Alvopetro Energy Ltd. (ALV:TSX.V; ALVOF:OTCQX) announced in a news release an amendment to its natural gas sales agreement with Bahiagás, the distributor for the state of Bahia.
"It allows us to secure early revenues, double our firm deliveries following full start-up, while having the security of a price floor embedded within our gas sales contract," Alvopetro President and CEO Corey Ruttan said in the release. "Relative to our peers, we are very well positioned."
According to the amended agreement, Alvopetro will sell natural gas produced from its Caburé field in Brazil to Bahiagás. Alvopetro will start accepting prepayment for natural gas as of May 1, 2020, at a rate of 120,000 cubic meters per day and take 15% off the current contractual price for any prepaid natural gas between May and June 2020. The company expects to generate about $1.1 million in total prepaid revenue during those two months. Alvopetro stated it will pay back the prepayments "through a portion of natural gas deliveries during the second half of 2020."
Bahiagás will double contracted deliveries to 300,000 cubic meters per day, or 10.6 million cubic feet per day, and reduce any potential supply failure penalties through year-end 2020. At this rate and assuming an estimated floor price from August through December 2020 of US$5.21 per million BTU, Alvopetro expects to generate $11.3 million, which, taking into account recent cost efficiencies, should result in an EBITDA of about $7.5 million in H2/20, the company stated.
Alvopetro also summarized in the news release its Q1/20 financial and operational results. The company reported a net loss of $2.4 million for the quarter. Capex for completion of its Caburé midstream development came to $1 million and other expenditures amounted to $0.6 million.
Q1/20 sales volumes averaged 11 barrels per day (11 bbl/d), which consisted of 5 bbl/d of natural gas liquids from the Caburé unit and 6 bbl/d of oil from the Mãe-da-lua field.
During the quarter, Alvopetro realized an operating netback of $8.87 per barrel because most of its sales occurred in January when Brent prices were higher.
During Q1/20, the company stated it drew $8 million on its credit facility, which increased the outstanding balance to $13.1 million. At quarter's end, Alvopetro had $6.2 million in cash and cash equivalents and $0.3 million in working capital.
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