It’s been a turbulent year for the markets, to say the least.
Interest rates have been surging, labor strikes have taken a bite out of the automobile and entertainment industries, a few big banks have failed, and wars are raging on two continents.
The future looks no less uncertain. Inflation has eased a bit, but it’s still too high for the Fed to fully ease up on interest rates. The wars in Europe and the Middle East continue, making food and energy prices more volatile than they have been in years.
And closer to home, next year proves to be one of the most divisive election years in memory.
In short, 2024 promises to be another uncertain year in the markets.
That’s why we’ve had our team of analysts and researchers identify the most promising stocks to keep an eye on in 2024.
Let’s take a look…
Stock #1 for 2024 – GeoPark Ltd. (GPRK)
Analyst: Jay Soloff, StockNews, POWR Income
I’ve spoken before about the price support that is in place for oil globally, and the recent outbreak of violence in the Middle East will only serve to bolster recent price increases.
Due to its small size and location in Colombia, GeoPark Ltd. (GPRK), an upstream oil and gas company, simply flies under the radar of most investors. But after taking a close look under the hood, I believe there’s a compelling story here. Actually, GeoPark is an income stock in value clothing.
Take a peek at what I found…
Business Overview
GeoPark is a leading independent exploration, developer and producer of oil and gas reserves in Chile, Colombia, Brazil, Argentina and Ecuador. Fact is, Latin America remains one of the world’s richest and most underexplored hydrocarbon regions.
GeoPark’s value begins in its drilling operations where GPRK has a 75% drilling success rate over the past 16 years.
Its prize asset is the Llanos 34 block—in its own words, “the largest oil discovery in over 20 years in Colombia.” Gross production has rocketed from zero to 75,000 barrels of oil per day in less than a decade.The drilling site was purchased for $30 million in 2012, has produced almost $2 billion since drilling began, and is estimated to contain another $2 billion of production today.
GeoPark also has a strategic partnership with ONGC Videsh – the government oil company of India – to jointly acquire, invest in, and create value from upstream oil and gas projects across Latin America. The company has net proven reserves of 87.8 million barrels of oil equivalent.
Here’s a look at all of GPRK’s operations:
Source: GPRK September 2023 Investor Presentation, p. 2
Financial Results
After weathering a downturn in earnings per share during the pandemic, GPRK bounced back and turned in explosive numbers in 2022.
Earnings Per Share:
● 2019 – $0.97
● 2020 – ($3.84)
● 2021 – $1.00
● 2022 – $3.78
GeoPark closed a record year in 2022, with revenues over $1 billion, adjusted EBITDA over $540 million, and bottom-line net profit of over $224 million.
Full year cash flow from operations was $467 million, which not only funded its capital expenditure program, but also paid down $170 million in debt, canceling entirely any debt owed in 2024.
In 2022, GeoPark paid shareholders more than $60 million, representing a yield of 6.15% or $0.52 per share. The company also has repurchased more than $133 million in its share buyback program since 2017.
Investment Considerations
Let’s talk a moment about the “value” side of GeoPark. The company trades at a lowly P/E of only 3.2, and at a super low 3x earnings. Its price to sales ratio is .88, and yet its operating margins are just under 50%. The company has $129 million of cash and cash equivalents on hand, and a credit facility of $80 million which has yet to be touched.
Its shares are a good value compared to the industry average P/E of 6.3. The company is extremely efficient, with operating margins clocking in at 44.4% and net profit margins of 22%.
Earnings have skyrocketed by 114% over the past year, and have grown by an average of 31.5% over the last five years. Meanwhile, dividends have blasted higher, from $0.02 cents per share in 2020 to $0.52 today—a 531% improvement in just three years, including a 58% jump since 2022.
And the good times should continue – the company plans on returning between 40% and 50% of free cash flow after taxes to shareholders (through dividends and buybacks).
Despite its low profile, the company is being squarely targeted by one group of savvy investors. Insiders currently own 16% of the shares and the top five shareholders own 55% of the company. Private equity firm Compass Group LLC, has almost…
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