Alvopetro Energy Ltd.

Howard, our Chief Financial Officer.

Hi, everyone. Thanks for joining us this morning. Just a couple of administrative points before we begin. We will be recording today's webcast and there will be a replay on our website later on this afternoon. In addition, just a reminder that everyone is placed in listen-only mode for the duration of the presentation. We will have a Q&A session at the end, and you can log any questions that you have through the Q&A button on Zoom. If you've dialed in by phone, you can send your questions to socialmedia at elbowpetro.com. And we will get to all of those questions at the end of the presentation. Lastly, just a reminder that we do go through some non-GAAP measures throughout the presentation, and we do make some forward-looking statements. So please read through our cautionary statements and other advisories that are included on the presentation that's on our website.

Great. Thank you, Alison. So just to start again with our average daily production, I think we presented this quite a few times. A reminder, we came on production in July of 2020. We've added this black dash line to this slide for this purpose, just to show you the firm volumes that we had committed with Bahia Gas. So you can see when we first came on production, we were almost exactly equal to that amount and that was equal to our share of the cabaret unit production plateau at the time. That production plateau increased and we also were able to increase our production from the unit. well above those pre-commercialization expectations and Bahia Gas was able to sell all that gas on a flexible basis under our contract. Starting in the second quarter of 2023, our partners started nominating for more gas and we've been back bouncing around closer to that Bahia Gas firm level since then. Our production, we had previously announced this, was It had increased quite a bit in the fourth quarter and then decreased back down in the first quarter of 2024. And we did, with yesterday's announcement, announce April production of 1,808 barrels of oil equivalent per day. So that was up about 6% from our Q1 average. The other thing that has happened, there's been I think about four months through this period of time where we have had Bahia Gas limiting our production because of some demand disruptions and you can see that reflected in a couple of cases where we're just slightly below the Bahia Gas firm levels. just talk about a couple of things. Our strategy here is to add more 100% working interest production to our portfolio so that no matter what's happening with production from the unit, we can be up closer to our 3000 barrel of oil equivalent per day goal. The other thing that's happened, and I'll talk about it, is we just finished our first redetermination of the unit. So once that becomes effective, our share of unit production of the plateau goes up to about 2300 barrels of oil equivalent per day. So with that redetermination result and with an expanding production base from our other projects, then that will position as well to also increase the firm volumes under our contract so we can increase this black dash line up and increase the guaranteed minimum amount of our cash flow levels. So just a little bit on the cabaret unit redetermination process. Our unit operating agreement did contain their somewhat typical redetermination provisions, which can happen from time to time. The first of these was completed in April of this year, and the result is that our working interest in the unit increases to 56.2% from 49.1%. sorry, there's a typo there, increases from 49.1. And What that does is, as I mentioned on the previous slide, it increases our production entitlement from the unit to almost 14 million cubic feet a day. We did have GLJ prepare pro forma reserves, reflecting the redetermined working interest as though it had happened when we completed our reserves at December 31st, 2023. And what that shows is that our 2P volumes increased by 11% up to 9.6 million barrels of oil equivalent, and our 2P NPVs go up by a similar amount, 11% up to $342 million. Our unit operating agreement does stipulate that expert decisions are to be binding and that the redetermination is to be effective on June 1st and it does provide the right for Alvopetro to operate as a result of that decision. We have noted in our previous disclosures that our partner is disputing this result and because of that Alvopetro moved to file an emergency arbitration injunction process to seek to make the decision effective as prescribed in our unit agreements. I think regardless of that decision in the emergency procedure, it is likely that the dispute will ultimately be heard by a full arbitration panel or tribunal, but our attempt with this emergency process is to make it effective in the interim period here. Just talk about our gas sales agreement with Bahia Gas. Just to recap, our gas sales agreement gets reset semi-annually on February 1st and August 1st of each year. It's based on three different international benchmark prices, which are the grey dashed lines that you see here. So this lower one is U.S. Henry Hub prices. This upper one is UK and BP prices. And then this dash line that you see through here is Brent oil equivalent prices. So left of this vertical red dash line is all the historical prices. And then in the future, this is the forward strip pricing as of May 6 that you see here. The black line is the output of the formula within our contract. We also have a floor and a ceiling in red and green respectively. Both those do escalate based on U.S. inflation. And you can see we're pretty close to the ceiling based on these forecast prices. It drops just slightly below it on the reset on February of 2025 based on these prices. And the black dash line that you can just barely see here is the is the price that was used in our reserve report so we're almost exactly still still at that price expectation.