[Music] Welcome to CEO Insights. I'm Marilyn Duzman with investingnews.com. On the heels of its first quarter 2025 earnings announcement, I'm speaking with Corey Rattan, president and CEO of Alvo Petro Energy to provide more insight on the company's recent financial results and operational plans. Welcome, Corey. Thank you. So as this as as I've mentioned, you've just released your Q1205 financial results and some operational updates. Provide us some of the highlights of this announcement.


Yeah, so last year we increased our productive capacity quite significantly off some strong results from our 100% working interest Mura Katutu project. Uh it's a natural gas project onshore uh in northeast Brazil. Um, this also allowed us to enhance our long-term gas sales agreement late last year and increase our firm commitments under that contract by by a third. Um, as a result of both of those things, our Q1 sales increased 41% quarter over quarter up to 2446 barrels of oil equivalent per day.


Um, our realized natural gas prices remain very strong at US $1044 per MCF and that helps continue to drive our industry-leading operating netback profit margins and allowed us to generate funds flow from operations in the quarter of US $9.2 million. Um, one of the things we do is we have a a very disciplined capital allocation model where we're looking to basically reinvest about half of our cash flows in organic growth and return the other half to stakeholders. So with the increased production and cash flow that we saw, we


did increase our quarterly dividend in the first quarter up to US 10 cents per share and that translates into a yield of about 10%. Great. In that same announcement, you've also um uh sort of disclosed that your new uh sales agreement with Baja Gas, there's a 7% increase in natural gas prices. How do you plan to leverage uh this to enhance your revenue streams and what strategies are in place to mitigate potential commodity and exchange rate uh currency exchange risks? Yeah, so we've certainly


seen a lot of volatility in the global commodity price environment lately. The way our gas sales agreement works is it reduces a lot of that volatility. So our price resets uh on a quarterly basis based on the prior 3 months average Brent oil equivalent prices Henry hub natural gas prices and the exchange rates. So it really helps smooth out a lot of that volatility. If you look at the current kind of commodity price forecast in the market, we would expect our realized natural gas price to stay


in the US $10 to $11 per MCF range for the foreseeable future. So that's about three times the price that US producers are receiving and it's over seven times what uh the the posted Canadian natural gas prices are. So given all that and also considering that we have no debt outstanding, we're certainly much less sensitive to um uh price volatility than our peers would be and with the strength of our gas price and our financial position, it really gives us a unique competitive advantage where we can


implement more consistent capital programs and target better rates of return on those investments. Could you maybe talk a little bit more about that? um your plan capital programs within Brazil like your uh uh you know how you're uh moving forward um new exploration plans. Talk a bit more about that. Yeah, in Brazil we've got um kind of a twofold capital program. We've got some development locations that we're drilling on our um original assets called Cabaret. We've got up to five


development wells to drill there this year. And in addition following up on that success that we had at MARA2utu uh last year, we're drilling a follow-up well to that success on the MARA2 project, which is 100% working interest. And our goal is to, you know, further expand our productive capacity and be in a position hopefully to be committing to, you know, ideally another 25% increase in our firm delivery commitments uh by the end of this year. And you've also indicated uh you know you now have the ability to invest in


high rate of return opportunities in both Brazil and western can in in western Canada. Talk about these opportunities and and your plans to pursue them. Yeah. So to complement that inventory of growth opportunities that we have in Brazil on February 5th of this year, we announced a strategic entry into the western Canadian sedimentary basin initially focused on the Manville stack oil fairway. Um within 45 days of signing this agreement along with our partner, we drilled the first two open hole multilateral oil


wells with a total of 12 horizontal legs and we had over 15 kilometers of of of horizontal re reservoir contact. So uh pretty excited about that. Both the first two wells were drilled under budget and both were on production by early April. So within two months of the announcement. Um, I think that achievement really highlights the strength of the Canadian regulatory environment and service sector to be able to execute a project like that on this timeline so effectively. So, you know, what we're looking to do here is,


you know, before we did this farm in, our our type curve or target type curve for the this play targets initial production rates on a per well basis of between 100 and 120 barrels of oil per day. targets expected ultimate oil recoveries of 100 to 120,000 uh barrels per well IRRs approaching 100% and and payouts measured in in under a year. So um excited about the early results from these first two wells. they're they're exceeding those initial expectations and we're looking forward to drilling up to


an additional four of those locations in Western Canada here um this year and we think we've got a pretty big inventory of lowrisk high rate of return oil wells to drill over the coming years. Um, as a result of this farm in we now have a 50% working interest in 25 sections or 25 square miles of highly prospective land in the Manville stack heavy oil fairway and that's on the western uh Saskatchewan side of the plate. Great. um with regards to your expansion in Western Canada and given the current


macroeconomic conditions in North America such as you know changing interest rates, inflationary pressures and regulatory uncertainty as well as the broader geopolitical tensions that are affecting energy markets today. How is Alvo Petro assessing the long-term strategic value of this Canadian expansion? Yeah, so I think as we're all aware, there's been a lot of volatility lately. Um, but if you step back and you consider that the break even WTI price for new oil drilling in the United States is around $60 US WTI per barrel.


Um, my view certainly is that prices can't be much below this level. And if so, so they probably can't be there for very long. So, you know, from our perspective, if anything, I think some of this this recent volatility that we've seen actually creates opportunities for a company like ours. um you know given our relative advantage with strong cash balances, no debt, higher gas prices and more resilient cash flows. And then you know if you step back and think the reality is you know the world needs more energy not


less for sure and and replacing oil production you know becomes more and more difficult with with time. Um, in Canada specifically, I think it remains to be seen whether our new Canadian government is actually serious about making Canada an energy superpower or not. I'm certainly optimistic um uh that common sense will prevail and it becomes more broadly appreciated that the Canadian oil and gas industry is critical to all of Canada's prosperity and and for for Canada's competitive position globally.


So, you know, one of the things we really like about this asset in Canada is that our share of each individual investment or each well that we drill cost us under under Canadian a million dollars. So, the nice thing about that is that we can really moderate our activity based on results, based on oil prices, and also based on the timing of our other capital projects. So, I feel it's a really nice complement to our opportunities in Brazil. I think it has a completely different risk profile and


it diversifies our inventory quite nicely and it really strengthens that disciplined capital allocation model that we have that focuses on organic growth and returns to stakeholders and aside from what you've already um discussed earlier are there any other catalysts that investors uh should look forward to from the company in the in the coming months? Yeah, no. Well, I think we've got a very exciting capital program for 2025. Uh it's all organically funded. Uh like I said, we've got a a very strong balance sheet


and and I think from an investment perspective, whether you look out on a value yield or growth basis, so there's no doubt in my mind that Albo Petro represents an extremely compelling uh investment. And we'll leave it at that. Thanks again, Corey, for joining me today. All right. Thank you. And thanks everyone for watching. Join us again next time for another edition of CEO Insights.