Corporate Presentation February 2016

Transcription

1 Corporate Presentation February 2016

2 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

3 Alvopetro s Vision Our vision is to be the premier independent exploration and production company in Brazil, maximizing shareholder value by being the lowest cost operator and applying innovation to underexploited opportunities. The Alvopetro Opportunity: Known Proven Assets Conventional Exploration Discovered Tight Gas Resource 3

4 Seismic Processing is Critical Key to success is reprocessing of existing data Seismic reprocessed across majority of Alvopetro s blocks 1,200 km 2 of reprocessed 3D seismic Reprocessed 2D lines show similar improvement All supported by reprocessed seismic Critical to all core focus areas in Alvopetro Significantly derisks 22 conventional prospects Provides better understanding of tight gas resource concept Identifies development drilling potential on our lower risk Bom Lugar field Before Reprocessing BL-001 ~300 MB EUR Processed Version from BDEP After Reprocessing Reprocessed 3D BL-001 ~300 MB EUR Pojuca Marfim Producing Zone Pre- Rift Processed Version from BDEP Reprocessed 2D 4

5 Alvopetro Highly under-explored prospective land base (154,257 acres, 144,243 net acres) and a balanced suite of opportunities Experienced team with a strong track record Base Net Asset Value of C$2.22/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$32.2 million Materials inventory on hand - US$4.3 million Conventional Exploration: 22 conventional prospects Supported by newly reprocessed/high quality seismic Partnered with ENGIE 4 blocks at 13 th (ALV 65%) Discovered Tight Gas Resource: Bid Round 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$141.6 million as at September 30, 2015 includes financial resources of US$32.2 million, 2C contingent resources on 197(2) of US$91.3 million (NPV10 before tax as at June 30, 2015), 2P reserves on two mature fields of US$13.8 million (NPV10 before tax as at December 31, 2014), and equipment inventory for use on future operations of US$4.3 million. 5

6 Known Assets 197(2) Gas Discovery ALV 197(2) well GR Top Caruacu TVD Sw Tested gas in 3 intervals of Caruacu Formation (tested 15 m of a total 78 m of potential encountered pay) D&M 47 BCF contingent resource, NPV10 $137.1 million (3C share) Combined unstimulated flow test rates of 8.7MMcf/d ALV 197(2) Average Forecasted Daily Deliverability First 30 days 19.8 mmcf/d First 90 days 15.9 mmcf/d First 365 days 10.2 mmcf/d Strong gas demand and robust pricing in Brazil support favourable economics 6

7 Agua Grande oil Known Assets 182(B1) Drilled to 2,095m encountering 6 m of net hydrocarbon pay in Agua Grande Formation January average production rate of 46 bopd with a 0.9% water cut 182(B1) shut-in to undertake enhancements to maximize productivity of the well ALV-182(B1) Structural closure 182 Agua Grande time structure 10 ms Contour Interval 7

8 Known Assets Bom Lugar Development Potential 3 mature fields (Bom Lugar, Jiribatuba and Fazenda Gameleira) NPV10(BT) 2P reserves of US$13.8 million (as at December 31, 2014) o Includes only one probable undeveloped location at Bom Lugar 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 ALV-BL- A1 Horizontal BL1 Loc. ALV-BL-C1 Block 107 Follow-up locations 8

9 Conventional Exploration Inventory Highly under-explored prospective land base (154,257 acres, 144,243 net acres) 22 conventional exploration prospects identified, all supported by reprocessed seismic Two conventional discoveries in 2015 attest to repeatability of conventional exploration Reprocessed seismic derisks all conventional prospects Average shallow conventional well cost expected to be <$5MM (drilled, cased, completed, tested) - significant cost reductions can be achieved with a continuous program Portfolio of conventional prospects in an area of developed oil and gas infrastructure, close to national and state grids, industry, and coastline 9

10 Conventional Prospects 170(B1) Prospect Shale Diapir Targets Marfim and Caruacu Formations updip of well that tested the oil water contact Well depth 2,000 m Site construction started in Q Target spud date February

11 Conventional Prospects 256(A1) Gas Prospect Three way fault closure Well Depth 2,200 m (Caruacu) Prospect located on south side of Mata Catu fault Environmental permit has been submitted to INEMA Alvopetro owns surface land for construction of location (Fazenda Girolandia) Erosional unconformity Block

12 Discovered Gomo Tight Gas Resource 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) 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

13 Block 197/183 Geobodies A A Jan m Tested Gas Deep Gas Geobody 5,460 Acres A 3550m Defined deep basin natural gas resource over a large mapped area in a non-structural setting A Gas Geobody Isopach 20 m C.I. 13

14 Brazil Gas Marketing Environment High demand for natural gas in Brazil, 93.3 million m 3 /day in In 2015, on average, Brazil imported 32.1 million m 3 /day of natural gas from Bolivia National gas infrastructure close to Alvopetro s natural gas discovery (see below) Petrobras eliminated discounts Petrobras Undiscounted US$/Mmbtu Average Price paid by industrial users US$/Mmbtu Petrobras Discounted US$/Mmbtu Henry Hub US$/Mmbtu Sources: Brazilian Association of Large Industrial Energy Consumers and Free Consumer, and Brazil Ministry of Mines and Energy ( 14

15 Gas Sales Options Compressed natural gas Thermal power plants 125 MW ~ 30 mmcf/d Bahia Gas local State distribution company Petrobras tie into national grid Large industrial users, largest consumes ~35 mmcf/d Power Substation 15

16 The Alvopetro Opportunity Experienced Team Well capitalized - US$32.2 million (1) of financial resources Highly under-explored prospective land base Balanced suite of opportunities Attractive valuation Base Net Asset Value of C$2.22/share (2) before exploration prospects and Gomo tight gas resource potential 1) As at September 30, 2015, includes cash, restricted cash and other working capital resources. 2) Base net asset value of US$141.6 million as at September 30, 2015 includes financial resources of US$32.2 million, 2C contingent resources on 197(2) of US$91.3 million (NPV10 before tax as at June 30, 2015), 2P reserves on Bom Lugar and Jiribatuba fields of US$13.8 million (NPV10 before tax as at December 31, 2014), and equipment inventory for use on future operations of US$4.3 million. 16

17 Appendix 17

18 Recôncavo Basin, Brazil Total Area: 10,000 square km First oil drilled (1939) 6,000 wells drilled 86 producing fields Developed infrastructure TPIIP 6.3 billion bbls (conventional) OGIP 3.2 TCF (conventional) Cumulative production 1.5 billion bbls 34 degree API light oil Oil production 41,000 bbl/d Natural gas production 120 mmcf/d Alberta outline compared to Parnaiba Basin 18

19 Recôncavo Basin Geological Model ANP 4 th Bid round - Modified from Braga et al.,

20 Favourable Fiscal Regime Operating netback targets Oil ($per bbl) Gas ($per mcf) Benchmark price Discount (5.00) - Sales price Transportation expenses (3.00) (0.30) Realized sales price Royalties (4.95) (0.72) Operating expenses (6.00) (0.93) Operating netback Note: Operating expenses are estimated based on commercial production levels. Royalties Payable on monthly production and computed based on the ANP reference price Basic government royalty = 10% on concession contracts and 5% on mature fields Landowner royalty = 1% on concession contracts and 0.5% on mature fields Additional royalties = 2.25% on Blocks 182, 196, 197 and 5.0% on Block 170 Special Participation Tax Applicable in high production/profit scenarios Corporate taxes General corporate tax rate = 34% of net taxable income SUDENE benefit available for eligible projects in Bahia state, reducing corporate tax rate to 15.25% Indirect taxes - Most common: PIS & COFINS Remitted monthly on revenues and included in the cost of goods. Combined rate of 9.25%. Offset by PIS&COFINS credits on eligible expenditures ICMS State tax levied on goods Rates differ by state and self-assessment must be made if goods are imported from out of state/country Alvopetro s ICMS rate is 17% ISS & INSS Taxes on services (typically 5% - 12%) IOF Financial transaction tax (0.38%) Various importation taxes (II, IPI, PIS&COFIN, ICMS, CIDE) 20

21 Oil Marketing Petrobras price is based on average monthly Brent pricing less a discount for Petrobras operational and transportation costs Current discount ~$10/bbl net of tax adjustments Alvopetro s current oil production is trucked to Petrobras Carmo Station or the Dax Refinery Dax discount is 5% off Brent New projects being implemented and proposed 21

22 Contact us: Calgary, Canada: Alvopetro Energy Ltd. Suite 1175, 332 6th Ave. SW Calgary, Alberta, Canada T2P 0B2 Tel: (587) 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 Tel: + 55 (71) [email protected] TSX-V: ALV