Arrow Exploration Corp. (AIM: AXL): Another good well result
• The RCE-4 well encountered 45 feet of net oil pay, including 25 feet in the Carbonera C7 and 20 feet in the Lower Gacheta. The well will initially be completed in the C7 zone, targeting to be on stream in late March. This will increase Arrow’s production and reserves.• The 25 feet encountered in the Carbonera C7 at RCE-4 compares with 19 feet in the same sand at RCE-3, 16 feet at RCE-2 and 38 feet at RCS-1 (C7A and C7B sands).
• RCE-2 is currently producing ~ 500 bbl/d (net to Arrow), RCS-1 is at >350 bbl/d (net) while RCE-3 is producing ~325 bbl/d (net).
• RCE-3 production is still on natural flow (ie – the pump has not been activated yet) while the other wells are on pump. RCE-3 is not producing any water yet and there is no pressure drop. This is important as it highlights the strong performance of this well. By comparison, the water cut at RCE-2 (the highest producer) increased to ~25% just a few days after first oil. As the pump at RCE-3 is activated, production is expected to increase to ~500 bbl/d (net to Arrow).
• Following completion operations at RCE-4, the rig will then be moved to the RCE-5 location with the intention that RCE-5 will spud within a few days of RCE-4 being brought on production.
• Our 2Q23 net production forecast for the RCE field (1,650 bbl/d) looks low given this level could be reached by the end of March assuming only 350 bbl/d (net) at RCE-4 and before taking into consideration the additional contribution from the RCE-5 well in early 2Q23.
• The RCE-4 and RCE-5 wells are the second and third wells of a 10 well programme. They will be followed by the first of three Carrizales Norte Wells.
• The FY23 drilling programme could add between 2,800 and 4,800 boe/d net production (before decline and in a success case).
• We re-iterate our target price of £0.45 per share (~our ReNAV).
Update at Capella
The Colombian government has agreed to some of the demands of the protesters and is reviewing other requests. Protesters have been leaving the area. The Capella field continues to be shut in and is currently protected by the Colombia military.
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. This represents ~80% of the current share price. Our ReNAV of £0.45 per share represents >140% 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.
Auctus provides Corporate Broking, Equity Research and Investment Banking services.
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