Oil Exploration Co. Releases Exciting Operational Updates

Arrow Exploration Corp. (AXL:TSX.V; AXL:LSE) has provided updates on the Rio Cravo Este-6 (RCE-6) well, which is located on the Tapir block in the Llanos basin of Colombia and the Oso Pardo-3 well on the Oso Pardo field, in the Middle Magdalena Valley basin of Colombia. The company has a 50% beneficial interest in the Llanos basin and a 100% working interest in the Middle Magdalena Valley. 

Arrow completed the RCE-6 well in the Carbonera C7 formation, and it has now been put into production. The well is situated in a high-quality upper Carbonera C7 sand, which has a porosity of 27%. It penetrated a 16-foot pay zone and is currently flowing — with the ESP turned off — at 834 barrels of oil per day (BOPD). 

The company, as reservoir stewards, plans to conservatively produce at rates allowing for maximum oil recovery and optimal production rates. 

According to its website, Arrow Exploration Corp. is a junior oil and gas company that "engages in the acquisition, exploration, development, and production of oil and gas properties in Colombia and Western Canada." 

As well as operations at the Tapir block and the Oso Pardo field, Arrow also holds a 10% interest in Colombia's Ombu Block, which contains the Capella discovery, "the most material and largest discovery in Colombia in the past 20+ years." 

It also has 100% working interest in the West & East Pepper natural gas production in Alberta, Canada. 

The Catalyst

According to the company's updates, the RCE-6 well encountered pay in the Ubaque formation. The Ubaque zone was tested for 78 hours and reached a gross production rate of 393 BOPD of heavy crude oil of 13.3 degrees API with a water cut of less than 10%. It's expected that the Ubaque discovery will add reserves and future production for the company. 

Other updates from the company focused on the Tapir forward work program. Drilling began at the Rio Cravo Este-7 well (RCE-7) on November 14 and is targeting the multizone pay stack within the RCE fault-bounded structure. The company will also progress to drilling the RCE 8 development well to evaluate further potential. 

It's expected that the drilling rig will then return to the Carrizales Norte field to begin a multiwell program. 

The Oso Pardo-3 (OP-3) well was spudded on October 27 and has penetrated multiple pay zones at a total of 53 feet in high-quality sands, with an average porosity of 23%.

Analyst Stephane Foucaud of Auctus Advisors has said that he believes the "better-than-expected flows and a discovery from one well plus greeted volumes out of another should positively impact future production totals" of the company. 

Arrow CEO Marshall Abbott said of the developments: "The RCE-6 test results in both the Ubaque formation and Carbonera are material and exciting for the company. The results demonstrate that the Carbonera remains a solid high-volume producer, while the Ubaque formation has proven production that extends beyond the Carrizales Norte complex. Multiple development locations are anticipated based on current results, including horizontal drilling in the Ubaque reservoir in the Carrizales Norte field. Horizontal wells typically produce at higher rates, increasing recovery and the economics of heavy oil fields."

He went on to describe the company's "fully funded, low-risk drilling program" as having "four additional development wells on production before the end of 2023." He noted that the company is "also encouraged by the interpretation of the Tapir 3-D seismic and looks forward to providing further updates in due course."

Demand For Oil and Arrow's Part to Play

Since 2010, there has been a marked increase in demand for oil on a global scale. According to Statista, the road sector "accounts for over one-third of the global demand for oil, largely due to reliance on motor spirits made from petroleum" and is the largest oil-consuming sector in the world. 

The OPEC (Organization of the Petroleum Exporting Countries) predicts that global demand for global oil products will increase to 109.8 million barrels per day by 2045, and demand for diesel and gas /oil will increase to 30.1 million barrels per day within the same timeframe. 

Arrow recently had the achievement of reaching CA$10.3 million in revenue from oil, which reached valuations of CA444.21 per barrel, and natural gas. It reached an average production of 2169 barrels of oil equivalent per day (boe/d) in Q2 of 2023 and attained a cash position of CA$10.8 million at the end of that quarter. 

The company will reveal additional updates from Colombia over the coming weeks. It also plans to drill a second well, Oso Pardo-4, as soon as Oso Pardo-3 is in production. 

Capital Cube noted that Arrow's commodities are "low cost" and that the company is "supplier financed." 

Analyst Stephane Foucaud of Auctus Advisors has said that he believes the "better-than-expected flows and a discovery from one well plus greeted volumes out of another should positively impact future production totals" of the company. 

Auctus has reiterated its £0.55 per share price target for Arrow Exploration, which currently trades at approximately £0.17 per share. This return to target would represent a return of 224% for investors.

Regarding the results from the RCE-6 well in the Ubaque formation, Foucaud said that "further drilling will be required to estimate the areal extent."

Zeus has concluded that, since "the company . . . has a history of adding new assets via acquisition" and following the positive results from drilling, it expects "ongoing drilling activity and production increases on the back of this, and value the stock in-line with our 37.6p total risked NAV." It's valuation of Arrow "remains unchanged." 

Capital Cube measured Arrow's recent results amongst a peer group that includes Geodrill Ltd., CanAsia Energy Corp., and Major Drilling Group International Inc.

It found that a "narrowing of operating margins contributed to [a] decline in earnings" and asserted that Arrow has a defined revenue focus. It also noted that Arrow's commodities are "low cost" and that the company is "supplier financed." 

Ownership and Share Structure

According to Reuters, management and insiders own 10.70% of the company.

Management with shares include Tim Leslie, who owns 5.95% of the company with 17.01 million shares, and Director Gage Jull, who owns 2.10% with almost 6 million shares. CEO Marshall Abbott owns 1.88% with 5.37 million shares. 

21.80% is with strategic investors. Canacol Energy Ltd. owns 21.01%, with 60.07 million shares, and Spreadex Ltd. has 0.79%, with 2.25 million.

9.64% is owned by institutions. Edale Capital LLP has 7.01%, with 20.05 million shares, and Yacktman Asset Management LP has 2.62%, with 7.50 million.

The rest is held by retail investors.

There are 238.07 million shares outstanding, with 173.64 free float traded shares. The company has a market cap of CA$54.28 million and trades in a 52-week period between CA$14.10 and CA$26.10.

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