Venezuela has yet to decide the tax cut GeoPark already priced into Bare

GeoPark will pay Grupo Gilinski for the Bare Block with newly issued shares, and how many depends on a decision the Venezuelan state has yet to make: the income tax rate it applies to the project. The range is 42.1 million to 47.6 million shares. The 5.4 million-share difference is worth about $66 million at the agreed price, and if the tax cut comes, January's oil reform protects it for the contract's 25 years.

The payment and its condition

GeoPark is listed in New York and pumps almost all its crude in Colombia. In September it announced its entry into Venezuela through Bare, an Orinoco Belt field that once produced more than 100,000 barrels a day and was then producing about 11,000. It will operate it under a 25-year production participation contract with PDVSA Petróleo: it funds all the capital of approved work programs and keeps a 65% net share of output.

It is not paying cash.

It is buying from Jaime Gilinski's group 95% of Energy Assets International, the Panamanian company that controls the Venezuelan company that signed the contract, and handing over new shares valued at $12.22 each. The announcement set a base of 42.1 million shares and an upward adjustment of up to 5.4 million if the project's contractual terms improve before closing. With the base, the group ends up with 56.3% of GeoPark; with the full adjustment, 58.4%.

On October 16, in the report it filed with the SEC to sell bonds, GeoPark spelled out what that adjustment depends on: the exact number of shares will follow from the applicable income tax rate in Venezuela at closing. The contractual improvement worth 5.4 million shares is a cut in that tax.

That $66 million does not come out of GeoPark's cash. It comes out of the other shareholders' slice, which with the full adjustment gives up a little over two points of the company. In exchange, they get an asset that will pay less tax.

Who sets the rate

Venezuela's Income Tax Law taxes companies that exploit hydrocarbons at 50%. January's oil reform opened the door to cutting that rate project by project. Its Article 58 empowers the executive, through the Finance Ministry and after hearing the Hydrocarbons Ministry, to reduce it if it is shown that the project needs the cut to stay economically balanced.

The article sets no floor. Nor does it provide for raising the rate.

The July regulations put a number on only one type of project: undeveloped fields are assigned 34%. For the rest, they describe a procedure. The Hydrocarbons Ministry sends the Finance Ministry the request for a cut, with the nature of the project, the royalties already assigned and the supporting calculations.

Bare is not an undeveloped field. GeoPark describes it as the redevelopment of a field with existing production and installed infrastructure, so the regulations do not assign it a rate. It has to be requested, and the Finance Ministry grants it. That is the decision the contract with Gilinski has already turned into shares, before anyone has made it.

Another figure is still open. The regulations classify each project to set the combined royalty and integrated tax: 25% for extra-heavy crude projects and 35% for developed fields in production. Bare is a producing field, and GeoPark warns it will need diluent, the input extra-heavy crude requires. The Hydrocarbons Ministry picks the category when it reviews the business plan, and the two are ten points apart.

The same company in three countries

The same report shows how tax is set where GeoPark already produces. In Colombia, the general rate is 35% and oil producers also pay a surcharge that rises with the Brent price; the company estimates 45% for 2026. It is in the law, and when it changes, it changes by law.

In Argentina, GeoPark applied to join the Large Investment Incentive Regime with a plan of more than a billion dollars in Vaca Muerta. That regime also requires the authority to approve each plan, so case-by-case decisions are not a Venezuelan oddity. What differs is where the benefit sits: the 25% income tax rate and 30-year stability are written into the law.

In Venezuela, the law sets the general rate and the power to cut it, and a ministry decides each project's rate. The Bare deal adds something absent from the other two cases: the value of that decision is already divided up in a private contract before the state makes it.

GeoPark's new debt keeps Venezuela apart. In October the company sold $550 million of seven-year bonds, guaranteed by its Colombian and Argentine subsidiaries, and stated that the proceeds would buy back earlier debt, fund Vaca Muerta and cover general corporate purposes.

Bare is not mentioned.

Who pays, and for how long

If the Finance Ministry grants the cut, Grupo Gilinski receives up to 5.4 million more shares. GeoPark's other shareholders give up part of the company in exchange for an asset that pays less. The Venezuelan treasury forgoes the difference on Bare's profits.

Article 58 requires showing that the cut is necessary. The projections GeoPark published in September assume Brent at $70 to $80, with Bare net EBITDA of between $400 million and $630 million a year toward the end of the decade. In late October, December Brent was trading above $115.

Once granted, the cut lasts.

January's reform requires preserving, for as long as the contract lives, the agreed balance and any later benefit that improves those terms. If another government later raises the tax burden, the law requires compensating the operator with a lower royalty, lower taxes, different fees or a longer term, until it is back where it was. Whatever a finance minister decides in 2026 reaches a contract whose horizon, in GeoPark's numbers, runs to 2051.

GeoPark acknowledges the limit of that protection in the same report. The reform was passed shortly after a change in government, and future governments, legislatures or courts could amend, repeal, reinterpret or decline to enforce it, along with the contracts signed under it.

It is on record that Bare's price depends on the rate, who decides it and that the law protects the cut for the life of the contract. It is not on record whether the Hydrocarbons Ministry has sent the request, what rate it seeks, which royalty category Bare fell into, or whether the tax reform announced by the acting president touches income tax: the National Assembly's note on that reform names only the tax on large financial transactions.

GeoPark expects to close before year-end. The number of shares it issues that day will be the first public figure for how much was cut.