Arrow Exploration Corp. (AIM: AXL): Adding reserves in Colombia
• Arrow’s 1P, 2P and 3P reserves were estimated at respectively 3.4 mmboe, 7.7 mmboe and 11.7 mmboe at YE22.• This includes 2.1 mmboe 2P reserves and 4.3 mmboe 3P reserves at the company’s core assets in Colombia (Tapir and Oso Pardo). Even after deducting 6 months of production (~0.18 mmbbl), the 2P and 3P reserves at the core assets have increased by ~0.08-0.35 mmboe since the end of June 2022 (date of the last reserves report).
• The reserves increase at the core assets reflects the high performance of the RCE wells drilled in 2H22. However the YE22 resources estimates do not account for the drilling campaign at Rio Cravo Este that started in January, which, given the encouraging results to date, might trigger further reclassifications and increases in reserves.
• The results of the RCE-5 well are expected to be announced imminently. The rig will then move to Carrizales Norte where three wells will be drilled.
• We continue to estimate that the FY23 drilling programme could add between 2,800 boe/d and 4,800 boe/d net production (before decline and in a success case). We forecast 3.6 mboe/d production in 2023 (that could prove to be too conservative) and 4.4 mboe/d in 2024.
• We have increased our Core NAV from £0.22 per share to £0.26 per share.
• We re-iterate our target price of £0.45 per share (~our ReNAV).
Other reserves movements
The YE22 2P and 3P reserves at Ombu (4.6 mmboe and 6.1 mmboe respectively) are broadly unchanged compared with the estimates at the end of June. The YE2P and 3P reserves in Canada were estimated respectively at 1.0 and 2.3 mmboe down ~0.5-0.6 mmboe versus the end of June.
Valuation and cashflow
We continue to forecast that the company will hold ~US$25 mm in net cash at YE23 and ~US$60 mm at YE24 under our Brent price assumptions. This represents ~100% of the current market cap. At US$70/bbl for Brent from 2Q23 to YE24, we forecast YE23 net cash of US$15 mm increasing to US$50 mm at YE24 (80% of the current market cap). Our ReNAV of £0.45 per share represents >180% upside to the current share price.
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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