Alvopetro Energy Ltd.

a few administrative points before we start. We are recording today's call and there will be a replay on our website later on this afternoon. In addition, all attendees have been placed in listen-in only mode for the duration of the call. As per usual, we will have a Q&A session at the end of the presentation and you can start logging any questions now using the Q&A button that you should see on your Zoom screen. If you've dialed in by phone, you can send us any questions to socialmedia at elvopetro.com. And lastly, just before we start here, we do make various forward-looking statements and we go through non-GAAP measures throughout the presentation. And so just please review all of the cautionary statements and other disclosures that you can find at the end of our presentation, which is posted on our website and also in our most recent MD&A, which we just released yesterday.

Thank you, Alison. So let's start off with our production results here. Just as a recap, if you remember, before we came on production from our Cabaret project, our pre-commercialization production guidance was basically equal to our firm sales under our Bahia gas contract at that time. and it was also equal to the unit productive capacity multiplied by our working interest in the unit. Since we started production in July of 2020, We've either met or significantly exceeded that expectation. I would say there was a considerable amount of time through 2021 through to 2023 where Bahia Gas was able to take a lot of flexible gas in addition to the firm volumes that we had committed to. In 2024, that did change a little bit. Bahia Gas had committed to their firm supply quite a ways in advance, and they did have some demand disruptions. So what we did is late in 2024, two things happened. Bahia Gas reduced their overall amount of firm commitments. And at the same time, Albo Petro increased, we increased our share or our firm volumes under our Bahia Gas contract by a third. And what you can see is that's resulted in a pretty nice uptick in production in the first quarter, which we had previously released. 2,446 barrels of oil equivalent per day, which is up about 41% quarter over quarter. And you can see we just announced April production here yesterday as well. And you'll notice it does include the very initial parts of our newly added Canadian oil production as well, but overall pretty flat from the first quarter and we'll talk about our plans on all those assets, but our strategy basically through the rest of the year is to add more 100% working interest natural gas production from Brazil, and also we expect to drill up to another four wells in Canada to further expand the oil production platform.

Okay, so we just released our Q1 2025 results yesterday afternoon, and we'll just go through some of the key highlights. Just to start here, this is our operating net back. It's one of those non-GAAP measures I talked about earlier. It's a measure of our operating profitability. We measure that on a per barrel of oil equivalent basis or per BOE. Just a reminder, that's calculated. We start with our realized sales price, which is the top of the bar chart. We deduct off royalties in orange, production expenses in gray. And then the operating net back is the green bar that you see on the chart. So looking at Q1 2025 here on the pricing basis, we are very consistent with last quarter decrease of about 21 cents per BOE. That incorporated our natural gas sales price of $10.44 per MCF for the quarter. The royalties, which is the orange bar, you'll see a big jump there in our royalties in Q1. That stems from some additional royalties we recognized this period relating to our gross overriding royalty that we have on some of our blocks in Brazil, including a block that is on both our Cabaret and our Merc 2-2 natural gas fields. And the dispute just stemmed from the computation of that gross overriding royalty on natural gas. So we have recognized an additional amount this quarter for that. Important to note that that amount that we've recognized in Q1 does include the historical amounts going back to since natural gas sales commenced in July 2020. So we aren't expecting this level of royalty rate going forward. Ultimately, it will depend on forecasted commodity prices, but We are expecting more in the 5% to 6% range as a percentage of our realized price. On the production expenses, that's the gray bar. Production expenses were relatively consistent with last quarter. They were up just about $100,000 overall on a dollar basis. We did start our compression operations this quarter, so there were some additional costs associated with that. But overall, we saw a decrease of $1.34 per BOE on the cost because we did have higher production this period and most of our production expenses are fixed in nature. So with higher volumes, we have lower costs per BOE. Overall, our net back for the period, $50.77. So again, a decrease of, of over $4 compared to last quarter, but still very strong net backs and relative to our realized price margin of 80%, even with that additional royalty amount recognized this period. So this has allowed us to generate really strong cash flows and funds flow from operating activities on this base level of production. So if we move on to funds flow, So this chart is just showing the change compared to last quarter. So last quarter, just under 7 million of funds flow from operations compared to 9.2 million this quarter. So an increase of 2.3 million. Most of that was the 41% increase in sales volumes that we saw. Offsetting that partially was the additional royalties and that slight addition in our production expenses. And then current tax was also higher with the higher earnings, G&A was lower. So that helped on the plus side. Similarly, on net income, we saw a significant increase in our net income this period for the same reasons that we just went through on the funds flow. But also impacting net income is various non-cash items. So the big one being foreign exchange, we had a foreign exchange gain this period of about 900,000 US compared to a loss of 2 million last quarter. So that's a swing in net income of 2.9 million. And then offsetting that is higher depletion with the higher production and then higher finance expense and then overall current and deferred tax as well. Moving on to the balance sheet, this chart shows our working capital, including cash balances. We go back to when we started natural gas sales in Q3 of 2020. And this is our working capital balance at the end of each period. A reminder, we are debt-free and have been since we repaid our initial credit facility back in fully repaid by September of 2022. This quarter, our working capital was 9.7 million, including cash of 17.3 million. So still very strong. Working capital and strong balance sheet, which positions us well going forward. We did see a decrease in our working capital. We had capital projects running in both Canada and Brazil. So our CapEx was higher this quarter, but overall still very strong balance sheet.