Alvopetro Energy announces July 2024 sales volumes, updated natural gas pricing under our long-term gas sales agreement, an intention to launch a share buyback program under a normal course issuer bid ("NCIB"), and financial results for the three and six months ended June 30, 2024.   We will host a live webcast to discuss Q2 2024 results on Thursday August 8, 2024 at 8:00 am Mountain time.

President & CEO, Corey C. Ruttan commented:
"We continue to post strong financial results with a Q2 2024 operating netback of $64.30/boe and funds flow from operations of $7.9 million.  We are also pleased to announce a significant 49% increase in production as we start the third quarter.  

Alvopetro has a disciplined capital allocation model whereby roughly half of our funds flow from operations are intended to be reinvested in organic growth and the other half in returns to stakeholders. We have already returned $43.8 million ($1.22/share) to shareholders through dividends and we plan to complement these stakeholder returns through a share repurchase program.  Our organically funded capital program is intensifying, we are planning a very busy second half of the year and we expect to have key results from initial activities to announce later this quarter."

Operational Update

July Sales Volumes
July sales volumes increased 49% over Q2 2024, averaging 2,432 boepd, including natural gas sales of 13.8 MMcfpd, associated natural gas liquids sales from condensate of 118 bopd and oil sales of 19 bopd, based on field estimates. To address continued impacts resulting from reductions in natural gas demand in the state of Bahia, Alvopetro and Bahiagás have agreed to review natural gas pricing on interruptible sales volumes (those volumes above our 300,000 m3/d (10.6 Mmcfpd) of Firm contracted sales) on a monthly basis. 

Development Activities
We completed the planned chemical injection program in our 197-1 well, the well is back online, and we are monitoring the effectiveness of the chemical program. We have initiated the recompletion of our 183-1 well in an uphole Caruaçu zone and expect to bring the well online through our Murucututu production facility this quarter. In parallel, we are finishing the completion of our 183-A3 well. This well was drilled to a total measured depth of 3,540 metres and based on open-hole logs, the well encountered potential net natural gas pay in both the Caruaçu Member of the Maracangalha Formation and the Gomo Member of the Candeias Formation, with an aggregate 127.7 metres total vertical depth of potential natural gas pay, using a 6% porosity cutoff, 50% Vshale cut-off and 50% water saturation cutoff.  We also plan to have this well on production through our Murucututu production facility later this quarter.  

Semi-Annual Natural Gas Pricing Update
Effective August 1, 2024, our natural gas price under our long-term gas sales agreement with Bahiagás has been adjusted to BRL1.945/m3 or $10.83/Mcf (based on average heat content to date, the July 31, 2024 BRL/USD exchange rate of 5.66 and sales tax credits applicable). While the BRL contracted price was virtually unchanged from the February 1, 2024 contracted price, the expected USD price of $10.83/Mcf, based on the July 31, 2024 exchange rate of 5.66, is 8% lower than the realized natural gas price of $11.83/Mcf in Q2 2024, which was based on the Q2 2024 average exchange rate of 5.21.

Financial and Operating Highlights – Second Quarter of 2024

• In April 2024, the independent expert appointed in connection with the redetermination of working interests in the Unit found in favour of Alvopetro, increasing Alvopetro's working interest from 49.1% to 56.2%. Our partner disputed the findings of the independent expert and the matter was subsequently referred to an emergency arbitrator of the International Chamber of Commerce ("ICC"). In May 2024, the emergency arbitrator found in favour of Alvopetro, making the decision of the appointed expert binding and increasing Alvopetro's working interest to 56.2% effective June 1, 2024. The decision of the emergency arbitrator is a provisional and contingent decision until the matter is decided upon by a full arbitral tribunal pursuant to the Rules of Arbitration of the ICC as provided for under the terms of the UOA. The full arbitration has now commenced.
• Our daily sales averaged 1,629 boepd in Q2 2024, a decrease of 18% from Q2 2023 and 4% from Q1 2024 due to lower natural gas demand.
• Our average realized natural gas price was $11.83/Mcf (-8% from Q2 2023) and our overall realized sales price per boe was $71.97 (-7% from Q2 2023).
• With lower overall sales volumes and realized prices per boe, our natural gas, condensate and oil revenue was $10.7 million, a decrease of $3.2 million (-23%) compared to Q2 2023 and $1.1 million (-9%) compared to Q1 2024.
• Our operating netback in the quarter was $64.30 per boe (-$5.31 from Q2 2023) due mainly to the reduction in our realized sales price per boe.
• We generated funds flows from operations of $7.9 million ($0.21 per basic and per diluted share), a decrease of $3.1 million compared to Q2 2023 and $0.6 million compared to Q1 2024 due mainly to lower sales volumes and realized prices.
• We reported net income of $2.4 million in Q2 2024, a decrease of $7.5 million compared to Q2 2023 and $2.2 million compared to Q1 2024 due mainly to lower sales volumes and realized prices as well as higher foreign exchange losses, mainly on intercompany balances.
• Capital expenditures totaled $3.4 million, including equipment purchases for the facility upgrade at Caburé and other long-lead purchases, costs for our Murucututu wells and additional capital for historical Unit projects as a result of our increased working interest following the redetermination.
• Our working capital surplus was $14.7 million as of June 30, 2024, increasing $1.6 million from December 31, 2023 and decreasing $0.4 million from March 31, 2024