Alvopetro Energy Ltd. press release
Alvopetro Announces 30% Increase in 2P Reserves & Operational Update
TSXV - TSX Venture Exchange · Natural Gas · Natural Gas Liquids · Oil · Canada
Canada NewsWire
CALGARY, March 9, 2020
CALGARY, March 9, 2020/CNW/ - Alvopetro Energy Ltd. (TSX-V:ALV; OTCQX: ALVOF) announces our reserves as at December 31, 2019with 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, 2020with an effective date of December 31, 2019(the "GLJ Report").
December 31, 2019Reserve 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 visitingwww.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)_
| | Total Proved | Total Proved plus Probable | Total Proved plus Probable plus Possible | | Conventional Natural Gas (Mboe) | 4,399 | 6,936 | 9,710 | | Light & Medium Oil (Mbbl) | 171 | 306 | 595 | | Natural Gas Liquids (Mbbl) | 353 | 664 | 1,085 | | Total oil equivalent (Mboe) | 4,923 | 7,906 | 11,390 | | Before Tax Net Present Value, discount at 10% (MUS) | $129,860 | $198,226 | $263,036 | | After Tax Net Present Value, discounted at 10% (MUS) | $120,422 | $176,939 | $225,284 |
| (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, 2019reserves 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$2.61per 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) | $129,860 | $198,226 | $263,036 | | Cash and cash equivalents – as at December 31, 2019(1) | 1,215 | 1,215 | 1,215 | | Credit facility balance outstanding – as at December 31, 2019(1) | (5,027) | (5,027) | (5,027) | | Non-cash working capital deficit – as at September 30, 2019(2) | (4,750) | (4,750) | (4,750) | | Materials and equipment inventory – as at September 30, 2019(2) | 1,387 | 1,387 | 1,387 | | Total Net Asset Value | $122,685 | $191,051 | $255,861 | | CAD per share(3) | $1.67 | $2.61 | $3.49 |
| (1) | Balance based on preliminary balance at December 31, 2019 (unaudited). Subject to change following conclusion of the Company's year-end audit. | | (2) | Balance as at September 30, 2019 (unaudited). Amounts will be updated following conclusion of the Company's 2019 year-end audit. | | (3) | Converted to Canadian dollars ("CAD") based on the exchange rate on March 6, 2020. The per share calculation is computed based on 98.3 million common shares outstanding as of March 6, 2020. |
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
| | 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 | 3 | 2 | - | - | - | - | 3 | 2 | | | Developed Non-Producing | 21 | 18 | 24,424 | 21,464 | 269 | 236 | 4,361 | 3,832 | | | Undeveloped | 147 | 138 | 1,971 | 1,754 | 84 | 75 | 560 | 505 | | Total Proved | 171 | 158 | 26,394 | 23,218 | 353 | 311 | 4,923 | 4,339 | | | | Probable | 135 | 125 | 15,220 | 13,394 | 311 | 274 | 2,983 | 2,632 | | Total Proved plus Probable | 306 | 284 | 41,614 | 36,612 | 664 | 585 | 7,906 | 6,971 | | | | Possible | 289 | 269 | 16,646 | 14,636 | 421 | 370 | 3,484 | 3,079 | | Total Proved plus Probable plus Possible | 595 | 553 | 58,260 | 51,248 | 1,085 | 956 | 11,390 | 10,050 | |
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 | - | - | - | - | - | - | 3 | 2 | 3 | 2 | | | Developed Non-Producing | 4,340 | 3,814 | - | - | - | - | 21 | 18 | 4,361 | 3,832 | | | Undeveloped | - | - | 412 | 367 | 147 | 138 | - | - | 560 | 505 | | Total Proved | 4,340 | 3,814 | 412 | 367 | 147 | 138 | 24 | 20 | 4,923 | 4,339 | | | | Probable | 1,902 | 1,671 | 946 | 835 | 121 | 113 | 14 | 12 | 2,983 | 2,632 | | Total Proved plus Probable | 6,241 | 5,485 | 1,358 | 1,202 | 268 | 251 | 38 | 32 | 7,906 | 6,971 | | | | Possible | 1,629 | 1,432 | 1,566 | 1,378 | 273 | 256 | 16 | 14 | 3,484 | 3,079 | | Total Proved plus Probable plus Possible | 7,871 | 6,917 | 2,924 | 2,580 | 541 | 507 | 55 | 46 | 11,390 | 10,050 | |
Summary of Before Tax Net Present Value of Future Net Revenue - MUS(1), (2), (3), (4), (5), (6), (7), (9)
Company Total
| | Undiscounted | 5% | 10% | 15% | 20% | | | Proved | | | | | | | | | Producing | (156) | (138) | (123) | (110) | (99) | | | Developed Non-Producing | 171,281 | 144,221 | 123,179 | 106,615 | 93,404 | | | Undeveloped | 11,301 | 8,740 | 6,804 | 5,330 | 4,190 | | Total Proved | $182,426 | $152,823 | $129,860 | $111,835 | $97,496 | | | | Probable | 143,825 | 97,292 | 68,366 | 49,700 | 37,231 | | Total Proved plus Probable | $326,252 | $250,115 | $198,226 | $161,535 | $134,727 | | | | Possible | 189,951 | 104,410 | 64,810 | 43,764 | 31,459 | | Total Proved plus Probable plus Possible | $516,202 | $354,525 | $263,036 | $205,299 | $166,186 | |
By Field
| | Undiscounted | 5% | 10% | 15% | 20% | | | Proved | | | | | | | | | Caburé Natural Gas Field | 171,084 | 144,026 | 122,990 | 106,433 | 93,229 | | | Gomo Gas Field | 8,020 | 6,169 | 4,832 | 3,855 | 3,127 | | | Bom Lugar Oil Field | 3,280 | 2,572 | 1,972 | 1,475 | 1,063 | | | Mãe-da-lua Oil Field | 41 | 57 | 66 | 73 | 76 | | Total Proved | $182,426 | $152,823 | $129,860 | $111,835 | $97,496 | | | Proved Plus Probable | | | | | | | | | Caburé Natural Gas Field | 266,189 | 207,981 | 166,679 | 136,818 | 114,733 | | | Gomo Gas Field | 50,870 | 34,682 | 25,483 | 19,761 | 15,930 | | | Bom Lugar Oil Field | 8,792 | 7,050 | 5,668 | 4,570 | 3,692 | | | Mãe-da-lua Oil Field | 401 | 402 | 396 | 385 | 372 | | Total Proved Plus Probable | $326,252 | $250,115 | $198,226 | $161,535 | $134,727 | | | Proved Plus Probable Plus Possible | | | | | | | | | Caburé Natural Gas Field | 350,739 | 258,081 | 196,921 | 155,515 | 126,556 | | | Gomo Gas Field | 145,175 | 80,467 | 53,328 | 39,393 | 31,077 | | | Bom Lugar Oil Field | 19,444 | 15,163 | 12,013 | 9,656 | 7,857 | | | Mãe-da-lua Oil Field | 844 | 813 | 775 | 735 | 696 | | Total Proved Plus Probable Plus Possible | $516,202 | $354,525 | $263,036 | $205,299 | $166,186 | |
Summary of After Tax Net Present Value of Future Net Revenue – MUS(1), (2), (3), (4), (5), (6), (7) ,(8), (9), (10)
| | Undiscounted | 5% | 10% | 15% | 20% | | | Proved | | | | | | | | | Producing | (156) | (138) | (123) | (110) | (99) | | | Developed Non-Producing | 158,265 | 133,712 | 114,547 | 99,414 | 87,313 | | | Undeveloped | 10,136 | 7,780 | 5,997 | 4,639 | 3,591 | | Total Proved | $168,245 | $141,355 | $120,422 | $103,944 | $90,805 | | | | Probable | 117,395 | 80,141 | 56,517 | 41,103 | 30,734 | | Total Proved plus Probable | $285,641 | $221,496 | $176,939 | $145,047 | $121,539 | | | | Possible | 135,808 | 76,523 | 48,345 | 33,112 | 24,081 | | Total Proved plus Probable plus Possible | $421,449 | $298,019 | $225,284 | $178,158 | $145,620 | |
| 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, 2019 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/jan20.pdffor 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 | | (8) | MMcf = Million cubic feet | | (9) | Gomo Gas Field reserves as at December 31, 2019 incorporate the condensate yields experienced during the 183(1) partial well test clean up flow period up to the end of 2019. As testing activities continued into 2020 and are ongoing, these results, once finalized, including pressure transient analysis and long-term production testing, will be incorporated into future reserve reports. | | (10) | Assumes a production start date of May 1, 2020. |
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 Reserves | Proved Plus Probable Reserves | Proved Plus Probable Plus Possible Reserves | | 2020 | | $8,383 | $10,368 | $10,368 | | 2021 | | 2,923 | 2,923 | 2,923 | | 2022 | | 2,167 | 2,167 | 6,204 | | 2023 | | 7,163 | 9,286 | 9,286 | | 2024 | | 2,185 | 2,185 | 2,185 | | Remaining Years | | 7,615 | 10,646 | 16,422 | | Total Undiscounted | | $30,436 | $37,574 | $47,388 |
| Notes: | | (1)MUS = 000's of U.S. dollars. |
By Field
| MUS_(1)_, Undiscounted | 2020 | 2021 | 2022 | 2023 | 2024 | Remaining | Total | | | Proved | | | | | | | | | | | Caburé Natural Gas Field | $3,133 | $1,730 | $1,730 | $6,187 | $1,730 | $7,151 | $21,661 | | | Gomo Gas Field | 1,800 | 1,193 | 437 | 976 | 455 | 464 | 5,325 | | | Bom Lugar Oil Field | 3,023 | - | - | - | - | - | 3,023 | | | Mãe-da-lua Oil Field | 427 | - | - | - | - | - | 427 | | Total Proved | $8,383 | $2,923 | $2,167 | $7,163 | $2,185 | $7,615 | $30,436 | | | Proved Plus Probable | | | | | | | | | | | Caburé Natural Gas Field | $3,133 | $1,730 | $1,730 | $6,187 | $1,730 | $9,227 | $23,737 | | | Gomo Gas Field | 3,060 | 1,193 | 437 | 3,099 | 455 | 1,419 | 9,663 | | | Bom Lugar Oil Field | 3,748 | - | - | - | - | - | 3,748 | | | Mãe-da-lua Oil Field | 427 | - | - | - | - | - | 427 | | Total Proved Plus Probable | $10,368 | $2,923 | $2,167 | $9,286 | $2,185 | $10,646 | $37,574 | | | Proved Plus Probable Plus Possible | | | | | | | | | | | Caburé Natural Gas Field | $3,133 | $1,730 | $1,730 | $6,187 | $1,730 | $12,975 | $27,485 | | | Gomo Gas Field | 3,060 | 1,193 | 437 | 3,099 | 455 | 3,447 | 11,691 | | | Bom Lugar Oil Field | 3,748 | - | 4,037 | - | - | - | 7,785 | | | Mãe-da-lua Oil Field | 427 | - | - | - | - | - | 427 | | Total Proved Plus Probable Plus Possible | $10,368 | $2,923 | $6,204 | $9,286 | $2,185 | $16,422 | $47,388 | |
| 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 September 2018Gas 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
| | Royalties
(MUS) | Operating Costs
(MUS) | Develop-
ment Costs
(MUS) | Abandonment and Reclamation Costs
(MUS) | Future Net Revenue Before Income Taxes
(MUS) | Future Income Taxes
(MUS) | Future Net Revenue After Income Taxes
(MUS) | | | | Revenue
(MUS) | | | | | | | | | | | | | | | | | | | Total Proved | 277,966 | 29,128 | 32,898 | 30,436 | 3,078 | 182,426 | 14,181 | 168,245 | | Total Proved plus Probable | 474,863 | 49,837 | 57,362 | 37,574 | 3,838 | 326,252 | 40,611 | 285,641 | | Total Proved plus Probable plus Possible | 734,887 | 77,193 | 89,209 | 47,388 | 4,895 | 516,202 | 94,754 | 421,449 |
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) | | December 31, 2018 | 3,779 | 2,317 | 6,096 | 3,210 | 9,306 | | Discoveries | - | - | - | - | - | | Extensions | - | - | - | - | - | | Improved Recovery | - | - | - | - | - | | Technical Revisions | 1,148 | 665 | 1,813 | 275 | 2,088 | | Disposition | - | - | - | - | - | | Production | (3) | - | (3) | - | (3) | | December 31, 2019 | 4,923 | 2,983 | 7,906 | 3,484 | 11,390 |