Arrow Exploration Corp. (AIM: AXL): Stable production, 10% cash increase
• Net production is currently exceeding 4.5 mboe/d, consistent with January levels.• The CN HZ10 well, located in the northern area of the CN field, commenced production on 31 March, delivering 1,183 bbl/d of oil (591 bbl/d net to Arrow) with a 21% water cut from the Ubaque reservoir. The well is in the process of cleaning up, with the water cut gradually decreasing.
• The CN HZ09 well, situated in the southern area of the field, is producing 244 bbl/d of oil (122 bbl/d net) from the Ubaque reservoir. The well initially encountered a high water cut of 90%, which is now stable. Arrow believes the elevated water cut at CN HZ09 is due to its suboptimal location near the CN4 vertical water injector well, resulting in water coning. However, Arrow remains confident that the oil reserves and resources in this part of the field are intact.
• Gross production at Alberta Llanos is now 460 bbl/d (230 bbl/d net) with the recently discovered Guadalupe reservoir now in production.
• Arrow held US$25.1 mm in cash on 01 April (+US$2.4 mm vs 01 February).
• We have changed our target price to £0.70 per share. It reflects (1) a lower production FY25 profile (5.1 mboe/d instead of 6.1 mboe/d) incorporating current production and a more prudent production build-up during 2025 and (2) lower Brent price assumptions for 2Q25 and 3Q25 (US$60/bbl vs. US$75/bbl previously).
Flexible drilling programme
Arrow is currently drilling the CN11 well, a directional, low-risk infill well targeting the C7 formation. The well is expected to begin production by the end of April. As part of the broader C7 reservoir plan at the Carrizales Norte pad, multiple C7 wells are under consideration. In light of declining oil prices, the company is re-evaluating its FY25 drilling programme and intends to prioritize low-risk infill and development wells. Notably, Arrow does not have any contractual obligations requiring the use of additional rigs or the drilling of extra wells.
Valuation
We have not changed our capex assumptions for the time being but logical candidates for deferral would be exploration wells. Our Core NAV is now £0.39 per share. Our new ReNAV of £0.69 per share reflects the previously announced exploration drilling programme. The major element of that programme is the Mateguafa Oeste well (£0.31 per share unrisked NAV). These projections are based on Brent prices of approximately US$63/bbl for 2Q-3Q25 2025 and US$70/bbl thereafter.
Front Range Resources is engaged in oil and natural gas exploration and production focusing on horizontal multi-stage frac development in Montney, Bluesky, Wilrich and Falher formations in the Deep Basin area of west central Alberta.
Auctus Advisors is a specialist Equity Capital Markets and Advisory business with a focus in the Energy Sector.
The partners have complementary skill sets, with decades of experience across Equity Capital Markets, Investment Banking and the Energy industry. We have worked at Société Générale, Canaccord Capital, BMO Capital Markets and Schlumberger. Most recently we have worked together for many years at GMP FirstEnergy.
Auctus has been set up at the beginning of a new decade in which we see significant opportunities in the Energy space. Globally, demand for energy is at record levels and continues to grow. Conversely, investment in traditional energy sources has been severely constrained. We believe this imbalance creates opportunities for both companies and investors.
Auctus provides Corporate Broking, Equity Research and Investment Banking services.
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