ALV:CC - Alvopetro Energy (ALVOF)(ALV:CA) - Results On Recently-Initiated Company Meet Expectations Dividend Increase Sooner Than Expected

Alvopetro reported fourth quarter and 2021 results that were very much in line with our modeling. Production volumes for 2021 were 2,432 BOE/d versus 1,950 last year and slightly above our 2,370 estimate. Revenues of $35.0 million were in line with our $36.7 million estimate and up more than 200% versus 2020 revenues of $11.3 million. Funds flow from operations was $24.6 million versus our $22.7 million estimate and up 290% from 2020 levels of $6.2 million. All in all, it was a very good quarter and year for the company, albeit not unexpected.The board raised the annual dividend 33% to $0.32 per share, sooner than we had expected. In our initiation report last week, we highlighted the tremendous amount of free cash flow that ALVO will be generating due to an increase in the price it will receive for gas sales. We indicated we believe the company would raise the dividend level that it set last fall. However, we did not expect the board to announce a dividend this soon. Management indicated in SEDAR documents filed with results that it has a strategy of investing half of its fund flow for organic growth and half will be returned to shareholders. We view the dividend increase favorably and note that the 7.6% yield at current prices should start to attract a new class of investors.With results coming in line with expectations, we haver renewed confidence in our Outperform rating and our $10 price target. The stock reacted favorably to the company's results, rising 3.5%. We believe this quarter is just the first of a long string of favorable quarters that will reported by the company as energy prices are reset at higher levels, management expands operations, cash flow rises, and the company announces regular dividend increases and perhaps even share repurchases. Read More >>