Alvopetro Energy Ltd.

there will be a replay available on our website later on today. All attendees have been placed in listen-in only mode for the duration of the webcast, but we will be hosting a Q&A session at the end of the presentation. And if you have any questions, you can use the Zoom Q&A button to submit those. Alternatively, if you're listening in on your phone, you can send any questions to socialmedia at elvopetro.com. And then lastly, just a reminder, we do go through various non-GAAP measures and we make forward-looking statements and go through some other reserve metrics. And we aren't going to go through all of that in detail, but we do encourage you to read the cautionary statements and other disclosures that are at the end of our presentation posted on our website, or all the calculations are in more detail in our MD&E, which we just released yesterday.

Thank you, Alison. So to start off, this chart obviously shows our production since we started natural gas sales from our Cabaret project in July of 2020. Reminder, our pre-commercialization guidance was equal to our firm sales to Bahia Gas at the time, which was also equal to the unit productive capacity multiplied by our working interest at the time. which was about 1800 barrels of oil equivalent per day, which was pretty consistent with the second half of 2020 production. And then you can see we went through a period of time where we significantly exceeded that guidance as we were selling flexible and interruptible gas to Bahia Gas. We also expanded our gas plant in the third quarter of 2022. And then, as you recall, probably in 2024 in particular, we were impacted by the fact that Bahia Gas had committed to too much firm capacity relative to their demand, and they did have some demand disruptions. James Forrest, Norcal PTACC, he I guess did have the opportunity to adjust for all that, at the end of 2024 and entering 2025 so they've reduced their overall firm commitments. James Forrest, Norcal PTACC, And at the same time elbow petro this firm supply actually increased by 33% or a much bigger portion of the gas market share now. The results have been a pretty good start to 2025. You can see our January and February production has averaged 2,375 barrels of oil equivalent per day, which was up 37% from the Q4 production that we just announced and the results that we announced yesterday. And then just to speak to our strategy as we move through 2025, Again, we're looking to add more 100% working interest production to the mix, build our production capacity further, and be in a position that we can commit to even higher levels of firm next year and hopefully sell that gas through the rest of this year also on a flexible basis, given how Bahia Gas has readjusted their supply mix.

Okay, so just going into some detail on our results that were just released yesterday. The first thing here is the operating net back, which is those green bars that you see on the chart. This is one of those non-GAAP measures I referred to earlier. Operating net back is essentially our net operating income expressed on a per unit basis. We express it in barrels of oil equivalent or BOE. A reminder, it's computed at our realized sales price, which is at the top of the chart. We deduct off royalties in orange, production expenses in gray, and then the green bars again are our operating net back. So in Q4 on the realized sales price, we did see a reduction of about 4% compared to Q3. Our natural gas sales price was $10.51 per MCF. That was also down about 4% from last quarter. Our contracted price was essentially equivalent to Q3. in local currency, but with the devaluation of the Brazilian hay relative to the U.S. dollar, when we expressed that for reporting purposes in U.S. dollar equivalent, there was a slight decrease there. Royalties, that's the orange bar, $2.15 per BOE in a quarter. That's an effective royalty rate of 3.4%, which is relatively consistent with past quarters. A reminder, our natural gas royalties are based on a reference price, which is more based on a value of raw unprocessed gas, so closer to Henry Hubbs. So relative to our gas price, it results in a lower effective royalty rate. On the production expenses, on a dollar basis, production expenses went up only about $19,000 in the quarter compared to last quarter, but we did have that 17% reduction in volume. So on a per VOE basis, we saw an increase. Overall operating net back of $55.09 down $4.10 from last quarter. But again, if you compare that to the realized sales price, it's still a very high operating net back margin at 86%. And we've said this before and we'll say it again, if you compare that to any other company's operating in South America or North America. These are very high net back margins. And with our lower tax rate applicable in Brazil on our project, with our tax incentives, it really allows us to generate significant funds flow from operations at these production levels. So moving on to funds flow, again, that's a non-GAAP measure. closest to cash flow from operating activities, but before changes in working capital. So this chart is just showing the change from Q3 to Q4. So there was a decrease of 2.9 million compared to Q3. The majority of that is that 17% reduction in sales volumes, slightly lower realized price, as I mentioned on the last slide. and then some higher G&A at Q4, just with some final year-end adjustments, and then slightly lower current tax. So funds flow from operations of $7 million in the quarter. Similarly, on net income, we saw a decrease of $4.9 million compared to Q3. Most of that was, or a lot of that was the lower operating net back with those lower sales volumes and lower realized prices, the GNA that we just talked about. And then the one big swing there is foreign exchange. So we had a foreign exchange gain of 600,000 in Q3 compared to a loss of 2 million in Q4. So that was a swing of 2.6 million. And just a reminder, that is virtually all related to US dollar denominated balances and foreign exchange losses recognized in our local Brazilian subsidiary on that fluctuation of the local currency relative to US dollars. And while we report in US dollars, we still have to carry through that foreign exchange loss from the subsidiary on the consolidated statements. And then that's just slightly offsetting that is the lower current tax and lower deferred tax. Moving on to the balance sheet, these green bars here are showing our working capital, including all of our cash balances. You know, this is since we came on production. So nice, strong balance sheet. We ended the year with $13.2 million of working capital. And so still very strong working capital balances. And just a reminder, we are debt-free and have been since September of 2022. Thank you.