TSXV: ALV OTCQX: ALVOF - Corporate Presentation February 2022
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Corporate Presentation February 2022 TSXV: ALV OTCQX: ALVOF
Cautionary Statements • Forward Looking Statements. This presentation contains forward-looking statements including forecasted future earnings and sales volumes, forecasted natural gas prices under the Company’s long-term gas sales agreement, the anticipated timing of projects, future exploration and development plans (including the timing and associated spending of such), the Company’s dividend policy and plans for dividends and other returns to stakeholders in the future, and results from future operations. These statements are based on current assumptions and judgments that involve numerous risks and uncertainties, which may cause actual results to differ from those anticipated. These risks include, but are not limited to: the timing of regulatory licenses and approvals, the impact of the COVID-19 pandemic, the ability to access capital markets, the risks inherent in the oil and gas industry, operational risks relating to exploration, development and production; potential 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, and health, safety and environmental risks; and fluctuations in foreign currency exchange rates and commodity prices. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements. Certain of these risks are set out in more detail in our 2020 MD&A and in our 2020 Annual Information Form all of which are available on SEDAR and can be accessed at www.sedar.com. • Test results. There is no representation by Alvopetro that the data relating to any well test results contained in this presentation is necessarily indicative of long-term performance or ultimate recovery. The reader is cautioned not to unduly rely on such data as such data may not be indicative of future performance of the well or of expected production or operational results for Alvopetro in the future. • Non-GAAP Measures. This presentation contains financial terms that are not considered measures under International Financial Reporting Standards (“IFRS”), such as funds flow from operations, funds flow per share, operating netback, funds flow netback, net debt and net working capital (deficit) surplus. For further information and reconciliation to these GAAP measures, see “Non-GAAP Measures” in our most recent MD&A. This presentation also refers to Net Asset Value, Net Asset Value per Share, and Earnings Before Interest, Tax, Depreciation, and Amortization (“EBITDA”). These measures are commonly utilized in the oil and gas industry and are considered informative for management and shareholders. Net Asset Value represents the value of the underlying assets held by the Company less net debt and Net Asset Value per Share is used to indicate the per unit market value. See Endnote 2 at the end of this presentation for further details as to how Net Asset Value and Net Asset Value per Share is computed. EBITDA is used to measure the Company’s operating performance and the cash available for reinvestment and distribution to stakeholders. Its most comparable GAAP measure is the Company’s net income (loss) and is reconciled to such by adding back depletion and depreciation, impairment, interest and taxes, as presented on the Company’s Statement of Operations and Comprehensive Income (Loss). The non-GAAP measures within this presentation may not be comparable to those reported by other companies nor should they be viewed as an alternative to measures of financial performance calculated in accordance with IFRS. ALVOPETRO ENERGY LTD. | TSXV: ALV, OTCQX: ALVOF 2
Cautionary Statements • Net Present Value. The net present value of future net revenue attributable to Alvopetro’s reserves 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 for only those wells assigned reserves by GLJ Ltd. (“GLJ”) respectively. The GLJ evaluation was dated March 8, 2021 with an effective date of December 31, 2020 (the “GLJ Report”). Full disclosure with respect to the Alvopetro’s reserves as at December 31, 2020 is included in the annual information form which is filed on SEDAR (www.sedar.com). It should not be assumed that the undiscounted or discounted net present value of future net revenue attributable to the Alvopetro’s reserves estimated GLJ represent the fair market value of those reserves. Actual reserves may be greater than or less than the estimates provided herein. Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves. • Prospective Resources. This presentation discloses estimates of Alvopetro’s prospective resources as evaluated by GLJ with an effective date of July 31, 2020 (as announced by Alvopetro on September 8, 2020) and as evaluated by GLJ with an effective date of December 31, 2020 (as announced by Alvopetro on March 23, 2021). 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. Prospective resources have both a chance of discovery and a chance of development, which combined represent for any undiscovered accumulation its chance of commerciality. Please refer to the noted news releases dated September 8, 2020 and March 23, 2021 for additional information as well as supplementary information contained in the Company’s annual information form which has been filed on SEDAR. • 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 evaluated by GLJ with an effective date of December 31, 2020 (as announced by the Company on March 23, 2021). 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. For additional details with respect to Alvopetro’s contingent resources, please refer to our news release dated March 23, 2021 and supplementary information contained in Alvopetro’s annual information form for the year-ended December 31, 2020 which has been filed on SEDAR (www.sedar.com). • Currency. All amounts within this presentation are in U.S. dollars, unless otherwise noted. ALVOPETRO ENERGY LTD. | TSXV: ALV, OTCQX: ALVOF 3
Alvopetro - A Leading Brazilian Independent Gas Company
First Brazilian integrated onshore natural gas producer
• Strategic midstream infrastructure to support organic growth (100% working interest)
• 9.6 mmboe 2P (88% natural gas) with focus on core Caburé field & Gomo tight gas potential
• Near-term high impact exploration and tight gas development catalysts
Strong operating and financial results well ahead of expectations
• Strong production - Q4 2021 - 2,432 boepd, January 2022 – 2,509 boepd
• Gas sales to AA-rated offtaker, current price $10.94/mcf (5)
Balanced reinvestment and stakeholder return model – accelerated shareholder dividends
• Supported by low leverage, industry leading operating margins, and strong cash flows
• Already repaid 57% of initial project finance loan ($6.5 million outstanding)
• Quarterly dividends of $0.06/share commenced in Q3 2021
Demonstrated ESG commitment
• Our commitment to social and environmental responsibility takes us beyond regulations
• Delivering affordable clean energy to the local community
• 53% reduction in greenhouse gas emissions when compared to fuel oil
Proven management team with successful LatAm track record
• Experience building and managing growth portfolios from 0 to 40+ kboe/d at Petrominerales (Colombia) and Pacalta Resources
(Ecuador) with successful exits ~$2.8 billion in combined proceeds
• Strong Brazilian team with long and established track record operating in State of Bahia
All references to “$” refers to U.S. dollars. C$ refers to Canadian dollars
ALVOPETRO ENERGY LTD. | TSXV: ALV, OTCQX: ALVOF 4
Brazil a Growing Market with Attractive Fundamentals
Largest oil producer in S. America and 9th globally
New natural gas market. 48% of supply is currently
imported
World’s 9th largest economy
Brazil
Attractive fiscal regime with 5.5-11% royalties & 15%-
34% income tax
Stable regulatory framework attracting new
investments
Significant growth opportunities through Petrobras
divestments
Brazil is ripe for growth -- carrying out the most pro-business reforms in the past year (World Bank)
Resources:
World Bank; ANP.gov.br - Development Perspective presentation (May 2018), Pre-Salt Exploration presentation (May 2018), Brazilian O&G Market Revival presentation (May 2018), ANP presentation, Pathway
for Energy Transition post COVID-19 (June 2020)
ALVOPETRO ENERGY LTD. | TSXV: ALV, OTCQX: ALVOF 5
State of Bahia – Reconcavo Basin
• Oldest producing basin in Brazil • Alvopetro SA operating in Brazil since 2006, acquired blocks in Rounds 7,
9, 11, 12, & 13
• Reconcavo Basin: 23.9 mbopd + 2.2 e6m3/d (77 mmcf/d)
• Alvopetro produces 18% of Basin's natural gas production
• Brazil's 4th largest city Salvador (pop 2.9 million)
• Brazil’s 14th largest producer
• Important natural harbor All Saints Bay
• First independently owned UPGN (gas processing facility)
• Major industrial complex Camacari
• First independent gas sales agreement with the local distribution
company
ALVOPETRO ENERGY LTD. | TSXV: ALV, OTCQX: ALVOF 6
Corporate Overview – Operating and Financial Results
Capital Structure
Common shares outstanding (000’s) (1) 33,904
February 4, 2022 share price(1) C$4.47/$3.54
52 week high/low–C$/share (1) C$5.26/C$2.13
Q4 2021 dividend per common share $0.06
Annualized yield at last share price 6.8%
Market cap (000’s) (1) C$151,549/$120,019
*field estimates Insider ownership % (1) 10.7%
Q3 2021 Operating Netback Financial & Reserves
Average realized prices(3) Cash ($000’s) (3) $8,084
Natural gas ($/mcf) 7.07 Working capital net of debt($000’s) (3),(7) $294
NGL – condensate ($/bbl) 79.36
61.11 Q3 2021 funds flow from operations ($000’s) (3) $7,930
Oil ($/bbl)
Total ($/boe) 44.04 - Per basic/diluted share $0.24/$0.22
Operating netback ($/boe) (3) 2P reserves (mboe) (4) 9,593
Realized sales price 44.04
Royalties (4.02) 2P reserve life index (years) 13.7
Production expenses (3.64) Net asset value ($000’s) (2) $195,509
Operating netback 36.38
Funds flow netback(3) 35.05 Net asset value per share (2) C$7.36/$5.77
All references to “$” refers to U.S. dollars. C$ refers to Canadian dollars
ALVOPETRO ENERGY LTD. | TSXV: ALV, OTCQX: ALVOF 7
Caburé – Asset Overview (49.1% ALV)
• Upstream – core asset is a joint development of a conventional natural gas discovery -
ALV 49.1% ( )
• Unitized area development - 7 wells and all production facilities
• Designed gross production plateau 15.9 mmcf/d (450 e3m3)
Mmscf/d Bcf
12.0
Caburé ALV Gas Production profile (Case: 2P)*
37.5
9.0 30.0
22.5
6.0
15.0
3.0
7.5
Virtual Field Tour: https://www.youtube.com/watch?v=p1AvDNX0YXk&t=16s
- -
1 2 3 4 5 6 7 8 9 10 11
Years
Average daily Cumulative production
production (mmcf/d) (Bcf)
*Caburé only, ALV company working interest, based on GLJ
12/31/20 reserve report forecast
ALVOPETRO ENERGY LTD. | TSXV: ALV, OTCQX: ALVOF 8
Midstream - Infrastructure & Marketing (100% ALV) • ALV owned 11-km transfer pipeline from the Unit ( ) • ALV Gas Plant (UPGN) constructed by Enerflex with 18 mmcfpd capacity • Bahiagás 15-km pipeline ( ) & 70 mmcfpd citygate at our plant site completed in July 2020 • First non-Petrobras gas plant in state of Bahia capable of delivering ANP sales specified natural gas • Gas deliveries commenced on July 5, 2020 • Precedent setting long-term GSA signed with Bahiagas gas distribution company (majority owned by Mitsui – Fitch AA rating) • Gas price floor US$5.65/mmbtu and cap of US$9.61/mmbtu (indexed to US CPI) as of Feb 1/22 • Natural gas price increased by 48% on Feb 1/22 to BRL$1.94/m3, US$10.94/mcf(5)* • Highly strategic legacy asset that positions ALV to unlock remaining natural gas potential *Natural gas prices will be impacted by fluctuations in BRL/USD currency exchange. Gas volumes are heat-content adjusted so that Alvopetro receives payments on an energy basis. ALVOPETRO ENERGY LTD. | TSXV: ALV, OTCQX: ALVOF 9
Gas Treatment Facility and City Gate (100% ALV)
N
Virtual Field Tour: https://www.youtube.com/watch?v=p1AvDNX0YXk&t=16sESG – First Year of Caburé Operations ALVOPETRO ENERGY LTD. | TSXV: ALV, OTCQX: ALVOF 11
Growth Plan (100% working interest)
Objective is to fully utilize our strategic
midstream assets (18 mmcfpd)
• Highly under-explored prospective land base (23,527 acres, 100% working interest)
• Eight exploration prospects identified, supported by high quality reprocessed seismic
• 2022 exploration program with unrisked prospective recoverable resource evaluated
by GLJ (best estimate)(8):
• ALV-182-C1 4.6 mmboe (47% chance of success)
• ALV-183-B1 5.9 mmboe (44% chance of success)
• Gomo/Murucututu tight gas play:
– 183(1) tie-in early 2022
– Broader development plan starting in 2022
– MURS(1) fit-for purpose development well, with up-hole conventional exploration
potential
• Petrobras divesting all onshore production
• Midstream processing opportunities
ALVOPETRO ENERGY LTD. | TSXV: ALV, OTCQX: ALVOF 12Reserves & Resources – Near-term Catalysts
Reserves (mboe) 1P 2P 3P Reserves NPV10BT ($000’s) 1P 2P 3P
Caburé 107,524 146,901 177,496
Caburé 4,098 6,018 7,668
Gomo 8,047 44,389 88,751
Gomo 843 3,276 5,951 Other 893 3,925 8,569
Total Company Reserves(4) 116,463 195,215 274,816
Other 167 300 589 Resource NPV10BT ($000’s) Low Best High
Risked Contingent - Gomo(9) 31,329 37,711 70,937
Total Company Reserves(4) 5,108 9,593 14,209
Risked Prospective - Gomo(9) 65,565 144,784 220,437
Recoverable Resource (mboe) Low Best High
Risked Contingent – Gomo(9) 2,874 3,451 5,665
Risked Prospective - Gomo(9) 6,555 12,072 17,827
Unrisked Prospective – 183-B1(8) 2,065 5,901 13,429
Unrisked Prospective – 182-C1(8) 1,168 4,618 16,757
Risked Prospective – 183-B1(8) 901 2,574 5,859
Risked Prospective – 182-C1(8) 545 2,157 7,825
ALVOPETRO ENERGY LTD. | TSXV: ALV, OTCQX: ALVOF 13Track Record of Delivery
April-May 2018 October 2018 Through June 2019 September 2019 Mid 2019 - May 2020 July 5, 2020 July 2020> September 2021 2022 Catalysts
Caburé Unitization Equity Support Award Project Debt 2P Reserves First Exceeding Quarterly • Increasing gas
$5.00 & Signed GSA for Project Development Financing Secured Growth Caburé Gas Production and Dividends price
Development Contracts Cash Flow Commence • Exploration
Expectations (US$0.06/share) wells (182-C1 &
$4.50
183-B1)
• Gomo
$4.00 Development
$3.50
CAD$ Share price (TSXV)
$3.00
$2.50
$2.00
$1.50
$1.00
$0.50
$0.00
Consistent growth and execution has generated a 751% (1) shareholder return since 2018
ALVOPETRO ENERGY LTD. | TSXV: ALV, OTCQX: ALVOF 14Why Invest?
• Stable production profile with little to no maintenance capital and a 13.7-year reserve life index
• Highly strategic infrastructure in heart of the Basin near major industrial demand
• Attractive long-term gas sales agreement, realized price increased to $10.94/mcf effective February 1, 2022(5)
• High margin production – Q3 2021 operating netback of $36.38/boe and funds flow from operations of $7.9 million ($0.24 per basic and
$0.22 per diluted share)
• Low leverage with working capital exceeding debt by $0.3 million(7)
• Disciplined & balanced stakeholder return and reinvestment model
• Commenced quarterly dividends in Q3 2021 at $0.06/share, Q4 2021 $0.06/share
• Strong organic growth plan
• Near-term, high-impact exploration catalysts + Gomo development upside
• Attractive valuation relative to Brazilian peers – trading at 61% of 2P NAV
Virtual Field Tour: https://www.youtube.com/watch?v=p1AvDNX0YXk&t=16s
ALVOPETRO ENERGY LTD. | TSXV: ALV, OTCQX: ALVOF 15TSXV: ALV
OTCQX: ALVOF
Calgary, Canada:
Alvopetro Energy Ltd.
Suite 1920, 215 – 9th Avenue SW
Calgary, Alberta, Canada
T2P 1K3
Tel: (587) 794-4224
Email: info@alvopetro.com
Salvador, Brazil:
Alvopetro S/A Extração de Petróleo e Gás Natural
Rua Ewerton Visco, 290, Boulevard Side Empresarial,
Sala 2004, Caminho das Árvores, Salvador-BA
CEP 41.820-022
Tel: + 55 (71) 3432-0917
Email: info@alvopetro.com
www.alvopetro.com
@AlvopetroEnergy @Alvopetro Alvopetro Energy Ltd Alvopetro EnergyEndnotes
1. As of February 4, 2022. C$ share price and C$ market cap (TSXV), $ share price and $ market cap (OTCQX). Share price return 2018-2020 YTD from December 29, 2017 to February 4,
2022(TSXV). All share prices have been adjusted for effective 3:1 consolidation following September 7, 2021 share restructuring.
2. Net Asset Value of $195.5 million ($5.77/share, C$7.36/share) includes; 2P NPV10 before tax of $195.2 million of reserves as evaluated by GLJ as at 12/31/20 plus working capital, net of
debt of $0.3 million as of September 30, 2021. Per share value based on 33,903,629 shares outstanding as of February 4, 2022. C$/share based on February 4, 2022 exchange rate of
C$1.2758/$1US.
3. Cash balance and working capital, net of debt as of September 30, 2021. Operating netback and funds flow from operations for three months ended September 30, 2021.
4. Proved (“1P”) reserves, proved plus probable (“2P”) reserves, and proved plus probable plus possible (“3P”) reserves evaluated by GLJ as of December 31, 2020.
5. The natural gas price is set semi-annually in Brazilian Real/m3. The natural gas price as of February 1, 2022 of BRL1.94/m3 and US$10.94/mcf is based on average heat content to date
of 107% and the January 31, 2022 foreign exchange rate of 5.357. Actual realized prices in US$/mcf will fluctuate with fluctuations in the BRL/USD exchange rate. See GLJ’s price
forecast at https://www.gljpc.com/sites/default/files/pricing/jan22.pdf.
6. Based on EIA & EPA average energy and emissions intensities.
7. Working capital net of debt is computed as net working capital surplus decreased by the carrying amount of the Credit Facility. As of September 30, 2021, the net working capital surplus
of $6.8 million exceeds the carrying amount of the Credit Facility by $0.3 million.
8. Undiscovered Petroleum Initially in Place (“UPIIP”) and Prospective Resources evaluated by GLJ with an effective date of July 31, 2020. See Alvopetro press release dated September 8,
2020 for further details. UPIIP values do not include an implied truncation for minimum economic field size. Prospective resources have been truncated for minimum economic field
size of 2.2 BCF. Prospective resources have both a chance of discovery and a chance of development, which combined represent for any undiscovered accumulation its chance of
commerciality. For the 182-C1 prospect, the chance of discovery is 0.48, with a chance of development of 0.98, for an overall chance of commerciality of 0.47. For the 183-B1 prospect,
the chance of discovery is 0.44, with a chance of development of 1.00, for a chance of commerciality of 0.44. The chance of commerciality has been included in the estimation of the
risked prospective resources.
9. Contingent and Prospective Resources on Alvopetro’s Gomo property as evaluated by GLJ with an effective date of December 31, 2020. See Alvopetro press release dated March 23,
2021, for further details and supplementary information contained in the Company’s annual information form which has been filed on SEDAR (www.sedar.com).
ALVOPETRO ENERGY LTD. | TSXV: ALV, OTCQX: ALVOF 17Appendix Additional Technical Materials
Natural Gas Exploration Drilling Program (100% ALV)
Fazenda Belem
Tie Miranga
Agua Grande
Biriba
Sussuarana
Rio Pojuca
ALV-183-B1
A
ALV-182-C1
A’
Remanso
Caburé • ALV-182-C1 & ALV-183-B1 Pre-Rift natural gas prospects (100% WI)
Mata Sao Joao • Unrisked prospective resource evaluated by GLJ (best estimate)(8)
Riacho Sao Pedro
• ALV-182-C1 4.6 mmboe (47% COS)
• ALV-183-B1 5.9 mmboe (44% COS)
• Prospects defined on reprocessed 3D seismic data
Jaquipe • Key analog fields
• Biriba OGIP 55 BCF (9.2 mmboe)
• Sussuarana OGIP 26 BCF (4.3 mmboe)
ALVOPETRO ENERGY LTD. | TSXV: ALV, OTCQX: ALVOF 19Gomo/Murucututu Deep Basin Natural Gas Resource (100% ALV)
A A’
Jan2 197-1 183-1
3275m
3550m
Tested Gas
• 5,460-acre tight gas resource
• Confirmed natural gas resource in 197-1 and 183-1 wells
• Installation of 8-km pipeline to connect 183-1 well to Caburé pipeline virtually complete and all
pressure testing completed. Initiated site construction for the field production facility.
• 2P reserves 3.3mmboe (19.7 Bcfe) (4) including two development locations at 183-1
• Best Estimate Risked Contingent Resource 3.5mmboe (20.7Bcfe)(9)
• Best Estimate Risked Prospective Resource 12.1mmboe (72.4Bcfe)(9)
• Planning “fit for purpose” development wells
ALVOPETRO ENERGY LTD. | TSXV: ALV, OTCQX: ALVOF 20Indicative Gomo/Murucututu Development Plan ALVOPETRO ENERGY LTD. | TSXV: ALV, OTCQX: ALVOF 21
ALV-182-C1 Agua Grande/Sergi Gas Prospect
NW SE
• 2900 meters TVD (100% WI)
• 780-acre pre-rift prospect, maximum column height
Pitanga 135m
• Gas prospect defined on reprocessed 3D seismic
3FBL 0007 BA well projected
9km (closest well to
• Seal potential is excellent for Sergi Fm juxtaposed
penetrate below Sergi)
against basement. Agua Grande Fm is juxtaposed
against Afligidos shale
Sergi
• GLJ independent prospective resource assessment
gross lease unrisked prospective resource 4.6
mmboe(8)
Basement
Sergi • 48% chance of discovery, 98% chance of
development
Basement
ALVOPETRO ENERGY LTD. | TSXV: ALV, OTCQX: ALVOF 22ALV-183-B1 Pre-Rift Agua Grande/Sergi Gas Prospect
A A A” A
’ 182-C1 Block
183-B1 Block
Biriba Sussuarana
A’
A”
• 3100 meters TVD (100% WI)
• Gas prospect defined on reprocessed 3D
seismic
• 1300-acre Pre-Rift prospect
Basement Basement
• Seal potential for Agua Grande Fm and
Sergi Fm similar to the fault set up for the
• GLJ independent prospective resource assessment, gross lease unrisked prospective
offsetting Biriba analog gas field
resource 5.9 mmboe(8)
• Sand/sand juxtaposition in analogs
• 44% chance of discovery, 100% chance of development
indicates sealing faults
ALVOPETRO ENERGY LTD. | TSXV: ALV, OTCQX: ALVOF 23Gomo Development Plan – Reserves and Resource Development Plans • Reserves: Pipeline to current well locations. 2 development wells • Contingent Resource: 4 additional development wells from the current well locations • Prospective Resource: 10 additional wellbores from 3 future multi-well development locations. Additional pipeline capacity for increased production. ALVOPETRO ENERGY LTD. | TSXV: ALV, OTCQX: ALVOF 24
Gomo Development: Single Well Economics
2P assessment (GLJ):
• 5.2Bcf sales gas+129mbbls of condensate = 1.0
mmboe
• Year 1 average production rate:
• 1.34 mmcfpd, 257 boepd (including
condensate)
• Field condensate rate is 24bbl/mmcf.
• Sales based on field heat content (no assumption
for UPGN condensate yield)
• Capex: $5.8MM
• F&D: $5.80/boe
• First year NOI: $3.5MM
• Full cycle IRR: 45%
• Simple payout: 1.8 years
ALVOPETRO ENERGY LTD. | TSXV: ALV, OTCQX: ALVOF 25You can also read
