Mr. Corey Ruttan reports

ALVOPETRO ANNOUNCES YEAR END 2023 FINANCIAL RESULTS, Q1 2024 DIVIDEND OF US$0.09/SHARE AND FILING OF OUR ANNUAL INFORMATION FORM

Alvopetro Energy Ltd. has released its financial results for the year ended Dec. 31, 2023, has declared a quarterly dividend of nine U.S. cents per common share and has filed its annual information form.

All references herein to dollars refer to U.S. dollars, unless otherwise stated, and all tabular amounts are in thousands of U.S. dollars, except as otherwise noted.

Recent updates

On Feb. 26, 2024, the company announced its Dec. 31, 2023, reserves based on the independent reserve assessment and evaluation prepared by GLJ Ltd. dated Feb. 26, 2024, with an effective date of Dec. 31, 2023. Its Dec. 31, 2023, reserves included total proven plus probable reserves of 8.7 million barrels of oil equivalent with a before-tax net present value discounted at 10 per cent of $309.7-million. It also announced the Murucututu resource assessment with a risked best-estimate contingent resource of 5.4 MMboe (before-tax net present value discounted at 10 per cent of $126.1-million) and risked best-estimate prospective resource of 9.6 MMboe (before-tax net present value discounted at 10 per cent of $184.9-million. With respect to the Cabure natural gas field, the reserves assigned in the GLJ reserve and resource report are based on Alvopetro's 49.1-per-cent working interest as of Dec. 31, 2023, in the unitized area, which includes Cabure. As previously announced, the working interest is subject to redeterminations, the first of which is currently under way. Alvopetro and its partner in the unit have engaged an independent expert to decide on the redetermined working interest to each party. The decision of the expert is expected near the end of the first quarter of 2024. The outcome of the expert's decision and the resulting working interest to Alvopetro following the decision are uncertain. The resulting impact on Alvopetro's reserves and future cash flows may be material, and may have a material adverse effect on Alvopetro.

Alvopetro's daily sales volumes averaged 1,592 barrels of oil equivalent per day in January and February, including 9.1 million cubic feet per day of natural gas, natural gas liquids sales from condensate of 75 barrels of oil per day and oil sales of 14 bopd, a decrease of 26 per cent from fourth quarter 2023 sales volumes, due to reductions in demand from Bahiagas. Demand resumed in early March, and natural gas sales have averaged 11.2 MMcfpd to date in March based on field estimates.

Effective Feb. 1, 2024, its natural gas price under its long-term gas sales agreement with Bahiagas was adjusted to 1.94 Brazilian reais per cubic metre. Its realized gas price, net of sales taxes, is approximately $12.36 per thousand cubic feet (based on its average heat content to date and the Jan. 31, 2024, Brazilian-real/U.S.-dollar foreign exchange rate of 4.95). The contracted price is based on the adjusted ceiling price of $10.58 per million British thermal units, which increased 0.5 per cent from the Aug. 1, 2023, price due to the U.S. inflation adjustment for the six-month period. With the appreciation of the Brazilian real relative to the U.S. dollar in the second half of 2023 compared with the first half of 2023, the Brazilian real contracted price decreased from 1.99 Brazilian reais per cubic metre as of Aug. 1, 2023m to 1.94 Brazilian reais per cubic metre as of Feb. 1, 2024. This price is effective for all natural gas sales from Feb. 1 to July 31, 2024.

In 2024, Alvopetro is focused on capital projects aimed at optimizing production rates from its three existing wells on its 100-per-cent-owned-and-operated Murucututu natural field with total forecasted capital expenditures on the field of $4.1-million. It is planning recompletions of both its 183-A3 well and its 183(1) well, targeting both the Caruacu and Gomo formations along with a project on its 197(1) well. At the Cabure unit, Alvopetro and its partner have agreed to a development plan, including drilling and completing five wells in 2024 and 2025. Alvopetro's share of these wells, based on the Dec. 31, 2023, working interest of 49.1 per cent, is estimated at $6.2-million, with $4.4-million forecasted in 2024. In addition, Alvopetro has a facilities upgrade planned at the field for an estimated $3.2-million relating to compression of natural gas to be delivered to Alvopetro's 100-per-cent-owned natural gas processing facility. On its exploration assets, Alvopetro has planned a stimulation of the 183-B1 well on block 183 to improve recovery rates.

Financial and operating highlights -- fourth quarter of 2023:

• Its daily sales averaged 2,143 barrels of oil equivalent per day during the quarter, an increase of 26 per cent from third quarter 2023, which had been impacted by lower demand from Bahiagas, and a decrease of 21 per cent from Q4 2022, due to reduced natural gas availability from the Cabure natural gas field following increased nominations from its partner on the field.
• Its average realized natural gas price increased to $12.85 per thousand cubic feet, a 15-per-cent increase from Q4 2022, with the 3-per-cent increase in its contracted Brazilian-real-denominated natural gas price, enhanced sales tax credits available in 2023 and a 6-per-cent appreciation in the average Brazilian real to U.S. dollar in Q4 2023 compared with Q4 2022. With the higher natural gas price, its overall realized price per boe was $77.60 (14-per-cent increase from Q4 2022).
• Its natural gas, condensate and oil revenue was $15.3-million in Q4 2023, a decrease of $1.8-million (10-per-cent decrease) compared with Q4 2022 and an increase of $3.0-million (24-per-cent increase) compared with Q3 2023.
• Its operating netback in the quarter was $69.69 per boe (increase of $9.61 per boe from Q4 2022) with higher realized sales prices and lower royalties, partially offset by the impact of fixed operating costs with lower sales volumes.
• It generated funds flows from operations of $12.4-million (33 cents per basic and per diluted share), a decrease of $800,000 compared with Q4 2022 and an increase of $2.8-million compared with Q3 2023.
• It reported net income of $700,000 in Q4 2023, a decrease of $4.5-million, compared with Q4 2022, and a decrease of $5.2-million, compared with Q3 2023. Net income in Q4 2023 included impairment losses of $11.0-million (Q4 2022: $6.3-million).
• Capital expenditures totalled $4.9-million, including drilling and completion costs for the 183-A3 well on its Murucututu natural gas field, completion costs for the BL-06 well on its Bom Lugar field and long-lead purchases for future capital projects.
• Its working capital surplus was $13.1-million as of Dec. 31, 2023, increasing $1.7-million from Sept. 30, 2023, and decreasing $1.6-million from Dec. 31, 2022.

Financial and operating highlights -- year ended Dec. 31, 2023:

• Its annual sales averaged 2,142 boepd (95 per cent natural gas, 5 per cent natural gas liquids from condensate and marginal crude oil production), a decrease of 16 per cent compared with 2022.
• It reported net income of $28.5-million, compared with $31.7-million in 2022 (10-per-cent decrease).
• It generated funds flow from operations of $48.0-million ($1.29 per basic share and $1.27 per diluted share), a decrease of $1.8-million, compared with 2022.
• Capital expenditures totalled $27.4-million in 2023.
• Dividends declared totalled 56 cents per share in 2023 compared with 36 cents per share in 2022 (56-per-cent increase).

The attached table provides a summary of Alvopetro's financial and operating results for the periods noted. The consolidated financial statements with the management's discussion and analysis are available on its website and will be available on the SEDAR+ website.

Quarterly dividend of nine U.S. cents per share

With lower production levels forecast in the first quarter of 2024 and consistent with its long-standing balanced stakeholder return model, its board of directors determined it was appropriate to reduce the quarterly dividend and declared a quarterly dividend of nine U.S. cents per common share, payable in cash on April 15, 2024, to shareholders of record at the close of business on March 28, 2024. This dividend is designated as an eligible dividend for Canadian income tax purposes.

Dividend payments to non-residents of Canada will be subject to withholding taxes at the Canadian statutory rate of 25 per cent. Shareholders may be entitled to a reduced withholding tax rate under a tax treaty between their country of residence and Canada. For further information, see Alvopetro's website.

Annual information form

Alvopetro has filed its annual information form with the Canadian securities regulators on SEDAR+. The AIF includes the disclosure and reports relating to oil and gas reserves data and other oil and gas information required pursuant to National Instrument 51-101 of the Canadian Securities Administrators. The AIF may be viewed electronically at SEDAR+ and on its website.

2023 results webcast

Alvopetro will host a live webcast to discuss its 2023 financial results at 8 a.m. Mountain Time on Wednesday, March 20, 2024. Details for joining the event are as follows.

Date:  March 20, 2024

Time:  8 a.m. Mountain Time/10 a.m. Eastern Time

Webinar ID:  839 2074 4797

The webcast will include a question-and-answer period. On-line participants will be able to ask questions through the Zoom portal. Dial-in participants can e-mail questions directly to socialmedia@alvopetro.com.

Corporate presentation

Alvopetro's updated corporate presentation is available on its website.

Alvopetro's vision is to become a leading independent upstream and mid-stream operator in Brazil. Its strategy is to unlock the onshore natural gas potential in the state of Bahia in Brazil, building off the development of its Cabure and Murucututu natural gas fields and its strategic mid-stream infrastructure.

We seek Safe Harbor.