CALGARY, March 9, 2020 - Alvopetro Energy Ltd. (TSX-V:ALV; OTCQX: ALVOF) announces our reserves as at December 31, 2019 with total proved plus probable ("2P") reserves of 7.9 MMboe and a before tax value discounted at 10% of US$198.2 million, increases of 30% and 37% respectively. The reserves data set forth herein is based on an independent reserve assessment and evaluation prepared by GLJ Petroleum Consultants ("GLJ") dated March 6, 2020 with an effective date of December 31, 2019 (the "GLJ Report").
December 31, 2019 Reserve Report Highlights
Both proved reserves and proved plus probable reserves increased 30% to 4.9 mmboe and 7.9 mmboe respectively, primarily due to technical revisions on reserves from the Caburé unitized natural gas field to reflect results of the three new wells drilled in the unit in 2019.
Proved plus probable net present value before tax discounted at 10% increased 37% to $198.2 million.
Year over year, net asset value per share increased by 21% to CAD$2.61/share (US$1.94/share).
Corey Ruttan, President and Chief Executive Officer, commented:
"Alvopetro's independent 2019 reserves evaluation reflects the strong results from three new Cabure Unit development wells drilled in 2019 and the higher than anticipated condensate yields achieved from our Gomo 183(1) well test late in 2019. The 30% increase in proved plus probable reserves resulted in a large increase in shareholder value represented by a 37% increase in reserve value and a 21% increase in net asset value per share. We look forward to commencing natural gas production and cash flow from our Caburé project next quarter."
Operational Update
Caburé Unit Development (49.1% Alvopetro)
The majority of Alvopetro's reserves are from the Caburé natural gas field (Alvopetro 49.1% working interest). There were three new wells drilled in 2019 and the field now has a total of seven wells. Six of the wells are now tied into recently expanded production facilities and are ready to deliver Alvopetro's share of natural gas into our Midstream Project. The Unit has a planned gross production plateau rate of 450,000 cubic metres per day (15.9 mmcfpd).
Caburé Midstream Project (100% Alvopetro)
Our Caburé Midstream Project includes construction of an 11-kilometre Transfer Pipeline and a Gas Treatment Facility ("Facility"). Construction of the Transfer Pipeline was completed in January and is now tied-into the Caburé Unit production facilities. The Facility is being constructed by Enerflex Ltd. ("Enerflex"). The construction of the Facility is complete and pre-commissioning work has commenced.
Our natural gas will be sold under our long-term gas sales agreement with Bahiagás, the local distribution company for the state of Bahia. As part of this agreement, Bahiagás agreed to extend their distribution network by 15 kilometres and construct a new gas receiving station (City Gate) at the Facility site. Bahiagas expects to complete their projects in the second quarter of 2020, at which time Alvopetro plans to start natural gas deliveries from the Caburé field.
Deep Basin Gomo Natural Gas Project (100% Alvopetro)
On our deep basin Gomo natural gas project, we completed the stimulation and initial production test of our 183(1) well in January. We expect to retrieve the downhole gauges and complete the pressure transient analysis from this initial test later in March. We are finalizing our permit application to extend our Transfer Pipeline eight kilometres to the north to tie-in the 183(1) well. We expect to commence construction on this pipeline extension in the second half of 2020.
2020 TSX Venture 50
Alvopetro was recently named to the TSX Venture 50, for the second year in a row. The TSX Venture 50 is an annual showcase of top performing companies from five industry sectors. Alvopetro was the top performer in the Energy sector in 2018, and the sixth best in 2019. Alvopetro's share price increased 137% in 2018 and 88% in 2019. A full listing of all TSX Venture 50 ranked companies and a profile video can be found by visiting www.tsx.com/venture50. A direct link to Alvopetro's Venture 50 video can be found at https://www.youtube.com/watch?v=p9iMJ-u-9ds.
Alvopetro Energy Ltd. Gross Reserves Summary at December 31, 2019(1), (2), (3), (4), (5), (6)
Total Proved
Total Proved plus Probable
Total Proved plus Probable plus Possible
Conventional Natural Gas (Mboe)
4,399
6,936
9,710
Light & Medium Oil (Mbbl)
171
306
595
Natural Gas Liquids (Mbbl)
353
664
1,085
Total oil equivalent (Mboe)
4,923
7,906
11,390
Before Tax Net Present Value, discount at 10% (MUS)
$129,860
$198,226
$263,036
After Tax Net Present Value, discounted at 10% (MUS)
$120,422
$176,939
$225,284
(1)
Gross Reserves means the Company's working interest reserves before calculation of royalties.
(2)
The tables above are a summary of the reserves of Alvopetro and the net present value of future net revenue attributable to such reserves as evaluated in the GLJ Report based on forecast price and cost assumptions. The tables summarize the data contained in the GLJ Report and as a result may contain slightly different numbers than such report due to rounding. Also due to rounding, certain columns may not add exactly.
(3)
MUS = 000's of U.S. dollars.
(4)
Mbbl = thousands of barrels
(5)
Mboe = thousands of barrels of oil equivalent
(6)
Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves
Net Asset Value
Following the December 31, 2019 reserves evaluation, based on the before tax net present value of Alvopetro's proved plus probable reserves, our total net asset value has increased to $191.1 million, reflecting CAD$2.61 per common share outstanding.
Net Asset Value (in MUS, other than per share amounts)
Total Proved
Total Proved plus Probable
Total Proved plus Probable plus Possible
Before Tax Net Present Value, discounted at 10% (MUS)
$129,860
$198,226
$263,036
Cash and cash equivalents – as at December 31, 2019(1)
1,215
1,215
1,215
Credit facility balance outstanding – as at December 31, 2019(1)
(5,027)
(5,027)
(5,027)
Non-cash working capital deficit – as at September 30, 2019(2)
(4,750)
(4,750)
(4,750)
Materials and equipment inventory – as at September 30, 2019(2)
1,387
1,387
1,387
Total Net Asset Value
$122,685
$191,051
$255,861
CAD per share(3)
$1.67
$2.61
$3.49
(1)
Balance based on preliminary balance at December 31, 2019 (unaudited). Subject to change following conclusion of the Company's year-end audit.
(2)
Balance as at September 30, 2019 (unaudited). Amounts will be updated following conclusion of the Company's 2019 year-end audit.
(3)
Converted to Canadian dollars ("CAD") based on the exchange rate on March 6, 2020. The per share calculation is computed based on 98.3 million common shares outstanding as of March 6, 2020.
December 31, 2019 Reserves
The GLJ Report has been prepared in accordance with the standards contained in the Canadian Oil and Gas Evaluation Handbook ("COGEH") that are consistent with the standards of National Instrument 51-101 ("NI 51-101"). GLJ is a qualified reserves evaluator as defined in NI 51-101. The GLJ Report was an evaluation of all reserves of Alvopetro including our Caburé and Caburé Leste natural gas fields (collectively referred to as our Caburé natural gas field), the Gomo natural gas from the drainage areas around our 183(1) and 197(1) wells, as well as our Bom Lugar and Mãe-da-lua oil fields.
Summary of Reserves (1), (2), (5), (7), (8), (9)
Company Total
Light & Medium Oil
Conventional Natural Gas
Natural Gas Liquids
Oil Equivalent
Company Gross
Company Net
Company Gross
Company Net
Company Gross
Company Net
Company Gross
Company Net
(Mbbl)
(Mbbl)
(MMcf)
(MMcf)
(Mbbl)
(Mbbl)
(Mboe)
(Mboe)
Proved
Producing
3
2
-
-
-
-
3
2
Developed Non-Producing
21
18
24,424
21,464
269
236
4,361
3,832
Undeveloped
147
138
1,971
1,754
84
75
560
505
Total Proved
171
158
26,394
23,218
353
311
4,923
4,339
Probable
135
125
15,220
13,394
311
274
2,983
2,632
Total Proved plus Probable
306
284
41,614
36,612
664
585
7,906
6,971
Possible
289
269
16,646
14,636
421
370
3,484
3,079
Total Proved plus Probable plus Possible
595
553
58,260
51,248
1,085
956
11,390
10,050
By Field
Caburé Natural Gas Field
Gomo Gas Field
Bom Lugar Oil Field
Mãe-da-lua Oil Field
Total
Company Gross
Company Net
Company Gross
Company Net
Company Gross
Company Net
Company Gross
Company Net
Company Gross
Company Net
(Mboe)
(Mboe)
(Mboe)
(Mboe)
(Mboe)
(Mboe)
(Mboe)
(Mboe)
(Mboe)
(Mboe)
Proved
Producing
-
-
-
-
-
-
3
2
3
2
Developed Non-Producing
4,340
3,814
-
-
-
-
21
18
4,361
3,832
Undeveloped
-
-
412
367
147
138
-
-
560
505
Total Proved
4,340
3,814
412
367
147
138
24
20
4,923
4,339
Probable
1,902
1,671
946
835
121
113
14
12
2,983
2,632
Total Proved plus Probable
6,241
5,485
1,358
1,202
268
251
38
32
7,906
6,971
Possible
1,629
1,432
1,566
1,378
273
256
16
14
3,484
3,079
Total Proved plus Probable plus Possible
7,871
6,917
2,924
2,580
541
507
55
46
11,390
10,050
Summary of Before Tax Net Present Value of Future Net Revenue - MUS (1), (2), (3), (4), (5), (6), (7), (9)
Company Total
Undiscounted
5%
10%
15%
20%
Proved
Producing
(156)
(138)
(123)
(110)
(99)
Developed Non-Producing
171,281
144,221
123,179
106,615
93,404
Undeveloped
11,301
8,740
6,804
5,330
4,190
Total Proved
$182,426
$152,823
$129,860
$111,835
$97,496
Probable
143,825
97,292
68,366
49,700
37,231
Total Proved plus Probable
$326,252
$250,115
$198,226
$161,535
$134,727
Possible
189,951
104,410
64,810
43,764
31,459
Total Proved plus Probable plus Possible
$516,202
$354,525
$263,036
$205,299
$166,186
By Field
Undiscounted
5%
10%
15%
20%
Proved
Caburé Natural Gas Field
171,084
144,026
122,990
106,433
93,229
Gomo Gas Field
8,020
6,169
4,832
3,855
3,127
Bom Lugar Oil Field
3,280
2,572
1,972
1,475
1,063
Mãe-da-lua Oil Field
41
57
66
73
76
Total Proved
$182,426
$152,823
$129,860
$111,835
$97,496
Proved Plus Probable
Caburé Natural Gas Field
266,189
207,981
166,679
136,818
114,733
Gomo Gas Field
50,870
34,682
25,483
19,761
15,930
Bom Lugar Oil Field
8,792
7,050
5,668
4,570
3,692
Mãe-da-lua Oil Field
401
402
396
385
372
Total Proved Plus Probable
$326,252
$250,115
$198,226
$161,535
$134,727
Proved Plus Probable Plus Possible
Caburé Natural Gas Field
350,739
258,081
196,921
155,515
126,556
Gomo Gas Field
145,175
80,467
53,328
39,393
31,077
Bom Lugar Oil Field
19,444
15,163
12,013
9,656
7,857
Mãe-da-lua Oil Field
844
813
775
735
696
Total Proved Plus Probable Plus Possible
$516,202
$354,525
$263,036
$205,299
$166,186
Summary of After Tax Net Present Value of Future Net Revenue – MUS (1), (2), (3), (4), (5), (6), (7) ,(8), (9), (10)
Undiscounted
5%
10%
15%
20%
Proved
Producing
(156)
(138)
(123)
(110)
(99)
Developed Non-Producing
158,265
133,712
114,547
99,414
87,313
Undeveloped
10,136
7,780
5,997
4,639
3,591
Total Proved
$168,245
$141,355
$120,422
$103,944
$90,805
Probable
117,395
80,141
56,517
41,103
30,734
Total Proved plus Probable
$285,641
$221,496
$176,939
$145,047
$121,539
Possible
135,808
76,523
48,345
33,112
24,081
Total Proved plus Probable plus Possible
$421,449
$298,019
$225,284
$178,158
$145,620
Notes:
(1)
The tables above are a summary of the reserves of Alvopetro and the net present value of future net revenue attributable to such reserves as evaluated in the GLJ report based on forecast price and cost assumptions. The tables summarize the data contained in the GLJ Report and as a result may contain slightly different numbers than such report due to rounding. Also due to rounding, certain columns may not add exactly.
(2)
Company Gross reserves means the total working interest share of remaining recoverable reserves owned by Alvopetro before deductions of royalties payable to others and without including any royalty interests owned by Alvopetro.
(3)
GLJ's December 31, 2019 escalated price forecast is used in the determination of future gas sales prices under Alvopetro's long-term gas sales agreement. See https://www.gljpc.com/sites/default/files/pricing/jan20.pdf for GLJ's price forecast.
(4)
The net present value of future net revenue attributable to Alvopetro's reserves is stated without provision for interest costs and general and administrative costs, but after providing for estimated royalties, production costs, development costs, other income, future capital expenditures, well abandonment and reclamation costs for only those wells assigned reserves and material dedicated gathering systems and facilities. The net present values of future net revenue attributable to the Alvopetro's reserves estimated by GLJ do not represent the fair market value of those reserves. Other assumptions and qualifications relating to costs, prices for future production and other matters are summarized herein. The recovery and reserve estimates of the Company's reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual reserves may be greater than or less than the estimates provided herein.
(5)
Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves
(6)
MUS = 000's of U.S. dollars.
(7)
Mbbl = thousands of barrels
(8)
MMcf = Million cubic feet
(9)
Gomo Gas Field reserves as at December 31, 2019 incorporate the condensate yields experienced during the 183(1) partial well test clean up flow period up to the end of 2019. As testing activities continued into 2020 and are ongoing, these results, once finalized, including pressure transient analysis and long-term production testing, will be incorporated into future reserve reports.
(10)
Assumes a production start date of May 1, 2020.
Future Development Costs
The table below sets out the total development costs deducted in the estimation in the GLJ Report of future net revenue attributable to proved reserves, proved plus probable reserves and proved plus probable plus possible reserves (using forecast prices and costs). Total development costs include capital costs for drilling and facilities but excludes abandonment and reclamation costs.
Company Total
Forecast Prices and Costs
MUS(1), Undiscounted
Proved Reserves
Proved Plus Probable Reserves
Proved Plus Probable Plus Possible Reserves
2020
$8,383
$10,368
$10,368
2021
2,923
2,923
2,923
2022
2,167
2,167
6,204
2023
7,163
9,286
9,286
2024
2,185
2,185
2,185
Remaining Years
7,615
10,646
16,422
Total Undiscounted
$30,436
$37,574
$47,388
Notes:
(1)MUS = 000's of U.S. dollars.
By Field
MUS(1), Undiscounted
2020
2021
2022
2023
2024
Remaining
Total
Proved
Caburé Natural Gas Field
$3,133
$1,730
$1,730
$6,187
$1,730
$7,151
$21,661
Gomo Gas Field
1,800
1,193
437
976
455
464
5,325
Bom Lugar Oil Field
3,023
-
-
-
-
-
3,023
Mãe-da-lua Oil Field
427
-
-
-
-
-
427
Total Proved
$8,383
$2,923
$2,167
$7,163
$2,185
$7,615
$30,436
Proved Plus Probable
Caburé Natural Gas Field
$3,133
$1,730
$1,730
$6,187
$1,730
$9,227
$23,737
Gomo Gas Field
3,060
1,193
437
3,099
455
1,419
9,663
Bom Lugar Oil Field
3,748
-
-
-
-
-
3,748
Mãe-da-lua Oil Field
427
-
-
-
-
-
427
Total Proved Plus Probable
$10,368
$2,923
$2,167
$9,286
$2,185
$10,646
$37,574
Proved Plus Probable Plus Possible
Caburé Natural Gas Field
$3,133
$1,730
$1,730
$6,187
$1,730
$12,975
$27,485
Gomo Gas Field
3,060
1,193
437
3,099
455
3,447
11,691
Bom Lugar Oil Field
3,748
-
4,037
-
-
-
7,785
Mãe-da-lua Oil Field
427
-
-
-
-
-
427
Total Proved Plus Probable Plus Possible
$10,368
$2,923
$6,204
$9,286
$2,185
$16,422
$47,388
Notes:
(1)MUS = 000's of U.S. dollars.
Under each reserve category, Alvopetro has elected to reflect 100% of the contractual obligations pursuant to our September 2018 Gas Treatment Agreement with Enerflex, including all operating, capital and related financing costs for the full duration of the agreement. Future development costs for additional compression at the Caburé field are included in 2023. The future development costs for the Gomo field in the proved category are for the pipeline and field facility development to tie-in the 183(1) well to Alvopetro's midstream assets. In the probable and possible categories, there are future development costs for the stimulation and tie-in of the 197-1 well, and future field compression. The future development costs for Bom Lugar in the proved category include costs for a directional wellbore and facilities upgrade. A second directional well is included in the future development costs for the possible category for Bom Lugar. Future development costs at the Mãe-da-lua relate to a stimulation of the existing producing well, planned in 2020.
Total Future Net Revenue (Undiscounted) – Forecast Prices and Costs
Gross Reserves means the Company's working interest reserves before calculation of royalties.
(2)
Based on the GLJ price forecast effective December 31, 2019.
(3)
Mboe = Thousand barrels of oil equivalent
(4)
Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum or proved plus probable plus possible reserves
Corporate Presentation
Alvopetro's updated corporate presentation is available on our website at: http://www.alvopetro.com/corporate-presentation.
Alvopetro Energy Ltd.'s vision is to become a leading independent upstream and midstream operator in Brazil. Our strategy is to unlock the on-shore natural gas potential in the state of Bahia in Brazil, building off the development of our Caburé natural gas field and the construction of strategic midstream infrastructure.
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, except as otherwise noted.
Oil and Natural Gas Reserves. The disclosure in this news release summarizes certain information contained in the GLJ Report but represents only a portion of the disclosure required under NI 51-101. Full disclosure with respect to the Company's reserves as at December 31, 2019 will be contained in the Company's annual information form for the year ended December 31, 2019 which will be filed on SEDAR (www.sedar.com) on or before April 30, 2020. All net present values in this press release are based on estimates of future operating and capital costs and GLJ's forecast prices as of December 31, 2019. The reserves definitions used in this evaluation are the standards defined by COGEH reserve definitions and are consistent with NI 51?101 and used by GLJ. The net present values of future net revenue attributable to the Alvopetro's reserves estimated by GLJ do not represent the fair market value of those reserves. Other assumptions and qualifications relating to costs, prices for future production and other matters are summarized herein. The recovery and reserve estimates of the Company's reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual reserves may be greater than or less than the estimates provided herein. Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves.
Abbreviations: CAD$ = Canadian dollars Mboe = thousand barrels of oil equivalent MMbtu = million British Thermal Units MMcf = million cubic feet MMcf/d = million cubic feet per day MMboe = million barrels of oil equivalent MMUS = millions of U.S. dollars MUS = thousands of U.S. dollars
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.
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", "expect", "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 the plans relating to the Company's operational activities, the expected timing of commencement of gas sales under Alvopetro's long-term gas sales agreement, the Company's reserves, exploration and development prospects of Alvopetro and the expected timing and outcomes of certain of Alvopetro's testing activities. The forward?looking statements are based on certain key expectations and assumptions made by Alvopetro, including but not limited to the timing of regulatory licenses and approvals, the success of future drilling, completion, recompletion and development activities, the outlook for commodity markets and ability to access capital markets, the performance of producing wells and reservoirs, well development and operating performance, general economic and business conditions, weather and access to drilling locations, the availability and cost of labour and services, environmental regulation, including regulation relating to hydraulic fracturing and stimulation, the ability to monetize hydrocarbons discovered, the regulatory and legal environment and other risks associated with oil and gas operations. 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.
