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viewArrow Exploration Corp.
(
TSX-V:AXL
)

Arrow Exploration is positioning to become a leading independent oil producer in Colombia

Snapshot

The firm’s core assets, the Tapir Block and the Oso Pardo Field, provide it with low-cost production and contain an extensive inventory of low-risk, high-upside development and exploration opportunities

Arrow Exploration Corp. -

Quick facts: Arrow Exploration Corp.

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TSX-V:AXL

Price: 0.13 CAD

Market Cap: $8.93 m
  • Core assets are the Tapir Block and the Oso Pardo Field
  • Offer low-cost production and contain an extensive inventory of low-risk, high-upside, development and exploration opportunities
  • Management and board have expertise in turning around, building, and developing international oil and gas companies

What Arrow Exploration does:

Arrow Exploration Corp. (CVE:AXL) is a rapidly growing oil and gas E&P company. The firm’s core assets are in Colombia - the Tapir Block and the Oso Pardo Field – and provide it with low-cost production and contain an extensive inventory of low-risk, high-upside development and exploration opportunities.

Arrow’s strategy is focused on the development of its opportunity-rich asset base, leading to increasing production and cash flow, a strong balance sheet, and the creation of significant shareholder value. The company’s management and board have expertise in turning around, building, and developing international oil and gas companies, and are positioning Arrow to become a leading independent oil producer in Colombia.

How is it doing:

Arrow Exploration has been making steady progress so far in 2021.

In a brief production update on July 6, Arrow said it had successfully restarted production at its Oso Pardo-1 and Oso Pardo-2 wells at the Oso Pardo Field, located on the Santa Isabel Block, Middle Magdalena Valley Basin in Colombia.

Both wells were restarted on July 4, the company said, with combined production currently approximately 61 barrels of oil per day, which is in addition to the production from the Morsa-1 well, which re-commenced output during the week of June 21, 2021, at a rate of 392 barrels of oil per day.

On July 2, Arrow confirmed plans to raise US$12 million from investors to pursue an expanded capital program, as it moves ahead with a dual listing of its shares on the AIM market of the London Stock Exchange. The company said the proceeds of the capital raise will help fund the drilling of two wells at its Rio Cravo Este property and one well at Carrizales Norte, with the balance used for additional working capital.

The company said it expects to be able to reach a production level of approximately 3,000 barrels of oil equivalent per day (boepd) within about 18 months of the closing of its offering, primarily due to the additional drilling at Rio Cravo Este and Carrizales Norte.

Arrow noted that the dual listing will boost liquidity for shareholders and give it direct access to London’s capital markets, among the global leaders for capital formation in the oil and gas sector, while broadening its investor base. The move will also enhance its reputation and financial standing in Colombia.

Following completion of the offering, Arrow said its shares will be admitted to trading on AIM. They will continue to be listed and to trade on the TSX Venture Exchange in Canada.

As part of its strategy to create more value for its shareholders, Arrow Exploration said it is also in negotiations to dispose of its non-core, 10% working interest in the Ombu heavy oil block. Ombu, located in Colombia’s Caguan-Putumayo basin, contains the Capella oil field.

Inflection points:

  • Completion of London listing on AIM
  • Drilling of wells at Rio Cravo Este and Carrizales Norte News on production from the Oso Pardo Field
  • News on the potential tie-in of 3-26 West Pepper well in Alberta, Canada

What the broker says:

Two London, UK-based stockbrokers, Arden Partners and Auctus Advisors, initiated equity research analyst coverage on Arrow in July 2021.

In the Arden initiation research report, dated July 5, 2021, the company was given a Buy recommendation, with the broker's analyst citing the full upcoming work program of up to 10 wells to be drilled and/or brought on stream between now and the end of 2023.

He went on to note the numerous sources of upside potential: “Our total risked net asset value (NAV) for Arrow is C$0.41/share, going to C$1.51/share unrisked. The full work programme, growth potential and discount to our NAV all support our initiating with a Buy recommendation."

Similarly, the Auctus initiation research report on Arrow, also referenced the company’s growth potential. “Arrow is one of the few micro-cap companies that has the potential to replicate the success of the previous generation,” Stephane Foucaud of Auctus wrote in the report.

He went on: “The company is looking to grow production 3.0 mboe/d by YE22, aggressively increase the ready to drill prospects inventory from an asset located in a prime postcode in Colombia and secure a licence extension to access a lowrisk 14-million-barrel (bbl) development.”

Arrow’s ability to consolidate smaller ‘orphan’ assets was also highlighted by the Auctus analyst as a factor that would make the company more attractive to sector majors.

“On 2.4 mboe/d production in 2022, we forecast US$20 million cashflow at US$61/bbl. At U$$75/bbl, the 2021-2023 Free Cash Flow is greater than Arrow’s Enterprise Value including funding,” Foucaud noted. “Our ReNAV for Arrow with the US$12 million funding required to deliver this production is US$80 million.

Securing an expansion of Oso Pardo and drilling a low-risk well to confirm the geology interpretation has an unrisked value of US$150 million.

What the boss says:

Initially announcing the company's intention to list on London’s AIM market on May 25, Arrow Exploration chief executive, Marshall Abbott said in a statement: “I am delighted to announce our intention to be dual-listed on the AIM and TSX-V."

“We have a company with a high-upside, cash-generative asset base in Colombia, a proven oil & gas jurisdiction. Our growth strategy involves aggressively pursuing a development drilling program for our Rio Cravo Este and Carrizales Norte assets in the prolific Llanos Basin. Furthermore, as we look forward it is our intention to monetize our non-core assets as well as selectively add value-accretive assets to our portfolio,” he added.

Contact the author at jon.hopkins@proactiveinvestors.com

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