REG - Arrow Exploration - Operations Update and Mid-Year Reserves Results

Arrow ExplorationAnnouncement

24/08/2022 07:00

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RNS Number : 9912W  Arrow Exploration Corp.  24 August 2022

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ARROW ANNOUNCES OPERATIONS UPDATE, UPCOMING PROJECTS AND

MID-YEAR RESERVES RESULTS

Drilling success and Colombian oil prices resulted in a 164% increase in 1P
NPV, 79% increase in 2P NPV and 3P NPV increased by 67%, 2P reserve
replacement ratio was 219%

CALGARY, August 24, 2022 - Arrow Exploration Corp. (AIM: AXL; TSXV: AXL)
("Arrow" or the "Company"), is pleased to provide an operations update and
announce the results of the 2022 mid-year reserve evaluation by Boury Energy
Consultants Ltd. ("BouryGEC") as at 30 June 2022.

Highlights

·      Proved (1P) Reserves:

o  PDP reserves increased 25% to 1.292 MMBls mainly from the Tapir Block.

o  1P reserves also increased by 17% to 3.567 MMBls reflecting the positive
results from the recent drilling campaign.

o  1P Net Present Value, before tax, discounted at 10% ("NPV-10"), is
significantly higher with an increase of 164% to US$ 77.7 million.

 

·      Proved plus Probable (2P reserves)

o  2P reserves increase to 7.864 MMBls of oil.

o  NPV-10 increased to US$ 150.4 million from US$ 84.1 million as at December
31, 2021, a 79% increase.

 

·      Proved plus Probable plus Possible (3P reserves):

o  3P reserves volume increase to 11.759 MMBls.

o  NPV-10 grew 67% to US$ 223.6 million from US$ 133.9 million as at 31
December 2021.

 

·      Oil price and new hydrocarbon accumulations resulted in positive
additions in reserves in all categories.

 

·      Additional drilling targets have been identified as a result of
the H1 2022 drilling campaign. A five well program will initiate in Q4 2022
with two wells in pursuit of further low risk exploitation on the RCE
structure. As well, two wells are planned to develop the Carizales Norte
structure A downdip well will also be drilled at RCE to test the stratigraphic
nature of the oil accumulation. This well will also serve as a water disposal
well.

 

Operational Update

Corporate production as of August 15, 2022, is approximately 1,450 boe/d.
Production from the RCE-2 well is approximately 540 bbls/d net (1,080 bbls/d
gross) producing from the C7A and C7 stringer zones. Production from the RCS-1
well is approximately 190 bbls/d net (380 bbls/d gross) producing only from
the new C7B zone at this time. In addition, organic growth opportunities for
Arrow are advancing, with the RCE-3 and RCE-4 wells on the Tapir Block in
Colombia expected to commence drilling in Q4 2022. Additional completions will
be performed in Q4 on the RCE-1 and RCS-1 wells to further exploit known
hydrocarbon accumulations. Current production from the RCE 1 and RCS 1 wells
is ahead of forecast in aggregate.

Arrow expects to re-complete the RCE-1 well, in the C7 stringer zone.  Arrow
is currently just producing from the C7B zone at RCS-1 and plans to
re-complete this well, expecting to open the C7A and C7 stringer zones in Q4
2022. This will have a material impact on overall RCE production.

The West Pepper well, owned 100% by Arrow and located in Canada, is producing
at 240 boe/d currently, with production curtailed due to third party facility
constraints. Expectations are that production will return to approximately 450
boe/d in September 2022. In Q3 2022, Arrow expects to tie-in the East Pepper
gas well in Canada (100% owned by Arrow). This second well, along with
continuing and expected robust natural gas prices in North America, is
expected to further enhance the value of the Pepper field.

In addition to the 3D seismic survey Arrow purchased earlier this year, the
Company intends to execute on a 130 square kilometer 3D seismic survey on the
northwest section of the Tapir block in Colombia. This will further delineate
low risk exploration fault structures that have been identified on 2-D seismic
data. The shooting of this seismic survey is expected to begin in Q1 2023.

2022 Mid-year Reserves Exercise

NPV-10 values increased 164% for 1P and 79% for 2P reserves.

The recent drilling campaign in Rio Cravo (Tapir Block, Colombia) was very
successful, resulting in the Company finding four more hydrocarbon
accumulations and increasing its 1P oil reserves from 236 MBbls to 853 MBbls
of oil. These results allow Arrow to better understand the continuity of the
reservoirs in RCE and provide a foundation for the next phase of exploitation
and material reserve additions at RCE.

Total Arrow reserves increased from 3.04 MMBOE to 3.56 MMBOE for 1P, and from
7.42 MMBOE to 7.86 MMBOE for 2P.

2022 Mid-Year Reserves Summary

The summary below summarizes Arrow's reserves as of June 30, 2022, as
presented in the reserves report prepared by BouryGEC, an independent
qualified reserves evaluator. The figures in the following tables have been
prepared in accordance with the standards contained in the most recent
publication of the Canadian Oil and Gas Evaluation Handbook (the "COGEH") and
the reserve definitions contained in National Instrument 51-101 - Standards of
Disclosure for Oil and Gas Activities ("NI 51-101"). In addition to the
summary information disclosed in this announcement, more detailed information
will be included in Arrow's reserves evaluation report  on certain properties
as at 30 June 2022 to be filed on SEDAR (www.sedar.com (http://www.sedar.com)
) and posted on Arrow's website (www.arrowexploration.ca
(http://www.arrowexploration.ca) ).

Marshall Abbott, CEO of Arrow Exploration Corp., commented: "Arrow delivered
an increase in volumes and values in all reserve categories. We are pleased
with the results of the BouryGEC independent reserves evaluation, which
reinforces the significant value of our Colombian and Canadian assets."

 

Brent Crude Oil Price and AECO Gas Price Forecasts in BouryGEC Reserves
Evaluation

 Year-End Forecast:       2022     2023    2024    2025    2026    2027    2028

 Brent (US$/bbl)          $74.50   $72.00  $69.50  $71.00  $72.00  $74.00  $76.00

As at 31 December 2021

 Brent (US$/bbl)          $110.00  $94.00  $85.00  $81.00  $82.62  $84.27  $85.96

As at 30 June 2022

                          C$6.58   C$4.68  C$4.26  C$4.01  C$4.09  C$4.17  C$4.25

 AECO-C Spot (C$/MMbtu)

As at 30 June 2022

 

MID-YEAR RESERVES

Possible reserves are those additional reserves that are less certain to be
recovered than probable reserves. There is a 10% probability that the
quantities recovered will equal or exceed the sum of proved plus probable plus
possible reserves.

(1) "Core" assets include Arrow's share of reserves in the Tapir Block, the
Santa Isabel Block (Oso Pardo), and Mateguafa. Arrow's 50% interest in the
Tapir Block is contingent on the assignment by Ecopetrol SA of such interest
to Arrow.

(2) "Non-core" assets include the Ombu Block (which includes the Capella
Field)

(3) "Canada" assets include Fir and Pepper

Mid-Year Working Interest Gross Reserves - Breakdown by Category and Country
(Mboe)

                                            2022 Mid  2021    Change  % Change
 Proved developed producing                 1,292     1,037   255     25%

 Colombia assets (core)                     654       287

 Colombia assets (non-core)                 110       117

 Canada assets                              528       633

 Proved developed non-producing             382       363     19      5%

 Colombia assets (core)                     63        63

 Colombia assets (non-core)                 58        42

 Canada assets                              261       258

 Proved undeveloped                         1,893     1,649   244     15%

 Colombia assets (core)                     337       88

 Colombia assets (non-core)                 1,556     1,561

 Canada assets                              -         -

 Total Proved                               3,567     3,049   518     17%

 Probable                                   4,297     4,372   -75     -2%

 Colombia assets (core)                     859       1,232

 Colombia assets (non-core)                 2,744     2,446

 Canada assets                              694       694

 Total Proved plus Probable                 7,864     7,421   443     6%

 Possible                                   3,895     4,120   -225    -5%

 Colombia assets (core)                     1,960     1,933

 Colombia assets (non-core)                 1,574     1,828

 Canada assets                              361       359

 Total Proved plus Probable & Possible      11,759    11,541  218     2%

 

Mid-Year Net Present Value at 10% - Before Tax (US$ Thousands)

 Category                                   2022 Mid  2021     % Change

 Proved

 Developed Producing                        40,054    11,406   251%

 Non-Producing                              4,628     2,113    119%

 Undeveloped                                33,024    15,889   108%

 Total Proved                               77,706    29,408   164%

 Probable                                   72,721    54,738   33%

 Total Proved plus Probable                 150,427   84,146   79%

 Possible                                   73,198    49,842   47%

 Total Proved plus Probable & Possible      223,626   133,988  67%

 

Mid-Year Net Present Value at 10% - After Tax (US$ Thousands)

 Category                                   2022 Mid  2021    % Change

 Proved

 Developed Producing                        32,833    11,170  194%

 Non-Producing                              4,072     2,112   93%

 Undeveloped                                19,899    11,705  70%

 Total Proved                               56,804    24,987  127%

 Probable                                   45,169    33,886  33%

 Total Proved plus Probable                 101,973   58,873  73%

 Possible                                   45,923    29,959  53%

 Total Proved plus Probable & Possible      147,895   88,832  66%

 

Forecast Revenues and Costs - Undiscounted (US$ millions)

(1) BT = Before Taxes and AT = After Taxes

(2) Operating Cost less processing and other income

(3) DC = Development Cost

 Category                                   Revenue (3)  Royalties  Operating Cost  DC    Abandonment & Reclamation       BT Future Net Revenue (1)   Income Taxes  AT Future Net Revenue (1)

                                                                    (2)
 Total Proved                               192.6        19.0       42.0            27.9  4.1                            99.5                         25.8          73.7

 Total Proved plus Probable                 413.3        38.8       81.0            63.9  6.6                            222.9                        67.6          155.3

 Total Proved plus Probable & Possible      660.0        68.6       134.0           79.1  7.9                            370.4                        117.2         253.1

 

 

2022 Mid-Year Gross Reserves Reconciliation (Mboe)

                      Total Proved  Total Proved plus Probable  Total Proved plus Probable & Possible
 31-Dec-21            3,049         7,421                       11,540

 Technical Revisions  651.2         298.3                       295.9

 Economic Factors     75.2          351.2                       130.9

 Production           -207.6        -207.6                      -207.6

 30-Jun-22            3,568         7,863                       11,759

 

Exercise of Warrants and Total Voting Rights

The Company also announces that pursuant to the receipt of notices for the
exercise of warrants issued in October 2021, it has issued 208,598 new common
shares of no par value ("Common Shares").

The application is being made for 208,598 new Common Shares to be admitted to
trading on AIM ("Admission"). It is expected that Admission will occur on
August 26, 2022. Following Admission, the Company will have 216,175,741 Common
Shares in issue with voting rights and admitted to trading on AIM. This figure
may be used as the denominator for the calculations by which they will
determine if they are required to notify their interest in, or a change to,
their interest in the share capital of the Company under the Financial Conduct
Authority's Disclosure Guidance and Transparency Rules.

 

For further Information, contact:

 Arrow Exploration
 Marshall Abbott, CEO                                                                   +1 403 651 5995
 Joe McFarlane, CFO                                                                     +1 403 818 1033

 Brookline Public Relations, Inc.

 Shauna MacDonald                                                                       +1 403 538 5645

 Canaccord Genuity (Nominated Advisor and Joint Broker)
 Henry Fitzgerald-O'Connor                                                              +44 (0)20 7523 8000

 James Asensio

 Gordon Hamilton

 Auctus Advisors (Joint Broker)
 Jonathan Wright (Corporate)                                                            +44 (0)7711 627449
 Rupert Holdsworth Hunt (Broking)

 Camarco (Financial PR)
 James Crothers                                                                         +44 (0)20 3781 8331
 Rebecca Waterworth
 Billy Clegg

 

About Arrow Exploration Corp.

Arrow Exploration Corp. (operating in Colombia via a branch of its 100% owned
subsidiary Carrao Energy S.A.) is a publicly traded company with a portfolio
of premier Colombian oil assets that are underexploited, under-explored and
offer high potential growth. The Company's business plan is to expand oil
production from some of Colombia's most active basins, including the Llanos,
Middle Magdalena Valley (MMV) and Putumayo Basin. The asset base is
predominantly operated with high working interests, and the Brent-linked light
oil pricing exposure combines with low royalties to yield attractive potential
operating margins. Arrow's 50% interest in the Tapir Block is contingent on
the assignment by Ecopetrol SA of such interest to Arrow. Arrow's seasoned
team is led by a hands-on executive team supported by an experienced board.
Arrow is listed on the AIM market of the London Stock Exchange and on TSX
Venture Exchange under the symbol "AXL".

Cautionary Statement

This press release contains various references to the abbreviation "BOE" which
means barrels of oil equivalent. Where amounts are expressed on a BOE basis,
natural gas volumes have been converted to oil equivalence at six thousand
cubic feet (Mcf) per barrel (bbl). The term BOE may be misleading,
particularly if used in isolation. A BOE conversion ratio of six thousand
cubic feet per barrel is based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead.

Forward-looking Statements

This news release contains certain statements or disclosures relating to Arrow
that are based on the expectations of its management as well as assumptions
made by and information currently available to Arrow which may constitute
forward-looking statements or information ("forward-looking statements") under
applicable securities laws. All such statements and disclosures, other than
those of historical fact, which address activities, events, outcomes, results
or developments that Arrow anticipates or expects may, could or will occur in
the future (in whole or in part) should be considered forward-looking
statements. In some cases, forward-looking statements can be identified by the
use of the words "continue", "expect", "opportunity", "plan", "potential" and
"will" and similar expressions. The forward-looking statements contained in
this news release reflect several material factors and expectations and
assumptions of Arrow, including without limitation, Arrow's evaluation of the
impacts of COVID-19, the potential of Arrow's Colombian and/or Canadian assets
(or any of them individually), the prices of oil and/or natural gas, and
Arrow's business plan to expand oil and gas production and achieve attractive
potential operating margins. Arrow believes the expectations and assumptions
reflected in the forward-looking statements are reasonable at this time, but
no assurance can be given that these factors, expectations, and assumptions
will prove to be correct.

The forward-looking statements included in this news release are not
guarantees of future performance and should not be unduly relied upon. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause actual results or events to differ materially
from those anticipated in such forward-looking statements. The forward-looking
statements contained in this news release are made as of the date hereof and
the Company undertakes no obligations to update publicly or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise, unless so required by applicable securities laws.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that
term is defined in policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release.

Glossary

Bbl/d: Barrels per day

$/Bbl: Dollars per barrel

Mcf/d: Thousand cubic feet of gas per day

$/Mcf: Dollars per thousand cubic feet of gas

Boe/d: Barrels of oil equivalent per day

$/Boe: Dollars per barrel of oil equivalent

PDP: Proved Developed Producing

1P: Proved Reserves

2P: Proved plus Probable Reserves

3P: Proved plus Probable plus Possible Reserves

MMbtu: Millions btu

MMboe: Millions of barrels of oil equivalent

Working Interest Gross Reserves: The reserves attributable to the Company's
license working interest pre-taxes and royalties

 

 

Qualified Person's Statement

The technical information contained in this announcement has been reviewed and
approved by Grant Carnie, senior non-executive director of Arrow Exploration
Corp. Mr. Carnie is a member of the Canadian Society of Petroleum Engineers,
holds a B.Sc. in Geology from the University of Alberta and has over 35 years'
experience in the oil and gas industry. The recovery and reserve estimates
provided in this news release are estimates only, and there is no guarantee
that the estimated reserves will be recovered. Actual reserves may eventually
prove to be greater than, or less than, the estimates provided herein. In
certain of the tables set forth above, the columns may not add due to
rounding.

 

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