Arrow Exploration Corp. (AIM: AXL): No flow from the Gacheta but overall reserves addition from CN-1 larger than initially expected
• The Gacheta zones proved unproductive at the CN-1 well location. Management is investigating potential reasons for the lack of productivity and plans to re-evaluate these Gacheta zones in future wells.• The Gacheta zones were located above the Ubaque that flowed at rates >1,100 bbl/d.
• Arrow will put in production the C7A and C7 zones during the course of next week. These are the primary zones at Carrizales Norte.
• Overall, the company’s preliminary interpretation of the CN-1 discovery suggests aggregate reserve capture materially exceeds initial expectations. Larger oil accumulations than expected were encountered at both the Ubaque and the C7 reservoirs. The development of Carrizales Norte could now be expanded beyond the three wells initially envisaged.
• We currently carry 1.8 mmbbl net resources for Carrizales Norte. A 2.7 mmbbl field (+50%) would add £0.05 per share to our Core NAV.
• Pending further visibility on the discovered volumes at Carrizales Norte, we re-iterate our target price of £0.50 per share (~our ReNAV).
Newsflow
Immediately following the CN-1 well being put on production, the rig will move over to spud the Carrizales Norte-2 (CN-2) well. This will be followed by CN-3. The company will then complete a new reserve report.
Valuation and cashflow
Our ReNAV is £0.52 per share. Assuming US$75/bbl for Brent until YE24, we continue to forecast that the company will hold >US$15 mm in net cash at YE23 and >US$50 mm at YE24.
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.
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