Alvopetro Energy Ltd. · TSXV:ALV
Alvopetro Energy — Investor Day (September 2014)
119 slides from Alvopetro Energy's investor day presentation, Sep 10, 2014
Slide 1: Investor Day September 10, 2014
Investor Day September 10, 2014
Slide 2: Introduction
ALVOPETRO ion Introduct
Slide 3: Vision
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 bringing innovation to underexploited opportunities Applying new ideas to old areas 3
Slide 4: Strategy – Maximize Share Price
Strategy – Maximize Share Price Find hydrocarbons • Quickly establish positive free cash flow • Efficiently prove the commercial viability of the Gomo resource • Exploit mature fields • Conventional exploration Be the lowest cost operator • Deliver step change improvements in costs with the same hig
Slide 5: Petrominerales: December 2012
Petrominerales: December 2012 Very high production rates (IP) Very high ROI PMG HAD ‘Smaller’ reservoirs High exploration risk Very high recovery of oil in place Complex development decisions Very short Reserve Life Index (RLI) ‘treadmill’ NEEDED Acceptable production rates (IP) Enough exposure to P
Slide 6: Petrominerales Brazil - Purchase of Alvopetro Assets
Petrominerales Brazil - Purchase of Alvopetro Assets Recôncavo Basin • Combination of geological prospectivity and fiscal regime • 1.5 billion bbls produced from basin, peaked at 250,000 bopd, down to 40,000 bopd, no investment since the 1980’s Gomo ‘shale’ play • Source rock play, met the requireme
Slide 7: Petrominerales – 2013 Recôncavo Basin Achievements
Petrominerales – 2013 Recôncavo Basin Achievements • Technical team’s strength was 3D seismic. Merged and reprocessed 6 existing 3D surveys, with game changing results • Geological work to understand basin and context • Operational planning for first wells • Potential and opportunity became clear, a
Slide 8: Overview of Alvopetro’s 2014 Activities To-Date
Overview of Alvopetro’s 2014 Activities To-Date • Drilled 197(1) with very good results - Got the well drilled. Complex drilling - Extensive core with excellent recovery - Wellbore integrity (first in basin?) - Confirmed unconventional with near conventional discoveries - Very significant potential
Slide 9: Extensive Progress in 2014
Extensive Progress in 2014 • Opportunity potentially more extensive than initially evaluated – Hybrid potential in multiple zones, possible large gas reserves • Seismic capability far exceeds expectations • Brazil issues moving forward – Defining and permitting required reservoir stimulations – Serv
Slide 10: Key Capabilities – Clear Management Vision
Key Capabilities – Clear Management Vision Frontier expertise • Execute in areas where big wells can be drilled • Remote locations / hostile environments / complex regulations / long lead times Developed basin expertise • Must have staff who can execute in very competitive areas ARA (Authority / Res
Slide 11: “The Legs of the Stool”
“The Legs of the Stool” • Combine: – Frontier Basin Expertise – Developed Basin Expertise – Very Effective Working Environment – Long Planning Horizon • Summary of the basic operating philosophy of Alvopetro: evolving since Pacalta in 1996 11
Slide 12: Where are we today?
Where are we today? • Extensive Frontier Basin expertise • Extensive Developed Basin expertise • Organizational structure with clear A/R/A. Some cultural and growth issues remaining. Building on past experience. Most capability in place or identified • Planning horizon being extended. Key milestones
Slide 13: Focused Land Base
Focused Land Base • 148,500 gross acres • 3 producing fields with exploration and development potential • 16 exploration blocks • Captured majority of deep Gomo play fairway in Miranga Low • Experienced team • $79.7 million of cash* 13 *As at June 30, 2014, includes cash, restricted cash (current an
Slide 14: Macro Brazil
ALVOPETRO Macro Braz
Slide 15: Brazil - General
Area: 8,502,728 km? Population: 196 million GDP: US$ 2.3 trillion World’s seventh largest economy Political, Economical and Regulatory stability Over US$ 377 billion in International Reserves Investment grade (Moody’s, Fitch and Standard and Poors) Oil, Natural Gas and Biofuels regulated under the s
Slide 16: Brazil Background Information
Brazil Background Information 16
Slide 17: Brazil – History of Industry Development
Brazil – History of Industry Development 17
Slide 18: Brazil – History of Industry Development
Brazil – History of Industry Development 1938: National Petroleum Council (CNP) established, controlling all activities in the petroleum industry 1939: First discovery made in Recôncavo Basin, Candeias Field 1953: Growing nationalist view of oil industry results in creation of Petrobras, Gov’t grant
Slide 19: Brazil – History of Industry Development
Brazil – History of Industry Development 1997: Bid Round Zero – Petrobras farms out ‘Blue Blocks” 2001: Most Blue Blocks returned to ANP as non-commercial. First full cycle of concessions post Petrobras monopoly 1999 to 2006: Bid Rounds 1 to 8 Nov 2007: First round held following news that Tupi held
Slide 20: Brazil - Distribution of Oil and Gas by Basin – July 2014
Brazil - Distribution of Oil and Gas by Basin – July 2014 Oil Natural Gas Total Production Number of Basin (bbl/d) (Mm³/d) (boe/d) producing fields Campos 1,716,559 29,625 1,902,900 47 Santos 331,100 20,082 457,414 11 Solimões 27,773 12.876 108,763 5 Espírito Santo 36,929 5,560 71,900 43 Potiguar 58
Slide 21: Oil and Gas Production by Operator – July, 2014
Oil and Gas Production by Operator – July, 2014 Nº Operator Oil (bbl/d) Natural Gas (Mm³/d) Total Production (boe/d) 1 Petrobras 2,051,849 80,450 2,557,877 2 Shell Brasil 88,459 1,339 96,882 3 Statoil Brasil 71,540 94 72,129 4 Parnaíba Gás 144 5,579 35,235 5 Chevron Frade 25,809 281 27,579 6 OGX 15,
Slide 22: Regulatory Framework
YE ALVOPETRO Regulatory Framework
Slide 23: Regulatory Framework
Regulatory Framework ANP: Key Regulations: Concession Contract: Exploration: • PEM- Minimum Exploratory Program • Financial Guarantees. • Cession Rights • Data acquisition • Exploratory Wells • Local Content • Notification of discovery • Evaluation Plan of the Discovery • Long test duration • Declar
Slide 24: Regulatory Framework
Regulatory Framework INEMA: Key Regulations: Environmental License: License types: • Environmental Authorization – AA: For exploratory activities (wells and seismic). Validity one year and renewable for more one year. Deadline for licensing: six months • Operating License - For production activities
Slide 25: Regulatory Framework
RE BRS SB BNBERRBLK Landowner Permission (1/3) 15 days| 0% Technical Project 5 days| Environmental impact Study / Reports 10 days| 0% Apply for Environmental License 1 day| 0% Analysis of Environmental Study / Visit of 180 days| Authority / Grant of license Data Acquisition 40 days} Data Processing
Slide 26: Brazil – Local Content Rules
Brazil – Local Content Rules Purpose: The local content system is intended to foster the growth of Brazilian industry, technological development, capacity building of human resources, employment and income. Rules: • Include Brazilian suppliers among the suppliers invited to submit proposals • Provid
Slide 27: Local Content – Exploration Phase - Forecast
Local Content – Exploration Phase - Forecast 27
Slide 28: Brazil – Political /Economic Overview
Brazil – Political /Economic Overview World Cup is over. Attention turns to Elections in October 5, 2014, and second vote (if needed) October 26, 2014. To win in the first round a candidate needs more votes than all other competitors combined. Second round is currently predicted to be necessary. Mai
Slide 29: Brazil Cost Structure
YE ALVOPETRO Brazil Cost Stiiaaae
Slide 30: WHY ?
Custo Brasila (Brazil Cost) $35,000 USD Houston Texas WHY? $75,000 USD – Import Duty Paid - Salvador de Bahia $125,000 USD – In Stock Sale Price - Salvador de Bahia 30
Slide 31: Brazil Cost
Brazil Cost Across the board: operational costs, currency exchange rates, tax regimes, salaries, antiquated labour laws, trade protection, cost of capital, low productivity There is general agreement that Brazil must: “compensate for our competitive inefficiencies and the persistent and anachronisti
Slide 32: Brazil – Performance in 2014 (of 189 countries)
Brazil – Performance in 2014 (of 189 countries) Rank (of 189) DTF (% of Best) India (Rank) Starting a Business 123 54.66 179 Dealing with Construction 130 55.26 182 Permits Getting Electricity 14 87.51 111 Registering Property 107 58.99 92 Getting Credit 109 50 28 Protecting Investors 80 53.33 34 Pa
Slide 33: Brazil Cost – Complex Causes of High Costs
Brazil Cost – Complex Causes of High Costs Underlying “Custo Brasila” • Steel, welding, fuel, power, and so on. General protectionism and lack of competitiveness, low productivity… • Specialized items not available or prohibitive (API, low carbon welding rod, etc.) Lack of competitiveness in O&G sec
Slide 34: Brazil Cost – Causes of High Costs (contd.)
Brazil Cost – Causes of High Costs (contd.) Concession agreements – Local content requirements in concession agreements perversely encourage importation under exemption (requiring re-export), over local purchase at higher prices, meaning contract or used materials are not available to other operator
Slide 35: Brazil Economics - Solutions
Brazil Economics - Solutions F&D is dollars per barrel • Barrels – Higher dollars, need more barrels. Drill big wells • Dollars • Extend Planning Horizon – Allow the best practice in each case for lowest overall cost – Work seasonally (build civil works in the dry season) • Best performance (‘the Ba
Slide 36: Brazil Economics – More Cost Solutions
Brazil Economics – More Cost Solutions Use all available tools and methods • Buy local, import and pay duty, import for re-export (Repetro) Develop critical mass • Long term drilling and completion programs – Long term service / supply contracts – Vertically integrate (fluids, specialized equipment,
Slide 37: Conclusions
Conclusions •Costs in Brazil are high for land operations – Some endemic to local economy – Some a factor of the technical complexity •Tools exist to manage and reduce costs •Alvopetro is working towards a full understanding and realization of all costs and mitigation opportunities •Economics are a
Slide 38: Infrastructure and Marketing
Infrastructure and Marketing
Slide 39: Brazil Oil Infrastructure
Brazil Oil Infrastructure Refineries: 4 Private Refineries In Bahia (near Alvopetro assets) the Dax Oil Refinery has 2,500 bopd capacity, current utilization 1,000 bopd 12 Petrobras Refineries In Bahia, Petrobras’ refinery has 279,000 bopd capacity, current utilization 237,000 bopd Pipelines: The us
Slide 40: Refineries - Capacity
Installed Capacity Average Volume Processed _ [thousand barrels/day] (thousand barrels/day) Localization lization (%) RPCC - Refinaria Clara Camarao REMAN - Refinaria Isaac Sabba Insta’ Capacity Average Volume Pri thousand barrels/day) ; (thousand barrels/day) UNIVEN Petroleo _ mang 5P ~ Itupeva _ _
Slide 41: Macro Natural Gas Environment
Macro Natural Gas Environment Bahia gas production – 87 mmcfpd Bahia gas consumption – 156 mmcfpd Brazil is a net gas importer: 409.6 bcf of natural gas was imported from Bolivia in 2013, at a cost of $4 billion/year* Proximal to national infrastructure High energy demand and prices in Bahia Gas pri
Slide 42: Brazil Gas Transportation Infrastructure (1999)
Brazil Gas Transportation Infrastructure (1999) 3,705 km of gas pipeline Belém Manaus Recife Salvador Brasília Production areas Gas Pipelines in operation Rio de Janeiro São Paulo Gas Pipelines in construction Porto Alegre Source: ANP 42
Slide 43: Brazil Gas Transportation Infrastructure (2012)
Brazil Gas Transportation Infrastructure (2012) 9,422 km of gas pipeline Urucu-Coari-Manaus Belém Manaus Açu-Serra do Mel Recife Pilar-Ipojuca Catu – Carmópolis – Pilar Salvador Cacimbas – Catu Production areas Brasília Gas Pipelines in production Gas Pipelines in Gasduc III construction Gasbel II J
Slide 44: Bahia Gas Infrastructure
weer Tucano Sul Basin IRAE SANA een z ant 80 GONCALO DOS CAMPOS MsTADE SHO 10K ‘sho sebastio DorESSE r basin r me Se caMACARL Bypeun | LEGENDA ‘easoDUTOS: Em pn 20 20 2012 Ermita: ALVOPETRO 4
Slide 45: Share of Gas in the Brazilian Energy Matrix
Share of Gas in the Brazilian Energy Matrix Current power generation is 69 GW, Alberta peak is 17 GW Source: ANP 45
Slide 46: Brazil Natural Gas Production (2000-2012)
Brazil Natural Gas Production (2000-2012) 100.000 100.000 90.000 90.000 80.000 80.000 70.000 70.000 60.000 60.000 Mil m3/dia 50.000 50.000 40.000 40.000 30.000 30.000 20.000 20.000 10.000 10.000 0 0 Net National Produção Production Nacional Líquida Imported Importação Offer Oferta Source: ANP 46
Slide 47: Natural Gas Consumption by Segment (2005 -2013)
Natural Gas Consumption by Segment (2005 -2013) Source: ANP 47
Slide 48: Recôncavo Basin - Gas Market
Recôncavo Basin - Gas Market 48
Slide 49: Brazil: Gas Marketing Environment
Brazil: Gas Marketing Environment Bahia, Brazil - Comparison between Natural Gas Prices for the Industrial Market (20,000 m³/day) and Fuel Oil • High demand for natural gas in Brazil, approx. 1.3 Tcf demand/year, 35% imported gas. • Gas infrastructure nearby Alvopetro’s operations • Opportunity exis
Slide 50: Operations
oO o _ W © 3 x Operations
Slide 51: Current Operations
Current Operations Rig start-up (learning curve) • Worked with rig contractor to bring equipment and operating practices up to acceptable standards • ALV approach is to have boots on ground at all times Very significant progress to date • Identified and tested optimized drilling fluids • Optimizing
Slide 52: 183 drilling curve
ALV-183-1 Cost , Time and Depth Curve updated to Sept 7, 2014 DDR ve Cost (USD) 024 6 8 10 -1000 1500 -3500 — ALVOPETRO :2
Slide 53: G&G Basin Geology
YE ALVOPETRO G&G Basin Geology
Slide 54: Regional Map – Currently in 4 Basins
Regional Map – Currently in 4 Basins 54
Slide 55: Recôncavo and Tucano Basins- Ancient Rift Valley Lakes
Recôncavo and Tucano Basins- Ancient Rift Valley Lakes A Rift is a linear Zone where the Earth’s crust and lithosphere are being pulled apart and is and example of extensional tectonics 3. Shallow lake Syn-Rift fill 2. Deep lake Syn-Rift fill 2. Deep anoxic (source) layer 1. Thin Fluvial fill 4 3 2
Slide 56: Modern Day Analog- East African Rift Valley Lakes
Modern Day Analog- East African Rift Valley Lakes Lake Tanganyika covers 32,900 km2 (~3 times the size of Recôncavo basin). It has a mean water depth of 570 m and a maximum depth of 1,470 m. Rift basin waters are often initially anoxic (lacking oxygen) and preserve organic material forming source ro
Slide 57: Recôncavo Basin Structural Framework
A Recôncavo Basin Structural Framework A’ • Asymmetric graben • Over 5,000m of sedimentary rocks in the depocenter • Jurassic pre-Rift phase • Lower Cretaceous Rift Valley phase • Anoxic early rift, Oxic late rift 57
Slide 58: Source Rock Isopach and distribution Stratigraphy
Source Rock Isopach and distribution Stratigraphy 28% DPIIP 16% DPIIP SR 56% DPIIP Modified from CAIXETA et al., 1994 Bruhn 1999 Reservoir Rocks Source Rock • Multiple, stacked reservoirs World class source rocks: • Fluvial, eolian deltaic sandstones •1-10% TOC • Turbidites 58 •In oil window below ~
Slide 59: Recôncavo Basin Hydrocarbon Habitat
Recôncavo Basin Hydrocarbon Habitat Conventional Horst Conventional traps eg. Conceptual deep resource play block fields 56% Bom Lugar 44% DPIIP Shale Play A DPIIP A’ ? ? ? ? FIGUEIREDO et al., 1994 59
Slide 60: “Unconventional” Petroleum System
“Unconventional” Petroleum System Thermal Maturity SOLID to LIQUID Conversion & Volume Expansion TOC = Increased Pressure Solid & Expulsion of Liquid Source shale remains Hydrocarbon saturated due to Permeability Trap – it is also a “seal” Any pore space encased in this shale is also saturated 60
Slide 61: “Unconventional” Petroleum System
“Unconventional” Petroleum System Conventional Seal Trap Source & Unconventional Maturation Seal & Permeability Trap http://geology.com/energy/shale-gas/ 7 February 2014 61
Slide 62: Recôncavo Petroleum System Chart
Recôncavo Petroleum System Chart Gomo, Lacustrine, oil prone, VR 0.6-1.3 Ro, basin wide, 1-3% TOC Sergi, Agua Grande, Gomo, Candeias SS, Marfim, Pojuca SS Pojuca and Candeias Shales (Gomo Mb) Rift Basin, half graben Structural (Extension/transverse), Stratigraphic (Gomo) Source Rocks >1500m in oil w
Slide 63: Recôncavo Basin - Unconventional Petroleum System
Recôncavo Basin - Unconventional Petroleum System Conceptual deep Gomo ss play Shale Play A A’ Top HC ? Generation Petroleum System: ? ? - Source rock present & generated HC - Permeability = Reservoir - Reservoir encased in source/seal rock Unconventional Criteria Source in present-day generation wi
Slide 64: Unconventional- Gomo Tight Sand/Shale Play Concepts
Unconventional- Gomo Tight Sand/Shale Play Concepts Tight Sand • Hydrocarbons stored in very fine-grained sediments-there is some tight gas produced in Brazil. Tight oil is completely unexploited Source Rock (Shale Gas and Shale Oil) • Hydrocarbons stored in rock containing organic material • Shale
Slide 65: Gomo Tight Sand Play - Comparison to the Cardium
Gomo Tight Sand Play - Comparison to the Cardium Source: PennWest 65
Slide 66: Gomo Tight Sand Play-Comparison to the Cardium
Gomo Tight Sand Play-Comparison to the Cardium Cardium operators are accessing oil from << 1 mD Source: PennWeste 66
Slide 67: Gomo Tight Sand Play - Comparison to the Cardium
Gomo Tight Sand Play - Comparison to the Cardium Good reservoir analogy; need to find oil-saturated sand in the Gomo 67
Slide 68: Gomo Tight Sand
Gomo Tight Sand S N • Some offset wells appear very good • Variable gross sand and porosity • Oil saturation may vary (may not be a true resource GR Sw play) GR Sw 197 GR Sw Lye Petrophysics Jan 2014 GR Sw 68
Slide 69: Gomo “Shale” Oil
Gomo “Shale” Oil GR Res “Shale oil” = permeable, S N fractured siltstone interval Bom Lugar Test if 1. permeable 2. will focus stimulation 3. will flow oil 69
Slide 70: Gomo Pilot Well Objectives (197-1 & 183-1)
Gomo Pilot Well Objectives (197-1 & 183-1) Objectives • To investigate the hydrocarbon potential in the Gomo shale/silt/sand sequences by obtaining detailed and high quality drilling, core and fluid data • To determine empirically the capital cost structures in the Recôncavo Basin • To earn and reta
Slide 71: Data Obtained to Implement Full Field Development
Data Obtained to Implement Full Field Development • Re-calculation of volumetric and play fairway extent based on flow test results, and log and core data is underway • Rock and log measurement have been successfully measured and have placed the reservoir quality as near-conventional, 0.1-4 md, whic
Slide 72: Early Data Gathering at the 197-1 Exploration Well
Early Data Gathering at the 197-1 Exploration Well Log •Basic wireline logs were run from surface to TD •Advanced logs were successfully obtained (eg CMR, Shear sonic, UBI) to obtain geomechanical models and good reservoir properties from basic logs Core •Porosity & permeability has been completed.
Slide 73: 2013 Strategy
Y Te ALVOPETRO 2013 Strategy
Slide 74: Apply Developed Basin Technology: Seismic Processing is Critical-Bom Lugar Example
Apply Developed Basin Technology: Seismic Processing is Critical-Bom Lugar Example BL-001 ~300 MB EUR BL-001 NE SW ~300 MB EUR NE SW Pojuca Marfim Producing Zone Pre-Rift Processed Version from BDEP Reprocessed 3D Facenda Onca 3D shot in 1993, sparse grid (~500m), 30 fold, pattern holes (3x500g) Alv
Slide 75: 2013 Three Play Strategy
2013 Three Play Strategy Large potential Unconventional Gomo play • Alvopetro strategy to quickly prove viability <$40mm expenditure Mature-Marginal field development • Lower risk, quicker reserve & cash flow • Define size of each opportunity & move forward Conventional Exploration • Tucano Block 17
Slide 76: 2014: Moving Forward On All Three Plays
2014: Moving Forward On All Three Plays Large potential Unconventional Gomo play • Affirmation of resource concept in 197(1) well • First test 197(1) flowed hydrocarbons with no water Mature-Marginal field development • Significant number of opportunities at Bom Lugar • 3 well locations submitted fo
Slide 77: Three Play Strategy
Three Play Strategy 1. Resource Play 2. Conventional Plays 3. Field Development
Slide 78: 197(1) Well: Affirmation of Resource Play Concept
197(1) Well: Affirmation of Resource Play Concept ALV-197-1 has no structural closure 3D Survey Rio 1ALV 197 1BA Fundo Pojuca Mud Diapir Marfim Maracangalha Top Candeias Pre-Rift Top Candeias Time Structure Map 25ms C.I. 78
Slide 79: 197(1) Ongoing Well Testing Program
197(1) Ongoing Well Testing Program 43 m aggregate Net Pay >8% Porosity Test 3 • Tight Sand Play • 20 m >8% porosity • analogous to the Bom Lugar 1-BL-1 producing zone Test 2 • Siltstone Play • Dominantly <8% porosity • 19 m >6% porosity • Strategic test to establish the ~300m viability of an extens
Slide 80: ALV-197-1 Well - Conventional Tight Sand Zone (Test 3)
ALV-197-1 Well - Conventional Tight Sand Zone (Test 3) Potential with Follow Up Development Locations Bom Lugar-1 Well: Rate vs. Cumulative Production 1,000 Thick sand (2,618 mKB) IP Rate: 534 bopd Well re-activation in the 197(1) well has barrels of oil per day 100 similar or better log character t
Slide 81: 183(1) Well (currently drilling) Comparison to 197(1) Well
183(1) Well (currently drilling) Comparison to 197(1) Well Overview • 183(1) well is a twin to the RF0006 well. • RF0006 : – 37 m Net Pay >8%. – Comparable to 197-1 well. – Much thicker concentration of clean sand allowing for upside on recovery Gross from the lower porosity 209 m • 197(1) well – 43
Slide 82: Well to Seismic Correlation: 197(1) to 183(1) Comparison
Well to Seismic Correlation: 197(1) to 183(1) Comparison South North Flattened on top Candeias Sequence boundary Sequence boundary Gross 209 m Untested Shale character Geobody? Test Zone Sand/geobody continuity and sequences can be mapped on seismic Well to well correlation would be difficult withou
Slide 83: Mapped Geobody With Internal Strong Amplitude Reflections
Mapped Geobody With Internal Strong Amplitude Reflections S N • Top and base picked on internal character similarities. • Testing at 197(1) Test 1 Flattened on top Candeias Sequence boundary • Single well penetration • Large potential Sequence boundary Testing Gas Untested Shale character Geobody? ?
Slide 84: East-West View of Geobody
East-West View of Geobody • Only well tie is the 197-1 lower section: do not believe RF6 tested it • ~300 m thick interbedded sand and shale/silt sequence at ALV- 197-1 well • ~500 m thick sequence in Block 183 Sequence boundary Sequence boundary Sequence boundary Sequence boundary Shale character 8
Slide 85: Block 197 Well Offset & Potential
Block 197 Well Offset & Potential • Top eroded off a “mini-basin” • ALV will drill an offset to RIP-1 which has substantial net pay indicated • Well defined development locations Candeias Pre-Rift 85
Slide 86: 3 Wells Show High Sand Content in Sequence From Riacho Sao Pedro Pool Through RIP 1
3 Wells Show High Sand Content in Sequence From Riacho Sao Pedro Pool Through RIP 1 Sequence Characteristics: • High Net: Gross clean sand & silt content • Oil saturated porosity calculated from logs • RSP1 well has no GR, only SP log • Initial target is an No GR offset to RIP1 SP used 86
Slide 87: Block 169; Fourth Identified Significant Log Calculated Pay Offset Opportunity
Block 169; Fourth Identified Significant Log Calculated Pay Offset Opportunity Offset well 3MGP-19 (off the block) also has thick, hydrocarbon saturated sand Seismic mapping shows 3MPG-19 potential can be mapped onto block 169 87
Slide 88: Seismic Geo-body Approach For Unconventional Resource In Place Estimates
Seismic Geo-body Approach For Unconventional Resource In Place Estimates • Will use the seismic regional mapping technique outline in previous slides to estimate rock volume to calculate potential OOIP & OGIP. • Risks of Source, Generation and Migration, Traps, Seals, and Preservation deemed low as
Slide 89: Three Play Strategy
Three Play Strategy 1. Resource Play 2. Conventional Plays 3. Field Development
Slide 90: Conventional Program
Conventional Program • >8 prospects identified • 2 await rig • 4 drill-ready • Focussed on developing a program to ensure success – Two main independent play types: • 3 and 4-way structural closures and • shale diapir seal • Blocks 131, 132, 144 are yet to be mapped! 90
Slide 91: ALV-197-2 Conventional Prospect (Next Well)
ALV-197-2 Conventional Prospect (Next Well) Gas/water Offset well contact • ALV-197-2 will be drilled directionally to 1217m intersect the Caruacu Fm Caruacu in the structurally highest elevation on block 197 Offset well • 400m from the IMET3 well 1388m Caruacu time structure 10 ms Contour Interval
Slide 92: ALV-182-2 Conventional Prerift Target (3rd Well)
ALV-182-2 Conventional Prerift Target (3rd Well) Dip line through structural culmination at BH target • ALV-182-2 will be drilled directionally to intersect the Pre-rift in a small 4-way structural closure: • Shallow commitment well targeting a proven zone • TD 2050m in the Sergi Fm Pre-rift Remanso
Slide 93: 107-1 Location Caruacu Conventional Prospect
107-1 Location Caruacu Conventional Prospect BL-1 360 Acres • 4-way closure • Caruacu Fm target is equivalent to BL-1 production • Commitment well for Block 107 • Adjacent to Bom Lugar infrastructure ALV-107-1 93
Slide 94: ALV-107-2 Location Marfim Conventional Prospect with Pre-rift Strat Test
ALV-107-2 Location Marfim Conventional Prospect with Pre-rift Strat Test Marfim Fm has reservoir potential for 15 - 25 m of 10 – 15% porosity sandstone Pojuca Pojuca Marfim Marfim PreRift PreRift ALV-107-2 94
Slide 95: Line through ALV-157-1 Prospect.
Line through ALV-157-1 Prospect. Shallow Conventional Prospect, Also test Gomo Potential with 3100m TD SW NE • 2 offset gas wells tested gas at ~1400 m • Indicates diapir is an DT DT effective seal Pojuca 1300m 1LV/7LV ZOI 3100m Gomo Test 1VQ ALV-157-1 Gas 95
Slide 96: Analog Pools Riacho Sao Pedro and Jacuipe
Analog Pools Riacho Sao Pedro and Jacuipe NW Illustrates effective diapir trap mechanism Shale Diapir 210 211 96
Slide 97: ALV-170-1 Conventional Prospect, Updip of Oil Show
ALV-170-1 Conventional Prospect, Updip of Oil Show Miranga Pool VP-1 Gas Production Shale diapir @ 650 m MD Downdip Test Test TFR 01 1470- 72.5 m Recovered 7.9 bbl (1.26 m3) OCM Estimated 39.6 bbl/d Location Oil shows Prospect target with stacked reservoir potential updip of an oil show in VP-1 well
Slide 98: Conventional Prospects in 255 & 256
Conventional Prospects in 255 & 256 • Gas show in down dip well on block 256 • Diapir (seal) identified on the west side • Separate 3 way closure against a fault on Block 256 and 255 m On trend to Top Candeias Time Structure significant number of discoveries along a major fault Wells 98
Slide 99: Conventional Exploration-Tucano Block (46,505 Acres)
Conventional Exploration-Tucano Block (46,505 Acres) Pre-Rift Time structure Facenda Matinha 20 ms C.I. Petrobras Oil/Gas pool Irai • Shallow leads <500-1000m Pre-Rift Petrobras Gas pool Conceicao • Possible diapir identified on the Petrobras Oil/Gas pool east side of the block would provide a good
Slide 100: Conventional Program: Since 2013
Conventional Program: Since 2013 • >8 prospects identified • 2 await rig • 4 drill-ready • Focussed on developing a program to ensure success – Two main independent play types: • 3 and 4-way structural closures and • shale diapir seal • Blocks 131, 132, 144 are yet to be mapped! 100
Slide 101: Three Play Strategy
Three Play Strategy 1. Resource Play 2. Conventional Plays 3. Field Development (Bom Lugar)
Slide 102: Marginal Field-Bom Lugar: 3 Initial Offset Locations
Marginal Field-Bom Lugar: 3 Initial Offset Locations With success Offset to RQ-1 consider HZ Offset to BL-1 wells Offset to BL-4 Follow-up locations for all RQ-1 RQ-1 well 35 m porous sand ~14 m good oil pay 107 Target 20 m updip Sw=20% First-phase development locations Transition Zone 102
Slide 103: Financial
ALVOPETRO Financial
Slide 104: Fiscal Regime
Fiscal Regime • Royalties – Payable on monthly production and computed based on the Operating Netback Q2 2014 Target ANP reference price Brent $109.74 $104.50 – Basic government royalty = 10% on concession contracts and 5% on Discount* (5.83) (7.23) mature fields Sales price 103.91 97.27 – Landowner
Slide 105: Financial Resources and Forecast
Financial Resources and Forecast Expected Financial Resources – December 31, 2014 $40 million 2014 capital plan, 2014 including up to: Opening cash - January 1st 100,268 Capital expenditures (40,000) • 2 vertical Gomo wells (197(1) and 183(1)) G&A expenditures (5,700) Realized foreign exchange loss
Slide 106: Alvopetro - Corporate Summary Information
Alvopetro - Corporate Summary Information Shares outstanding: 85.2 million Stock options outstanding: 3.067 mil August 2014 production: 31 bopd (1 well at Bom Lugar) Market cap: $81 million Cash & restricted cash - June 30: $81.7 million 2013 Reserves: bbls NPVAT(10) 1P 45,515 $ 1,310,980 2P 758,969
Slide 107: Planning for Success
Planning for Success
Slide 108: Strengths
Strengths • Team – developed basin + local team • Capitalization • Focused yet extensive land base, multiple plays • Reprocessed seismic (better pair of glasses) • Positive 5-year local operating track record – communities and government • Small but established operating team – processes established
Slide 109: Goals
Goals Maximize Share Price 1) Find hydrocarbons 2) Be the lowest cost operator 109
Slide 110: Find Hydrocarbons
Find Hydrocarbons • Be cash flow positive ASAP • Quickly and efficiently prove the viability of the Gomo play for less than $40 million • Exploit mature fields • Proactively pursue conventional exploration potential 110
Slide 111: Be the Lowest Cost Operator
Be the Lowest Cost Operator • Long-term planning with continuous operations • Be best in class at managing the regulatory process • Optimize drilling fluids and solids control • Internal design • Innovate – don’t accept standard practice • Real time continuous improvement • Purchasing, contracting &
Slide 112: APPENDICES
Pa ALVOPETRO APPENDICES
Slide 113: Exploration Block Land Summary
Exploration Block Land Summary Gross Current Block Acres Exploration Term Phase Phase Expiry Phase Commitments Exploration Blocks 131 5,016 3 years + 2 years 2 18-Oct-14 (Note 1) 1 exploration well 132 6,301 3 years + 2 years 2 18-Oct-14 (Note 1) 1 exploration well 144 4,843 3 years + 2 years 2 18-O
Slide 114: Alvopetro Team
Alvopetro Team COREY C. RUTTAN - PRESIDENT AND CHIEF EXECUTIVE OFFICER AND DIRECTOR • President and Chief Executive Officer of Petrominerales Ltd. May 2010, previously VP Finance and CFO (since 2006) • Former SVP and CFO of Petrobank Energy and Resources Ltd. and Executive Vice President and CFO of
Slide 115: Alvopetro Team
Alvopetro Team CARLOS EDUARDO ARANTES FREITAS - BRASIL COUNTRY MANAGER • Joined Alvopetro in 2008, prior thereto, responsible for investments of over US$150 million dollars in E & P activities on behalf of various companies • Since September 2011, Vice-President and Director of the Brasilian Associa
Slide 116: Alvopetro Team
Alvopetro Team SARAH FALCONER- ADMINISTRATIVE ASSISTANT • Joined Petrominerales March 2012 as Administrative Assistant to the VP of Exploration • Previous to Petrominerales; worked, volunteered and traveled extensively through out South America for 1 year • Fluent in French, Spanish and conversation
Slide 117: Alvopetro Team
Alvopetro Team MARIANO NUNES- PRODUCTION AND OPERATIONS • 2006 – Current: Production and Completions Engineer - Alvopetro SA • 2005 – 2006: Mechanical Engineer - ACINOR Inspections and Technical Serciços LTDA. • 2004 - 2005 Analyst - Industries Ltd., Ford Northeast Industrial Camaçari – BA • 2001 -
Slide 118: Alvopetro Team – Org Chart
Alvopetro Team – Org Chart 118
Slide 119: Calgary, Canada: Salvador, Brazil: Belo Horizonte, Brazil:
Calgary, Canada: Alvopetro Energy Ltd. Suite 1175, 332 6th Ave. SW Calgary, Alberta, Canada T2P 0B2 Tel: (587) 794-4224 Email: info@alvopetro.com Salvador, Brazil: Alvopetro S/A Extração de Petróleo e Gás Natural Rua Ewerton Visco, 290, Boulevard Side Empresarial, Sala 2004, Caminho das Árvores, Sal