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Alvopetro Announces Operational Update, Year-End 2018 Financial Results and Filing of Annual Information Form

CALGARY , March 21, 2019 /CNW/ - Alvopetro Energy Ltd. (TSX-V:ALV; OTCQX: ALVOF) announces our year-end 2018 financial results, the filing of our annual information form and an operational update.

December 31, 2018 Reserves and Net Asset Values

On March 7, 2019 , Alvopetro announced its December 31, 2018 reserves based upon the independent reserve assessment and evaluation prepared by GLJ Petroleum Consultants ("GLJ") dated March 7, 2019 (the "GLJ Report"). The GLJ Report assigned total provided plus probable reserves ("2P") reserves of 6.1 MMboe and a before tax value discounted at 10% of US$145.0 million . Following this evaluation and based on the updated year-end 2018 financial results, the Company's net asset value based on its 2P reserves is US$153.6 million , reflecting CAD$2.12 per common share.


Net Asset Value ($MUS, other than per share amounts)


Total Proved

Total Proved plus

Total Proved plus
Probable plus

Before Tax Net Present Value(1), discounted at 10%




Net working capital surplus(2) – as at Dec. 31, 2018




Materials and equipment inventory – as at Dec. 31, 2018




Total Net Asset Value(3)




CAD per share(4)





See "Oil and Natural Gas Reserves" section within this news release


Non-GAAP measure.  See "Non-GAAP Measures" section within this news release.


The long-term liability of $2.3 million as at December 31, 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 within 30 days of the earlier of commencement of production allocations to Alvopetro (which is anticipated to be January 2020) and March 31, 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 reflected in the table above. 


Converted to Canadian dollars ("CAD") based on the exchange rate on March 20, 2019 of CAD$1.3317 to US$1. The per share calculation is computed based on 96.7 million common shares outstanding as at December 31, 2018.


$MUS = thousands of U.S. dollars


Operational Update

In 2019, Alvopetro will be focused on executing the planned development for the Caburé natural gas field and anticipates approximately $3.7 million in cash capital expenditures for Caburé, largely with respect to the construction of our 100% owned 11-kilometre transfer pipeline from the Caburé unit to the natural gas processing facility.  Additional activities in 2019 include the construction of the remaining field production facilities and drilling three to four additional development wells as part of our joint unit field development (Alvopetro 49.1%).  The majority of Alvopetro's share of these joint unit development costs (estimated at $7.0 million ) is not payable until 30 days after Alvopetro commences production allocations or March 31, 2020 , whichever occurs first. Alvopetro is awaiting final installation permits for pipeline and facility construction and we are expecting to start field construction early in the second quarter of 2019 and targeting to have all infrastructure 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.  

We have received the environmental license for the stimulation of our 183(1) well which is part of our deep basin Gomo natural gas project (Alvopetro 100% working interest).  We are in the process of securing a service rig and expect to complete the stimulation in the second quarter of 2019 at an estimated cost of $0.8 million .

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. Alvopetro has a 65% working interest on this block and anticipates costs of $0.7 million in 2019 for our share of this well.

Financial and Operating Highlights - Fourth Quarter 2018

  • In October 2018 , we completed a private placement for net proceeds of $3.8 million , issuing 11,504,000 common shares and 3,676,000 warrants, with each warrant entitling the holder to acquire one common share at an exercise price of $0.50 per share ( CAD$0.64 per share). Three insiders of the Company participated in the Private Placement, subscribing for 860,000 common shares and 215,000 warrants.
  • Our production decreased to 11 bopd in the fourth quarter, a 42% decrease from the third quarter as our Bom Lugar well was offline for much of the quarter due to a workover and other maintenance. Production expenses of $0.2 million included $0.1 million in workover and maintenance costs on this well, contributing to higher production expenses per barrel in the quarter. Due to continuing wellbore problems, this well was shut-in and will be abandoned in 2019.
  • We reported a net loss of $1.4 million in the fourth quarter, which included total impairment charges of $0.6 million as a result of impairments booked on our E&E assets. Negative funds flow from operations decreased to $0.8 million in the fourth quarter due to reduced oil sales and increased G&A and production expenses.
  • Capital expenditures in the fourth quarter of $1.2 million include $0.6 million in respect of Alvopetro's 49.1% share of Caburé joint unit development costs, Caburé midstream expenditures of $0.3 million and capitalized G&A of $0.3 million .
  • Our cash, restricted cash and working capital resources total $6.7 million , including cash and cash equivalents of $7.1 million . Long-term liabilities of $2.3 million at December 31, 2018 relate to our share of Caburé unit development costs incurred to December 31, 2018 . Under the terms of the Unit Operating Agreement ("UOA"), these costs are initially funded by our partner and are to be repaid by Alvopetro no later than 30 days after the earlier of when we commence production allocations or March 31, 2020 .

Financial and Operating Highlights – Year-End 2018

  • In 2018, we made considerable progress in the commercialization of our natural gas assets within Brazil through the completion of the unitization process for the Caburé natural gas field with the execution of the UOA and the unit development plan in April 2018 , the execution of the long-term gas sales agreement with Bahiagás, the Bahia state natural gas distribution company, in May 2018 ; and the execution of the Gas Treatment Agreement with Enerflex Ltd. in September 2018 .
  • Capital expenditures of $5.3 million in 2018 included Caburé joint unit development costs of $2.7 million , expenditures of $0.8 million for testing the 183(1) well, and midstream expenditures on pipeline and permitting of $0.5 million , along with capitalized G&A of $1.1 million .
  • The net loss for the year ended December 31, 2018 improved to $4.3 million compared to $7.1 million in 2017, largely due to reduced impairment charges of $0.8 million in 2018 compared to $3.7 million in 2017.

Summary of Q4 2018 and Year-End 2018 Results

The following table provides a summary of Alvopetro's financial and operating results for the periods noted. The audited 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 System for Electronic Document Analysis and Retrieval (SEDAR) website at www.sedar.com. The summary of annual and quarterly results contained in this news release represents a comparison of the respective periods ended December 31, 2018 and December 31, 2017 .


Three months ended
December 31,

Twelve months ended
December 31,






($000s, except where noted)

Oil sales





Net loss





Per share   – basic and diluted ($)(1)





Funds flow from operations (2)





Per share   – basic and diluted ($)(1)





Capital expenditures(3)





Total assets





Long-term liabilities





Net working capital surplus (2) (4)





Common shares outstanding, end of year (000s)






Diluted (1)






Operating netback ($/bbl) (2)

Brent benchmark price










Sales price





Transportation expenses





Realized sales price





Royalties and production taxes





Production expenses





Operating netback





Average daily crude oil production (bopd)







Consists of outstanding common shares, stock options, and warrants of the Company.


Non-GAAP measure. See "Non-GAAP Measures" section within this news release.


Includes non-cash capital expenditures of $0.6 million in the three months ended December 31, 2018 (December 31, 2017 - $nil) and $2.7 million in the year ended December 31, 2018 (December 31, 2017 - $0.4 million).


Includes current restricted cash of $0.1 million (December 31, 2017 - $0.1 million), assets held for sale of $0.2 million (December 31, 2017 - $0.2 million) and current portion of decommissioning liabilities of $0.07 million (December 31, 2017 - $0.02 million).


Updated Corporate Presentation

Alvopetro's updated corporate presentation is available at: http://www.alvopetro.com/corporate-presentation.

Annual Information Form

Alvopetro has filed its annual information form (AIF) with the Canadian securities regulators on SEDAR. The AIF includes the disclosure and reports relating to oil and gas reserves data and other oil and gas information required pursuant to National Instrument 51-101 of the Canadian Securities Administrators.  The AIF may be accessed electronically from at www.sedar.com.

Alvopetro Energy Ltd.'s vision is to become a leading independent oil and natural gas 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.  Our efforts in the near-term are concentrated on concurrently finalizing a long-term natural gas sales contract and a mandatory unitization process.

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.

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 National Instrument 51-101.  Full disclosure with respect to the Company's reserves as at December 31, 2018 is contained in the Company's annual information form for the year ended December 31, 2018 which has been filed on SEDAR (www.sedar.com).  All net present values in this press release are based on estimates of future production 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 Canadian Oil and Gas Evaluation Handbook reserve definitions and consistent with National Instrument 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




barrels of oil per day



thousand barrels of oil equivalent



million British Thermal Units



million cubic feet



million cubic feet per day



million barrels of oil equivalent



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.

Non-GAAP Measures. This news release contains financial terms that are not considered measures under International Financial Reporting Standards ("IFRS"), 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 excluding 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 and assets held for sale) less current liabilities and is used to evaluate the Company's financial resources. Operating netback is determined by dividing oil sales less royalties and production taxes, transportation and production 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 IFRS. For more information with respect to financial measures which have not been defined by GAAP, including reconciliations to the closest comparable GAAP measure, see the "Non-GAAP Measures" section of the Company's MD&A which may be accessed through the SEDAR website at www.sedar.com.

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.

SOURCE Alvopetro Energy Ltd.

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