June 6, 2018 - 5:38 PM EDT
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Alvopetro Announces Natural Gas Reserves

Canada NewsWire

CALGARY, June 6, 2018 /CNW/ - Alvopetro Energy Ltd. (TSX-V:ALV) announces the completion of an independent reserves evaluation of our Caburé natural gas field and the Gomo gas discovered from our 183(1) and 197(1) wells, assigning total proved plus probable ("2P") reserves of 5.7 MMboe with a before tax value discounted at 10% of US$124.0 million. Including these reserves, Alvopetro's net asset value has increased to CAD$2.20 per share.

The reserves data set forth below is based upon an independent reserve assessment and evaluation prepared by GLJ Petroleum Consultants ("GLJ") dated June 6, 2018 with an effective date of May 31, 2018 (the "GLJ Report"). 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 replaces the 2015 DeGoyler and MacNaughton contingent resource report.

The GLJ Report was an evaluation of only our Caburé and Caburé Leste natural gas fields (collectively referred to as our Caburé natural gas field) and the Gomo gas only from the drainage areas around our 183(1) and 197(1) wells.  The oil reserves associated with our Bom Lugar and Jiribatuba producing fields as previously evaluated with an effective date of December 31, 2017 were not included in the May 31, 2018 GLJ report.

The reserves assigned to our Caburé natural gas field are based on the terms of the unitization agreement ("UOA") and the unit development plan executed in April 2018 wherein Alvopetro holds an initial working interest share of 49.1%.  The terms of the UOA entitle each party to nominate its working interest share of field production and any natural gas not nominated by the other party.  Alvopetro plans to construct a pipeline and a natural gas processing facility ("UPGN") for its share of gas produced from the unit.  All unit wells are planned to be completed and tied in by the end of 2019 with a planned gross field production rate of 15.9 mmcf/d (450 e3m3/d) when Alvopetro commences production, which is expected by the end of 2019. 

The reserves assigned to our Gomo gas field include reserves associated with the 183(1) well, drilled in 2014 and tested in 2018, and the 197(1) well, drilled and tested in 2014.  Alvopetro plans to complete a stimulation of the 183(1) well later in 2018 with additional development pending results from this stimulation.  Gas produced from this field will be tied into the Caburé pipeline and UPGN via an 8-km transfer pipeline from the 183(1) well.  The long-term production results from these wells will help define the broader Gomo development opportunity across our acreage.

The reserves assigned to both the Caburé natural gas field and the Gomo gas field are based on pricing assumptions from the long-term natural gas sales agreement ("GSA") Alvopetro entered into with Bahiagás, the Bahia State natural gas distribution company. The GSA provides for the sale of up to 17.7 mmcf/d (500 e3m3/d) on a firm and interruptible basis, adjustable annually. The natural gas price to be received under the GSA is set semi-annually using a weighted average basket of trailing benchmark prices.  The calculated natural gas price under the GSA for the month of February 2018 price was $6.54/mmbtu and will be adjusted next in August 2018.

Net Asset Value

As a result of the newly assigned gas reserves, Alvopetro's total net asset value has increased to $145.0 million, reflecting CAD$2.20 per common share outstanding.







MUS

CAD/share(1)





Proved plus Probable Reserves, Before Tax Net Present Value, discounted at 10%





Gas reserves - GLJ report – May 31, 2018 effective date


$123,969

$1.88


Oil reserves – Sproule report – December 31, 2017 effective date


11,648

0.18

Total Proved plus Probable Reserves


$135,617

$2.06


Working capital – as at March 31, 2018


6,628

0.10


Materials and equipment inventory – as at March 31, 2018


2,793

0.04

Total Net Asset Value


$145,038

$2.20

(1)

Converted to Canadian dollars ("CAD") based on the exchange rate on May 31, 2018. The per share calculation is computed based on 85.2 million common shares outstanding as at May 31, 2018.

 

Total Natural Gas Reserves – May 31, 2018

Summary of Gas Reserves (1), (2), (3)

Company Total






Conventional Natural Gas

Natural Gas Liquids

Oil Equivalent


Company

Company

Company

Company

Company

Company


Gross

Net

Gross

Net

Gross

Net


(MMcf)

(MMcf)

(Mbbl)

(Mbbl)

(Mboe)

(Mboe)

Proved








Proved Undeveloped

20,755

18,262

117

103

3,576

3,147

Total Proved

20,755

18,262

117

103

3,576

3,147


Probable

12,534

11,032

81

71

2,170

1,910

Total Proved plus Probable

33,289

29,294

198

174

5,746

5,056

 

By Field






Caburé Natural Gas Field

Gomo Gas Field

Total


Company

Company

Company

Company

Company

Company


Gross

Net

Gross

Net

Gross

Net


(Mboe)

(Mboe)

(Mboe)

(Mboe)

(Mboe)

(Mboe)

Proved








Proved Undeveloped

3,227

2,836

349

311

3,576

3,147

Total Proved

3,227

2,836

349

311

3,576

3,147


Probable

1,387

1,219

783

691

2,170

1,910

Total Proved plus Probable

4,614

4,055

1,132

1,002

5,746

5,056

 

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

Company Total










Undiscounted

5%

10%

15%

20%

Proved








Proved Undeveloped


$111,952

$90,989

$74,352

$61,140

$50,587

Total Proved


$111,952

$90,989

$74,352

$61,140

$50,587

       Probable


102,227

70,264

49,616

35,938

26,626

Total Proved plus Probable


$214,179

$161,253

$123,969

$97,078

$77,214

 

By Field








Undiscounted

5%

10%

15%

20%

Proved Undeveloped







Caburé Natural Gas Field 

$109,345

$89,160

$73,249

$60,618

$50,507


Gomo Gas Field

2,607

1,829

1,103

522

80

Total Proved

$111,952

$90,989

$74,352

$61,140

$50,587

Probable Undeveloped







Caburé Natural Gas Field

$71,077

$49,387

$34,942

$25,131

$18,348


Gomo Gas Field

31,150

20,878

14,675

10,807

8,279

Total Proved plus Probable

$214,179

$161,253

$123,969

$97,078

$77,214

 

Summary of After Tax Net Present Value of Future Net Revenue – MUS (1), (2), (3), (4), (5), (6)








Undiscounted

5%

10%

15%

20%

Proved







Proved Undeveloped

$103,195

$83,745

$68,282

$55,995

$46,182

Total Proved

$103,195

$83,745

$68,282

$55,995

$46,182


Probable

88,151

60,242

42,271

30,417

22,384

Total Proved plus Probable

$191,347

$143,987

$110,553

$86,413

$68,566

Notes:

(1)

The tables above are a summary of the reserves of the Caburé natural gas field and the Gomo natural gas field 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.  Alvopetro's reserves associated with its Bom Lugar and Jiribatuba producing fields were not included in the GLJ report and have not been updated from the December 31, 2017 report prepared by Sproule International Limited ("Sproule") dated March 5, 2018.  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 are classified as Proved Undeveloped or Probable Undeveloped due to the required construction of the pipeline and the UPGN.

(4)

GLJ's March 31, 2018 escalated price forecast is used in the determination of future gas sales prices under the GSA.

(5)

The net present value of future net revenue attributable to Alvopetro's reserves on the Caburé natural gas field and the Gomo natural gas field 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)

MUS = 000's of U.S. dollars.

 

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 and proved plus probable reserves (using forecast prices and costs). Total development costs include capital costs for drilling and facilities but excludes abandonment and reclamation costs.




Forecast Prices and Costs, Gas Reserves


Caburé Natural Gas Field

Gomo Gas Field

Total Gas Reserves

MUS(1)

Proved

Proved Plus

Proved

Proved Plus

Proved

Proved Plus


Reserves

Probable

Reserves

Probable

Reserves

Probable



Reserves


Reserves


Reserves

2018

$4,450

$4,450

$800

$800

$5,250

$5,250

2019

7,364

7,364

1,326

1,326

8,690

8,690

2020

8,032

8,032

2,341

2,341

10,373

10,373

2021

764

764

0

1,337

764

2,101

2022

779

779

541

2,706

1,321

3,485

Remaining Years

13,370

13,370

0

0

13,370

13,370

Total Undiscounted

$34,759

$34,759

$5,008

$8,510

$39,767

$43,269

Notes:

(1)MUS = 000's of U.S. dollars.

 

Total Future Net Revenue (Undiscounted) – Forecast Prices and Costs
















Future Net


Future Net






Abandonment

Revenue


Revenue






and

Before

Future

After




Operating

Development

Reclamation

Income

Income

Income


Revenue

Royalties

Costs

Costs

Costs

Taxes

Taxes

Taxes

(Undiscounted)

(MUS)

(MUS)

(MUS)

(MUS)

(MUS)

(MUS)

(MUS)

(MUS)










Total Proved

$207,023

$24,826

$27,589

$39,767

$2,888

$111,952

$8,757

$103,195

Total Proved plus Probable

$354,343

$42,407

$49,843

$43,269

$4,644

$214,179

$22,832

$191,347

 

Annual General Meeting and Investor Presentation

Alvopetro's Annual General Meeting is planned for September 10, 2018 at the Eighth Avenue Place Conference Centre, Suite 410 (Fourth Floor), 525 – 8th Avenue S.W., Calgary, Alberta Canada, beginning at 9:30 a.m. 

Alvopetro is hosting an investor presentation for interested shareholders on Tuesday June 12, 2018 at the Club at Rolling Hills in Golden, Colorado (15707 West 26th Avenue).  Should any shareholders wish to attend, please contact [email protected] for additional details and to confirm attendance.  A summary of the materials presented and a link to a video of the presentation will be available shortly after the meeting on Alvopetro's website at www.alvopetro.com.

Corporate Presentation

Alvopetro's updated corporate presentation is available on our website at: http://www.alvopetro.com/corporate-presentation.

Oil and Natural Gas Reserves. 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 March 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 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, is for the interim period ended May 31, 2018 and excludes the Company's oil reserves which were evaluated at December 31, 2017.  Full disclosure with respect to the Company's reserves as at December 31, 2017 is contained in the Company's annual information form for the year ended December 31, 2017 which was filed on SEDAR. 

Abbreviations:

e3m3/d           

=      

thousand cubic metres per day

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.

View original content: http://www.newswire.ca/en/releases/archive/June2018/06/c2883.html

Corey C. Ruttan, President, Chief Executive Officer and Director, or Alison Howard, Chief Financial Officer, Phone: 587.794.4224, Email: [email protected], www.alvopetro.com, TSX-V: ALVCopyright CNW Group 2018


Source: Canada Newswire (June 6, 2018 - 5:38 PM EDT)

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