15.08.2019 00:40:00

Alvopetro Announces Operational Update and Second Quarter 2019 Financial and Operating Results

CALGARY, Aug. 14, 2019 /CNW/ - Alvopetro Energy Ltd. (TSX-V: ALV; OTCQX: ALVOF) announces an operational update and our second quarter financial and operating results.

Operational Update

Block 57 Exploration Prospect (100% Alvopetro)

We have entered into an agreement to commence drilling our Block 57(A1) exploration prospect and the drilling rig is now mobilizing. The 57(A1) prospect is a multi-zone, pre-rift, oil exploration prospect targeting Agua Grande, Sergi and Boipeba formations. The well is estimated to be drilled to a total depth of 1,500 metres, and is scheduled to take 10 days to drill. We expect to have results near the end of August. Alvopetro has also negotiated the ability to increase our working interest in the Block to 100%, subject to the approval of the ANP, at a total estimated remaining cost, including drilling the well, of US$1.4 million.

Caburé Unit Development (49.1% Alvopetro)

Alvopetro's unitized Caburé natural gas field currently consists of four existing wells, two of which are already tied into low pressure production facilities. The development plan includes the construction of high-pressure production facilities, completion and tie-in of the remaining wells, and drilling of up to four new development wells. The Unit has received the required alteration license to complete the development plan. Drilling of the first of the development wells is underway and all remaining development is expected to be completed through the second half of 2019. Our partner is initially funding the majority of the unit development capital until the earlier of 30 days from when Alvopetro commences production, or March 31, 2020.

Caburé Midstream Project (100% Alvopetro)

Construction of our 11-kilometre transfer pipeline ("Transfer Pipeline") commenced in May 2019. Our contractor has now cleared and prepared the majority of the Transfer Pipeline right-of-way, and has commenced welding operations.

Our Facility is being constructed by Enerflex Ltd. where they will construct, own and operate the Facility. Enerflex is responsible for all operations and maintenance of the Facility and is warrantying the delivery schedule and on-stream performance of the Facility. The majority of the processing skids for the Facility have been shipped to Brazil and have now cleared customs. The final shipment departed Houston on August 5, 2019 for Salvador, Brazil. Civil construction at the Facility site is ongoing and initial areas are expected to be released to Enerflex within one week so they may commence field foundation work and the installation of the processing skids.

Alvopetro expects to start natural gas deliveries from the Caburé field in early 2020. Our natural gas is being 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 City gate receiving station at the Facility site. In July, Bahiagás issued their service authorization to commence the construction of this pipeline extension. Their contractor is mobilizing equipment to commence construction and Bahiagás expects to start receiving pipe this month.

Financial and Operating Highlights – Second Quarter of 2019

  • In the second quarter, we received the environmental installation permits from INEMA, the Bahia State environmental regulator, and authorization from the National Agency of Petroleum, Natural Gas and Biofuels of Brazil ("ANP") for construction of both the Transfer Pipeline and the gas treatment facility to be built as part of the planned development of our Caburé natural gas asset. Construction of the Transfer Pipeline and site construction for the gas treatment facility commenced in the quarter. Capital expenditures of $0.8 million included $0.3 million in respect of the Caburé pipeline, $0.1 million for site construction at the gas treatment facility and an additional $0.3 million in capitalized G&A.
  • Our sales volumes averaged 6 bopd in the quarter with all sales from the Mãe-da-lua field.
  • We reported a net loss of $0.8 million in the quarter, primarily due to negative funds flow from operations of $0.7 million.
  • Our cash and cash equivalents totaled $3.3 million as of June 30, 2019.

Summary of Q2 2019 Financial and Operating Results

The following table provides a summary of Alvopetro's financial and operating results for the three and six months ended June 30, 2019 and June 30, 2018. 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 System for Electronic Document Analysis and Retrieval (SEDAR) website at www.sedar.com.

SELECTED QUARTERLY RESULTS


As at and Three Months
Ended June 30,

As at and Six Months
Ended June 30,


2019

2018

2019

2018

Financial





($000s, except where noted)





Oil and condensate sales

30

216

98

332

Net loss

(841)

(1,128)

(1,604)

(2,017)

Per share – basic and diluted ($)(1)

(0.01)

(0.01)

(0.02)

(0.02)

Funds flow from operations (2)

(699)

(844)

(1,336)

(1,686)

Per share – basic and diluted ($)(1)

(0.01)

(0.01)

(0.01)

(0.02)

Capital expenditures(3)

775

930

2,024

2,206

Total assets

64,366

62,150

64,366

62,150

Cash and cash equivalents

3,338

5,839

3,338

5,839

Net working capital surplus(2), (4)

996

5,454

996

5,454

Common shares outstanding, end of year (000s)





Basic

96,593

85,167

96,593

85,167

Diluted (1)

107,438

93,008

107,438

93,008

Operations





Operating netback ($/bbl) (2)





Brent benchmark price

68.33

74.91

66.08

71.04

Discount

(10.53)

(3.81)

(11.73)

(3.41)

Sales price

57.80

71.10

54.35

67.63

Transportation expenses

-

(1.65)

-

(1.83)

Realized sales price

57.80

69.45

54.35

65.80

Royalties and production taxes

(7.71)

(6.25)

(7.21)

(6.52)

Production expenses

(123.31)

(58.92)

(87.63)

(84.54)

Operating netback

(73.22)

4.28

(40.49)

(25.26)






Average daily crude oil and condensate sales (bopd)

6

33

10

27

(1)

Consists of outstanding common shares, stock options, and warrants of the Company.

(2)

Non-GAAP measure. See "Non-GAAP Measures" section within this news release.

(3)

Includes non-cash capital expenditures of $0.03 million for the three and six months ended June 30, 2019 (June 30, 2018 - $0.6 million).

(4)

Includes Other Liabilities of $2.4 million as of June 30, 2019 which was transferred to current liabilities in 2019.

 

Updated Corporate Presentation

Alvopetro's updated corporate presentation is available 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 new release are in United States dollars, unless otherwise stated and all tabular amounts are in thousands of United States dollars, except as otherwise noted.

Non-GAAP Measures. This news release contains financial terms that are not considered measures under International Financial Reporting Standards ("IFRS"), such as funds flow from operations, funds flow per share, net working capital surplus and operating netback. These measures are commonly utilized in the oil and gas industry and are considered informative for management and shareholders. Specifically, funds flow from operations and funds flow per share reflect cash generated from operating activities excluding changes in non-cash working capital. Management considers funds flow from operations and funds flow per share important as they help evaluate performance and demonstrate the Company's ability to generate sufficient cash to fund future growth opportunities. Net working capital surplus includes current assets less current liabilities and is used to evaluate the Company's financial resources. Operating netback is determined by dividing oil and condensate sales less royalties and production taxes, transportation and production expenses by sales volumes. Management considers operating netback important as it is a measure of profitability per barrel sold and reflects the economic quality of production. Funds flow from operations, funds flow per share, net working capital surplus and operating netbacks may not be comparable to those reported by other companies nor should they be viewed as an alternative to cash flow from operations, net income or other measures of financial performance calculated in accordance with IFRS. 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" section of the Company's MD&A which may be accessed through the SEDAR website at www.sedar.com.

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 expected timing and outcomes of certain of regulatory approvals and Alvopetro's operational activities and expected timing of commencement of gas sales under Alvopetro's long-term gas sales agreement. 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.

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