Arrow Exploration Corp. (AIM: AXL): Large shareholders increase stake in Arrow
• Canacol Energy has exercised 18.4 mm warrants. The company will now hold 60.1 mm shares in Arrow representing 21.2% of the issued share capital.• Tim Leslie has exercised 10.2 mm warrants, which more than doubles his interest from 7.6 mm shares to 17.8 mm shares. This represents 6.3% of the issued share capital.
• Arrow’s management has exercised 5.7 mm warrants. Management now holds ~6% of the issued share capital. Management has taken aggregate loans of C$675,000 with Arrow that we understand is to fund the exercise of the warrants.
• We view the exercise of warrants and the resulting increase in interests in Arrow as a positive. The concern of investors having to sell shares to exercise their warrants had created an overhang on the share price that should dissipate with this announcement.
• The exercise of warrants will also increase the cash resources of the company.
• We re-iterate our target price of £0.55 per share (~our ReNAV). This excludes any contribution from exploration success in 2024.
Drilling at Rio Cravo Este
Arrow has spudded the RCE-6 well in early October. Two further wells will be drilled at RCE.
Valuation and cashflow
Our ReNAV is unchanged at ~£0.55 per share. We had already assumed the exercise of all the warrants. Assuming US$90/bbl for Brent until YE25, we forecast that the company will hold >US$40 mm in net cash at YE24 and >US$85 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.
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