Alvopetro Announces Sale of Brazilian Assets

Alvopetro Inc has entered into an agreement with Petrominerales Ltd to sell its 25 percent interest in 10 exploration blocks located in the Reconcavo Basin and three marginal fields located in Brazil for $9.0 million.

Alvopetro entered into a purchase and sale agreement on March 5, 2012 with the shareholders of Alvorada Petroleo S.A. ("Alvorada") to acquire the shares of a newly established entity, Alvopetro S.A. Extracao de Petroleo e Gas Natural ("Alvopetro S.A."), it's assets consisting of most of the assets and operations of Alvorada being nine exploration blocks in the Recôncavo Basin and three marginal fields in Brazil. The acquisition was subject to, amongst other things, the approval of the Agencia Nacional do Petroleo, Gas Natural e Biocombustiveis of Brazil (the "ANP") which eventually was granted in September, 2013.

Alvopetro entered into an agreement on December 7, 2013 with Petrominerales for it to acquire 75 percent of Alvopetro S.A. for US$36.85 million, satisfying the purchase price with the Alvorada shareholders and becoming the manager of the Brazilian assets. Since the acquisition of the Brazilian assets, Alvopetro has been aggressively pursuing financing options which efforts have been largely unsuccessful and lead to establishing a Special Committee of the Board consisting of the Independent Directors to examine strategic alternatives available to maximize the value of the Company. After a review of a number of alternatives, the Special Committee had determined that the best option available to the Company was to accept an offer from Petrominerales to acquire its interests in the Brazilian assets for $9.0 million.

The transaction is subject to the approval of the Alvopetro shareholders. A special meeting of the Alvopetro shareholders is expected to be held by the end of November, 2013 to consider the transaction and approve a change of name of the Company with an information circular to be mailed to Alvopetro shareholders by mid October, 2013. Directors and officers of Alvopetro are required to enter into lock-up and support agreements with Petrominerales pursuant to which they will agree to vote their shares held in favour of the approval of the transaction at the shareholders meeting. The purchase and sale agreement contemplates a non-completion fee of $450,000 payable on the occurrence of certain circumstances including if the Alvopetro shareholders do not approve the transaction. The support agreement also provides for customary non-solicitation covenants, subject to customary "fiduciary out" provisions entitling Alvopetro to consider a superior proposal.

Subject to the satisfaction of all of the conditions to closing set out in the purchase and sale agreement, it is anticipated that the transaction will close in the fourth quarter of 2013. Conditions to closing include, among other matters, receipt of all required regulatory approvals and receipt of Alvopetro shareholder approval.

The proceeds will be used to repay trade payables of approximately $1.8 million which the Company has incurred to pursue its interests in Brazil and offer repayment $2.815 million of convertible debentures.

In September 2013, the Company engaged Sayer Energy Advisors as agent to offer for sale its remaining oil and gas assets in Canada, consisting of a mature producing property in the Buick Creek area of NE British Columbia producing at approximately 100 boe/d and a shut-in natural gas property in the Pine Creek area of Alberta. The sales process concludes on October 3, 2013 and there is no certainty acceptable offers will be received.

In September 2008, the Company re-filed its income tax returns for the 1997 to 1999 tax years to claim additional scientific research and experimental development credits and investment tax credits related to the bio-technology business of its predecessor company, which could result in a refund to the Company of approximately $3,700,000.

The Company has not been reassessed by the Canada Revenue Agency ("CRA") for the amended income tax returns as CRA maintained that these years were statute barred. The Company did not agree with the CRA position and took the CRA to the Federal Court in January 2012. The court's decision was received in November 2012 and was in favour of the Company, requiring CRA to issue a notice of determination for the amended income tax returns. CRA had 30 days to appeal but elected not to appeal the court's decision. The Company's tax advisors have continued to follow up with the CRA on the status of the claim. The CRA delayed the processing of the claim stating that it requires additional time to assess certain technical issues, specifics of which have not been provided, and to determine the wider implications of the court's decision. In August, CRA stated that they would communicate their decision by mid September 2013 and they would comply with the court's decision. The Company has been advised that the CRA has resolved the technical issues allowing it to proceed with the issuance of a notice of determination. The Company has not been advised of the specific issues addressed by CRA or whether or not the Company will be entitled to the full amount of the refund.

Following the Shareholders Meeting, the Special Committee will examine strategic alternatives and liquidity options available to Shareholders.

For more information about related Opportunities and Key Players visit Brazil Oil and Gas Projects