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

CALGARY, March 9, 2020 /CNW/ - Alvopetro Energy Ltd. (TSX-V:ALV; OTCQX: ALVOF) 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)}

	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, 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.

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.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
(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 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

		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

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, 2019.
(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

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.

Corey C. Ruttan, President, Chief Executive Officer and Director, or Alison Howard, Chief Financial Officer, Phone: [phone]; Email: [email protected], www.alvopetro.com, TSX-V: ALV

Related Links

http://www.alvopetro.com/