Arrow Exploration Corp. (AIM: AXL): AB wells deliver flow rates above expectations
• Current production ranges between 4,600 and 4,800 bbl/d driven by strong performance from two new horizontal wells at Alberta Llanos (AB). AB-HZ5, onstream for ~2 weeks, is producing 1,790 bbl/d (895 bbl/d net to Arrow), while AB-HZ4, online for over a month, continues to produce 880 bbl/d (440 bbl/d net). Both wells are outperforming expectations in terms of flow rates and pressure, which may positively impact reserves estimates. By comparison, AB-1 and AB=3 had IP rates of 658 bb/d and 580 bbl/d (gross), respectively.• Current production compares favourably with 1Q25 output of 4,085 boe/d.
• The company is currently drilling a short horizontal well in the Ubaque at RCE. The rig at Alberta Llanos will move to Carrizales Norte (CN) to drill two new horizontal Ubaque wells.
• Arrow held US$13.5 mm in cash as of 1 July, down from ~US$25 mm at end-March. This incorporates a reversal of the large positive working capital movement (~US$5 mm) recorded in 1Q25.
• We re-iterate our target price of £0.70 per share.
Lessons from RCE-9 and CN-11
Arrow has also drilled two vertical wells in the C7 formation (rather than the Ubaque) at RCE and CN. RCE-9 was drilled in close proximity to RCS-1, one of Arrow’s strongest producers. As a result, RCE-9 encountered water coning from RCS-1, limiting oil output to 201 bbl/d (101 bbl/d net to Arrow) with a high water cut of 88%. CN-11, also a vertical well, was also drilled close to an existing producing well. CN-11 was brought on stream in April. The well is now producing 143 bbl/d (72 bbl/d net), similarly with 88% water cut. The future wells will be drilled further away from existing producers. Arrow indicates that there is no impact on the number of future drilling locations.
Valuation and forecasts
Following the successful development at Alberta Llanos, we have fully derisked the contingent resources associated with the field. Our production forecasts for 2025 and 2026 have been reduced by ~100 bbl/d. Our Core NAV and ReNAV now stand at £0.39 and £0.69 per share, respectively. Assuming no exploration capex beyond 2025, we project net cash will match the current market capitalisation by early 2028. We also note the company is evaluating a potential share buyback programme.
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.
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