Arrow Exploration Corp. (AIM: AXL): Zone at Carrizales Norte with no booked reserves has flowed >1 mbbl/d
• The Ubaque horizon at the Carrizales Norte-1 (CN-1) exploration well was put on three tests, the last of which tested at 1,134 bbl/d of 13.5 API oil on pump. The flow rate was stabilized with a 28.3% water cut (completion fluid). The water cut has been decreasing throughout testing.• This is a very good result, given that no reserves are booked in the Ubaque.
• There is an opportunity to mix the heavy oil from the Ubaque with the C7 light to maximize pricing.
• Arrow plans to complete the test of additional pay zones in the Gacheta and C7 reservoirs over the coming weeks and then decide which zone to bring on production.
• The CN-2 well will be drilled once CN-1 is on stream.
• We continue to anticipate YE23 production of ~5 mboe/d including the all the CN wells. Excluding additional CN wells, YE23 production would be 3.5-4.0 mboe/d.
• Pending further visibility on the discovered volumes in the Ubaque at Carrizales Norte, we re-iterate our target price of £0.50 per share (~our ReNAV).
1Q23 results
1Q23 production was 1,635 boe/d. Net production at Tapir was 1,004 bbl/d in line with our expectations. Net production at Ombu was only 80 bbl/d (we assumed 160 bbl/d) due the shut down caused by on field protests and Canada produced 414 boe/d (we expected 540 boe/d). 1Q23 production in Canda was shut in for short periods due to pipeline and facility constraints. Production has now returned to normal. Ombu and Canada have low value in the current environment (we carry US$9 mm for these two assets in our NAV). At the end of March, Arrow held US$12.4 mm in cash and no debt.
Valuation and cashflow
We have now increased our estimated chance of success for Carrizales Norte from 85% to 100% but have left our estimate of 1.8 mmbbl recoverable resources unchanged pending further details. Our ReNAV has increased from £0.49 per share to £0.52 per share. Assuming US$75/bbl for Brent until YE24, we 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.
Auctus provides Corporate Broking, Equity Research and Investment Banking services.
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