Arrow Exploration Corp. (AIM: AXL): Material discovery at Alberta Llanos
• The AB-1 (Alberta Llanos) exploration well has encountered four main hydrocarbon bearing reservoirs with a total true vertical depth of 121 feet, including the C7, Gacheta, Guadalupe, and Ubaque formations.• The main pre-drill targets were the C7 and the Ubaque formations. The Gacheta and Guadalupe formations carried a higher risk, and encountering these two formations is a positive.
• The success of this well could open a new area of development and add reserves. Pre-drill, the company estimated 1.2 mmbbl of net prospective resources with a total of three producing wells. With horizontal wells from the CNC pad, they now believe there could be in excess of 5 wells in the Alberta Llanos area.
• Before the well was drilled, the Guadalupe had a lower probablility of success than the C7 or the Ubaque. Initial log interpretation shows very strong potential for the Guadalupe. Because the Ubaque and the Guadalupe are thick reservoirs, horizontal drilling techniques are more likely to be successful. This has positive implication for production.
• The AB-1 well will be tested shortly and then put on production in the Ubaque. Arrow will then drill the AB-2 well to further appraise the discovery.
• We have increased our target price from £0.75 per share to £0.80 per share. We anticipate production will exceed 7 mbbl/d by YE25. The FY25 exploration programme (excluding Alberta Llanos) is targeting ~10 mmboe prospective resources with an aggregate unrisked NAV of £0.38 per share.
Valuation and cashflow
We have increased our chance of success at Alberta Llanos from 50% to 75%. We have also assumed that the discovery holds 1.8 mmbbl (net) rather than 1.2 mmbbl. We have also moved Carrizales Noroeste and Alberta Llanos into our Core NAV that increases from £0.36 per share to £0.54 per share with a ReNAV of £0.80 per share (£0.76 per share previously).
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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