Alvopetro Energy Ltd. announces record daily average February sales volumes, updated results from our 183-1 deep basin Gomo natural gas well, and the early commencement of long-term debt repayments.
February Sales Volumes
Alvopetro's February natural gas sales averaged 12.7 mmcfpd with associated natural gas liquids sales from condensate of 99 bpd, for an overall daily average of 2,222 boepd, based on field estimates. This represents 14% and 16% increases over Q4 2020 and January 2021 production levels, respectively. In December 2020, we successfully conducted tests of our Caburé gas processing facility to ensure the facility can meet required sales quality specifications at higher production rates. This allowed us to increase production in February to accommodate incremental demand from our offtaker, Bahiagás. Alvopetro expects to continue production at these rates for March. In addition, February is our first month of production at the recently recalculated gas sales price of BRL$1.06/m3 ($5.88/mcf), which represents a 10% increase from the prior period. Under our gas contract, our sales price is recalculated every 6 months based on a basket of global energy price markers and is subject to an escalating minimum base price, currently set at $5.28/mmbtu. Our semi-annual gas sales price is denominated in the local currency, and as such, future US$ denominated sales prices will be impacted by changes in BRL/US$ exchange rates.
Deep Basin Gomo Natural Gas Project (100% Alvopetro Working Interest)
We have completed our updated production test on our 183-1 Gomo well which validated the previous production test of the well. We originally drilled the well in 2014 to a total depth of 3,550 metres. We completed the stimulation of a 14-metre zone in the Gomo Member of the Candeias Formation and in early 2020 conducted an initial 72-hour production test. We recently installed a plunger lift system and, prior to starting a new production test, we recovered 226 bbls of completions fluid, 427 barrels of 64-degree API condensate and 10.1 mmcf of natural gas over a 34-day clean up period. Then, over the 72-hour flow period of the production test, the well produced a total of 1.9 mmcf of natural gas, 21 bbls of completion fluid and 45 bbls of 64-degree API condensate, or approximately 24 bbls of condensate per mmcf, with a final flowing wellhead pressure of 60 psi on a 32/64" choke. The test duration was 80-hours with 72-hours of actual flowtime due to an equipment malfunction. Through laboratory testing we were also able to confirm that the produced water during the test was from completion fluids and not formation water.
This test validates previous pressure transient analysis that is the basis for our longer-term productivity forecast from this well. Based on this analysis, this single 14-metre zone is expected to produce at an average rate of 410 mcfpd over the first year of production (assuming the well is operated at a flowing wellhead pressure of 500 psi) and to ultimately recover over 2 Bcf over a 25-year period. We don't believe that these results are indicative of future results from developing this Gomo resource since we only stimulated one-half of the net pay in the well, and we were limited to using an undersized stimulation because the 183-1 well was drilled only 120 metres from a pre-existing well. Most importantly, the test now allows us to better predict productivity using optimally sized stimulations across all the net pay in future wells. We have designed a "fit for purpose" development drilling and completion plan for future wells to optimize productivity and reserve recovery.
We have received environmental approvals to install our 9-kilometre Gomo transfer pipeline extension to tie this well into our Caburé gas processing facility through our existing Caburé transfer pipeline. We expect to complete the installation of this Gomo pipeline extension by the end of 2021 at an estimated cost, including field production facilities, of $2.3 million. This pipeline will provide us with further flexibility to set the pace of future expansion and development of this Gomo resource.
Early Debt Repayment
Given strong production and financial results since starting production from our Caburé project on July 5, 2020, we have decided to commence the early repayment of our outstanding long-term debt. In February, we repaid $2.5 million, bringing the outstanding balance under our credit facility down to $13.0 million (including accrued payment-in-kind interest amounts outstanding). This debt level now represents leverage of only 0.7 times our base 2021 EBITDA forecast.
For the third year in a row Alvopetro has been recognized as a TSX Venture 50 winner. The TSX Venture 50 is a ranking of the top performers on the TSX Venture Exchange over the last year. The ranking is composed of 10 companies from each of 5 industry sectors, selected based on 3 equally weighted criteria. Alvopetro's video can also be found at https://vimeo.com/509529541/0c9c40fc1e.