acquired 34 – (105,303)
Collections related to financial leases 6,734 –
Cash flows used in investing activities – net (221,299) (303,507)
Cash flows from financing activities

Proceeds from borrowings 307,259 37,200
Proceeds from transaction with non-controlling interest 40,667 12,452
Proceeds from loans from related parties 8,344 –
Proceeds from issuance of shares 3,442 –
Repurchase of shares (440) –
Principal paid (179,360) (12,382)
Interest paid (15,894) (10,895)
Cash flows from financing activities – net 164,018 26,375
Net increase (decrease) in cash and cash equivalents 82,813 (145,330)
Cash and cash equivalents at 1 January 38,292 183,622
Cash and cash equivalents at the end of the year 121,105 38,292
Ending Cash and cash equivalents are specified as follows:

Cash in bank 121,113 48,268
Cash in hand 22 24
Bank overdrafts (30) (10,000)
Cash and cash equivalents 121,105 38,292

The notes on pages 7 to 63 are an integral part of these consolidated financial statements.

(M Proceeds from transaction with Non-controlling interest for the year ended 31 December 2013 includes: US$ 9,529,000

from capital contributions received in the period; and US$ 31,138,000 as result of collection of receivables included in
Prepayment and other receivables as of 31 December 2012, relating to equity transactions made in 2012 and 2011.

GEOPARK LIMITED
31 DECEMBER 2013

NOTES

Note
1 General Information

GeoPark Limited (the Company) is a company incorporated under the laws of Bermuda. The Registered
office address is Cumberland House, 9!” Floor, 1 Victoria Street, Hamilton HM 11, Bermuda.

On 30 July 2013 the shareholders approved the change of the Company’s name from GeoPark Holdings
Limited to GeoPark Limited.

The principal activity of the Company and its subsidiaries (“the Group”) are exploration, development and
production for oil and gas reserves in Chile, Colombia, Brazil and Argentina. The Group has working in-
terests and/or economic interests in 28 hydrocarbon blocks.

The Group was founded in 2002. The first acquisition was the purchase of AES Corporation’s upstream
oil and natural gas assets in Chile and Argentina. Those assets included a non-operating working interest
in the Fell Block in Chile, which at that time was operated by Empresa Nacional de Petróleo (“ENAP”), the
Chilean state-owned hydrocarbon company, and operating working interests in the Del Mosquito, Cerro
Doña Juana and Loma Cortaderal blocks in Argentina. In 2006, the Group was awarded a 100% operat-
ing working interest in the Fell Block by the Republic of Chile. In 2008 and 2009, the Group continued the
growth in Chile by acquiring operating working interests in each of the Otway and Tranquilo blocks. In
2011, the Group was awarded operating working interests in each of the Isla Norte, Flamenco and Cam-
panario blocks in Tierra del Fuego, Chile, and in 2012, the Group formalized and entered into special op-
eration contracts (Contratos Especiales de Operación para la Exploración y Explotación de Yacimientos
de Hidrocarburos) (each, a “CEOP”) with Chile for the exploitation and exploration of these blocks. In the
first quarter of 2012, GeoPark extended its footprint to Colombia by acquiring three privately held Explora-
tion and Production (“ESP”) companies, Winchester, La Luna and Cuerva, that includes working interests
and/or economic interests in 10 blocks located in the Llanos, Magdalena and Catatumbo basins.

In May 2013, the Company has extended its footprint into Brazil since it has been awarded seven new li-
censes in the Brazilian Round 11 of which two are in the Reconcavo Basin in the State of Bahia and five
are in the Potiguar Basin in the State of Rio Grande do Norte. In addition, in November 2013, the Com-
pany has also been awarded two new concessions in a new international bidding round, Round 12, in the
Parnaíba Basin in the State of Maranháo and Sergipe Alagoas Basin in the State of Alagoas (see
Note 34).

On 7 February 2014, the Securities and Exchange Commission (“SEC”) declared effective the Company’s
registration statement upon which 13,999,700 shares were issued at a price of US$ 7 per share, including
over-allotment option. Gross proceeds from the offering totalled US$ 98 million. As a result, the Compa-
ny commenced trading on the New York Stock Exchange (“NYSE”) under the ticker symbol GPRK. Also
its shares are authorized for trading on the Santiago Off-Shore Stock Exchange.

GEOPARK LIMITED
31 DECEMBER 2013

Note
1 General Information (continued)

Subsequently, the Company listing cancellation on the AIM London Stock Exchange became effective on
19 February 2014.

These consolidated financial statements were authorised for issue by the Board of Directors on 28 March
2014.

Note
2 Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are
set out below. These policies have been consistently applied to the years presented, unless otherwise
stated.

2.1 Basis of preparation

The consolidated financial statements of GeoPark Limited have been prepared in accordance with Inter-
national Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards
Board (“IASB”).

The consolidated financial statements are presented in thousands (US$ “000) of United States Dollars
and all values are rounded to the nearest thousand (US$’000), except where otherwise indicated.

The consolidated financial statements have been prepared on a historical cost basis.

The preparation of financial statements in conformity with IFRS requires the use of certain critical ac-
counting estimates. lt also requires management to exercise ¡ts judgement in the process of applying the
Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas
where assumptions and estimates are significant to the consolidated financial statements are disclosed in
this note under the title “Accounting estimates and assumptions”.

GEOPARK LIMITED
31 DECEMBER 2013
Note
2 Summary of significant accounting policies (continued)

2.1 Basis of preparation (continued)

2.1.1 Changes in accounting policy and disclosure

New and amended standards adopted by the Group

The following standards have been adopted by the Group for the first time for the financial year beginning
on or after 1 January 2013 and have no material impact on the Group:

Amendment to lAS 1, “Financial statement presentation’ regarding other comprehensive income. The
main change resulting from these amendments is a requirement for entities to group items presented in
“other comprehensive income” (OCI) on the basis of whether they are potentially reclassifiable to profit or
loss subsequently (reclassification adjustments).

IFRS 10, ‘Consolidated financial statements” builds on existing principles by identifying the concept of
control as the determining factor in whether an entity should be included within the consolidated financial
statements of the parent company. The standard provides additional guidance to assist in the determina-
tion of control where this is difficult to assess.

IFRS 11, “Joint arrangements’ focuses on the rights and obligations of the parties to the arrangement ra-
ther than its legal form. There are two types of joint arrangements: joint operations and joint ventures.
Joint operations arise where the investors have rights to the assets and obligations for the liabilities of an
arrangement. A joint operator accounts for ¡ts share of the assets, liabilities, revenue and expenses. Joint
ventures arise where the investors have rights to the net assets of the arrangement; joint ventures are
accounted for under the equity method. Proportional consolidation of joint arrangements is no longer
permitted.

IFRS 12, ‘Disclosures of interests in other entities” includes the disclosure requirements for all forms of in-
terests in other entities, including joint arrangements, associates, structured entities and other off balance
sheet vehicles.

IFRS 13, Fair value measurement’, aims to improve consistency and reduce complexity by providing a
precise definition of fair value and a single source of fair value measurement and disclosure requirements
for use across IFRSs. The requirements, which are largely aligned between IFRSs and US GAAP, do not
extend the use of fair value accounting but provide guidance on how it should be applied where its use is
already required or permitted by other standards within IFRSs.

GEOPARK LIMITED
31 DECEMBER 2013
Note
2 Summary of significant accounting policies (continued)

2.1 Basis of preparation (continued)

2.1.1 Changes in accounting policy and disclosure (continued)

New standards, amendments and interpretations issued but not effective for the financial year beginning
1 January 2013 and not early adopted

IFRS 9, “Financial instruments”, addresses the classification, measurement and recognition of financial
assets and financial liabilities. IFRS 9 was issued in November 2009 and October 2010. It replaces the
parts of lAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires
financial assets to be classified into two measurement categories: those measured at fair value and those
measured at amortised cost. The determination is made at initial recognition. The classification depends
on the entity’s business model for managing its financial instruments and the contractual cash flow char-

acteristics of the instrument. For financial liabilities, the standard retains most of the lAS 39 requirements.

The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a
fair value change due to an entity’s own credit risk is recorded in other comprehensive income rather than
the income statement, unless this creates an accounting mismatch. The Group is yet to assess IFRS 9’s
full impact and intends to adopt IFRS 9 no later than the accounting period beginning on or after
1 January 2015.

Amendment to IAS 32, “Financial instruments: Presentation’ on asset and liability offsetting. These
amendments are to the application guidance in lAS 32, “Financial instruments: Presentation”, and clarify
some of the requirements for offsetting financial assets and financial liabilities on the balance sheet. The
Company has assessed IAS 32’s impact and concluded there will be no material impact on the Group.

Amendment to IAS 36, ‘Impairment of assets’ on recoverable amount disclosures. This amendment ad-
dresses the disclosure of information about the recoverable amount of impaired assets if that amount is
based on fair value less costs of disposal. The Company has assessed IAS 36’s impact and concluded
there will be no material impact on the Group.

10

GEOPARK LIMITED
31 DECEMBER 2013
Note
2 Summary of significant accounting policies (continued)

2.1 Basis of preparation (continued)

2.1.1 Changes in accounting policy and disclosure (continued)

IFRIC 21, ‘Levies”, is an interpretation of IAS 37, *Provisions, contingent liabilities and contingent assets’.
IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to
have a present obligation as a result of a past event (known as an obligating event). The interpretation
clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the
relevant legislation that triggers the payment of the levy. The Company has assessed IFRIC 21’s impact
and concluded there will be no material impact on the Group.

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to
have a material impact on the Group.

Management assessed the relevance of other new standards, amendments or interpretations not yet ef-
fective and concluded that they are not relevant to Group.

2.2 Going concern

The Directors regularly monitor the Group’s cash position and liquidity risks throughout the year to ensure
that it has sufficient funds to meet forecast operational and investment funding requirements. Sensitivities
are run to reflect latest expectations of expenditures, oil and gas prices and other factors to enable the
Group to manage the risk of any funding short falls and/or potential loan covenant breaches.

Considering macroeconomic environment conditions, the performance of the operations, the US$ 300
million debt fund raising completed in February 2013, the proceeds from the registration statement with
the SEC (see Note 1) and Group’s cash position, the Directors have formed a judgement, at the time of
approving the financial statements, that there is a reasonable expectation that the Group has adequate
resources to continue with its investment programme to increase oil and gas reserves, production and
revenues and meeting all its obligations for the foreseeable future. For this reason, the Directors have
continued to adopt the going concern basis in preparing the consolidated financial statements.

GEOPARK LIMITED
31 DECEMBER 2013
Note
2 Summary of significant accounting policies (continued)

2.3 Consolidation

Subsidiaries are all entities (including structured entities) over which the group has control. The group
controls an entity when the group is exposed to, or has rights to, variable returns from ¡ts involvement with
the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the group. They are deconsolidated from the
date that control ceases.

The Group applies the acquisition method to account for business combinations. The consideration trans-
ferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred
to the former owners of the acquiree and the equity interests issued by the Group. The consideration
transferred includes the fair value of any asset or liability resulting from a contingent consideration ar-
rangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition date.

Acquisition-related costs are expensed as incurred.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree
and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the
identifiable net assets acquired is recorded as goodwill. If the total of consideration transferred, non-
controlling interest recognised and previously held interest measured is less than the fair value of the net
assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly

in the income statement.

Intercompany transactions, balances and unrealised gains on transactions between the Group and its
subsidiaries are eliminated. Unrealised losses are also eliminated unless the transaction provides evi-
dence of an impairment of the asset transferred. Amounts reported in the financial statements of subsidi-
aries have been adjusted where necessary to ensure consistency with the accounting policies adopted by
the Group.

2.4 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision-maker. The chief operating decision-maker, who is responsible for allocating re-
sources and assessing performance of the operating segments, has been identified as the strategic steer-
ing committee that makes strategic decisions. This committee consists of the CEO, COO, CFO and man-
agers in charge of the Exploration, Development, Drilling, Operations, SPEED and Finance departments.
This committee reviews the Group’s internal reporting in order to assess performance and allocate re-

sources. Management has determined the operating segments based on these reports.

rn

GEOPARK LIMITED
31 DECEMBER 2013

Note

2 Summary of significant accounting policies (continued)
2.5 Foreign currency translation
a) Functional and presentation currency

The consolidated financial statements are presented in US Dollars, which is the Group’s presentation cur-

rency.

Items included in the financial statements of each of the Group’s entities are measured using the currency
of the primary economic environment in which the entity operates (the “functional currency”). The func-
tional currency of Group companies incorporated in Chile, Colombia and Argentina is the US Dollar,
meanwhile for the Group Brazilian company the functional currency is the local currency, which is the
Brazilian Real.

b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates pre-
Vailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement
of such transactions and from the translation at period end exchange rates of monetary assets and liabili-
ties denominated in foreign currencies are recognised in the Consolidated Statement of Income.

2.6 Joint arrangements

The company has applied IFRS 11 to all joint arrangements as of 1 January 2013. Under IFRS 11 in-
vestments in joint arrangements are classified as either joint operations or joint ventures depending on

the contractual rights and obligations each investor.

The Company has assessed the nature of its joint arrangements and determined them to be joint opera-
tions. The company combines its share in the joint operations individual assets, liabilities, results and

cash flows on a line-by-line basis with similar items in its financial statements.

2.7 Revenue recognition

Revenue from the sale of crude oil and gas is recognised in the Statement of Income when risk trans-
ferred to the purchaser, and if the revenue can be measured reliably and is expected to be received.
Revenue is shown net of VAT, discounts related to the sale and overriding royalties due to the ex-owners
of oil and gas properties where the royalty arrangements represent a retained working interest in the
property.

2.8 Production costs

Production costs include wages and salaries incurred to achieve the net revenue for the year. Direct and
indirect costs of raw materials and consumables, rentals and leasing, property, plant and equipment de-
preciation and royalties are also included within this account.

13

GEOPARK LIMITED
31 DECEMBER 2013

Note

2 Summary of significant accounting policies (continued)

2.9 Financial costs

Financial costs include interest expenses, realised and unrealised gains and losses arising from transac-
tions in foreign currencies and the amortisation of financial assets and liabilities. The Company has capi-
talised borrowing cost for wells and facilities that were initiated after 1 January 2009. Amounts capitalised
during the year totalled US$ 1,312,953 (US$ 1,368,952 in 2012).

2.10 Property, plant and equipment

Property, plant and equipment are stated at historical cost less depreciation, and impairment if applicable.
Historical cost includes expenditure that is directly attributable to the acquisition of the items; including
provisions for asset retirement obligation.

Oil and gas exploration and production activities are accounted for in accordance with the successful ef-
forts method on a field by field basis. The Group accounts for exploration and evaluation activities in ac-
cordance with IFRS 6, Exploration for and Evaluation of Mineral Resources, capitalizing exploration and
evaluation costs until such time as the economic viability of producing the underlying resources is deter-
mined. Costs incurred prior to obtaining legal rights to explore are expensed immediately to the Consoli-
dated Statement of Income.

Exploration and evaluation costs may include: license acquisition, geological and geophysical studies
(i.e.: seismic), direct labour costs and drilling costs of exploratory wells. No depreciation and/or amortisa-
tion are charged during the exploration and evaluation phase. Upon completion of the evaluation phase,
the prospects are either transferred to oil and gas properties or charged to expense (exploration costs) in
the period in which the determination is made depending whether they have found reserves or not. If not
developed, exploration and evaluation assets are written off after three years unless, it can be clearly
demonstrated that the carrying value of the investment is recoverable.

A charge of US$ 10,962,000 has been recognised in the Consolidated Statement of Income within Explo-
ration costs (US$ 25,552,000 in 2012) for write-offs in Argentina, Colombia and Chile (see Note 11).

All field development costs are considered construction in progress until they are finished and capitalised
within oil and gas properties, and are subject to depreciation once complete. Such costs may include the
acquisition and installation of production facilities, development drilling costs (including dry holes, service
wells and seismic surveys for development purposes), project-related engineering and the acquisition
costs of rights and concessions related to proved properties.

GEOPARK LIMITED
31 DECEMBER 2013
Note
2 Summary of significant accounting policies (continued)

2.10 Property, plant and equipment (continued)

Workovers of wells made to develop reserves and/or increase production are capitalized as development
costs. Maintenance costs are charged to income when incurred.

Capitalised costs of proved oil and gas properties and production facilities and machinery are depreciated
on a licensed area by the licensed area basis, using the unit of production method, based on commercial
proved and probable reserves. The calculation of the “unit of production” depreciation takes into account
estimated future finding and development costs and is based on current year end unescalated price lev-
els. Changes in reserves and cost estimates are recognised prospectively. Reserves are converted to
equivalent units on the basis of approximate relative energy content.

Depreciation of the remaining property, plant and equipment assets (i.e. furniture and vehicles) not direct-
ly associated with oil and gas activities has been calculated by means of the straight line method by ap-
plying such annual rates as required to write-off their value at the end of their estimated useful lives. The
useful lives range between 3 years and 10 years.

Depreciation is allocated in the Consolidated Statement of Income as production, exploration and admin-
istrative expenses, based on the nature of the associated asset.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount (see Impairment of non-financial assets in
Note 2.12).

2.11 Provisions and other long-term liabilities

Provisions for asset retirement obligations, deferred income, restructuring obligations and legal claims are
recognised when the Group has a present legal or constructive obligation as a result of past events; it is
probable that an outflow of resources will be required to settle the obligation; and the amount has been
reliably estimated. Restructuring provisions comprise lease termination penalties and employee termina-
tion payments.

Provisions are measured at the present value of the expenditures expected to be required to settle the
obligation using a pre-tax rate that reflects current market assessments of the time value of money and
the risks specific to the obligation. The increase in the provision due to passage of time is recognised as

interest expense.

GEOPARK LIMITED
31 DECEMBER 2013

Note
2 Summary of significant accounting policies (continued)

2.11.1 Asset Retirement Obligation

The Group records the fair value of the liability for asset retirement obligations in the period in which the
wells are drilled. When the liability is initially recorded, the Group capitalises the cost by increasing the
carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value at
each reporting period, and the capitalized cost is depreciated over the estimated useful life of the related
asset. According to interpretations and application of current legislation and on the basis of the changes
in technology and the variations in the costs of restoration necessary to protect the environment, the
Group has considered it appropriate to periodically re-evaluate future costs of well-capping. The effects of
this recalculation are included in the financial statements in the period in which this recalculation is de-
termined and reflected as an adjustment to the provision and the corresponding property, plant and
equipment asset.

2.11.2 Deferred Income

Relates to contributions received in cash from the Group’s clients to improve the project economics of gas
wells. The amounts collected are reflected as a deferred income in the balance sheet and recognised in
the Consolidated Statement of Income over the productive life of the associated wells. The depreciation
of the gas wells that generated the deferred income is charged to the Consolidated Statement of Income
simultaneously with the amortisation of the deferred income.

2.12 Impairment of non-financial assets

Assets that are not subject to depreciation and/or amortisation (i.e.: exploration and evaluation assets)
are tested annually for impairment. Assets that are subject to depreciation and/or amortisation are re-
viewed for impairment whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable.

An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recov-
erable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value
in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash flows (cash-generating units), generally a licensed area. Non-financial as-
sets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at
each reporting date.

No asset should be kept as an exploration and evaluation asset for a period of more than three years, ex-
cept if it can be clearly demonstrated that the carrying value of the investment will be recoverable.

No impairment loss has been recognised during 2013; only write-offs (see Note 11).

16

GEOPARK LIMITED
31 DECEMBER 2013
Note
2 Summary of significant accounting policies (continued)

2.13 Lease contracts

All current lease contracts are considered to be operating leases on the basis that the lessor retains sub-
stantially all the risks and rewards related to the ownership of the leased asset. Payments related to op-
erating leases and other rental agreements are recognised in the Consolidated Income Statement on a
straight line basis over the term of the contract. The Group’s total commitment relating to operating leases
and rental agreements is disclosed in Note 31.

Leases in which substantially all of the risks and rewards of ownership are transferred to the lessee are
classified as finance leases. Under a finance lease, the Company as lessor has to recognize an amount
receivable equal to the aggregate of the minimum lease payments plus any unguaranteed residual value
accruing to the lessor, discounted at the interest rate implicit in the lease.

2.14 Inventories

Inventories comprise crude oil and materials.

Crude oil is measured at the lower of cost and net realisable value. Materials are measured at the lower
of cost and recoverable amount. The cost of materials and consumables is calculated at acquisition price
with the addition of transportation and similar costs. Cost is determined using the first-in, first-out (FIFO)
method.

2.15 Current and deferred income tax

The tax expense for the year comprises current and deferred tax. Tax is recognised in the Consolidated

Statement of Income.

The current income tax charge is calculated on the basis of the tax laws enacted or substantially enacted
at the balance sheet date in the countries where the Company’s subsidiaries operate and generate taxa-
ble income. The computation of the income tax expense involves the interpretation of applicable tax laws
and regulations in many jurisdictions. The resolution of tax positions taken by the Group, through negotia-
tions with relevant tax authorities or through litigation, can take several years to complete and in some
cases it is difficult to predict the ultimate outcome.

Deferred income tax is recognised, using the liability method, on temporary differences arising between
the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially en-
acted by the balance sheet date and are expected to apply when the related deferred income tax asset is
realised or the deferred income tax liability is settled.

GEOPARK LIMITED
31 DECEMBER 2013
Note
2 Summary of significant accounting policies (continued)
2.15 Current and deferred income tax (continued)

In addition, the Group has tax-loss carry-forwards in certain taxing jurisdictions that are available to offset
against future taxable profit. However, deferred tax assets are recognized only to the extent that it is
probable that taxable profit will be available against which the unused tax losses can be utilized. Man-
agement judgment is exercised in assessing whether this is the case.

To the extent that actual outcomes differ from management’s estimates, taxation charges or credits may

arise in future periods.

Deferred income tax liabilities are provided on taxable temporary differences arising from investments in
subsidiaries and joint arrangements, except for deferred income tax liability where the timing of the rever-
sal of the temporary difference is controlled by the Group and it is probable that the temporary difference
will not reverse in the foreseeable future. The Group is able to control the timing of dividends from its
subsidiaries and hence does not expect taxable profit. Hence deferred tax is recognized in respect of the
retained earnings of overseas subsidiaries only if at the date of the statements of financial position, divi-
dends have been accrued as receivable or a binding agreement to distribute past earnings in future has
been entered into by the subsidiary.

Deferred tax liabilities are provided in full, with no discounting.

2.16 Financial assets

Financial assets are divided into the following categories: loans and receivables; financial assets at fair
value through the profit or loss; available-for-sale financial assets; and held-to-maturity investments. Fi-
nancial assets are assigned to the different categories by management on initial recognition, depending
on the purpose for which the investments were acquired. The designation of financial assets is re-
evaluated at every reporting date at which a choice of classification or accounting treatment is available.

All financial assets are recognised when the Group becomes a party to the contractual provisions of the
instrument. All financial assets are initially recognised at fair value, plus transaction costs.

Derecognition of financial assets occurs when the rights to receive cash flows from the investments ex-
pire or are transferred and substantially all of the risks and rewards of ownership have been transferred.
An assessment for impairment is undertaken at each balance sheet date.

Interest and other cash flows resulting from holding financial assets are recognised in the Consolidated
Income Statement when receivable, regardless of how the related carrying amount of financial assets is

measured.

GEOPARK LIMITED
31 DECEMBER 2013
Note
2 Summary of significant accounting policies (continued)

2.16 Financial assets (continued)

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market. They are included in current assets, except for maturities greater than
twelve months after the balance sheet date. These are classified as non-current assets. The Group’s
loans and receivables comprise trade receivables, prepayments and other receivables and cash at bank
and in hand in the balance sheet. They arise when the Group provides money, goods or services directly
to a debtor with no intention of trading the receivables. Loans and receivables are subsequently meas-
ured at amortised cost using the effective interest method, less provision for impairment. Any change in
their value through impairment or reversal of impairment is recognised in the Consolidated Statement of
Income. All of the Group’s financial assets are classified as loan and receivables.

2.17 Other financial assets

Non current other financial assets include contributions made for environmental obligations according to a
Colombian government request. For 2012, non current other financial assets also relate to the cash col-
lateral account required under the terms of the Bond issued in 2010. This investment was intended to
guarantee interest payments and was recovered at repayment date (see Note 26).

2.18 Impairment of financial assets

Provision against trade receivables is made when objective evidence is received that the Group will not
be able to collect all amounts due to it in accordance with the original terms of those receivables. The
amount of the write-down is determined as the difference between the asset’s carrying amount and the
present value of estimated future cash flows.

2.19 Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term high-
ly liquid investments with original maturities of three months or less, and bank overdrafts. Bank over-
drafts, if any, are shown within borrowings in the current liabilities section of the Consolidated Statement
of Financial Position.

2.20 Trade and other payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary
course of the business from suppliers. Accounts payable are classified as current liabilities if payment is
due within one year or less (or in the normal operating cycle of the business if longer). If not, they are
presented as non-current liabilities.

GEOPARK LIMITED
31 DECEMBER 2013

Note
2 Summary of significant accounting policies (continued)

2.20 Trade and other payables (continued)

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using
the effective interest method.

2.21 Borrowings

Borrowings are obligations to pay cash and are recognised when the Group becomes a party to the con-
tractual provisions of the instrument.

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subse-
quently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the
redemption value is recognised in the Consolidated Statement of Income over the period of the borrow-
ings using the effective interest method.

Direct issue costs are charged to the Consolidated Statement of Income on an accruals basis using the
effective interest method.

2.22 Share capital

Equity comprises the following:

e “Share capital” representing the nominal value of equity shares.
e “Share premium” representing the excess over nominal value of the fair value of consideration
received for equity shares, net of expenses of the share issue.
+ “Other reserve” representing:
– the equity element attributable to shares granted according to IFRS 2 but not issued at
year end or,
– the difference between the proceeds from the transaction with non-controlling interests
received against the book value of the shares acquired in the subsidiaries GeoPark
Chile S.A. and GeoPark Colombia S.A. (see Note 34).
e “Translation reserve” representing the differences arising from translation of investments in over-
seas subsidiaries.
+ “Retained earnings (accumulated losses)” representing accumulated earnings and losses.

20

GEOPARK LIMITED
31 DECEMBER 2013
Note
2 Summary of significant accounting policies (continued)

2.23 Share-based payment

The Group operates a number of equity-settled and cash-settled share-based compensation plans com-
prising share awards payments and stock options plans to certain employees and other third party con-
tractors.

Share-based payment transactions are measured in accordance with IFRS 2.

Fair value of the stock option plan for employee or contractors services received in exchange for the grant
of the options is recognised as an expense. The total amount to be expensed over the vesting period is
determined by reference to the fair value of the options granted calculated using the Black-Scholes
model.

Non-market vesting conditions are included in assumptions about the number of options that are ex-
pected to vest. At each balance sheet date, the entity revises ¡ts estimates of the number of options that
are expected to vest. lt recognises the impact of the revision to original estimates, if any, in the Consoli-
dated Statement of Income, with a corresponding adjustment to equity.

The fair value of the share awards payments is determined at the grant date by reference of the market
value of the shares and recognised as an expense over the vesting period.

When the options are exercised, the Company issues new shares. The proceeds received net of any di-
rectly attributable transaction costs are credited to share capital (nominal value) and share premium when
the options are exercised.

For cash-settled share-based payment transactions, the Company measures the services acquired for
amounts that are based on the price of the Company’s shares. The fair value of the liability incurred is
measured using Geometric Brownian Motion method. Until the liability is settled, the Company is required
to remeasure the fair value of the liability at each reporting date and at the date of settlement, with any
changes in value recognised in profit or loss for the period.

21

GEOPARK LIMITED
31 DECEMBER 2013

Note

3 Financial Instruments-risk management
The Group is exposed through its operations to the following financial risks:

e Currency risk

e Price risk

e Credit risk – concentration
+ Funding and liquidity risk
e Interest rate risk

e Capital risk management

The policy for managing these risks is set by the Board. Certain risks are managed centrally, while others
are managed locally following guidelines communicated from the corporate office. The policy for each of
the above risks is described in more detail below.

Currency risk

In Argentina, Colombia and Chile the functional currency is the US Dollar. The fluctuation of the local cur-
rencies of these countries against the US Dollar does not impact the loans, costs and revenues held in
US Dollars; but it does impact the balances denominated in local currencies. Such is the case of the pre-
paid taxes.

In Chile, Colombia and Argentina subsidiaries most of the balances are denominated in US Dollars, and
since it is the functional currency of the subsidiaries, there is no exposure to currency fluctuation except
from receivables or payables originated in local currency mainly corresponding to VAT. The balances as
of 31 December 2013 of VAT were credits for US$ 3,177,000 (US$ 3,624,000 in 2012) in Argentina, cred-
its for US$ 5,288,000 (US$ 221,000 in 2012) in Chile and VAT payable for US$ 5,870,000
(US$ 2,418,000 in 2012) in Colombia.

The Group minimises the local currency positions in Argentina, Colombia and Chile by seeking to equili-
brate local and foreign currency assets and liabilities. However, tax receivables (VAT) are very difficult to
match with local currency liabilities. Therefore the Group maintains a net exposure to them.

Most of the Group’s assets held in those countries are associated with oil and gas productive assets.
Such assets in the oil and gas industry even in the local markets are usually settled in US Dollar equiva-
lents.

During 2013, the Argentine Peso weakened by 33% (weakened by 16% in 2012) against the US Dollar,
the Chilean Peso weakened by 10% (strengthened by 8% in 2012) and the Colombian Peso weakened
by 9% (strengthened by 9% in 2012). lf the Argentine Peso, the Chilean Peso and the Colombian Peso
had each weakened an additional 5% against the US dollar, with all other variables held constant, post-
tax profit for the year would have been higher by US$ 139,500 (lower by US$ 45,500 in 2012).

GEOPARK LIMITED
31 DECEMBER 2013
Note
3 Financial Instruments-risk management (continued)

Currency risk (continued)

During 2014, the Argentine Peso weakened by approximately 22% against the US Dollar. The Company
estimates that this devaluation will not impact significantly the results of the Company.

In Brazil the functional currency is the local currency, which is the Brazilian Real. The fluctuation of the
US Dollars against the Brazilian Real does not impact the loans, costs and revenues held in Brazilian Re-
al; but it does impact the balances denominated in US Dollars. Such is the case of the cash at bank. Most
of the balances are denominated in Brazilian Real, and since it is the functional currency of the Brazilian
subsidiary, there is no exposure to currency fluctuation except from cash at bank held in US Dollars.

During 2013, the Brazilian Real weakened by 6% against the US Dollar. If the Brazilian Real had weak-
ened an additional 5% against the US dollar, with all other variables held constant, post-tax profit for the
year would have been higher by US$ 1,826,000.

As currency rate changes between the U.S. Dollar and the local currencies, the Group recognizes gains
and losses in the Consolidated Statement of Income.

Price risk

The price realised for the oil produced by the Group is linked to WTI (West Texas Intermediate) and
Brent, which is settled in the international markets in US dollars. The market price of these commodities is
subject to significant fluctuation but the Board does not consider it appropriate to manage the Group’s risk
to such fluctuation through futures contracts or similar because to do so would not have been efficiently
economic at the achieved production levels.

In Chile, the oil price is based on WTI minus certain marketing and quality discounts such as, inter alia,
API quality and mercury content; the price formula also includes adjustments for differences between the
WT! and Brent at certain price levels. In Argentina, the oil price is also subject to the impact of the reten-
tion tax on oil exports defined by the Argentine government which limits the direct correlation to the WTI.

The Company has signed a long-term Gas Supply Contract with Methanex in Chile. The price of the gas
under this contract is indexed to the international methanol price.

If the market prices of WTI, Brent and methanol had fallen by 10% compared to actual prices during the

year, with all other variables held constant, post-tax profit for the year would have been lower by
US$ 27,179,000 (US$ 18,784,000 in 2012).

23

GEOPARK LIMITED
31 DECEMBER 2013

Note

3 Financial Instruments-risk management (continued)

Price risk (continued)

The Board will consider adopting a hedging policy against commodity price risk, when deemed appropri-
ate, according to the size of the business and market implied volatility.

Credit risk – concentration

The Group’s credit risk relates mainly to accounts receivable where the credit risks correspond to the rec-
ognised values. There is not considered to be any significant risk in respect of the Group’s major custom-
ers.

In Chile, most of gas production is sold to the local subsidiary of the Methanex Corporation, a Canadian
public company (7% of total revenue, 12% in 2012). All the oil produced in Chile is sold to ENAP (40% of
total revenue, 48% in 2012), the State owned oil and gas company. In Colombia, 21% of the oil we pro-
duced there, was sold to Hocol, a subsidiary of Ecopetrol, the Colombian Sate owned oil Company (11%
of total revenue, 31% in 2012). The mentioned companies all have good credit standing and despite the
concentration of the credit risk, the Directors do not consider there to be a significant collection risk.

See disclosure in Note 24.

Funding and Liquidity risk

The Group has strong support from its financial partners and maintains flexibility in adjusting the pro-
gramme to ensure the development of the key properties.

During 2012, LGl made a capital subscription in GeoPark Colombia S.A. for an amount of
US$ 14,920,000 for the 20% of the Colombian business. In addition, as part of the transaction,
US$ 5,000,000 was transferred directly to the Colombian subsidiary as a loan (see Note 34).

In addition, during 2013 the Company placed US$ 300 million notes (see Note 26) and on February 2014
collected US$ 98 million from the registration statement with the SEC (see Note 1).

Interest rate risk

The Group’s profit and operating cash flows are substantially independent of changes in market interest
rates. The Group’s interest rate risk arises from long-term borrowings issued at variable rates, which ex-

pose the Group to cash flow to interest rate risk.

The Group does not face interest rate risk on its US$ 300,000,000 Notes which carry a fixed rate coupon
of 7.50% per annum.

24

GEOPARK LIMITED
31 DECEMBER 2013

Note

3 Financial Instruments-risk management (continued)

Interest rate risk (continued)

The Group analyses its interest rate exposure on a dynamic basis. Various scenarios are simulated tak-
ing into consideration refinancing, renewal of existing positions, alternative financing and hedging. Based
on these scenarios, the Group calculates the impact on profit and loss of a defined interest rate shift. For
each simulation, the same interest rate shift is used for all currencies. The scenarios are run only for lia-
bilities that represent the major interest-bearing positions.

At 31 December 2012, if interest rates on currency-denominated borrowings had been 1% higher with all
other variables held constant, post-tax profit for the year would have been US$ 160,866 lower.

At 31 December 2013, the Group has no exposure to fluctuations in the interest rate, since its long-term
borrowings were issued at fixed rate.

Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going
concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain
an optimal capital structure to reduce the cost of capital.

Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This
ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including
“current and non-current borrowings’ as shown in the consolidated balance sheet) less cash at bank and

in hand. Total capital is calculated as “equity’ as shown in the consolidated balance sheet plus net debt.

The Group’s strategy is to keep the gearing ratio within a 30% to 45% range.

The gearing ratios at 31 December 2013 and 2012 were as follows:

Amounts in US$ ‘000 2013 2012
Net Debt 265,952 * 144,740
Total Equity 365,957 312,086
Total Capital 631,909 456,826
Gearing Ratio 42% 32%

(2 For the calculation of the gearing ratio the Group does not consider the cash that has been allocated
for future M8A activities. In 2013, the Group has allocated US$ 70 million for the acquisition of Río Das
Contas (see Note 34).

25

GEOPARK LIMITED
31 DECEMBER 2013
Note
4 Accounting estimates and assumptions

Estimates and assumptions are used in preparing the financial statements. Although these estimates are
based on management’s best knowledge of current events and actions, actual results may differ from
them. Estimates and judgements are continually evaluated and are based on historical experience and
other factors, including expectations of future events that are believed to be reasonable under the circum-
stances.

The key estimates and assumptions used in these consolidated financial statements are noted below:

e The Group adopts the successful efforts method of accounting. The Management of the Compa-
ny makes assessments and estimates regarding whether an exploration asset should continue to
be carried forward as an exploration and evaluation asset not yet determined or when insufficient
information exists for this type of cost to remain as an asset. In making this assessment the Man-
agement takes professional advice from qualified experts.

e Cash flow estimates for impairment assessments require assumptions about two primary ele-
ments – future prices and reserves. Estimates of future prices require significant judgments about
highly uncertain future events. Historically, oil and gas prices have exhibited significant volatility.
Our forecasts for oil and gas revenues are based on prices derived from future price forecasts
amongst industry analysts and our own assessments. Our estimates of future cash flows are
generally based on our assumptions of long-term prices and operating and development costs.

Given the significant assumptions required and the possibility that actual conditions will differ, we

consider the assessment of impairment to be a critical accounting estimate.

The process of estimating reserves is complex. It requires significant judgements and decisions
based on available geological, geophysical, engineering and economic data. The estimation of
economically recoverable oil and natural gas reserves and related future net cash flows was per-
formed based on the Reserve Report dated December 2013 prepared by DeGolyer and Mac-
Naughton, an international consultancy to the oil and gas industry based in Dallas. It incorporates
many factors and assumptions including:

o expected reservoir characteristics based on geological, geophysical and engineering as-
sessments;

o future production rates based on historical performance and expected future operating and
investment activities;

o future oil and gas prices and quality difterentials;

o assumed effects of regulation by governmental agencies; and

o future development and operating costs.

26

Note

GEOPARK LIMITED
31 DECEMBER 2013

4 Accounting estimates and assumptions (continued)

Note

Management believes these factors and assumptions are reasonable based on the information
available to us at the time we prepare our estimates. However, these estimates may change sub-
stantially as additional data from ongoing development activities and production performance be-
comes available and as economic conditions impacting oil and gas prices and costs change.

Oil and gas assets held in property plant and equipment are mainly depreciated on a unit of pro-
duction basis at a rate calculated by reference to proven and probable reserves and incorporating
the estimated future cost of developing and extracting those reserves. Future development costs
are estimated using assumptions as to the numbers of wells required to produce those reserves,
the cost of the wells and future production facilities.

Obligations related to the plugging of wells once operations are terminated may result in the
recognition of significant obligations. Estimating the future abandonment costs is difficult and re-
quires management to make estimates and judgments because most of the obligations are many
years in the future. Technologies and costs are constantly changing as well as political, environ-
mental, safety and public relations considerations. The Company has adopted the following crite-
rion for recognising well plugging and abandonment related costs: The present value of future
costs necessary for well plugging and abandonment is calculated for each area on the basis of a
cash flow that is discounted at an average interest rate applicable to Company’s indebtedness.
The liabilities recognised are based upon estimated future abandonment costs, wells subject to

abandonment, time to abandonment, and future inflation rates.

5 Consolidated Statement of Cash Flow

The Consolidated Statement of Cash Flow shows the Group’s cash flows for the year for operating, in-

vesting and financing activities and the change in cash and cash equivalents during the year.

Cash flows from operating activities are computed from the results for the year adjusted for non-cash op-

erating items, changes in net working capital, and corporation tax. Tax paid is presented as a separate

item under operating activities.

The following chart describes non-cash transactions related to the Consolidated Statement of Cash Flow:

Amounts in US$ ‘000 2013 2012

Increase in asset retirement obligation 7,183 3,440
Financial leases (Note 19) 14,133 –

27

GEOPARK LIMITED
31 DECEMBER 2013

Note
5 Consolidated Statement of Cash Flow (continued)

Cash flows from investing activities include payments in connection with the purchase and sale of proper-
ty, plant and equipment, cash flows relating to the purchase and sale of enterprises to third
parties and cash flows from financial lease transactions. Cash flows from financing activities include
changes in Shareholders’ equity, and proceeds from borrowings and repayment of loans. Cash and cash

equivalents include bank overdraft and liquid funds with a term of less than three months.

Changes in working capital shown in the Consolidated Statement of Cash Flow are disclosed as follows:

Amounts in US$ ‘000 2013 2012
Change in Prepaid taxes (4,283) (11,046)
Change in Inventories (4,166) 8,837
Change in Trade receivables (10,357) (7,842)
Change in Prepayments and other receivables
and Other assets (13,330) 9,759
Change in liabilities 12,835 6,070
(19,301) 5,778
Note

6 Segment information

Management has determined the operating segments based on the reports reviewed by the strategic
steering committee that are used to make strategic decisions. The committee considers the business
from a geographic perspective.

The strategic steering committee assesses the performance of the operating segments based on a
measure of adjusted earnings before interest, tax, depreciation, amortisation and certain non-cash items
such as write-offs, impairments and share-based payments (Adjusted EBITDA). This measurement basis
excludes the effects of non-recurring expenditure from the operating segments, such as impairments
when it is the result of an isolated, non-recurring event. Interest income and expenses are not included in
the result for each operating segment that is reviewed by the strategic steering committee. Other infor-
mation provided, except as noted below, to the strategic steering committee is measured in a manner
consistent with that in the financial statements.

28

Note

6 Segment information (continued)

Segment areas (geographical segments):

GEOPARK LIMITED
31 DECEMBER 2013

Amounts in US$ ‘000 Argentina Brasil Colombia Chile Corporate Total
2013

Net revenue 1,538 – 179,324 157,491 – 338,353
Gross profit 1,192 – 67,612 89,906 – 158,710
Operating (loss) / profit (1,942) (3,107) 38,811 63,110 (12,908) 83,964
Adjusted EBITDA 166 (3,037) 82,611 96,348 (8,835) 167,253
Depreciation (225) (2) (39,406) (30,471) (96) (70,200)
Impairment and write-off – – (3,258) (7,704) – (10,962)
Total assets 7,977 29,222 259,421 477,263 72,532 846,415
Employees (average) 97 3 107 184 – 391
Amounts in US$ ‘000 Argentina Brasil Colombia Chile Corporate Total
2012

Net revenue 1,050 – 99,501 149,927 – 250,478
Gross (loss) / profit (2,194) – 39,304 84,133 – 121,243
Operating (loss) / profit (6,129) – 8,500 47,915 (9,539) 40,747
Adjusted EBITDA 2,051 – 34,474 93,908 (9,029) 121,404
Depreciation (3,408) – (21,050) (28,734) (125) (53,317)
Impairment and write-off (1,915) – (5,147) (18,490) – (25,552)
Total assets 6,108 – 213,202 405,674 3,033 628,017
Employees (average) 100 – 80 144 – 324

Approximately 63% of capital expenditure was allocated to Chile (70% in 2012) and 37% was allocated to
Colombia (30% in 2012).

29

Note

6 Segment information (continued)

GEOPARK LIMITED
31 DECEMBER 2013

A reconciliation of total Adjusted EBITDA to total profit before income tax is provided as follows:

Amounts in US$ ‘000 2013 2012

Adjusted EBITDA for reportable segments 167,253 121,404
Depreciation (70,200) (53,317)
Share-based payment (9,167) (5,396)
Impairment and write-off of unsuccessful efforts (10,962) (25,552)
Others (% 7,040 3,608
Operating profit 83,964 40,747
Financial results (33,876) (16,308)
Bargain purchase gain on acquisition of subsidiaries – 8,401
Profit before tax 50,088 32,840

(a)

Includes internally capitalised costs.

Note
7 Net Revenue
Amounts in US$ ‘000 2013 2012
Sale of crude oil 315,435 221,564
Sale of gas 22,918 28,914
338,353 250,478
Note
8 Production costs
Amounts in US$ ‘000 2013 2012
Depreciation 68,579 52,307
Well and facilities maintenance 20,662 9,385
Royalties 17,239 11,424
Consumables 14,855 9,884
Staff costs (Note 10) 14,202 14,171
Transportation costs 11,392 7,211
Equipment rental 7,139 5,936
Non operated blocks costs 5,635 1,030
Safety and Insurance costs 4,843 1,428
Field camp 4,805 2,407
Gas plant costs 3,217 3,371
Cost of crude oil sold from acquired business – 3,826
Other costs 7,075 6,855
179,643 129,235

30

Note

9

Depreciation

GEOPARK LIMITED
31 DECEMBER 2013

Amounts in US$ ‘000 2013 2012
Oil and gas properties 59,234 44,552
Production facilities and machinery 9,341 7,708
Furniture, equipment and vehicles 964 713
Buildings and improvements 661 344
Depreciation of property, plant and equipment 70,200 53,317
Recognised as follows:
Production costs 68,579 52,307
Administrative costs 1,621 1,010
Depreciation total 70,200 53,317
Note
10 Staff costs and Directors Remuneration
2013 2012
Average number of employees 391 324
Amounts in US$ ‘000
Wages and salaries 29,504 19,132
Share-based payment (Note 29) 8,362 5,396
Share-based payment – Cash awards 805 –
Social security charges 5,291 3,636
43,962 28,164
2013 2012
Board of Directors’ and key managers’ remuneration
Salaries and fees 7,702 5,711
Share-based payment 2,971 846
Other benefits 742 –
11,415 6,557

31

Note

10 Staff costs and Directors Remuneration (continued)

Directors’ Remuneration

GEOPARK LIMITED
31 DECEMBER 2013

2013 Cash Payment Stock Payment
Executive Executive Non-Executive Director Fees Cash Equivalent
Directors” Directors” Directors” Paid in Shares Total
Fees Bonus Fees No. of Shares Remuneration
Gerald
O’Shaughnessy US$ 250,000 US$ 150,000 – – US$ 400,000
James F. Park US$ 500,000 US$ 300,000 – – US$ 800,000
Pedro Aylwin’ – – – – –
Sir Michael Jenkins? – – £5,813 1,712 US$ 27,234
Peter Ryalls – – £17,500 2,906 US$ 55,414
Christian Weyer” – – £18,678 – US$ 29,697
Juan Cristóbal Pavez* – – 223,250 2,906 US$ 64,484
Carlos Gulisano – – 237,875 – US$ 59,902
Steven J. Quamme – – £20,375 2,906 US$ 59,902

Y Pedro Aylwin has a service contract that provides for him to act as Manager of Legal and Governance.
? Audit Committee Chairman until his death on 31 March 2013. Afterwards the Chairman is Steven J. Quamme.
3 Nomination Committee Chairman until his resignation on 15 April 2013. Afterwards the Chairman is Carlos

Gulisano.
* Remuneration Committee Chairman.

Non-executive director fee includes a fee of £5,750 for holding a committee chairman position during the year.

IPO Stock Options to Executive Directors

The following Stock Options were issued to Executive Directors during 2006:

N* of Underlying Exercise Price Earliest Exercise

Name Common Shares (£) Date
Gerald 153,345 3.20 15 May 2008
O’Shaughnessy 306,690 4.00 15 May 2008
153,345 3.20 15 May 2008

James F. Park 306,690 4.00 15 May 2008

Expiry Date
15 May 2013
15 May 2013
15 May 2013
15 May 2013

During 2013 the abovementioned stock options were fully exercised by the Executive Directors.

GEOPARK LIMITED
31 DECEMBER 2013

Note

10 Staff costs and Directors Remuneration (continued)

Stock Awards to Executive Directors
The following Stock Options were issued to Executive Directors during 2012:

N* of
Underlying
Common Exercise Price Earliest
Name Shares Grant Date (US$) Exercise Date
Gerald
O’Shaughnessy 270,000 23 Nov 2012 0.001 23 Nov 2015
James F. Park 450,000 23 Nov 2012 0.001 23 Nov 2015

In addition, Dr Carlos Gulisano holds the following interests in stock options and awards as a result of the
services that he has previously provided to the Company:
e 50,000 IPO Stock Options issued on 15 May 2008 at an exercise price of £4.00 to be exercised
between 15 May 2008 and 15 May 2013. These were fully exercised during 2013.
e 100,000 Stock awards issued on 15 December 2008 at an exercise price of $0.001 to be
exercised between 15 December 2012 and 15 December 2018.

Note
11 – Exploration costs

Amounts in US$ ‘000 2013 2012
Write-off of unsuccessful efforts (? 10,962 25,552
Staff costs (Note 10) 7,676 4,418
Other services 1,406 1,269
Allocation to capitalised project (2,437) (1,849)
Amortisation of other long-term liabilities related to
unsuccessful efforts (600) (1,500)
Recovery of abandonments costs (753) –
16,254 27,890

() The 2013 charge corresponds to the cost of five unsuccessful exploratory wells: two of them in
Chile (one in Fell Block and one in Tranquilo Block) and three of them in Colombia (one well in
Cuerva Block, one well in each of the non-operated blocks, Arrendajo and Llanos 32). The 2012
charge corresponds to the costs of eight unsuccessful exploratory wells: five of them in Chile (two in
Fell Block, two in Otway Block and the remaining in Tranquilo Block) and three of them in Colombia
(one well in Cuerva Block, one well in Arrendajo Block and the remaining in Llanos 17 Block). The
2012 charge also includes the loss generated by the relinquishment of an area in the Del Mosquito
Block in Argentina.

33

GEOPARK LIMITED
31 DECEMBER 2013

Note
12 Administrative costs

Amounts in US$ ‘000 2013 2012
Staff costs (Note 10) 22,084 9,575
Consultant fees 6,424 5,122
New projects 3,720 2,927
Office expenses 2,652 3,293
Director’s fees and allowance 1,426 1,516
Travel expenses 1,258 1,563
Depreciation 1,621 1,010
Other administrative expenses 7,399 3,792

46,584 28,798

Note

13 Selling expenses

Amounts in US$ ‘000 2013 2012
Transportation 16,181 22,066
Delivery or pay penalty – 1,718
Storage 665 645
Selling taxes 406 202
17,252 24,631

Note

14 – Financial income

Amounts in US$ ‘000 2013 2012
Exchange difference 1,468 348
Interest received 3,425 544

4,893 892

34

Note

15 Financial expenses

GEOPARK LIMITED
31 DECEMBER 2013

Note

Amounts in US$ ‘000 2013 2012
Bank charges and other financial costs 2,519 1,764
Exchange difference 2,228 2,429
Bond GeoPark Fell SpA cancellation costs (Note 26) 8,603 –
Unwinding of long-term liabilities 1,523 1,262
Interest and amortisation of debt issue costs 25,209 13,114
Less: amounts capitalised on qualifying assets (1,313) (1,369)

38,769 17,200

16 Income tax

Amounts in US$ ‘000 2013 2012
Current tax 13,337 7,536
Deferred income tax (Note 17) 1,817 6,858

15,154 14,394

The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the

weighted average tax rate applicable to profits of the consolidated entities as follows:

Amounts in US$ ‘000 2013 2012
Profit before tax 50,088 32,840
Tax losses from non-taxable jurisdictions 14,348 8,373
Taxable profit 64,436 41,213
Income tax calculated at domestic tax rates applicable to profits in the

respective countries 14,011 6,290
Tax losses where no deferred income tax is recognised 328 2,864
Effect of currency translation on tax base (5,146) 2,436
Expiration of tax loss carry-forwards 1,988 –
Non-taxable results (” 3,973 2,804
Income tax 15,154 14,394

(1)

tax assets and liabilities.

Includes non-deductible expenses in each jurisdiction and changes in the estimation of deferred

Under current Bermuda law, the Company is not required to pay any taxes in Bermuda on income or

capital gains. The Company has received an undertaking from the Minister of Finance in Bermuda that, in

the event of any taxes being imposed, they will be exempt from taxation in Bermuda until March 2035. In-

come tax rates in those countries where the Group operates (Argentina, Brazil, Colombia and Chile)

ranges from 15% to 35%.

35

Note

16 Income Tax (continued)

GEOPARK LIMITED
31 DECEMBER 2013

The Group has significant tax losses available which can be utilised against future taxable profit in the fol-

lowing countries:

Amounts in US$ ‘000 2013 2012
Argentina 10,259 11,645
Total tax losses at 31 December 10,259 11,645

At the balance sheet date deferred tax assets in respect of tax losses in Argentina have not been recog-

nised as there is insufficient evidence of future taxable profits before the statute of limitation of these tax

losses causes them to expire.

Expiring dates for tax losses accumulated at 31 December 2013 are:

Expiring date

Amounts in US$ ‘000

2014 477

2015 3,778

2016 1,985

2017 2,617

2018 1,402
Note

17 – Deferred income tax

The gross movement on the deferred income tax account is as follows:

Amounts in US$ ‘000 2013 2012
Deferred tax at 1 January (3,911) (12,659)
Acquisition of subsidiaries – 15,606
Reclassification ‘” (4,001) –
Income statement charge (1,817) (6,858)
Deferred tax at 31 December (9,729) (3,911)

The breakdown and movement of deferred tax assets and liabilities as of 31 December 2013 and 2012

are as follows:

– Acquisition of (Charged) /
At the begin- o o
. subsidiaries credited to net Atend oof year

. ning of year .
Amounts in US$ ‘000 profit
Deferred tax assets
Difference in depreciation rates and
other 9,211 – (11,788) (2,577)
Taxable losses * 4,380 – 11,555 15,935
Total 2013 13,591 – (233) 13,358
Total 2012 450 15,606 (2,465) 13,591

36

Note
17 – Deferred income tax (continued)

GEOPARK LIMITED
31 DECEMBER 2013

At the begin- (Charged) /

Reclassification Atend of year

ning of year credited to net (0
Amounts in US$ ‘000 profit
Deferred tax liabilities
Difference in depreciation rates
and other (17,502) (1,584) (4,001) (23,087)
Total 2013 (17,502) (1,584) (4,001) (23,087)
Total 2012 (13,109) (4,393) – (17,502)

(% Corresponds to the difference between 2012 income tax provision and the final form presented, which

resulted in a higher deferred income tax liability and lower income tax payable.

(2 In Chile, taxable losses have no expiration date.

Note

18 -Earnings per share

Amounts in US$ ‘000 2013 2012
Numerator:
Profit for the year 22,012 11,879
Denominator:
Weighted average number of shares used in basic EPS 43,603,846 42,673,981
Earnings after tax per share (US$) – basic and diluted 0.50 0.28
Amounts in US$ ‘000 2013 2012
Weighted average number of shares used in basic EPS 43,603,846 42,673,981
Effect of dilutive potential common shares
Stock award at US$ 0.001 2,928,203 1,435,324
Weighted average number of common shares for the purposes of di-
luted earnings per shares 46,532,049 44,109,305
Earnings after tax per share (US$) – diluted 0.47 0.27

37

Note

19 Property, plant and equipment

Furniture,

Production

Buildings

Exploration

GEOPARK LIMITED
31 DECEMBER 2013

Oil 8 gas equipment facilities and and im- Construction and evalua-

Amounts in US$’000 properties and vehicles machinery provements in progress tion assets(” Total
Cost at 1 January 2012 171,956 2,175 47,102 2,437 32,896 42,140 298,706
Additions 4,071 637 32,335 – 81,241 83,360 201,644
Disposals (416) – (130) – – – (546)
Write-off / Impairment – – – – – (25,552) (25,552)
Acquisition of subsidiaries 62,449 389 10,865 – 9,452 27,818 110,973
Transfers 106,311 375 (3,223) 761 (69,564) (34,660) –
Cost at 31 December 2012 344,371 3,576 86,949 3,198 54,025 93,106 585,225
Additions 9,367 2,060 512 – 89,976 133,301 235,216
Disposals (553) (22) (15,870)0 – – – (16,445)
Write-off / Impairment – – – – – (10,962) (10,962)
Transfers 140,075 117 27,246 3,820 (103,572) (67,686) –
Cost at 31 December 2013 493,260 5,731 98,837 7,018 40,429 147,759 793,034
don at denuary 2012 (53,604) (1,123) (18,628) (716) . – (74,071)
Depreciation (44,552) (713) (7,708) (344) – – (53,317)
Depreciation and write-
down at 31 December (98,156) (1,836) (26,336) (1,060) – – (127,388)
2012
Depreciation (59,234) (964) (9,341) (661) – – (70,200)
Depreciation and write-
down at 31 December (157,390) (2,800) (35,677) (1,721) – – (197,588)
2013
car ano at 31 246,215 1,740 60,613 2,138 54,025 93,106 457,837
Carrying amount at 31 335,870 2,931 63,160 5,297 40,429 147,759 595,446

December 2013

As of 31 December 2013, the Group has pledged, as security for a mortgage obtained for the acquisition
of the operating base in Chile, assets amounting to US$ 493,000 (US$ 692,000 in 2012). See Note 26.

(% During 2013, the Company entered into a finance lease for which it has transferred a substantial portion

of the risk and rewards of some assets which had a book value of US$ 14.1 million. As of 31 December

2013, prepayments and other receivables include receivables under finance leases amounting to US$ 8.0

million, which US$ 6.5 million are maturity no later than one year and US$ 1.5 million between one and

five years. Total unearned interest income amounts to US$ 1.2 million.

38

Note
19 Property, plant and equipment (continued)

GEOPARK LIMITED
31 DECEMBER 2013

(1 Exploration wells movement and balances are shown in the below table; seismic and other ex-

ploratory assets amount to US$ 117,841,000 (US$ 65,941,000 in 2012).

Amounts in US$ ‘000 Total

Exploration wells at 31 December 2011 22,241
Additions 47,891
Write-offs (21,339)
Transfers (23,496)
Acquisition of subsidiaries 1,868
Exploration wells at 31 December 2012 27,165
Additions 77,933
Write-offs (7,934)
Transfers (67,246)
Exploration wells at 31 December 2013 29,918

As of 31 December 2013, there were five exploratory wells that have been capitalised for a period over a

year amounting to US$ 11,251,000 and six exploratory wells that have been capitalised for a period less

than a year amounting to US$ 18,668,000.

Note
20 Subsidiary undertakings

The following chart illustrates main companies of the Group structure as of 31 December 2013:

ers

o 1

tr es as

TEN PA Sospen
am en amada (Co

39

A ma
E

GEOPARK LIMITED
31 DECEMBER 2013

Note

20 Subsidiary undertakings (continued)

Details of the subsidiaries and joint operations of the Company are set out below:

Name and registered office

GeoPark S.A. (Chile)

GeoPark Brazil Exploracáo y Produgáo de Petróleo e
Gas Ltda. (Brazil)

GeoPark Chile S.A. (Chile)

GeoPark Fell S.p.A. (Chile)

GeoPark Magallanes Limitada (Chile)

GeoPark TdF S.A. (Chile)

Ownership interest

Subsidiaries GeoPark Argentina Ltd. – Bermuda 100%
GeoPark Argentina Ltd. – Argentine Branch 100% (a)
GeoPark Latin America 100% (h)
GeoPark Latin America – Agencia en Chile 100% (a) (h)
(a)

100% (a) (b)

100%
80% (a) (c)
80% (a) (c)
80% (a) (c)
68.8% (a) (d)
) (e)

GeoPark Colombia S.A. (Chile) 80% (a) (e
GeoPark Colombia SAS (Colombia) 100% (a) (e) (i)
GeoPark Brazil S.p.A. (Chile) 100% (a) (b)
GeoPark Latin America Cooperatie U.A. (The Nether-
lands) 100%(b)
GeoPark Colombia Cooperatie U.A. (The Nether-
lands) 100%(b)
GeoPark Brazil Cooperatie U.A. (The Netherlands) 100%(b)
Raven Pipeline Company LLC (United States) 23.5% (b)
Joint operations Tranquilo Block (Chile) 29% (j) (9)
Otway Block (Chile) 25% (f) (9)
Flamenco Block (Chile) 50% (g)
Isla Norte Block (Chile) 60% (g)
Campanario Block (Chile) 50% (9)
Llanos 17 Block (Colombia) 36.84%
Yamu/Carupana Block (Colombia) 75%]/54.5% (9)
Llanos 34 Block (Colombia) 45% (9)
Llanos 32 Block (Colombia) 10%

(a) Indirectly owned.

(b) Dormant companies.

(c) LG International has 20% interest.

(d) LG International has 20% interest through GeoPark Chile S.A. and a 14% direct interest, totalling 31.2%.
(e) During the first quarter of 2012, the Company entered into a business combination acquiring 100% interest

in each entity. In December 2012, LG International acquired 20% equity.

(f) In April 2013, the Group voluntarily relinquished to the Chilean Government all of our acreage in the Otway
Block, except for 49,421 acres. In May 2013, our partners under the joint operating agreement governing the
Otway Block decided to withdraw from such joint operating agreement and to apply to withdraw from the
Otway Block CEOP, such that, subject to the Chilean Ministry of Energy’s approval, the Group will be the
sole participant, and have a working interest of 100%, in the remaining areas in the Otway Block.

(g) GeoPark is the operator in all blocks.

h) Formerly named GeoPark Chile Limited.

During 2013, the Company has finalized a merger process by which GeoPark Colombia SAS will continue

the operations related to GeoPark Luna SAS (Colombia), GeoPark Llanos SAS (Colombia), La Luna Oil Co.

Ltd. (Panama), Winchester Oil and Gas S.A. (Panama), GeoPark Cuerva LLC (United States), Sucursal La

Luna Oil Co. Ltd. (Colombia), Sucursal Winchester Oil and Gas S.A. (Colombia) and Sucursal GeoPark

Cuerva LLC (Colombia).

40

GEOPARK LIMITED
31 DECEMBER 2013

Note

20 Subsidiary undertakings (continued)

(i) At 31 December 2013, the Consortium members and interest were: GeoPark 29%, Pluspetrol 29%, Winter-
shall 25% and Methanex 17%. During 2014, Methanex announced its decision to abandon the Consortium.
The new ownership will be as follows: GeoPark 37.5%, Pluspetrol 34.9% and Wintershall 27.6%.

Note
21 Prepaid taxes

Amounts in US$ ‘000 2013 2012
V.A.T. 10,635 5,962
Withholding tax 4,601 3,347
Income tax credits 344 4,692
Other prepaid taxes 2,853 149
Total prepaid taxes 18,433 14,150

Classified as follows:

Current 6,979 3,443

Non current 11,454 10,707

Total prepaid taxes 18,433 14,150
Note

22 Inventories

Amounts in US$ ‘000 2013 2012
Crude oil 4,464 3,838
Materials and spares 3,658 117

8,122 3,955

41

GEOPARK LIMITED
31 DECEMBER 2013

Note
23 Trade receivables and Prepayments and other receivables

Amounts in US$ ‘000 2013 2012
Trade accounts receivable 42,628 32,271

42,628 32,271
To be recovered from co-venturers 15,508 8,773
Related parties receivables (Note 32) – 31,138
Prepayments and other receivables 26,617 10,219

42,125 50,130
Total 84,753 82,401

Classified as follows:

Current 78,392 81,891
Non current 6,361 510
Total 84,753 82,401

Trade receivables that are aged by less than three months are not considered impaired. As of 31 Decem-
ber 2013, trade receivables of US$ 1,143,393 (US$ 31,984 in 2012) were aged by more than 3 months,
but not impaired. These relate to customers for whom there is no recent history of default. There are no
balances due between 31 days and 90 days as of 31 December 2013 and 2012.

At 31 December 2013, the Group has no receivables for which exist impairment indicators. Therefore, the
Group has no recognised any provision for receivables impairment.

The credit period for trade receivables is 30 days. The maximum exposure to credit risk at the reporting
date is the carrying value of each class of receivable. The Group does not hold any collateral as security
related to trade receivables.

The carrying value of trade receivables is considered to represent a reasonable approximation of its fair
value due to their short-term nature.

Note

24 – Financial instruments by category

Amounts in US$ ‘000 Loans and receivables

2013 2012
Assets as per statement of financial position
Trade receivables 42,628 32,271
To be recovered from co-venturers 15,508 8,773
Other financial assets 5,168 7,791
Cash at bank and in hand 121,135 48,292

184,439 97,127

GEOPARK LIMITED
31 DECEMBER 2013

Note

24 – Financial instruments by category (continued)

% Other financial assets relate to contributions made for environmental obligations according to Colombi-
an government regulations. For 2012, they also include the cash collateral account required under the

terms of the Bond issued in 2010. This investment was intended to guarantee interest payments and was
recovered at repayment date (see Note 26).

Other financial liabilities at amor-

Amounts in US$ ‘000 tised cost
2013 2012
Liabilities as per statement of financial position
Trade payables 61,130 50,590
To be paid to co-venturers 1,201 2,007
Borrowings 317,087 193,032
379,418 245,629

Credit quality of financial assets

The credit quality of financial assets that are neither past due nor impaired can be assessed by reference
to external credit ratings (if available) or to historical information about counterparty default rates:

Amounts in US$ ‘000 2013 2012
Trade receivables

Counterparties with an external credit rating (Moody’s)

Bal – 4,769
Baal – 13,488
Baa2 2,048 4,781
Baa3 17,321 –
Counterparties without an external credit rating

Groupt 23,259 9,233
Total trade receivables 42,628 32,271

o Group 1 – existing customers (more than 6 months) with no defaults in the past.

All trade receivables are denominated in US Dollars.

43

Note
24 Financial instruments by category (continued)

Cash at bank and other financial assets ‘”

GEOPARK LIMITED
31 DECEMBER 2013

Amounts in US$ ‘000 2013 2012
Counterparties with an external credit rating (Moody’s, Fitch, BRC In-

vestor Services)

A1 4,812 7,408
A3 – 366
Aal – 2,131
Aa3 11 38,952
P1 102,390 2,537
P2 460 –
P3 3,789 –
AA+ 2,643 –
BRC 1+ 3,546 –
Counterparties without an external credit rating 8,631 4,665
Total 126,282 56,059

(M The rest of the balance sheet item “cash at bank and in hand” is cash on hand amounting to

US$ 21,000 (US$ 24,000 in 2012).

Financial liabilities – contractual undiscounted cash flows

The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the

remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table

are the contractual undiscounted cash flows.

Less than 1 Between 1 Between 2 Over 5
Amounts in US$ ‘000 year and 2 years and 5 years years
At 31 December 2013
Borrowings 39,585 22,600 67,500 345,000
Trade payables 61,130 – – –
100,715 22,600 67,500 345,000
At 31 December 2012
Borrowings 36,031 10,437 181,100 –
Trade payables 50,590 – 7 –
86,621 10,437 181,100 –

Note

25 Share capital

GEOPARK LIMITED
31 DECEMBER 2013

Issued share capital 2013 2012
Common stock (amounts in US$ ‘000) 44 43
The share capital is distributed as follows:
Common shares, of nominal US$ 0.001 43,861,614 43,495,585
Total common shares in issue 43,861,614 43,495,585
Authorised share capital
US$ per share 0.001 0.001
Number of common shares (US$ 0.001 each) 5,171,949,000 5,171,969,000
Amount in US$ 5,171,949 5,171,969

Details regarding the share capital of the Company are set out below:

Common shares

As of 31 December 2013 the outstanding common shares confer the following rig

+ theright to one vote per share;

hts on the holder:

e ranking pari passu, the right to any dividend declared and payable on common shares;

Shares Shares

GeoPark common shares history issued closing US$(000)

Date (millions) (millions) Closing
Shares outstanding at the end of 2011 42.5 43
Issue of shares to Non-Executive Directors 2012 0.02 42.5 43
Stock awards Oct 2012 1.01 43.5 43
Shares outstanding at the end of 2012 43.5 43
Issue of shares to Non-Executive Directors 2013 0.01 43.5 43
Stock awards Sept 2013 0.36 43.9 44

Shares outstanding at the end of 2013

44

During 2013, the Company issued 10,430 (15,100 in 2012) shares to Non-Executive Directors in accord-

ance with contracts as compensation, generating a share premium of US$ 100,988 (US$ 142,492 in

2012). The amount of shares issued is determined considering the contractual compensation and the fair

value of the shares for each relevant period.

45

GEOPARK LIMITED
31 DECEMBER 2013

Note
25 Share capital (continued)

Under the stock awards programmes and other share based payments, during 2013, 60,000 (30,000 in
2012) new common shares were issued, pursuant to a consulting agreement for services rendered to
GeoPark Limited generating a share premium of US$ 506,630 (US$ 253,315 in 2012).

On 17 September 2013, 295,599 common shares were allotted to the trustee of the Employee Beneficiary
Trust (“EBT”), generating a share premium of US$ 3,441,689. On 22 October 2012, 976,211 common
shares were allotted to the trustee of the EBT, generating a share premium of US$ 4,191,000.

On 29 October 2013, the Company put into place an irrevocable, non-discretionary share purchase pro-
gram for the purchase of its common shares for the account of the EBT. This Purchase Program expired
on 31 December 2013. The common shares purchased under the program will be used to satisfy future
awards under the incentive schemes. During 2013, the Company purchased 50,000 common shares for a
total amount of US$ 440,000.

The accounting treatment of the shares is in line with the Group’s policy on share-based payments.

Other Reserve

During 2012, LGl acquired a 20% interest in GeoPark Colombia S.A., the subsidiary that owns the Co-
lombian assets by making a capital contribution in GeoPark Colombia S.A. for an amount of
US$ 14,920,000. In addition, as part of the transaction, US$ 5,000,000 was transferred directly to the Co-
lombian subsidiary as a loan. The differences between total consideration and the net equity of the Com-
panies as per the book value were recorded as Other Reserve in the Consolidated Statement of Changes
in Equity.

Note
26 Borrowings

Amounts in US$ ‘000 2013 2012
Outstanding amounts as of 31 December
Bond GeoPark Latin America Agencia en Chile (a) 299,912 –
Methanex Corporation (b) – 8,036
Banco de Crédito e Inversiones (c) 2,143 7,859
Banco de Chile (d) 15,002 –
Overdrafts (e) 30 10,000
Banco Itaú (f) – 37,685
Bond GeoPark Fell SpA (g) – 129,452
317,087 193,032

Classified as follows:
Non current 290,457 165,046
Current 26,630 27,986

46

GEOPARK LIMITED
31 DECEMBER 2013
Note
26 Borrowings (continued)

The fair value of these financial instruments at 31 December 2013 amounts to US$ 312,208,000
(US$ 190,188,000 in 2012). The fair values are based on cash flows discounted using a rate based on
the borrowing rate of 7.81% (2012: 9.63%) and are within level 2 of the fair value hierarchy.

(a) During February 2013, the Company successfully placed US$ 300 million notes which were offered
under Rule 144A and Regulation S exemptions of the United States Securities laws.

The Notes, issued by the Company’s wholly-owned subsidiary GeoPark Latin America Limited Agencia
en Chile (“the Issuer”), were priced at 99.332% and carry a coupon of 7.50% per annum to yield 7.625%
per annum. Final maturity of the notes will be 11 February 2020. The Notes are guaranteed by GeoPark
Limited and GeoPark Latin America Cooperatie U.A. and are secured with a pledge of all of the equity inter-
ests of the Issuer in GeoPark Chile S.A. and GeoPark Colombia S.A. and a pledge of certain intercompa-
ny loans. Notes were rated single B by both Standard 8 Poor’s and Fitch Ratings. The debt issuance cost
for this transaction amounted to US$ 7,637,000.

The net proceeds of the notes were partially used to repay debt of approximately US$ 170 million, includ-
ing the existing Reg S Notes due 2015 and the Itaú loan. The remaining proceeds are being used to fi-
nance the Company’s expansion plans in the region. The transaction extended GeoPark’s debt maturity
significantly, allowing the Company to allocate more resources to its investment and inorganic growth
programs in the coming years.

(b) The financing obtained in 2007, for development and investing activities on the Fell Block, was struc-
tured as a gas pre-sale agreement with a six year pay-back period and an interest rate of LIBOR flat. The
loan has been fully repaid during 2013.

(c) Facility to establish the operational base in the Fell Block. This facility was acquired though a mort-
gage loan granted by the Banco de Crédito e Inversiones (BCI), a Chilean private bank (Note 19). The
loan was granted in Chilean Pesos and is repayable over a period of 8 years. The interest rate applicable
to this loan is 6.6%. The outstanding amount at 31 December 2013 is US$ 212,000 (US$ 344,000 in
2012). In addition, during 2011, GeoPark TdF obtained financing from BCI to start the operations in the
newly acquired blocks. The outstanding amount at 31 December 2013 is US$ 1,931,000 (US$ 7,515,000
in 2012). This financing was structured as letter of credit and was fully repaid in February 2014.

(d) Short term financing obtained in December 2013 and fully repaid in January 2014. The interest rate
applicable to this loan was 0.71% per annum.

(e) The Group has been granted with credit lines for over US$ 76,000,000.

47

Note

26 Borrowings (continued)

GEOPARK LIMITED
31 DECEMBER 2013

(f) GeoPark Limited executed a loan agreement with Banco ltaú BBA S.A., Nassau Branch for

US$ 37,500,000. GeoPark used the proceeds to finance the acquisition and development of the La

Cuerva and Llanos 62 blocks in Colombia. This loan was fully repaid in February 2013.

(g) Private placement of US$ 133,000,000 of Reg S Notes on 2 December 2010. The Notes carried a
coupon of 7.75% per annum and mature on 15 December 2015. These Notes were fully repaid in

March 2013.

Note

27 Provisions and other long-term liabilities

Amounts in US$ ‘000

At 1 January 2012

Addition to provision / Contributions
received

Acquisition of subsidiaries
Amortisation

Unwinding of discount

At 31 December 2012

Addition to provision / Contributions

received
Recovery of abbandonments costs

Amortisation
Unwinding of discount
At 31 December 2013

Asset retirement
obligation
5,450

3,440
6,061
1,262
16,213

7,183
(753)
1,523
24,166

Deferred
income

3,962

5,550

(2,143)

7,369

(1,165)

6,204

Other

100
2,309

2,409

297

2,706

Total

9,412

9,090
8,370
(2,143)
1,262
25,991

7,480
(753)
(1,165)
1,523
33,076

The provision for asset retirement obligation relates to the estimation of future disbursements related to

the abandonment and decommissioning of oil and gas wells.

Deferred income and other mainly relates to contributions received to improve the project economics of

the gas wells. The amortisation is in line with the related asset.

48

GEOPARK LIMITED
31 DECEMBER 2013

Note
28 Trade and other payables

Amounts in US$ ‘000 2013 2012
V.A.T 8,074 4,300
Trade payables 61,130 50,590
Payables to related parties (” 8,456 –
Staff costs to be paid 8,551 5,867
Royalties to be paid 3,375 3,909
Taxes and other debts to be paid 9,190 5,418
To be paid to co-ventures 1,201 2,007
99,977 72,091
Classified as follows:
Non current 8,344 –
Current 91,633 72,091

(1 In December 2012, LGI entered into GeoPark’s operations in Colombia through the acquisition of a 20% of interest in

Colombian business. As part of the transaction, LGl committed to fund the operations in Colombia through loans
(see Note 34). The maturity of these loans is December 2015 and the applicable interest rate is 8% per annum.
The average credit period (expressed as creditor days) during the year ended 31 December 2013 was 58
days (2012: 69 days)

The fair value of these short-term financial instruments is not individually determined as the carrying
amount is a reasonable approximation of fair value.

Note
29 Share-based payments

IPO Award Programme and Executive Stock Option plan

The Group has established different stock awards programmes and other share-based payment plans to
incentivise the Directors, senior management and employees, enabling them to benefit from the in-
creased market capitalization of the Company.

Stock Award Programmes and Other Share Based Payments

During 2008, GeoPark Shareholders voted to authorize the Board to use up to 12% of the issued share
capital of the Company at the relevant time for the purposes of the Performance-based Employee Long-
Term Incentive Plan.

Main characteristics of the Stock Awards Programmes are:
+ All employees are eligible.
+ Exercise price is equal to the nominal value of shares.
+ Vesting period is four years.
+ Specific Award amounts are reviewed and approved by the Executive Directors and the Remu-
neration Committee of the Board of Directors.

49

GEOPARK LIMITED
31 DECEMBER 2013

Note
29 Share-based payments (continued)

Additionally, during 2013 the Company approved two new share-based compensation programmes: ¡.) a
stock awards plan oriented to Managers (non-Top Management) and key employees which qualifies as
an equity-settled plan and ii.) a cash awards plan, oriented to all non-management employees which
qualifies as a cash-settled plan.

Main characteristics of these news plans are:

– – Exercise price: US$ 0.001
– – Grant date: July 2013
– – Grant price: £ 5.8
– – Vesting date: 31 December 2015
– – Conditions to be able to exercise:
e Continue to be an employee
e Obtain the Company minimum Production, Adjusted EBITDA and Reserves target for the
year of vesting
e The stock market price at the date of vesting should be higher than the share price at the
price of grant
– – Amount of shares for equity-settled plan: 500,000
– – Estimated equivalent amount of shares for cash-settled plan: 500,000

Also during 2013, the Company approved a plan named Value creation plan (“VCP”) oriented to Top
Management. The VCP establishes awards payables in a variable number of shares with some limitation,
subject to certain market conditions, among others, reach certain stock market price for the Company
share at vesting date. VCP has been classified as an equity-settled plan.

Details of these costs and the characteristics of the different stock awards programmes and other share
based payments are described in the following table and explanations:

Awards Charged to net profit

Awards at granted Awards

the begin- in the Awards Awards at year
Year ning year forfeited exercised end 2013 2012
2013 – 500,000 – – 500,000 619 –
2012 – 500,000 – – 500,000 1,296 55
2011 500,000 – – – 500,000 893 926
2010 863,100 – 11,000 – 852,100 2,779 2,929
2008 976,211 – – 976,211 – – 1,087
Subtotal 5,587 4,997
Stock awards tor service con-
tracts 60,000 – – 60,000 – – –
Stock options to Executive Di-
rectors 720,000 – – – 720,000 2,365 257
Shares granted to Non-
Executive Directors – 10,430 – 10,430 – 101 142
vVCP – – – – – 309 –

8,362 5,396

50

GEOPARK LIMITED
31 DECEMBER 2013

Note
29 Share-based payments (continued)

The awards that are forfeited correspond to employees that had left the Group before vesting date.

On 23 November 2012, the Remuneration Committee and the board of directors approved granting
720,000 options over ordinary shares of US$0.001 each to the Executive Directors. Options granted vest
on the third anniversary of the date on which they are granted and have an exercise price of US$0.001.

Other share-based payments
As it is mentioned in Note 25, the Company granted 10,430 (15,100 in 2012) shares for services rendered
by the Non-Executive Directors of the Company. Fees paid in shares were directly expensed in the Ad-

ministrative costs line in the amount of US$ 100,988 (US$ 142,492 in 2012).

Note
30 Interests in Joint operations

The Group has interests in nine joint operations, which are involved in the exploration of hydrocarbons in
Chile and Colombia.

GeoPark is the operator of all of the Chilean blocks.
The following amounts represent the Company’s share in the assets, liabilities and results of the joint op-

erations which have been consolidated line by line in the consolidated statement of financial position and

statement of income:

Chile
Joint operation Tranquilo Block Otway Block
Subsidiary GeoPark Magallanes Ltda. GeoPark Magallanes Ltda. (1)
Interest 29% 100% 25%
2013 2012 2013 2012
ASSETS
PP8E / ESE 15,255 13,328 6,009 6,516
Other assets 210 1,467 175 1,326
Total Assets 15,465 14,795 6,184 7,842
LIABILITIES
Current liabilities (391) (3,252) (48) (2,412)
Total Liabilities (391) (3,252) (48) (2,412)
NET ASSETS/ (LIABILITIES) 15,074 11,543 6,136 5,430
Sales – – – –
Net loss (275) (544) (100) (386)

(1) Included for comparative purposes. See Note 20.

51

GEOPARK LIMITED
31 DECEMBER 2013

Note
30 Interests in Joint Operations (continued)

Joint operation Flamenco Block Campanario Block Isla Norte Block

Subsidiary GeoPark TdF S.A. GeoPark TdF S.A. GeoPark TdF S.A.
Interest O 50% 50% 60%
2013 2013 2013
ASSETS
PP8E / ESE 42,048 17,172 4,497
Other assets – – –
Total Assets 42,048 17,172 4,497
LIABILITIES
Current liabilities (2,537) (405) (303)
Total Liabilities (2,537) (405) (303)
NET ASSETS/ (LIABILITIES) 39,511 16,767 4,194
Sales 243 – –
Net loss (239) – –

O As the activity on the three blocks corresponds to the first exploratory period, the above balances and
operations were consolidated at 100% (see Note 31).

Colombia

31 December 2013

Yamu/Carupana Llanos 34 Block Llanos 32 Block

Joint operation Llanos 17 Block Block
GeoPark GeoPark GeoPark GeoPark

Subsidiary Colombia SAS Colombia SAS Colombia SAS Colombia SAS
Interest 36.84% 75%/54.50% 45% 10%
ASSETS
PP8E / ESE 6,448 15,476 51,963 4,993
Other assets 29 482 1,129 –
Total Assets 6,477 15,958 53,092 4,993
LIABILITIES
Current liabilities – – – –
Total Liabilities – – – –
NET ASSETS / (LIABILITIES) 6,477 15,958 53,092 4,993
Sales 1,407 17,727 78,390 5,507
Net profit / (loss) (544) 2,127 39,192 1,035

GEOPARK LIMITED
31 DECEMBER 2013

Note
30 Interests in Joint Operations (continued)

31 December 2012

Yamu/Carupana Llanos 34 Block Llanos 32 Block

Joint operation Llanos 17 Block Block

GeoPark Luna GeoPark Colom- GeoPark Colom- GeoPark Luna

bia and Luna bia SAS

Subsidiary SAS SAS SAS
Interest 36.84% 75%]/54.50% 45% 10%
ASSETS
PP8E / ESE 3,872 12,626 25,178 4,384
Other assets 144 26 72 1,484
Total Assets 4,016 12,652 25,250 5,868
LIABILITIES
Current liabilities (224) – – (1,509)
Total Liabilities (224) – – (1,509)
NET ASSETS/ (LIABILITIES) 3,792 12,652 25,250 4,359
Sales 144 23,283 10,362 2,900
Net profit / (loss) 144 4,034 3,767 1,207

Capital commitments are disclosed in Note 31 (b).

Note
31 Commitments

(a) Royalty commitments

In Argentina, crude oil production accrues royalties payable to the Provinces of Santa Cruz and Mendoza
equivalent to 12% on estimated value at well head of those products. This value is equivalent to final
sales price less transport, storage and treatment costs.

In Argentina crude oil sales accrue private royalties payable to EPP Petróleo S.A. (2.5% on invoiced
amount of crude oil obtained from wells at “Del Mosquito”, Province of Santa Cruz, Argentina) and to Oc-
cidental Petroleum Argentina INC, formerly Vintage Argentina Ltd. (8% on invoiced amount of crude oil

obtained from wells at “Loma Cortaderal” and “Cerro Doña Juana”, Province of Mendoza, Argentina).
In Chile, royalties are payable to the Chilean Government. In the Fell Block, royalties are calculated at

5% of crude oil production and 3% of gas production. In the Flamenco Block, royalties are calculated at
5% of gas production.

53

GEOPARK LIMITED
31 DECEMBER 2013
Note
31 Commitments (continued)
(a) Royalty commitments (continued)

In Colombia, royalties on production are payable to the Colombian Government and are determined on a
field-by-field basis using a level of production sliding scale and a rate which ranges between 6%-8%. The
Colombian National Hydrocarbons Agency (“ANH”) also has an additional economic right equivalent to
1% of production, net of royalties. Additionally, under the terms of the Winchester Stock Purchase
Agreement, we are obligated to make certain payments to the previous owners of Winchester based on
the production and sale of hydrocarbons discovered by exploration wells drilled after October 25, 2011.
These payments involve both an earnings based measure and an overriding royalty equal to an estimated
4% carried interest on the part of the vendor. As at the balance sheet date and based on preliminary
internal estimates of additions of 2P reserves since acquisition, the Company’s best estimate of the total
commitment over the remaining life of the concession is a range of US$ 40 million – US$ 50 million
(assuming a discount rate of 10% and oil price of US$ 94 per barrel). During 2013, the Company has
accrued and paid US$ 11.5 million and US$ 7.8 million, respectively.

(b) Capital commitments

Chile

As of 31 December 2013 the only remaining commitments in Chile are related to Tierra del Fuego blocks.
The future investment commitments assumed by GeoPark outstanding are:

e Flamenco Block: 6 exploratory wells (US$ 19,440,000)
+ Campanario Block: 8 exploratory wells (US$ 30,666,000)

e Isla Norte Block: 3 exploratory wells and 221 km2 of seismic surveys (US$ 13,857,000)

The investments made in the first exploratory period will be assumed 100% by GeoPark.

Colombia

The Llanos 32 Block Consortium has committed to drill two exploratory wells between 2013 and 2014.
The Llanos 17 Block Consortium has committed to drill either two exploratory wells or one exploratory
well and perform 3D seismic between 2013 and 2014. The joint operation estimates that the remaining

commitment amounts to US$ 1,225,000 at GeoPark’s working interest (36.84%).

The Llanos 62 Block (100% working interest) has committed to drill two exploratory wells before August
2014. The remaining commitment amounts to US$ 3,000,000.

54

GEOPARK LIMITED
31 DECEMBER 2013

Note
31 Commitments (continued)
(b) Capital commitments (continued)

Brazil

On 14 May 2013, the ANP awarded GeoPark seven new concessions in Brazil in an international bidding
round, Round 11. For these seven concessions, GeoPark committed to invest a minimum of US$
15,300,000 (including bonuses and work program commitment) during the first three years of the explora-
tory period for the concessions.

On 28 November 2013, the ANP awarded GeoPark two new concessions in a new international bidding
round, Round 12. For these two concessions, GeoPark have committed to invest a minimum of US$
4,000,000 (including bonus and work program commitments) during the first exploratory period.

(c) Operating lease commitments – Group company as lessee

The Group leases various plant and machinery under non-cancellable operating lease agreements.

The Group also leases offices under non-cancellable operating lease agreements. The lease terms are
between 2 and 3 years, and the majority of lease agreements are renewable at the end of the lease peri-
od at market rate.

During 2013 a total amount of US$ 19,110,000 (US$ 4,531,000 in 2012) was charged to the income
statement and US$ 37,263,000 of operating leases were capitalised as Property, plant and equipment
(US$ 32,706,000 in 2012).

The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

Amounts in US$ ‘000 2013 2012
Operating lease commitments

Falling due within 1 year 68,817 26,464
Falling due within 1 – 3 years 56,556 3,709
Falling due within 3 – 5 years 31,145 443
Falling due over 5 years 505 895

Total minimum lease payments 157,023 31,511

55

GEOPARK LIMITED
31 DECEMBER 2013

Note
32 Related parties

Controlling interest

The main shareholders of GeoPark Limited, a company registered in Bermuda, as of 31 December 2013,

are:
Common Percentage of outstanding

Shareholder shares common shares
Gerald E. O’Shaughnessy(” 7,533,907 17.18%
James F. Park” 7,156,269 16.32%
Steven J. Quamme’” 4,984,394 11.36%
IFC Equity Investments” 3,456,594 7.88%
Moneda A.F.1. 2,241,650 5.11%
Juan Cristóbal Pavez!” 2,171,363 4.95%
BTG Pactual 2,097,257 4.78%
Charles Schwab 8 Co. 1,393,361 3.18%
Other shareholders 12,826,819 29.24%

43,861,614 100.00%

(M Held directly and indirectly through GP Investments LLP, Vidacos Nominees Limited and Globe Re-
sources Group Inc., all of which are controlled by Mr. O’Shaughnessy.

(2 Held by Energy Holdings, LLC, which is controlled by James F. Park, a member of our Board of Direc-
tors. The number of common shares held by Mr. Park does not reflect the 782,702 common shares held
as of January 10, 2014 in the employee benefit trust described under “Management-Compensation-
Employee Benefit Trust”.

% Held through certain private investment funds managed and controlled by Cartica Management, LLC.
The common shares reflected as being held by Mr. Quamme include 7,422 common shares held by him
personally. Mr. Steven Quamme, one of our principal shareholders and a member of our board of direc-
tors, is the Senior Managing Director of Cartica Management, LLC, and therefore may be deemed to
have voting and investment power over the common shares of GeoPark held by Cartica Management,
LLC.

MIFC Equity Investments voting decisions are made through a portfolio management process which in-
volves consultation from investment officers, credit officers, managers and legal staff.

6) Held through various funds managed by Moneda A.F.!. (Administradora de Fondos de Inversión), an
asset manager.

(6 Held through Socoservin Overseas Ltd, which is controlled by Juan Cristóbal Pavez. The common
shares reflected as being held by Mr. Pavez include 8,559 common shares held by him personally.

56

Note

32 Related parties (continued)

Balances outstanding and transactions with related parties

Account (Amounts in 000)
2013

To be recovered from co-ventures
Payables account

To be paid to co-venturers
Financial expenses

2012

To be recovered from co-ventures
Prepayment and other receivables
To be paid to co-venturers
Exploration costs

Administrative costs

Transaction
in the year

31
219

0% Corresponding to consultancy services.

Balances
at year
end

15,508
(8,456)
(1,201)

8,773
31,138
(2,007)

Related Party

Joint Operations
LGl
Joint Operations
LGl

Joint Operations

LGl
Joint Operations
Carlos Gulisano
Carlos Gulisano

GEOPARK LIMITED
31 DECEMBER 2013

Relationship

Joint Operations
Partner
Joint Operations
Partner

Joint Operations

Partner

Joint Operations
Non-Executive Director *
Non-Executive Director *

There have been no other transactions with the Board of Directors, Executive Board, Executive officers,

significant shareholders or other related parties during the year besides the intercompany transactions

which have been eliminated in the consolidated financial statements, the normal remuneration of Board of

Directors and Executive Board and other benefits informed in Note 10.

Note
33 Fees paid to Auditors

Amounts in US$ ‘000

Fees payable to the Group’s auditors for the audit of the consolidated

financial statements ‘

Fees payable to the Group’s auditors for the review of interim financial

results

Fees payable for the audit of the Group’s subsidiaries pursuant to legis-

lation
Non-audit services

Fees paid to auditors

% Include fees related to the IPO process

2013 2012
668 346
150 52
273 298
337 713

1,428 1,409

Non-audit services relates to tax services for US$ 292,000 (US$ 121,000 in 2012) and due diligence and
other services for US$ 45,000 (US$ 592,000 in 2012).

57

GEOPARK LIMITED
31 DECEMBER 2013

Note
34 Business transactions

Acquisitions in Colombia

On 14 February 2012, GeoPark acquired two privately-held exploration and production companies oper-
ating in Colombia, Winchester Oil and Gas S.A. and La Luna Oil Company Limited S.A. (“Winchester Lu-
na”). For accounting purposes, these acquisitions were computed as if they had occurred on 1 February
2012.

On 27 March 2012, a second acquisition occurred with the purchase of Hupecol Cuerva LLC (“Hupecol”),
a privately-held company with two exploration and production blocks in Colombia. For accounting pur-
poses, this acquisition was computed as if it had occurred on 1 April 2012.

In accordance with the acquisition method of accounting, the acquisition cost was allocated to the under-
lying assets acquired and liabilities assumed based primarily upon their estimated fair values at the date
of acquisition. An income approach (being the net present value of expected future cash flows) was
adopted to determine the fair values of the mineral interest. Estimates of expected future cash flows re-
flect estimates of projected future revenues, production costs and capital expenditures based on our
business model.

Under the terms of the sale and purchase agreement entered into in 2012 in respect of the acquisition of
Winchester Luna, the Company has to make certain payments to the former owners arising from the pro-
duction and sale of hydrocarbons discovered by exploration wells drilled after 25 October 2011 on the
working interests of the companies at that date. These payments which involve both, an earnings based
measure and an overriding revenue royalty, equate to an estimated 4% carried interest on the part of the
vendor.

The following table summarises the combined consideration paid for Winchester Luna and Hupecol, the
fair value of assets acquired and liabilities assumed for these transactions:

Amounts in US$ ‘000 Hupecol Winchester Luna Total
Cash (including working capital ad- 79,630 32,243 111,873
justments)

Total consideration 79,630 32,243 111,873
Cash and cash equivalents 976 5,594 6,570

Property, plant and equipment (includ-

ing Mineral interest) 73,791 37,182 110,973
Trade receivables 4,402 4,098 8,500
Prepayments and other receivables 5,640 2,983 8,623
Deferred income tax assets 10,344 5,262 15,606
Inventories 10,596 1,612 12,208
Trade payables and other debt (20,487) (11,981) (32,468)
Borrowings – (1,368) (1,368)
Provision for other long-term liabilities (5,632) (2,738) (8,370)
Total identifiable net assets 79,630 40,644 120,274
Bargain purchase gain on acquisi- . 8,401 8,401

tion of subsidiaries

58

GEOPARK LIMITED
31 DECEMBER 2013

Note
34 Business transactions (continued)

Acquisitions in Colombia (continued)

(‘” The bargain purchase gain is related to the fact that the Company paid a full market price for the
proved reserves but received a discount on the probable and possible reserves and resource base ac-
quired due to the vendor’s limited ability to fund the future development of these assets.

The purchase price allocation above mentioned is final.

Acquisition-related costs have been charged to administrative expenses in the consolidated income
statement for the year ended 31 December 2012.

LGl partnership

On 12 March 2010, LGl and the Company agreed to form a new strategic partnership to jointly acquire
and develop upstream oil and gas projects in Latin America.

During 2011, GeoPark and LGl entered into several agreements through which LGl acquires an equity in-
terest in the Chilean Business of the Group.

In December 2012, LGl has also joined GeoPark’s operations in Colombia through the acquisition of a
20% interest in GeoPark Colombia S.A., a company that holds GeoPark’s Colombian assets and which
includes interests in 10 hydrocarbon blocks. A capital contribution in GeoPark Colombia S.A. for an
amount of US$ 14,920,000 was made in 2013. In addition, as part of the transaction, US$ 5,000,000 was
transferred directly to the Colombian subsidiary as a loan.

In addition, in March 2013 GeoPark and LGl announced their agreement to extend their strategic alliance
to build a portfolio of upstream oil and gas assets throughout Latin America through 2015.

Further, on 8 January 2014, following an internal corporate reorganization of our Colombian operations,
GeoPark Colombia Coóperatie U.A. and GeoPark Latin America entered into a new members” agreement
with LGI, or the LGI Colombia Members” Agreement, that sets out substantially similar rights and obliga-

tions to the LGI Colombia Shareholders’ Agreement in respect of our oil and gas business in Colombia.

59

GEOPARK LIMITED
31 DECEMBER 2013

Note

34 – Business transactions (continued)

Entry in Brazil

Proposed acquisition in Brazil

GeoPark entered into Brazil with the proposed acquisition of a ten percent working interest in the offshore
Manati gas field (“Manati Field”), the largest natural gas producing field in Brazil. On May 14, 2013,
GeoPark executed a stock purchase agreement (“SPA”) with Panoro Energy do Brazil Ltda., the subsidi-
ary of Panoro Energy ASA, (“Panoro”), a Norwegian listed company with assets in Brazil and Africa, to
acquire all of the issued and outstanding shares of its wholly-owned Brazilian subsidiary, Rio das Contas
Produtora de Petróleo Ltda (“Rio das Contas”), the direct owner of 10% of the BCAM-40 Block (the
“Block”), which includes the shallow-depth offshore Manati Field in the Camamu-Almada basin.

The Manati Field is a strategically important, profitable upstream asset in Brazil and currently provides
approximately 50% of the gas supplied to the northeastern region of Brazil and more than 75% of the gas
supplied to Salvador, the largest city and capital of the northeastern state of Bahia. The field is largely de-
veloped with existing producing wells and an extensive pipeline, treatment and delivery infrastructure and
is not expected to require significant future capital expenditures to meet current production estimates.
Additional reserve development may be possible.

The Manati Field is operated by Petrobras (35% working interest), the Brazilian national company, largest
oil and gas operator in Brazil and internationally-respected offshore operator. Other partners in the block
include Queiroz Galvao Exploragáo e Produgáo (45% working interest) and Brasoil Manati Exploracáo
Petrolífera S.A. (10% working interest).

GeoPark has agreed to pay a cash consideration of US$140 million at closing, which will be adjusted for
working capital with an effective date of April 30, 2013. The agreement also provides for possible future
contingent payments by GeoPark over the next five years, depending on the economic performance and
cash generation of the Block. On 26 March 2014 the Brazilian National Petroleum, Natural Gas and Bio-
fuels Agency (“ANP”) consented with the transaction. The closing of the acquisition is expected to occur
within the following weeks, after the acquisition process is formalised.

The Company will afford the acquisition from existing cash resources as of 31 December 2013 (see
Note 3) and through a loan pre-approved on February 2014 by Itaú BBA International for US$ 70.5 mil-
lion. The interest rate applicable to this loan will be LIBOR plus 3.9% per annum. The interests will be
paid semi-annually; principal will be cancelled semi-annually with one year grace period.

60

GEOPARK LIMITED
31 DECEMBER 2013

Note

34 – Business transactions (continued)

Entry in Brazil (continued)

Proposed acquisition in Brazil (continued)

The Manati Field acquisition provides GeoPark with:

– A ssolid foundational platform in Brazil to support future growth and expansion in Brazil – one of
the world’s most attractive hydrocarbon regions.

– Participation in an economically-attractive and strategic asset representing the largest non-
associated gas producing field in Brazil, with a gross production of over 200 million cubic feet per
day of gas and a secure attractively-priced long term off take contract that covers 75% of proven
reserves (100% of proven developed reserves).

– – Alow-risk and fully-developed producing gas field with no significant drilling or capital expenditure
investments expected.

– – Avaluable partnership with Petrobras, the largest operator in Brazil.

– An established geoscience and administrative team to manage the assets – and seek new growth
opportunities.

New operations in Brazil

On 14 May 2013, the Company has been awarded seven new licenses in the Brazilian Round 11 of which
two are in the Reconcavo Basin in the State of Bahia and five are in the Potiguar Basin in the State of Rio
Grande do Norte.

The licensing round was organized by the ANP and all proceedings and bids have been made public. On
17 September 2013, the winning bids were approved by the ANP.

For its winning bids on the seven blocks, GeoPark has committed to invest a minimum of US$ 15.3 mil-
lion (including bonus and work program commitment) during the first 3 years of the exploratory period.

The new blocks cover an area of approximately 54,850 acres.

On November 28, 2013, the ANP awarded GeoPark with two new concessions in a new international bid-
ding round, Round 12, in the following basins:

+ Parnaíba Basin in the State of Maranháo: PN-T-597 Concession; and
*xx Sergipe Alagoas Basin in the State of Alagoas: SEAL-T-268 Concession.

61

GEOPARK LIMITED
31 DECEMBER 2013

Note

34 – Business transactions (continued)

New operations in Brazil (continued)

The Company’s winning bids are subject to confirmation of qualification requirements. For its winning bids
on these two concessions, GeoPark has committed to invest a minimum of US$ 4.0 million (including bo-
nus and work program commitments) during the first exploratory period. These two new concessions
cover an area of approximately 196,500 acres.

Note
35 Agreement with Methanex

In March 2012, the Company and Methanex signed a third addendum and amendment to the Gas Supply
Agreement to incentivise the development of gas reserves. Through this new agreement, the Company
completed the drilling of five new gas wells during 2012. Methanex contributed to the cost of drilling the
wells in order to improve the project economics. The Company fulfilled all the commitments under this

agreement.

The Agreement also includes monthly commitments for delivering certain volumes of gas and in case of
failure; the Company could satisfy the obligation from future deliveries without penalty during a period of
three months. As of 31 December 2012, the accrued penalty for under delivered volumes amount to
US$ 1.7 million which was recorded in Provisions for other liabilities in the Statement of Financial Posi-

tion.

On August 30, 2013, the Company signed a fourth amendment to the Methanex Gas Supply Agreement,
pursuant to which Methanex has committed, for a period of six months commencing September 15, 2013,
to purchase an increased volume, in a total amount of 400,000 SCM/d per month (subject to reduction for
deliveries above 200,000 SCM/d to Methanex or ENAP made between April 29 and September 15,
2013), at an additional price per month of US$ 1.50 per mmbtu for volumes in excess of 180,000 SCM/a,
or an additional price per month of US$ 2.00 per mmbtu in any month in which we commit to deliver at
least 500,000 SCM/d (subject to certain exceptions based on methanol prices). The amendment also
provides for temporary DOP and TOP thresholds of 100% and 50%, respectively. As of 31 December
2013, the Company has fulfilled the delivery volume commitment.

GEOPARK LIMITED
31 DECEMBER 2013

Note
36 Drilling operations start-up in Tierra del Fuego

In April 2013, the Company has started the exploration drilling in Tierra del Fuego in Chile in its partner-
ship with Empresa Nacional de Petroleo de Chile (“ENAP”) with the spudding of the Chercán 1 well on
the Flamenco Block. Chercán 1 is the first of 21 exploratory wells on the Flamenco, Campanario and Isla
Norte Blocks in Tierra del Fuego as part of an estimated US$ 100 million investment commitment during
the First Exploration Period.

As of March 2014, 8 wells have been drilled and 1,500 sq km of 3D seismic have been carried out over
the three blocks; which represent the total 3D seismic program commitment.

Note

37 Strategic alliance with Tecpetrol in Brazil

On 30 September 2013, the Company and Tecpetrol S.A. (“Tecpetrol”) announced the formation of a new
strategic alliance to jointly identify, study and potentially acquire upstream oil and gas opportunities
in Brazil, with a specific focus on the Parnaiba, Sao Francisco, Reconcavo, Potiguar and Sergipe-Alagoas
basins.

Tecpetrol is the oil and gas subsidiary of the Techint Group (a multinational oilfield and steel conglomer-
ate) with an extensive track-record as an oil and gas explorer and operator with its portfolio of assets cur-
rently in Argentina, Peru, Colombia, Ecuador, Mexico, Bolivia, Venezuela and the United States, and with
a current net production of over 85,000 barrels of oil equivalent per day.

At 31 December 2013, there is no accounting impact of the creation of the alliance.

63

Link al archivo en CMFChile: https://www.cmfchile.cl/sitio/aplic/serdoc/ver_sgd.php?s567=de8b5537a1830b7b61d945d5e857442eVFdwQmVFNUVRVEJOUkVGNlRXcFplazFuUFQwPQ==&secuencia=-1&t=1682366909