Arrow Exploration Corp. (AIM: AXL): Appraisal drilling results at Alberta Llanos unlock full field development with horizontal wells
• YE24 2P and 3P reserves are estimated at 13.6 mmboe and 22.3 mmboe, respectively. This represents an increase of 15% and 25%, respectively vs. YE23.• Adding back FY24 production of 1.3 mmboe, the 2024 activity program has added approximately 2.8 mmboe of 2P reserves and 5.3 mmboe of 3P reserves at Tapir (overall increase including all the company’s assets: +3.0 mmboe of 2P reserves and +5.7 mmboe of 3P reserves).
• The 2P reserves addition during 2024 is in line with our forecasts (+3.4 mmboe).
• The YE24 reserves estimate includes only a very small contribution from the Alberta Llanos discovery given that only one well had been drilled at YE24. In addition only the Ubaque had been tested by then while oil had also been discovered in other horizons (C7 and Guadalupe). Three wells are now in production. We currently assume 1.8 mmbbl WI resources at Alberta Llanos. This discovery could be developed with approximately six horizontal wells spaced 300 feet apart, starting later in 2025.
• The reserves estimate also does not include any contribution from the CN HZ-9 well drilled in 1Q25 and currently cleaning-up.
• We re-iterate our target price of £0.80 per share. The FY25 exploration programme (excluding Alberta Llanos) is targeting ~10 mmboe prospective resources with an aggregate unrisked NAV of £0.67 per share.
Valuation
With the incorporation of additional reserves and the associated expected development costs in our financial model (they were previously only accounted for in our valuation), we have increased our production forecasts for 2026-2028. Our Core NAV and ReNAV are now £0.46 per share and £0.82 per share, respectively, representing over 170% and 380% upside. These projections are based on Brent prices of approximately US$74/bbl for 2025 and US$70/bbl in later periods.
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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