Arrow Exploration Corp. (AIM: AXL): 1.9 mbbl/d at latest CN well. Water disposal infrastructure operational. High net cash.
• The fifth horizontal well at Carrizales Norte (CNB HZ-6) is producing 1.9 mbbl/d of oil (0.95 mbbl/d net to Arrow) with a water cut of 31%. The well reached TD ~ one month ago.• After ~1 month of production, CNB HZ-1 and CNB HZ-3 were also producing >30% water with ~1 mbbl/d oil production (gross). Overall current gross oil production from the existing horizontal wells (CNB HZ-1, HZ-3, HZ-4 and HZ-5 but excluding HZ-6) is 4.36 mbbl/d (2.18 mbbl/d net to Arrow) with each well producing 1-1.16 mbbl/d (gross).
• The water cut at CNB HZ-1, HZ-3, HZ-4 and HZ-5 stands at 52%-71% with the higher end of the range reflecting the older wells. The water cut is in line with our expectations. We are assuming water cut of 60-80% after six months. The water cut at CNB HZ-1 (on production since mid June) is 71%.
• Overall current net production is now 5,305 boe/d (5,835 boe/d six weeks ago). However, Arrow has now completed the water disposal facility at the CNB pad. The facility began operating on 2 November. Combined with the water disposal facilities at the CN and RCE pads, Arrow believes it has the ability to dispose of all water to be produced from those pads and increase the speed of the well pumps, adding initially 600-800 bbl/d of oil production (300-400 bbl/d net to Arrow).
• The CNB HZ-7 development well spud on 22 October and will add further production. The company will then drill the Alberta Llanos prospect (formerly Chorreron-1/Baquiano-1). Our unrisked value for Alberta Llanos is £0.05/sh.
• Arrow plans to utilize two drilling rigs in 2025 to develop the Alberta Llanos prospect and drill development wells at the RCE and CN fields. Also in 2025, the Mateguafa Oeste, Mateguafa Attic and Capullo prospects will be drilled. We re-iterate our £0.70/sh target in line with our ReNAV.
High net cash
Arrow held US$18 mm in cash on 11 November 2024, up US$3 mm compared to the cash position on 23 September. While the company has a very active drilling programme, the cash increase over the last 6 weeks represents an annual cash build-up run rate of US$24 mm per year.
Valuation and cashflow
Pending further details on the 2025 capex programme, we have not changed our forecasts. Our Core NAV based on the company’s 2P reserves is £0.32/sh. Booking 4.35 mmbbl net reserves at Carrizales Noroeste in the next reserve report could add a further £0.25/sh to our Core NAV. Our ReNAV is £0.67/sh.
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.
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