ALVOPETRO ENERGY LTD.
All references herein to $ refer to
Recent Updates
On
Alvopetro's daily sales volumes averaged 1,592 boepd In January and February including 9.1 MMcfpd of natural gas, natural gas liquids sales from condensate of 75 bopd and oil sales of 14 bopd, a decrease of 26% from Q4 2023 sales volumes due to reductions in demand from Bahiagás. Demand resumed in early March and natural gas sales have averaged 11.2 MMcfpd to date in March based on field estimates.
Effective February 1, 2024, our natural gas price under our long-term gas sales agreement with Bahiagás was adjusted to
In 2024, Alvopetro is focused on capital projects aimed at optimizing production rates from our three existing wells on our 100% owned and operated Murucututu natural field with total forecasted capital expenditures on the field of
Financial and Operating Highlights – Fourth Quarter of 2023
- Our daily sales averaged 2,143 boepd during the quarter, an increase of 26% from Q3 2023 which had been impacted by lower demand from Bahiagás and a decrease of 21% from Q4 2022 due to reduced natural gas availability from the Caburé natural gas field following increased nominations from our partner on the field.
- Our average realized natural gas price increased to
$12.85 /Mcf, a 15% increase from Q4 2022 with the 3% increase in our contracted BRL-denominated natural gas price, enhanced sales tax credits available in 2023 and a 6% appreciation in the average BRL to USD in Q4 2023 compared to Q4 2022. With the higher natural gas price, our overall realized price per boe was$77.60 (+14% from Q4 2022). - Our natural gas, condensate and oil revenue was
$15.3 million in Q4 2023, a decrease of$1.8 million (-10%) compared to Q4 2022 and an increase of$3.0 million (+24%) compared to Q3 2023. - Our operating netback in the quarter was
$69.69 per boe (+$9.61 per boe from Q4 2022) with higher realized sales prices and lower royalties, partially offset by the impact of fixed operating costs with lower sales volumes. - We generated funds flows from operations of
$12.4 million ($0.33 per basic and per diluted share), a decrease of$0.8 million compared to Q4 2022 and an increase of$2.8 million compared to Q3 2023. - We reported net income of
$0.7 million in Q4 2023, a decrease of$4.5 million compared to Q4 2022 and a decrease of$5.2 million compared to Q3 2023. Net income in Q4 2023 included impairment losses of$11.0 million (Q4 2022 -$6.3 million ). - Capital expenditures totaled
$4.9 million , including drilling and completion costs for the 183-A3 well on our Murucututu natural gas field, completion costs for the BL-06 well on our Bom Lugar field, and long-lead purchases for future capital projects. - Our working capital surplus was
$13.1 million as ofDecember 31, 2023 , increasing$1.7 million fromSeptember 30, 2023 , and decreasing$1.6 million fromDecember 31, 2022 .
Financial and Operating Highlights – Year Ended
- Our annual sales averaged 2,142 boepd (95% natural gas, 5% NGLs from condensate and marginal crude oil production), a decrease of 16% compared to 2022.
- We reported net income of
$28.5 million , compared to$31.7 million in 2022 (-10%). - We generated funds flow from operations of
$48.0 million ($1.29 per basic share and$1.27 per diluted share), a decrease of$1.8 million compared to 2022. - Capital expenditures totaled
$27.4 million in 2023. - Dividends declared totaled
$0.56 per share in 2023 compared to$0.36 per share in 2022 (+56%).
The following table provides a summary of Alvopetro's financial and operating results for the periods noted. 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 | As at and Year Ended | |||||
2023 | 2022 | Change (%) | 2023 | 2022 | Change (%) | |
Financial | ||||||
($000s, except where noted) | ||||||
Natural gas, oil and condensate sales | 15,300 | 17,077 | (10) | 59,687 | 63,508 | (6) |
Net income | 652 | 5,191 | (87) | 28,525 | 31,732 | (10) |
Per share – basic ($)(1) | 0.02 | 0.14 | (86) | 0.77 | 0.92 | (16) |
Per share – diluted ($)(1) | 0.02 | 0.14 | (86) | 0.76 | 0.86 | (12) |
Cash flows from operating activities | 7,904 | 12,366 | (36) | 47,702 | 47,534 | - |
Per share – basic ($)(1) | 0.21 | 0.34 | (38) | 1.29 | 1.37 | (6) |
Per share – diluted ($)(1) | 0.21 | 0.33 | (36) | 1.26 | 1.29 | (2) |
Funds flow from operations (2) | 12,393 | 13,193 | (6) | 48,030 | 49,879 | (4) |
Per share – basic ($)(1) | 0.33 | 0.36 | (8) | 1.29 | 1.44 | (10) |
Per share – diluted ($)(1) | 0.33 | 0.35 | (6) | 1.27 | 1.35 | (6) |
Dividends declared | 5,127 | 4,357 | 18 | 20,462 | 12,697 | 61 |
Per share(1) | 0.14 | 0.12 | 17 | 0.56 | 0.36 | 56 |
Capital expenditures | 4,934 | 5,944 | (17) | 27,449 | 24,795 | 11 |
Cash and cash equivalents | 18,326 | 19,784 | (7) | 18,326 | 19,784 | (7) |
Net working capital(2) | 13,117 | 14,698 | (11) | 13,117 | 14,698 | (11) |
Weighted average shares outstanding | ||||||
Basic (000s)(1) | 37,262 | 36,231 | 3 | 37,121 | 34,642 | 7 |
Diluted (000s)(1) | 37,963 | 37,298 | 2 | 37,770 | 36,919 | 2 |
Operations | ||||||
Natural gas, NGLs and crude oil sales: | ||||||
Natural gas (Mcfpd), by field: | ||||||
Caburé (Mcfpd) | 11,699 | 15,329 | (24) | 11,742 | 14,592 | (20) |
Murucututu (Mcfpd) | 546 | 217 | 152 | 487 | 55 | 785 |
Total natural gas (Mcfpd) | 12,245 | 15,546 | (21) | 12,229 | 14,647 | (17) |
NGLs – condensate (bopd) | 92 | 128 | (28) | 99 | 110 | (10) |
Oil (bopd) | 10 | 5 | 100 | 6 | 6 | - |
Total (boepd) | 2,143 | 2,724 | (21) | 2,142 | 2,557 | (16) |
Average realized prices(2): | ||||||
Natural gas ($/Mcf) | 12.85 | 11.18 | 15 | 12.64 | 11.07 | 14 |
NGLs – condensate ($/bbl) | 89.45 | 89.29 | - | 86.29 | 103.50 | (17) |
Oil ($/bbl) | 73.67 | 79.50 | (7) | 71.22 | 82.67 | (14) |
Total ($/boe) | 77.60 | 68.13 | 14 | 76.33 | 68.04 | 12 |
Operating netback ($/boe)(2) | ||||||
Realized sales price | 77.60 | 68.13 | 14 | 76.33 | 68.04 | 12 |
Royalties | (2.07) | (4.15) | (50) | (2.13) | (4.81) | (56) |
Production expenses | (5.84) | (3.90) | 50 | (5.38) | (3.80) | 42 |
Operating netback | 69.69 | 60.08 | 16 | 68.82 | 59.43 | 16 |
Operating netback margin(2) | 90 % | 88 % | 2 | 90 % | 87 % | 3 |
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. |
Quarterly Dividend of
With lower production levels forecast in the first quarter of 2024 and consistent with our long standing balanced stakeholder return model, our Board of Directors determined it was appropriate to reduce the quarterly dividend and declared a quarterly dividend of US$0.09 per common share, payable in cash on April 15, 2024, to shareholders of record at the close of business on March 28, 2024. This dividend is designated as an "eligible dividend" for Canadian income tax purposes.
Dividend payments to non-residents of Canada will be subject to withholding taxes at the Canadian statutory rate of 25%. Shareholders may be entitled to a reduced withholding tax rate under a tax treaty between their country of residence and Canada. For further information, see Alvopetro's website at https://alvopetro.com/Dividends-Non-resident-Shareholders.
Annual Information Form
Alvopetro has filed its annual information form ("AIF") with the Canadian securities regulators on SEDAR+. The AIF includes the disclosure and reports relating to oil and gas reserves data and other oil and gas information required pursuant to National Instrument 51-101 of the Canadian Securities Administrators. The AIF may be accessed electronically at www.sedarplus.ca and on our website at www.alvopetro.com.
2023 Results Webcast
Alvopetro will host a live webcast to discuss our 2023 financial results at
Date:
Time: 8:00
Link: https://us06web.zoom.us/j/83920744797
Dial-in numbers: https://us06web.zoom.us/u/kdcVycQytc
Webinar ID: 839 2074 4797
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
Neither the
Abbreviations:
$000s | = | thousands of |
boepd | = | barrels of oil equivalent ("boe") per day |
bopd | = | barrels of oil and/or natural gas liquids (condensate) per day |
BRL | = | Brazilian Real |
Mcf | = | thousand cubic feet |
Mcfpd | = | thousand cubic feet per day |
MMcf | = | million cubic feet |
MMcfpd | = | million cubic feet per day |
NGLs | = | natural gas liquids (condensate) |
Q3 2023 | = | three months ended |
Q4 2022 | = | three months ended |
Q4 2023 | = | three months ended |
USD | = | |
GAAP | = | IFRS Accounting Standards |
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 (boe). 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 boe basis.
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 December 31, | Year Ended | |||
2023 | 2022 | 2023 | 2022 | |
Operating netback - $ per boe | 69.69 | 60.08 | 68.82 | 59.43 |
Average realized price - $ per boe | 77.60 | 68.13 | 76.33 | 68.04 |
Operating netback margin | 90 % | 88 % | 90 % | 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 December 31, | Year Ended | |||
$ per share | 2023 | 2022 | 2023 | 2022 |
Per basic share: | ||||
Cash flows from operating activities | 0.21 | 0.34 | 1.29 | 1.37 |
Funds flow from operations | 0.33 | 0.36 | 1.29 | 1.44 |
Per diluted share: | ||||
Cash flows from operating activities | 0.21 | 0.33 | 1.26 | 1.29 |
Funds flow from operations | 0.33 | 0.35 | 1.27 | 1.35 |
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 December 31, | Year Ended | |||
2023 | 2022 | 2023 | 2022 | |
Cash flows from operating activities | 7,904 | 12,366 | 47,702 | 47,534 |
Add back changes in non-cash working capital | 4,489 | 827 | 328 | 2,345 |
Funds flow from operations | 12,393 | 13,193 | 48,030 | 49,879 |
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 | |||
2023 | 2022 | ||
Total current assets | 25,995 | 27,627 | |
Total current liabilities | (12,878) | (12,929) | |
Net working capital | 13,117 | 14,698 | |
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, NGL 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, NGL 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, NGL and oil sales volumes (barrels of oil equivalent).
Oil and Natural Gas Advisories
Oil and Natural Gas Reserves
The disclosure in this news release summarizes certain information contained in the GLJ Reserves and Resources Report but represents only a portion of the disclosure required under National Instrument 51-101 ("NI 51-101"). Full disclosure with respect to the Company's reserves as at
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
Contingent Resources
This news release discloses estimates of Alvopetro's contingent resources and the net present value associated with net revenues associated with the production of such contingent resources as included in the GLJ Reserves and Resources Report. There is no certainty that it will be commercially viable to produce any portion of such contingent resources and the estimated future net revenues do not necessarily represent the fair market value of such contingent resources. Estimates of contingent resources involve additional risks over estimates of reserves. Full disclosure with respect to the Company's contingent resources as at
Prospective Resources
This news release discloses estimates of Alvopetro's prospective resources included in the GLJ Reserves and Resources Report. There is no certainty that any portion of the prospective resources will be discovered and even if discovered, there is no certainty that it will be commercially viable to produce any portion. Estimates of prospective resources involve additional risks over estimates of reserves. The accuracy of any resources estimate is a function of the quality and quantity of available data and of engineering interpretation and judgment. While resources presented herein are considered reasonable, the estimates should be accepted with the understanding that reservoir performance subsequent to the date of the estimate may justify revision, either upward or downward. Full disclosure with respect to the Company's prospective resources as at
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 the redetermination and Alvopetro's working interest share of the unitized area and the potential impact of the redetermination on Alvopetro, the expected natural gas price, gas sales and gas deliveries under Alvopetro's long-term gas sales agreement, the timing and taxation of dividends and plans for dividends in the future, 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, 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 AIF 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.
SOURCE
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