Next well in exploitation plan spud as production increases
Calgary, Alberta--(Newsfile Corp. - May 30, 2022) - Arrow Exploration Corp. (AIM: AXL) (TSXV: AXL) ("Arrow" or the "Company") announces that the Rio Cravo Este-2 ("RCE-2") well was brought on production on May 23, 2022. The Company has also successfully spud the next well, RCS-1 (Rio Cravo Sur-1) on May 23rd in the Tapir Block of its Rio Cravo Este 2 area, located in the Llanos Basin of Colombia. In addition, Arrow announces the filing of its unaudited interim Financial Statements and Management's Discussion and Analysis ("MD&A") for the quarter ended March 31, 2022, which are available on SEDAR (www.sedar.com). All dollar figures are in U.S. dollars, except as otherwise noted.
OPERATIONS UPDATE
The second well on the Tapir Block, the RCE-2, well was brought on stream slowly on May 23rd. The well initially produced clean oil at high rates but has developed a water cut. The well is currently being managed at reduced rates of 1000 BOPD (500 net). This exceeds forecast pre-drill rates of 360 BOPD net and the water cut has stabilized at less than 20%. Consistent with good production practice, oil flow rates will be adjusted in a timely manner. The Company will produce oil rates around the current level over the intermediate term. The well is expected to payout in less than six months.
The RCS-1 well, was successfully spud on May 23rd and is currently drilling ahead at 1500 feet. RCS-1 is expected to reach Total Depth of 8700 feet on or about June 7th.The well is targeting 6 separate hydrocarbon bearing reservoirs. The Company expects the RCS-1 well to come in 20 feet higher at the Carbonera Formation C-7 level, the primary objective, than was experienced in the RCE-2 well. Drilling and casing of the well will be followed by completion and testing. Total testing time is dependent on the number of zones encountered but is expected to take approximately five days per zone.
The Company is proceeding with a full field development plan to be submitted to Colombian Regulators for approval. The development plan includes additional wells targeting the Carbonera C-7, the Middle Gacheta and the Lower Gacheta, all of which tested commercial rates in the RCE-2 Well. Existing 3-D seismic has been successfully reprocessed and interpreted and is supportive of an expeditious development program. The Company anticipates full field development will be internally funded by cash flow.
Marshall Abbott, CEO of Arrow, commented: "We are encouraged with the results of the RCE-2 well, which add materially to our production, reserves and cashflow. Building on this momentum, we have successfully spud the RCS-1 well, and look forward to providing the results of the zone testing once drilling is complete. We expect that this new well will further increase our production rates, producing additional positive cashflow and reserves for Arrow during an ongoing high commodity price environment."
Continued strong production rates from existing tied-in wells combined with additional and expected production from the RCE-2 well and RCS-1 wells support the Company's objective of achieving a production rate of 3,000 boe/d within 18 months of its AIM listing (October 2021).
2022 FIRST QUARTER INTERIM RESULTS
FINANCIAL AND OPERATING HIGHLIGHTS
(in United States dollars, except as otherwise noted)
Three months ended March 31, 2022
Three months ended March 31, 2021
Financial Highlights:
Total natural gas and crude oil revenues, net of royalties
3,402,962
847,432
Funds flow from (used in) operations (1)
312,951
(371,107
)
Funds flow from (used in) operations per share (1)
Basic
0.00
(0.01
)
Diluted
0.00
(0.01
)
Net income (loss)
(5,431,865
)
(510,405
)
Net income (loss) per share
Basic
(0.03
)
(0.01
)
Diluted
(0.02
)
(0.01
)
Adjusted EBITDA (1)
562,284
(172,417
)
Weighted average shares outstanding
Basic
213,577,686
68,674,602
Diluted
250,941,120
68,674,602
Common shares end of period
213,814,643
68,674,602
Capital expenditures
725,665
97,330
Cash and cash equivalents
8,967,197
6,427,994
Current assets
11,538,944
10,145,687
Current liabilities
3,881,006
12,805,377
Working capital (deficit) (1)
7,657,938
(2,659,690
)
Long-term portion of restricted cash (2)
742,733
490,760
Total assets
39,914,240
27,684,920
Operational Highlights:
Natural gas and crude oil production, before royalties
Natural gas (Mcf/d)
4,221
383
Natural gas liquids (bbl/d)
6
4
Crude oil (bbl/d)
434
174
Total (boe/d)
1,144
242
Operating netbacks ($/boe) (1)
Natural gas ($/Mcf)
$
0.73
$
1.02
Crude oil ($/bbl)
$
48.94
$
35.33
Total ($/boe)
$
20.16
$
27.77
(1)Non-IFRS measures - see "Non-IFRS Measures" section within the first quarter 2022 MD&A (2)Long term restricted cash not included in working capital
DISCUSSION OF OPERATING RESULTS
The Company's first quarter 2022 average corporate production increased by 61% to 1,144 boe/d, compared to the fourth quarter 2021 average production of 712 boe/d. This increase was largely attributable to the Canadian operation's tie-in of the West Pepper well in Alberta, Canada, which was brought on production in December 2021. Arrow's production on a quarterly basis is summarized below.
Average Production (boe/d)
Q1 2022
Q4 2021
Q3 2021
Q2 2021
Q1 2021
Oso Pardo
121
123
137
20
-
Ombu (Capella)
177
190
193
97
-
Rio Cravo Este (Tapir)
136
142
151
147
174
Total Colombia
434
455
481
264
174
Fir, Alberta
73
82
94
67
68
Pepper, Alberta
636
181
-
-
-
TOTAL
1,144
719
575
331
242
For the three months ended March 31, 2022, the Company's average production mix consisted of crude oil and natural gas production in Colombia of 434 bbl/d (2021: 174 bbl/d) and 4,221 Mcf/d (2021: 383 Mcf/d), along with minor amounts of natural gas liquids from the Arrow's Canadian properties.
Subsequent to quarter end, the Company successfully drilled the RCE-2 well, which was spud on April 2, 2022 and targeted a large, three-way fault bounded structure with multiple high-quality reservoir objectives on the Tapir Block in the Llanos Basin of Colombia. The well was drilled to a total measured depth of 9,600 feet and encountered six hydrocarbon bearing intervals totaling 90 net feet of oil pay.
DISCUSSION OF FINANCIAL RESULTS
During Q1 2022 the Company continued to realize good oil and gas prices, as summarized below.
Average Benchmark and Realized Prices
Three months ended March 31
2022
2021
Change
Benchmark Prices
AECO ($/Mcf)
$
3.68
$
2.30
60%
Brent ($/bbl)
$
97.90
$
61.32
60%
West Texas Intermediate ($/bbl)
$
94.94
$
58.13
63%
Realized Prices
Natural gas, net of transportation ($/Mcf)
$
3.65
$
3.02
21%
Natural gas liquids ($/bbl)
$
76.89
$
49.62
55%
Crude oil, net of transportation ($/bbl)
$
73.87
$
55.25
34%
Corporate average, net of transport ($/boe)
$
40.13
$
45.36
-12%
(1)Non-IFRS measures - see "Non-IFRS Measures" section within the MD&A
The Company also continued to realize good operating netbacks, as summarized below.
Operating Netbacks
Three months ended March 31
2022
2021
Natural Gas ($/Mcf)
Revenue, net of transportation expense
$
3.65
$
3.02
Royalties
(0.79
)
(0.32
)
Operating expenses
(2.13
)
(1.68
)
Natural gas operating netback(1)
$
0.73
$
1.02
Crude oil ($/bbl)
Revenue, net of transportation expense
$
73.87
$
55.25
Royalties
(6.24
)
(8.19
)
Operating expenses
(18.69
)
(11.73
)
Crude oil operating netback(1)
$
48.94
$
35.33
Corporate ($/boe)
Revenue, net of transportation expense
$
40.13
$
45.36
Royalties
(5.22
)
(6.49
)
Operating expenses
(14.76
)
(11.11
)
Corporate operating netback(1)
$
20.16
$
27.77
(1)Non-IFRS measure
Arrow experienced lower operating netbacks quarter-over-quarter, decreasing to $20.16/boe in the first quarter of 2022 from $27.35/boe in the fourth quarter of 2021. This decrease is due to higher natural gas production but lower netbacks from natural gas, which resulted in lower revenues per boe of production sold.
The Company incurred in some capital expenditures during the first quarter of 2022 in connection with the drilling of the RCE-2 well. At the end of the quarter, Arrow had a positive working capital position of $7.6 million and a cash position of $8.9 million, which are expected to fund the Company's expenditure plan for the foreseeable future.
For further Information, contact:
Arrow Exploration
Marshall Abbott, CEO +1 403 651 5995
Joe McFarlane, CFO +1 403 818 1033
Brookline Public Relations, Inc.
Shauna MacDonald +1 403 538 5645
Canaccord Genuity (Nominated Advisor and Joint Broker)
Henry Fitzgerald-O'Connor James Asensio Gordon Hamilton +44 (0)20 7523 8000
Auctus Advisors (Joint Broker)
Jonathan Wright (Corporate) Rupert Holdsworth Hunt (Broking) +44 (0)7711 627449
Camarco (Financial PR) James Crothers Rebecca Waterworth Billy Clegg +44 (0)20 3781 8331
About Arrow Exploration Corp.
Arrow Exploration Corp. (operating in Colombia via a branch of its 100% owned subsidiary Carrao Energy S.A.) is a publicly traded company with a portfolio of premier Colombian oil assets that are underexploited, under-explored and offer high potential growth. The Company's business plan is to expand oil production from some of Colombia's most active basins, including the Llanos, Middle Magdalena Valley (MMV) and Putumayo Basin. The asset base is predominantly operated with high working interests, and the Brent-linked light oil pricing exposure combines with low royalties to yield attractive potential operating margins. Arrow's 50% interest in the Tapir Block is contingent on the assignment by Ecopetrol SA of such interest to Arrow. Arrow's seasoned team is led by a hands-on executive team supported by an experienced board. Arrow is listed on the AIM market of the London Stock Exchange and on TSX Venture Exchange under the symbol "AXL".
Forward-looking Statements
This news release contains certain statements or disclosures relating to Arrow that are based on the expectations of its management as well as assumptions made by and information currently available to Arrow which may constitute forward-looking statements or information ("forward-looking statements") under applicable securities laws. All such statements and disclosures, other than those of historical fact, which address activities, events, outcomes, results or developments that Arrow anticipates or expects may, could or will occur in the future (in whole or in part) should be considered forward-looking statements. In some cases, forward-looking statements can be identified by the use of the words "continue", "expect", "opportunity", "plan", "potential" and "will" and similar expressions. The forward-looking statements contained in this news release reflect several material factors and expectations and assumptions of Arrow, including without limitation, Arrow's evaluation of the impacts of COVID-19, the potential of Arrow's Colombian and/or Canadian assets (or any of them individually), the prices of oil and/or natural gas, and Arrow's business plan to expand oil and gas production and achieve attractive potential operating margins. Arrow believes the expectations and assumptions reflected in the forward-looking statements are reasonable at this time, but no assurance can be given that these factors, expectations, and assumptions will prove to be correct.
The forward-looking statements included in this news release are not guarantees of future performance and should not be unduly relied upon. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The forward-looking statements contained in this news release are made as of the date hereof and the Company undertakes no obligations to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
Glossary
Bbl/d: Barrels per day $/Bbl: Dollars per barrel Mcf/d: Thousand cubic feet of gas per day $/Mcf: Dollars per thousand cubic feet of gas Boe/d: Barrels of oil equivalent per day $/Boe: Dollars per barrel of oil equivalent
Qualified Person's Statement
The technical information contained in this announcement has been reviewed and approved by Grant Carnie, senior non-executive director of Arrow Exploration Corp. Mr. Carnie is a member of the Canadian Society of Petroleum Engineers, holds a B.Sc. in Geology from the University of Alberta and has over 35 years' experience in the oil and gas industry.
This announcement contains inside information for the purposes of the UK version of the market abuse regulation (EU No. 596/2014) as it forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018.
NOT FOR RELEASE, DISTRIBUTION, PUBLICATION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO OR FROM THE UNITED STATES, AUSTRALIA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.
