CALGARY,
AB, Aug. 9, 2023 /CNW/ - Alvopetro Energy Ltd.
(TSXV: ALV) (OTCQX: ALVOF) is pleased to announce financial results
for the three and six months ended June 30,
2023 and an operational update.
All references herein to $ refer to United States dollars, unless otherwise stated
and all tabular amounts are in thousands of United States dollars, except as otherwise
noted.
President & CEO, Corey C.
Ruttan commented:
"We continue to post strong results, generating an operating
netback of $69.61 per boe and
$11 million in funds flow from
operations, highlighting the strong profitability of our
operations. Our 2023 capital program is focused on adding 100%
interest production from our Murucututu natural gas project and our
Bom Lugar oil field. We have had exciting early results with the
stimulation of our 197(1) Murucututu well and drilling our first
oil development well at Bom Lugar."
Operational Update
Drilling operations continue on the 183-A3 well on our
Murucututu natural gas field. The well was spud on July 11th and is targeting shallower
exploration potential in the Caruaçu Formation and the Gomo member
of the Candeias Formation. We expect drilling to be completed later
this quarter. We also expect to complete our recently drilled Bom
Lugar well (BL-06) and have the well on production in the third
quarter.
Our natural gas price under our long-term gas sales agreement
with Bahiagás was adjusted effective August
1st to BRL1.99/m3 or $13.25/Mcf, based on our average heat content to
date, the July 31, 2023 BRL/USD
foreign exchange rate of 4.74 and enhanced sales tax credits
applicable in 2023. This new gas price is effective for all of our
natural gas sales from both our Caburé and Murucututu fields as of
August 1, 2023.
Financial and Operating Highlights – Second Quarter of
2023
- Average daily sales decreased to 1,975 boepd (-29% from Q1 2023
and -16% from Q2 2022) due mainly to reduced production from our
Caburé natural gas field as a result of higher nominated volumes
from our partner.
- Our average realized natural gas price increased to
$12.86/Mcf, an 8% increase from Q2
2022 with the 3% increase in our contracted natural gas price and
enhanced sales tax credits available in 2023. Compared to Q1 2023,
our realized sales price increased 7% due mainly to the
appreciation of the BRL to the USD in Q2. With the higher natural
gas price, our overall realized price per boe increased to
$77.41 (+6% from Q1 2023 and +5% from
Q2 2022), despite lower Brent pricing on condensate sales.
- Our natural gas, condensate and oil revenue was $13.9 million in Q2 2023, a decrease of
$1.9 million compared to Q2 2022
(-12%) due to a 16% decrease in production partially offset by the
increase in realized sales prices per boe.
- Our operating netback improved to $69.61 per boe (+$3.00 per boe from Q1 2023 and
+$5.65 per boe from Q2 2022) with a higher realized sales price and
lower royalties, partially offset by the impact of fixed operating
costs with lower sales volumes.
- We generated funds flows from operations of $11.0 million ($0.30 per basic share and $0.29 per diluted share), a decrease of
$1.4 million compared to Q2 2022 and
$3.9 million compared to Q1
2023.
- We reported net income of $9.9
million in Q2 2023, an increase of $3.2 million (+49%) compared to Q2 2022.
- Capital expenditures totaled $8.5
million, including drilling cost for our BL-06 well on our
Bom Lugar field, stimulation costs for our 197(1) well on our
Murucututu field, and long-lead purchases for future capital
projects.
- Our working capital surplus was $18.1
million as of June 30, 2023, a
decrease of $2.8 million from
March 31, 2023, and an improvement of
$3.4 million from December 31, 2022.
The following table provides a summary of Alvopetro's financial
and operating results for three and six months ended June 30, 2023 and June 30,
2022. 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
SEDAR+ website at www.sedarplus.ca.
|
As at and Three
Months Ended
June
30,
|
As at and Six
Months Ended
June
30,
|
|
2023
|
2022
|
Change
|
2023
|
2022
|
Change (%)
|
Financial
|
|
|
|
|
|
|
($000s, except
where noted)
|
|
|
|
|
|
|
Natural gas, oil and
condensate sales
|
13,914
|
15,787
|
(12)
|
32,074
|
29,759
|
8
|
Net income
|
9,852
|
6,631
|
49
|
22,054
|
17,746
|
24
|
Per share – basic
($)(1)
|
0.27
|
0.20
|
35
|
0.60
|
0.52
|
15
|
Per share – diluted
($)(1)
|
0.26
|
0.18
|
44
|
0.59
|
0.49
|
20
|
Cash flows from
operating activities
|
13,473
|
12,997
|
4
|
27,329
|
21,330
|
28
|
Per share – basic
($)(1)
|
0.37
|
0.38
|
(3)
|
0.75
|
0.63
|
19
|
Per share – diluted
($)(1)
|
0.36
|
0.35
|
3
|
0.73
|
0.59
|
24
|
Funds flow from
operations (2)
|
11,047
|
12,434
|
(11)
|
26,019
|
23,338
|
11
|
Per share – basic
($)(1)
|
0.30
|
0.37
|
(19)
|
0.71
|
0.69
|
3
|
Per share – diluted
($)(1)
|
0.29
|
0.34
|
(15)
|
0.69
|
0.64
|
8
|
Dividends
declared
|
5,109
|
2,728
|
87
|
10,213
|
5,444
|
88
|
Per
share(1)
|
0.14
|
0.08
|
75
|
0.28
|
0.16
|
75
|
Capital
expenditures
|
8,521
|
6,338
|
34
|
11,812
|
10,138
|
17
|
Cash and cash
equivalents
|
25,598
|
13,672
|
87
|
25,598
|
13,672
|
87
|
Net working capital
surplus(2)
|
18,084
|
11,641
|
55
|
18,084
|
11,641
|
55
|
Working capital, net of
debt(2)
|
18,084
|
9,096
|
99
|
18,084
|
9,096
|
99
|
Weighted average shares
outstanding
|
|
|
|
|
|
|
Basic
(000s)(1)
|
36,697
|
33,973
|
8
|
36,627
|
33,941
|
8
|
Diluted
(000s)(1)
|
37,755
|
36,637
|
3
|
37,657
|
36,426
|
3
|
Operations
|
|
|
|
|
|
|
Natural gas, NGLs and
crude oil sales:
|
|
|
|
|
|
|
Natural gas
(Mcfpd)
|
11,269
|
13,546
|
(17)
|
13,520
|
13,940
|
(3)
|
NGLs – condensate (bopd)
|
92
|
97
|
(5)
|
111
|
98
|
13
|
Oil (bopd)
|
5
|
5
|
-
|
5
|
8
|
(38)
|
Total
(boepd)
|
1,975
|
2,359
|
(16)
|
2,369
|
2,429
|
(2)
|
|
|
|
|
|
|
|
Average realized
prices(2):
|
|
|
|
|
|
|
Natural gas ($/Mcf)
|
12.86
|
11.90
|
8
|
12.40
|
10.94
|
13
|
NGLs – condensate ($/bbl)
|
83.35
|
121.93
|
(32)
|
83.79
|
114.11
|
(27)
|
Oil ($/bbl)
|
63.93
|
94.47
|
(32)
|
68.00
|
83.90
|
(19)
|
Total ($/boe)
|
77.41
|
73.54
|
5
|
74.80
|
67.68
|
11
|
|
|
|
|
|
|
|
Operating netback
($/boe)(2)
|
|
|
|
|
|
|
Realized sales
price
|
77.41
|
73.54
|
5
|
74.80
|
67.68
|
11
|
Royalties
|
(1.97)
|
(5.35)
|
(63)
|
(2.18)
|
(4.84)
|
(55)
|
Production
expenses
|
(5.83)
|
(4.23)
|
38
|
(4.75)
|
(4.00)
|
19
|
Operating
netback
|
69.61
|
63.96
|
9
|
67.87
|
58.84
|
15
|
Operating netback
margin(2)
|
90 %
|
87 %
|
3
|
91 %
|
87 %
|
5
|
Notes:
|
(1) Per share
amounts are based on weighted average shares outstanding other than
dividends per share, which is based on the number of common shares
outstanding at each dividend record date. The weighted average
number of diluted common shares outstanding in the computation of
funds flow from operations and cash flows from operating activities
per share is the same as for net income per share.
|
(2) See
"Non-GAAP and Other Financial Measures" section within this
news release.
|
Q2 2023 Results Webcast
Alvopetro will host a live webcast to discuss our Q2 2023
financial results at 9:00 am Mountain time
on Thursday August 10, 2023. Details for joining the event
are as follows:
Date: August 10,
2023
Time: 9:00 AM
Mountain/11:00 AM Eastern
Link: https://us06web.zoom.us/j/83723796296
Dial-in numbers: https://us06web.zoom.us/u/kcmVqG8cd9
Webinar ID: 837 2379 6296
The webcast will include a question and answer period. Online
participants will be able to ask questions through the Zoom portal.
Dial-in participants can email questions directly to
socialmedia@alvopetro.com.
Corporate Presentation
Alvopetro's updated corporate presentation is available on our
website at:
http://www.alvopetro.com/corporate-presentation.
Social Media
Follow Alvopetro on our social media channels at the following
links:
Twitter -
https://twitter.com/AlvopetroEnergy
Instagram - https://www.instagram.com/alvopetro/
LinkedIn -
https://www.linkedin.com/company/alvopetro-energy-ltd
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 and Murucututu natural gas fields
and our 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.
Abbreviations:
$000s
|
=
|
thousands of U.S.
dollars
|
bbls
|
=
|
barrels
|
boepd
|
=
|
barrels of oil
equivalent ("boe") per day
|
bopd
|
=
|
barrels of oil and/or
natural gas liquids (condensate) per day
|
BRL
|
=
|
Brazilian
Real
|
CAD
|
=
|
Canadian
dollars
|
m3
|
=
|
cubic metre
|
Mcf
|
=
|
thousand cubic
feet
|
Mcfpd
|
=
|
thousand cubic feet per
day
|
MMcf
|
=
|
million cubic
feet
|
MMcfpd
|
=
|
million cubic feet per
day
|
NGLs
|
=
|
natural gas
liquids
|
Q1 2023
|
=
|
three months ended
March 31, 2023
|
Q2 2022
|
=
|
three months ended June
30, 2022
|
Q2 2023
|
=
|
three months ended June
30, 2023
|
Non-GAAP and Other Financial Measures
This news release contains references to various non-GAAP
financial measures, non-GAAP ratios, capital management measures
and supplementary financial measures as such terms are defined in
National Instrument 52-112 Non-GAAP and Other Financial Measures
Disclosure. Such measures are not recognized measures under
GAAP and do not have a standardized meaning prescribed by IFRS and
might not be comparable to similar financial measures disclosed by
other issuers. While these measures may be common in the oil and
gas industry, the Company's use of these terms may not be
comparable to similarly defined measures presented by other
companies. The non-GAAP and other financial measures referred to in
this report should not be considered an alternative to, or more
meaningful than measures prescribed by IFRS and they are not meant
to enhance the Company's reported financial performance or
position. These are complementary measures that are used by
management in assessing the Company's financial performance,
efficiency and liquidity and they may be used by investors or other
users of this document for the same purpose. Below is a description
of the non-GAAP financial measures, non-GAAP ratios, capital
management measures and supplementary financial measures used in
this news release. 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 and Other Financial Measures" section of
the Company's MD&A which may be accessed through the SEDAR+
website at www.sedarplus.ca.
Non-GAAP Financial Measures
Operating netback
Operating netback is calculated as natural gas, oil and
condensate revenues less royalties and production expenses. This
calculation is provided in the "Operating Netback" section
of the Company's MD&A using our IFRS measures. The Company's
MD&A may be accessed through the SEDAR+ website at
www.sedarplus.ca. Operating netback is a common metric used in the
oil and gas industry used to demonstrate profitability from
operations.
Non-GAAP Financial Ratios
Operating netback per boe
Operating netback is calculated on a per unit basis, which is
per barrel of oil equivalent ("boe"). It is a common non-GAAP
measure used in the oil and gas industry and management believes
this measurement assists in evaluating the operating performance of
the Company. It is a measure of the economic quality of the
Company's producing assets and is useful for evaluating variable
costs as it provides a reliable measure regardless of fluctuations
in production. Alvopetro calculated operating netback per boe as
operating netback divided by total sales volumes (barrels of oil
equivalent). This calculation is provided in the "Operating
Netback" section of the Company's MD&A using our IFRS
measures. The Company's MD&A may be accessed through the SEDAR+
website at www.sedarplus.ca. Operating netback is a common metric
used in the oil and gas industry used to demonstrate profitability
from operations on a per unit basis (boe).
Operating netback margin
Operating netback margin is calculated as operating netback per
boe divided by the realized sales price per boe. Operating netback
margin is a measure of the profitability per boe relative to
natural gas, oil and condensate sales revenues per boe and is
calculated as follows:
|
Three Months
Ended
June
30,
|
Six Months
Ended
June
30,
|
|
2023
|
2022
|
2023
|
2022
|
Operating netback - $
per boe
|
69.61
|
63.96
|
67.87
|
58.84
|
Average realized price
- $ per boe
|
77.41
|
73.54
|
74.80
|
67.68
|
Operating netback
margin
|
90 %
|
87 %
|
91 %
|
87 %
|
Funds Flow from Operations Per Share
Funds flow from operations per share is a non-GAAP ratio that
includes all cash generated from operating activities and is
calculated before changes in non-cash working capital, divided by
the weighted the weighted average shares outstanding for the
respective period. For the periods reported in this news release
the cash flows from operating activities per share and funds flow
from operations per share is as follows:
|
Three Months
Ended
June
30,
|
Six Months
Ended
June
30,
|
$ per
share
|
2023
|
2022
|
2023
|
2022
|
Per basic
share:
|
|
|
|
|
Cash flows from
operating activities
|
0.37
|
0.38
|
0.75
|
0.63
|
Funds flow from
operations
|
0.30
|
0.37
|
0.71
|
0.69
|
|
|
|
|
|
Per diluted
share:
|
|
|
|
|
Cash flows from
operating activities
|
0.36
|
0.35
|
0.73
|
0.59
|
Funds flow from
operations
|
0.29
|
0.34
|
0.69
|
0.64
|
Capital Management Measures
Funds Flow from Operations
Funds flow from operations is a non-GAAP capital management
measure that includes all cash generated from operating activities
and is calculated before changes in non-cash working capital. The
most comparable GAAP measure to funds flow from operations is cash
flows from operating activities. Management considers funds flow
from operations important as it helps evaluate financial
performance and demonstrates the Company's ability to generate
sufficient cash to fund future growth opportunities. Funds flow
from operations should not be considered an alternative to, or more
meaningful than, cash flows from operating activities however
management finds that the impact of working capital items on the
cash flows reduces the comparability of the metric from period to
period. A reconciliation of funds flow from operations to cash
flows from operating activities is as follows:
|
Three Months
Ended
June
30,
|
Six Months
Ended
June
30,
|
|
2023
|
2022
|
2023
|
2022
|
Cash flows from
operating activities
|
13,473
|
12,997
|
27,329
|
21,330
|
(Deduct) add back
changes in non-cash working capital
|
(2,426)
|
(563)
|
(1,310)
|
2,008
|
Funds flow from
operations
|
11,047
|
12,434
|
26,019
|
23,338
|
Net Working Capital
Net working capital is computed as current assets less current
liabilities. Net working capital is a measure of liquidity, is used
to evaluate financial resources, and is calculated as
follows:
|
|
As at June
30,
|
|
|
2023
|
2022
|
Total current
assets
|
|
32,801
|
21,461
|
Total current
liabilities
|
|
(14,717)
|
(9,820)
|
Net working capital
surplus
|
|
18,084
|
11,641
|
Working Capital Net of Debt
Working capital net of debt is computed as net working capital
surplus decreased by the carrying amount of the Credit Facility.
Working capital net of debt is used by management to assess the
Company's overall financial position.
|
|
As at June
30,
|
|
|
2023
|
2022
|
Net working capital
surplus
|
|
18,084
|
11,641
|
Credit Facility,
balance outstanding
|
|
-
|
(2,545)
|
Working capital, net of
debt
|
|
18,084
|
9,096
|
Supplementary Financial Measures
"Average realized natural gas price - $/Mcf" is comprised
of natural gas sales as determined in accordance with IFRS, divided
by the Company's natural gas sales volumes.
"Average realized NGL – condensate price - $/bbl" is
comprised of condensate sales as determined in accordance with
IFRS, divided by the Company's NGL sales volumes from
condensate.
"Average realized oil price - $/bbl" is comprised of oil
sales as determined in accordance with IFRS, divided by the
Company's oil sales volumes.
"Average realized price - $/boe" is comprised of natural
gas, condensate and oil sales as determined in accordance with
IFRS, divided by the Company's total natural gas, condensate and
oil sales volumes (barrels of oil equivalent).
"Dividends per share" is comprised of dividends declared,
as determined in accordance with IFRS, divided by the number of
shares outstanding at the dividend record date.
"Royalties per boe" is comprised of royalties, as
determined in accordance with IFRS, divided by the total natural
gas, condensate and oil sales volumes (barrels of oil
equivalent).
"Production expenses per boe" is comprised of production
expenses, as determined in accordance with IFRS, divided by the
total natural gas, condensate and oil sales volumes (barrels of oil
equivalent).
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 (6 Mcf/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.
Forward‐looking statements involve significant risks and
uncertainties, should not be read as guarantees of future
performance or results, and will not necessarily be accurate
indications of whether or not such results will be achieved. A
number of factors could cause actual results to vary significantly
from the expectations discussed in the forward-looking statements.
These forward-looking statements reflect current assumptions and
expectations regarding future events. Accordingly, when relying on
forward-looking statements to make decisions, Alvopetro cautions
readers not to place undue reliance on these statements, as
forward-looking statements involve significant risks and
uncertainties. More particularly and without limitation, this news
release contains forward-looking statements concerning concerning
plans relating to the Company's operational activities, proposed
exploration development activities and the timing for such
activities, exploration and development prospects of Alvopetro,
capital spending levels, future capital and operating costs, future
production and sales volumes, production allocations from the
Caburé natural gas field, the expected natural gas price, gas sales
and gas deliveries under Alvopetro's long-term gas sales agreement,
the expected timing of testing the BL-06 well and production
commencement from the BL-06 well, anticipated duration of drilling
operations for the 183-A3 well, anticipated timing for upcoming
drilling and testing of other wells, projected financial results,
the expected timing and outcomes of certain of Alvopetro's testing
activities, and sources and availability of capital.
Forward-looking statements are necessarily based upon assumptions
and judgments with respect to the future including, but not limited
to, expectations and assumptions concerning the timing of
regulatory licenses and approvals, equipment availability, the
success of future drilling, completion, testing, recompletion and
development activities and the timing of such activities, the
performance of producing wells and reservoirs, well development and
operating performance, expectations regarding Alvopetro's working
interest and the outcome of any redeterminations, environmental
regulation, including regulation relating to hydraulic fracturing
and stimulation, the ability to monetize hydrocarbons discovered,
the outlook for commodity markets and ability to access capital
markets, foreign exchange rates, general economic and business
conditions, forecasted demand for oil and natural gas, the impact
of global pandemics, weather and access to drilling locations, the
availability and cost of labour and services, 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. In addition, the
declaration, timing, amount and payment of future dividends remain
at the discretion of the Board of Directors. Although we believe
that the expectations and assumptions on which the forward-looking
statements are based are reasonable, undue reliance should not be
placed on the forward-looking statements because we can give no
assurance that they will prove to be correct. Since forward looking
statements address future events and conditions, by their very
nature they involve inherent risks and uncertainties. Actual
results could differ materially from those currently anticipated
due to a number of factors and risks. These include, but are not
limited to, risks associated with the oil and gas industry in
general (e.g., operational risks in development, exploration and
production; delays or changes in plans with respect to exploration
or development projects or capital expenditures; the uncertainty of
reserve estimates; the uncertainty of estimates and projections
relating to production, costs and expenses, reliance on industry
partners, availability of equipment and personnel, uncertainty
surrounding timing for drilling and completion activities resulting
from weather and other factors, changes in applicable regulatory
regimes and health, safety and environmental risks), commodity
price and foreign exchange rate fluctuations, market uncertainty
associated with financial institution instability, and general
economic conditions. 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.
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 factors
that could affect the operations or financial results of Alvopetro
are included in our annual information form which may be accessed
on Alvopetro's SEDAR+ profile at www.sedarplus.ca. 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.
www.alvopetro.com
TSX-V: ALV, OTCQX: ALVOF
SOURCE Alvopetro Energy Ltd.