Monday, May 16, 2022

Alvopetro Energy (ALVOF)
A strong quarter as higher prices take effect

Alvopetro Energy Ltd.’s vision is to become a leading independent upstream and midstream operator in Brazil. Our strategy is to unlock the on-shore natural gas potential in the state of Bahia in Brazil, building off the development of our Caburé natural gas field and our strategic midstream infrastructure.

Michael Heim, CFA, Senior Research Analyst, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

First quarter results reflect higher prices. Revenues in the 2022 first quarter were $14.0m versus $6.9m and our $13.4m projection. Higher revenues reflect a 15% increase in production and a 48% increase in prices ($10.03/mcf). As a result of higher prices, operating netbacks rose to $53.94/boe from $28.52/boe. This is one of the best netbacks in the industry. 

Cash flow is soaring. Funds from operations rose to $10.9m versus $4.8m. The company has been active with its cash flow increasing its capital expenditures, paying down debt, and raising the dividend. Working capital less debt switched over to a positive position a few quarters ago and is now $7.3 million. With debt levels soon to be eliminated, the stakeholder focus will soon shift to equity shareholders. We expect additional dividend increases in upcoming quarters and would not be surprised to see the company initiate a share repurchase program in 2023….

This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision. 

Image Credit: Robert Course-Baker (Flickr)

Meet the Power Plant of the Future: Solar + Battery Hybrids are Poised for Explosive Growth

America’s electric power system is undergoing radical change as it transitions from fossil fuels to renewable energy. While the first decade of the 2000s saw huge growth in natural gas generation, and the 2010s were the decade of wind and solar, early signs suggest the innovation of the 2020s may be a boom in “hybrid” power plants.

A typical hybrid power plant combines electricity generation with battery storage at the same location. That often means a solar or wind farm paired with large-scale batteries. Working together, solar panels and battery storage can generate renewable power when solar energy is at its peak during the day and then release it as needed after the sun goes down.

A look at the power and storage projects in the development pipeline offers a glimpse of hybrid power’s future.

This article was republished with permission from The Conversation, a news site dedicated to sharing ideas from academic experts. It was written by and represents the research-based opinions of Joachim Seel, Senior Scientific Engineering Associate, Lawrence Berkeley National Laboratory, Bentham Paulos, Affiliate, Electricity Markets & Policy Group, Lawrence Berkeley National Laboratory, and Will Gorman, Graduate Student Researcher in Electricity Markets and Policy, Lawrence Berkeley National Laboratory

Our team at Lawrence Berkeley National Laboratory found that a staggering 1,400 gigawatts of proposed generation and storage projects have applied to connect to the grid – more than all existing U.S. power plants combined. The largest group is now solar projects, and over a third of those projects involve hybrid solar plus battery storage.

While these power plants of the future offer many benefits, they also raise questions about how the electric grid should best be operated.

 

Why Hybrids are Hot

As wind and solar grow, they are starting to have big impacts on the grid.

Solar power already exceeds 25% of annual power generation in California and is spreading rapidly in other states such as Texas, Florida and Georgia. The “wind belt” states, from the Dakotas to Texas, have seen massive deployment of wind turbines, with Iowa now getting a majority of its power from the wind.

This high percentage of renewable power raises a question: How do we integrate renewable sources that produce large but varying amounts of power throughout the day?

That’s where storage comes in. Lithium-ion battery prices have rapidly fallen as production has scaled up for the electric vehicle market in recent years. While there are concerns about future supply chain challenges, battery design is also likely to evolve.

The combination of solar and batteries allows hybrid plant operators to provide power through the most valuable hours when demand is strongest, such as summer afternoons and evenings when air conditioners are running on high. Batteries also help smooth out production from wind and solar power, store excess power that would otherwise be curtailed, and reduce congestion on the grid.

Hybrids Dominate the Project Pipeline

At the end of 2020, there were 73 solar and 16 wind hybrid projects operating in the U.S., amounting to 2.5 gigawatts of generation and 0.45 gigawatts of storage.

Today, solar and hybrids dominate the development pipeline. By the end of 2021, more than 675 gigawatts of proposed solar plants had applied for grid connection approval, with over a third of them paired with storage. Another 247 gigawatts of wind farms were in line, with 19 gigawatts, or about 8% of those, as hybrids.

The amount of proposed solar, storage and wind power waiting to hook up to the grid has grown dramatically in recent years, while coal, gas and nuclear have faded. Lawrence Berkeley National Laboratory

Of course, applying for a connection is only one step in developing a power plant. A developer also needs land and community agreements, a sales contract, financing and permits. Only about one in four new plants proposed between 2010 and 2016 made it to commercial operation. But the depth of interest in hybrid plants portends strong growth.

In markets like California, batteries are essentially obligatory for new solar developers. Since solar often accounts for the majority of power in the daytime market, building more adds little value. Currently 95% of all proposed large-scale solar capacity in the California queue comes with batteries.

Five Lessons on Hybrids and Questions for the Future

The opportunity for growth in renewable hybrids is clearly large, but it raises some questions that our group at Berkeley Lab has been investigating.

Here are some of our top findings:

• The investment pays off in many regions. We found that while adding batteries to a solar power plant increases the price, it also increases the value of the power. Putting generation and storage in the same location can capture benefits from tax credits, construction cost savings and operational flexibility. Looking at the revenue potential over recent years, and with the help of federal tax credits, the added value appears to justify the higher price.

• Co-location also means tradeoffs. Wind and solar perform best where the wind and solar resources are strongest, but batteries provide the most value where they can deliver the greatest grid benefits, like relieving congestion. That means there are trade-offs when determining the best location with the highest value. Federal tax credits that can be earned only when batteries are co-located with solar may be encouraging suboptimal decisions in some cases.

Hybrid power has become standard in Hawaii as solar power saturates the grid. Dennis Schroeder/NREL

• There is no one best combination. The value of a hybrid plant is determined in part by the configuration of the equipment. For example, the size of the battery relative to a solar generator can determine how late into the evening the plant can deliver power. But the value of nighttime power depends on local market conditions, which change throughout the year.

• Power market rules need to evolve. Hybrids can participate in the power market as a single unit or as separate entities, with the solar and storage bidding independently. Hybrids can also be either sellers or buyers of power, or both. That can get complicated. Market participation rules for hybrids are still evolving, leaving plant operators to experiment with how they sell their services.

• Small hybrids create new opportunities: Hybrid power plants can also be small, such as solar and batteries in a home or business. Such hybrids have become standard in Hawaii as solar power saturates the grid. In California, customers who are subject to power shutoffs to prevent wildfires are increasingly adding storage to their solar systems. These “behind-the-meter” hybrids raise questions about how they should be valued, and how they can contribute to grid operations.

 

Hybrids are just beginning, but a lot more are on the way. More research is needed on the technologies, market designs and regulations to ensure the grid and grid pricing evolve with them.

While questions remain, it’s clear that hybrids are redefining power plants. And they may remake the U.S. power system in the process.

Suggested Reading

The Good News and Bad News Surrounding US Uranium Self-Reliance

Has Uranium Demand Changed with Russia Ukraine War?

The Appeal of EVs with Bidirectional Charging

Clean vs Dirty Electrons on Power Grid

 

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Thursday, May 12, 2022

InPlay Oil (IPOOF)
Results surpass expectations once again

InPlay Oil is a junior oil and gas exploration and production company with operations in Alberta focused on light oil production. The company operates long-lived, low-decline properties with drilling development and enhanced oil recovery potential as well as undeveloped lands with exploration possibilities. The common shares of InPlay trade on the Toronto Stock Exchange under the symbol IPO and the OTCQX Exchange under the symbol IPOOF.

Michael Heim, CFA, Senior Research Analyst, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

2022-1Q results surpass expectations. Production levels continue to soar as the company executes a robust drilling program. Production was 8,221 boed up 66% and above our 8,000 boed estimate. Realized prices of $97.5 per barrel and $5.18 per thousand cubic feet (mcf) were up sharply from last year but slightly below that in our models. Resulting operating income of $34.1 million and adjusted funds from operations of $29.4 million were in line with expectations.

This is just the beginning for InPlay. The company was very active in the quarter, drilling six wells.  InPlay will continue to be active in the June quarter drilling five wells, three of which should come online in the second quarter. Management indicates a payback of three months for the wells at current prices. At such a rate of return, expanding drilling efforts is an easy decision. Rising costs, including steel and crew costs, have yet to significantly impact well drilling costs but bear watching….

This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision. 

InPlay Oil Corp. Announces First Quarter 2022 Financial and Operating Results Highlighted by Record Quarterly Production and Financial Results

News and Market Data on InPlay Oil Corp

CALGARY, Alberta, May 11, 2022 — InPlay Oil Corp. (TSX: IPO) (OTCQX: IPOOF) (“InPlay” or the “Company”) announces its record setting financial and operating results for the three months ended March 31, 2022, our first full quarter incorporating the acquisition of Prairie Storm Resources Corp. (“Prairie Storm”). InPlay’s condensed unaudited interim financial statements and notes, as well as Management’s Discussion and Analysis (“MD&A”) for the three months ended March 31, 2022 will be available at “www.sedar.com” and our website at “www.inplayoil.com”. Our corporate presentation will soon be available on our website.

First Quarter 2022 Financial &
Operating Highlights

• Achieved record average quarterly production of 8,221 boe/d⁽¹⁾ (59% light crude oil and NGLs), an increase of 66% from first quarter production in 2021 of 4,965 boe/d
  ⁽¹⁾ (70% light crude oil and NGLs) and an increase of 23% compared to our previous quarterly record of 6,687 boe/d⁽¹⁾ (61% light crude oil and NGLs) in the fourth quarter of 2021. Average production per weighted average basic share increased 31% compared to the first quarter of 2021 (34% on a debt adjusted⁽⁴⁾ basis) and 3% compared to the fourth quarter of 2021 (9% on a debt adjusted basis).
• Generated record quarterly adjusted funds flow (“AFF”)⁽²⁾ of $29.4 million ($0.34 per weighted average basic share⁽³⁾), an increase of 381% compared to $6.1 million ($0.09 per weighted average basic share) in the first quarter of 2021 and an increase of 71% compared to $17.1 million ($0.23 per weighted average basic share) in the fourth quarter of 2021, our prior record quarter.
• Increased operating netbacks
  ⁽⁴⁾ by 73% to $46.06/boe from $26.66/boe in the first quarter of 2021 and 17% compared to $39.43/boe in the fourth quarter of 2021, our prior record quarter.
• Realized quarterly record operating income⁽⁴⁾ and operating income profit margin⁽⁴⁾ of $34.1 million and 65% respectively compared to $11.9 million and 60% in the first quarter of 2021; $24.3 million and 65% in the fourth quarter of 2021, our prior record quarter.
• Reduced operating expenses by 10% to $12.96/boe compared to $14.37/boe in the first quarter of 2021, despite rising costs of services in the industry.
• Generated free adjusted funds flow (“FAFF”)⁽⁴⁾ of $7.8 million, a quarterly record for the Company.
• Achieved a record quarterly annualized net debt⁽²⁾ to earnings before interest, taxes and depletion (“EBITDA”)⁽⁴⁾ ratio of 0.6, compared to 2.6 in the first quarter of 2021 and 1.1 in fourth quarter of 2021.
• Realized net income of $18.8 million ($0.22 per basic share; $0.21 per diluted share) compared to a net loss of $7.5 million ($0.11 per basic and diluted share) in the first quarter of 2021.

Notes:
1.	See “Reader Advisories – Production Breakdown by Product Type”
2.	Capital management measure. See “Non-GAAP and Other Financial Measures” contained within this press release.
3.	Supplementary financial measure. See “Non-GAAP and Other Financial Measures” contained within this press release.
4.	Non-GAAP financial measure or ratio that does not have a standardized meaning under International Financial Reporting Standards (IFRS) and GAAP and therefore may not be comparable with the calculations of similar measures for other companies. Please refer to “Non-GAAP and Other Financial Measures” contained within this press release.

Financial and Operating Results:

(CDN) ($000’s)	Three months ended March 31
	2022		2021
Financial
Oil and natural gas sales	52,156		20,001
Adjusted funds flow(1)	29,379		6,105
Per share – basic (1)	0.34		0.09
Per share –diluted(1)	0.32		0.09
Per boe(1)	39.71		13.66
Comprehensive income (loss)	18,774		(7,536	)
Per share – basic	0.22		(0.11	)
Per share – diluted	0.21		(0.11	)
Capital expenditures – PP&E and E&E	21,562		12,209
Property acquisitions (dispositions)	(1	)	19
Corporate acquisitions	432		–
Net debt(1)	(73,392	)	(79,780	)
Shares outstanding	86,537,351		68,256,616
Basic weighted-average shares	86,449,636		68,256,616
Diluted weighted-average shares	90,964,311		68,256,616
Operational
Daily production volumes
Light and medium crude oil (bbls/d)	3,571		2,665
Natural gas liquids (bbls/d)	1,307		802
Conventional natural gas (Mcf/d)	20,054		8,994
Total (boe/d)	8,221		4,965
Realized prices(2)
Light and medium crude oil & NGLs ($/bbls)	97.50		55.75
Conventional natural gas ($/Mcf)	5.18		3.22
Total ($/boe)	70.50		44.76
Operating netbacks ($/boe)(3)
Oil and natural gas sales	70.50		44.76
Royalties	(10.27	)	(2.79	)
Transportation expense	(1.21	)	(0.94	)
Operating costs	(12.96	)	(14.37	)
Operating netback	46.06		26.66
Realized (loss) on derivative contracts	(0.81	)	(6.81	)
Operating netback (including realized derivative contracts)	45.25		19.85

 

(1)	Capital management measure. See “Non-GAAP and Other Financial Measures” contained within this press release.
(2)	Supplementary financial measure. See “Non-GAAP and Other Financial Measures” contained within this press release.
(3)	Non-GAAP financial measure or ratio that does not have a standardized meaning under International Financial Reporting Standards (IFRS) and GAAP and therefore may not be comparable with the calculations of similar measures for other companies. Please refer to “Non-GAAP and Other Financial Measures” contained within this press release.

First Quarter 2022 Financial &
Operations Overview:

Production averaged 8,221 boe/d (59% light crude oil & NGLs)⁽¹⁾ in the first quarter of 2022 which includes the impact of a force majeure of a third party facility that affected March production by approximately 200 boe/d. Production increased by 66% compared to 4,965 boe/d (70% light crude oil & NGLs)
⁽¹⁾ in the first quarter of 2021 and 23% compared to 6,687 boe/d (61% light crude oil & NGLs)⁽¹⁾ in the fourth quarter of 2021. This resulted in a quarterly record $29.4 million of Adjusted Funds Flow (“AFF”) generated during the first quarter of 2022 and $7.8 million in Free Adjusted Funds Flow (“FAFF”) which reduced debt levels.

InPlay’s capital program for the first quarter of 2022 consisted of $21.6 million of capital expenditures. The Company drilled, completed and brought on production three (3.0 net) Extended Reach Horizontal (“ERH”) wells in Pembina, and two (1.7 net) Willesden Green wells on our newly acquired Prairie Storm assets, and participated in one (0.2 net) non-operated Willesden Green ERH well. The Company also completed the two (1.6 net) wells that were drilled in December on Prairie Storm Willesden Green assets and these wells were brought on production in the second half of January. A total of six (4.9 net) wells were drilled during the quarter, the most active quarter in the Company’s history. The first quarter capital program also included lease construction to expedite the second quarter drilling program and the construction of a small modular multi-well battery in Willesden Green to accommodate future drilling. Given the strong economics tied to the current pricing environment, InPlay also increased its well servicing expenditures in the quarter to optimize wells, activate wellbores that had been down and to reduce operating expenses on certain wells.

The average well results from the first quarter capital program are above our forecasted type curves with average payouts of wells (with over two months of production data) expected to be approximately three months in the current pricing environment. The initial production (“IP”) rates for the two (1.6 net) wells drilled in Willesden Green in December and brought on production in the second half of January, which are stabilizing ahead of forecast, were as follows:

	IP 30	IP 60	IP 90
	(% light crude oil and NGLs)	(% light crude oil and NGLs)	(% light crude oil and NGLs)
1.5 mile well	593 boe/d (80%)	433 boe/d (79%)	355 boe/d (78%)
1.0 mile well	203 boe/d (83%)	169 boe/d (77%)	161 boe/d (72%)

The combined IP rates for the three (3.0 net) ERH wells drilled in Pembina and brought on production ahead of schedule in late February continue to clean up as follows:

IP 30	IP 60	Current(1)
(% light crude oil and NGLs)	(% light crude oil and NGLs)	(% light crude oil and NGLs)
1,063 boe/d (73%)	1,122 boe/d (67%)	1,292 boe/d (55%)

The IP rates for the two (1.7 net) wells drilled in Willesden Green and brought on production in mid-March continue to clean up as follows:

	IP 30	Current(1)
	(% light crude oil and NGLs)	(% light crude oil and NGLs)
1.5 mile well	296 boe/d (88%)	415 boe/d (82%)
1.0 mile well*	126 boe/d (85%)	197 boe/d (80%)

* The 1.0 mile well had initially experienced wax and pumping issues.

(1)   Based on field
estimates.

Efficient field operations and increased production levels resulted in the Company achieving a 10% reduction to operating expenses to $12.96/boe compared to $14.37/boe in the first quarter of 2021. This was a significant achievement given the cold winter, inflationary pressures in the industry and ongoing supply chain disruptions. The resulting operating income⁽²⁾ and operating income profit margin⁽²⁾ for the first quarter of 2022 were quarterly records for the Company at $34.1 million and 65% respectively. Net income of $18.8 million ($0.22 per basic share; $0.21 per diluted share) was realized in the first quarter compared to a net loss of $7.5 million ($0.11 per basic and diluted share) in the first quarter of 2021.

Notes:
1.	See “Reader Advisories – Production Breakdown by Product Type”
2.	Non-GAAP financial measure or ratio that does not have a standardized meaning under International Financial Reporting Standards (IFRS) and GAAP and therefore may not be comparable with the calculations of similar measures for other companies. Please refer to “Non-GAAP and Other Financial Measures”.

Operations Update

InPlay’s capital program for the second quarter of 2022 is ahead of schedule which will benefit the Company as production is anticipated to be brought on earlier than forecasted into a very strong price environment. Drilling operations for three (3.0 net) wells in Pembina have just finished and these wells are expected to come on production by the end of May. An additional two (1.9 net) two-mile wells are planned to be drilled in Willesden Green during the second quarter and are expected to come on production in mid-July. The Company plans to utilize the same drilling rig for the remainder of our 2022 capital program allowing for continued drilling efficiencies and cost savings associated with a consistent and experienced crew, materially reducing our inflation risk in the current environment.

Environmental, Social and Governance
(“ESG”) Update

InPlay is committed to environmental stewardship while safely and efficiently developing our assets that contribute to the local, provincial and Canadian economies. The Company will further outline our ESG initiatives with the release of our inaugural sustainability report this summer. We place a high importance on managing emissions, water conservation, spill mitigation and abandonment and reclamation activities. Our goal is to ensure all stakeholders benefit from our business operations both in the short-term and long into the future.

The Company continues to reduce our inactive well liability. During the first quarter of 2022, InPlay spent $1.4 million on the abandonment of 14 wellbores and the reclamation of 4 well sites. To further evidence our commitment to ESG initiatives, the Company has added approximately $1 million to our budget for emission related projects during 2022. Specifically, the Company will be accelerating projects to convert high-bleed pneumatic devices to low-bleed pneumatics and install vapor recovery units at certain facilities. These projects will have the benefit of materially reducing our emissions while also providing the Company with economic benefit through more efficient operations and gas conservation.

Outlook⁽⁴⁾

InPlay’s successful first quarter capital program has led to a strong start to the year and establishes a solid foundation to generate significant FAFF throughout the remainder of the year while providing strong returns to shareholders. InPlay’s production in April averaged approximately 9,000 boe/d⁽¹⁾ based on field estimates and is currently tracking at the mid-point of our average annual production guidance of 8,900 to 9,400 boe/d⁽¹⁾. The Company’s drilling program is ahead of schedule, and with approximately 70% of our planned 2022 wells remaining to be drilled and expected to be on production by the middle of the fourth quarter, InPlay is well positioned to deliver strong production and FAFF growth to its shareholders.

Strong commodity pricing, increased fuel prices, supply chain disruptions and increased activity levels have heightened inflationary pressures across the industry. One of the biggest issues has been the supply of steel casing and tubular products required to drill wells. InPlay has been able to mitigate these supply issues through strong industry relationships and proactive decision making. The Company proactively acquired an inventory of these products at favorable pricing in the summer and fall of 2021 to accommodate our H1 2022 drilling program. The Company has acquired all pipe products to accommodate our drilling program for the second half of the year, albeit at higher pricing levels. InPlay will also incur additional costs associated with drilling two (1.9 net) two mile wells (versus 1.5 mile wells in our original budget), and approximately $1 million for various emission reduction initiatives. In aggregate, these additional activities combined with inflationary pressures has our 2022 capital budget increased to $64 million (previously $58 million). The Company will continue to monitor industry wide cost pressures and efforts will be taken to minimize their impact on our operations.

With the further strengthening of commodity prices and our updated capital budget, InPlay now forecasts 2022 AFF⁽²⁾ of $147 to $156 million (versus prior guidance of $141 to $150 million) with FAFF⁽³⁾ at $83 to $92 million (in line with prior guidance), which would result in InPlay being in a positive working capital position, in excess of debt, by year end. The Company’s leverage metrics are forecasted to remain at historically low levels, with net debt to quarterly annualized earnings before interest, taxes and depletion (“EBITDA”)
⁽³⁾ forecasted to be 0.3x for the second quarter of 2022.

InPlay is executing its strategy to provide disciplined, top-tier light oil weighted production and FAFF per share growth, reducing debt and leverage ratios, while seeking to capitalize on strategic and accretive acquisition opportunities with our pristine balance sheet. Execution of InPlay’s disciplined strategy is significantly ahead of schedule on debt and leverage reduction which places the Company in a solid position to sustainably generate long-term per share growth and deliver top-tier returns to shareholders in a prudent and fiscally responsible manner. Management would like to thank our employees, board members, lenders and shareholders for their support and we look forward to continuing our journey of deleveraging and maximizing shareholder returns.

 

Notes:
1.	See “Production Breakdown by Product Type” at the end of this press release.
2.	Capital management measure. See “Non-GAAP and Other Financial Measures” contained within this press release.
3.	Non-GAAP financial measure or ratio that does not have a standardized meaning under International Financial Reporting Standards (IFRS) and GAAP and therefore may not be comparable with the calculations of similar measures for other companies. Please refer to “Non-GAAP and Other Financial Measures” contained within this press release.
4.	See “Reader Advisories – Forward Looking Information and Statements” for key budget and underlying assumptions related to our 2022 capital program and associated guidance.

 

Reader Advisories

Non-GAAP and Other Financial Measures

Throughout this press release and other materials disclosed by the Company, InPlay uses certain measures to analyze financial performance, financial position and cash flow. These non-GAAP and other financial measures do not have any standardized meaning prescribed under GAAP and therefore may not be comparable to similar measures presented by other entities. The non-GAAP and other financial measures should not be considered alternatives to, or more meaningful than, financial measures that are determined in accordance with GAAP as indicators of the Company performance. Management believes that the presentation of these non-GAAP and other financial measures provides useful information to shareholders and investors in understanding and evaluating the Company’s ongoing operating performance, and the measures provide increased transparency and the ability to better analyze InPlay’s business performance against prior periods on a comparable basis.

Non-GAAP
Financial Measures and Ratios

Included in this document are references to the terms “free adjusted funds flow”, “operating income”, “operating netback per boe”, “operating income profit margin”, “Net Debt to EBITDA” and “Debt adjusted production per share”. Management believes these measures are helpful supplementary measures of financial and operating performance and provide users with similar, but potentially not comparable, information that is commonly used by other oil and natural gas companies. These terms do not have any standardized meaning prescribed by GAAP and should not be considered an alternative to, or more meaningful than “profit (loss) before taxes”, “profit (loss) and comprehensive income (loss)”, “adjusted funds flow”, “capital expenditures”, “corporate acquisitions, net of cash acquired”, “net debt”, “weighted average number of common shares (basic)” or assets and liabilities as determined in accordance with GAAP as a measure of the Company’s performance and financial position.

Free Adjusted Funds Flow

Management considers free adjusted funds flow and free adjusted funds flow per share important measures to identify the Company’s ability to improve its financial condition through debt repayment, which has become more important recently with the introduction of second lien lenders, on an absolute and weighted average per share basis. Free adjusted funds flow should not be considered as an alternative to or more meaningful than adjusted funds flow as determined in accordance with GAAP as an indicator of the Company’s performance. Free adjusted funds flow is calculated by the Company as adjusted funds flow less exploration and development capital expenditures and property dispositions (acquisitions) and is a measure of the cashflow remaining after capital expenditures before corporate acquisitions that can be used for additional capital activity, corporate acquisitions, repayment of debt or decommissioning expenditures. Free adjusted funds flow per share is calculated by the Company as free adjusted funds flow divided by weighted average outstanding shares. Refer below for a calculation of historical Free adjusted fund flow and to the “Forward Looking Information and Statements” section for a calculation of forecast Free adjusted funds flow.

(thousands of dollars)	Three Months Ended March 31
	2022		2021
Adjusted funds flow	29,379		6,105
Exploration and dev. capital expenditures	(21,562	)	(12,209	)
Property dispositions (acquisitions)	1		(19	)
Free adjusted funds flow	7,818		(6,123	)

Operating Income/Operating Netback per
boe/Operating Income Profit Margin

InPlay uses “operating income”, “operating netback per boe” and “operating income profit margin” as key performance indicators. Operating income is calculated by the Company as oil and natural gas sales less royalties, operating expenses and transportation expenses and is a measure of the profitability of operations before administrative, share-based compensation, financing and other non-cash items. Management considers operating income an important measure to evaluate its operational performance as it demonstrates its field level profitability. Operating income should not be considered as an alternative to or more meaningful than net income as determined in accordance with GAAP as an indicator of the Company’s performance. Operating netback per boe is calculated by the Company as operating income divided by average production for the respective period. Management considers operating netback per boe an important measure to evaluate its operational performance as it demonstrates its field level profitability per unit of production. Operating income profit margin is calculated by the Company as operating income as a percentage of oil and natural gas sales. Management considers operating income profit margin an important measure to evaluate its operational performance as it demonstrates how efficiently the Company generates field level profits from its sales revenue. Refer below for a calculation of operating income, operating netback per boe and operating income profit margin.

(thousands of dollars)	Three Months Ended March 31
	2022		2021
Revenue	52,156		20,001
Royalties	(7,599	)	(1,245	)
Operating expenses	(9,588	)	(6,422	)
Transportation expenses	(893	)	(418	)
Operating income (2)	34,076		11,916
Sales volume (Mboe)	739.9		446.9
Per boe
Revenue	70.50		44.76
Royalties	(10.27	)	(2.79	)
Operating expenses	(12.96	)	(14.37	)
Transportation expenses	(1.21	)	(0.94	)
Operating netback per boe	46.06		26.66
Operating income profit margin	65	%	60	%

Net Debt to EBITDA

Management considers Net Debt to EBITDA an important measure as it is a key metric to identify the Company’s ability to fund financing expenses, net debt reductions and other obligations. EBITDA is calculated by the Company as adjusted funds flow before interest expense. When this measure is presented quarterly, EBITDA is annualized by multiplying by four. This measure is consistent with the EBITDA formula prescribed under the Company’s Senior Credit Facility. Net Debt to EBITDA is calculated as Net Debt divided by EBITDA. Refer to the “Forward Looking Information and Statements” section for a calculation of forecast Net Debt to EBITDA.

Production per Debt Adjusted Share

InPlay uses “Production per debt adjusted share” as a key performance indicator. Debt adjusted shares should not be considered as an alternative to or more meaningful than common shares as determined in accordance with GAAP as an indicator of the Company’s performance. Debt adjusted shares is a non-GAAP measure used in the calculation of Production per debt adjusted share and is calculated by the Company as common shares outstanding plus the change in net debt divided by the Company’s current trading price on the TSX, converting net debt to equity. Debt adjusted shares should not be considered as an alternative to or more meaningful than weighted average number of common shares (basic) as determined in accordance with GAAP as an indicator of the Company’s performance. Management considers Debt adjusted share is a key performance indicator as it adjusts for the effects of capital structure in relation to the Company’s peers. Production per debt adjusted share is calculated by the Company as production divided by debt adjusted shares. Management considers Production per debt adjusted share is a key performance indicator as it adjusts for the effects of changes in annual production in relation to the Company’s capital structure. Refer below for a calculation of Production per debt adjusted share.

		Three months ended March 31
		2022	2021
Production	Boe/d	8,221	4,965
Net Debt	$ millions	$73.4	$79.8
Weighted average outstanding shares	# millions	86.4	68.3
Assumed Share price(2)	$	3.20	N/A
Production per debt adjusted share growth(2)		34%	N/A

 

		Three months ended
		March 31, 2022	Dec. 31, 2021
Production	Boe/d	8,221	6,687
Net Debt	$ millions	$73.4	$80.2
Weighted average outstanding shares	# millions	86.4	74.3
Assumed Share price(2)	$	3.20	N/A
Production per debt adjusted share growth(2)		9%	N/A

 

	(1)	Production per debt adjusted share is calculated by the Company as production divided by debt adjusted shares. Debt adjusted shares is calculated by the Company as common shares outstanding plus the change in net debt divided by the Company’s current trading price on the TSX, converting net debt to equity. Share price at December 31, 2022 is assumed to be consistent with the share price at December 31, 2021.
	(2)	Weighted average share price throughout the first quarter of 2022.

Capital
Management Measures

Adjusted Funds Flow

Management considers adjusted funds flow to be an important measure of InPlay’s ability to generate the funds necessary to finance capital expenditures. Adjusted funds flow is a GAAP measure and is disclosed in the notes to the Company’s consolidated financial statements for the year ending December 31, 2021. All references to adjusted funds flow throughout this document are calculated as funds flow adjusting for decommissioning expenditures and transaction and integration costs. This item is adjusted from funds flow as decommissioning expenditures are incurred on a discretionary and irregular basis and are primarily incurred on previous operating assets and transaction costs are non-recurring costs for the purposes of an acquisition, making the exclusion of these items relevant in Management’s view to the reader in the evaluation of InPlay’s operating performance. The Company also presents adjusted funds flow per share whereby per share amounts are calculated using weighted average shares outstanding consistent with the calculation of profit (loss) per common share.

Net Debt

Net debt is a GAAP measure and is disclosed in the notes to the Company’s consolidated financial statements for the year ending December 31, 2021. The Company closely monitors its capital structure with a goal of maintaining a strong balance sheet to fund the future growth of the Company. The Company monitors net debt as part of its capital structure. The Company uses net debt (bank debt plus accounts payable and accrued liabilities less accounts receivables and accrued receivables, prepaid expenses and deposits and inventory) as an alternative measure of outstanding debt. Management considers net debt an important measure to assist in assessing the liquidity of the Company.

Supplementary
Measures

“Average realized crude oil
price” is comprised of crude oil commodity sales from production, as determined in accordance with IFRS, divided by the Company’s crude oil production. Average prices are before deduction of transportation costs and do not include gains and losses on financial instruments.

“Average realized NGL price” is comprised of NGL commodity sales from production, as determined in accordance with IFRS, divided by the Company’s NGL production. Average prices are before deduction of transportation costs and do not include gains and losses on financial instruments.

“Average realized natural gas
price” is comprised of natural gas commodity sales from production, as determined in accordance with IFRS, divided by the Company’s natural gas production. Average prices are before deduction of transportation costs and do not include gains and losses on financial instruments.

“Average realized commodity
price” is comprised of commodity sales from production, as determined in accordance with IFRS, divided by the Company’s production. Average prices are before deduction of transportation costs and do not include gains and losses on financial instruments.

“Adjusted funds flow per weighted
average basic share” is comprised of adjusted funds flow divided by the basic weighted average common shares.

“Adjusted funds flow per weighted
average diluted share” is comprised of adjusted funds flow divided by the diluted weighted average common shares.

“Adjusted funds flow per
boe” is comprised of adjusted funds flow divided by total production.

Forward-Looking Information and
Statements

This news release contains certain forward–looking information and statements within the meaning of applicable securities laws. The use of any of the words “expect”, “anticipate”, “continue”, “estimate”, “may”, “will”, “project”, “should”, “believe”, “plans”, “intends”, “forecast” and similar expressions are intended to identify forward-looking information or statements. In particular, but without limiting the foregoing, this news release contains forward-looking information and statements pertaining to the following; the Company’s planned 2022 capital program including wells to be drilled and completed and the timing of the same; 2022 guidance based on the planned capital program including forecasts of 2022 annual average production levels, debt adjusted production levels, adjusted funds flow, free adjusted funds flow, Net Debt/EBITDA ratio, operating income profit margin, and Management’s belief that the Company can grow some or all of these attributes and specified measures; light crude oil and NGLs weighting estimates; expectations regarding future commodity prices; future oil and natural gas prices; future liquidity and financial capacity; future results from operations and operating metrics; future costs, expenses and royalty rates; future interest costs; the exchange rate between the $US and $Cdn; future development, exploration, acquisition, development and infrastructure activities and related capital expenditures, including our planned 2022 capital program; the amount and timing of capital projects; forecasted spending on decommissioning and emission reduction projects in 2022; the expectation that InPlay will be in a positive working capital position by 2022 year end; the expectation that the Company will experience inflationary cost pressures in the second half of 2022; the Company’s planned 2022 abandonment and reclamation program, including the abandonments and reclamations to be completed, forecasted spending on these activities, reduction to our ARO and forecasted LMR rating; the planned release of InPlay’s inaugural sustainability report in the summer of 2022; and methods of funding our capital program.

Forward-looking statements or information are based on a number of material factors, expectations or assumptions of InPlay which have been used to develop such statements and information but which may prove to be incorrect. Although InPlay believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because InPlay can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified herein, assumptions have been made regarding, among other things: the impact of increasing competition; the general stability of the economic and political environment in which InPlay operates; the timely receipt of any required regulatory approvals; the ability of InPlay to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects in which InPlay has an interest in to operate the field in a safe, efficient and effective manner; the ability of InPlay to obtain debt and/or equity financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development and exploration; the timing and cost of pipeline, storage and facility construction and the ability of InPlay to secure adequate product transportation; future commodity prices; that various conditions to a shareholder return strategy can be satisfied; expectations regarding the potential impact of COVID-19 and the Russia/Ukraine conflict; currency, exchange and interest rates; regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which InPlay operates; and the ability of InPlay to successfully market its oil and natural gas products.   

The forward-looking information and statements included herein are not guarantees of future performance and should not be unduly relied upon. Such information and statements, including the assumptions made in respect thereof, involve known and unknown risks, uncertainties and other factors that may cause actual results or events to defer materially from those anticipated in such forward-looking information or statements including, without limitation: the continuing impact of the COVID-19 pandemic and the Russia/Ukraine conflict; changes in our planned 2022 capital program; changes in commodity prices and other assumptions outlined herein; the potential for variation in the quality of the reservoirs in which we operate; changes in the demand for or supply of our products; unanticipated operating results or production declines; changes in tax or environmental laws, royalty rates or other regulatory matters; changes in development plans or strategies of InPlay or by third party operators of our properties; changes in our credit structure, increased debt levels or debt service requirements; inaccurate estimation of our light crude oil and natural gas reserve and resource volumes; limited, unfavorable or a lack of access to capital markets; increased costs; a lack of adequate insurance coverage; the impact of competitors; and certain other risks detailed from time-to-time in InPlay’s continuous disclosure documents filed on SEDAR including our Annual Information Form and our MD&A.

The internal projections, expectations or beliefs underlying the Company’s 2022 capital budget, associated guidance and corporate outlook for 2022 and beyond are subject to change in light of ongoing results, prevailing economic circumstances, commodity prices and industry conditions and regulations. InPlay’s outlook for 2022 and beyond provides shareholders with relevant information on management’s expectations for results of operations, excluding any potential acquisitions, dispositions or strategic transactions that may be completed in 2022 and beyond including, without limitation, the potential impact of any shareholder return strategy that may be implemented in the future. Accordingly, readers are cautioned that events or circumstances could cause results to differ materially from those predicted and InPlay’s 2022 guidance and outlook may not be appropriate for other purposes.

This press release contains future-oriented financial information and financial outlook information (collectively, “FOFI”) about InPlay’s prospective capital expenditures, all of which are subject to the same assumptions, risk factors, limitations, and qualifications as set forth in the above paragraphs. The actual results of operations of InPlay and the resulting financial results will likely vary from the amounts set forth in this press release and such variation may be material. InPlay and its management believe that the FOFI has been prepared on a reasonable basis, reflecting management’s best estimates and judgments. However, because this information is subjective and subject to numerous risks, it should not be relied on as necessarily indicative of future results. Except as required by applicable securities laws, InPlay undertakes no obligation to update such FOFI. FOFI contained in this press release was made as of the date of this press release and was provided for the purpose of providing further information about InPlay’s anticipated future business operations. Readers are cautioned that the FOFI contained in this press release should not be used for purposes other than for which it is disclosed herein.

The forward-looking information and statements contained in this news release speak only as of the date hereof and InPlay does not assume any obligation to publicly update or revise any of the included forward-looking statements or information, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

The key budget and underlying material assumptions used by the Company in the development of its 2022 guidance including forecasted production, operating income, capital expenditures, adjusted funds flow, free adjusted funds flow, FAFF yield, Net Debt, Net Debt/EBITDA, EV/DAAFF, production per debt adjusted share growth are as follows:

		Actuals FY 2021	Previous Guidance FY 2022(1)	Updated Guidance FY 2022
WTI	US$/bbl	$67.91	$90.00	$95.40
NGL Price	$/boe	$37.79	$52.35	$47.80
AECO	$/GJ	$3.44	$4.30	$6.00
Foreign Exchange Rate	CDN$/US$	0.80	0.80	0.79
MSW Differential	US$/bbl	$3.88	$3.00	$2.70
Production	Boe/d	5,768	8,900 – 9,400	8,900 – 9,400
Royalties	$/boe	5.51	9.80 – 10.60	11.50 – 13.00
Operating Expenses	$/boe	12.83	10.00 – 13.00	11.00 – 14.00
Transportation	$/boe	1.11	0.85 – 1.10	1.05 – 1.30
Interest	$/boe	2.67	0.75 – 1.15	0.85 – 1.25
General and Administrative	$/boe	2.83	2.00 – 2.60	2.40 – 2.95
Hedging loss	$/boe	6.20	0.35 – 0.65	1.85 – 2.15
Decommissioning Expenditures	$ millions	$1.4	$2.0 – $2.5	$2.0 – $2.5
Adjusted Funds Flow	$ millions	$47.0	$141 – $150	$147 – $156
Weighted average outstanding shares	# millions	69.8	86.2	86.5
Adjusted Funds Flow per share	$/share	0.67	1.64 – 1.75	1.70 – 1.80

 

		Actuals FY 2021	Previous Guidance FY 2022(1)	Updated Guidance FY 2022
Adjusted Funds Flow	$ millions	$47.0	$141 – $150	$147 – $156
Capital Expenditures	$ millions	$33.3	$58.0	$64.0
Free Adjusted Funds Flow	$ millions	$13.6	$83 – $92	$83 – $92
Shares outstanding, end of year	# millions	86.2	86.2	86.5
Assumed Share Price	$	2.18(4)	3.06	3.66
Market capitalization	$ millions	$188	$264	$317
FAFF Yield	%	7%	31% – 35%	26% – 29%

 

		Actuals FY 2021	Previous Guidance FY 2022(1)	Updated Guidance FY 2022
Adjusted Funds Flow	$ millions	$47.0	$141 – $150	$147 – $156
Interest	$/boe	2.67	0.75 – 1.15	0.85 – 1.25
EBITDA	$ millions	$52.6	$144 – $153	$150 – $159
Net Debt/(Positive working capital, in excess of debt)	$ millions	$80.2	($1) – ($10)	($1) – ($10)
Net Debt/EBITDA		1.5	0.0 – 0.1	0.0 – 0.1

 

		Actuals Q2 2021	Previous Guidance FY 2022(1)	Updated Guidance Q2 2022
Adjusted Funds Flow	$ millions	$8.2		$37 – $40
Interest	$/boe	3.27		1.00 – 1.25
EBITDA	$ millions	$9.8		$38 – $41
Annualized EBITDA	$ millions	$39.2		$154 – $162
Net Debt/(Positive working capital, in excess of debt)	$ millions	$76.1		$50 – $53
Net Debt/EBITDA		1.9	N/A(3)	0.3

 

		Actuals FY 2021	Previous Guidance FY 2022(1)	Updated Guidance FY 2022
Production	Boe/d	5,768	8,900 – 9,400	8,900 – 9,400
Opening Net Debt	$ millions	$73.7	$80.2	$80.2
Ending Net Debt/(Pos. working capital, in excess of debt)	$ millions	$80.2	($1) – ($10)	($1) – ($10)
Weighted average outstanding shares	# millions	69.8	86.2	86.5
Assumed Share price	$	1.16(5)	3.06	3.66
Production per debt adjusted share growth(2)		31%	85% – 95%	70% – 80%

 

		Actuals FY 2021	Previous Guidance FY 2022(1)	Updated Guidance FY 2022
Share outstanding, end of year	# millions	86.2	86.2	86.5
Assumed Share price	$	2.18(3)	3.06	3.66
Market capitalization	$ millions	$188	$264	$317
Net Debt/(Positive working capital, in excess of debt)	$ millions	$80.2	($1) – ($10)	($1) – ($10)
Enterprise value	$millions	$268.2	$253 – $261	$307 – $316
Adjusted Funds Flow	$ millions	$44.1	$141 – $150	$147 – $156
Interest	$/boe	2.67	0.75 – 1.15	0.85 – 1.25
Debt Adjusted AFF	$ millions	$49.7	$144 – $153	$151 – $160
EV/DAAFF		5.4	1.6 – 1.8	1.9 – 2.1

 

	(1)	As previously released March 16, 2022.
	(2)	Production per debt adjusted share is calculated by the Company as production divided by debt adjusted shares. Debt adjusted shares is calculated by the Company as common shares outstanding plus the change in net debt divided by the Company’s current trading price on the TSX, converting net debt to equity. Share price at December 31, 2022 is assumed to be consistent with the current share price.
	(3)	Guidance had not been previously released for this measure.
	(4)	Ending share price at December 31, 2021.
	(5)	Weighted average share price throughout 2021.
	•	See “Production Breakdown by Product Type” below
	•	Quality and pipeline transmission adjustments may impact realized oil prices in addition to the MSW Differential provided above
	•	Changes in working capital are not assumed to have a material impact between Dec 31, 2021 and Dec 31, 2022.

Test Results and Initial Production
(“IP”) Rates
Test results and initial production rates disclosed herein, particularly those short in duration, may not necessarily be indicative of long term performance or of ultimate recovery. A pressure transient analysis or well-test interpretation has not been carried out and thus certain of the test results provided herein should be considered to be preliminary until such analysis or interpretation has been completed.

Production Breakdown by Product Type
Disclosure of production on a per boe basis in this press release consists of the constituent product types as defined in NI 51-101 and their respective quantities disclosed in the table below:

	Light and Medium Crude oil (bbls/d)		NGLS (boe/d)		Conventional Natural gas (Mcf/d)		Total (boe/d)
Q1 2021 Average Production	2,665		802		8,994		4,965
Q4 2021 Average Production	3,156		932		15,589		6,687
2021 Average Production	2,981		782		12,030		5,768
Q1 2022 Average Production	3,571		1,307		20,054		8,221
2022 Annual Guidance	4,320		1,311		21,114		9,150(1)
April 2022 Average Production	3,971		1,447		21,492		9,000

 

Note:
	1.	This reflects the mid-point of the Company’s 2022 production guidance range of 8,900 to 9,400 boe/d.
	2.	With respect to forward-looking production guidance, product type breakdown is based upon management’s expectations based on reasonable assumptions but are subject to variability based on actual well results.

References to crude oil, NGLs or natural gas production in this press release refer to the light and medium crude oil, natural gas liquids and conventional natural gas product types, respectively, as defined in National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities (“Nl 51-101”).

BOE Equivalent
Barrel of oil equivalents or BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different than the energy equivalency of 6:1, utilizing a 6:1 conversion basis may be misleading as an indication of value.  

Oil and Gas Metrics
This presentation may contain metrics commonly used in the oil and natural gas industry, such as “payout”. This term does not have standardized meaning or standardized methods of calculation and therefore may not be comparable to similar measures presented by other companies, and therefore should not be used to make such comparisons. Management uses oil and gas metrics for its own performance measurements and to provide shareholders with measures to compare InPlay’s operations over time. Readers are cautioned that the information provided by these metrics, or that can be derived from the metrics presented in this presentation, should not be unduly relied upon.

“Payout” refers to the time required to pay back the capital expenditures (on a before tax basis) of a project.

Tuesday, May 10, 2022

Gevo (GEVO)
First quarter results meet expectations, but real story is plant progression

Gevo’s mission is to transform renewable energy and carbon into energy-dense liquid hydrocarbons. These liquid hydrocarbons can be used for drop-in transportation fuels such as gasoline, jet fuel, and diesel fuel, that when burned have potential to yield net-zero greenhouse gas emissions when measured across the full lifecycle of the products. Gevo uses low-carbon renewable resource-based carbohydrates as raw materials, and is in an advanced state of developing renewable electricity and renewable natural gas for use in production processes, resulting in low-carbon fuels with substantially reduced carbon intensity (the level of greenhouse gas emissions compared to standard petroleum fossil-based fuels across their lifecycle). Gevo’s products perform as well or better than traditional fossil-based fuels in infrastructure and engines, but with substantially reduced greenhouse gas emissions. In addition to addressing the problems of fuels, Gevo’s technology also enables certain plastics, such as polyester, to be made with more sustainable ingredients. Gevo’s ability to penetrate the growing low-carbon fuels market depends on the price of oil and the value of abating carbon emissions that would otherwise increase greenhouse gas emissions. Gevo believes that its proven, patented, technology enabling the use of a variety of low-carbon sustainable feedstocks to produce price-competitive low carbon products such as gasoline components, jet fuel, and diesel fuel yields the potential to generate project and corporate returns that justify the build-out of a multi-billion-dollar business.

Michael Heim, CFA, Senior Research Analyst, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

Gevo reported revenues of $0.2m versus $0.1m, operating income of ($16.0m) versus ($9.9m) and net income of ($15.7m) versus ($10.1m). Results were in line with our expectations. The company’s cash position is solid at $413 million, and the company is already planning out its financing for plant development. Plans call for the combined use of nonrecourse project financing, corporate debt and shareholder investments.

Projects are moving forward. In January, Gevo announced it had begun the process of bringing its dairy manure-based project online in order to apply for credits. The credits could contribute $16-$20 million annually, and management is prepared for timing issues between production and receipt of credits. In March, it signed several “take-or-pay” agreements with airlines to provide jet fuel made from ethanol at its Net Zero One plant. In total, Gevo has contracts for 200m gallons of fuel annually and has stated a goal of delivering 1 billion gallons of fuel by 2030. Plant operations are on track, although management indicated it has used up some of the slack assumed in its timeline. …

This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision. 

Gevo Reports First Quarter 2022 Financial Results

Research, News, and Market Data on Gevo

Gevo to Host Conference Call Today at 4:30 p.m. EST/2:30 p.m. MST ENGLEWOOD, Colo. – May 9, 2022 – Gevo, Inc. (NASDAQ: GEVO) (“Gevo”, the “Company”, “we”, “us” or “our”) today announced financial results for the first quarter of 2022 and recent corporate highlights. Recent Corporate Highlights On January 31, 2022, Gevo announced that it had begun the process of bringing its dairy manure-based renewable natural gas (“RNG”) project online in northwest Iowa and once this facility has reached steady-state production levels of approximately 355,000 MMBTU, its evaluation period by the California Air Resource Board and the Environmental Protection Agency for Low Carbon Fuel Standard (“LCFS”) and Renewable Identification Number (“RIN”) credits will commence. Our Net-Zero 1 project continues to be on schedule, and we recently received the conditional use permits for the plant and the wind turbines that will help power the project. Verity Tracking continues to develop a proprietary platform based on distributed ledger technology (also known as the “blockchain”) and recently partnered with Farmers’ Edge, a company dedicated to helping farmers track data and improve agricultural decision making, to support development. On March 18, 2022, Gevo signed a “take-or-pay” agreement with British Airways plc to supply 30 million gallons per year of sustainable aviation fuel (“SAF”) over a five-year term. On March 21, 2022, the oneworld® Alliance announced that certain of its members plan to purchase up to 200 million gallons per year of SAF from Gevo over a five-year term expected to commence in 2027. On March 22, 2022, Gevo signed a “take-or-pay” agreement with Delta Air Lines, Inc. to supply 75 million gallons per year of SAF for seven years, replacing the existing agreement signed with Delta in 2019 to purchase 10 million gallons per year. 2022 First Quarter Financial Highlights Ended the quarter with cash, cash equivalents, restricted cash and marketable securities of $429.6 million compared to $475.8 million as of the end of Q4 2021 Revenue of $0.2 million for the quarter compared to $0.1 million in Q1 2021 Loss from operations of $(16.0) million for the quarter compared to $(9.9) million in Q1 2021 Non-GAAP cash EBITDA loss of $(10.3) million for the quarter compared to $(7.8) million in Q1 2021 GAAP net loss per share and non-GAAP adjusted net loss per share of $(0.08) for the quarter compared to $(0.05) in Q1 2021   Commenting on the first quarter of 2022 and recent corporate events, Dr. Patrick R. Gruber, Gevo’s Chief Executive Officer, said “We are moving forward with our Net Zero 1 plans in Lake Preston, South Dakota and couldn’t be more pleased with the progress we have made. We look forward to beginning site preparations later this year and construction early next year. We believe we have a world class team in place to manage the development of this first of its kind, Net-Zero plant and the many additional plants that will be needed to produce this valuable fuel. In northwest Iowa, our dairy RNG facility continues its ramp to stable production and I am very proud of how well that team executed to deliver the project on time and within budget. We intend to build many Net-Zero plants over the coming years and we believe we have all the right people in place to get it done.”   First Quarter 2022 Financial Results During the three months ended March 31, 2022, total revenue was $0.2 million, compared with $0.1 million in the same period in 2021. We sold approximately 35,000 gallons of SAF, isooctane and isooctene from our development facility at Luverne, Minnesota  in first quarter of 2022 compared to nil for the three months ended March 31, 2021 due to the COVID-19 shutdown. Cost of goods sold was $4.2 million for the three months ended March 31, 2022, compared with $2.0 million in the same period in 2021. The majority of first quarter 2022 cost of goods sold was related to a $2.9 million adjustment made to the Company’s finished goods and work in process inventory to net realizable value with the offset recorded in cost of goods sold. Selling, general and administrative expense increased by $5.6 million during the three months ended March 31, 2022, compared with the same period in 2021, due primarily to increases in personnel costs related to strategic new hiring, stock-based compensation, professional fees related to new contracts and higher costs for insurance. Preliminary stage project costs are related to our NW Iowa RNG and Net-Zero projects and consist primarily of research and development expense in addition to selling, general and administrative expenses of the projects. Preliminary stage project costs decreased by $2.2 million during the three months ended March 31, 2022, compared to the same period in 2021. The decrease is primarily due to the capitalization of Net-Zero 1 project costs in the third quarter of 2021, after completing certain project milestones. Net-Zero 1 related costs and RNG related costs were still being expensed in the first quarter of 2021. Gevo incurred a net loss for the three months ended March 31, 2022, of $(15.7) million, compared with a net loss of $(10.1) million during the same period in 2021. Non-GAAP adjusted net loss for the three months ended March 31, 2022, was $(15.7) million, compared with a non-GAAP adjusted net loss of $(10.0) million during the same period in 2021. Among other things, we incurred costs related to our production of isobutanol and hydrocarbon products for market development purposes, process technology and related process engineering work, expenses for additional intellectual property and know-how development for chemical and biological catalysts and related technologies, market development, partnership development, site development work, and Verity Tracking development expenses. Non-GAAP cash EBITDA loss in the three months ended March 31, 2022, was $(10.3) million, compared with a $(7.8) million non-GAAP cash EBITDA loss in the same period in 2021. During the three months ended March 31, 2022, we used $7.9 million in cash for investing activities, of which $71.1 million related to proceeds from sales and maturities of marketable securities, offset by the reinvestment of $31.2 million in marketable securities, and $31.5 million of investments in our capital projects, including $18.3 million in the NW Iowa RNG project, $9.6 million in the Net-Zero 1 project, as well as $3.2 million in development projects at Agri-Energy and Gevo.   Webcast and Conference Call Information Hosting today’s conference call at 4:30 p.m. EST (2:30 p.m. MST) will be Dr. Patrick R. Gruber, Chief Executive Officer, L. Lynn Smull, Chief Financial Officer, Dr. Chris Ryan, Chief Operating Officer, Heather Manuel, Vice President – Investor Relations & Communications and John Richardson, Director of Investor Relations. They will review Gevo’s financial results and provide an update on recent corporate highlights . To participate in the conference call, please dial 1 (833) 729-4776 (inside the U.S.) or 1 (830) 213-7701 (outside the U.S.) and reference the access code 2251249# or through the event weblink https://edge.media-server.com/mmc/p/rkzfqmut A replay of the call and webcast will be available two hours after the conference call ends on May 9, 2022. To access the replay, please dial 1 (855) 859-2056 (inside the U.S.) or 1 (404) 537-3406 (outside the U.S.) and reference the access code 2251249#. The archived webcast will be available in the Investor Relations section of Gevo’s website at www.gevo.com. About Gevo Gevo’s mission is to transform renewable energy and carbon into energy-dense liquid hydrocarbons. These liquid hydrocarbons can be used for drop-in transportation fuels such as gasoline, jet fuel, and diesel fuel, that when burned have potential to yield net-zero greenhouse gas emissions when measured across the full lifecycle of the products. Gevo uses low-carbon renewable resource-based carbohydrates as raw materials, and is in an advanced state of developing renewable electricity and renewable natural gas for use in production processes, resulting in low-carbon fuels with substantially reduced carbon intensity (the level of greenhouse gas emissions compared to standard petroleum fossil-based fuels across their lifecycle). Gevo’s products perform as well or better than traditional fossil-based fuels in infrastructure and engines, but with substantially reduced greenhouse gas emissions. In addition to addressing the problems of fuels, Gevo’s technology also enables certain plastics, such as polyester, to be made with more sustainable ingredients. Gevo’s ability to penetrate the growing low-carbon fuels market depends on the price of oil and the value of abating carbon emissions that would otherwise increase greenhouse gas emissions. Gevo believes that its proven, patented, technology enabling the use of a variety of low-carbon sustainable feedstocks to produce price-competitive low carbon products such as gasoline components, jet fuel, and diesel fuel yields the potential to generate project and corporate returns that justify the build-out of a multi-billion-dollar business. Gevo believes that Argonne National Laboratory GREET model is the best available standard of scientific based measurement for life cycle inventory or LCI. Learn more at Gevo’s website: www.gevo.com Forward-Looking Statements Certain statements in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to a variety of matters, including, without limitation, our financial condition, our results of operation and liquidity, our business development activities, our Net-Zero Projects, our RNG Project, the engineering and design work for our projects, our offtake agreements, our plans to develop its business, our ability to successfully construct and finance our operations and growth projects, our ability to achieve cash flow from our planned projects, the ability of our products to contribute to lower greenhouse gas emissions, particulate and sulfur pollution, Verity Tracking development progress, project development costs and other statements that are not purely statements of historical fact These forward-looking statements are made based on the current beliefs, expectations and assumptions of the management of Gevo and are subject to significant risks and uncertainty. Investors are cautioned not to place undue reliance on any such forward-looking statements. All such forward-looking statements speak only as of the date they are made, and Gevo undertakes no obligation to update or revise these statements, whether as a result of new information, future events or otherwise. Although Gevo believes that the expectations reflected in these forward-looking statements are reasonable, these statements involve many risks and uncertainties that may cause actual results to differ materially from what may be expressed or implied in these forward-looking statements. For a further discussion of risks and uncertainties that could cause actual results to differ from those expressed in these forward-looking statements, as well as risks relating to the business of Gevo in general, see the risk disclosures in the Annual Report on Form 10-K of Gevo for the year ended December 31, 2021 and in subsequent reports on Forms 10-Q and 8-K and other filings made with the U.S. Securities and Exchange Commission by Gevo.     Non-GAAP Financial Information This press release contains financial measures that do not comply with U.S. generally accepted accounting principles (GAAP), including non-GAAP cash EBITDA loss, non-GAAP adjusted net loss and non-GAAP adjusted net loss per share. Non-GAAP cash EBITDA loss excludes depreciation and amortization and non-cash stock-based compensation from GAAP loss from operations. Non-GAAP adjusted net loss and adjusted net loss per share exclude non-cash gains and/or losses recognized in the quarter due to the changes in the fair value of certain of Gevo’s financial instruments, such as warrants, convertible debt and embedded derivatives, from GAAP net loss. Management believes these measures are useful to supplement its GAAP financial statements with this non-GAAP information because management uses such information internally for its operating, budgeting and financial planning purposes. These non-GAAP financial measures also facilitate management’s internal comparisons to Gevo’s historical performance as well as comparisons to the operating results of other companies. In addition, Gevo believes these non-GAAP financial measures are useful to investors because they allow for greater transparency into the indicators used by management as a basis for its financial and operational decision making. Non-GAAP information is not prepared under a comprehensive set of accounting rules and therefore, should only be read in conjunction with financial information reported under U.S. GAAP when understanding Gevo’s operating performance. A reconciliation between GAAP and non-GAAP financial information is provided in the financial statement tables below   Gevo, Inc. Condensed Consolidated Balance Sheets Information (Unaudited, in thousands, except share and per share amounts) March 31, 2022 December 31, 2021 Assets Current assets Cash and cash equivalents $                     44,626 $                     40,833 Marketable securities (current)                      265,813                      275,340 Restricted cash (current)                        16,216                        25,032 Accounts receivable, net                            168                            978 Inventories                          2,735                          2,751 Prepaid expenses and other current assets                          5,861                          6,857 Total current assets                      335,419                      351,791 Property, plant and equipment, net                      156,896                      139,141 Long-term marketable securities                        32,724                        64,396 Long-term restricted cash                        70,238                        70,168 Operating right-of-use assets                          2,209                          2,414 Finance right-of-use assets                        26,887                        27,297 Intangible assets, net                          8,656                          8,938 Deposits and other assets                          5,631                          2,331 Total assets $                   638,660 $                   666,476 Liabilities Current liabilities Accounts payable and accrued liabilities $                     13,410 $                     28,288 Operating lease liabilities (current)                            416                            772 Finance lease liabilities (current)                          4,029                          3,413 Loans payable – other (current)                              89                            158 Total current liabilities                        17,944                        32,631 2021 Bonds payable (long-term)                        66,669                        66,486 Loans payable – other (long-term)                            276                            318 Operating lease liabilities (long-term)                          1,838                          1,902 Finance lease liabilities (long-term)                        17,403                        17,797 Other long-term liabilities                              95                              87 Total liabilities                      104,225                      119,221 Stockholders’ Equity Common stock, $0.01 par value per share; 500,000,000 authorized; 201,752,722 and 201,988,662 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively.                          2,019                          2,020 Additional paid-in capital                   1,107,051                   1,103,224 Accumulated other comprehensive loss                        (1,587)                           (614) Accumulated deficit                     (573,048)                     (557,375) Total stockholders’ equity                      534,435                      547,255 Total liabilities and stockholders’ equity $                   638,660 $                   666,476   Gevo, Inc. Condensed Consolidated Statements of Operations Information (Unaudited, in thousands, except share and per share amounts) Three Months Ended March 31, 2022 2021 Revenue and cost of goods sold Ethanol sales and related products, net $                        169 $                          — Hydrocarbon revenue                             63                             13 Other revenue                             —                             80 Total revenues                           232                             93 Cost of production                        3,090                           901 Depreciation and amortization                        1,091                        1,093 Gross loss                      (3,949)                      (1,901) Operating expenses Research and development expense (including noncash compensation expense of $0.1 million and $0.5 million, respectively)                        1,192                        1,378 Selling, general and administrative expense (including noncash compensation expense of $1.4 million and $0.5 million, respectively)                        9,367                        3,814 Preliminary stage project costs                           507                        2,727 Other operations (including noncash compensation expense of $0.1 million and nil, respectively)                           589                             — Depreciation and amortization                           351                             58 Total operating expenses                     12,006                        7,977 Loss from operations                    (15,955)                      (9,878) Other income (expense) (Loss) gain from change in fair value of derivative warrant liability                             —                            (53) Interest expense                              (2)                              (5) Interest and dividend income                           252                             31 Other income (expense), net                             32                          (152) Total other income (expense), net                           282                          (179) Net loss $                 (15,673) $                 (10,057) Net loss per share – basic and diluted $                     (0.08) $                     (0.05) Weighted-average number of common shares outstanding – basic and diluted 201,925,747 183,566,524   Gevo, Inc. Condensed Consolidated Statements of Comprehensive Income (Unaudited, in thousands, except share and per share amounts) Three Months Ended March 31, 2022 2021 Net loss $                 (15,673) $                (10,057) Other comprehensive income (loss) Unrealized gain (loss) on available-for-sale securities, net of tax                          (974)                             — Adjustment for net gain (loss) realized and included in net income, net of tax                               1                             — Total change in other comprehensive income (loss)                          (973)                             — Comprehensive loss $                 (16,646) $                (10,057)   Gevo, Inc. Condensed Consolidated Statements of Stockholders’ Equity Information (Unaudited, in thousands, except share amounts) Common Stock Paid-In Capital Accumulated Other Comprehensive Loss Accumulated Deficit Stockholders’ Equity Shares Balance, December 31, 2021 201,988,662 $     2,020 $    1,103,224 $                      (614) $             (557,375) $             547,255 Issuance of common stock upon exercise of warrants 4,677             —                   3                           —                       —                          3 Non-cash stock-based compensation —             —             4,044                           —                       —                   4,044 Issuance of common stock under stock plans, net of taxes (240,617)             (1)               (220)                           —                       —                     (221) Other comprehensive loss —             —                 —                         (973)                       —                     (973) Net loss —             —                 —                           —                (15,673)                (15,673) Balance, March 31, 2022 201,752,722 $     2,019 $    1,107,051 $                   (1,587) $             (573,048) $             534,435 Balance, December 31, 2020 128,138,311 $     1,282 $      643,269 $                        — $             (498,172) $             146,379 Issuance of common stock, net of issuance costs 68,170,579           682         457,008                           —                       —                457,690 Issuance of common stock upon exercise of warrants 1,863,058             18             1,099                           —                       —                   1,117 Non-cash stock-based compensation —             —                562                           —                       —                      562 Issuance of common stock under stock plans, net of taxes (121,499)             (1)                   1                           —                       —                        — Net loss —             —                 —                           —                (10,057)                (10,057) Balance, March 31, 2021 198,050,449 $     1,981 $    1,101,939 $                        — $             (508,229) $             595,691   Gevo, Inc. Condensed Consolidated Cash Flow Information (Unaudited, in thousands) Three Months Ended March 31, 2022 2021 Operating Activities Net loss $                    (15,673) $                   (10,057) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation                          4,258                            925 Depreciation and amortization                          1,442                         1,149 Non-cash lease expense                             139                              17 Non-cash interest expense                          1,150                              — Changes in operating assets and liabilities: Accounts receivable                             810                            435 Inventories                              16                              39 Prepaid expenses and other current assets, deposits and other assets                         (2,317)                        (4,273) Accounts payable, accrued expenses and long-term liabilities                         (2,285)                         4,600 Net cash used in operating activities                       (12,460)                        (7,165) Investing Activities Acquisitions of property, plant and equipment                       (31,218)                        (4,630) Acquisition of patent portfolio                             (10)                              — Proceeds from sale and maturity of marketable securities                        71,082                              — Purchase of marketable securities                       (31,993)                              — Net cash used in investing activities                          7,861                        (4,630) Financing Activities Debt and equity offering costs                              —                      (31,683) Proceeds from issuance of common stock and common stock warrants                              —                      489,373 Proceeds from exercise of warrants                                3                         1,117 Net settlement of common stock under stock plans                           (220)                              — Payment of loans payable – other                           (103)                             (27) Payment of finance lease liabilities                             (34)                              — Net cash provided by financing activities                           (354)                      458,780 Net increase (decrease) in cash and cash equivalents                         (4,953)                      446,985 Cash, cash equivalents and restricted cash at beginning of period 136,033 78,338 Cash, cash equivalents and restricted cash at end of period $                   131,080 $                   525,323   Gevo, Inc. Reconciliation of GAAP to Non-GAAP Financial Information (Unaudited, in thousands, except share and per share amounts) Three Months Ended March 31, 2022 2021 Non-GAAP Cash EBITDA: Loss from operations $                 (15,955) $                   (9,878) Depreciation and amortization                        1,442                        1,149 Stock-based compensation                        4,258                           925 Non-GAAP cash EBITDA $                 (10,255) $                   (7,804) Non-GAAP Adjusted Net Loss:     Net Loss $                 (15,673) $                 (10,057) Adjustments: Gain (loss) from change in fair value of derivative warrant liability                              —                            (53) Total adjustments                             —                            (53) Non-GAAP Net Income (Loss) $                 (15,673) $                 (10,004) Non-GAAP adjusted net loss per share – basic and diluted $                     (0.08) $                     (0.05) Weighted-average number of common shares outstanding – basic and diluted 201,925,747 183,566,524 Investor and Media Contact +1 720-647-9605 IR@gevo.com 1 Cash EBITDA loss is a non-GAAP measure calculated by adding back depreciation and amortization and non-cash stock-based compensation to GAAP loss from operations. A reconciliation of cash EBITDA loss to GAAP loss from operations is provided in the financial statement tables following this release. 2 Adjusted net loss per share is a non-GAAP measure calculated by adding back non-cash gains and/or losses recognized in the quarter due to the changes in the fair value of certain of our financial instruments, such as warrants, convertible debt and embedded derivatives, to GAAP net loss per share. A reconciliation of adjusted net loss per share to GAAP net loss per share is provided in the financial statement tables following this release. 3 Adjusted net loss is a non-GAAP measure calculated by adding back non-cash gains and/or losses recognized in the quarter due to the changes in the fair value of certain of our financial instruments, such as warrants, convertible debt and embedded derivatives, to GAAP net loss. A reconciliation of adjusted net loss to GAAP net loss is provided in the financial statement tables following this release. 4 Cash EBITDA loss is a non-GAAP measure calculated by adding back depreciation and amortization and non-cash stock compensation to GAAP loss from operations. A reconciliation of cash EBITDA loss to GAAP loss from operations is provided in the financial statement tables following this release.

 

Investor & Media Contact: Gevo Inc. 345 Inverness Drive South, Building C Suite 310, Englewood, CO 80112 Phone: +1 720-647-9605 Email: IR@gevo.com

Friday, May 06, 2022

Alvopetro Energy (ALVOF)
April production levels remain on target

Michael Heim, CFA, Senior Research Analyst, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

Alvopetro reported April sales volumes of 2,494 barrel of oil equivalent per day (boepd). Results were slightly below March sales volumes of 2,512 boepd and March quarter levels of 2,501 boepd reflecting natural well production declines. Results were slightly above the 2,461 boepd rate we have modeled for the June quarter. The completion of the 182-C1 well in March and the expected completion of the 183-B1 well in May should offset normal well declines and boost overall production going forward.

Alvopetro anticipates announcing 2022-1Q results after market close on May 12th. Management will host a call with investors on May 13th at 10:00 EST. We are expecting revenues of $13.3 million, a 110% annual and 45% sequential increase due mainly to an increase in the price of gas received. We look for EBITDA of $11 million and earnings of $5.9 million ($0.17 per share)….

This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision. 

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