Alvopetro Energy Ltd. (ALV) Earnings Call Transcript & Summary

I second the motion.

Thank you, Nanna. All those in favor, please signify by a show of hands. [Voting]

Contrary, if any? [Voting]

I therefore declare the motion carried. I declare the meeting terminated and let you know that this concludes the formal portion of this meeting, and I'd now like to turn the meeting over to Corey Ruttan, our President and Chief Executive Officer.

All right. Thank you, John. We'd certainly hope that by deferring our meeting until September that we would have been able to have more people in person. Obviously, as a result of the situation, the vast majority of people are attending via webcast. As John mentioned, we will be having a question-and-answer session at the end of the presentation. For those of you online, you can -- at any time during the presentation, you can log your questions through the chat function on the upper right portion of your screens. I wanted to start before I get into the presentation, just on behalf of all of our shareholders, thanking our Board of Directors for their contributions over the past year. I do think they do an excellent job of representing the interest of all shareholders. Secondly, I wanted to take some time. Those of you on the webcast won't be able to see them, but I can assure you they're in the room, some of our staff here, Alison Howard, our Chief Financial Officer; Adrian Audet, our Vice President, Asset Management; Nanna Eliuk, our Exploration Manager; and Heather Bligh, our controller. So thank you, and with that, I'll get started on the presentation. So I'll let everyone read the cautionary statements at their leisure. It's been an extremely exciting year since our last AGM. I guess it's a little over a year now. I think Alvopetro has absolutely been leading the charge in opening up the onshore natural gas business in Brazil. I think -- I'm really proud of the team, what we've accomplished, especially if you consider that the last part of this was finished during the pandemic. Really happy about where we're at. We'll obviously spend a fair bit of time today talking about Caburé because it's 80% of our existing 2P reserves, but I'm also going to try to dedicate a fair amount of time to talk about what's next and the future opportunities for growth. I think one of the really unique things about Alvopetro is that we control 100% of the midstream part of our business, which is really unique for a company our size. By midstream, I mean our pipeline and particularly our gas processing facility. That gas processing facility actually has a capacity of 18 million cubic feet per day, which is right now we're only using about 60% of that capacity. So there's a lot of room for us to grow organically. There's opportunities also for us to generate midstream revenues out of this asset. And I think to put it in perspective, we're the first independent company. And by independent, I mean non-Petrobras or nonstate oil company in Brazil to do this. So we're the only company other than Petrobras that can deliver sales specified gas into a gas distribution company in the country of Brazil, which I think is a pretty remarkable achievement. And I do think that this asset will help us unlock the rest of the natural gas potential in our portfolio. All of this basically hinged off our gas sales agreement with Bahia Gas. I'll talk about that in some detail, but I can tell you we've got a built-in hedge here basically even at the floor pricing within our contract. We can generate extremely strong free cash flow and support our balanced growth and stakeholder return model that I'll talk about later in the presentation. Next, on the ESG side of things, I can assure you our project received very good support locally. It was declared in the public interest by the state of Bahia and the local municipality. I think as demonstrated by the response times we had from the national hydrocarbon regulator, there was very strong support for our project. And we've had very positive and good visibility locally in Brazil following completion of our project. On the greenhouse gas side, compared to fuel oil, we generate about a 53% reduction in greenhouse gas emissions. On an employment basis, we generated over 400 jobs during construction. There's about 50 permanent positions after we've come on production here. And the vast majority of the reinvestment that we're going to make is back into the state of Bahia. Lastly, I think by allowing -- or providing a lower gas price in the state of Bahia helps attract and retain existing industry and has a spin-off benefit in the area that we're operating. Lastly, this is a team that's done this before in Latin America. We have a pretty good track record. I first started working with John Wright, our Chairman, back in the late '90s with Pacalta Resources in Ecuador and then after that into Colombia in 2002. I can assure you that was long before Colombia was popular. One of the approaches we've always tried to take is to bring new ideas into these opportunities. I think John as CEO of Pacalta with the team there did a great job of using 3D seismic on a very broad basis, more as an exploration tool, which was really not done at the time; using long-reach wells off central pads, central processing facilities, high-volume lift pumps; conserving gas in the jungle, a bunch of kind of new ideas. Similarly in Colombia, one of the things that we did is we used high-quality 3D seismic as an exploration tool. I think we were the first or one of the first to do that. We became one of the country's leading exploration companies. Both those companies grew to about 40,000 barrels a day, and we managed exits of both of those businesses on a combined basis for about $2.8 billion of proceeds. So the team here, like I said, I've been working with John since the late '90s. The rest of the team that I introduced here today, we've been working together since the Petrominerales days. In addition, I want to draw attention to our Brazil country manager and our entire Brazilian team, they've been working together for about 12 years. Frederico is doing a great job of managing that team and was instrumental in helping us get to the finish line during the pandemic. And I would say our entire team in both countries has done an amazing job, worked very hard, a lot of perseverance and persistence to kind of get us to this stage, and I'm very thankful for everyone's efforts. So just a quick overview where we're located. We're in Northeast Brazil in the state of Bahia, just north of the city of Salvador. So Salvador is a city of over 3 million people. Just north of the city of Salvador is a main industrial complex called Camacari. This is where most of the gas in the state of Bahia is actually consumed, and it sits just south of our operating area. So our main Caburé project is in the light blue outline that you see in the center of the map. The yellow lands just north of that are 100% Alvopetro assets, and we'll talk about that as we go through the presentation. The Reconcavo Basin, where we're operating, is the oldest producing basin in Brazil. It's been producing since the late '30s. And as a result, you see a lot of discoveries. The green and red blobs are all the existing oil and gas discoveries. An extensive pipeline network. We have overhead power pretty much everywhere and a good infrastructure of roads. So it's a good place to do business, and it's an area that's used to seeing a lot of activity. From a reserve -- or sorry, first of all, talk about our production forecast here for the second half of 2020 at just shy of 1,800 barrels of oil equivalent per day. To be clear, that just comes out of our core Caburé asset, and we'll talk about the areas where we can potentially grow that. Our August production was actually above 1,800 barrels of oil equivalent per day. The EBITDA forecast that you see here, again, are just generated off of our core Caburé project alone, and they're based on the floor pricing within our gas sales agreement. Reserves of close to 8 million barrels of oil equivalent, about 80% of that comes from Caburé. We've got a very strong reserve life index at just shy of 12 years. And on a net asset value per share basis just from our 2P reserves, it's $2.50, almost CAD 2.50. So we're trading at less than 30% of that right now, which I think is a huge opportunity. So in the second quarter of 2018, it was really like the starter's pistol for us. We completed our unitization of our main asset. We signed our gas sales agreement with Bahia Gas. And since that time, I think we've been doing a very good job of delivering on what we said we would do. In the fourth quarter of 2018, we completed a $4 million equity financing. We did our OTCQX listing in the United States. And then through the middle part of 2019, we completed the award of all the construction contracts for the pipeline, the gas processing facility, and we received all our environmental permits to start the construction of the project. At the end of September of 2019, we completed a $15 million debt financing with a group called Cordiant Capital. They're headquartered out of Montreal. They're an emerging market lender. They've been very good to work with, and it was another instrumental piece of the puzzle to kind of get us to the finish line here on our project. Through the middle part of 2019, all the way through to May of 2020, we finished all the construction, both within the unit of all the surface production facilities as well as completed the planned development drilling campaign. That actually allowed us last year to book a 30% increase in our 2P reserves. And at the same time, we constructed the pipeline and finished construction of the -- of our UPG. In early July, our counterparty finished their part of the project, which I'll show you what that was later. But it allowed us to come on production on July 5, which was a huge milestone for us. And like I said, our first month of full production was in August. And we averaged 1,867 barrels of oil equivalent per day, including condensate sales. You'll see later but we can maintain a very flat production profile with very little maintenance capital, and what that does is it allows us to take the vast majority of our cash flow and reinvest it in either growing our business or returning it to stakeholders. So I'll show you what that looks like, but I think we're well positioned for future growth. Just stepping back and talking a little bit about Brazil. Brazil is the largest oil producer in South America. It's the world's eighth largest economy. One of the things we've always tried to do is look for the best combinations of geological prospectivity in fiscal regime, and we absolutely think we have this here. Like I said earlier, we're operating in a proven hydrocarbon basin. We've got royalties between 5.5% and 11%, income tax rates between 15% and 33%. So very good fiscal regime. We've got an attractive gas price. The other dynamic that's happening in Brazil right now is the state oil company, Petrobras, is in the process of divesting of all sorts of assets of entire business lines and basically their entire portfolio of onshore production in Brazil. So some of that's already started to happen and will continue to happen over the coming couple of years. But 2 years from now, the entire onshore landscape is going to look completely different, and I think it's a great place for Alvopetro to be operating at a time like this. Lastly, both the federal government and the national hydrocarbon regulator have both been absolutely dedicated towards trying to improve the investment climate and improving and increasing direct foreign investment. There's a bunch of policy reforms that have benefited our space. You can see the World Bank acknowledge Brazil as having the -- carrying out the most pro business reforms in the past year or couple of years as the case may be now. So we think it's a great place to be operating. So we talk about this platform to unlock the basin-wide natural gas potential. And when I talk about Alvopetro, it's kind of -- it's a combination of upstream and midstream. And by that, what I mean, the upstream part of our business is wells and production and reserves. Most of that today is centered around our Caburé asset. We'll talk about the areas for growth later in the presentation, but they'll come from our Gomo opportunity, which you can see in the red dash outline on the map, just north of our Caburé, asset as well as our portfolio of exploration prospects, of which we have 2 planned for next year that we'll walk through. And you can see they're in very close proximity, the red triangles just to the north of our gas processing facility that you can see on the map there. And the key to really unlocking this natural gas weighted potential was signing our gas sales agreement and constructing this midstream infrastructure, which was all backstopped by our Caburé asset but now opens the door to unlock the rest of this, not only for us, but there's a lot of other operators that have had difficulties monetizing and capitalizing on natural gas opportunities. So we think that will create a bunch of potential third-party revenues and/or business partnerships where we can help accelerate and help others with that challenge that we've already managed. So skipping over to our Caburé asset. Again, this is 80% of our 2P reserves. On the image on the top left-hand side, first of all, sorry, this is a unitized field, so we're 49% working interest. You can see some of our 3D seismic on the top left image. There's actually been 7 wells drilled into the unit now. They're the black dots that you see on that seismic image. There's a main bounding bulk that runs roughly North South. That separates the reservoirs on the west side of the fault. There's one well drilled into there. And the vast majority of the resource sits on the eastern side of that fault, where we now have 6 wells drilled. You can see the cross-section on the bottom image with the 7 different wells and 6 of them into that main reservoir that is shaded in light red or pink. We get very good deliverability from these wells. The production that we've been delivering since we came on production has all been coming out of 3 wells. You can see a very flat production profile projection on the bottom right image. And we can do that with virtually no maintenance capital, which is really unique in a world right now where most of the plays are very capital intensive, very high decline resource plays. A huge proportion of the cash flow needs to be reinvested just to stay flat. So what we can do is instead of doing that, we can take that cash flow and reinvest it both in growing our business as well as returning cash to stakeholders. So moving on to the midstream part of our business. The red pipeline that you see moving from the unit area there, it runs 11 kilometers almost straight west to a gas processing facility that was constructed by Enerflex, another Canadian-listed company. They constructed this under a build, own, operate, maintain model. So not only did they finance the facility, they warrantied the delivery date or construction schedule, which they met, as well as warranting the onstream performance of the plant. So it's great to have a world-class partner in this. They've been very good to work with, and I'll show you a little bit more about what that looks like. We talked about this being the first independently-owned facility in Brazil, and Bahia Gas contributed to the project as well. I'm going to show you that on the upcoming slide here. But again, the fact that we can control this part of our business is really unique for a company our size, and we own this all 100%. So just to talk a little bit about our gas sales agreement with Bahia Gas. Bahia Gas is majority-owned by Mitsui, a large Japanese company, partly owned by the state of Bahia. They're AA-rated by Fitch from a credit perspective. And our contract is broken down into 2 components. There's a firm delivery component for 10.5 million cubic feet a day or 300,000 cubic meters a day and then an interruptible component that would allow us to increase that by about 50%. Like I said, our August sales, including condensate, 1,867 barrels of oil equivalent per day. The gas pricing mechanism within our contract works based on a blend of 3 different international benchmark prices. So it's a combination of Brent oil prices; Henry Hub, U.S. natural gas prices; and U.K. gas prices or NBP, National Balancing Point. And you blend those 3 together, you average them over a relatively long period of time, and that in itself creates a lot less volatility in our commodity prices, and it acts like a natural hedge. And then on top of that, you layer in the fact that we have a floor and a ceiling that both escalate based on U.S. inflation. Currently, they're set at $5.23, by $8.89 per MMBtu. So certainly attractive by North American standards. In addition, what Bahia gas did, you can see on the map here, the black pipeline, their existing city gate was located right within the industrial complex of Camacari, and they built a new 15-kilometer pipeline and a brand-new city gate with a 70 million cubic foot a day capacity right at our physical location. So because we can't be in Brazil and having a field trip, we thought we'd show you a couple of drone photos of what we've been investing in, and we're going to start out in the unit area. So this is our joint development with our partner. This is the central processing facility. It's actually at the lease where the westernmost well was drilled. You can see that in the center of the map sheet, the little red wellhead there. The vast majority of the gas is coming in from those wells on the eastern side of the field along a pipeline that basically runs along that forested area just to the bottom part of that, and it's coming into the facility on the top right-hand side. And then it runs into the smaller vessels at the top or some low-pressure separation, and the larger vessel is the high-pressure separation that was installed last year. Our partner's share of gas runs up that hill to a thermal power project, and our share of gas enters our fiscal meter on the upper left-hand side of the lease. There's a little blue fiscal meter there that you may or may not be able to see. And then it goes on to the -- the left-hand and the lower left-hand portion of the lease is dedicated to Alvopetro. You can see a big area there near the bottom that's vacant. That's available for future compression if we so require. You can see the pipeline -- the pig launcher there at the beginning of our 11-kilometer pipeline on the bottom left-hand side, and you can see it goes underground there, crosses that road and then runs down the image to the west, and I'll show you that in a little bit. The last thing to kind of comment, the tanks on the right-hand side there is just for condensate and any water production that there is. So yes, and we're going to move 11-kilometer straight west and show where the pipeline enters our UPGN, our gas treatment facility. You can see on the bottom left-hand corner of the image, that's where the pipeline comes in. You can see the pig receiver there just across the fence line. The gas then runs up into this -- the facility. It's a mechanical refrigeration unit. It was constructed for the most part in Houston on skids shipped to Brazil and then brought out to the field. There's a lot of fabrication that happened in Brazil as well for all the components and piping to connect all the pieces. But why Enerflex did this is they could basically manage the quality control of the construction as well as the time line by constructing everything off-site in parallel and then bringing it and constructing it. So the skids that you see on the right-hand side of that pipe rack there or the refrigeration units basically and on the left-hand side of the pipe rack are the 3 large compressors that we have for the process. The gas then runs up to the top of the image there. And on the top right of the lease, that's Bahia Gas, is 70 million cubic foot a day city gate, and that's where we deliver our gas. In addition, you can see the tanks there, again, for water and/or condensate storage. That -- it looks like a paved area. Just to the right of that is for our trucks to come in and unload condensate, which is happening every few days, 3 or 4 days at this rate. And the last thing to point out is the area in the middle right-hand portion of the lease, we've reserved that to basically transfer all of our physical inventory in tubulars from a leased location to this location that we own. So we'll be able to save some additional costs there. The other thing is you can see another oil operator off in in the distance and their large facility there. The municipality that you see off in the distance to the top left is the municipality of Mata de Sao Joao. There's a population of about 46,000 people just right there. So that's the best we're going to be able to do during COVID for a field tour. Hopefully, next year, we can maybe do something a little bit different. So this is the model that we're pursuing. It's -- we refer to as a disciplined reinvestment and stakeholder return model. The key thing to point out here is that this is the EBITDA forecast that's generated just from our Caburé 2P reserves. So we think that's a fairly conservative representation of our potential. The height of the left hand or lighter green bars is the EBITDA that we generate even at our floor pricing within our contract, which can generate at this production level, $17 million of EBITDA next year. And then we take the first half of that, and we return it to stakeholders. And by stakeholders, I mean the yellow wedge that you see there is our payments to Enerflex for the gas plant. The dark blue is interest on debt. The light blue is principal repayments on our debt. And then we have green, which is dividends to shareholders; and red, which is income taxes. So from a dividend perspective, we show that here accumulating over, just the time of this graph, to CAD 0.74 per share. So that's higher than our current share price. The other thing to point out is the area above the stakeholder payments, the EBITDA above that, is available for reinvestment in growing our business. And that accumulates to USD 82 million over the life of this graph, and we haven't shown any incremental benefit from those investments. And to put it in perspective, if we can generate on our medium-term objective, which is basically filling our gas processing facility up to 18 million cubic feet a day even at the floor pricing, our EBITDA can increase from $17 million a year to $31 million a year, and that takes into account. Our Caburé project is basically funding a lot of fixed costs here. The last thing to point out is we have an active strategy in place to try to accelerate the dividend payment plan. I think we've been conservative on how we've shown the EBITDA profile. Hopefully, we've been, I think, very conservative in showing an accelerated complete debt repayment. So there's not many companies that could say they're 100% debt-free within the first 2 years of their project coming online. And the fact that we can do that from just a small portion of our EBITDA, I think, really sets us apart. The other thing is, obviously, we've got $82 million of capital here. It doesn't all necessarily have to go into reinvestment. And depending on how some of the exploration works out and all that, we have ability to tweak how we're adjusting that, and that's something that can be debated with our Board in the coming months and quarters. So with that, the last part of the presentation is really going to be focused on where we're going to reinvest our capital. Like I said, our medium-term objective is to fill our gas sales agreement at our gas processing facility and get to the 18 million cubic foot a day production level. How we're going to do this is a combination of our Gomo asset as well as our exploration portfolio, in addition, the Petrobras divestiture process that I talked about earlier. Basically, all of this onshore production is going to be in third-party hands here probably within the next 12 to 24 months. So I think there'll be a lot of opportunities that come out of that, and not to mention midstream opportunities that come out of our facility ownership. The last point to make here is that our current capital budget is just $7.6 million between now and, say, the end of next year. And to put it in perspective, over that same period of time, it represents just 31% of our EBITDA. So I think we've been pretty conservative out of the gate here. So moving on to our Gomo asset. We've got 2 wells drilled into this play. We tested gas in both of them. You see the bottom or the right-hand image here is some of our reprocessed 3D seismic. We can map this geobody. It's between the yellow sequence boundary and the red sequence boundary over a pretty large area. It's about 8.5 sections of land. We booked reserves just very -- around a very small drainage area of the existing wells. Our next steps here, Adrian is just mobilizing to do an optimized production test here that involves the installation of a plunger lift system to get all the completion fluid out of the 183 well bore and then do another production test to help determine the permeability and the ultimate deliverability of these wells, which with success could lead to a pretty large development. In parallel, we're permitting the pipeline extension that you see on the upper left-hand map. It's the thinner rent pipeline that runs straight north from the Caburé unit up to the 183 well, which is a little over 8-kilometers. Moving on to our exploration campaign for next year. We've got 2 wells planned, the 182-C1 and 183-B1 prospects. These are prospects that have been in our inventory for quite some time, but there was no way we were going to allocate more capital to natural gas exploration before we actually started selling gas. So now that we're in that position, we can fund this entirely organically from a small portion of our cash flow. This is the next step for us. And with success at even 1 of these 2 prospects, I think we're in very good shape to achieve our medium-term objective. So geologically, what you're seeing here is this is some of our reprocessed seismic. It's in Agua Grande, so top of the Agua Grande structure. And south of the colored area here, you can see a main black bounding fault that runs roughly northwest to southeast. South of that line is what's referred to as the Camacari low. We're operating in the Miranga low, so this is where the vast majority of the natural gas has been kind of generated from the source rocks. You can see or you can see all the different black lines here, it represents a bunch of different fault blocks within that Miranga low, and what we're targeting right in the center of that in the yellow outlines are 2 undrilled fault blocks. There's 2 -- the 2 best analogies for us are probably the Biriba field just to the north and the Sussuarana field just to the northwest above where we'll be drilling these wells. You can see the analog original gas in place estimates at the bottom of the sheet. The other point to make here, these are multi-zone pre-rift prospects. So pre-rift, this is before the continent separated, the sediments that were laid down at that time. The vast majority of the production and reserves in the basin come from these reservoirs. The other thing is at these depths, the faults tend to be sealed quite well, and I'll show you that on the next slide. The last point I'm going to make, I think, hopefully, everyone saw our last press release, we had GLJ, our reserve evaluators, independently assessed these prospects. And you can see their best estimate of prospective resource here at 4.6 million barrels of oil equivalent and 5.9 million barrels of oil equivalent, respectively. And if you compare that to Caburé, we've got 6.2 million barrels of oil equivalent of Caburé reserves. So with success at the midpoint here, we're close to -- on just one of them, we come close to doubling our existing production and reserve base. So if we shift over to the 183-B1 prospect and then has put together kind of a funky seismic line for us here so that we can try and incorporate both of the analog fields, being Biriba to the left of the cross-section here and Sussuarana in the middle. One of the key things, you can better see all the different fault blocks here. One of the things is even where we've got sand against sand on the other side of the fault, these faults tend to be ceiling, which is a really good sign. The 183-B1 is the well trajectory you see there with the red star on top of it into that undrilled fault block. We've got the license for this. It's a 3,100 meter well, and we'll be in a position to drill it sometime early next year. GLJ's best estimate on this, like I said, is 5.9 million barrels of oil equivalent, and they assigned a 44% chance of success on this prospect. So the next one, 182-C1, we'll zoom in a little bit closer for you this time. This is a 2,900 meter well, again, multi-zone pre-rift prospect. You can see here the prospective sands on the right side of that main fault, with being the Agua Grande and Sergi are actually stacked up against shale and basement on the other side of the fault. So that's an even better place set up arguably. GLJ's best estimate of a prospective resource here, 4.6 million barrels of oil equivalent with a 47% chance of success. So this brings us close to the end of the presentation, and I guess I'm just posing the question. I know all of our shareholders are already invested. But why invest in Alvopetro? I think it's a great time to be a shareholder. To recap some of the things we talked about, we can deliver a very stable production profile with little to no maintenance capital and a very attractive reserve life index. Our gas sales agreement is very attractive. And you combine the floor pricing that we've got, we can generate some very strong cash flows that help support our balanced reinvestment and stakeholder return model. I think the fact that we've got this 100% controlled strategic infrastructure right in the heart of the basin really sets Alvopetro apart. Together, this allows us to generate very strong free cash flow EBITDA of $17 million forecast for next year. And if you consider, this is at a time when most producers are shutting in production and faced with either negative or flat free cash flow, we feel like we're in a pretty unique spot here. Lastly, obviously, a very attractive valuation even at this stage after we've come on production and completely derisked the project, in my opinion. Both on a NAV and an EBITDA multiple basis, we're trading, I think, very cheaply at less than 25% of our net asset value. And then when you consider the magnitude of the exploration catalysts that we've got coming up over a relatively short period of time, I think it's a pretty good time to be investing in Alvopetro. So with that, we're at the point where we can field questions either from the audience here or virtually. I don't know, maybe we can start with here if there are any for now.

We have a relatively small in-person audience. So Alison, I don't know if we have anything.

We do have a couple of questions that have come in from our webcast viewers. The first question, you talked about having a strategy to potentially accelerate dividends. Can you elaborate in a bit more detail on that and how you would choose between additional investment versus dividend?

Yes. So first of all, hopefully -- our first order of business is we're looking at strategies to refinance our current debt, to not only extend the maturity of it, but hopefully reduce the absolute cost of that facility. And I think if we can extend that out over a longer time frame, obviously, we have higher amounts that can be dedicated earlier to dividends. The second thing, if you look at the capital even from the first 18 months of coming on production, there's quite a bit of additional capital that can be potentially allocated to those dividends. So what we're going to do is we want to get the couple of exploration wells drilled to figure what we've got to deal with there and then decide how much capital we need or want to allocate to that. And depending on that answer, even absent the debt refinancing, we have the ability to potentially accelerate that dividend. And more importantly, over the longer term, I do think we very conservatively projected our business model there by just using 2P reserves. So I think when you contemplate reinvesting the amount of money we're talking about, I think we've got a pretty big probability of growing the size of our production and reserves.

The next question regarding the Gomo project, what is the time line for the tests that you just discussed earlier? And what do you see as the high, low and best resource potential for this asset?

Yes. So the timing -- Adrian is just finishing up all the procurement steps here that will dictate the exact day and month that we'll start this, but he's targeting to have it done in the fourth quarter of this year. From a resource perspective, if you look at our -- the reserves that GLJ estimated on this, the 2P number, I think, on a combined basis between the 2 wells is about 6 Bcf. And on the lower side, you can look at our filings, but I think it's closer to 2 Bcf. So if we can be -- certainly, if we're anywhere close to the midpoint of that estimate, I think we have a huge development to do in. But to be clear, we need to production test this and prove what the actual deliverability is. I think that the other thing is these wells were drilled, if you step way back in time, were drilled to target a tight oil play, and we tested a whole bunch of zones. To be clear, I think we can drill a much better, more optimized well as well. So I think there's certainly a lot of room for improvement by optimizing the way we drill and complete and stimulate these wells.

Another question we have from the webcast audience is how has the COVID-19 pandemic impacted your operations to date? And what is expected going forward?

Yes. So I think Brazil has been in the news. Obviously, it's a huge country and a difficult environment for managing this. I think our team has done a great job. I think the fortunate part, our part of the project with the pipeline and the UPGN, was for the most part relatively complete before it got really bad. I think from a pipeline perspective, the good news is it's kind of a naturally socially distanced construction activity. I would say the supply chain was a little bit challenged. And I think quite frankly, our off-taker basically came on -- or became ready for production right at the kind of end of what they were expecting to do. So there was probably a small impact, but I don't think it materially affected us. I think industrial activity probably in the months of April or May was impacted, but it seems to have rebounded back fairly well. And we've got all the standard protocols in place at our facility to kind of manage the risks.

Corey, maybe just for clarity, if we have success of Gomo, are we talking about drilling 5 more wells or 50 more wells? What's the [indiscernible]?

Yes. I think if you -- on a success case basis, I think we were talking about drilling at least 20 additional wells of well pads. And obviously, we would step out and continue to prove up the resource. But when you talk about 8.5 sections of land, that's 8.5 square miles of land, that would not be a very tight well density relative to what's happening in the world today. Excellent. Okay. Well, I think as Alvopetro shareholders, we have an awful lot to be excited about, especially with all the uncertainty in the world today. I'm feeling absolutely fortunate. I can assure you that we've been able to deliver on this. I feel fortunate that we can generate this kind of cash flow for our shareholders. I know the entire team is excited about our next phase here in getting back to drilling wells. I want to reiterate my thanks to the entire team for all the hard work and dedication they put in to get us to this stage. I want to thank our shareholders for their continued support and faith in what we're doing here. The last thing I'll point out on this slide, you can see we've actually got a couple of social media channels, so I encourage you to follow those on Twitter, Instagram and LinkedIn. And I'm certainly looking forward to our next AGM with a much larger in-person contingent and who knows maybe even in Brazil. So with that, thank you, and feel free to reach out to me anytime and contact me directly. Thank you.