Arrow Exploration Corp. (AIM: AXL): The RCE-5 well encounters one of the largest net pay to date in the RCE field
• The RCE-5 well encountered 90 feet of net oil pay across the Carbonera C7 (36 feet) and the Lower Gacheta sands (54 feet).• This is the third successful well in the 2023 campaign. RCE-5 encountered the largest net pay in the current programme.
• The well is expected to add production and reserves and will be put in production in early April.
• The rig will now move to Carrizales Norte where three wells will be drilled.
• We estimate current production at approximately 2,100 2,400 boe/d including 350 bbl/d net at RCE-4 (natural flow) and 400 bbl/d net at RCE-3 (now on pump with the pump rate being progressively increased).
• Overall, the remaining eight wells in the FY23 programme (including RCE-5 not on stream yet) could add a further 2,200 bbl/d to 3,800 bbl/d net production by YE23 (before decline and in a success case). We continue to conservatively forecast 3.6 mbbl/d production in 2023 and 4.4 mbbl/d in 2024.
• We re-iterate our target price of £0.45 per share (~our ReNAV).
Carrizales Norte
Carrizales Norte is a very high chance of success prospect (~75% but we assume 50% in our forecasts). The Carrizales Norte-1 well is a low-risk step-out well considered to be an extension of the Carrizales Field. On success, it could allow the company to book 1.8 mmbbl 2P reserves.
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 under our Brent price assumptions. This represents ~100% of the current market cap. At US$80/bbl for Brent from 2Q23 to YE24, we forecast YE23 net cash of US$18 mm increasing to US$55 mm at YE24 (85% of the current market cap). Our ReNAV of £0.45 per share represents >180% 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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