Arrow Exploration Corp. (AIM: AXL): High production on low decline at Mateguafa
• The M-8 well has been brought onstream in the C9 formation (30 ft of oil pay) at 230 bbl/d gross (115 bbl/d net) on a 28/128 choke with 78% water cut. The three C7 intervals did not flow commercial hydrocarbons. The well also encountered 12 ft of net pay in the Gacheta. Although M‑8 is the smallest contributor to field output, it was drilled as a step out the north where it has extended the field with additional drilling opportunities..• Mateguafa production remains robust, with lower‑than‑expected declines and water cut. The M-HZ7 well that was flowing 1,694 bbl/d in mid-December is still flowing 1,300 bbl/d. The M-6 well is currently flowing 465 bbl/d (772 bbl/d in mid December) and the M-5 well produces 780 bbl/d of oil (800 bbl/d in December).
• Arrow’s total production is 4,625 boe/d, above the 4,510 boe/d reported on 18 December and ahead of our 1Q26 forecast of 4,395 boe/d. Given past share‑price sensitivity to production misses, this strong update should be well received.
• With water production at Mateguafa lower than expected, the company has opted to drill M‑9 as a horizontal producer rather than a disposal well. The well has spudded, and success should lift output. Two additional development wells will follow.
• The company held US$11.5 mm in cash at the end of January, ~ US$5 mm above our expectations.
• We maintain our forecasts pending the FY26 budget and reiterate our £0.40/sh target price.
Upcoming drilling
Arrow plans to move the rig to the Icaco pad for an exploration well expected to spud in 2Q26. Five cellars are currently being constructed and should be ready to receive the rig by late February. Our unrisked NAV for Icaco is £0.12/sh. After Icaco, the rig will be redeployed to the RCE, CN, Alberta, and Mateguafa pads for follow‑up development drilling.
Valuation
Our Core NAV is £0.28 per share with a ReNAV of £0.39 per share.
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.
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