Alvopetro Announces Operational Update and Second Quarter Financial and Operating Results

CALGARY, Aug. 23, 2016 /CNW/ - Alvopetro Energy Ltd. (TSX-V:ALV) is pleased to provide an operational update and announce our second quarter financial and operating results.  

Operational Update

By the end of August, we expect to spud our 256(A1) well which is a multi-zone prospect located on Block 256 and is one of our largest exploration prospects to-date. Block 256 is located near existing State gas transmission infrastructure and the drilling of 256(A1) will fulfil our Block 256 exploratory phase commitment. 

We continue to be prudent in preserving our financial resources through cost reductions and a disciplined capital program targeting high potential exploration prospects.  Our primary focus is on building a natural gas business and we are actively working towards finalizing a unitization agreement with the adjacent resource owner while at the same time advancing negotiations to secure a gas sales contract in order to finalize the field commercialization plan for our 197(2) gas discovery. 

Financial and Operating Highlights – Q2 2016

  • In the second quarter of 2016, our production decreased 38% to 36 bopd. The 182(B1) well was shut-in on May 11, 2016 and is currently offline to replace rental equipment with Company owned facilities to reduce production expenses going forward.  Second quarter production was also impacted by reduced production from the Bom Lugar field which was offline as of mid-June awaiting pump repairs.   This work was completed in August and production has now resumed.
  • Capital and other asset expenditures of $0.8 million in the second quarter included $0.3 million incurred for the 182(B1) facilities, $0.2 million in costs for the 256(A1) well, the next well to be drilled by Alvopetro, as well as capitalized G&A of $0.2 million
  • We reported a net loss of $2.0 million in the second quarter, primarily due to $1.3 million negative funds flow from operations and deferred tax expense of $0.5 million.  Included in the net loss is $0.2 million in exploration and evaluation expenditures relating to all costs incurred on Block 170 in the second quarter.  This block was relinquished to the National Agency of Petroleum, Natural Gas and Biofuels ("ANP") on March 29, 2016 and all costs incurred after this date are directly expensed in net loss. 
  • Our cash and working capital resources total $22.9 million, including $23.8 million of cash and cash equivalents. 

Summary of Q2 2016 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, 2016 and June 30, 2015. 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.

SUMMARY OF Q2 2016 RESULTS





Three months ended
June 30,

Six months ended
June 30,


2016

2015

2016

2015

Financial





($000s, except where noted)





Oil sales

126

150

279

322

Funds flow from operations (1)

(1,309)

(1,352)

(2,534)

(2,709)


Per share – basic and diluted ($)(2)

(0.02)

(0.02)

(0.03)

(0.03)

Net loss

(2,000)

(980)

(6,515)

(2,543)


Per share – basic and diluted ($)(2)

(0.02)

(0.01)

(0.08)

(0.03)

Capital and other asset expenditures

835

6,602

3,901

7,956

Total assets

84,295

112,822

84,295

112,822

Debt

-

-

-

-

Net working capital surplus (1) (3)

22,909

30,737

22,909

30,737

Common shares outstanding, end of period (000s)






Basic

85,167

85,167

85,167

85,167


Diluted (2)

91,348

90,543

91,348

90,543

Operations





Operating netback ($/bbl) (1)






Brent benchmark price

46.97

63.50

41.03

59.33


Discount

(8.50)

(11.36)

(8.50)

(10.95)


Sales price

38.47

52.14

32.53

48.38


Transportation expenses

(2.44)

(1.74)

(2.10)

(3.16)


Realized sales price

36.03

50.40

30.43

45.22


Royalties and production taxes

(3.36)

(2.09)

(3.38)

(3.16)


Production expenses

(109.92)

(91.76)

(83.82)

(76.92)


Operating netback

(77.25)

(43.45)

(56.77)

(34.86)






Average daily crude oil production (bopd)

36

32

47

37


Notes:

(1)

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

(2)

Consists of outstanding common shares and stock options of the Company as at June 30, 2016.

(3)

Includes current restricted cash of $4.6 million as at June 30, 2015 but excludes non-current restricted cash of
$5.0 million as at June 30, 2015.  The Company has no current or non-current restricted cash as at June 30, 2016.

 

Updated Corporate Presentation

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

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 tight-gas resource play. Our efforts in the near-term are concentrated on building a natural gas business by finalizing a unitization agreement and securing a gas sales contract for our 197(2) discovery.

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 news release are in United States dollars, unless otherwise noted. 

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", "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 financial results and operating results, reserves and potential hydrocarbons in our assets, exploration and development prospects of Alvopetro and the expected timing 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 expectations and assumptions concerning testing results, the timing of regulatory licenses and approvals, availability of capital, the success of future drilling 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.

Non-GAAP Measures. This news release contains financial terms that are not considered measures under Canadian generally accepted accounting principles ("GAAP"), 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 before 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 (including current restricted cash) less current liabilities (excluding the current portion of decommissioning obligations) and is used to evaluate the Company's financial leverage.  Operating netback is determined by dividing oil sales less royalties and production taxes, transportation and operating expenses by sales volume of produced oil. 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 GAAP.

SOURCE Alvopetro Energy Inc.

For further information: Corey C. Ruttan, President, Chief Executive Officer and Director, Alison Howard, Chief Financial Officer, Phone: 587.794.4224, Email: info@alvopetro.com, www.alvopetro.com, TSX-V: ALV

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