Arrow Exploration Corp. ("Arrow" or the "Company"), the high-growth operator with a portfolio of assets across key Colombian hydrocarbon basins, is pleased to provide an update on operational activity and announce the filing of its Interim Condensed (unaudited) Consolidated Financial Statements and Management's Discussion and Analysis ("MD&A") for the three and nine months ended September 30, 2024 which are available on SEDAR (www.sedar.com) and will also be available shortly on Arrow's website at www.arrowexploration.ca.
Q3 2024 Highlights:
· The strongest quarter in Arrow's history for production, revenue, EBITDA and cash flow.
· Successfully drilled the first three horizontal development wells in the Carrizales Norte (CN) field.
· Recorded $21.3 million of total oil and natural gas revenue, net of royalties, representing a 53% increase when compared to the same period in 2023 (Q3 2023: $13.9 million).
· Net income of $6.7 million.
· Adjusted EBITDA(1) of $15.9 million, a 62% increase when compared to 2023 (Q3 2023: $9.8 million) and a 79% increase compared to Q2 2024 ($8.9 million).
· Average corporate production of 4,124 boe/d (Q3 2023: 2,518 boe/d).
· Realized corporate oil operating netbacks(1) of $50.76/bbl.
· Cash position of $16.5 million at the end of Q3 2024.
· Generated operating cashflows of $29.2 million for the nine months ended September 30, 2024 (2023: $13.9 million).
Post Period End Highlights:
· Drilled three additional successful CN horizontal wells.
· Currently mobilizing rig to the Alberta Llanos pad (formerly known as Baquiano) in the Tapir block to spud the exploratory Alberta-1 well in early December.
CNB HZ-7
The sixth horizontal well on the Carrizales Norte "B" pad (CNB HZ-7) is now on production. The well initially flowed at a rate of approximately 800 BOPD gross (400 BOPD net to Arrow) with a 60% water cut. Currently the well has a 65% water cut and gross production of 700 BOPD gross (350 BOPD net).
HZ-7 was drilled lower in the structure than the other horizontal wells and expectations were that the water cut would be higher on this well with lower production. Nevertheless, the HZ7 well is expected to pay out in approximately four months. As pump frequency is increased production should increase as well.
The results of HZ7 and the other horizontal wells have derisked further horizontal development to the north and south of the current horizontal wells at Carrizales Norte.
CNB HZ-7 was spud on October 22, 2024, and reached a target depth of 8,448 feet (true vertical depth) on November 7, 2024. The well was drilled to a total measured depth of 13,893 feet with a horizontal section of approximately 3,612 feet. CNB HZ-7 came on production on November 14, 2024, with the use of an electric submersible pump (ESP).
Please note initial production flows are not necessarily indicative of long-term performance or ultimate recovery and a stabilized production rate will be determined in the first few weeks of operations, in keeping with conservative reservoir management. Further updates will be provided in due course.
Corporate Update
Current net corporate production is approximately 5,500 BOE/D, inclusive of CNB HZ-7. Optimization continues.
Arrow's cash position was approximately $19 million on November 1, 2024. Arrow has maintained a healthy balance sheet with no debt while growing the production base.
Upcoming Drilling
The rig is mobilizing to the Alberta Llanos prospect where Arrow plans to drill a low risk, vertical exploration well with multiple targets including the C7, Gacheta and Ubaque. Thereafter, the Company expects to drill two more vertical wells on the Alberta Llanos pad.
Arrow plans another year of growth in 2025, expecting to drill up to 23 wells utilizing two rigs. Rig 1 will drill the Alberta Llanos prospect and will also be used at the Carrizales Norte development area and the Mateguafa Oeste and Capullo prospects. Rig 2 will drill development wells at RCE and from a new pad, called Carrizales Norte C, which will be positioned to drill horizontal wells in the northern section of Carrizales Norte field and the Alberta Llanos prospect. The Company is also planning a 3D seismic project over the southern area of the Tapir block which will further develop the Icaco and Macoya prospects. Total budgeted capital expenditures planned for 2025 is approximately $50 million, net to Arrow, which is expected to result in production for 2025 being significantly higher than current levels.
Marshall Abbott, CEO of Arrow Exploration Corp., commented:
"The third quarter of 2024 was the best quarter on record for Arrow. Compared to the same quarter last year, corporate production grew by 64% and revenue grew by 53%. Operating income and EBITDA grew by 54% and 62% respectively despite Brent and AECO prices being less than in 2023."
"The highly successful horizontal well program at Carrizales Norte is ongoing with the completion of HZ-7. This program has also demonstrated that the Carrizales Norte reservoir extends further than originally thought and the plan is to exploit the reservoir extension with additional horizontal wells. The Ubaque reservoir has proven to be productive and very economic with the average wells paying out in less than three months. Declines from CNB HZ1, the longest producing horizontal well, were 50% in the first 3 months and 27% from day 90 until now. Individual well performance will vary, but HZ-1 is indicative of declines across the Company's horizontal wells thus far. Expectations are that these horizontal wells will continue to produce for many years to come."
"Arrow is looking forward to 2025 with an approved budget that will see up to 23 wells drilled on the Tapir block. The 2025 budget will be focused on production growth in development areas and low risk exploration. Arrow plans to test the Mateguafa Oeste and Capullo prospects and to develop further the Carrizales Norte and Rio Cravo Este areas using both vertical and horizontal technology."
"Arrow's focus for the remainder of 2024 will be the low-risk exploration well at the Alberta Llanos prospect. The Alberta Llanos prospect is a continuation of the fault from the Carrizales and Carrizales Norte fields and the 3D seismic shows 3-way closure with multi zone potential including the C7, Gacheta and Ubaque. Arrow expects to have drilling and log results before the end of 2024. "
Discussion of Operating Results
The Company continued increasing its production from new wells at CN which allowed the Company to continue to improve its operating results and EBITDA. There has been a decrease in the Company's natural gas production in Canada due to shut in of wells and natural declines.
Average Production by Property
The Company's average production for the three months ended September 30, 2024 was 4,124 boe/d, which consisted of crude oil production in Colombia of 4,042 bbl/d, natural gas production of 461 Mcf/d, and minor amounts of natural gas liquids from the Company's Canadian properties. The Company's Q3 2024 production was 62% higher than its Q2 2024 production and 64% higher when compared to Q3 2023.
The operating netbacks of the Company continued within healthy levels during 2024 due increasing production from its Colombian assets and consistent crude oil prices, which were offset by decreases in natural gas prices.
During Q3 2024, the Company incurred $7 million of capital expenditures, primarily in connection with the drilling of three additional CN wells in the Tapir block. This accelerated tempo is expected to continue during the remainder of 2024, funded by cash on hand and cashflow.