CALGARY, ALBERTA--(Marketwired - Feb. 1, 2016) - Alvopetro Energy Ltd. (TSX VENTURE:ALV) is pleased to announce an operational update.
We expect to spud our 170(B1) well in early February. All site construction is complete and a drilling rig has been mobilized. The 170(B1) prospect is captured within the boundaries of Block 170 and Fazenda Gameleira, and the drilling of 170(B1) will fulfil our Block 170 exploratory phase commitments.
Following the drilling of 170(B1), we plan to drill our 256(A1) well, which is a multi-zone prospect located on Block 256 and is our largest natural gas exploration prospect to-date. All required regulatory approvals have been received and site construction is 50% complete. Block 256 is located near existing State gas transmission infrastructure and the drilling of 256(A1) will fulfil our Block 256 exploratory phase commitments.
In 2015, our 182(B1) well was drilled to a total measured depth of 2,095 metres, cased and cemented. Late in the fourth quarter, 182(B1) was brought on production. For the month of January the 182(B1) well produced oil at an average rate of 46 bopd with a 0.9% water cut. Produced oil from 182(B1) is trucked and sold to a nearby refinery. We plan to shut-in the 182(B1) well to measure reservoir pressure and evaluate enhancements to maximize productivity. Alvopetro has three wells on production, with total average production of 81 bopd, comprised of 25 bopd from Bom Lugar, 10 bopd from Jiribatuba and 46 bopd from 182(B1).
In the fourth quarter of 2015, Alvopetro acquired the Fazenda Gameleira mature field at Brazil's Mature Field Bid Round. The field was acquired by Alvopetro for a bid round bonus payment of R$283,000 (US$71,000), a one well re-entry program and a 3D seismic reinterpretation work commitment, both to be completed prior to May 2019. Fazenda Gameleira is 927 acres and is located centrally within the northern outer boundary of Alvopetro's Block 170 (100% Alvopetro working interest). Following the Mature Field Bid Round, Alvopetro holds and operates 16 exploration blocks and 3 mature fields, totaling 154,257 gross acres (144,243 net acres.) The prospect targeted by our 170(B1) well is partially located on Fazenda Gameleira and, upon success, allows Alvopetro to capture 100% of the exploration upside.
On January 12, 2016, we notified the Agencia Nacional do Petróleo, Gás Natural e Biocombustíveis of Brazil ("ANP") of our intention to relinquish Block 196 in accordance with the associated Brazil 9th Bid Round concession contract. Prior to the relinquishment, Block 196 represents 5,906 acres of Alvopetro's 154,257 gross acreage. Our seismic and geotechnical work indicated limited prospectivity on this Block and its relinquishment will relieve Alvopetro of our commitment to drill one exploration well on Block 196. Upon relinquishment, Alvopetro will pay approximately US$760,000 to the ANP, being the performance guarantee fee required for the relinquishment, based on current exchange rates. This relinquishment fee has been included in accounts payable and accrued liabilities set forth in Alvopetro's financial statements since December 31, 2014.
We continue our disciplined capital program in light of low commodity prices. Our 170(B1) and 256(A1) prospects are potentially the two largest conventional prospects in our inventory and fulfill ANP exploratory phase work commitments. We plan to drill 170(B1) and 256(A1) in sequence allowing us to realize drilling and operational cost savings. Following the drilling of these two wells, we expect to suspend drilling operations temporarily and continue to focus on building our natural gas business. Alvopetro's strong balance sheet, conventional exploration prospect inventory and proven operational expertise provide a solid foundation for growth as commodity prices improve.
Grant of Stock Options
Acknowledging current market conditions and commodity prices, and in lieu of certain cash compensation, Alvopetro has granted stock options to employees to purchase shares under Alvopetro's stock option plan, of which 370,000 stock options were granted to officers. Each stock option has an exercise price of Cdn.$0.29, being the volume weighted average trading price of Alvopetro's shares on the TSX Venture Exchange for the five consecutive trading days up to and including January 29, 2016. All stock options granted expire five years from the date of grant.
Alvopetro Energy Ltd.'s vision is to be the premier independent exploration and production company in Brazil, maximizing shareholder value by applying innovation to underexploited opportunities. Our strategy is to focus on three core opportunities including lower risk development drilling on our mature fields, shallow conventional exploration, and the development of the significant hydrocarbon potential present in our deep Gomo resource play.
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.
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", "plan", "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 planned drilling, potential hydrocarbons in our assets, exploration and development prospects of Alvopetro and the expected timing of certain of Alvopetro's operational activities. The forward‐looking statements are based on certain key expectations and assumptions made by Alvopetro, including expectations and assumptions concerning the timing of operations and drilling activities, regulatory licenses and approvals, availability of capital, the success of future drilling and exploration and development activities, prevailing commodity prices and economic conditions, the availability of labour and services, the ability to transport and market our production, timing of completion of infrastructure and transportation projects, weather and access to drilling locations. 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.