Alvopetro Energy Ltd. (TSXV:ALV) has core natural gas assets in Brazil, a high-performing entry into Canada, and a balanced capital allocation strategy that reinvests in growth while rewarding shareholders. Alvopetro has turned disciplined operations into tangible returns.
From multilateral drilling success to firm gas sales contracts, this company is proving that smart energy investing isn’t just a tagline, it’s a playbook.
We caught up with Corey Ruttan, President and CEO of Alvopetro, to talk growth, gas, and how this company is staying profitable while scaling up.
The following is a transcription of the above video, and The Market Online has edited it for clarity
Lyndsay: Let’s jump right in here if we can. I mean, with firm gas sales in Brazil up 41% in Q1 and long-term contracts locked in, how much running room remains in your current Brazilian infrastructure before capacity becomes a constraint?
Corey: Obviously we had a really nice increase in our Q1 sales volumes and our goal this year through our drilling program is to increase that production again by at least another 25%. And our strategic infrastructure that we’ve built is already equipped to accommodate that additional capacity.
Lyndsay: So then your 183-D4 well that encountered 61 meters of gas pay in Murucututu. How does this shift your view of the field’s total productive potential and your near term development plans in Brazil?
Corey: That well was a follow up to our very successful well that we drilled last year, 183-A3. We brought that on production in the second half of last year. And as expected the 183-D4 well like you said, encountered the same caruacu sands but structurally up dip by over a hundred meters. So, we’re very excited about that well, we’re just starting the completion now and we would expect to have the well on production by the end of August. And then following up on that, we’ve got several additional follow up locations that we can drill from existing well pads that are already pipeline connected to our strategic infrastructure. So, I really think we’re uniquely positioned to quickly convert the successes into production and cash flow.
Lyndsay: You’ve got high margin contracted natural gas sales in Brazil and a strong fiscal regime. What’s the biggest competitive advantage you’re leveraging in that market that investors might be overlooking then?
Corey: I think we’re really fortunate to be operating in a very good environment that combines an excellent level of geological prospectivity with an attractive fiscal regime. Our realized natural gas prices are about US $11 per MCF. So, to put that in perspective, that’s about three times what the US natural gas prices are and it’s over 10 times what Canadian companies are realizing right now.
So, combine that with an effective royalty rate of about 6% and consider that we’ve got very low cost natural gas production. What it leads to is an industry leading operating net back margin that approaches about 90%. So on top of that, our project is eligible for a 15% income tax rate. So, this is about as good as it gets in our industry. And then like any business, if you have the highest margins, your business is stronger and more resilient.
That’s really our advantage. What it allows us to do is generate more cash flow off the same amount of production relative to our peers and then that helps drive our capital allocation model that you mentioned earlier where we’re looking to balance returns to stakeholders and organic growth. So, and then the other part of the equation is really the strategic infrastructure that we’ve invested in helps support that growth plan and we feel like we’re really well positioned both in Brazil and now also in Canada to implement our growth objectives.
Lyndsay: I want to push that just a little bit further if we can and really uncover a lot more of that model that you’ve built around reinvesting roughly half of your cash flows into organic growth. I mean, how much of that capital is currently weighted towards advancing your Brazilian drilling profile versus scaling newer Canadian assets?
Corey: To put it in perspective, we added the Canadian growth platform on I think February 5th of this year. And I’m excited to say we’ve already drilled our first two wells. They were both on production by early April. So, it really shows how quickly you can move. We’ve just completed drilling the third well and the fourth well is going to be finished shortly. So, since February we’ve been investing in both opportunities in parallel, but from a capital expenditure perspective, we’re probably still about three quarters of our capital is probably going to our Brazilian assets right now.
Lyndsay: So, then the remaining cash is returned to stakeholders. So, can you give us some details and tell us what investors can expect in terms of yield?
Corey: With the increase in production that we saw in the first quarter, we did increase our dividend by 11% up to US 10 cents per share quarterly. And we did just finish paying that for the second quarter here as well. So, at our current share price, that translates into a yield of over 9%. And as we mentioned earlier, our strategy is obviously to continue to grow our business and with continued success, my expectation is that we can continue to grow the dividend commensurate with that success.
Lyndsay: Corey, between price stability, infrastructure control and upside in untapped zones, what are the key catalysts right now in Brazil that investors should be watching for through the remainder of 2025?
Corey: I think it’s Brazil and Canada quite frankly and I think it’s really a continuation of what we’ve already been showing to start this year off. As mentioned, our latest well the 183-D4 well is expected to be completed and on production here in August. So, I think investors can look forward to those results and then the results from the additional follow up wells that would come after that in Canada. I think, you know, the results from the first two wells are extremely exciting.
They’re well ahead of the expectations that we had set for ourselves when we entered into that opportunity and I hope investors can look forward to more of the same in that business, which is really off to a fantastic start.
You can find Alvopetro Energy on the Venture under the symbol V.ALV and you can learn more at their website alvopetro.com.
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