Alvopetro Announces 30% Increase in 2P Reserves & Operational Update

CALGARY, March 9, 2020 /CNW/ - Alvopetro Energy Ltd. ALVALVOF 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)}

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.

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

By Field

Summary of Before Tax Net Present Value of Future Net Revenue - MUS ^{(1), (2), (3), (4), (5), (6), (7), (9)}

Company Total

By Field

Summary of After Tax Net Present Value of Future Net Revenue – MUS ^{(1), (2), (3), (4), (5), (6), (7) ,(8), (9), (10)}

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

By Field

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

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

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.

SOURCE Alvopetro Energy Ltd.