Alvopetro Announces 2015 Reserves and Contingent Resources
/EINPresswire.com/ -- CALGARY, AB--(Marketwired - March 22, 2016) - Alvopetro Energy Ltd. (TSX VENTURE: ALV) is pleased to announce our 2015 reserves and contingent resources.
2015 Highlights
- Alvopetro began 2015 with 11 conventional exploration prospects. We had two conventional exploration successes with our 197(2) and 182(B1) wells and ended 2015 with 22 prospects in our prospect inventory.
- We successfully tested three separate intervals in our significant 197(2) natural gas discovery. Pressure transient analysis forecasts potential post-stimulation rates with total deliverability averaging 15.9 MMcfpd (2,650 boepd) over the first three months of continuous production and averaging 10.2 MMcfpd (1,700 boepd) over the first year of continuous production.
- Alvopetro's 197(2) contingent resources are comprised of a "best estimate" (2C) of 5.8 MMboe and our 2015 year-end reserves are 741 Mstb (total gross proved plus probable).
- Our 197(2) contingent resources have a NPV10 of US $91.3 million (2C) and our 2015 year-end reserves have a NPV10 of US $9.5 million (total gross proved plus probable). The NPV10 value of our contingent resources reflects the significant value of our first conventional natural gas discovery and highlights the potential of our prospect inventory. Upon elimination of certain of the contingencies to commerciality, Alvopetro expects resources currently classified as contingent resources to be re-classified as reserves.
- We brought our 182(B1) discovery on production.
- We strategically relinquished four non-prospective blocks in 2015 and one block in January 2016, with favourable exchange rates, reducing performance guarantee fees.
Our operating plan has provided Alvopetro with a solid foundation for growth as commodity prices improve. We continue our disciplined capital program in light of low commodity prices and our financial flexibility allows us to manage our capital spending in the near term without impairing our ability to grow when commodity prices recover.
2015 Year-End Reserves Summary
The reserves data set forth below is based upon an independent reserve assessment and evaluation prepared by Sproule International Limited ("Sproule") dated March 22, 2016 with an effective date of December 31, 2015 (the "Sproule Report"). The Sproule Report has been prepared in accordance with the standards contained in the Canadian Oil and Gas Evaluation Handbook reserve definitions that are consistent with the standards of National Instrument 51-101 ("NI 51-101"). The Sproule Report was only an evaluation of our Bom Lugar and Jiribatuba mature fields, and the Agua Grande Formation of our Block 182 discovery, and did not include: (i) the Gomo fractured shale potential discovered in our 182(B1) well, (ii) our other exploration blocks, or (iii) our Block 183 and 197 discoveries.
Summary of Reserves (1), (2), (6)
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Light, Medium and Light, Medium and
Shale Oil Shale Oil
Company Gross Company Net
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(Mstb) (Mstb)
Proved
Proved Developed
Producing 23 21
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Total Proved 23 21
Probable 718 674
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Total Proved plus
Probable 741 695
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Summary of Before Tax Net Present Value of Future Net Revenue - MUS$ (1),
(2), (3), (4), (5)
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Undiscounted 5% 10% 15% 20%
Proved
Proved Developed Producing -125 -107 -92 -81 -72
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Total Proved -125 -107 -92 -81 -72
Probable 20,253 13,790 9,586 6,718 4,682
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Total Proved plus Probable 20,128 13,684 9,494 6,637 4,610
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Summary of After Tax Net Present Value of Future Net Revenue - MUS$ (1),
(2), (3), (4), (5)
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Undiscounted 5% 10% 15% 20%
Proved
Proved Developed Producing -125 -107 -92 -81 -72
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Total Proved -125 -107 -92 -81 -72
Probable 17,149 11,504 7,835 5,334 3,562
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Total Proved plus Probable 17,024 11,397 7,743 5,254 3,491
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Notes:
- The tables above are a summary of the reserves of Alvopetro and the net present value of future net revenue attributable to such reserves as evaluated in the Sproule Report based on forecast price and cost assumptions. The tables summarize the data contained in the Sproule Report and as a result may contain slightly different numbers than such report due to rounding. Also due to rounding, certain columns may not add exactly.
- Company Gross reserves means the total working interest share of remaining recoverable reserves owned by Alvopetro before deductions of royalties payable to others and without including any royalty interests owned by Alvopetro.
- Based on Sproule's December 31, 2015 escalated price forecast.
- 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. The net present values of future net revenue attributable to the Alvopetro's reserves estimated by Sproule do not represent the fair market value of those reserves. Other assumptions and qualifications relating to costs, prices for future production and other matters are summarized herein. The recovery and reserve estimates of the Company's reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual reserves may be greater than or less than the estimates provided herein.
- MUS$ = 000's of U.S. dollars.
- Mstb = thousand stock tank barrels.
Future Development Costs
The table below sets out the total development costs deducted in the estimation in the Sproule Report of future net revenue attributable to proved reserves and proved plus probable reserves (using forecast prices and costs). Total development costs include capital costs for drilling, facilities, abandonment and reclamation.
Forecast Prices and Costs
MUS$ (1) Proved Reserves Proved Plus Probable Reserves
2016 - 430
2017 - 8,892
2018 - -
2019 139 -
2020 - 97
Remaining Years - 441
--------------- -----------------------------------
Total Undiscounted 139 9,860
=============== ===================================
Notes:
- MUS$ = 000's of U.S. dollars.
Reconciliation of Alvopetro's Gross Reserves (Before Royalty)
Gross Proved Gross Probable Gross Proved Plus
(Mstb) (Mstb) Probable
(Mstb)
December 31, 2014 33.0 710.0 742.0
Technical Revisions (2.9) (53.7) (55.6)
Discoveries 0.0 59.7 59.7
Economic Factors 6.0 2.0 8.0
Production (13.1) 0.0 (13.1)
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December 31, 2015 23.0 718.0 741.0
Notes:
- Gross Reserves means the Company's working interest reserves before calculation of royalties.
- Based on the Sproule price forecast effective December 31, 2015.
- Mstb = thousand stock tank barrels.
Contingent Resource Summary
The contingent resource data set forth in this news release is based upon an independent contingent resource assessment and evaluation prepared by D&M dated October 8, 2015, with an effective date of June 30, 2015 (the "D&M Report"). The D&M Report was prepared in accordance with the COGE Handbook and National Instrument 51-101 of the Canadian Securities Administrators ("NI 51-101").
Alvopetro holds a 100% interest in Blocks 197 and 198, and the contingent resources estimated in the D&M Report are assumed to be developed under unitization of Blocks 197, 198, 211 and 212. Under Brazilian and ANP regulation, petroleum accumulations straddling two or more licensed blocks must undergo unitization in order to promote efficient exploration and development of the accumulation. Participation interests, which represent the percentage share of ownership in each license block in the accumulation, have been assumed in the D&M Report for Blocks 197, 198, 211 and 212 in the 1C, 2C and 3C contingent resources classifications based on the discovered non-associated gas initially-in-place (DPIIP) associated with each block. These assumptions do not reflect actual participation interests to be agreed upon by all parties with interests in Blocks 197, 198, 211 and 212.
Summary of Company Gross Contingent Resources (1), (2), (3), (5), (7), (12), (13), (14), (15) ---------------------------------------------------------------------------- Development Pending Economic 2C "Best" 1C "Low" 3C "High" Contingent Resources ---------------------------------------------------------------------------- Natural gas sales (MMcf) 33,483 19,538 46,500 Condensate (Mbbl) 234 138 326 ---------------------------------------------------------------------------- Barrels of oil equivalent 5,815 (Mboe) 3,394 8,076 ----------------------------------------------------------------------------
See 'Contingent Resource Notes' section of this news release.
Summary of Before Tax Net Present Value of Future Net Revenue of Contingent
Resources- MUS$ (1), (2), (3), (4), (5), (6), (7), (9), (11)
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Undiscounted 5% 10% 15% 20%
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2C "Best Estimate" 165,458 121,935 91,337 69,273 53,014
1C "Low Estimate" 109,113 81,672 61,859 47,318 36,490
3C "High Estimate" 245,736 182,425 137,096 104,013 79,450
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See 'Contingent Resource Notes' section of this news release.
Summary of Discovered Non-Associated Gas Initially-in-Place (DPIIP) (1),
(3), (5), (12), (13), (14)
----------------------------------------------------------------------------
2C "Best" 1C "Low" 3C "High"
----------------------------------------------------------------------------
Non-Associated Gas (mmcf) 45,187 28,145 59,957
Total Barrels of oil equivalent (mboe) 7,531 4,691 9,993
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See 'Contingent Resource Notes' section of this news release.
The table below sets out the project development costs assumed in the D&M Report in the estimation of future net revenue attributable to contingent resources and assumes first commercial production on January 1, 2017. The D&M Report assumes capital deployment during 2016 for the construction of facilities, flowlines and development wells. There can be no certainty that the project will developed on the timelines discussed herein. Development of the project is dependent on a number of contingencies as further described in this news release. The information presented herein is based on company net project development costs.
Assumed Project Development Costs (3), (4), (11)
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MUS$ 2C ("Best") 1C ("Low") 3C ("High")
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2015 - - -
2016 24,088 13,330 35,082
2017 14 12 22
2018 14 12 22
2019 14 12 22
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Remaining Years 2,098 1,144 3,063
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Total Undiscounted 26,228 14,510 38,211
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See 'Contingent Resource Notes' section of this news release.
D&M Report 10-Year Projected Production Profile of Company Gross Sales Gas (1), (2), (3), (4), (5), (7) ,(9), (13) ---------------------------------------------------------------------------- mmcf 2015 2016 2017 2018 2019 2020 ---------------------------------------------------------------------------- 2C "Best Estimate" - - 4,461 4,461 4,455 3,956 1C "Low Estimate" - - 2,757 2,757 2,757 2,535 3C "High Estimate" - - 6,114 6,114 6,114 6,130 ---------------------------------------------------------------------------- D&M Report 10-Year Projected Production Profile of Company Gross Sales Gas (1), (2), (3), (4), (5), (7) ,(9), (13) ---------------------------------------------------------------------------- mmcf 2021 2022 2023 2024 2025 2026 2027 ---------------------------------------------------------------------------- 2C "Best Estimate" 3,183 2,585 2,116 1,749 1,449 1,215 1,025 1C "Low Estimate" 2,153 1,832 1,552 1,311 1,092 795 - 3C "High Estimate" 5,646 4,208 3,131 2,379 1,829 1,433 1,138 ----------------------------------------------------------------------------
See 'Contingent Resource Notes' section of this news release.
In accordance with NI 51-101, volumes and potential net present value of development pending contingent resources is required to be adjusted for risk of development ("Development Risked"). The D&M report estimates the chance of development risk factor as the product of three commercial variables associated with the project development, being: 1) the probability of securing as gas sales agreement, which D&M estimates at 85%; 2) the probability of unitization, which D&M estimates at 100%; and 3) the probability of government approval of a plan of development, which D&M estimates at D&M at 85%. The product of these three commercial variables is 72.25%, which is the risk factor that has been applied to the Development Risked company gross contingent resources and the net present value figures reported below.
Upon elimination of certain of the contingencies to commerciality, Alvopetro expects resources currently classified as Contingent Resources to be re-classified as reserves.
Summary of Development Risked Company Gross Contingent Resources (1), (2),
(3), (7), (8), (12), (13, (14)
----------------------------------------------------------------------------
2C "Best" 1C "Low" 3C "High"
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Natural gas sales (MMcf) 24,191 14,116 33,596
Condensate (Mbbl) 169 100 236
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Barrels of oil equivalent (MMboe) 4,201 2,452 5,835
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See 'Contingent Resource Notes' section of this news release.
Summary of Development Risked Before Tax Net Present Value of Future Net
Revenue of Contingent Resources- MUS$ (1), (2), (3), (4), (5), (6), (7),
(8), (9), (11)
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Undiscounted 5% 10% 15% 20%
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2C "Best Estimate" 119,543 88,098 65,991 50,050 38,303
1C "Low Estimate" 78,834 59,008 44,693 34,187 26,364
3C "High Estimate" 177,544 131,802 99,052 75,149 57,403
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See 'Contingent Resource Notes' section of this news release.
Contingent Resource Notes:
- Contingent Resources are defined in the COGE Handbook as those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies may include factors such as economic, legal, environmental, political and regulatory matters or a lack of markets. It is also appropriate to classify as contingent resources the estimated discovered recoverable quantities associated with a project in the early evaluation stage. For various reasons, including lack of unitization agreement, lack of internal and government approved plans for development, lack of defined infrastructure and lack of an approved gas sales contact, there is uncertainty of the commerciality of these contingent resources, and as such, the contingent resources estimated herein cannot be classified as reserves. The specific outstanding contingencies applicable to the contingent resources disclosed herein are lack of a gas sales agreement, lack of unitization agreement, and lack of government approval of a plan for development.
- The Contingent Resources estimated in the D&M Report are classified as "economic contingent resources", which are those contingent resources that are currently economically recoverable. All such resources are further sub-classified with a project status of "development pending", meaning that resolution of the final conditions for development are being actively pursued.
- "Low estimate" (C1) is considered to be a conservative estimate of the quantity of resources that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed the low estimate. Those resources in the low estimate range have the highest degree of certainty - a 90% confidence level - that the actual quantities recovered will be equal or exceed the estimate. "Best estimate" (C2) is considered to be the best estimate of the quantity of resources that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. Those resources that fall within the best estimate have a 50% confidence level that the actual quantities recovered will be equal or exceed the estimate. "High estimate" (C3) is considered to be an optimistic estimate of the quantity of resources that will actually be recovered. It is unlikely that the actual remaining quantities of resources recovered will equal or exceed the high estimate. Those resources in the high estimate have a lower degree of certainty - a 10% confidence level - that the actual quantities recovered will equal or exceed the estimate.
- The Contingent Resource tables above are a summary of the contingent resources of Alvopetro and the net present value of future net revenue attributable to such contingent resources as evaluated in the D&M Report based on constant price and cost assumptions. The D&M Report uses a constant natural gas price of US$8.53 per mcf and a constant condensate price of US$52.00 per barrel, such prices based on the average publically reported prices paid for natural gas in northeastern Brazil for the 12 month period ended April, 2015. Prices and costs were not adjusted for inflation. Alvopetro is currently in discussions with numerous counterparties with respect to securing our natural gas discovery. The sales price ultimately realized by Alvopetro may differ significantly from sales prices assumed in the D&M Report.
- The DPIIP and contingent resources estimates set out herein are expressed as company gross contingent resources. Gross contingent resources are defined as the total estimated gas and condensate that is potentially recoverable from known accumulations after June 30, 2015. Company gross contingent resources are defined as that portion of the gross contingent resources potentially to be produced that are attributable to Alvopetro's assumed unitized interest before deduction of any royalty burden. The Company gross working interest share of resources was estimated based on DPIIP and ultimately will be subject to the terms agreed to in the unitization required with adjacent resource owners.
- The net present value of future net revenue attributable to Alvopetro's contingent resources 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, and well abandonment costs. The royalty burdens set out in the D&M Report include a Brazilian government royalty of 11% and an overriding royalty on Block 197 of 2.5%, both such royalty obligations are paid in cash. The net present values of future net revenue attributable to the Alvopetro's contingent resources estimated by D&M do not represent the fair market value of those resources. Other assumptions and qualifications relating to project development costs, pricing and other matters are summarized herein.
- The recovery estimates of the Company's contingent resources provided herein are estimates only and there is no guarantee that the estimated resources will be recovered. There is uncertainty that it will be commercially viable to produce any portion of the resources. Actual recovered resource may be greater than or less than the estimates provided herein.
- An estimate of Development Risked net present value of future net revenue of contingent resources is preliminary in nature and is provided to assist the reader in reaching an opinion on the merit and likelihood of the company proceeding with the required investment. It includes contingent resources that are considered too uncertain with respect to the chance of development to be classified as reserves. There is uncertainty that the Development Risked net present value of future net revenue will be realized.
- The tables in this news release summarize the data contained in the D&M Report and as a result may contain slightly different numbers than such report due to rounding. Also due to rounding, certain columns may not add exactly.
- The D&M report quantifies the DPIIP and the contingent resources for Alvopetro's Blocks 197 and 198. There are no reserves, prospective resources, unrecoverable or recoverable undiscovered petroleum initially-in-place, nor any unrecoverable discovered petroleum initially-in-place associated with Blocks 197 and 198 in the D&M Report or this news release.
- MUS$ = 000's of U.S. dollars.
- Mcf = thousand cubic feet.
- MMcf = million cubic feet.
- Mbbl = thousand barrels.
- Mboe = thousand barrels of oil equivalent.
Corporate Presentation
Alvopetro's updated corporate presentation is available on our website 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 resource play.
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.
Disclosure of Oil and Gas Information
Oil and Natural Gas Reserves. The disclosure in this press release summarizes certain information contained in the Sproule Report but represents only a portion of the disclosure required under NI 51-101. Full disclosure with respect to the Company's reserves as at December 31, 2015 will be contained in the Company's annual information form for the year ended December 31, 2015 which will be filed on SEDAR (www.sedar.com) on or before April 30, 2016. All net present values in this press release are based estimates of future operating and capital costs and Sproule's forecast prices as of December 31, 2015. The reserves definitions used in this evaluation are the standards defined by COGEH reserve definitions and consistent with NI 51-101 and used by Sproule. The oil reserves are presented in thousands of barrels, at stock tank conditions.
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. 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.
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 (6Mcf/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.
Test Results. Any references in this news release to test results, production from testing and performance rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such well will continue production and decline thereafter. Test results are not necessarily indicative of long-term performance of the relevant well or fields or of ultimate recovery of hydrocarbons.
Discovered Petroleum Initially-in-Place. DPIIP is defined is that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production. The recoverable portion of discovered petroleum initially-in-place includes production, reserves and contingent resources; the remainder is unrecoverable. There is no certainty that it will be commercially viable to produce any portion of the resources.
Supplementary Information of Oil and Natural Gas Resources and Reserves. The disclosure in this news release summarizes certain information contained in the D&M Report and is supplemental to the disclosure required under NI 51-101. The D&M report estimates the DPIIP and the contingent resources associated with Alvopetro's Blocks 197 and 198, and there are no reserves, prospective resources, unrecoverable or recoverable undiscovered petroleum initially-in-place associated, nor any unrecoverable discovered petroleum initially-in-place with these blocks. Full disclosure with respect to the Company's reserves as at December 31, 2014 is contained in the Company's annual information form for the year ended December 31, 2014 filed on SEDAR (www.sedar.com) and full disclosure with respect to the Company's reserves as at December 31, 2015 will be contained in the Company's annual information form for the year ended December 31, 2015 which will be filed on SEDAR (www.sedar.com) on or before April 30, 2016.
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", "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 contingent resources and potential hydrocarbons, 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 Alvopetro's 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.
FOR FURTHER INFORMATION PLEASE CONTACT:
Corey C. Ruttan
President and Chief Executive Officer and Director
Phone: 587.794.4224
Email: info@alvopetro.com
www.alvopetro.com
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