Alvopetro Energy Ltd. press release
Alvopetro Announces Year End 2023 Financial Results, Q1 2024 Dividend of US$0.09/share and Filing of our Annual Information Form
TSXV - TSX Venture Exchange · Natural Gas · Natural Gas Liquids · Oil · Canada
Canada NewsWire
CALGARY, AB , March 19, 2024 /CNW/ - Alvopetro Energy Ltd. (TSXV:ALV) (OTCQX: ALVOF) announces our financial results for the year ended December 31, 2023 , a quarterly dividend of US$0.09 per common share and filing of our annual information form.
All references herein to $ refer to United States dollars, unless otherwise stated and all tabular amounts are in thousands of United States dollars, except as otherwise noted.
Recent Updates
On February 26, 2024 , we announced our December 31, 2023 reserves based on the independent reserve assessment and evaluation prepared by GLJ Ltd. ("GLJ") dated February 26, 2024 with an effective date of December 31, 2023 (the "GLJ Reserves and Resources Report"). Our December 31, 2023 reserves included total proved plus probable reserves of 8.7 MMboe with a before tax net present value discounted at 10% of $309.7 million . We also announced the Murucututu resources assessment with risked best estimate contingent resource of 5.4 MMboe (before tax net present value discounted at 10% of $126.1 million ) and risked best estimate prospective resource of 9.6 MMboe (before tax net present value discounted at 10% of $184.9 million . With respect to the Caburé natural gas field, the reserves assigned in the GLJ Reserves and Resource Report are based on Alvopetro's 49.1% working interest as of December 31, 2023 in the unitized area (the "Unit") which includes Caburé. As previously announced, the working interest is subject to redeterminations, the first of which is currently underway. Alvopetro and its partner in the Unit have engaged an independent expert (the "Expert") to decide on the redetermined working interest to each party. The decision of the Expert is expected near the end of the first quarter of 2024. The outcome of the Expert's decision and the resulting working interest to Alvopetro following the decision is uncertain. The resulting impact on Alvopetro's reserves and future cash flows may be material and may have a material adverse effect on Alvopetro.
Alvopetro's daily sales volumes averaged 1,592 boepd In January and February including 9.1 MMcfpd of natural gas, natural gas liquids sales from condensate of 75 bopd and oil sales of 14 bopd, a decrease of 26% from Q4 2023 sales volumes due to reductions in demand from Bahiagás. Demand resumed in early March and natural gas sales have averaged 11.2 MMcfpd to date in March based on field estimates.
Effective February 1, 2024, our natural gas price under our long-term gas sales agreement with Bahiagás was adjusted to BRL1.94 /m 3 . Our realized gas price, net of sales taxes, is approximately $12.36/Mcf (based on our average heat content to date and the January 31, 2024 BRL /USD foreign exchange rate of 4.95). The contracted price is based on the adjusted ceiling price of $10.58/MMBtu which increased 0.5% from the August 1, 2023 price due to the US inflation adjustment for the six-month period. With the appreciation of the BRL relative to the USD in the second half of 2023 compared to the first half of 2023, the BRL contracted price decreased from BRL1.99/m 3 as of August 1, 2023 to BRL1.94/m 3 as of February 1, 2024. This price is effective for all natural gas sales from February 1 to July 31, 2024.
In 2024, Alvopetro is focused on capital projects aimed at optimizing production rates from our three existing wells on our 100% owned and operated Murucututu natural field with total forecasted capital expenditures on the field of $4.1 million . We are planning recompletions of both our 183-A3 well and our 183(1) well, targeting both the Caruaçu and Gomo Formations along with a project on our 197(1) well. At the Caburé Unit, Alvopetro and its partner have agreed to a development plan including drilling and completing five wells in 2024 and 2025. Alvopetro's share of these wells, based on the December 31, 2023 working interest of 49.1% is estimated at $6.2 million , with $4.4 million forecasted in 2024. In addition, Alvopetro has a facilities upgrade planned at the field for an estimated $3.2 million relating to compression of natural gas to be delivered to Alvopetro's 100%-owned natural gas processing facility. On our exploration assets, Alvopetro has planned a stimulation of the 183-B1 well on Block 183 to improve recovery rates.
Financial and Operating Highlights – Fourth Quarter of 2023
Our daily sales averaged 2,143 boepd during the quarter, an increase of 26% from Q3 2023 which had been impacted by lower demand from Bahiagás and a decrease of 21% from Q4 2022 due to reduced natural gas availability from the Caburé natural gas field following increased nominations from our partner on the field. Our average realized natural gas price increased to $12.85 /Mcf, a 15% increase from Q4 2022 with the 3% increase in our contracted BRL-denominated natural gas price, enhanced sales tax credits available in 2023 and a 6% appreciation in the average BRL to USD in Q4 2023 compared to Q4 2022. With the higher natural gas price, our overall realized price per boe was $77.60 (+14% from Q4 2022). Our natural gas, condensate and oil revenue was $15.3 million in Q4 2023, a decrease of $1.8 million (-10%) compared to Q4 2022 and an increase of $3.0 million (+24%) compared to Q3 2023. Our operating netback in the quarter was $69.69 per boe (+$9.61 per boe from Q4 2022) with higher realized sales prices and lower royalties, partially offset by the impact of fixed operating costs with lower sales volumes. We generated funds flows from operations of $12.4 million ( $0.33 per basic and per diluted share), a decrease of $0.8 million compared to Q4 2022 and an increase of $2.8 million compared to Q3 2023. We reported net income of $0.7 million in Q4 2023, a decrease of $4.5 million compared to Q4 2022 and a decrease of $5.2 million compared to Q3 2023. Net income in Q4 2023 included impairment losses of $11.0 million (Q4 2022 - $6.3 million ). Capital expenditures totaled $4.9 million , including drilling and completion costs for the 183-A3 well on our Murucututu natural gas field, completion costs for the BL-06 well on our Bom Lugar field, and long-lead purchases for future capital projects. Our working capital surplus was $13.1 million as of December 31, 2023 , increasing $1.7 million from September 30, 2023 , and decreasing $1.6 million from December 31, 2022 .
Financial and Operating Highlights – Year Ended December 31, 2023
Our annual sales averaged 2,142 boepd (95% natural gas, 5% NGLs from condensate and marginal crude oil production), a decrease of 16% compared to 2022. We reported net income of $28.5 million , compared to $31.7 million in 2022 (-10%). We generated funds flow from operations of $48.0 million ( $1.29 per basic share and $1.27 per diluted share), a decrease of $1.8 million compared to 2022. Capital expenditures totaled $27.4 million in 2023. Dividends declared totaled $0.56 per share in 2023 compared to $0.36 per share in 2022 (+56%).
The following table provides a summary of Alvopetro's financial and operating results for the periods noted. The 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 SEDAR+ website at www.sedarplus.ca .
| | As at and Three Months Ended
December 31, | As at and Year Ended
December 31, | | | | | | | 2023 | 2022 | Change (%) | 2023 | 2022 | Change (%) | | Financial | | | | | | | | ($000s, except where noted) | | | | | | | | Natural gas, oil and condensate sales | 15,300 | 17,077 | (10) | 59,687 | 63,508 | (6) | | Net income | 652 | 5,191 | (87) | 28,525 | 31,732 | (10) | | Per share – basic ($) (1) | 0.02 | 0.14 | (86) | 0.77 | 0.92 | (16) | | Per share – diluted ($) (1) | 0.02 | 0.14 | (86) | 0.76 | 0.86 | (12) | | Cash flows from operating activities | 7,904 | 12,366 | (36) | 47,702 | 47,534 | - | | Per share – basic ($) (1) | 0.21 | 0.34 | (38) | 1.29 | 1.37 | (6) | | Per share – diluted ($) (1) | 0.21 | 0.33 | (36) | 1.26 | 1.29 | (2) | | Funds flow from operations (2) | 12,393 | 13,193 | (6) | 48,030 | 49,879 | (4) | | Per share – basic ($) (1) | 0.33 | 0.36 | (8) | 1.29 | 1.44 | (10) | | Per share – diluted ($) (1) | 0.33 | 0.35 | (6) | 1.27 | 1.35 | (6) | | Dividends declared | 5,127 | 4,357 | 18 | 20,462 | 12,697 | 61 | | Per share (1) | 0.14 | 0.12 | 17 | 0.56 | 0.36 | 56 | | Capital expenditures | 4,934 | 5,944 | (17) | 27,449 | 24,795 | 11 | | Cash and cash equivalents | 18,326 | 19,784 | (7) | 18,326 | 19,784 | (7) | | Net working capital (2) | 13,117 | 14,698 | (11) | 13,117 | 14,698 | (11) | | Weighted average shares outstanding | | | | | | | | Basic (000s) (1) | 37,262 | 36,231 | 3 | 37,121 | 34,642 | 7 | | Diluted (000s) (1) | 37,963 | 37,298 | 2 | 37,770 | 36,919 | 2 | | Operations | | | | | | | | Natural gas, NGLs and crude oil sales: | | | | | | | | Natural gas (Mcfpd), by field: | | | | | | | | Cabur é (Mcfpd) | 11,699 | 15,329 | (24) | 11,742 | 14,592 | (20) | | Murucututu (Mcfpd) | 546 | 217 | 152 | 487 | 55 | 785 | | Total natural gas (Mcfpd) | 12,245 | 15,546 | (21) | 12,229 | 14,647 | (17) | | NGLs – condensate (bopd) | 92 | 128 | (28) | 99 | 110 | (10) | | Oil (bopd) | 10 | 5 | 100 | 6 | 6 | - | | Total (boepd) | 2,143 | 2,724 | (21) | 2,142 | 2,557 | (16) | | | | | | | | | | Average realized prices (2) : | | | | | | | | Natural gas ($/Mcf) | 12.85 | 11.18 | 15 | 12.64 | 11.07 | 14 | | NGLs – condensate ($/bbl) | 89.45 | 89.29 | - | 86.29 | 103.50 | (17) | | Oil ($/bbl) | 73.67 | 79.50 | (7) | 71.22 | 82.67 | (14) | | T otal ($/boe) | 77.60 | 68.13 | 14 | 76.33 | 68.04 | 12 | | | | | | | | | | Operating netback ($/boe) (2) | | | | | | | | Realized sales price | 77.60 | 68.13 | 14 | 76.33 | 68.04 | 12 | | Royalties | (2.07) | (4.15) | (50) | (2.13) | (4.81) | (56) | | Production expenses | (5.84) | (3.90) | 50 | (5.38) | (3.80) | 42 | | Operating netback | 69.69 | 60.08 | 16 | 68.82 | 59.43 | 16 | | Operating netback margin (2) | 90 % | 88 % | 2 | 90 % | 87 % | 3 |
| Notes: | | | (1) | Per share amounts are based on weighted average shares outstanding other than dividends per share, which is based on the number of common shares outstanding at each dividend record date. The weighted average number of diluted common shares outstanding in the computation of funds flow from operations and cash flows from operating activities per share is the same as for net income per share. | | (2) | See " _Non-GAAP and Other Financial Measures _" section within this news release. |
Quarterly Dividend of US$0.09 per Share
With lower production levels forecast in the first quarter of 2024 and consistent with our long standing balanced stakeholder return model, our Board of Directors determined it was appropriate to reduce the quarterly dividend and declared a quarterly dividend of US$0.09 per common share, payable in cash on April 15, 2024, to shareholders of record at the close of business on March 28, 2024. This dividend is designated as an "eligible dividend" for Canadian income tax purposes.
Dividend payments to non-residents of Canada will be subject to withholding taxes at the Canadian statutory rate of 25%. Shareholders may be entitled to a reduced withholding tax rate under a tax treaty between their country of residence and Canada. For further information, see Alvopetro's website at https://alvopetro.com/Dividends-Non-resident-Shareholders .
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 at www.sedarplus.ca and on our website at www.alvopetro.com .
2023 Results Webcast
Alvopetro will host a live webcast to discuss our 2023 financial results at 8:00 am Mountain time on Wednesday March 20, 2024. Details for joining the event are as follows:
Date: March 20, 2024 Time: 8:00 AM Mountain/ 10:00 AM Eastern Link: https://us06web.zoom.us/j/83920744797 Dial-in numbers: https://us06web.zoom.us/u/kdcVycQytc Webinar ID: 839 2074 4797
The webcast will include a question-and-answer period. Online participants will be able to ask questions through the Zoom portal. Dial-in participants can email questions directly to socialmedia@alvopetro.com .
Corporate Presentation
Alvopetro's updated corporate presentation is available on our website at: http://www.alvopetro.com/corporate-presentation .
Social Media
Follow Alvopetro on our social media channels at the following links:
Twitter - https://twitter.com/AlvopetroEnergy Instagram - https://www.instagram.com/alvopetro/ LinkedIn - https://www.linkedin.com/company/alvopetro-energy-ltd
_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 and Murucututu natural gas fields and our 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.
Abbreviations:
| $000s | = | thousands of U.S. dollars | | boepd | = | barrels of oil equivalent ("boe") per day | | bopd | = | barrels of oil and/or natural gas liquids (condensate) per day | | BRL | = | Brazilian Real | | Mcf | = | thousand cubic feet | | Mcfpd | = | thousand cubic feet per day | | MMcf | = | million cubic feet | | MMcfpd | = | million cubic feet per day | | NGLs | = | natural gas liquids (condensate) | | Q3 2023 | = | three months ended September 30, 2023 | | Q4 2022 | = | three months ended December 31, 2022 | | Q4 2023 | = | three months ended December 31, 2023 | | USD | = | United States dollars | | GAAP | = | IFRS Accounting Standards |
Non-GAAP and Other Financial Measures
This news release contains references to various non-GAAP financial measures, non-GAAP ratios, capital management measures and supplementary financial measures as such terms are defined in National Instrument 52-112 Non-GAAP and Other Financial Measures Disclosure . Such measures are not recognized measures under GAAP and do not have a standardized meaning prescribed by IFRS and might not be comparable to similar financial measures disclosed by other issuers. While these measures may be common in the oil and gas industry, the Company's use of these terms may not be comparable to similarly defined measures presented by other companies. The non-GAAP and other financial measures referred to in this report should not be considered an alternative to, or more meaningful than measures prescribed by IFRS and they are not meant to enhance the Company's reported financial performance or position. These are complementary measures that are used by management in assessing the Company's financial performance, efficiency and liquidity and they may be used by investors or other users of this document for the same purpose. Below is a description of the non-GAAP financial measures, non-GAAP ratios, capital management measures and supplementary financial measures used in this news release. 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 and Other Financial Measures _" section of the Company's MD&A which may be accessed through the SEDAR+ website at www.sedarplus.ca .
Non-GAAP Financial Measures
Operating netback
Operating netback is calculated as natural gas, oil and condensate revenues less royalties and production expenses. This calculation is provided in the " _Operating Netback _" section of the Company's MD&A using our IFRS measures. The Company's MD&A may be accessed through the SEDAR+ website at www.sedarplus.ca . Operating netback is a common metric used in the oil and gas industry used to demonstrate profitability from operations.
Non-GAAP Financial Ratios
Operating netback per boe
Operating netback is calculated on a per unit basis, which is per barrel of oil equivalent ("boe"). It is a common non-GAAP measure used in the oil and gas industry and management believes this measurement assists in evaluating the operating performance of the Company. It is a measure of the economic quality of the Company's producing assets and is useful for evaluating variable costs as it provides a reliable measure regardless of fluctuations in production. Alvopetro calculated operating netback per boe as operating netback divided by total sales volumes (boe). This calculation is provided in the " _Operating Netback _" section of the Company's MD&A using our IFRS measures. The Company's MD&A may be accessed through the SEDAR+ website at www.sedarplus.ca . Operating netback is a common metric used in the oil and gas industry used to demonstrate profitability from operations on a per boe basis.
Operating netback margin
Operating netback margin is calculated as operating netback per boe divided by the realized sales price per boe. Operating netback margin is a measure of the profitability per boe relative to natural gas, oil and condensate sales revenues per boe and is calculated as follows:
| | Three Months Ended
December 31, | Year Ended
December 31, | | | | | 2023 | 2022 | 2023 | 2022 | | Operating netback - $ per boe | 69.69 | 60.08 | 68.82 | 59.43 | | Average realized price - $ per boe | 77.60 | 68.13 | 76.33 | 68.04 | | Operating netback margin | 90 % | 88 % | 90 % | 87 % |
Funds Flow from Operations Per Share
Funds flow from operations per share is a non-GAAP ratio that includes all cash generated from operating activities and is calculated before changes in non-cash working capital, divided by the weighted the weighted average shares outstanding for the respective period. For the periods reported in this news release the cash flows from operating activities per share and funds flow from operations per share is as follows:
| | Three Months Ended
December 31, | Year Ended
December 31, | | | | $ per share | 2023 | 2022 | 2023 | 2022 | | Per basic share: | | | | | | Cash flows from operating activities | 0.21 | 0.34 | 1.29 | 1.37 | | Funds flow from operations | 0.33 | 0.36 | 1.29 | 1.44 | | | | | | | | Per diluted share: | | | | | | Cash flows from operating activities | 0.21 | 0.33 | 1.26 | 1.29 | | Funds flow from operations | 0.33 | 0.35 | 1.27 | 1.35 |
Capital Management Measures
Funds Flow from Operations
Funds flow from operations is a non-GAAP capital management measure that includes all cash generated from operating activities and is calculated before changes in non-cash working capital. The most comparable GAAP measure to funds flow from operations is cash flows from operating activities. Management considers funds flow from operations important as it helps evaluate financial performance and demonstrates the Company's ability to generate sufficient cash to fund future growth opportunities. Funds flow from operations should not be considered an alternative to, or more meaningful than, cash flows from operating activities however management finds that the impact of working capital items on the cash flows reduces the comparability of the metric from period to period. A reconciliation of funds flow from operations to cash flows from operating activities is as follows:
| | Three Months Ended
December 31, | Year Ended
December 31, | | | | | 2023 | 2022 | 2023 | 2022 | | Cash flows from operating activities | 7,904 | 12,366 | 47,702 | 47,534 | | Add back changes in non-cash working capital | 4,489 | 827 | 328 | 2,345 | | Funds flow from operations | 12,393 | 13,193 | 48,030 | 49,879 |
Net Working Capital
Net working capital is computed as current assets less current liabilities. Net working capital is a measure of liquidity, is used to evaluate financial resources, and is calculated as follows: