Corporate Presentation June 2018
Cautionary Statements Forward Looking Statements. This presentation contains forward-looking statements including management s assessment of future plans, operations, expectations of future production and capital expenditures. 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 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. 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, working capital and Earnings Before Interest, Depreciation, and Amortization ( EBIDA ). 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 less current 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. EBIDA is used to measure the Company s operating performance and the cash available for reinvestment and distribution to stakeholders. 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 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 by Sproule or GLJ respectively. It should not be assumed that the undiscounted or discounted net present value of future net revenue attributable to the Alvopetro s reserves estimated by Sproule and GLJ 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 and reserve estimates of the Company's reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual reserves may be greater than or less than the estimates provided herein. 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 infrastructure assets. Upstream/midstream hybrid corporate vehicle to provide sustainable returns to our stakeholders 3
Brazil Opportunity Population 207 million World s 8 th largest economy GDP US$15,500 per capita World s 10 th oil producer, #1 in Latam Production 2.5 million bopd & 3.8 bcfpd Proven reserves 12.8 billion bbls & 13 TCF Policy reforms to increase direct foreign investment Labour reform Relaxed local content requirements Repetro importation regime extended Gas to grow initiatives Petrobras divestitures Recurring bid rounds with lower financial guarantees Reducing royalties Initiatives to encourage reserve based lending Attractive fiscal regime: international commodity pricing, 11% royalties & 15% income tax on eligible projects Resources: http://www.anp.gov.br/images/palestras/anp_britcham_23_05_2018.pdf http://www.anp.gov.br/images/palestras/state_art_pre-salt_brazil_aapg_2018.pdf http://www.anp.gov.br/images/palestras/ppt_anp_decio_oddone_brazilian_o&g_market_revival_02_05_2018.pdf 4
Corporate Overview Common shares (000 s) (1) 85,167 Market cap (Cdn000 s) (1) $25,550 Insider ownership % (1) 7.56% Cash and financial resources (US000 s) (2) $6,628 Inventory (US000 s) (2) $2,793 Debt (US000 s) (1) Nil Production Q1 2018 (bopd) (2) 21 2P Reserves (mboe) (3) 6,443 2P NPV 10%BT (US000 s) (3) $135,617 (1) As of June 6, 2018 (2) As of March 31, 2018 (3) Oil assets evaluated by Sproule effective 12/31/17, natural gas evaluated by GLJ effective 5/31/2018 5
Reserves MBOE Company Interest NPV10% - Before Tax (US millions) 1P 2P 3P 1P 2P 3P Oil fields 1-697 869 - $11.6 $15.8 Caburé 2 3,227 4,614 6,198 $73.2 $108.2 $142.3 Gomo 3 349 1,132 2,467 $1.1 $15.8 $37.9 1 Sproule effective 12/31/17 2 GLJ effective 5/31/18 3 GLJ effective 5/31/18, assigned reserves to drainage areas around 183-1 & 197-1 wells Total 3,576 6,443 9,534 $74.4 $135.6 $196.0 1 Sproule effective 12/31/17 2 GLJ effective 5/31/18 3 GLJ effective 5/31/18, assigned reserves to drainage areas around 183-1 & 197-1 wells 6
The Alvopetro Opportunity Experienced team with a strong track record Under-explored highly prospective land base (73,473 acres, 63,460 net acres) and a balanced suite of opportunities 2P reserves 6.4 mmboe (38.7 Bcfe) Base 2P Net Asset Value of C$2.20/share (1) Core Natural Gas Development: Caburé gas field precedent setting natural gas development 28 Bcfe of 2P reserves (ALV share) Gas sales agreement Feb 2018 US$6.54/mmbtu Strategic natural gas midstream assets Evolving Gomo Natural Gas Project: 2 existing wells assigned 7 BCF of 2P reserves Defined broader deep basin natural gas resource covering multiple Alvopetro blocks Significant additional development potential Conventional Exploration Upside: 15 conventional prospects supported by reprocessed seismic (1) Base net asset value includes; 2P NPV10 before tax of US$135.6 million, financial resources of US$6.6 million as at March 31, 2018, and equipment inventory for use on future operations of US$2.8 million as at March 31, 2018. 7
Caburé Natural Gas Project Upstream + Midstream Upstream - joint development of a conventional natural gas discovery (ALV 49.1%) Unitized development area (light blue ) 4 existing wells 3-4 additional wells and surface facilities to be completed by end of 2019 Midstream - 100% Alvopetro Precedent setting Gas Sales Agreement (GSA) with the State distribution company 11-km transfer pipeline from the Unit (dark blue ) ALV Gas Plant (UPGN) Only non-petrobras facility in state of Bahia capable of delivering ANP sales spec natural gas Strong asset values and cash flows Highly strategic legacy asset with excellent growth potential Platform to unlock Basin-wide natural gas potential 8
Core Assets Caburé Natural Gas Unit (ALV 49.1%) 4 Existing Wells IME-10 IME-3 ALV-197(2) ALV-198(A1) ALV share of 2P reserves 27.7 Bcfe (4.6 mmboe) ALV NPV10BT US$108.2 million Pojuca Marfim Maracangalha Leste Maracangalha Oeste 9
Caburé Unit Development Plan Early production plateau up to 5.3 mmcf/d (150 e3m3/d) from 2 of 4 existing wells through low pressure production facilities to initially supply partner s Thermal Power Project when dispatched (allocated against partner s share of 2P reserves) Partner 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 2018/2019 unit capital, ~US$7 million, to be funded by March 2020 (1) Alvopetro production to commence at end of 2019 Gross field production plateau of 15.9 mmcf/d (450 e3m3/d) (1) Payable on the earlier of the date Alvopetro commences production allocations or March 30, 2020, net of equipment inventory contributed to the unit. (2) Development plan is subject to ANP approval. 10
Midstream Infrastructure (100% ALV) US$ millions Alvopetro 11-km transfer pipeline $3.5 Alvopetro gas processing facility (UPGN) $0 - $10 1 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. (2) Subject to regulatory approvals 11
Gas Sales Agreement - Bahiagas Bahiagas to construct a 15-km distribution pipeline and a new Citygate with design capacity of 35 mmcf/d (1,000 e3m3/d) Alvopetro constructing 11-km transfer pipeline and gas processing plant (UPGN) Firm sales volume 5.3 mmcf/d (150 m3/d), adjustable annually Interruptible sales volume up to 12.4 mmcf/d (350 e3m3/d) Total contracted volume > 19.4 Bcf (550 e6m3) Start of supply by 12/31/2019 Price reset semi-annually based on rolling average basket of trailing 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 12
Alvopetro/Bahiagas Price Forecast (1) Based on 03/31/2018, GLJ escalated price forecasts. (2) Floor and caps escalated based on 2% US CPI inflation (5-year historical average). 13
Gomo Deep Basin Natural Gas Project A A Jan2 183-1 197-1 Tested Gas Tested Gas 3275m Tested Gas 3550m Long-term production results will define the broader deep basin development opportunity across our acreage Tested natural gas on an unstimulated basis from Sequence 5 in 197-1 and 183-1 wells 183-1 stimulation planned for Q4 2018 8km tie-in 2P reserves 6.8 Bcf assigned to drainage areas around existing 2 wells 5,460 acre geobody 14
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 15
Key to Unlocking New Opportunities Key to success is reprocessing available data 1,400 km 2 of reprocessed 3D seismic Reprocessed 2D lines show similar improvement High quality processing is fundamental to proper seismic interpretation Critical to all core focus areas: Significantly derisks 15 conventional exploration prospects Defines deep basin Gomo potential Identifies development drilling potential on our lower risk Bom Lugar oil field 2001 Brazil Reprocessing ALV 2017 Reprocessing 16
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 17
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 18
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 upside Third party processing upside nearby fields 0.3 Tcf of reserves, >20 mmcf/d 19
Upstream/Midstream Distributable Cash Model Cash flow available for additional upstream investments Significant cash generating capacity just from development of 2P reserves Funds returns to stakeholders (50%) and high impact upstream reinvestment (50%) Does not reflect any incremental upside from additional upstream investments 20
Milestones Caburé unitization completed April 20, 2018 ALV gas plant and pipeline construction permits filed April 30, 2018 Bahiagas gas sales agreement signed May 7, 2018 Independent reserve evaluation completed June 6, 2018 Project financing Q3 2018 Award gas plant and pipeline tenders Q3 2018 License to construct Q4 2018 Stimulate 183(1) Gomo natural gas well Q4 2018/Q1 2019 Gas plant and pipeline construction 2019 First ALV gas sales End 2019 21
M US$ M US$ M US$ Operational Performance - Continuous Improvement In-house functionality Hands-on approach Reduced drilling costs per meter 61% Optimized drilling location civil construction costs Well testing costs reduced by 77% Demonstrated we can receive drilling permits in less than 180 days 3 2 1 0 500 400 300 200 100 0 Drilling Costs (Per Meter) 197-1 183-1 197-2 182-2 170-B1 256-A1 198-A1 177-A1 Drilling Location Costs 197-1 183-1 197-2 182-2 170-B1 256-A1 198-A1 177-A1 1500 Testing Costs (Per Zone) 1000 500 0 197-1 197-2 182-1 198-A1 183-1
The Alvopetro Opportunity Precedent setting natural gas sales agreement Highly strategic natural gas infrastructure assets Upstream/midstream hybrid model Basin-wide growth potential Attractive valuation Base 2P Net Asset Value of C$2.20/share (1) Brazil investment climate improving Motivated & experienced team (1) Base net asset value includes; 2P NPV10 before tax od US$135.6 million, financial resources of US$6.6 million as at March 31, 2018, and equipment inventory for use on future operations of US$2.8 million as at March 31, 2018. 23
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