Alvopetro Energy Ltd (TSX-V:ALV, OTC:ALVOF) CEO Corey Ruttan provided an update on the company's strong performance in Q3 2024.
With production numbers up significantly from the previous quarter, Ruttan discussed the company's strategic goals, including its near-term objective of reaching 3,000 barrels of oil equivalent per day.
He also highlighted the success of the recently online well, which has exceeded expectations, and outlines the company's capital allocation model that balances reinvestment in organic growth with returning value to shareholders.
Finally, Ruttan reflected on Alvopetro's competitive advantage operating in Brazil, where favorable natural gas prices and a strong fiscal regime position the company for continued success.
Proactive: You're out with your Q3 2024 production numbers, which show some really strong results. These are preliminary, of course, but I would imagine you're quite happy with them?
Corey Ruttan: Yeah, we saw a nice bounce. Our third-quarter sales were up 29% compared to what we reported in the second quarter, reaching 20,106 barrels of oil equivalent per day. We’ll be announcing the corresponding financial results in a few weeks, on November 6, so it should be a pretty strong quarter for us.
You posted a notable increase in production—was that by design? You had been planning for that all along, correct? It's obviously a positive outcome for the quarter.
I think we're on track to meet our near-term objective of reaching 3,000 barrels of oil equivalent per day, which would align with the current capacity of our gas plant. Given our recent results, I believe we're well-positioned to achieve that.
You also began production in September at the 183-A3 well, which is now online. Can you tell me a bit about that well and what the plan is for that area moving forward?
We're really excited about this result, as it’s significantly above our initial expectations. The well is producing about 2.1 million cubic feet per day, along with approximately 50 barrels per day of condensate. Together, that totals around 400 barrels of oil equivalent per day. What this means is we're moving forward with plans to drill another well later this year, which really sets the stage for our organic growth plan. What's also great is that this is a 100% working interest project. We have three well pads ready to go, and it's all pipeline-connected, so it can be brought into production right away.
Corey, you mentioned the organic growth strategy. Can you elaborate on that a bit more so people can better understand it?
Stepping back, we have a capital allocation model that directs half of our cash flows into reinvestment for organic growth. With the recent well result, I believe we're really well positioned on that front. The other half of our cash flows is returned to stakeholders, primarily through dividends and share repurchases. Given the recent increase in production and the corresponding cash flows, I think this really sets the stage to continue executing that model as we move forward.
One last thing I want to ask you about is your unique situation and where you operate. While discussions about the natural gas and oil markets often focus on North America, your location offers a very different—and positive—environment for your company.
There’s been a lot of volatility in the global E&P space, but we feel very fortunate to be operating in Brazil. We’re benefiting from a strong natural gas price, especially compared to North American standards. We’re selling our gas for over $10 US per MCF, and we have a very favorable fiscal regime that allows us to generate best-in-class operating profit margins. Our operating margins are over 90%, which is about as good as it gets. So, yeah, we’re quite pleased.
Quotes have been lightly edited for style and clarity