Alvopetro Energy Ltd. press release
Alvopetro Announces 21% Increase in 2P Reserves
TSXV - TSX Venture Exchange · Natural Gas · Natural Gas Liquids · Oil · Canada
Canada NewsWire
CALGARY, AB , March 9, 2021 /CNW/ - Alvopetro Energy Ltd. (TSXV: ALV) (OTCQX: ALVOF) announces our reserves as at December 31, 2020 with total proved plus probable ("2P") reserves of 9.6 MMboe and a before tax value discounted at 10% of US$195.2 million , changes of 21% and (2%) respectively from our previous years reporting. The reserves data set forth herein is based on an independent reserve assessment and evaluation prepared by GLJ Ltd. ("GLJ") dated March 8, 2021 with an effective date of December 31, 2020 (the "GLJ Report").
December 31, 2020 Reserve Report Highlights
Proved reserves ("1P") and 2P reserves increased to 5.1 mmboe (+4%) and 9.6 mmboe (+21%) respectively, primarily due to the addition of development locations at our Gomo development. Reserve additions replaced production by 154% on a Proved and 594% on a 2P basis. Recognized 2P F&D costs of $3.50 /boe, representing a recycle ratio of 8.0 times based on estimated Q4 2020 operating netbacks. 2P net present value before tax discounted at 10% decreased 2% to $195.2 million despite a 16% average decrease in GLJ's forecasted prices. This represents a 2P Net Asset Value of CAD$2.35 /share ( US$1.86 /share).
Corey Ruttan , President and Chief Executive Officer, commented:
"Our 2020 reserves evaluation highlights the strong results from our Caburé natural gas field and the early recognition of our Gomo resource potential. Even with an average 16% year over year decline in GLJ's forecasted commodity prices, our 2P before tax net present value, discounted at 10%, only declined 2% to US$195.2 million . We are excited to be advancing our Gomo project, which was the main driver for our 21% overall increase in 2P reserves from 7.9 MMboe to 9.6 MMboe."
Alvopetro Energy Ltd. Gross Reserves Summary at December 31, 2020 (1), (2), (3), (4), (5), (6)
| | Total Proved | Total Proved plus Probable | Total Proved plus Probable plus Possible | | Conventional Natural Gas (Mboe) | 4,601 | 8,538 | 12,421 | | Light & Medium Oil (Mbbl) | 167 | 300 | 589 | | Natural Gas Liquids (Mbbl) | 340 | 756 | 1,199 | | Total oil equivalent (Mboe) | 5,108 | 9,593 | 14,209 | | Before Tax Net Present Value, discount at 10% (MUS) | $116,463 | $195,215 | $274,816 | | After Tax Net Present Value, discounted at 10% (MUS) | $105,852 | $169,985 | $232,645 |
| | | | (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, 2020 reserves evaluation, based on the before tax net present value of Alvopetro's 2P reserves, our total net asset value is $185.3 million , reflecting CAD$2.35 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) | $116,463 | $195,215 | $274,816 | | Net debt – as at December 31, 2020 (1) | (9,884) | (9,884) | (9,884) | | Total Net Asset Value (2) | $106,579 | $185,331 | $264,932 | | CAD per basic share (3) | $1.35 | $2.35 | $3.36 |
| | | | (1) | Net debt is computed as the carrying amount of the Company's Credit Facility, decreased by net working capital surplus. The Net debt balance included in the table above is based on unaudited and preliminary financial information as at December 31, 2020. This balance is subject to change following conclusion of the Company's year-end audit. See "Unaudited Financial Information" at the end of this news release. | | (2) | Alvopetro has reflected all contractual obligations pursuant to our September 2018 Gas Treatment Agreement with Enerflex, including the equipment rental component of the agreement which is treated as a right of use asset and reflected as a capital lease obligation on our financial statements. As the future capital lease payments reduce the forecasted future net revenue in all reserves categories, the capital lease obligation as reflected on the Company's financial statements has not been included in the table above. | | (3) | Converted to Canadian dollars ("CAD") based on the exchange rate on March 8, 2021. The per share calculation is computed based on 99.7 million common shares outstanding as of March 8, 2021. |
December 31, 2020 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 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)
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 | - | - | 23,201 | 21,750 | 231 | 217 | 4,098 | 3,842 | | | Developed Non-Producing | 22 | 19 | 2,103 | 1,939 | 52 | 48 | 425 | 390 | | | Undeveloped | 145 | 136 | 2,302 | 2,123 | 57 | 52 | 586 | 542 | | Total Proved | 167 | 155 | 27,606 | 25,812 | 340 | 318 | 5,108 | 4,774 | | | Probable | 133 | 123 | 23,619 | 21,939 | 416 | 384 | 4,485 | 4,164 | | | Total Proved plus Probable | 300 | 278 | 51,226 | 47,751 | 756 | 702 | 9,593 | 8,938 | | | Possible | 289 | 270 | 23,298 | 21,568 | 443 | 408 | 4,615 | 4,273 | | | Total Proved plus Probable plus Possible | 589 | 548 | 74,524 | 69,319 | 1,199 | 1,110 | 14,209 | 13,211 | |
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 | 4,098 | 3,842 | - | - | - | - | - | - | 4,098 | 3,842 | | | Developed Non-Producing | - | - | 403 | 371 | - | - | 22 | 19 | 425 | 390 | | | Undeveloped | - | - | 441 | 406 | 145 | 136 | - | - | 586 | 542 | | Total Proved | 4,098 | 3,842 | 843 | 777 | 145 | 136 | 22 | 19 | 5,108 | 4,774 | | | | Probable | 1,920 | 1,804 | 2,433 | 2,237 | 121 | 113 | 12 | 10 | 4,485 | 4,164 | | Total Proved plus Probable | 6,018 | 5,646 | 3,276 | 3,014 | 266 | 249 | 34 | 29 | 9,593 | 8,938 | | | | Possible | 1,650 | 1,552 | 2,675 | 2,452 | 272 | 256 | 17 | 14 | 4,615 | 4,273 | | Total Proved plus Probable plus Possible | 7,668 | 7,198 | 5,951 | 5,466 | 538 | 505 | 51 | 43 | 14,209 | 13,211 | |
Summary of Before Tax Net Present Value of Future Net Revenue - M US (1), (2), (3), (4), (5), (6)
Company Total
| | Undiscounted | 5% | 10% | 15% | 20% | | | Proved | | | | | | | | | Producing | 140,695 | 122,535 | 107,524 | 95,353 | 85,421 | | | Developed Non-Producing | 7,701 | 4,871 | 3,115 | 2,025 | 1,316 | | | Undeveloped | 19,459 | 10,126 | 5,825 | 3,520 | 2,133 | | Total Proved | 167,855 | 137,531 | 116,463 | 100,897 | 88,870 | | | Probable | 205,752 | 117,703 | 78,752 | 56,696 | 42,526 | | | Total Proved plus Probable | 373,607 | 255,234 | 195,215 | 157,593 | 131,396 | | | Possible | 244,931 | 126,208 | 79,601 | 55,412 | 40,923 | | | Total Proved plus Probable plus Possible | 618,538 | 381,442 | 274,816 | 213,005 | 172,319 | |
By Field
| | Undiscounted | 5% | 10% | 15% | 20% | | | Proved | | | | | | | | | Caburé Natural Gas Field | 140,695 | 122,535 | 107,524 | 95,353 | 85,421 | | | Gomo Gas Field | 25,719 | 13,847 | 8,047 | 4,867 | 2,949 | | | Bom Lugar Oil Field | 1,655 | 1,331 | 1,050 | 815 | 623 | | | Mãe-da-lua Oil Field | (214) | (182) | (157) | (138) | (122) | | Total Proved | 167,855 | 137,531 | 116,463 | 100,897 | 88,870 | | | Proved Plus Probable | | | | | | | | | Caburé Natural Gas Field | 217,870 | 177,381 | 146,901 | 124,192 | 106,922 | | | Gomo Gas Field | 149,913 | 73,083 | 44,389 | 30,147 | 21,754 | | | Bom Lugar Oil Field | 5,755 | 4,690 | 3,840 | 3,167 | 2,635 | | | Mãe-da-lua Oil Field | 69 | 80 | 85 | 86 | 85 | | Total Proved Plus Probable | 373,607 | 255,234 | 195,215 | 157,593 | 131,396 | | | Proved Plus Probable Plus Possible | | | | | | | | | Caburé Natural Gas Field | 294,579 | 225,049 | 177,496 | 144,351 | 120,508 | | | Gomo Gas Field | 310,284 | 145,652 | 88,751 | 61,704 | 46,089 | | | Bom Lugar Oil Field | 13,274 | 10,355 | 8,206 | 6,610 | 5,407 | | | Mãe-da-lua Oil Field | 401 | 385 | 363 | 340 | 316 | | Total Proved Plus Probable Plus Possible | 618,538 | 381,442 | 274,816 | 213,005 | 172,319 | |
Summary of After Tax Net Present Value of Future Net Revenue – M US (1), (2), (3), (4), (5), (6)
| | Undiscounted | 5% | 10% | 15% | 20% | | | Proved | | | | | | | | | Producing | 128,100 | 112,187 | 98,887 | 88,047 | 79,168 | | | Developed Non-Producing | 5,720 | 3,818 | 2,491 | 1,619 | 1,033 | | | Undeveloped | 14,549 | 7,731 | 4,474 | 2,671 | 1,155 | | Total Proved | 148,368 | 123,736 | 105,852 | 92,337 | 81,756 | | | Probable | 158,288 | 94,267 | 64,132 | 46,446 | 34,844 | | | Total Proved plus Probable | 306,656 | 218,003 | 169,985 | 138,784 | 116,600 | | | Possible | 181,522 | 97,111 | 62,660 | 44,210 | 32,912 | | | Total Proved plus Probable plus Possible | 488,178 | 315,114 | 232,645 | 182,993 | 149,511 | |
| 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, 2020 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/jan21.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; Mboe = thousands of barrels of oil equivalent. | | (8) | 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 Producing | Proved | Proved Plus Probable | Proved Plus Probable Plus Possible | | 2022 | 1,730 | 10,062 | 21,096 | 21,096 | | 2023 | 1,730 | 1,730 | 1,730 | 5,727 | | 2024 | 1,730 | 1,730 | 1,730 | 1,730 | | 2025 | 1,730 | 1,730 | 1,730 | 1,730 | | Remaining Years | 6,429 | 6,429 | 10,524 | 13,552 | | Total Undiscounted | 15,309 | 25,741 | 40,870 | 47,895 |
| 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 Gas Treatment Agreement with Enerflex, including all operating, capital, and related financing costs for the full duration of the agreement. These costs are attributable to the Caburé field and also represent the majority of the future development costs for the Caburé field in the table below. The future costs associated with equipment rental are also reflected as a capital lease obligation on our financial statements.
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, as well as a development location. In the probable and possible categories, there are future development costs for an additional development location and the stimulation and tie-in of the 197(1) well. The future development costs for Bom Lugar in the proved category include costs for a directional wellbore and facilities upgrade, both planned for 2022. 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 2022.
By Field
| MUS (1) , Undiscounted | 2021 | 2022 | 2023 | 2024 | 2025 | Remaining | Total | | | Proved | | | | | | | | | | | Caburé Natural Gas Field | 1,960 | 1,730 | 1,730 | 1,730 | 1,730 | 6,429 | 15,309 | | | Gomo Gas Field | 2,100 | 4,848 | - | - | - | - | 6,948 | | | Bom Lugar Oil Field | - | 3,053 | - | - | - | - | 3,053 | | | Mãe-da-lua Oil Field | - | 431 | - | - | - | - | 431 | | Total Proved | 4,060 | 10,062 | 1,730 | 1,730 | 1,730 | 6,429 | 25,741 | | | Proved Plus Probable | | | | | | | | | | | Caburé Natural Gas Field | 1,960 | 1,730 | 1,730 | 1,730 | 1,730 | 10,524 | 19,404 | | | Gomo Gas Field | 2,100 | 15,150 | - | - | - | - | 17,250 | | | Bom Lugar Oil Field | - | 3,785 | - | - | - | - | 3,785 | | | Mãe-da-lua Oil Field | - | 431 | - | - | - | - | 431 | | Total Proved Plus Probable | 4,060 | 21,096 | 1,730 | 1,730 | 1,730 | 10,524 | 40,870 | | | Proved Plus Probable Plus Possible | | | | | | | | | | | Caburé Natural Gas Field | 1,960 | 1,730 | 1,730 | 1,730 | 1,730 | 13,552 | 22,432 | | | Gomo Gas Field | 2,100 | 15,150 | - | - | - | - | 17,250 | | | Bom Lugar Oil Field | - | 3,785 | 3,997 | - | - | - | 7,783 | | | Mãe-da-lua Oil Field | - | 431 | - | - | - | - | 431 | | Total Proved Plus Probable Plus Possible | 4,060 | 21,096 | 5,727 | 1,730 | 1,730 | 13,552 | 47,895 | |
| Notes: | | | (1) | MUS = 000's of U.S. dollars. |
Company Capital Program Efficiency (Estimated)
| | Proved | Proved Plus Probable | | Estimated 2020 capital expenditures (MUS) (1)(2) | 3,814 | 3,814 | | Change in FDC required for reserves development (MUS) | (4,695) | 3,296 | | Estimated F&D costs (MUS) | (881) | 7,110 | | | | | | Gross reserve additions (Mboe) (3) | 527 | 2,030 | | | | | | Estimated F&D costs per boe ($/boe) (4) | - | 3.50 | | Estimated Q4 2020 operating netback ($/boe) (2) | 27.92 | 27.92 | | Estimated recycle ratio (5) | - | 8.0 |
| Notes: | | | (1) | MUS = 000's of U.S. dollars. | | (2) | The capital expenditures and the operating netback reflected in the table above are based on unaudited and preliminary financial information as at and for the three months and year ended December 31, 2020 (unaudited). These amounts are subject to change following conclusion of the Company's year-end audit. See "Unaudited Financial Information" at the end of this news release. | | (3) | Gross reserve additions are calculated as the change in reserves from the beginning to the end of the period, excluding any production in the period. | | (4) | Due to changes in projected capital expenditure for the Caburé project the resulting 2020 F&D costs is negative. For this reason, we did not calculate the resulting F&D cost per barrel in the proved reserves category. | | (5) | Recycle ratio is calculated by dividing the operating netback per boe by the estimated F&D costs per boe. |
Total Future Net Revenue (Undiscounted) – Forecast Prices and Costs
| | | | | | | | | | | | 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 | 250,682 | 16,511 | 36,594 | 25,741 | 3,980 | 167,855 | 19,486 | 148,368 | | Total Proved plus Probable | 526,106 | 36,477 | 69,737 | 40,870 | 5,415 | 373,607 | 66,951 | 306,656 | | Total Proved plus Probable plus Possible | 825,068 | 58,962 | 94,091 | 47,895 | 5,581 | 618,538 | 130,360 | 488,178 |
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) | | Extensions | 420 | 1,573 | 1,994 | 1,330 | 3,324 | | Technical Revisions | 107 | (71) | 36 | (199) | (163) | | Production | (342) | - | (342) | - | (342) | | December 31, 2020 | 5,108 | 4,485 | 9,593 | 4,615 | 14,209 |
| 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, 2020. | | (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 |
Pricing Assumptions – Forecast Prices and Costs
GLJ employed the following pricing and inflation rate assumptions as of December 31, 2020 in the GLJ Report in estimating reserves data using forecast prices and costs.
| Year | Brent Blend Crude Oil FOB North Sea ($/Bbl) | National Balancing Point (UK)
($/mmbtu) | NYMEX Henry Hub Near Month Contract
($/mmbtu) | Alvopetro-Bahiagas Gas Contract
$/mmbtu
(Current Year) | Alvopetro-Bahiagas Gas Contract
$/mmbtu
(Previous Year) | Change from prior year | | 2021 | 50.75 | 6.50 | 2.75 | 5.70 | 7.21 | (21%) | | 2022 | 55.00 | 5.85 | 2.80 | 6.40 | 7.57 | (15%) | | 2023 | 58.50 | 5.85 | 2.85 | 6.65 | 7.93 | (16%) | | 2024 | 61.79 | 6.00 | 2.90 | 6.89 | 8.24 | (16%) | | 2025 | 62.95 | 6.15 | 2.95 | 7.14 | 8.49 | (16%) | | 2026 | 64.13 | 6.25 | 3.01 | 7.31 | 8.69 | (16%) | | 2027 | 65.33 | 6.35 | 3.07 | 7.45 | 8.90 | (16%) | | 2028 | 66.56 | 6.50 | 3.13 | 7.59 | 9.09 | (17%) | | 2029 | 67.81 | 6.65 | 3.19 | 7.74 | 9.26 | (16%) | | 2030 | 69.17 | 6.78 | 3.25 | 7.90 | 9.45 | (16%) |