Arrow Exploration Corp. (AIM: AXL): CN-2 now in production at 1 mbbl/d. Carrizales Norte to be developed with 21 wells
• 2Q23 production was 2,169 boe/d. This is below our forecast of 2,600 boe/d due to the timing of production ramp-up at Carrizales Norte and some wells at RCE being temporarily offline.• The CN-2 well is now in production at 1,000 bbl/d (500 bbl/d net). This is above the previous reported figure of 680 bbl/d gross (340 bbl/d net).
• The CN-3 well is expected to be put into production in the Ubaque next week.
• Arrow indicated that Carrizales Norte well will be developed with 21 wells. This includes 6 wells in the Carbonera, 5 wells in the Gacheta and 8 wells in the Ubaque. 11 wells are expected to be drilled in 2024.
• A new reserves report for Carrizales Norte is expected to be published by the end of September. Assuming 0.3-0.5 mmbbl are recovered per well would suggest the field holds ~6-10 mmbbl gross resources (3-5 mmbbl net). This is very material in the context of Rio Cravo Este estimated to hold 2.1 mmbbl net.
• As we update our production profile that now incorporates Carrizales Norte, we increase our target price from £0.50 to £0.55 per share (~our ReNAV). This excludes any contribution from exploration success in 2024.
Production and capex profile
We have now factored some delays in our 2023 production ramp-up with only two new RCE wells being onstream by YE23 (only one fully contributing to 4Q23) while the third comes onstream in 1Q24. We have also assumed that the two new Oso Pardo wells will not be onstream before 4Q23. We have taken the cautious view to assume only 500 bbl/d (gross) for each new Ubaque well at Carrizales Norte. We assume US$2 mm net capex for each new CN well. Overall, we now forecast production of ~2.6 mboe/d in 2023, 4.9 mboe/d in 2024 and 5.0 mboe/d in 2025 with capex of ~US$25 mm for 2024 (excluding exploration drilling) and US$16 mm for 2025.
Valuation and cashflow
Arrow held US$10.8mm in cash at the end of June. Our ReNAV is now £0.55 per share. It reflects lower oil price assumption for 4Q23 (US$90/bbl instead of US$100/bbl previously). Assuming US$85/bbl for Brent until YE24, we now forecast that the company will hold~US$12 mm in net cash at YE23, >US$50 mm at YE24 and US$80 mm at YE25.
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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