CALGARY, ALBERTA--(Marketwired - Nov 19, 2015) - Alvopetro Energy Ltd. (TSX VENTURE:ALV) is pleased to provide an operational update and our third quarter 2015 financial and operating results.
Operational Update
DeGolyer and MacNaughton ("D&M") completed an independent contingent resource report of our 197(2) conventional natural gas pool located on Blocks 197 and 198 in the Recôncavo Basin onshore Brazil, quantifying Alvopetro's contingent resources with a "best estimate" (2C) of 5.8 million barrels of oil equivalent (mmboe), 3.4 mmboe "low estimate" (1C) and 8.1 mmboe "high estimate" (3C). The 10% discounted net present values (NPV10) estimated by D&M are $91.3 million (2C), $61.9 million (1C), and $137.1 million (3C). The D&M resource report reflects the significant value of our first conventional natural gas discovery and highlights a small portion of the potential that exists in our current inventory of 22 conventional exploration prospects.
In Brazil's 13th Bid Round held on October 7, 2015, Alvopetro, in partnership with ENGIE (GDF SUEZ E&P Brasil Participações Limitada), was the successful bidder on four blocks, all located in the Recôncavo Basin, onshore Brazil. Alvopetro will operate all of the blocks acquired and holds a 65% participating interest, with ENGIE holding the remaining 35% participating interest. In Brazil, ENGIE is the largest private power producer with 8,765 Megawatts in operation and 4,515 Megawatts under construction. Following the Bid Round, Alvopetro holds and operates 16 exploration blocks and two mature fields, comprising 153,330 gross acres (142,625 net acres.)
On October 1, we sold our Aracaju field to a third party, eliminating all associated obligations with respect to this mature field, which we viewed as having limited prospectivity. The Aracaju field was not included in any of our independent reserves or resource reports.
Our 182(B1) well was drilled to a total measured depth of 2,095 metres and successfully cased and cemented. In the third quarter, pressure transient build-up analysis for this well indicated an expected initial oil rate of 123 bopd from the Agua Grande Formation and 46 bopd from the Candeias Formation. Subject to customary regulatory approvals, we expect to commence long-term production testing before the end of 2015 by commingling the Candeias and Agua Grande zones.
We continue our prudent and disciplined approach to our capital program in light of low commodity prices, and expect to benefit from reduced service sector activity and equipment prices to improve our long-term capital efficiencies. Alvopetro's strong balance sheet, significant conventional prospect exploration inventory and proven operational expertise provide a solid foundation for growth as commodity prices improve.
In 2015, our first two conventional exploration wells have been successful, resulting in a significant natural gas discovery at 197(2) and a crude oil success with our 182(B1) discovery. In early 2016, we plan to drill our 170(B1) conventional oil prospect on Block 170, which will be our third conventional exploration location. We then plan to drill our largest natural gas exploration prospect, located on Block 256.
Financial and Operating Highlights
- In August 2015, we completed testing our 182(B1) well. Pressure transient build up analysis indicates an expected initial oil rate of 123 bopd from the Agua Grande Formation and 46 bopd from the Candeias Formation.
- During the third quarter, $7.3 million of restricted cash balances were added to cash and cash equivalents as a result of the release of a work commitment letter of credit, a reduction of letter of credit related collateral requirements, and the elimination of $5.0 million in letters of credit previously provided by Alvopetro for which we have now obtained Export Development Canada credit coverage.
- Capital and other asset expenditures of $2.6 million in the third quarter included $1.7 million relating to testing and facilities preparation for our 182(B1) well and $0.2 million in capitalized G&A.
- Our cash, restricted cash and net working capital resources total $32.2 million, including $32.4 million of cash and cash equivalents and $2.3 million of current restricted cash.
Summary of Third Quarter 2015 Financial Results
The following table provides a summary of Alvopetro's financial and operating results for the three and nine months ended September 30, 2015 and September 30, 2014. The interim condensed consolidated financial statements with the Management's Discussion and Analysis ("MD&A") are available on our website at www.alvopetro.com and will be available on the SEDAR website at www.sedar.com.
| | Three months ended
September 30, | | | Nine months ended
September 30, | |
| | 2015 | | | 2014 | | | 2015 | | | 2014 | |
| Financial | | | | | | | | | | | | |
| ($000s, except where noted) | | | | | | | | | | | | |
| Oil sales | | 97 | | | 257 | | | 419 | | | 894 | |
| Funds flow from operations (1) | | (1,240 | ) | | (1,331 | ) | | (3,949 | ) | | (6,240 | ) |
| Per share - basic and diluted ($) | | (0.01 | ) | | (0.02 | ) | | (0.05 | ) | | (0.07 | ) |
| Net loss | | (84 | ) | | (1,722 | ) | | (2,627 | ) | | (7,047 | ) |
| Per share - basic and diluted ($) | | - | | | (0.02 | ) | | (0.03 | ) | | (0.08 | ) |
| Capital and other asset expenditures | | 2,636 | | | 14,663 | | | 10,592 | | | 28,127 | |
| Total assets | | 98,282 | | | 151,779 | | | 98,282 | | | 151,779 | |
| Debt | | - | | | - | | | - | | | - | |
| Net working capital surplus (1) (2) | | 32,150 | | | 45,104 | | | 32,150 | | | 45,104 | |
| Common shares outstanding, end of period (000s) | | | | | | | | | | | | |
| Basic | | 85,167 | | | 85,167 | | | 85,167 | | | 85,167 | |
| Diluted (3) | | 90,568 | | | 88,264 | | | 90,568 | | | 88,264 | |
| Operations | | | | | | | | | | | | |
| Operating netback ($/bbl) (1) | | | | | | | | | | | | |
| Brent benchmark price | | 51.17 | | | 103.38 | | | 56.61 | | | 107.02 | |
| Discount | | (12.65 | ) | | (2.56 | ) | | (10.94 | ) | | (5.42 | ) |
| Sales price | | 38.52 | | | 100.82 | | | 45.67 | | | 101.60 | |
| Transportation expenses | | (3.18 | ) | | (3.53 | ) | | (3.16 | ) | | (3.98 | ) |
| Realized sales price | | 35.34 | | | 97.29 | | | 42.51 | | | 97.62 | |
| Royalties and production taxes | | (2.78 | ) | | (9.42 | ) | | (3.05 | ) | | (10.34 | ) |
| Production expenses | | (71.49 | ) | | (104.35 | ) | | (75.43 | ) | | (108.31 | ) |
| Operating netback | | (38.93 | ) | | (16.48 | ) | | (35.97 | ) | | (21.03 | ) |
| Average daily crude oil production (bopd) | | 27 | | | 28 | | | 34 | | | 32 | |
| | | | | | | | | | | | |
| Notes: | |
| (1) | Non-GAAP measure. See "Non-GAAP Measures" section within this news release. |
| (2) | Includes current restricted cash of $2.3 million (September 30, 2014 - $ 11.1 million) but excludes non-current restricted cash (September 30, 2015 - $nil; September 30, 2014 - $18.6 million). |
| (3) | Consists of outstanding common shares and stock options of the Company as at September 30, 2015 and 2014. |
| |
Updated Corporate Presentation
Our updated corporate presentation is available at http://www.alvopetro.com/corporate-presentation.
Alvopetro Energy Ltd.'s vision is to be the premier independent exploration and production company in Brazil, maximizing shareholder value by applying innovation to underexploited opportunities. Our strategy is to focus on three core opportunities including lower risk development drilling on our mature fields, shallow conventional exploration, and the development of the significant hydrocarbon potential present in our deep Gomo resource play.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.
All amounts contained in this news release are in United States dollars, unless otherwise noted.
Forward-Looking Statements and Cautionary Language. This news release contains "forward-looking information" within the meaning of applicable securities laws. The use of any of the words "will", "plan", "intend" and other similar words or expressions are intended to identify forward-looking information. More particularly and without limitation, this news release contains forward-looking information concerning financial results and operating results, reserves and potential hydrocarbons in our assets, exploration and development prospects of Alvopetro and the expected timing of certain of Alvopetro's testing and operational activities. The forward‐looking statements are based on certain key expectations and assumptions made by Alvopetro, including expectations and assumptions concerning testing results, the timing of regulatory licenses and approvals, availability of capital, the success of future drilling and development activities, prevailing commodity prices and economic conditions, the availability of labour and services, the ability to transport and market our production, timing of completion of infrastructure and transportation projects, weather and access to drilling locations. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be incorrect. Actual results achieved during the forecast period will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors. Although Alvopetro believes that the expectations and assumptions on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information because Alvopetro can give no assurance that it will prove to be correct. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect the operations or financial results of Alvopetro are included in our annual information form which may be accessed through the SEDAR website at www.sedar.com. The forward-looking information contained in this news release is made as of the date hereof and Alvopetro undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
Test Results. Any references in this news release to test results, production from testing and performance rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such well will continue production and decline thereafter. Test results are not necessarily indicative of long-term performance of the relevant well or fields or of ultimate recovery of hydrocarbons.
Abbreviations:
Boepd = barrels of oil equivalent per day
Bopd = barrels of oil per day
BOE Disclosure. The term barrels of oil equivalent ("boe") may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet per barrel (6Mcf/bbl) of natural gas to barrels of oil equivalence is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. All boe conversions in this news release are derived from converting gas to oil in the ratio mix of six thousand cubic feet of gas to one barrel of oil.
Non-GAAP Measures. This news release contains financial terms that are not considered measures under Canadian generally accepted accounting principles ("GAAP"), such as funds flow from operations, funds flow per share, net working capital surplus and operating netback. These measures are commonly utilized in the oil and gas industry and are considered informative for management and shareholders. Specifically, funds flow from operations and funds flow per share reflect cash generated from operating activities before changes in non-cash working capital. Management considers funds flow from operations and funds flow per share important as they help evaluate performance and demonstrate the Company's ability to generate sufficient cash to fund future growth opportunities. Net working capital surplus includes current assets (including current restricted cash) less current liabilities and is used to evaluate the Company's financial leverage. Operating netback is determined by dividing oil sales less royalties and production taxes, transportation and operating expenses by sales volume of produced oil. Management considers operating netback important as it is a measure of profitability per barrel sold and reflects the economic quality of production. Funds flow from operations, funds flow per share, net working capital surplus and operating netbacks may not be comparable to those reported by other companies nor should they be viewed as an alternative to cash flow from operations, net income or other measures of financial performance calculated in accordance with GAAP.
