Arrow Exploration Corp. (AIM: AXL): High flow rate at RCE-3
• The RCE-3 well flowed naturally at rates equivalent to 2,000 bbl/d gross (1,000 bbl/d net to Arrow) over four hours after unloading the kill fluid. In the last 24 hours, the well has produced at a rate of 968 bbl/d (483 bbl/d net to Arrow) with 0% water cut.• This is a very good result at the top end of expectations of 500-1,000 bbl/d (300-500 bbl/d net to Arrow). This is also above the rates achieved from the C7A and C7B sands at RCS-1 (~700 bbl/d gross/350 bbl/d net).
• It is also very encouraging that (1) there is no water being produced, (2) the well is choked back on a very small choke and (3) the well is flowing naturally (ie the pump has not been activated yet). These facts all suggest a very high reservoir performance.
• The results of the RCE-3 well are also expected to add 2P reserves.
• The RCE-3 well is the first well on a 10 well programme. The RCE-4 well spud on 01 March and should be in production by the end of the month. It will be followed by the RCE-5 well.
• 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).
Capella still offline
The Capella field continues to be shut in and discussions between the government, protesters and the operator are ongoing. We carry 160 bbl/d production from the field net to Arrow in 1Q23.
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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