Corporate
Presentation
November 2016
Cautionary Statements
Forward Looking Statements. Statements in this presentation may contain forward-looking statements including management’s assessment of future plans, operations, expectations of
future production and capital expenditures. Information concerning resources is deemed to be forward-looking statements as such estimates involve the implied assessment that the
resources described can be economically produced. These statements are based on current expectations 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 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 and resource estimates; the uncertainty of
estimates and projections relating to production, costs and expenses, and health, safety and environmental risks; and fluctuation in foreign currency exchange rates and commodity price
fluctuation. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements.
Undiscovered Petroleum Initially-In-Place (“UPIIP”), equivalent to ‘undiscovered resources’, are those quantities of petroleum that are estimated, on a given date, to be contained in
accumulations yet to be discovered. The recoverable portion of UPIIP is referred to as prospective resources, the remainder as unrecoverable. Undiscovered resources carry discovery risk.
There is no certainty that any portion of these resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources.
Discovered Petroleum Initially-In-Place (“DPIIP”), equivalent to ‘discovered resources’, is that quantity of oil that is estimated, as of a given date, to be contained in known accumulations
prior to production. The recoverable portion of DPIIP 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.
Total Petroleum Initially-In-Place ("TPIIP“) is that quantity of petroleum that is estimated to exist originally in naturally occurring accumulations. It includes that quantity of petroleum that is
estimated, as of a given date, to be contained in known accumulations, prior to production, plus those estimated quantities in accumulations yet to be discovered. There is no certainty that
undiscovered resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources.
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 IFRS 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 and working capital. These measures are commonly utilized in the oil and gas industry and are considered informative for management
and shareholders. We evaluate our performance based on funds flow from operations. Funds flow from operations is a non-IFRS term that represents 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
Alvopetro’s ability to have or generate sufficient cash to fund future growth opportunities. Working capital surplus includes current assets less current liabilities and is used to evaluate the
Company's short-term financial leverage. Operating netback is determined by dividing oil sales less royalties, 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 quality of production. Funds flow from operations, funds flow per share,
working capital 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 IFRS.
Net Present Value. The net present value of future net revenue attributable to Alvopetro’s reserves and 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 for only those wells assigned
reserves or resources by Sproule or D&M respectively. It should not be assumed that the undiscounted or discounted net present value of future net revenue attributable to the Alvopetro’s
reserves and resources estimated by Sproule and D&M 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, reserve and resource estimates of the Company's reserves and resources provided herein are estimates only and there is no
guarantee that the estimated reserves or resources will be recovered. Actual reserves or resources may be greater than or less than the estimates provided herein.
2
Alvopetro’s Vision & Strategy
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.
The Alvopetro Opportunity:
• Known Proven Assets
• Conventional Exploration
• Discovered Tight Gas Resource
Near-term focus on building a natural gas
business by finalizing a unitization
agreement and securing a gas sales contract
for our 197(2) discovery.
3
Seismic Processing is Critical
• Key to success is reprocessing of
existing data
• Seismic reprocessed across majority of
Alvopetro’s blocks
Before Reprocessing
After Reprocessing
BL-001
~300 MB EUR
BL-001
~300 MB EUR
– 1,200 km2 of reprocessed 3D seismic
– Reprocessed 2D lines show similar
improvement
– All supported by reprocessed seismic
Pojuca
• Critical to all core focus areas in
Alvopetro
– Significantly derisks 21 conventional
prospects
– Provides better understanding of tight
gas resource concept
– Identifies development drilling potential
on our lower risk Bom Lugar field
Marfim
Producing
Zone
Processed Version from BDEP
Reprocessed 3D
Processed Version from BDEP
Reprocessed 2D
PreRift
4
The Alvopetro Opportunity
• Highly under-explored prospective land base
(140,509 acres, 123,313 net acres) and a balanced
suite of opportunities
• Experienced team with a strong track record
• Base Net Asset Value of C$1.90/share(1)
Known Proven Assets:
• 197(2) Gas field – D&M estimates 47 BCF contingent
resource (3C - ALV share)
• 182(B1) oil discovery
• Existing reserves and production on mature fields
• Strong cash position - US$18.4 million, at Sept 30, 2016
• Materials inventory on hand - US$4.1 million
Conventional Exploration:
• 21 conventional prospects
• Supported by newly reprocessed/high quality seismic
• Partnered with ENGIE on 4 blocks at 13th Bid Round
(ALV 65%)
Discovered Tight Gas Resource:
• 2-well pilot project drilled
• Defined deep basin natural gas resource over a large
mapped area in a non-structural setting
(1) Base net asset value of US$123.3 million as at Sept 30, 2016 includes financial resources of US$18.4
million, 2C contingent resources on 197(2) of US$91.3 million (NPV10 before tax as at June 30, 2015), 2P
reserves on Block 182 and two mature fields of US$9.5 million (NPV10 before tax as at December 31, 2015),
and equipment inventory for use on future operations of US$4.1 million.
5
Known Assets – Bom Lugar Development Potential
• Bom Lugar and Jiribatuba mature fields
̶
̶
Sproule estimated 465,000 bbl recoverable per well based on BL -1
Existing single well production suggests larger pool
• First well planned 400 m horizontal leg at 2,414 m TVD
• 4+ follow-up locations
• Surface location built
Caruacu Time structure
2 ms Contour Interval
ALV-BL-B1
Loc. ALV-BL-C1
ALV-BLA1
Horizontal
BL1
Block 107
Follow-up locations
6
Known Assets – 182(B1)
•
•
•
•
•
Drilled to 2,095m encountering 6 m of net hydrocarbon pay in Agua Grande Formation
Average production rate in the first quarter of 2016 of 33 bopd
The well was offline from May to Sept to transition to company owned equipment and reduce production expenses.
2 additional conventional exploration prospects
Candeias fractured shale potential
Agua Grande time structure
5 ms Contour Interval
Agua Grande
182
Candeias
Structural closure
7
Known Assets – 197(2) Gas Discovery
ALV 197(2) well
TVD
GR
Top Caruacu
•
•
Sw
•
Tested gas in 3 intervals of Caruacu Formation (tested 15 m
of a total 78 m of potential encountered pay)
– Combined unstimulated flow test rates of 8.7MMcf/d
– ALV 197(2) Average Forecasted Daily Deliverability
• First 30 days – 19.8 MMcf/d (3,300 boepd)
• First 90 days – 15.9 MMcf/d (2,650 boepd)
• First 365 days – 10.2 MMcf/d (1,700 boepd)
– D&M 47 BCF contingent resource, NPV10 $137.1 million (3C share)
Strong gas demand and robust pricing in
Brazil support favourable economics
Next steps – finalize unitization agreement
and secure gas sales contract
8
198(A1) Location
D&M 2C Area
Top Sand Structure
10 m Contour Interval
198-A1 Marfim Exploration, Caruacu Development
W
E
vshale from sp
GR
Pojuca interbedded shales and sand
Best potential cross fault seal
G/W contact
Up-hole exploration not booked in D&M Contingent Resources
Caruacu step out included in D&M Contingent Resources
Juxtaposition of
Marfim reservoir
against sand/shale
interbeds in Pojuca
across the fault
Conventional Exploration Inventory
• Highly under-explored prospective land base
(140,509 acres, 123,313 net acres)
• 21 conventional exploration prospects identified,
all supported by reprocessed seismic
• Two conventional discoveries
• Average shallow conventional well cost expected
to be $3MM
• Portfolio of conventional prospects in an area of
developed oil and gas infrastructure, close to
national and state grids, industry, and coastline
11
Discovered Gomo Tight Gas Resource
• 197-1 Well
– Encountered 43 m potential net
hydrocarbon pay
– Recovered 78 m of core
– Lower zone flowed natural gas at an
average rate of 40 mcf/d (unstimulated)
• 183-1 Well
– Encountered 189 m potential net
hydrocarbon pay (3 zones)
– Recovered over 40 m of core
– Upper Gomo – 96 m of net pay including:
o Thick 46 m interval with average
porosity of 10%
o 3 m zone with 14% porosity
– Deep Gomo – 93 m of net pay, average
porosity of 7%
12
Block 197/183 Geobodies
A
A’
Jan2
183-1
197-1
Deep Gas Geobody 5,460 Acres
Tested Gas
A’
3275m
3550m
183-1
•
Defined deep basin natural gas resource over a large mapped area in
a non-structural setting
A
197-1
Gas Geobody Isopach 20 m C.I.
13
Brazil Gas Marketing Environment
•
High demand for natural gas in Brazil,
93.3 million m3/day in 2015.
•
In 2015, on average, Brazil imported
32.1 million m3/day of natural gas
from Bolivia
•
National gas infrastructure close to
Alvopetro’s natural gas discovery
(see below)
•
Petrobras eliminated discounts
Sources: Brazilian Association of Large Industrial Energy Consumers and Free Consumer, and Brazil Ministry of Mines and Energy (http://www.mme.gov.br/)
14
Gas Sales Options
•
Compressed natural gas
•
Thermal power plants – 125 MW ~ 30 mmcf/d
•
Bahia Gas – local State distribution company
•
Large industrial users, largest consumes ~35
mmcf/d
•
Petrobras – tie into national grid
15
Brazil Macro Fundamentals
• Political climate improving
• Improving investment climate
• Economic outlook positive
• Petrobras asset divestitures
16
The Alvopetro Opportunity
• Experienced Team
• Well capitalized - US$18.4 million(1) of financial
resources
• Highly under-explored prospective land base
• Attractive valuation
• Base Net Asset Value of C$1.90/share(2) before
exploration prospects and Gomo tight gas resource
potential.
1)
2)
As at Sept 30, 2016, includes cash and other working capital resources.
Base net asset value of US$123.3 million as at Sept 30, 2016 includes financial resources of US$18.4 million, 2C contingent resources on 197(2)
of US$91.3 million (NPV10 before tax as at June 30, 2015), 2P reserves on Block 182 and two mature fields of US$9.5 million (NPV10 before tax
as at December 31, 2015), and equipment inventory for use on future operations of US$4.1 million.
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Contact us:
Calgary, Canada:
Alvopetro Energy Ltd.
Suite 1175, 332 6th Ave. SW
Calgary, Alberta, Canada
T2P 0B2
Tel: (587) 794-4224
Email: [email protected]
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: [email protected]
www.alvopetro.com
TSX-V: ALV