Arrow Exploration Corp. (AIM: AXL): Good flow rate at RCE-4
• The RCE-4 well has been put in production. It has produced at a rate of 728 bbl/d (364 bbl/d net to Arrow) of 28.5 API oil with a 1% water cut from the C7-A and C7 Stringer zones over the last 24 hours.• This is a similar result as at RCE-3 (24 h flow rate of 968 bbl/d gross/484 bbl/d net). As was the case at RCE-3, the RCE-4 well is also flowing naturally (ie the pump has not been turned on yet) and is choked back.
• The RCE-5 well spud on 19 March. Target depth is expected to be reached within the next two weeks. The rig will then move to Carrizales Norte where three wells will be drilled.
• With already two new wells (out of 10 in 2023) delivering high flow rates, we continue to estimate that the FY23 drilling programme could add between 2,800 and 4,800 boe/d net production (before decline and in a success case). Our FY23 production forecast of 3.6 mboe/d could be too conservative.
• We re-iterate our target price of £0.45 per share (~our ReNAV).
Increasing production at RCE-3
Production has RCE-3 has increased from 650 bbl/d (325 bbl/d net) as per last week’s press release to 822 bbl/d (411 bbl/d). The pump has not been activated yet. This implies aggregate net production from RCE-1, RCS-1, RCE-2 and RCE-3 of ~1,580 bbl/d. Adding 400 bbl/d for RCE-4 once on pump suggests net production from Tapir could imminently reach ~2,000 bbl/d. RCE-5 could add a further 500 bbl/d in early April while current production in Canada and at Oso Pardo add a further 550-600 boe/d.
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.
Auctus provides Corporate Broking, Equity Research and Investment Banking services.
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