Alvopetro Announces December 31, 2018 Reserves & Operational Update

CALGARY, March 7, 2019 /CNW/ - Alvopetro Energy Ltd. (TSX-V:ALV; OTCQX: ALVOF) announces our reserves as at December 31, 2018 with total proved plus probable ("2P") reserves of 6.1 MMboe and a before tax value discounted at 10% of US$145.0 million. The reserves data set forth herein is based upon an independent reserve assessment and evaluation prepared by GLJ Petroleum Consultants ("GLJ") dated March 7, 2019 with an effective date of December 31, 2018 (the "GLJ Report").

The majority of Alvopetro's reserves are from the Caburé natural gas field (Alvopetro 49.1% working interest).  The field has four existing wells and the first phase of field production facility construction was completed in 2018.  In 2019 the remaining field production facilities will be built and an additional three to four development wells will be drilled.  Alvopetro's share of gas from the Caburé natural gas field will be shipped via an 11-kilometre transfer pipeline (Alvopetro 100%) to a natural gas processing facility operated by Enerflex under the terms of our September 2018 Gas Treatment Agreement. All gas will then be sold by Alvopetro to Bahiagás under the terms of our May 2018 long-term Gas Sales Agreement.   Alvopetro is awaiting final installation permits for pipeline and facility construction and is targeting all infrastructure to be in place to commence first gas sales in January 2020.  All pipe has been shipped to the field staging area and our pipeline contractor is ready to commence installation upon receipt of regulatory approvals.  Initial equipment for the gas processing facility has been assembled, tested, and will be ready for shipment to Brazil beginning in April.   

On our deep basin Gomo natural gas project (Alvopetro 100% working interest), we have received the environmental license for the stimulation of our 183(1) well.  We are in the process of securing a service rig and expect to complete the stimulation in the second quarter of 2019.

We have also received the permit to drill our Block 57 multi-zone oil prospect.  Drilling will commence based on rig availability and we are currently targeting to spud the well in the second quarter of 2019.

2019 TSX Venture 50

Alvopetro was recently named to the TSX Venture 50, an annual showcase of top performing companies from five industry sectors.  Alvopetro was the top performing 2019 Venture 50 company in the Energy sector, achieving a 169% improvement in market capitalization, a 137% share price change and overall trading volume of 14.9 million shares for the year ended December 31, 2018.  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 video can also be found at https://www.bnnbloomberg.ca/building-a-natural-gas-business-in-brazil-1.1222308  and https://business.financialpost.com/business-trends/building-a-natural-gas-business-in-brazil.

Alvopetro Energy Ltd. Gross Reserves Summary at December 31, 2018^{(1), (2), (3), (4), (5), (6)}

	Total Proved	Total Proved plus Probable	Total Proved plus Probable plus Possible
Conventional Natural Gas (Mboe)	3,485	5,586	8,393
Light & Medium Oil (Mbbl)	175	310	600
Natural Gas Liquids (Mbbl)	118	200	313
Total oil equivalent (Mboe)	3,779	6,096	9,306
Before Tax Net Present Value, discount at 10% (MUS)	$88,981	$144,950	$209,585
After Tax Net Present Value, discounted at 10% (MUS)	$81,025	$130,335	$183,126

(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 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, 2018 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 $155.0 million, reflecting CAD$2.16 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)		$88,981	$144,950	$209,585
	Working capital – as at September 30, 2018	4,391	4,391	4,391
	Net proceeds from October 16, 2018 equity issuance	3,935	3,835	3,835
	Materials and equipment inventory – as at September 30, 2018	1,823	1,823	1,823
Total Net Asset Value^(1)		$99,030	$154,999	$219,634
CAD per share^(2)		$1.38	$2.16	$3.06

(1)

The long-term liability of $1.7 million as at September 30, 2018 is not included as a separate reduction in the computation of net asset value as these amounts are included as future development costs for the Caburé natural gas field.  Alvopetro is required to reimburse our partner for the majority of our share of joint unit development costs of the Caburé natural gas field on the earlier of March 2020 or commence of production allocations to Alvopetro (which is anticipated to be January 2020).  All existing and future costs to be reimbursed to our partner are therefore considered as future development costs in January 2020 and reduce the overall net present value of reserves of $145.0 million reflected in the table above.

(2)

Converted to Canadian dollars ("CAD") based on the exchange rate on March 7, 2019. The per share calculation is computed based on 96.7 million common shares outstanding following the October 16, 2018 equity issuance.

December 31, 2018 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), (3), (6), (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	24	20	-	-	-	-	24	20
	Undeveloped	148	139	20,911	18,401	118	104	3,752	3,310
Total Proved		175	162	20,911	18,401	118	104	3,779	3,333
	Probable	135	125	12,607	11,098	81	72	2,318	2,047
Total Proved plus Probable		310	287	33,519	29,499	200	176	6,096	5,379
	Possible	290	270	16,839	14,804	113	99	3,209	2,837
Total Proved plus Probable plus Possible		600	557	50,357	44,303	313	275	9,306	8,216

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	-	-	-	-	-	-	24	20	24	20
	Undeveloped	3,227	2,836	376	335	148	139	-	-	3,752	3,310
Total Proved		3,227	2,836	376	335	148	139	27	23	3,779	3,333
	Probable	1,387	1,219	796	703	121	113	14	12	2,318	2,047
Total Proved plus Probable		4,614	4,055	1,172	1,038	269	252	41	35	6,096	5,379
	Possible	1,584	1,392	1,335	1,174	274	257	16	14	3,209	2,837
Total Proved plus Probable plus Possible		6,198	5,447	2,507	2,212	542	509	57	48	9,306	8,216

Summary of Before Tax Net Present Value of Future Net Revenue - MUS ^{(1), (2), (3), (4), (5), (6), (7)}

Company Total

		Undiscounted	5%	10%	15%	20%
Proved
	Proved Producing	(641)	(587)	(546)	(513)	(486)
	Proved Developed Non-Producing	199	195	184	169	154
	Proved Undeveloped	125,089	105,225	89,343	76,572	66,205
Total Proved		$124,647	$104,834	$88,981	$76,228	$65,872
	Probable	109,221	76,830	55,969	41,949	32,183
Total Proved plus Probable		$233,868	$181,663	$144,950	$118,177	$98,056
	Possible	176,700	101,048	64,635	44,317	31,873
Total Proved plus Probable plus Possible		$410,569	$282,712	$209,585	$162,494	$129,928

By Field

		Undiscounted	5%	10%	15%	20%
Proved
	Caburé Natural Gas Field	115,615	97,823	83,605	72,108	62,708
	Gomo Gas Field	5,638	4,304	3,256	2,477	1,900
	Bom Lugar Oil Field	3,378	2,651	2,045	1,560	1,178
	Mãe-da-lua Oil Field	16	55	75	83	85
Total Proved		$124,647	$104,834	$88,981	$76,228	$65,872
Proved Plus Probable
	Caburé Natural Gas Field	184,030	147,011	119,532	98,732	82,702
	Gomo Gas Field	40,331	27,043	19,294	14,470	11,271
	Bom Lugar Oil Field	9,115	7,205	5,731	4,603	3,734
	Mãe-da-lua Oil Field	393	404	394	373	349
Total Proved Plus Probable		$233,868	$181,663	$144,950	$118,177	$98,056
Proved Plus Probable Plus Possible
	Caburé Natural Gas Field	268,328	200,635	154,413	121,885	98,358
	Gomo Gas Field	121,266	65,744	42,261	30,240	23,124
	Bom Lugar Oil Field	20,110	15,509	12,147	9,669	7,807
	Mãe-da-lua Oil Field	865	824	764	700	639
Total Proved Plus Probable Plus Possible		$410,569	$282,712	$209,585	$162,494	$129,928

Summary of After Tax Net Present Value of Future Net Revenue – MUS ^{(1), (2), (3), (4), (5), (6), (7) ,(8), (9)}

		Undiscounted	5%	10%	15%	20%
Proved
	Proved Producing	(641)	(587)	(546)	(513)	(486)
	Proved Developed Non-Producing	199	195	184	169	154
	Proved Undeveloped	114,312	96,017	81,386	69,629	60,093
Total Proved		$113,870	$95,625	$81,025	$69,286	$59,760
	Probable	93,561	66,860	49,310	37,364	28,967
Total Proved plus Probable		$207,432	$162,485	$130,335	$106,650	$88,727
	Possible	138,895	81,570	52,792	36,328	26,099
Total Proved plus Probable plus Possible		$346,326	$244,055	$183,126	$142,978	$114,826

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 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)	There are currently four existing wells drilled within the unit area of the Caburé natural gas field and two wells drilled within the Gomo gas field.  However, all reserves associated with these fields are classified as Proved Undeveloped or Probable Undeveloped due to the required construction of the pipeline and the gas processing facility.
(4)	GLJ's December 31, 2018 escalated price forecast is used in the determination of future gas sales prices under Alvopetro's long-term gas sales agreement.
(5)	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.
(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
(7)	MUS = 000's of U.S. dollars.
(8)	Mbbl = thousands of barrels
(9)	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 Reserves	Proved Plus Probable Reserves	Proved Plus Probable Plus Possible Reserves
2019		$5,040	$5,040	$5,040
2020		13,653	15,678	19,636
2021		2,167	2,167	2,167
2022		2,706	4,829	4,829
2023		6,731	6,731	6,731
Remaining Years		9,492	11,801	13,827
Total Undiscounted		$39,789	$46,246	$52,230

Notes:

⁽¹⁾MUS = 000's of U.S. dollars.

By Field

MUS^(1), Undiscounted		2019	2020	2021	2022	2023	Remaining	Total
Proved
	Caburé Natural Gas Field	$4,340	$8,146	$1,730	$1,730	$6,276	$8,555	$30,777
	Gomo Gas Field	700	1,989	437	976	455	937	5,494
	Bom Lugar Oil Field	-	3,083	-	-	-	-	3,083
	Mãe-da-lua Oil Field	-	435	-	-	-	-	435
Total Proved		$5,040	$13,653	$2,167	$2,706	$6,731	$9,492	$39,789
Proved Plus Probable
	Caburé Natural Gas Field	$4,340	$8,146	$1,730	$1,730	$6,276	$9,890	$32,112
	Gomo Gas Field	700	3,274	437	3,099	455	1,911	9,876
	Bom Lugar Oil Field	-	3,823	-	-	-	-	3,823
	Mãe-da-lua Oil Field	-	435	-	-	-	-	435
Total Proved Plus Probable		$5,040	$15,678	$2,167	$4,829	$6,731	$11,801	$46,246
Proved Plus Probable Plus Possible
	Caburé Natural Gas Field	$4,340	$8,146	$1,730	$1,730	$6,276	$10,380	$32,602
	Gomo Gas Field	700	3,274	437	3,099	455	3,477	11,412
	Bom Lugar Oil Field	-	7,781	-	-	-	-	7,781
	Mãe-da-lua Oil Field	-	435	-	-	-	-	435
Total Proved Plus Probable Plus Possible		$5,040	$19,636	$2,167	$4,829	$6,731	$13,827	$52,230

Notes:

⁽¹⁾MUS = 000's of U.S. dollars.

Future development costs for Caburé are consistent amongst all three reserve categories and include costs for the 11‑kilometre transfer pipeline construction in 2019, the payments for full field development in 2020. 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 stimulation of the 183-1 well, and the pipeline and field facility development to tie-in the 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

(Undiscounted)	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	220,779	23,248	30,066	39,789	3,029	124,647	10,777	113,870
Total Proved plus Probable	374,876	39,413	51,848	46,246	3,501	233,868	26,437	207,432
Total Proved plus Probable plus Possible	614,004	64,527	82,527	52,230	4,152	410,569	62,242	346,326

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, 2017	-	697	697	172	869
Discoveries	3,603	2,183	5,786	2,920	8,706
Extensions	148	(115)	33	209	242
Improved Recovery	31	14	46	16	62
Technical Revisions	1	(271)	(270)	(59)	(328)
Disposition	-	(191)	(191)	(48)	(239)
Production	(5)	-	(5)	-	(5)
December 31, 2018	3,779	2,317	6,096	3,210	9,306

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, 2018.
(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. 

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, 2018 will be contained in the Company's annual information form for the year ended December 31, 2018 which will be filed on SEDAR (www.sedar.com) on or before April 30, 2019.  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, 2018. The reserves definitions used in this evaluation are the standards defined by COGEH reserve definitions and 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:
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
MUS	=	000's 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 reserves, exploration and development prospects of Alvopetro and the expected timing and outcomes of certain of Alvopetro's testing and operational 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.

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.

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

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