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$2.12 per common
share.
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|
|
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Net Asset Value ($MUS, other than per share amounts)
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Total Proved
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Total Proved plus
Probable
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Total Proved plus
Probable plus
Possible
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Before Tax Net Present Value(1), discounted at 10%
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$88,981
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$144,950
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$209,585
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Net working capital surplus(2) – as at Dec. 31, 2018
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6,729
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6,729
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6,729
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Materials and equipment inventory – as at Dec. 31, 2018
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1,910
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1,910
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1,910
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Total Net Asset Value(3)
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$97,620
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$153,589
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$218,224
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CAD per share(4)
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$1.34
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$2.12
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$3.01
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(1)
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See "Oil and Natural Gas Reserves" section within this news
release
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(2)
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Non-GAAP measure. See "Non-GAAP Measures" section within this news
release.
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(3)
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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.
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(4)
|
Converted to Canadian dollars ("CAD") based on the exchange rate on March
20, 2019 of CAD$1.3317 to US$1. The per share calculation is computed based on 96.7 million common shares outstanding as
at December 31, 2018.
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(5)
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$MUS = thousands of U.S. dollars
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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.
SELECTED QUARTERLY AND ANNUAL RESULTS
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Three months ended
December 31,
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Twelve months ended
December 31,
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2018
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2017
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2018
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2017
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Financial
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($000s, except where noted)
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|
|
|
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Oil sales
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62
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85
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519
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462
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Net loss
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(1,445)
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(2,079)
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(4,340)
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(7,117)
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Per share – basic and diluted ($)(1)
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(0.02)
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(0.02)
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(0.05)
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(0.08)
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Funds flow from operations (2)
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(821)
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(775)
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(3,266)
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(3,254)
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Per share – basic and diluted ($)(1)
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(0.01)
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(0.01)
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(0.04)
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(0.04)
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Capital expenditures(3)
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1,249
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434
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5,344
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5,432
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Total assets
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65,372
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68,715
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65,372
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68,715
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Long-term liabilities
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2,348
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-
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2,348
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-
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Net working capital surplus (2) (4)
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6,729
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8,762
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6,729
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8,762
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Common shares outstanding, end of year (000s)
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Basic
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96,671
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85,167
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96,671
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85,167
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Diluted (1)
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107,528
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91,706
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107,528
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91,706
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Operations
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Operating netback ($/bbl) (2)
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Brent benchmark price
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68.08
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61.53
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71.53
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54.83
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Discount
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(8.23)
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(6.48)
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(4.36)
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(6.36)
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Sales price
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59.85
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55.05
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67.17
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48.47
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Transportation expenses
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(0.97)
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(2.59)
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(1.68)
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(2.41)
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Realized sales price
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58.88
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52.46
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65.49
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46.06
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Royalties and production taxes
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(9.65)
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(6.48)
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(7.12)
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(5.35)
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Production expenses
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(229.73)
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(112.05)
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(108.71)
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(86.45)
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Operating netback
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(180.50)
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(66.07)
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(50.34)
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(45.74)
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Average daily crude oil production (bopd)
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11
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17
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21
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26
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Notes:
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(1)
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Consists of outstanding common shares, stock options, and warrants of the
Company.
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(2)
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Non-GAAP measure. See "Non-GAAP Measures" section within this news
release.
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(3)
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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).
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(4)
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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).
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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
Abbreviations:
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bopd
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=
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barrels of oil per day
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Mboe
|
=
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thousand barrels of oil equivalent
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MMbtu
|
=
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million British Thermal Units
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MMcf
|
=
|
million cubic feet
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MMcf/d
|
=
|
million cubic feet per day
|
MMboe
|
=
|
million barrels of oil equivalent
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$MUS
|
=
|
thousands of U.S. dollars
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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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