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Alvopetro Announces December 31, 2018 Reserves & Operational Update

CALGARY , March 7, 2019 /CNW/ - Alvopetro Energy Ltd. (TSX-V:ALV; OTCQX: ALVOF) announces our reserves as at December 31, 2018 with total proved plus probable ("2P") reserves of 6.1 MMboe and a before tax value discounted at 10% of US$145.0 million . The reserves data set forth herein is based upon an independent reserve assessment and evaluation prepared by GLJ Petroleum Consultants ("GLJ") dated March 7, 2019 with an effective date of December 31, 2018 (the "GLJ Report").

The majority of Alvopetro's reserves are from the Caburé natural gas field (Alvopetro 49.1% working interest).  The field has four existing wells and the first phase of field production facility construction was completed in 2018.  In 2019 the remaining field production facilities will be built and an additional three to four development wells will be drilled.  Alvopetro's share of gas from the Caburé natural gas field will be shipped via an 11-kilometre transfer pipeline (Alvopetro 100%) to a natural gas processing facility operated by Enerflex under the terms of our September 2018 Gas Treatment Agreement. All gas will then be sold by Alvopetro to Bahiagás under the terms of our May 2018 long-term Gas Sales Agreement.   Alvopetro is awaiting final installation permits for pipeline and facility construction and is targeting all infrastructure to be in place to commence first gas sales in January 2020.  All pipe has been shipped to the field staging area and our pipeline contractor is ready to commence installation upon receipt of regulatory approvals.  Initial equipment for the gas processing facility has been assembled, tested, and will be ready for shipment to Brazil beginning in April.   

On our deep basin Gomo natural gas project (Alvopetro 100% working interest), we have received the environmental license for the stimulation of our 183(1) well.  We are in the process of securing a service rig and expect to complete the stimulation in the second quarter of 2019.

We have also received the permit to drill our Block 57 multi-zone oil prospect.  Drilling will commence based on rig availability and we are currently targeting to spud the well in the second quarter of 2019.

2019 TSX Venture 50

Alvopetro was recently named to the TSX Venture 50, an annual showcase of top performing companies from five industry sectors.  Alvopetro was the top performing 2019 Venture 50 company in the Energy sector, achieving a 169% improvement in market capitalization, a 137% share price change and overall trading volume of 14.9 million shares for the year ended December 31 , 2018.  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 video can also be found at https://www.bnnbloomberg.ca/building-a-natural-gas-business-in-brazil-1.1222308  and https://business.financialpost.com/business-trends/building-a-natural-gas-business-in-brazil.

Alvopetro Energy Ltd. Gross Reserves Summary at December 31, 2018 (1), (2), (3), (4), (5), (6)






Total Proved

Total Proved plus
Probable

Total Proved plus
Probable plus Possible

Conventional Natural Gas (Mboe)

3,485

5,586

8,393

Light & Medium Oil (Mbbl)

175

310

600

Natural Gas Liquids (Mbbl)

118

200

313

Total oil equivalent (Mboe)

3,779

6,096

9,306

Before Tax Net Present Value, discount at 10% (MUS)

$88,981

$144,950

$209,585

After Tax Net Present Value, discounted at 10% (MUS)

$81,025

$130,335

$183,126

(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 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, 2018 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 $155.0 million , reflecting CAD$2.16 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)

$88,981

$144,950

$209,585


Working capital – as at September 30, 2018

4,391

4,391

4,391


Net proceeds from October 16, 2018 equity issuance

3,935

3,835

3,835


Materials and equipment inventory – as at September 30, 2018

1,823

1,823

1,823

Total Net Asset Value(1)

$99,030

$154,999

$219,634

CAD per share(2)

$1.38

$2.16

$3.06

(1)

The long-term liability of $1.7 million as at September 30, 2018 is not included as a separate reduction in the computation of net asset value as these amounts are included as future development costs for the Caburé natural gas field.  Alvopetro is required to reimburse our partner for the majority of our share of joint unit development costs of the Caburé natural gas field on the earlier of March 2020 or commence of production allocations to Alvopetro (which is anticipated to be January 2020).  All existing and future costs to be reimbursed to our partner are therefore considered as future development costs in January 2020 and reduce the overall net present value of reserves of $145.0 million reflected in the table above. 

(2)

Converted to Canadian dollars ("CAD") based on the exchange rate on March 7, 2019. The per share calculation is computed based on 96.7 million common shares outstanding following the October 16, 2018 equity issuance.

 

December 31, 2018 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), (3), (6), (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

24

20

-

-

-

-

24

20


Undeveloped

148

139

20,911

18,401

118

104

3,752

3,310

Total Proved

175

162

20,911

18,401

118

104

3,779

3,333


Probable

135

125

12,607

11,098

81

72

2,318

2,047

Total Proved plus Probable

310

287

33,519

29,499

200

176

6,096

5,379


Possible

290

270

16,839

14,804

113

99

3,209

2,837

Total Proved plus Probable plus
Possible

600

557

50,357

44,303

313

275

9,306

8,216

 

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

-

-

-

-

-

-

24

20

24

20


Undeveloped

3,227

2,836

376

335

148

139

-

-

3,752

3,310

Total Proved

3,227

2,836

376

335

148

139

27

23

3,779

3,333


Probable

1,387

1,219

796

703

121

113

14

12

2,318

2,047

Total Proved plus Probable

4,614

4,055

1,172

1,038

269

252

41

35

6,096

5,379


Possible

1,584

1,392

1,335

1,174

274

257

16

14

3,209

2,837

Total Proved plus Probable
plus Possible

6,198

5,447

2,507

2,212

542

509

57

48

9,306

8,216

 

Summary of Before Tax Net Present Value of Future Net Revenue - MUS (1), (2), (3), (4), (5), (6), (7)

Company Total








Undiscounted

5%

10%

15%

20%

Proved







Proved Producing

(641)

(587)

(546)

(513)

(486)


Proved Developed Non-Producing

199

195

184

169

154


Proved Undeveloped

125,089

105,225

89,343

76,572

66,205

Total Proved

$124,647

$104,834

$88,981

$76,228

$65,872


Probable

109,221

76,830

55,969

41,949

32,183

Total Proved plus Probable

$233,868

$181,663

$144,950

$118,177

$98,056


Possible

176,700

101,048

64,635

44,317

31,873

Total Proved plus Probable plus Possible

$410,569

$282,712

$209,585

$162,494

$129,928

 

By Field








Undiscounted

5%

10%

15%

20%

Proved







Caburé Natural Gas Field 

115,615

97,823

83,605

72,108

62,708


Gomo Gas Field

5,638

4,304

3,256

2,477

1,900


Bom Lugar Oil Field

3,378

2,651

2,045

1,560

1,178


Mãe-da-lua Oil Field

16

55

75

83

85

Total Proved

$124,647

$104,834

$88,981

$76,228

$65,872

Proved Plus Probable







Caburé Natural Gas Field

184,030

147,011

119,532

98,732

82,702


Gomo Gas Field

40,331

27,043

19,294

14,470

11,271


Bom Lugar Oil Field

9,115

7,205

5,731

4,603

3,734


Mãe-da-lua Oil Field

393

404

394

373

349

Total Proved Plus Probable

$233,868

$181,663

$144,950

$118,177

$98,056

Proved Plus Probable Plus Possible







Caburé Natural Gas Field

268,328

200,635

154,413

121,885

98,358


Gomo Gas Field

121,266

65,744

42,261

30,240

23,124


Bom Lugar Oil Field

20,110

15,509

12,147

9,669

7,807


Mãe-da-lua Oil Field

865

824

764

700

639

Total Proved Plus Probable Plus Possible

$410,569

$282,712

$209,585

$162,494

$129,928

 

Summary of After Tax Net Present Value of Future Net Revenue – MUS (1), (2), (3), (4), (5), (6), (7) ,(8), (9)








Undiscounted

5%

10%

15%

20%

Proved







Proved Producing

(641)

(587)

(546)

(513)

(486)


Proved Developed Non-Producing

199

195

184

169

154


Proved Undeveloped

114,312

96,017

81,386

69,629

60,093

Total Proved

$113,870

$95,625

$81,025

$69,286

$59,760


Probable

93,561

66,860

49,310

37,364

28,967

Total Proved plus Probable

$207,432

$162,485

$130,335

$106,650

$88,727


Possible

138,895

81,570

52,792

36,328

26,099

Total Proved plus Probable plus Possible

$346,326

$244,055

$183,126

$142,978

$114,826


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 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)

There are currently four existing wells drilled within the unit area of the Caburé natural gas field and two wells drilled within the Gomo gas field.  However, all reserves associated with these fields are classified as Proved Undeveloped or Probable Undeveloped due to the required construction of the pipeline and the gas processing facility.

(4)

GLJ's December 31, 2018 escalated price forecast is used in the determination of future gas sales prices under Alvopetro's long-term gas sales agreement.

(5)

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.

(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

(7)

MUS = 000's of U.S. dollars.

(8)

Mbbl = thousands of barrels

(9)

MMcf = Million cubic feet

 

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

2019


$5,040

$5,040

$5,040

2020


13,653

15,678

19,636

2021


2,167

2,167

2,167

2022


2,706

4,829

4,829

2023


6,731

6,731

6,731

Remaining Years


9,492

11,801

13,827

Total Undiscounted


$39,789

$46,246

$52,230


Notes:

(1)MUS = 000's of U.S. dollars.

 

By Field









MUS(1), Undiscounted

2019

2020

2021

2022

2023

Remaining

Total

Proved









Caburé Natural Gas Field 

$4,340

$8,146

$1,730

$1,730

$6,276

$8,555

$30,777


Gomo Gas Field

700

1,989

437

976

455

937

5,494


Bom Lugar Oil Field

-

3,083

-

-

-

-

3,083


Mãe-da-lua Oil Field

-

435

-

-

-

-

435

Total Proved

$5,040

$13,653

$2,167

$2,706

$6,731

$9,492

$39,789

Proved Plus Probable









Caburé Natural Gas Field

$4,340

$8,146

$1,730

$1,730

$6,276

$9,890

$32,112


Gomo Gas Field

700

3,274

437

3,099

455

1,911

9,876


Bom Lugar Oil Field

-

3,823

-

-

-

-

3,823


Mãe-da-lua Oil Field

-

435

-

-

-

-

435

Total Proved Plus Probable

$5,040

$15,678

$2,167

$4,829

$6,731

$11,801

$46,246

Proved Plus Probable Plus Possible









Caburé Natural Gas Field

$4,340

$8,146

$1,730

$1,730

$6,276

$10,380

$32,602


Gomo Gas Field

700

3,274

437

3,099

455

3,477

11,412


Bom Lugar Oil Field

-

7,781

-

-

-

-

7,781


Mãe-da-lua Oil Field

-

435

-

-

-

-

435

Total Proved Plus Probable Plus Possible

$5,040

$19,636

$2,167

$4,829

$6,731

$13,827

$52,230

Notes:

(1)MUS = 000's of U.S. dollars.

 

Future development costs for Caburé are consistent amongst all three reserve categories and include costs for the 11‑kilometre transfer pipeline construction in 2019, the payments for full field development in 2020. 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 stimulation of the 183-1 well, and the pipeline and field facility development to tie-in the 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










(Undiscounted)

 

Revenue
(MUS)

Royalties  
(MUS)

 

Operating
Costs
(MUS)

Develop-
ment
Costs
(MUS)

Abandon-
ment and
Reclamation
Costs
(MUS)

Future Net
Revenue Before
Income
Taxes
(MUS)

Future
Income
Taxes
(MUS)

Future Net
Revenue After
Income Taxes
(MUS)










Total Proved

220,779

23,248

30,066

39,789

3,029

124,647

10,777

113,870

Total Proved plus Probable

374,876

39,413

51,848

46,246

3,501

233,868

26,437

207,432

Total Proved plus Probable
plus Possible

614,004

64,527

82,527

52,230

4,152

410,569

62,242

346,326

 

Reconciliation of Alvopetro's Gross Reserves (Before Royalty) (1), (2), (3), (4)








Proved
(Mboe)

Probable
(Mboe)

Proved Plus
Probable
(Mboe)

Possible

(Mboe)

Proved plus
Probable plus
Possible

(Mboe)

December 31, 2017

-

697

697

172

869

Discoveries

3,603

2,183

5,786

2,920

8,706

Extensions

148

(115)

33

209

242

Improved Recovery

31

14

46

16

62

Technical Revisions

1

(271)

(270)

(59)

(328)

Disposition

-

(191)

(191)

(48)

(239)

Production

(5)

-

(5)

-

(5)

December 31, 2018

3,779

2,317

6,096

3,210

9,306

 

Notes:

(1)

Gross Reserves means the Company's working interest reserves before calculation of royalties.

(2)

Based on the GLJ price forecast effective December 31, 2018.

(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

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, 2018 will be contained in the Company's annual information form for the year ended December 31, 2018 which will be filed on SEDAR (www.sedar.com) on or before April 30 , 2019.  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, 2018 . The reserves definitions used in this evaluation are the standards defined by COGEH reserve definitions and 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:

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

MUS

=

000's 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 reserves, exploration and development prospects of Alvopetro and the expected timing and outcomes 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 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.

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.

SOURCE Alvopetro Energy Ltd.


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