Gavin Wylie at Scotiabank loves this name
Valuation Support for Serious Growth and FCF
In our view, GeoPark currently offers one of the most attractive
combinations of above-average FCF yield and production growth, with a number
of material catalysts on the way.
GeoPark’s near 100% Brent-linked production (see
Exhibit 3 & 4) is also expected to support free cash flow levels of $171M (13% yield)
and $135M (10% yield) in 18E/19E, respectively, which sits at the top-end of its peer
group averages of 9% and 7% and the top tier Canadian names that are at ~5% on all-
After a largely in-line Q2, GeoPark’s shares have fallen ~12%, which we see as
oversold, thereby offering an attractive entry point. At current levels, GeoPark is trading
at a 2019E EV/DACF multiple of 3.4x versus its peer average of 3.5x and the Canadian
Juniors at 6.5x.
We reiterate our Sector Outperform rating on GeoPark and our
one-year target price of $22.00 per share, based on our Risked NAVPS of $20.49.