Corporate Presentation May 2018
Cautionary Statements Forward Looking Statements. Statements in this presentation may contain forward looking statements including management s assessment of future plans, operations, expectations of future production and capital expenditures. Information concerning resources is deemed to be forward looking statements as such estimates involve the implied assessment that the resources described can be economically produced. These statements are based on current expectations that involve numerous risks and uncertainties, which may cause actual results to differ from those anticipated. These risks include, but are not limited to: the risks inherent in the oil and gas industry, operational risks relating to exploration, development and production; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve and resource estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks; and fluctuation in foreign currency exchange rates and commodity price fluctuation. As a consequence, actual results may differ materially from those anticipated in the forward looking statements. Undiscovered Petroleum Initially In Place ( UPIIP ), equivalent to undiscovered resources, are those quantities of petroleum that are estimated, on a given date, to be contained in accumulations yet to be discovered. The recoverable portion of UPIIP is referred to as prospective resources, the remainder as unrecoverable. Undiscovered resources carry discovery risk. There is no certainty that any portion of these resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources. Discovered Petroleum Initially In Place ( DPIIP ), equivalent to discovered resources, is that quantity of oil that is estimated, as of a given date, to be contained in known accumulations prior to production. The recoverable portion of DPIIP includes production, reserves, and contingent resources; the remainder is unrecoverable. There is no certainty that it will be commercially viable to produce any portion of the resources. Total Petroleum Initially In Place ("TPIIP ) is that quantity of petroleum that is estimated to exist originally in naturally occurring accumulations. It includes that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations, prior to production, plus those estimated quantities in accumulations yet to be discovered. There is no certainty that undiscovered resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources. Test results. There is no representation by Alvopetro that the data relating to any well test results contained in this presentation is necessarily indicative of long term performance or ultimate recovery. The reader is cautioned not to unduly rely on such data as such data may not be indicative of future performance of the well or of expected production or operational results for Alvopetro in the future. Non GAAP Measures. This presentation contains financial terms that are not considered measures under International Financial Reporting Standards ( IFRS ), such as funds flow from operations, funds flow per share, operating netback and working capital. These measures are commonly utilized in the oil and gas industry and are considered informative for management and shareholders. We evaluate our performance based on funds flow from operations. Funds flow from operations is a non IFRS term that represents cash generated from operating activities before changes in non cash working capital. Management considers funds flow from operations and funds flow per share important as they help evaluate performance and demonstrate the Alvopetro s ability to have or generate sufficient cash to fund future growth opportunities. Working capital surplus includes current assets (including current restricted cash and assets held for sale) less current liabilities (excluding the current portion of decommissioning liabilities) and is used to evaluate the Company's short term financial leverage. Operating netback is determined by dividing oil sales less royalties, transportation and production expenses by sales volume of produced oil. Management considers operating netback important as it is a measure of profitability per barrel sold and reflects the quality of production. Funds flow from operations, funds flow per share, working capital and operating netbacks may not be comparable to those reported by other companies nor should they be viewed as an alternative to measures of financial performance calculated in accordance with IFRS. Net Present Value. The net present value of future net revenue attributable to Alvopetro s reserves and resources is stated without provision for interest costs and general and administrative costs, but after providing for estimated royalties, production costs, development costs, other income, future capital expenditures, and well abandonment costs for only those wells assigned reserves or resources by Sproule or D&M respectively. It should not be assumed that the undiscounted or discounted net present value of future net revenue attributable to the Alvopetro s reserves and resources estimated by Sproule and D&M represent the fair market value of those reserves. Other assumptions and qualifications relating to costs, prices for future production and other matters are summarized herein. The recovery, reserve and resource estimates of the Company's reserves and resources provided herein are estimates only and there is no guarantee that the estimated reserves or resources will be recovered. Actual reserves or resources may be greater than or less than the estimates providedhereinandtheestimatednet present values will change following completion of the unitization process and finalization of a gas sales agreement. 2
Alvopetro s Vision & Strategy Alvopetro Energy Ltd.'s vision is to become a leading independent upstream and midstream operator in Brazil. Our strategy is to unlock the on shore natural gas potential in the state of Bahia in Brazil, building off the development of our Caburé natural gas field and the construction of strategic midstream infrastructure. Upstream/midstream hybrid corporate vehicle to provide sustainable returns to our stakeholders 3
Corporate Overview Common shares (000 s) (1) 85,167 Market cap (Cdn$000 s) (1) 14,478 D&O ownership % (1) 7.56% Cash and financial resources (US$000 s) (2) 8,762 Inventory (US$000 s) (2) 2,907 Debt (US$000 s) (1) Nil Production Q4 17 (bopd) (2) 17 2P Reserves (mbbl) (2) 697 2C Resource (mboe) (3) 5,815 2P+2C (mboe) (2) & (3) 6,512 2P+2C NPV 10%BT (US$000 s) (2) & (3) 102,985 (1) As of May 4, 2018 (2) As of December 31, 2017 (3) As of June 30, 2015 4
The Alvopetro Opportunity Experienced team with a strong track record Highly under explored prospective land base (73,473 acres, 63,460 net acres) and a balanced suite of opportunities Base 1C/2C Net Asset Value of C$1.25 $1.69/share (1) Core Proven Assets: Existing reserves, production + 5% GORR on Blocks 107/108 Caburé gas field D&M best estimate 33 BCF contingent resource (ALV share) Gas sales agreement Feb 2018 US$6.54/mmbtu Strategic natural gas midstream assets Discovered Gomo Resource: 2 well pilot project drilled Defined deep basin natural gas resource over a large mapped area Conventional Exploration: 15 conventional prospects supported by reprocessed seismic (1) Base net asset value includes; financial resources of US$8.8 million as at December 31, 2017, contingent resources of Caburé gas discovery, NPV10 before tax as at June 30, 2015 (to be updated with reserve report/valuation in Q2 2018), of US$61.9 million (1C) to US$91.3 million (2C), 2P reserves on two mature fields of US$11.6 million (NPV10 before tax as at December 31, 2017), and equipment inventory for use on future operations of US$2.9 million as at December 31, 2017. 5
Core Assets Caburé Natural Gas Unit 197 2 198 A1 ANP assessment of OGIP: Imetame 50.9%, 10.8 mmboe (64.7 Bcf) Alvopetro 49.1%, 10.4 mmboe (62.4 Bcf) D&M Recoverable Resource Assessment ALV Share (Oct 2015): 33.5 Bcf (2C), 19.5 Bcf (1C), 46.5 Bcf (3C) Engaged GLJ to complete a reserve evaluation incorporating the Unitization and the Bahiagas Gas Sales Agreement Pojuca Marfim Maracangalha Oeste Maracangalha Leste 6
Caburé Unit Development Plan Early production plateau 150,000 m3/d (5 mmcfpd) through early low pressure production facilities from 2 of 4 existing wells for supply of Imetame Thermal Power Project (allocated against Imetame s share of 2P reserves Imetame to fund 100% of drilling of Block 212 well in 2018 2019: drill 3 additional development wells, install a high pressure production facility and tie in all wells Alvopetro estimated share of unit capital ~US$7 million to be funded by March 2020 (1) Gross field production plateau of 450,000 m3/d (16 mmcfpd) (1) Payable on the earlier of the date Alvopetro commences production allocations or March 30, 2020, net of equipment inventory contributed to the unit. 7
Gas Sales Agreement Bahiagas Bahiagas to construct a 15 km distribution pipeline and a new Citygate with design capacity of 35 mmcfpd (1.0 million m3/d) Alvopetro constructing 11 km transfer pipeline and gas processing plant (UPGN) Firm sales volume 5.3 mmcfpd (150,000 m3/d), adjustable annually Interruptible sales volume up to 12.4 mmcfpd (350,000 m3/d) Total contracted volume > 19.4 Bcf (0.55 billion m3) Start of supply by 12/31/2019 Price set semi annually based mainly on trailing rolling average basket of benchmark equivalent prices (Brent, US Henry Hub, UK National Balancing Point) Feb 2018 price = US$6.54/mmbtu Floor US$5.00/mmbtu, cap US$8.50/mmbtu, both indexed to US inflation 8
Alvopetro/Bahiagas Price Forecast (1) Based on 03/31/2018, GLJ escalated price forecasts. (2) Floor and caps escalated based on 1.8% US CPI inflation (5 year historical average). 9
Caburé Midstream Project (100% ALV) US$ millions 1 Alvopetro 11 km transfer pipeline $3.5 Alvopetro gas processing facility (UPGN) $0 $10 Total 2018/2019 midstream capital $3.5 $13.5 UPGN/City gate location secured, required engineering and permitting work completed, and environmental permits submitted for approval end of April Only non Petrobras facility capable of processing to ANP sales spec (1) Range of estimates includes contingency and using different contracting strategies for the UPGN; build/own/operate/maintain (leasing) model versus 100% ownership. 10
Caburé Net Operating Income Sensitivity 2020 NOI (MMUSD) Sales Price (USD/MMBTU) Floor Mid Escalated Ceiling Rate (e3m3/d) $ 5.14 $ 6.94 $ 7.84 $ 8.73 221 $ 12.5 $ 17.1 $ 19.3 $ 21.6 261 $ 15.0 $ 20.4 $ 23.1 $ 25.7 300 $ 17.5 $ 23.7 $ 26.8 $ 29.8 ALV share of planned unit production 221,000 m3/d ALV can take uncontracted/unnominated partner gas Current partner contracted demand from the unit = 150,000 m3/d ALV share of unit production including uncontracted partner gas = 300,000 m3/d Incremental potential: Gomo, conventional gas exploration, third party revenues 11
Discovered Gomo Resource 197/183 Geobodies A A Jan2 197-1 183-1 3275m Tested Gas Tested Gas 3550m Tested Gas Tested gas on an unstimulated basis in Sequence 5 in 197 1 (40 mcfpd) and 183 1 (240 mcfpd) wells Defined deep basin natural gas resource over a 5,460 acre mapped area in a non structural setting 12
Conventional Exploration Inventory Highly under explored prospective land base (73,473 acres, 63,460 net acres) 15 conventional exploration prospects identified, all supported by reprocessed seismic Two conventional discoveries Average shallow conventional well cost expected to be $2MM to $3MM Portfolio of conventional prospects in an area of developed oil and gas infrastructure 13
Seismic Processing is Critical - Bid Round 13 Examples Key to success is reprocessing of existing data Seismic reprocessed across majority of Alvopetro s blocks 1,400 km 2 of reprocessed 3D seismic Reprocessed 2D lines show similar improvement All supported by reprocessed seismic Critical to all core focus areas in Alvopetro Significantly derisks 15 conventional prospects Provides better understanding of tight gas resource concept Identifies development drilling potential on our lower risk Bom Lugar field Before Reprocessing After Reprocessing 14
Block 57-A1 Pre-Rift Oil Exploration Prospect Pre Rift Depth Converted Structure 3 way Closure Against Fault P10 P90 P50 1500 metres (ALV 65%) Pre Rift multi zone prospect (AG/Sergi/Boipeba) P90 one fault seal dependency, maximum column height 100m, 491 acres. P50 two faults sealing, maximum column height 170m, 1754 acres. P10 two faults sealing, maximum column height 310m, 4769 acres 15
Block 182(C1) Multi-Zone Natural Gas Prospect NW SE Pitanga 3FBL 0007 BA well projected 9km (closest well to penetrate below Sergi) Sergi Basement Sergi Basement 2900 meters TVD (100% WI) 780 acre pre rift prospect, maximum column height 135m 8.5 km north of ALV UPGN Seal potential is excellent for Sergi juxtaposed against Afligidos and basement. Agua Grande juxtaposed against Boipeba Sands 16
Building a Sustainable Upstream/Midstream Model An upstream/midstream hybrid opportunity Building a sustainable base of distributable cash flow Finalized Unitization and Gas Sales Agreements Strategic infrastructure Provides platform to unlock remaining natural gas potential Gomo 2-well pilot Conventional Exploration Third party processing upside nearby fields 0.3 Tcf of reserves, >20 mmcfpd 17
Financing Alternatives Objective is to maximize returns to existing shareholders with non-dilutionary funding Capital lease for gas processing facility Vendor backed financing for gas processing facility Rights offering: common shares, preferred shares, or subordinated debt Project financing Reserve based loan Strategic partner 18
The Alvopetro Opportunity Brazil investment climate improving Attractive natural gas sales agreement Highly strategic midstream infrastructure Upstream/midstream hybrid Attractive valuation Base Net Asset Value 1C/2C of C$1.25 1.69/share (2) before exploration and Gomo resource potential Small, motivated & experienced team 1) As at December 31, 2017, includes cash and other working capital resources, including current restricted cash and assets held for sale. 2) Base net asset value includes; financial resources of US$8.8 million as at December 31, 2017, contingent resources of Caburé gas discovery, NPV10 before tax as at June 30, 2015, of US$61.9 million (1C) to US$91.3 million (2C), 2P reserves on two mature fields of US$11.6 million (NPV10 before tax as at December 31, 2017), and equipment inventory of $2.9 million for use on future operations as at December 31, 2017. 19
Contact us: Calgary, Canada: Alvopetro Energy Ltd. Suite 1700, 525 8 th Avenue SW Calgary, Alberta, Canada T2P 1G1 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, Salvador-BA CEP 41.820-022 Tel: + 55 (71) 3432-0917 Email: info@alvopetro.com www.alvopetro.com TSX-V: ALV