Alvopetro Energy Ltd. press release
Alvopetro Announces 2023 Year End Reserves
TSXV - TSX Venture Exchange · Natural Gas · Natural Gas Liquids · Oil · Canada
Canada NewsWire
CALGARY, AB , Feb. 26, 2024 /CNW/ - Alvopetro Energy Ltd. (TSXV:ALV) (OTCQX: ALVOF) announces our reserves as at December 31, 2023 with total proved plus probable ("2P") reserves of 8.7 MMboe and a before tax net present value discounted at 10% ("NPV10") of $309 .7 million, risked best estimate contingent resources of 5.4 MMboe (NPV10 $126.1 million ) and risked best estimate prospective resources of 9.6 Mmboe (NPV10 $184.9 million ). The reserves and resources data set forth herein is based on an independent reserves and resources 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").
The GLJ Reserves and Resources Report incorporates Alvopetro's working interest share of remaining recoverable reserves held by Alvopetro in the Caburé and Murucututu natural gas fields and the Bom Lugar and Mãe-da-lua oil fields as well as Alvopetro's working interest share of remaining recoverable resources held by Alvopetro in the Murucututu natural gas field. With respect to Murucututu, Bom Lugar, and Mãe-da-lua, Alvopetro's working interest share is 100%. With respect to the unitized area (the "Unit") which includes our Caburé and Caburé Leste fields (collectively referred to as "Caburé" in this news release) and two fields held by our third-party partner in the Unit, Alvopetro's working interest share as of December 31, 2023 was 49.1%, with the remaining 50.9% held by our partner. As previously announced by the Company, the first redetermination of the working interests to each party commenced in the fourth quarter of 2023. The parties engaged an independent expert (the "Expert") to evaluate the redetermination. Pursuant to the provisions of the UOA, where an Expert is engaged, the Expert's determination shall be made using what is commonly referred to as the "pendulum" method of dispute resolution. Under this method, the Expert is not required or permitted to provide their own interpretation but is required to select the single Final Proposal (between the two partner's respective Final Proposals), which, in the Expert's opinion, provides the most technically justified result of the application of the relevant information and data and material provided to the Expert consistent with the UOA and all related documents. As of the date of this news release, 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. The impact on Alvopetro's working interest will be effective on the first calendar day of the second month following the date of the decision of the Expert, subject to any government approvals that may be required. The decision of the Expert is expected near the end of the first quarter of 2024. The GLJ Reserves and Resource Report and the references included herein are based on the 49.1% interest in Caburé, Alvopetro's working interest share as of December 31, 2023 . The reserves data included in this news release and in the GLJ Reserves and Resources Report may be materially impacted following the Expert's decision.
All references herein to $ refer to United States dollars, unless otherwise stated.
December 31, 2023 GLJ Reserves and Resource Report:
Proved reserves ("1P") decreased 30% to 2.7 MMboe Proved reserves mainly due to 2023 production and technical revisions related to the 197-1 and 183-1 Murucututu wells. Alvopetro is working to enhance production from these wells with optimizations in 2024. 2P reserves decreased 4% from 9.0 to 8.7 MMboe after 0.8 MMboe of production in 2023. Production in 2023 was offset by improved recovery factors at Caburé due to the agreed Unit development plan and new additions associated with the discovery at the 183-A3 well in the Caruaçu Formation. Proved plus Probable plus Possible reserves ("3P") increased to 15.2 MMboe from 14.4 MMboe as a result of additions associated with the discovery at the 183-A3 well in the Caruaçu Formation. 2P NPV10 decreased 11% to $309.7 million due to changes in forecast natural gas prices and 2023 production offset mainly by additional value associated with discovered zones in the Caruaçu Formation on our Murucututu natural gas field. Risked best estimate contingent resources increased from 2.9 MMboe to 5.4 MMboe at December 31, 2023 with a NPV10 of $126.1 million , increases from December 31, 2022 of 84% and 103% respectively. The increases were associated with the discovery at the 183-A3 well in the Caruaçu Formation. Risked best estimate prospective resources decreased from 12.5 MMboe to 9.6 MMboe with a NPV10 of $184.9 million , decreases of 23% and 29% respectively from December 31, 2022 . The decrease was due primarily to adjustments to the probabilistic models incorporating the logs results for the Gomo zone at the 183-A3 well.
SUMMARY
December 31, 2023 Gross Reserve and Gross Resource Volumes : (1)(2)(3)(4)(5)(6)
| December 31, 2023 Reserves (Gross) | Total Proved
(1P) | Total Proved plus Probable
(2P) | Total Proved plus Probable plus Possible
(3P) | | | (Mboe) | (Mboe) | (Mboe) | | Caburé Natural Gas Field | 1,995 | 3,700 | 4,853 | | Murucututu Natural Gas Field | 582 | 4,559 | 9,679 | | Bom Lugar Oil Field | 126 | 415 | 622 | | Mãe-da-lua Oil Field | 23 | 36 | 53 | | Total Company Reserves | 2,727 | 8,711 | 15,208 | | | | | | | December 31, 2023 Murucututu Resources (Gross) | Low Estimate | Best Estimate | High Estimate | | | (Mboe) | (Mboe) | (Mboe) | | Risked Contingent Resource
Risked Prospective Resource | 3,500
4,790 | 5,356
9,646 | 5,919
15,222 | | See 'Footnotes' section at the end of this news release | | | |
Net Present Value Before Tax Discounted at 10% : (1)(2)(3)(4)(5)(6)(7)(8)
| Reserves | 1P | 2P | 3P | | | ($000s) | ($000s) | ($000s) | | Caburé Natural Gas Field | 99,946 | 170,854 | 212,653 | | Murucututu Natural Gas Field | 11,700 | 129,169 | 254,433 | | Bom Lugar Oil Field | 3,978 | 8,940 | 13,798 | | Mãe-da-lua Oil Field | 262 | 694 | 1,189 | | Total Company | 115,886 | 309,657 | 482,073 | | | | | | | Murucututu Resource | Low Estimate | Best Estimate | High Estimate | | | ($000s) | ($000s) | ($000s) | | Risked Contingent Resource
Risked Prospective Resource | 82,489
77,906 | 126,134
184,859 | 133,884
304,997 | | See 'Footnotes' section at the end of this news release | | | |
PRICING ASSUMPTIONS – FORECAST PRICES AND COSTS
GLJ employed the following pricing and inflation rate assumptions as of January 1, 2024 in the GLJ Reserves and Resources Report in estimating reserves and resources data using forecast prices and costs.
| Year | Brent Blend Crude Oil FOB North Sea ($/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 | | 2024 | 77.00 | 11.11 | 2.75 | 10.56 | 10.96 | -3.6 % | | 2025 | 79.50 | 13.00 | 3.85 | 10.08 | 10.79 | -6.6 % | | 2026 | 81.49 | 11.85 | 4.16 | 10.44 | 11.01 | -5.2 % | | 2027 | 82.58 | 10.75 | 4.25 | 10.51 | 11.12 | -5.5 % | | 2028 | 84.19 | 10.98 | 4.33 | 10.48 | 10.75 | -2.5 % | | 2029 | 85.90 | 11.20 | 4.42 | 10.63 | 10.73 | -0.9 % | | 2030 | 87.64 | 11.43 | 4.50 | 10.82 | 10.88 | -0.6 % | | 2031 | 89.37 | 11.65 | 4.60 | 11.04 | 11.09 | -0.5 % | | 2032 | 91.16 | 11.89 | 4.69 | 11.26 | 11.30 | -0.4 % | | 2033* | 92.98 | 12.12 | 4.78 | 11.48 | 11.53 | -0.4 % | | _*Escalated at 2% per year thereafter _ | | | | | | |
As of February 1, 2024 , Alvopetro's contracted natural gas price under the terms of our long-term gas sales agreement is based on the ceiling price within the contract. Pricing is forecast to stay slightly below the ceiling for future price adjustments. The ceiling price incorporates assumed US inflation of 2%.
GLJ RESERVES AND RESOURCES REPORT
The GLJ Reserves and Resources Report has been prepared in accordance with the standards contained in the Canadian Oil and Gas Evaluation Handbook (the "COGE Handbook") 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 Reserves and Resources Report was an evaluation of all reserves of Alvopetro including our working interest share as of December 31, 2023 of the Unit (referred to herein as the Caburé natural gas field), our Murucututu natural gas project, as well as our Bom Lugar and Mãe-da-lua oil fields. The GLJ Reserves and Resources Report also includes an evaluation of the gas resources of our Murucututu natural gas field. In addition to the reserves assigned to our Murucututu field, contingent resource was assigned to the area in proximity to our existing Murucututu reserves, deemed to be discovered. The area mapped by 3D seismic west and north of the area defined as contingent was assigned prospective resource. Additional reserves and resources information as required under NI 51-101 will be included in the Company's Annual Information Form for the 2023 fiscal year which will be filed on SEDAR+ ( www.sedarplus.ca ) by April 30, 2024 .
December 31, 2023 Reserves Information:
Summary of Reserves (1)(2)(3)
| | 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 | 8 | 7 | 11,460 | 11,000 | 122 | 117 | 2,039 | 1,957 | | | | | | | | | | | Developed Non-Producing | 142 | 133 | - | - | - | - | 142 | 133 | | | | | | | | | | | Undeveloped | - | - | 2,951 | 2,818 | 54 | 52 | 546 | 522 | | | | | | | | | | Total Proved | 150 | 140 | 14,411 | 13,818 | 176 | 169 | 2,727 | 2,612 | | | | | | | | | | | Probable | 302 | 285 | 31,175 | 29,859 | 486 | 465 | 5,983 | 5,726 | | | | | | | | | | | Total Proved plus Probable | 451 | 425 | 45,586 | 43,677 | 662 | 634 | 8,711 | 8,338 | | | | | | | | | | | Possible | 224 | 211 | 34,253 | 32,785 | 565 | 540 | 6,497 | 6,215 | | | | | | | | | | | Total Proved plus Probable plus Possible | 675 | 635 | 79,839 | 76,462 | 1,226 | 1,174 | 15,208 | 14,553 | | | | | | | | | | | See 'Footnotes' section at the end of this news release | | | | | | | | | | | | | | | | | |
Summary of Before Tax Net Present Value of Future Net Revenue - $000s (1)(2)(3)(7)(8)
| | Undiscounted | 5 % | 10 % | 15 % | 20 % | | | Proved | | | | | | | | | Producing | 114,762 | 106,922 | 100,204 | 94,364 | 89,230 | | | Developed Non-Producing | 6,337 | 5,157 | 4,257 | 3,570 | 3,040 | | | Undeveloped | 18,155 | 14,371 | 11,425 | 9,181 | 7,467 | | Total Proved | 139,254 | 126,450 | 115,886 | 107,115 | 99,738 | | | Probable | 391,202 | 263,064 | 193,771 | 151,218 | 122,597 | | | Total Proved plus Probable | 530,456 | 389,514 | 309,657 | 258,333 | 222,335 | | | Possible | 538,835 | 271,641 | 172,416 | 124,475 | 96,580 | | | Total Proved plus Probable plus Possible | 1,069,291 | 661,155 | 482,073 | 382,808 | 318,915 | |
| See 'Footnotes' section at the end of this news release |
Summary of After Tax Net Present Value of Future Net Revenue – $000s (1)(2)(3)(7)(8)
| | Undiscounted | 5 % | 10 % | 15 % | 20 % | | | Proved | | | | | | | | | Producing | 107,434 | 100,320 | 94,209 | 88,886 | 84,200 | | | Developed Non-Producing | 5,623 | 4,552 | 3,728 | 3,098 | 2,613 | | | Undeveloped | 14,191 | 11,454 | 9,192 | 7,412 | 6,022 | | Total Proved | 127,248 | 116,326 | 107,129 | 99,396 | 92,834 | | | Probable | 297,522 | 205,240 | 153,457 | 120,748 | 98,250 | | | Total Proved plus Probable | 424,769 | 321,565 | 260,586 | 220,145 | 191,085 | | | Possible | 388,926 | 204,696 | 133,885 | 98,386 | 77,076 | | | Total Proved plus Probable plus Possible | 813,695 | 526,262 | 394,471 | 318,531 | 268,160 | |
| See 'Footnotes' section at the end of this news release |
Future Development Costs (1)(2)(3)(7)(8)
The table below sets out the total development costs deducted in the estimation of future net revenue attributable to proved reserves, proved plus probable reserves and proved plus probable plus possible reserves (using forecast prices and costs), by field, in the GLJ Reserves and Resources Report. Total development costs include capital costs for drilling and completing wells and for facilities but excludes abandonment and reclamation costs.
The future development costs for the Caburé field include Alvopetro's working interest share (49.1%) for three development wells in the proved category and an additional two development wells in the probable and possible categories. Also included in future development costs for Caburé are costs associated with a facilities upgrade planned at the field for compression of natural gas to be delivered to Alvopetro's natural gas processing facility. In prior years, Alvopetro reflected all equipment rental payments associated with our Gas Treatment Agreement with Enerflex Ltd. as part of future development costs; however in 2023, such costs are now incorporated within operating expense along with other operating costs associated with the agreement. 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 Murucututu field in the proved category include one development well and stimulation costs for the 183-1 and 183-A3 wells and one project to improve recovery from the 197(1) well. The probable category also includes an additional two development wells along with additional stimulation projects at the 183-1 and 183-A3 wells. The possible category includes one additional well.
The future development costs for Bom Lugar in the proved category include costs to stimulate the BL-06 well drilled by Alvopetro in 2023. Costs in the probable category also include one development well and costs for facilities upgrade. Future development costs at the Mãe-da-lua field relate to a stimulation of the existing producing well.
Alvopetro's share of future development costs are summarized as follows:
| $000s, Undiscounted | 2024 | | 2025 | 2026 | 2027 | 2028 | Remaining | | Total | | | Proved | | | | | | | | | | | | | Caburé Natural Gas Field | 6,993 | | - | - | - | - | - | | 6,993 | | | Murucututu Gas Field | 2,050 | | 6,885 | - | - | - | - | | 8,935 | | | Bom Lugar Oil Field | - | | 510 | - | - | - | - | | 510 | | | Mãe-da-lua Oil Field | - | | 551 | - | - | - | - | | 551 | | Total Proved | 9,043 | | 7,946 | - | - | - | - | | 16,989 | | | Proved Plus Probable | | | | | | | | | | | | | Caburé Natural Gas Field | 6,993 | | 2,504 | - | - | - | - | | 9,497 | | | Murucututu Gas Field | 3,950 | | 20,655 | - | - | - | - | | 24,605 | | | Bom Lugar Oil Field | - | | 6,059 | - | - | - | - | | 6,059 | | | Mãe-da-lua Oil Field | - | | 551 | - | - | - | - | | 551 | | Total Proved Plus Probable | 10,943 | | 29,769 | - | - | - | - | | 40,712 | | | Proved Plus Probable Plus Possible | | | | | | | | | | | | | Caburé Natural Gas Field | 6,993 | | 2,504 | - | - | - | - | | 9,497 | | | Murucututu Gas Field | 3,950 | | 27,540 | - | - | - | - | | 31,490 | | | Bom Lugar Oil Field | - | | 6,059 | - | - | - | - | | 6,059 | | | Mãe-da-lua Oil Field | - | | 551 | - | - | - | - | | 551 | | Total Proved Plus Probable Plus Possible | 10,943 | | 36,654 | - | - | - | - | | 47,597 | |
| See 'Footnotes' section at the end of this news release |
Reconciliation of Alvopetro's Gross Reserves (Before Royalty) (1)(2)(3)(8)
| | Proved (Mboe) | Probable (Mboe) | Proved Plus Probable (Mboe) | Possible
(Mboe) | Proved plus
Probable plus Possible
(Mboe) | | December 31, 2022 | 3,909 | 5,128 | 9,037 | 5,345 | 14,382 | | Discoveries | - | 1,398 | 1,398 | 2,488 | 3,886 | | Extensions | - | 148 | 148 | (148) | - | | Technical Revisions | (400) | (690) | (1,090) | (1,188) | (2,278) | | Production | (782) | - | (782) | - | (782) | | December 31, 2 023 | 2,727 | 5,983 | 8,711 | 6,497 | 15,208 |
| See 'Footnotes' section at the end of this news release. |
December 31, 2023 Murucututu Contingent Resources Information:
Summary of Unrisked Company Gross Contingent Resources (1)(2)(5)(6)
| Development Pending Economic Contingent Resources | Low Estimate | Best Estimate | High Estimate | | Conventional natural gas (MMcf) | 20,952 | 32,062 | 35,433 | | Natural gas liquids (Mbbl) | 386 | 591 | 653 | | Oil equivalent (Mboe) | 3,878 | 5,935 | 6,559 |
| See 'Footnotes' section at the end of this news release. |
Summary of Before Tax Net Present Value of Future Net Revenue of Unrisked Contingent Resources- $000s (1)(2)(5)(6)(7)(8)
| | Undiscounted | 5 % | 10 % | 15 % | 20 % | | Low Estimate | 279,201 | 146,114 | 91,400 | 63,327 | 46,651 | | Best Estimate | 470,246 | 226,624 | 139,760 | 97,612 | 73,016 | | High Estimate | 540,860 | 246,103 | 148,348 | 102,781 | 76,691 |
| See 'Footnotes' section at the end of this news release . |
The GLJ Contingent Resource Report for Murucututu assumes capital deployment starting in 2025 for the drilling and completion of wells with total project costs of $20.8 million and first commercial production in 2025. The information presented herein is based on company net project development costs. The recovery technology assumed for purposes of the estimate is based on established technologies utilized repeatedly in the industry.
There can be no certainty that the project will be developed on the timelines discussed herein. The project is based on a pre-development study. Development of the project is dependent on several contingencies as further described in this news release. Significant positive factors relevant to the estimate include existing production in close proximity, proximity to infrastructure, existing long-term gas sales agreement and corporate commitment to the project. Significant negative factors relevant to the estimate include reservoir performance and the economic viability of the project (with sensitivity to low commodity prices), access to and amount of capital required to develop resources at an acceptable cost, and regulatory approvals for planned activities including stimulations and new infrastructure developments.
Summary of Development Pending Risked Company Gross Contingent Resources (1)(2)(5)(6)
The GLJ Reserves and Resources Report estimates the Chance of Development as the product of two main contingencies associated with the project development, which are: 1) the probability of corporate sanctioning, which GLJ estimates at 95%; 2) the probability of finalization of a development plan, which GLJ estimates at 95%. The product of these two contingencies is 90%. As there is no risk related to discovery, the Chance of Commerciality for the contingent resource is therefore 90% which is the risk factor that has been applied to the Development Risked company gross contingent resources and the net present value figures reported below.
| | Low Estimate | Best Estimate | High Estimate | | Conventional natural gas (MMcf) | 18,909 | 28,936 | 31,978 | | Natural gas liquids (Mbbl) | 349 | 533 | 590 | | Oil equivalent (Mboe) | 3,500 | 5,356 | 5,919 |
| See 'Footnotes' section at the end of this news release. |
Summary of Development Pending Risked Before Tax Net Present Value of Future Net Revenue of Contingent Resources- $000s (1)(5)(6)(7)(8)
| | Undiscounted | 5 % | 10 % | 15 % | 20 % | | Low Estimate | 251,978 | 131,868 | 82,489 | 57,153 | 42,102 | | Best Estimate | 424,397 | 204,528 | 126,134 | 88,095 | 65,897 | | High Estimate | 488,126 | 222,108 | 133,884 | 92,760 | 69,214 |
| See 'Footnotes' section at the end of this news release. |
December 31, 2023 Murucututu Prospective Resources Information:
Summary of Unrisked Company Gross Prospective Resources (1)(2)(4)(6)
| Prospective Resources | Low | Best | High | | Conventional natural gas (MMcf) | 31,903 | 64,251 | 101,392 | | Natural gas liquids (Mbbl) | 588 | 1,184 | 1,869 | | Oil equivalent (Mboe) | 5,905 | 11,893 | 18,768 |