Speaker 1:

From the New York Stock Exchange at the corner of Wall and Broad Streets in New York City, welcome Inside the ICE House. Our podcast from Intercontinental Exchange is your go-to for the latest on markets, leadership, vision and business. For over 230 years, the NYSE has been the beating heart of global growth. Each week, we bring you inspiring stories of innovators, job creators and the movers and shakers of capitalism here at the NYSE and ICE's exchanges around the world. Now, let's go Inside the ICE House. Here's your host, Lance Glinn.

Lance Glinn:

Welcome in to another episode of the Inside the ICE House podcast. Our guest today, Felipe Bayon, is CEO of GeoPark, that's NYSE ticker symbol GPRK, a Latin American oil and gas explorer, operator and consolidator with assets across Latin America. New to his tenure with the company having started on June 1st, Felipe takes over GeoPark during an important time for the oil and gas industry and a pivotal time for the company as well as they look for new areas of growth across the region. Felipe, thanks so much for joining us Inside the ICE House.

Felipe Bayon:

Thanks for having me, it's great to be here.

Lance Glinn:

So, you stepped into the role of CEO at GeoPark on June 1st so not yet even through your first six months in the role. But as your tenure began, just what were your first impressions of the company from the inside and how did you approach those early days of leadership getting to understand where GeoPark has been and where it currently is now?

Felipe Bayon:

So, I'd say that there's actually a couple things. One, GeoPark has been a company that I've admired for a very long time in terms of how they approach and how they conduct businesses, relationship with the communities, with their partners, actually dealing with the environment and everything else. So, that's something that I've liked for a very long time. And then, when I joined, I saw a very committed team, people that wanted to do the right thing but I also saw a company that needed a little bit of a reset and that's what we did in terms of saying there's two key things that need to happen. One, we need to protect and take care of what we have, the existing business, point number one. And the second thing was we need to go back to growth which is what we did when we announced the acquisitions in Argentina.

Lance Glinn:

And we're going to speak to those acquisitions in just a little bit. You've had tons of experience elsewhere so how did that shape you? I'm talking Shell, BP, most recently Ecopetrol, how did those experiences really shape your leadership style and shape how you want to help GeoPark grow into the future?

Felipe Bayon:

So, two things. One, I'd say that the first thing is understanding or acknowledging that relationships need to be respectful and need to be long-term so I touch back on some of those relationships that I had for a very long time. And the other thing is just accepting as a leader that, first, you don't have all the answers, that you need to be truthful to your leadership style whatever that would be. There's some things that you want to do, some things that you don't want to replicate from other eventual role models.

Lance Glinn:

Sure.

Felipe Bayon:

It's surrounding yourself with people that know more than you basically in everything that you do. And when in need, raise your hand and be truthful to your ulterior purpose in life. And that, to me, it sounds probably very simple-

Lance Glinn:

No, but it makes sense.

Felipe Bayon:

... but I think it's helped in terms of different roles, leadership roles that I've had over more than 30 something years in industry.

Lance Glinn:

Absolutely. And so, I want to speak real quick to just culture and I think culture is often described as this invisible force that drives behavior but I think, more and more, it's increasingly becoming something that's very tangible and really a strategic asset for a lot of companies. How do you as CEO actively shape and protect that culture on a day-to-day basis so that it either remains a company strength or, if it's not a company strength, could become one?

Felipe Bayon:

I think, first of all, the GeoPark has a very strong culture of performance, delivery and basically be truthful to their promises. So, that's something that we need to build on. Having said that, I believe also that cultures need to be explicitly written down and discussed with the organization. So, what we did, we conducted a company large survey, very, very simple survey, what are the things you like about the company in terms of cultures, what are the things we need to let go or stop doing and what are the things that we should bring into the conversation. We brought the board and they actually participated and then the last thing we did we brought a Aura which is our AI agent for culture. So, Aura is part of the team and she's helping or he's helping us develop the culture and we should be launching that in the next few weeks or so.

Lance Glinn:

That's very exciting. I like the use and the implementation of AI, something we'll also speak to, obviously, later in the conversation because it's a technology that's influencing everything, as you know, regardless of the sector that one is in. And I think so much of how culture is influenced is obviously by the people. And throughout these first few months at GeoPark, I'm sure you've been able to travel around and meet GeoPark's people and meet the people that really make the company go, those that are working firsthand in it. What have you learned from them and your experiences meeting them about, again, who GeoPark was, what GeoPark currently is now and where GeoPark can go in the future?

Felipe Bayon:

Yeah. So, the first thing that you observe is a company that has been agile and nimble, that has been very quick at implementing things. For example, technology and you were talking about AI and we can probably touch on that a bit more. A company where people are very honored and proud of what they do. Also, I think a company that's humble in terms of how they present themselves, has good partnerships, has good recognition from the communities in which we operate and that's what I saw. But I think what we needed as a company is also to regain that aspiration and vision to grow again, to be able to say we're here, how do we take ourselves to the next level and what's required behind that.

Lance Glinn:

So, let's talk about AI since we were on the topic. Most companies across, again, various sectors are using it whether that's using it for just back-end operations to increase efficiency or that could be as large as, wow, this technology's really revolutionizing not only what the company is doing but what the industry is doing. And sometimes you have businesses that fall into one spectrum or the other or some that just fall in the middle from increasing speed, efficiency, safety, whatever may be the case. You obviously mentioned Aura before but how is GeoPark using AI to get ahead and to find that growth that you speak to?

Felipe Bayon:

I'd start with safety, it's the first thing. So, we actually use enhanced visual recognition and we have it in the drilling rigs. So, with those cameras and AI, we can detect potentially unsafe acts and basically prevent an accident from happening. And over the time that we've actually deployed the technology, we've stopped north of 800 unsafe or potentially unsafe actions so that's good. And people start getting used to that and say, "Look, this is another tool that I can help." Or we can use it in or we are using it in our drilling operations and we've drilled north of 200 wells in the field and we have two rigs running continuously so we can, in some parts of the reservoirs, we can use AI to basically guide where the well will go and it's already showing some improvements, significant improvements in terms of rates of penetrations and speed and savings that ultimately hit the bottom end or the bottom line, sorry.

And then there's things like not necessarily AI but things like nanotechnology in terms of drilling fluids or machine learning in terms of the rigs themselves or rigs that can basically move, they can walk and you can position them in different places. So, there's a lot of technology in the operations themselves, efficiencies around use of electricity. Our fields are all electrified which is good for emissions as well but it provides some opportunities in terms of technology. And then there's what I would describe as how do we ensure that we can make the life of people in the office, in the organization and in the field better. How can we improve the way in which they work and make it easier?

So, there's 350 employees in the company and we have 1,100 agents with AI created by the people. So, we've been very open in terms of letting them use technology and things like Aura that we discussed for culture or things like them being part of the teams in different areas, things like using seismic data and then creating data with AI that can help us better define the petrophysics, so the technical side of the subsurface to try to be more accurate in terms of where we go. So, there's lots of things that we are using it and I think we haven't even ... We're scratching the surface, I would say.

Lance Glinn:

Yeah. I think that's the fascinating thing about AI as a whole or at least the thing that I find the most fascinating is over the last, say, two or three years, and I know AI has been around for longer than two or three years, but since we really had that big aha moment, the world did with AI since, I think, it was 2022, there have already been hundreds of thousands, if not, millions of use cases found and the fascinating thing is that there could be millions more use cases that have yet to be found because the technology is continuously advancing. And what we see AI as today doesn't necessarily mean it's what AI is going to be tomorrow or the next week or the next month or the next year. So, the fascinating thing for me is that it's constantly evolving and, at least for me as a podcaster, I'm trying to implement it as best that I can too knowing that it's going to keep moving and I have to stay ahead of it or at least have to stay on par with the movement.

Being in the energy sector for so long at those various places that I mentioned, Shell, BP, Ecopetrol, et cetera, now with GeoPark, how have you just seen the sector as a whole adjust to AI and change with this new evolution of technology and the constant advancement of it?

Felipe Bayon:

I'd say there's different speeds in terms of actually embracing AI and there's some people that are cautious and saying, "Hmm, I need to see it." At least in our case, what we've done is we've had at the C-suite or the leadership level training sessions and workshops where we all sit down with our computers and do stuff and they're very tailored to ourselves. We have a very capable group of people in what would be the IT and the CIO departments and it creates a difference when you actually start ... You jump in the water and say I need to practice now so I think that helps. And I think, as I tell people probably a bit jokingly, when I started in college, we didn't have personal computers. I had to punch cards and take my Fortran programs to a very, very large computing facility. Our cell phones have more capacity than those buildings did in the past so it's just saying, look, this is here, it's not the enemy, it's not even just a tool. It needs to be part of how you conduct your business and, at the end of a day, you need to make AI part of your teams.

Lance Glinn:

Yeah. Look, I never sat in a computing facility, I'm 29 years old. When I was growing up, we had a computer class though which we all got our own big Dell lab desk or desktop, I think, at the time and so I never sat in a computing facility but I do remember those days and, like you said, our cell phones nowadays have a hundred times more capacity than any of those computers probably ever did. But to that point of AI changing the sector, it is a sector that's, I think, undergoing transformation, there's pressure to innovate, pressure to decarbonize among other things. How do you see GeoPark positioning itself in this evolving energy landscape that, like AI, is constantly moving?

Felipe Bayon:

So, I'd say that the first thing is that demand for energy overall will continue to grow in the world. And in that sense, I'm convinced that all the forms of energy are valid. The enemy is not the form of energy, the enemy, for example, could be the emissions that you have or the carbon footprint. As a company, we have a very, very low carbon footprint that it's below 10 kilograms of CO2 per barrel. It's world-class, it's very, very low. So, how do we continue to advance in that space and I was saying we have electrified our operations, we have solar energy as well, we're going to biomass so there's a few things that we would do. We need to understand how to better manage the water that we produce. For every barrel of oil, we produce 10 barrels of water. How do you actually save energy in doing that in the treatment, transportation and everything else?

So, I see ourselves as a company that will continue to be part of that ecosystem and now not only in Colombia but also in Argentina with the new acquisition. So, I think that's part of how we see GeoPark. And then the other thing which I haven't mentioned which is great and being here where we are, New York Stock Exchange, all of our employees are shareholders of the company and that creates, I think, a sense of commitment and ownership. That's probably happens in some other companies but I think that's very particular to GeoPark.

Lance Glinn:

Yeah, no, I think it brings the employees closer to the company, for sure, so I applaud GeoPark and I applaud yourself for that. Now, so GeoPark has a strong portfolio of assets across Latin America. I know part of the strategy of growth moving forward as you mentioned earlier and as we talked little bit about was protecting what you currently have and then finding those new opportunities for growth. How do you balance those two areas? Ensuring that your current assets are taken care of while also actively innovating and searching for those new opportunities because you got to make sure ... You can't prioritize one and not the other and let the other one slip. How do you make sure you have a firm focus on both?

Felipe Bayon:

As everything in life, Lance, I think that it's better when you have more ideas than money because then you need to choose, you need to prioritize, you need to be very disciplined. So, being very disciplined in terms of the strategy and the direction, the investment plans, deployment or allocation of capital is fundamental to what we do so we will continue to do that. And in the case of our recent investment in Argentina or entry into Argentina, country entry into Argentina, a unconventional [inaudible 00:15:43] and formation that's called Vaca Muerta, it's an area that experiencing an investment of north of 10 billion US dollars per year. Production has grown five or six-fold in the last few years, it's producing north of 500,000 barrels a day from fracking and, in gas, it's three and a half BCF per day. So, it's an industry or it's an area where industry, the oil and gas industry, can actually develop a lot of activity, it's very friendly in that case. And I would say that, related to the US, it's the one place in this hemisphere where things have been done well in terms of unconventionals. The US and I've had some prior experience in the Permian specifically and then Argentina.

So, we see ourselves as an investor, an operator and we'll grow from this position north of ... It's just a little bit north of 12,000 acres. We're going to take current production from 2,000 barrels to 20,000 barrels per day over the next three years. Overall, an investment of a billion dollars which is significant for a company like us but it allows us, if you will, to, in the course of the next three years, basically double the size of the company if you use EBITDA or EBITDA as a measure and take the production from 28,000 barrels to 45,000 barrels, 46,000 barrels. So, it allows us that opportunity and, at the end of a day, back to our shareholders, we need to ensure that we can return to them value.

Lance Glinn:

Sure. So, let's talk about Vaca Muerta.

Felipe Bayon:

Sure.

Lance Glinn:

You mentioned a whole host of reasons for why it's friendly to the company, why it makes sense to now start to expand into that area. But why was now the right time? Why was it the right asset for GeoPark to get involved when could have been a year ago, could have been two years ago, why was now the right time for GeoPark to get involved in Vaca Muerta?

Felipe Bayon:

So, the company has been trying to get into the unconventionals in Argentina and I'll mention something that probably most people don't know but the company actually was created and born in Argentina. It was 23 years ago in a province in Patagonia which is further south, Santa Cruz, that's where it started with conventional operations. So, we're back in country and it's great, we have this area where we can now start developing the facilities, drill the wells, some 55 wells we want to drill into two blocks, two concessions and get the production to 20,000 barrels per day. But I'd say there's additional things that have happened and we will always remain very disciplined and focused. But a lot of people have approached this and said, "Look, Felipe and GeoPark, we want to do things with you. You're a company that we trust that has done the things right historically so there are some more things that we'll continue to assess but we'll do, if they are the right thing, we'll do them."

And then the longer term shot, if is unconventionals are allowed and the doors open back in Colombia, we can bring the expertise from Argentina back into Colombia and then be, hopefully, an unconventional player. So, that's this strategic direction that we see in this and, again, Vaca Muerta, probably like the Permian in the U.S. and the province of Neuquén specifically in Argentina, is an area where there's a lot of activity, a lot of expertise, a lot of great talent and a lot of action in terms of developing these resources.

Lance Glinn:

And so, the acquisition, obviously, now complete teams already on the ground ready to deliver, what are the immediate priorities for GeoPark in Vaca Muerta? Is it the drilling of the wells that you mentioned before? What are the first steps to really, as you said, going from ... I think you said 2,000 barrels to 20,000 barrels, how do you do that?

Felipe Bayon:

So, the first thing was basically receiving the operation from Pluspetrol and that was seamless. Some people transferred from Pluspetrol to our company, we had some teams in the ground, we brought some other people so we're consolidating the team, that's point number one, and ensuring that we can continue to operate safely, responsibly and in a way that's profitable. We've already started intervening some of the wells to look at the artificial lift systems which is how can I improve what we have in terms of productivity. Then the third thing will be around going back and drilling some of the wells that have not been finished so getting them to total death, TD, ensuring that we can continue or finalize drilling operations and frack the wells. And then probably, in the next nine to 12 months, we'll start drilling operations and we'll have one rig running. In parallel to that or simultaneously, we'll be doing all the permitting, all the consultations to ensure, and the engineering, to ensure that we can provide the facilities, the pipelines and everything else. So, lots of activity in the next three years, five to $600 million of investment.

Lance Glinn:

Wow. So, you mentioned, obviously, and we've been talking about Vaca Muerta and its importance, you mentioned earlier GeoPark as a whole starting in Argentina, in Santa Cruz in 2002 and to ... What makes the country such a compelling place to invest and operate in right now especially given the complexities of the energy landscape in Latin America?

Felipe Bayon:

So, I think, if you look at the region overall, there's a few countries that are very appealing in terms of oil and gas. Guyana, offshore, very, very large companies, large discoveries. Brazil, offshore, you need a lot of expertise, we're not an offshore operator. And Vaca Muerta, through the unconventionals in Argentina, is a country where, first, as I said when I met with the governor, he said, "Look, you're welcome, the door is open," and we said, "We want to come in, we want to invest, we want to operate." And the industry I think is used to uncertainty and changes, volatility, we can deal with that. We have a long-term view on the investments that we do and, in that sense, think Vaca Muerta provides a great ecosystem in terms of the companies, the technology that's being used, the service providers where we can go and not only develop a lot of those competencies, we already have a lot of people in the team with a lot of experience in unconventional development but broaden the experience, the competencies and then be a successful operator.

So, I think it's a long-term game. These concessions, some of them or one of them is until 2057, the other one is until 2060.

Lance Glinn:

Wow.

Felipe Bayon:

So, there's still some time-

Lance Glinn:

A long way to go.

Felipe Bayon:

... but we'll make sure that we do things in a way that's disciplined and that creates value.

Lance Glinn:

So, Felipe, as we begin to wrap up our conversation, we've obviously been talking about Vaca Muerta, we talked about the importance of Argentina and everything that GeoPark has going on there. As you step into the role of CEO and, of course, as we talked about earlier in our conversation, still relatively new to the role here at GeoPark, stepping into the role of CEO, you're now at the helm of a company with a strong foundation and, obviously, a big regional presence. When you look ahead just five or 10 years down the line, what is your vision for what GeoPark will become? We talked about going after new opportunities, you talked about how there are a lot of people coming to you with investment ideas and opportunities to come. So, in your vision, if you could predict out five, 10 years, what does GeoPark look like when we talk in 2030?

Felipe Bayon:

Sure. And this is based on a lot of technical work that we've done with the teams and kudos to them, they've done a great job in terms of understanding the assets and how can we maximize the value from the assets. So, three, four years, I see the company doubling its size in terms of production, in terms of generation of EBITDA. We'll need to actually deploy a lot of CapEx, cash flow generation is going to be tight but, in that space, we're growing. So, I think, directionally, first is a company that's growing, 2028 roughly so it's a few years from now. But then, onwards, we are already seeing what we described as sufficient, can we take that to the next level and I think the answer is yes.

Given where we are, given the assets that we have, the people that we have and I think also the track record, reputation and, as I mentioned before, people approaching us and saying we'd love to do things with you, you're a company we want to partner with and, as I said, relationships need to be respectful and trustful and long-term relationships as well. So, that's where I see the company.

Lance Glinn:

Great. Well, Felipe, I appreciate you joining us. I wish you the best of luck as your tenure as CEO continues and thank you so much for joining us Inside the ICE House.

Felipe Bayon:

Thanks for having me, it's great to be here and I really enjoyed the conversation. Thanks very much.

Speaker 1:

That's our conversation for this week. Remember to rate, review and subscribe wherever you listen and follow us on X at ICE House Podcast. From the New York Stock Exchange, we'll talk to you again next week Inside the ICE House.

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