Alvopetro Announces Inaugural Sustainability Report

Source: 8/4/2022, Location: South America

Alvopetro Energy Ltd. announces our inaugural sustainability report for the year-ended December 31, 2021, July sales volumes and an operational update.

Inaugural Sustainability Report
We are pleased to present our inaugural 2021 Sustainability Report (the "Report"), highlighting the operational milestones achieved through the development of our Caburé project and outlining Alvopetro's approach to environmental, social and governance ("ESG") practices. The Report was approved by the Company's Board of Directors and provides stakeholders insight into our environmental stewardship, community involvement and corporate governance practices. A full copy of the Report can be found on our website at

Corey Ruttan, President and Chief Executive Officer, commented: "Our goal while developing this sustainability report was to create transparency on how we manage our business objectives focused on innovation, business strength and our approach to sustainability by; responsibly supplying energy, strengthening communities and our workforce, and minimizing our impact."

2021 ESG highlights included:
- Alvopetro's locally produced natural gas resulted in average savings of 48% for consumers relative to imported LNG and 53% lower GHG emissions relative to fuel oil;
- 100% of produced water reinjected;
- Scope 1 & 2 emissions intensity of 4.7 kg CO2e per boe;
- 65% less vegetation removed than allowed in our permit during the construction of our Murucututu pipeline extension;
- 75 jobs created during Murucututu pipeline construction;
- Zero lost-time safety incidents; and
- Budgeting $0.20/boe to voluntary social programs.

July Sales Volumes and Facility Expansion
Our July sales volumes averaged 2,514 boepd based on field estimates, including natural gas sales of 14.4 MMcfpd, associated natural gas liquids sales from condensate of 108 bopd and oil sales of 6 bopd, a 7% increase from our Q2 average of 2,359 boepd. Our Caburé gas processing facility expansion was commissioned and completed in late July. We now have available processing capacity of up to 500,000 cubic metres per day (18 MMcfpd). Prior to the expansion our sales volumes were limited by the gas processing facility capacity. With the expanded capacity, our production is expected to be driven by Alvopetro's share of available Caburé unit production and production additions from new projects.

Operational Update
In April, we completed drilling our 182-C1 well on Block 182 and, based on open-hole wireline logs, the well discovered 25 metres of potential net natural gas pay in the Agua Grande formation with an average 34% water saturation and average porosity of 8.2%, using a 6% porosity cut-off, 50% Vshale cut-off and 50% water saturation cut-off. We have commenced completion and testing operations using the drilling rig. After perforating and cleaning up the well we will complete a 72-hour formation test. We then plan to move the drilling rig on the same drilling location to drill a follow up well further east from the bounding fault to further assess the Agua Grande potential and to target the Sergi Formation.

In July, we completed drilling our second 2022 exploration well (183-B1) on the fault block immediately east to our 182-C1 discovery. The 183-B1 location was also a multi-zone pre-rift prospect targeting both the Agua Grande and Sergi Formations. Based on open-hole logs and collected fluid samples, the 183-B1 well encountered multiple zones of interest with an aggregate 34.3 metres of potential net hydrocarbon pay, using a 6% porosity cut-off, 50% Vshale cut-off and 50% water saturation cut-off. Subject to equipment availability we expect to commence multi-zone formation tests later in the third quarter.

On our Murucututu project, we commenced commissioning of our field production facility at our 183-1 location in July and subject to final ANP inspection we expect to have our 183-1 well on production near the end of the month. We also commenced field installation of the pipeline extension to tie-in our 197-1 well in June and expect construction to be completed later in the third quarter. Subject to receipt of regulatory approvals, we plan to complete and tie-in the 197-1 well in the fourth quarter.

At the Caburé Unit, the unit operator has commenced drilling the Unit C well (49.1% Alvopetro) targeting development and exploration potential in the Pojuca, Marfim and Caruaçu formations. Drilling is expected to be completed near the end of August.

Semi-Annual Natural Gas Price Redetermination
Pursuant to the terms of our long-term gas sales agreement with Bahiagás, our natural gas price effective August 1, 2022 is BRL1.94/m3 or $11.28/Mcf (based on our average heat content to date of 107% and the July 31, 2022 BRL/USD foreign exchange rate of 5.19). The adjusted price is based on the ceiling price in the contract, which was adjusted to $10.22/MMBtu effective August 1, 2022. While the ceiling price increased by 6% from the February 1, 2022 ceiling price, due to the appreciation of the BRL relative to the USD in the first half of 2022 compared to the latter half of 2021, the BRL denominated contractual price remained consistent. This price will be effective for all natural gas sales from August 1, 2022 to January 31, 2023.

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