Arrow Exploration Corp. (AIM: AXL): Appraisal drilling results at Alberta Llanos unlock full field development with horizontal wells
• Following the discovery well, Arrow has drilled two new vertical wells at Alberta Llanos, effectively delineating the field.• The AB-2 well at the far northern limit of the field encountered multiple hydrocarbon-bearing intervals with good reservoir characteristics but came in structurally lower than anticipated, resulting in sub-economic oil rates from the Carbonera sandstones. Additional zones can be completed at a later stage.
• The AB-3 well at the extreme south of the field encountered four oil-bearing sands: the Carbonera C7, Guadalupe, Gacheta, and Ubaque, totalling approximately 96 feet of oil pay. The well is currently producing 580 bbl/d gross (290 bbl/d net) of 13.6° API oil with a 9% water cut from the Ubaque.
• The results of the appraisal program at Alberta Llanos confirm the potential to develop the field with approximately six horizontal wells spaced 300 feet apart, starting later in 2025.
• Production in January was over 4,500 boe/d (4,899 boe/d in December) including contributions from AB-3 and AB-1, with production expected to increase with the back-to-back drilling of new horizontal wells from February. We continue to expect over 7,000 boe/d by year-end 2025.
• 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 £0.51 per share.
Drilling programme
Arrow plans to drill 23 wells in 2025, with two already drilled in January. Starting in February, the rig will drill three new horizontal wells at Carrizales Norte (approximately three weeks per well) before moving on to the Mateguafa Oueste prospect. The second rig will begin drilling four directional wells at the Rio Cravo Este field from 2Q25, and then proceed to Alberta Llanos to drill the first two horizontal wells in existing cellars. The FY25 program will also include an additional 11 wells.
Valuation
Net cash at 1 February was US$22.7 mm (+US$3.6 mm vs. 1 January). As we incorporate the current production and the 1Q25 and 2Q25 drilling programme, our Core NAV and ReNAV are now £0.50 per share and £0.78 per share, respectively. These represent over 100% and 230% upside respectively. This is based on Brent prices of ~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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