Alvopetro Energy Ltd. announces October production, third quarter results and an operational update including our first quarter of natural gas sales from our Caburé Project under our long-term Gas Sales Agreement ("GSA") with Bahiagás. Commercial deliveries commenced on July 5th and we averaged daily natural gas sales of 10.1 mmcfpd (286 103m3/d) in the third quarter with associated natural gas liquids sales from condensate of 79 bopd for overall sales volumes in the quarter of 1,764 boepd. Sales rose further in October with natural gas sales, based on field estimates, of 10.8 mmcfpd and condensate sales of 84 bopd for an overall daily average in October of 1,892 boepd.
Corey Ruttan, President and CEO, commented, "On July 5th Alvopetro became the first independent operator in Brazil to process natural gas to the national sales specification and sell it into the distribution network. We posted record levels of production and cash flows, generating over $3.6 million in funds flow from operations in the third quarter. We expect production from our Caburé field to continue at these levels through the end of 2021 and are now focused on building off this early success and unlocking the natural gas potential in the rest of our portfolio and throughout the state of Bahia."
Operational Update and Outlook
In the fourth quarter we plan to undertake a production test at our 183-1 well, part of our Gomo project, to evaluate the long-term deliverability of this well, at total budgeted costs of $0.2 million. Future capital plans for our Gomo project, including an 8-kilometre flowline to connect the 183-1 well to our Caburé transfer pipeline, will be dependent on results from this production test. We have commenced civil construction for our 183-B1 and 182-C1 natural gas exploration prospects in the fourth quarter, with plans to drill these wells in the first half of 2020. We expect total capital expenditures of $7.4 million on these wells, with additional spending dependent on the drilling results.
Financial and Operating Highlights – Third Quarter of 2020 (All $ amounts refer to US$)
- On July 5, 2020, we commenced natural gas deliveries to Bahiagás under our GSA, with average daily natural gas sales in the quarter of 10.1 mmcfpd (286 103m3/d). Natural gas liquids sales from condensate averaged 79 bopd, and overall sales volumes totaled 1,764 boepd in the quarter.
- We had an average realized natural gas sales price of $5.37/mcf.
- We generated natural gas and condensate revenues of $5.3 million, with an operating netback of $25.99 per boe and funds flow from operations of $3.6 million ($0.04 per basic share and $0.03 per diluted share).
- We reported net income of $6.5 million in the quarter, compared to a net loss of $2.3 million in the same period in 2019 and a net loss of $1.2 million in the second quarter of 2020. Net income was positively impacted by a deferred income tax recovery of $4.9 million for recognition of a previously unrecognized deferred tax asset.
- As all Caburé development was completed by the end of the second quarter, capital expenditures reduced to $0.1 million, compared to $3.6 million in the same period in 2019 and $1.6 million in the second quarter of 2020.
- As at September 30, 2020, we had a net working capital surplus of $2.2 million, including $3.2 million in cash and cash equivalents. A total of $15.3 million was outstanding under our credit facility, bringing the Company's net debt to $13.1 million at the end of the quarter.