Alvopetro Announces Operational Update and Third Quarter Financial and Operating Results

CALGARY, Nov. 16, 2016 /CNW/ - Alvopetro Energy Ltd. (TSX-V:ALV) is pleased to provide an operational update and announce our third quarter financial and operating results.  

Operational Update

Our near-term 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 natural gas sales contract in order to finalize the field commercialization plan for our 197(2) gas discovery.   We have commenced site construction for our next well to be drilled, 198(A1), which will fulfil our Block 198 exploratory phase commitment.  The 198(A1) well is both a step out well to our 197(2) natural gas discovery in the Caruacu Formation, which our independent evaluator assigned contingent recoverable resources, and targets uphole exploration potential.

Our disciplined approach to capital spending continues while we focus on realizing significant near-term value for our shareholders by establishing a natural gas platform onshore Brazil.  Over the longer-term we plan to focus on unlocking the value of our expanding inventory of shallow conventional prospects, lower risk development drilling locations, and Gomo resource potential.

Financial and Operating Highlights – Q3 2016

  • In the third quarter of 2016, our production decreased 42% to 21 bopd. The 182(B1) well was shut-in on May 11, 2016 to replace rental equipment with Company-owned facilities and to complete a workover. Production resumed on September 19, 2016. Third quarter production was also impacted by reduced production from the Bom Lugar field which was offline from mid-June to mid-August for a pump repair.
  • Capital expenditures of $3.8 million in the third quarter included $2.9 million for the 256(A1) well, $0.3 million for facilities and workover projects on our 182(B1) well and capitalized G&A of $0.4 million.
  • We reported a net loss of $5.7 million in the third quarter, primarily due to the $4.5 million impairment booked, $4.4 million of which was attributable to Block 256.
  • During the third quarter we entered into a farmout agreement with an independent third party (the "Farmee") to transfer a 95% interest in Block 107 in exchange for a $0.3 million cash payment and an agreement by the Farmee to drill two wells on Block 107 in satisfaction of block work commitments. The agreement is subject to the receipt of environmental permits for the two wells to be drilled and approval by the National Agency of Petroleum, Natural Gas and Biofuels of Brazil ("ANP"). Following receipt of all approvals and completion of the two wells, we will be entitled to exchange our 5% interest for a 5% gross-overriding royalty and, in the event of a drilling success on Block 107, a 5% gross-overriding royalty on an adjacent block held by the Farmee.
  • Our cash and working capital resources total $18.4 million, including $21.8 million of cash and cash equivalents and $0.1 million of current restricted cash.

    Summary of Q3 2016 Financial and Operating Results

    The following table provides a summary of Alvopetro's financial and operating results for the three and nine months ended September 30, 2016 and September 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 Q3 2016 RESULTS





    Three months ended
    September 30,

    Nine months ended
    September 30,


    2016

    2015

    2016

    2015

    Financial





    ($000s, except where noted)





    Oil sales

    74

    97

    353

    419

    Funds flow from operations (1)

    (1,155)

    (1,240)

    (3,689)

    (3,949)


    Per share – basic and diluted ($)(2)

    (0.01)

    (0.01)

    (0.04)

    (0.05)

    Net loss

    (5,692)

    (84)

    (12,207)

    (2,627)


    Per share – basic and diluted ($)(2)

    (0.07)

    -

    (0.14)

    (0.03)

    Capital and other asset expenditures

    3,785

    2,636

    7,686

    10,592

    Total assets

    80,765

    98,282

    80,765

    98,282

    Debt

    -

    -

    -

    -

    Net working capital surplus (1) (3)

    18,376

    32,150

    18,376

    32,150

    Common shares outstanding, end of period (000s)






    Basic

    85,167

    85,167

    85,167

    85,167


    Diluted (2)

    91,373

    90,568

    91,373

    90,568

    Operations





    Operating netback ($/bbl) (1)






    Brent benchmark price

    46.98

    51.17

    42.48

    56.61


    Discount

    (8.38)

    (12.65)

    (8.84)

    (10.94)


    Sales price

    38.60

    38.52

    33.64

    45.67


    Transportation expenses

    (2.09)

    (3.18)

    (2.10)

    (3.16)


    Realized sales price

    36.51

    35.34

    31.54

    42.51


    Royalties and production taxes

    (4.17)

    (2.78)

    (3.53)

    (3.05)


    Production expenses

    (137.72)

    (71.49)

    (93.66)

    (75.43)


    Operating netback

    (105.38)

    (38.93)

    (65.65)

    (35.97)

    Average daily crude oil production (bopd)

    21

    27

    38

    34






    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 September 30, 2016.

    (3)

    Includes current restricted cash of $0.1 million at September 30, 2016 ($2.3 million - September 30, 2015). 

     

    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 production 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 Ltd.

    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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