REG - Arrow Exploration - Q1 2025 Interim Results and Operational Update
30/05/2025 07:00
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RNS Number : 6975K Arrow Exploration Corp. 30 May 2025
NOT FOR RELEASE, DISTRIBUTION, PUBLICATION, DIRECTLY OR INDIRECTLY, IN WHOLE
OR IN PART, IN OR INTO OR FROM THE UNITED STATES, AUSTRALIA, JAPAN, THE
REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE TO DO SO MIGHT
CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH
JURISDICTION.
ARROW ANNOUNCES Q1 2025 INTERIM RESULTS AND PROVIDES OPERATIONAL UPDATE
CALGARY, May 30, 2025 - Arrow Exploration Corp. (AIM: AXL; TSXV: AXL) ("Arrow"
or the "Company"), the high-growth operator with a portfolio of assets across
key Colombian hydrocarbon basins, is pleased to announce the filing of its
Interim Condensed (unaudited) Consolidated Financial Statements and
Management's Discussion and Analysis ("MD&A") for the three months ended
March 31, 2025, which are available on SEDAR (www.sedar.com
(http://www.sedar.com) ) and will also be available shortly on Arrow's
website at www.arrowexploration.ca (http://www.arrowexploration.ca) , and to
provide an update on operational activity.
Q1 2025 Highlights:
· Recorded $19.5 million of total oil and natural gas revenue, net of
royalties, representing a 36% increase when compared to the same period in
2024 (Q1 2024: $14.4 million).
· Adjusted EBITDA((1)) of $11.5 million, a 15% increase when compared
to Q1 2024 (Q1 2024: $10 million).
· Average corporate production of 4,085 boe/d (Q1 2024: 2,730 boe/d).
· Realized corporate oil operating netbacks((1)) of $38.66/bbl.
· Cash position of $24.9 million at the end of Q1 2025.
· Generated operating cashflows of $14.4 million (Q1 2024: $8.6
million).
· Drilled two additional development wells (AB 2 and AB 3) in the
Alberta Llanos field in the Tapir block.
· Net income of $2.7 million.
· Completed shooting 90 km2 of new seismic data on the southeast
section of the Tapir Block to identify and confirm existing prospects.
((1))Non-IFRS measures - see "Non-IFRS Measures" section within the MD&A
Post Period End Highlights:
· Spud the first horizontal well, AB HZ4, in the Alberta Llanos field
in the Tapir block.
· CN HZ 10 and CN 11 brought on production.
· Entered into a $20 million prepayment agreement with an integrated
energy company.
Upcoming Drilling
The rig has spud the AB HZ 4 well, the first horizontal well in the Alberta
Llanos field, which is expected to be on production in June. Thereafter, the
Company expects to drill another horizontal well on the Alberta Llanos pad.
Arrow has also secured a second rig that will mobilize to the Rio Cravo Este
(RCE) field to drill up to four development wells in RCE and will then
mobilize to the Carrizales Norte pad for further development drilling. The
first RCE well is expected to spud in early June.
Total budgeted capital expenditures planned for 2025 is approximately $50
million, net to Arrow, of which $11.4 million was spent in Q1 2025. The
capital program is expected to result in production for 2025 being
significantly higher than current levels.
Prepayment Agreement
The Company has entered into a two-year crude prepayment agreement with an
integrated energy major to market its oil production in Colombia. In
exchange for the exclusive right to market the Company's oil production, the
agreement provides access of up to US$20 million in prepaid crude sales in
year one with the limit reducing to US$15 million in prepaid sales in year two
at attractive interest rates.
As at May 1, the Company's cash balances were $24 million.
Marshall Abbott, CEO of Arrow Exploration Corp., commented:
"The first quarter of 2025 has been exciting for Arrow. The two wells, AB 2
and AB 3 at Alberta Llanos, have highlighted the potential for horizontal
development in the Ubaque as well as follow up zones in the C7 and Guadalupe."
"During the dry summer months in the Llanos basin, the Company has developed a
new road system from the Carrizales Norte pad to the Capullo pad, the
Mateguafa Oeste pad and the Mateguafa Attic pad. These pads will be utilized
in the Company's planned drilling program for the remainder of 2025. The
Company has secured a second rig which is expected to spud the first of four
wells at RCE in early June."
"The Company completed a 90 km2 3D seismic program in the southeast section of
the Tapir block. The seismic has been processed and is now being analyzed to
help develop prospects for the 2026 drilling program."
"In the first quarter of 2025, the Company put in place additional water
disposal infrastructure in the form of the conversion of AB 2 into a water
disposal well and the workover of RCE 1 and CN 4. We are also working
towards the conversion of CN 5 into a water disposal well. AB 2 should be in
operation in late Q2 and CN 5 in Q3. The wells at Carrizales Norte and
Alberta Llanos have begun to produce more water than previously modeled,
resulting in curtailment of production. The new water infrastructure is
expected to create excess disposal capacity to allow for increases in pump
speed on currently curtailed production and for the next development stage of
2025 budgeted projects."
"Arrow is pleased to announce that it has entered into a prepayment financing
agreement with an integrated energy major. The two-year agreement provides
Arrow with access to up to US$20 million in prepaid crude sales, with the
limit reducing to US$15 million after the first year. This facility provides
Arrow with significant financial flexibility, allowing Arrow to pursue growth
opportunities from acquisitions to expanded capital programs. In conjunction
with the financing, the integrated energy major, through its Colombian
subsidiaries, will become the exclusive marketer for all of Arrow's oil
production."
"Both Brent and AECO prices have been impacted by the volatility experienced
in early 2025 but the Company still has very healthy netbacks from its
Colombian oil production. Arrow's 2025 capital budget is expected to be paid
for by available cash and cash flow from operations. Our focus for the
remainder of 2025 will be to grow production, continue development at the
Carrizales Norte, Rio Cravo Este and Alberta Llanos fields and explore low
risk new prospects in the Tapir block."
FINANCIAL AND OPERATING HIGHLIGHTS
Three months ended March 31, 2025 Three months ended March 31, 2024
(in United States dollars, except as otherwise noted)
Total natural gas and crude oil revenues, net of royalties 19,506,125 14,404,921
Funds flow from operations ((1)) 9,745,553 7,210,683
Funds flow from operations ((1)) per share -
Basic($) 0.03 0.03
Diluted ($) 0.03 0.02
Net income 2,663,764 3,176,727
Net income per share -
Basic ($) 0.01 0.01
Diluted ($) 0.01 0.01
Adjusted EBITDA ((1)) 11,531,548 10,021,139
Weighted average shares outstanding -
Basic ($) 285,864,348 285,864,348
Diluted ($) 294,094,348 292,791,385
Common shares end of period 285,864,348 285,864,348
Capital expenditures 11,379,180 6,281,328
Cash and cash equivalents 24,946,934 11,606,342
Current Assets 30,288,808 20,779,081
Current liabilities 19,252,474 11,258,252
Adjusted working capital ((1)) 11,036,334 9,520,829
Long-term portion of restricted cash ((2)) 129,849 237,814
Total assets 90,532,063 64,579,940
Operating
Natural gas and crude oil production, before royalties
Natural gas (Mcf/d) 1,851 1,760
Natural gas liquids (bbl/d) 6 4
Crude oil (bbl/d) 3,770 2,432
Total (boe/d) 4,085 2,730
Operating netbacks ($/boe) ((1))
Natural gas ($/Mcf) ($1.00) ($0.14)
Crude oil ($/bbl) $42.29 $56.27
Total ($/boe) $38.66 $50.10
((1))Non-IFRS measures - see "Non-IFRS Measures" section of the MD&A
((2)Long term restricted cash not included in working capital)
Discussion of Operating Results
During Q1 2025, the Company's production has decreased due to natural declines
and increasing water cuts across its fields in the Tapir block. Production
growth is expected to resume once the Company develops additional water
handling capacity and executes on the 2025 budget. Nevertheless, the
Company has maintained good operating results and healthy EBITDA.
Average Production by Property
Average Production Boe/d Q1 2025 FY 2024 Q4 2024 Q3 2024 Q2 2024 Q1 2024
Oso Pardo 126 153 154 180 113 166
Ombu (Capella) - - - - - -
Rio Cravo Este (Tapir) 1,118 1,294 1,178 1,078 1,283 1,644
Carrizales Norte (Tapir) 2,321 1,897 3,153 2,784 991 622
Alberta Llanos 205 7 26 - - -
Total Colombia 3,770 3,351 4,511 4,042 2,387 2,432
Fir, Alberta 105 81 88 82 77 78
Pepper, Alberta 210 110 139 - 82 220
TOTAL (Boe/d) 4,085 3,542 4,738 4,124 2,546 2,730
The Company's average production for the three months March 31, 2025 was 4,085
boe/d which consisted of crude oil production in Colombia of 3,770 bbl/d,
natural gas production of 1,851 Mcf/d, and minor amounts of natural gas
liquids. The Company's Q1 2025 production was 50% higher than its Q1 2024
production and 14% lower than Q4 2024 due to natural declines and water
handling capability.
Discussion of Financial Results
During Q1 2025 the Company experienced a reduction in both crude oil and gas
prices, as summarized below:
Three months ended March 31
2025 2024 Change
Benchmark Prices
AECO (C$/Mcf) $2.19 $2.55 (14%)
Brent ($/bbl) $71.47 $84.67 (16%)
West Texas Intermediate ($/bbl) $71.40 $76.95 (7%)
Realized Prices
Natural gas, net of transportation ($/Mcf) $1.51 $1.87 (19%)
Natural gas liquids ($/bbl) $62.02 $66.20 (61%)
Crude oil, net of transportation ($/bbl) $64.70 $73.31 (12%)
Corporate average, net of transport ($/boe) $60.48 $66.58 (9%)
((1)Non-IFRS measure)
Operating Netbacks
The Company also continued to realize good oil operating netbacks, as
summarized below:
Three months ended
March 31
2025 2024
Natural Gas ($/Mcf)
Revenue, net of transportation expense $1.51 $1.87
Royalties ($0.06) ($0.10)
Operating expenses ($2.45) ($1.91)
Natural gas operating netback((1)) ($1.00) ($0.14)
Crude oil ($/bbl)
Revenue, net of transportation expense $64.70 $73.31
Royalties ($7.76) ($9.00)
Operating expenses ($14.65) ($8.04)
Crude oil operating netback((1)) $42.29 $56.27
Corporate ($/boe)
Revenue, net of transportation expense $60.48 $66.58
Royalties ($7.19) ($8.08)
Operating expenses ($14.63) ($8.40)
Corporate operating netback((1)) $38.66 $50.10
((1))Non-IFRS measure
The operating netbacks of the Company have been affected in 2025 due to
increasing water production from its Colombian assets and decreased crude oil
prices.
During Q1 2025, the Company incurred $11 million of capital expenditure,
primarily in connection with the drilling of additional Alberta Llanos wells
in the Tapir block. This tempo is expected to continue during the remainder of
2025, funded by cash on hand and cashflow.
The Company also confirms that its audited financial statements and MD&A
for the year ended 31 December 2024 were posted to UK shareholders on May 29,
2025 and are also available on its website.
For further Information, contact:
Arrow Exploration
Marshall Abbott, CEO +1 403 651 5995
Joe McFarlane, CFO +1 403 818 1033
Canaccord Genuity (Nominated Advisor and Joint Broker)
Henry Fitzgerald-O'Connor +44 (0)20 7523 8000
James Asensio
George Grainger
Auctus Advisors (Joint Broker)
Jonathan Wright +44 (0)7711 627449
Rupert Holdsworth Hunt
Camarco (Financial PR)
Owen Roberts +44 (0)20 3781 8331
Rebecca Waterworth
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".
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 global pandemics, 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 or bop/d: Barrels per day
$/Bbl: Dollars per barrel
Mcf/d: Thousand cubic feet of gas per day
Mmcf/d: Million cubic feet of gas per day
$/Mcf: Dollars per thousand cubic feet of gas
Mboe: Thousands of barrels of oil equivalent
Boe/d: Barrels of oil equivalent per day
$/Boe: Dollars per barrel of oil equivalent
MMbbls: Million of barrels
BOE's may be misleading particularly if used in isolation. A BOE conversion
ratio of 6 Mcf: 1 bblis based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead.
This Announcement contains inside information for the purposes of the UK
version of the market abuse regulation (EU No. 596/2014) as it forms part of
United Kingdom domestic law by virtue of the European Union (Withdrawal) Act
2018 ("UK MAR").
Non‐IFRS Measures
The Company uses non-IFRS measures to evaluate its performance which are
measures not defined in IFRS. Working capital, funds flow from operations,
realized prices, operating netback, adjusted EBITDA, and net debt as presented
do not have any standardized meaning prescribed by IFRS and therefore may not
be comparable with the calculation of similar measures for other entities. The
Company considers these measures as key measures to demonstrate its ability to
generate the cash flow necessary to fund future growth through capital
investment, and to repay its debt, as the case may be. These measures should
not be considered as an alternative to, or more meaningful than net income
(loss) or cash provided by operating activities or net loss and comprehensive
loss as determined in accordance with IFRS as an indicator of the Company's
performance. The Company's determination of these measures may not be
comparable to that reported by other companies.
Arrow Exploration Corp.
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ended MARCH 31, 2025 AND 2024
IN UNITED STATES DOLLARS
(UNAUDITED)
Notice of No Auditor Review of the Interim Condensed Consolidated Financial
Statements
as at and for the three months ended March 31, 2025
Under National Instrument 51-102, Part 4, subsection 4.3 (3)(a), if an auditor
has not performed a review of the interim condensed consolidated financial
statements, they must be accompanied by a notice indicating that an auditor
has not reviewed the financial statements.
The accompanying unaudited interim condensed consolidated financial statements
of the Company have been prepared by and are the responsibility of the
Company's management.
The Company's independent auditor has not performed a review of these
financial statements in accordance with standards established by the Chartered
Professional Accountants of Canada for a review of interim financial
statements by an entity's auditor.
Arrow Exploration Corp.
Interim Consolidated Statements of Financial Position
In United States Dollars
(Unaudited)
As at Notes March 31, 2025 December 31, 2024
ASSETS
Current assets
Cash $ 24,946,934 $ 18,837,784
Restricted cash and deposits 3 283,973 238,141
Trade and other receivables 4 2,037,258 3,830,215
Taxes receivable 5 2,585,007 2,656,926
Deposits and prepaid expenses 254,969 232,730
Inventory 180,667 177,400
30,288,808 25,973,196
Non-current assets
Restricted cash and deposits 3 129,849 167,545
Exploration and evaluation assets 6 2,725,849 142,995
Property and equipment 7 57,387,557 54,984,998
Total Assets $ 90,532,063 $ 81,268,734
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 11,992,570 $ 8,504,332
Lease obligation 8 57,125 44,639
Income taxes 6,817,123 4,294,109
Stock based compensation liability 10 385,656 1,483,947
19,252,474 14,327,027
Non-current liabilities
Lease obligations 8 161,313 174,767
Other liabilities 607,708 610,059
Deferred income taxes 8,327,154 6,832,229
Decommissioning liability 9 6,502,195 6,307,659
Total liabilities 34,850,844 28,251,741
Shareholders' equity
Share capital 10 73,829,795 73,829,795
Contributed surplus 856,093 856,093
Deficit (18,107,130) (20,770,894)
Accumulated other comprehensive loss (897,539) (898,001)
Total shareholders' equity 55,681,219 53,016,993
Total liabilities and shareholders' equity $ 90,532,063 $ 81,268,734
Commitments and contingencies (Note 11)
The accompanying notes are an integral part of these interim consolidated
financial statements.
On behalf of the Board:
signed "Gage Jull"
Director
signed "Ian Langley" Director
Gage
Jull
Ian Langley
Arrow Exploration Corp.
Interim Condensed Consolidated Statements of Operations and Comprehensive
Income
In United States Dollars
(Unaudited)
For the three months ended March 31, Notes 2025 2024
Revenue
Oil and natural gas 13 22,136,159 16,393,642
Royalties 13 (2,630,034) (1,988,721)
Total oil and natural gas revenue, net of royalties 19,506,125 14,404,921
Expenses
Operating 5,356,599 2,069,011
Administrative 2,881,990 2,681,922
Share-based compensation (income) expense 10 (1,101,470) 101,278
Financing costs:
Accretion 9 68,277 37,376
Interest 8 7,168 9,769
Other - 120,653
Foreign exchange (gain) loss (244,212) (288,739)
Depletion and depreciation 7 6,520,968 3,531,772
Other income, net (19,801) -
Total expenses, net 13,469,519 8,263,042
Income before income tax 6,036,606 6,141,879
Income tax expense
Current 1,877,917 2,505,285
Deferred 1,494,925 459,867
3,372,842 2,965,152
Net income 2,663,764 3,176,727
Other comprehensive income (loss)
Foreign exchange 462 (143,318)
Total other comprehensive income (loss) 462 (143,318)
Total comprehensive income 2,664,226 3,033,409
Net income per share:
Basic $ 0.01 $ 0.01
Diluted $ 0.01 $ 0.01
Weighted average shares outstanding
Basic 285,864,348 285,864,348
Diluted 294,094,348 292,791,385
The accompanying notes are an integral part of these interim consolidated
financial statements.
Arrow Exploration Corp.
Interim Condensed Statements of Changes in Shareholders' Equity
In United States Dollars
(Unaudited)
Accumulated other comprehensive loss
Contributed Surplus
Share Capital Deficit Total Equity
Balance January 1, 2025 $ 73,829,795 $ 856,093 $ (898,001) $ (20,770,894) $ 53,016,993
Net income for the period - - - 2,663,764 2,663,764
Other comprehensive income - - 462 - 462
Total comprehensive income - - 462 2,663,764 2,664,226
Balance March 31, 2025 $ 73,829,795 856,093 (897,539) (18,107,130) 55,681,219
Accumulated other comprehensive loss
Contributed Surplus
Share Capital Deficit Total Equity
Balance January 1, 2024 $ 73,829,795 $ 2,161,945 $ (536,322) $ (33,945,895) $ 41,509,523
Net income for the period - - - 3,176,727 3,176,7`27
Other comprehensive income - - (143,318) - (143,318)
Total comprehensive income - - (143,318) 3,176,727 3,033,409
Share-based compensation - 101,278 - - 101,278
Balance March 31, 2024 $ 73,829,795 $ 2,263,223 $ (679,640) $ (30,769,168) $ 44,644,210
The accompanying notes are an integral part of these interim consolidated
financial statements.
Arrow Exploration Corp.
Interim Condensed Consolidated Statements of Cash Flows
In United States Dollars
(Unaudited)
For the three months ended March 31, Notes 2025 2024
Cash flows provided by operating activities:
Net income $ 2,663,764 $ 3,176,727
Items not involving cash:
Deferred taxes 1,494,925 459,867
Share-based compensation (income) expense 10 (1,101,470) 101,278
Depletion and depreciation 7 6,520,968 3,531,772
Interest on leases 8 7,168 9,769
Accretion 9 68,277 37,376
Unrealized foreign exchange (gain) loss 91,921 (35,877)
Payment of asset decommissioning obligations - (70,229)
Changes in non‑cash working capital balances:
Restricted cash and deposits (8,136) 343,746
Trade and other receivables 1,792,957 299,554
Taxes receivable 71,920 (164,078)
Deposits and prepaid expenses (22,238) (152,963)
Inventory (3,268) 92
Income tax payable 2,523,014 1,342,465
Accounts payable and accrued liabilities 330,382 (297,211)
Cash provided by operating activities 14,430,184 8,582,288
Cash flows used in investing activities:
Additions to exploration and evaluation assets 6 (2,582,854) (578,082)
Additions to property and equipment 7 (8,796,326) (5,703,246)
Changes in non-cash working capital 3,157,859 (2,751,994)
Cash flows used in investing activities (8,221,321) (9,033,322)
Cash flows used in financing activities:
Lease payments 8 (8,327) (20,486)
Cash flows used in financing activities (8,327) (20,486)
Effect of changes in the exchange rate on cash (91,386) (57,514)
Increase (decrease) in cash 6,109,150 (529,034)
Cash, beginning of period 18,837,784 12,135,377
Cash, end of period 24,946,934 11,606,342
Supplemental information
Interest paid $ - $ -
Taxes paid $ - $ -
The accompanying notes are an integral part of these interim consolidated
financial statements.
1. Corporate Information
Arrow Exploration Corp. ("Arrow" or "the Company") is a public junior oil and
gas company engaged in the acquisition, exploration and development of oil and
gas properties in Colombia and in Western Canada. The Company's shares trade
on the TSX Venture Exchange and the AIM Market of the London Stock Exchange
plc under the symbol AXL. The head office of Arrow is located at 203, 2303 -
4th Street SW, Calgary, Alberta, Canada, T2S 2S7 and the registered office is
located at 600, 815 8th Avenue SW, Calgary, Alberta, Canada, T2P 3P2.
2. Basis of Presentation
Statement of compliance
These interim condensed consolidated financial statements (the "Financial
Statements") have been prepared in accordance with International Accounting
Standard ("IAS") 34 Interim Financial Reporting. These Financial Statements
were authorized for issue by the board of directors of the Company on May 29,
2025. They do not contain all disclosures required by International Financial
Reporting Standards ("IFRS") for annual financial statements and, accordingly,
should be read in conjunction with the audited consolidated financial
statements as at December 31, 2024.
These Financial Statements have been prepared on the historical cost basis,
except for financial assets and liabilities recorded in accordance with IFRS
9. The Financial Statements have been prepared using the same accounting
policies and methods as the consolidated financial statements for the year
ended December 31, 2024. In preparing these condensed consolidated financial
statements, the significant judgements made by management in applying the
group's accounting policies and the key sources of estimation uncertainty were
the same as those that applied to the consolidated financial statements for
the year ended December 31, 2024.
3. Restricted Cash and deposits
March 31, December 31, 2024
2025
Colombia (i) $ 283,973 $ 275,949
Canada 129,849 129,737
Sub-total 413,822 405,686
Long-term portion (129,849) (167,545)
Current portion of restricted cash and deposits $ 283,973 $ 238,141
(i) This balance is comprised of a deposit held as
collateral to guarantee abandonment expenditures related to the Tapir, OMBU
and Santa Isabel blocks.
4. Trade and other receivables
March 31, December 31, 2024
2025
Trade receivables, net of advances $ 507,472 $ 1,926,176
Other accounts receivable 1,529,786 1,904,039
$ 2,037,258 $ 3,830,215
As at March 31, 2025, other accounts receivable include $699,851 (December 31,
2024 - $699,880) receivable from on demand loans with executives and
directors.
5. Taxes receivable
March 31, December 31, 2024
2025
Value-added tax (VAT) credits recoverable $ 2,104,919 $ 1,738,536
Income tax withholdings and advances, net 480,088 918,390
$ 2,585,007 $ 2,656,926
The VAT recoverable balance pertains to non-compensated value-added tax
credits originated in Colombia as operational and capital expenditures are
incurred. The Company is entitled to compensate or claim for the reimbursement
of these VAT credits.
6. Exploration and Evaluation
March 31, December 31,
2025 2024
Balance, beginning of the period $ 142,995 $ -
Additions 2,582,854 3,818,279
Reclassification to Property and Equipment (Note 8) - (3,675,284)
Balance, end of the period $ 2,725,849 $ 142,995
During 2024, the Company incurred in exploration and development costs
associated to its Alberta Llanos prospect in the Tapir block, and determined
the technical feasibility and commercial viability of these assets,
transferring $3,675,284 to its property and equipment. An impairment test on
these assets was prepared and no losses were identified as a result of such
tests.
7. Property and Equipment
Oil and Gas Properties Right of Use and Other Assets
Cost Total
Balance, December 31, 2023 $ 75,292,865 $ 544,217 $ 75,837,082
Additions 27,295,956 6,908 27,302,864
Adjustment to ROU assets - (53,543) (53,543)
Transfers from exploration of evaluation assets 3,675,284 - 3,675,284
Decommissioning adjustment 2,702,058 - 2,702,058
Balance, December 31, 2024 $108,966,163 $ 497,582 $109,463,745
Additions 8,796,326 - 8,796,326
Decommissioning adjustment 127,036 - 127,036
Balance, March 31, 2025 $117,889,525 $ 497,582 118,387,107
Accumulated depletion and depreciation and impairment Oil and Gas Properties Right of Use and Other Assets
Total
Balance, December 31, 2023 $ 37,074,320 $ 227,142 $ 37,301,462
Depletion and depreciation 17,448,880 86,935 17,535,815
Impairment reversal (662,753) - (662,753)
Balance, December 31, 2024 $ 53,860,447 $ 314,077 $ 54,174,524
Depletion and depreciation 6,504,952 16,016 6,520,968
Balance, March 31, 2025 $ 60,365,399 $ 330,093 $ 60,695,492
Foreign exchange
Balance December 31, 2023 $ (161,237) $ (3,022) $ (164,259)
Effects of movements in foreign
exchange rates (122,332) (17,632) (139,964)
Balance, December 31, 2024 $ (283,569) $ (20,654) $ (304,223)
Effects of movements in foreign
exchange rates 6 159 165
Balance, March 31, 2025 $ (283,563) $ (20,495) $ (304,058)
Net Book Value
Balance December 31, 2024 $ 54,822,147 $ 162,851 $ 54,984,998
Balance March 31, 2025 $ 57,240,563 $ 146,994 $ 57,387,557
Canada
As at March 31, 2025, no indicators of impairment were identified in the
Company's property and equipment. As at December 31, 2024, the Company
determined there were indicators of impairment reversal in its Canada CGU.
Management determined the recoverable amount of its Canada CGU using the fair
value less costs of disposal approach.
8. Lease Obligations
A reconciliation of the discounted lease obligation is set forth below:
2025 2024
Obligation, beginning of the period $ 219,406 $ 320,593
Changes to leases - (53,543)
Lease payments (8,327) (57,807)
Interest 7,168 31,846
Effects of movements in foreign exchange rates 191 (21,683)
Obligation, end of the period 218,438 219,406
Current portion (57,125) (44,639)
Long-term portion 161,313 174,767
During 2024, the Company recognized the impact of a change in payment terms of
its office lease and recognized a decrease in lease liabilities and ROU assets
for $ 53,543. As at March 31, 2025, the Company has the following future lease
obligations:
Less than one year 71,852
2 - 5 years 215,231
Total lease payments 287,083
Amounts representing interest over the term (68,645)
Present value of the net obligation 218,438
9. Decommissioning Liability
The following table presents the reconciliation of the beginning and ending
aggregate carrying amount of the obligation associated with the
decommissioning of oil and gas properties:
March 31, December 31,
2025 2024
Obligation, beginning of the period 6,307,659 3,973,075
Additions 406,095 1,467,282
Change in estimated cash flows (279,060) 843,978
Payments or settlements - (110,263)
Accretion expense 68,277 178,296
Effects of movements in foreign exchange rates (776) (44,709)
6,502,195 6,307,659
Obligation, end of the period
The obligation was calculated using a risk-free discount rate range of 2.50%
to 3.75% in Canada (2024: 1.25% to 4.50%) and between 4.43% and 4.60% in
Colombia (2024: 4.30% and 4.60%) with an inflation rate of 2.0% and 1.90%,
respectively (2024: 2.0% and 1.9%). The majority of costs are expected to
occur between 2026 and 2038. The undiscounted amount of cash flows, required
over the estimated reserve life of the underlying assets, to settle the
obligation, adjusted for inflation, is estimated at $8,204,727 (2024:
$8,155,704).
10. Share Capital
(a) Authorized: Unlimited number of common shares without par value
(b) Issued:
March 31, 2025 December 31, 2024
Common shares Shares Amounts Shares Amounts
Balance at beginning and end of the period 285,864,348 73,829,795 285,864,348 73,829,795
(c) Stock options:
The Company has a stock option plan that provides for the issuance to its
directors, officers and employees options to purchase non-transferable common
shares not exceeding 10% of the outstanding common shares. The exercise price
is based on the closing price of the Company's common shares on the day prior
to the day of the grant. A summary of the Company stock option plan as at
March 31, 2025 and December 31, 2024 and changes during the periods ended on
those dates is presented below:
March 31, 2025 December 31, 2024
Stock Options Number of options Weighted average Number of options Weighted average
exercise price exercise price
(CAD $) (CAD $)
Beginning of period 25,795,002 $0.24 20,531,668 $0.18
Granted - - 14,176,108 $0.27
Expired/Forfeited - - (2,433,333) $0.12
Exercised - - (7,479,441) $0.11
End of period 25,795,002 $0.24 25,795,002 $0.24
Exercisable, end of period 8,492,778 $0.32 8,442,778 $0.42
Date of Grant Number Outstanding Exercise Price Weighted Date of Number
(CAD $) Average Remaining Contractual Life Expiry Exercisable
March 31, 2025
October 22, 2018 250,000 $1.15 3.81 Oct. 22, 2028 250,000
May 3, 2019 100,000 $0.31 4.34 May 3, 2029 100,000
March 20, 2020 1,200,000 $0.05 5.22 Mar. 20, 2030 1,200,000
April 13, 2020 1,200,000 $0.05 5.28 April 13, 2030 1,200,000
December 13, 2021 2,983,336 $0.13 0.45 June 13, 2024 and 2025 2,983,336
June 9, 2022 600,001 $0.28 0.74 Dec. 9, 2023, 2024 and 2025 133,333
September 7, 2022 833,334 $0.26 0.68 Mar. 7, 2024, 2025 and 2026 416,666
December 21, 2022 3,652,222 $0.28 1.94 June 21, 2024, 2025 and 2026 1,826,110
January 23, 2023 100,000 $0.32 1.06 July 23, 2024, 2025 and 2026 50,000
September 21, 2023 1,000,000 $0.33 1.22 Mar. 21, 2025, 2026 and 2027 333,333
April 29, 2024 8,543,888 $0.38 1.83 Oct.29 2025, 2026 and 2027 -
September 11, 2024 4,332,221 $0.48 2.19 Mar.11 2026, 2027 and 2028 -
Total 25,795,002 $0.32 1.87 years 8,492,778
For the three months ended March 31, 2025, the Company has recognized
shared-based compensation income of $1,101,470 (2024: expense of $101,278)
corresponding to the progressive vesting and fair market value of options,
reducing its stock based compensation liability in the same amount (2024:
increasing contributed surplus).
11. Commitments and Contingencies
Exploration and Production Contracts
The Company has entered into a number of exploration contracts in Colombia
which require the Company to fulfill work program commitments and issue
financial guarantees related thereto (see Letters of Credit section below).
Presented below are the Company's exploration and production contractual
commitments at March 31, 2025:
Block Less than 1 year 1-3 years Thereafter Total
COR-39 - 12,000,000 - 12,000,000
Total - - 12,000,000
12,000,000
Contingencies
From time to time, the Company may be involved in litigation or has claims
sought against it in the normal course of business operations.
Management of the Company is not currently aware of any claims or actions that
would materially affect the Company's reported financial position or results
from operations. Under the terms of certain agreements and the Company's
by-laws the Company indemnifies individuals who have acted at the Company's
request to be a director and/or officer of the Company, to the extent
permitted by law, against any and all damages, liabilities, costs, charges or
expenses suffered by or incurred by those individuals.
Letters of Credit
At March 31, 2025, the Company had obligations under Letters of Credit
("LC's") outstanding totaling $3.1 million to guarantee work commitments on
exploration blocks and other contractual commitments. In the event the Company
fails to secure the renewal of the letters of credit underlying the ANH
guarantees, the ANH could decide to cancel the underlying exploration and
production contract, as applicable.
Current Outstanding Letters of Credit
Contract Beneficiary Issuer Type Amount Renewal Date
(US $)
SANTA ISABEL ANH Carrao Energy Abandonment 621,158 April 14, 2026
ANH Carrao Energy Financial Capacity 1,672,162 June 30, 2025
COR - 39 ANH Carrao Energy Compliance 100,000 June 30, 2025
OMBU ANH Carrao Energy Financial Capacity 436,300 October 14, 2025
OMBU ANH Carrao Energy Abandonment 265,782 August 28, 2025
Total 3,095,402
12. Risk Management
The Company holds various forms of financial instruments. The nature of these
instruments and the Company's operations expose the Company to commodity
price, credit and foreign exchange risks. The Company manages its exposure to
these risks by operating in a manner that minimizes its exposure to the extent
practical.
(a) Commodity price risk
The Company's principal operation is the production and sale of crude oil
and natural gas. Fluctuations in prices of these commodities directly impact
the Company's financial performance. Commodity price risk is the risk that the
fair value or future cash flows of a financial instrument will fluctuate as a
result of changes in commodity prices. Lower commodity prices can also
impact the Company's ability to raise capital. Commodity prices for crude
oil are impacted by world economic events that dictate the levels of supply
and demand. There were no derivative contracts during 2025.
(b) Credit Risk
Credit risk reflects the risk of financial loss to the Company if a customer
or counterparty to a contract fails to fulfill their contractual obligations.
It arises mostly from the Company's cash balances and accounts receivable. The
Company's cash balances are held with six counterparties, large reputable
financial institutions, and management has therefore concluded that credit
associated is low. The majority of the Company's account receivable balances
relate to petroleum and natural gas sales. The Company's policy is to enter
into agreements with customers that are well established entities in the oil
and gas industry such that the level of risk is mitigated. In Colombia, a
significant portion of the sales is with producing companies and commodities
trader under existing sale/offtake agreements with prepayment provisions and
priced using the Brent benchmark. The Company's trade account receivables
primarily relate to sales of crude oil and natural gas, which are normally
collected within 25 days (in Canada) and up to 15 days (in Colombia) after the
month of production.
Other accounts receivable mainly relate to balances owed by the Company's
partner in one of its blocks, and are mainly recoverable through joint
billings. The Company has historically not experienced any significant
collection issues with its customers and partners.
(c) Market Risk
Market risk is comprised of two components: foreign currency exchange risk and
interest rate risk.
i) Foreign Currency Exchange Risk
The Company operates on an international basis and therefore foreign exchange
risk exposures arise from transactions denominated in currencies other than
the United States dollar. The Company is exposed to foreign currency
fluctuations as it holds cash and incurs expenditures in exploration and
evaluation and administrative costs in foreign currencies.
The Company incurs expenditures in Canadian dollars, United States dollars,
British Pounds and the Colombian peso and is exposed to fluctuations in
exchange rates in these currencies. There are no exchange rate contracts in
place.
ii) Interest Rate Risk
Interest rate risk is the risk that future cash flows will fluctuate as a
result of changes in market interest rates. The Company is not currently
exposed to interest rate risk.
(d) Liquidity Risk
Liquidity risk includes the risk that, as a result of the Company's
operational liquidity requirements:
· The Company will not have sufficient funds to settle a
transaction on the due date;
· The Company will be forced to sell financial assets at a value
which is less than what they are worth; or
· The Company may be unable to settle or recover a financial asset.
The Company's approach to managing its liquidity risk is to ensure, within
reasonable means, sufficient liquidity to meet its liabilities when due, under
both normal and unusual conditions, without incurring unacceptable losses or
jeopardizing the Company's business objectives. The Company prepares annual
capital expenditure budgets which are monitored regularly and updated as
considered necessary. Petroleum and natural gas production is monitored
daily to provide current cash flow estimates and the Company utilizes
authorizations for expenditures on projects to manage capital expenditures.
Any funding shortfall may be met in a number of ways, including, but not
limited to, the issuance of new debt or equity instruments, further
expenditure reductions and/or the introduction of joint venture partners.
(e) Capital Management
The Company's objective is to maintain a capital base sufficient to provide
flexibility in the future development of the business and maintain investor,
creditor and market confidence. The Company manages its capital structure
and makes adjustments in response to changes in economic conditions and the
risk characteristics of the underlying assets. The Company considers its
capital structure to include share capital, bank debt (when available),
promissory notes and working capital, defined as current assets less current
liabilities. From time to time the Company may issue common shares or other
securities, sell assets or adjust its capital spending to manage current and
projected debt levels. The Company adjusts its capital structure based on its
net debt level. Net debt is a non-GAAP measure and is defined as the
principal amount of its outstanding debt, less working capital items. The
Company prepares annual budgets, which are updated as necessary including
current and forecast crude oil prices, changes in capital structure, execution
of the Company's business plan and general industry conditions. The annual
budget is approved by the Board of Directors. The Company's capital includes
the following:
March 31, 2025 December 31, 2024
Working capital $11,036,334 $ 11,646,169
13. Segmented Information
The Company has two reportable operating segments: Colombia and Canada. The
Canada segment is also considered the corporate segment. The following tables
show information regarding the Company's segments for the years ended as at
March 31:
Three months ended March 31, 2025 Colombia Canada Total
Revenue:
Oil Sales $ 21,850,288 $ - $ 21,850,288
Natural gas and liquid sales - 285,871 285,871
Royalties (2,620,671) (9,363) (2,630,034)
Expenses (11,911,128) (1,558,391) (13,469,519)
Income taxes (3,372,842) - (3,372,842)
Net income (loss) $ 3,945,647 $ (1,281,883) $ 2,663,764
Capital expenditures for the period $ 9,895,072 $ 1,484,108 $ 11,379,180
Total Assets as at March 31, 2025 $ 83,377,874 $ 7,154,189 $ 90,532,063
Total liabilities as at March 31, 2025 $ 30,422,878 $ 4,427,966 $ 34,850,844
Three months ended March 31, 2024 Colombia Canada Total
Revenue:
Oil Sales $ 16,067,291 $ - $ 16,067,291
Natural gas and liquid sales - 326,351 326,351
Royalties (1,972,379) (16,342) (1,988,721)
Expenses (5,586,708) (2,676,335) (8,263,042)
Income taxes (2,965,152) - (2,965,152)
Net income (loss) $ 5,543,052 $ (2,366,326) $ 3,176,727
Capital expenditures for the period $ 6,281,043 $ 285 $ 6,281,328
Total Assets as at December 31, 2024 $ 58,524,885 $ 6,055,055 $ 64,579,940
Total liabilities as at December 31, 2024 $ 17,234,936 $ 2,610,794 $ 19,935,730
14. Subsequent event
During May 2025, The Company has entered into a two-year crude prepayment
agreement with an integrated energy major to market its oil production in
Colombia. The agreement provides access to $20 million US in funding in year
one and $15 million in funding in year two. The interest rate is SOFR + 4%
for the first $10 million and SOFR + 5% for amounts exceeding $10 million.
Arrow Exploration Corp.
MANAGEMENT's DISCUSSION AND ANALYSIS
THREE MONTHS ENDED MARCH 31, 2025
MANAGEMENT'S DISCUSSION AND ANALYSIS
This Management's Discussion and Analysis ("MD&A") as provided by the
management of Arrow Exploration Corp. ("Arrow" or the "Company"), is dated as
of May 29, 2025 and should be read in conjunction with Arrow's interim
condensed (unaudited) consolidated financial statements and related notes as
at and for the three months ended March 31 2025 and 2024. Additional
information relating to Arrow, including its annual consolidated financial
statements and related notes as at and for years ended December 31, 2024 and
2023 (the "Annual Financial Statements"), is available under Arrow's profile
on www.sedar.com (http://www.sedar.com) .
Advisories
Basis of Presentation
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS"), and all amounts herein
are expressed in United States dollars, unless otherwise noted, and all
tabular amounts are expressed in United States dollars, unless otherwise
noted. Additional information for the Company may be found on SEDAR at
www.sedar.com.
Advisory Regarding Forward‐Looking Statements
This MD&A 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 "believe", "continue", "could", "expect", "likely", "may",
"outlook", "plan", "potential", "will", "would" and similar expressions. In
particular, but without limiting the foregoing, this MD&A contains
forward-looking statements pertaining to the following: global pandemics and
their impact; tax liability; capital management strategy; capital structure;
credit facilities and other debt; letters of credit; Arrow's costless collar
structure; cost reduction initiatives; potential drilling on the Tapir block;
capital requirements; expenditures associated with asset retirement
obligations; future drilling activity and the development of the Rio Cravo
Este, Carrizales Norte and Alberta Llanos structures on the Tapir Block.
Statements relating to "reserves" and "resources" are deemed to be
forward-looking information, as they involve the implied assessment, based on
certain estimates and assumptions, that the reserves and resources described
exist in the quantities predicted or estimated and can be profitably produced
in the future.
The forward-looking statements contained in this MD&A reflect several
material factors and expectations and assumptions of Arrow including, without
limitation: current and anticipated commodity prices and royalty regimes; the
impact of the global pandemics; the financial impact of Arrow's costless
collar structure; availability of skilled labour; timing and amount of capital
expenditures; future exchange rates; commodity prices; the impact of
increasing competition; general economic conditions; availability of drilling
and related equipment; receipt of partner, regulatory and community approvals;
royalty rates; changes in income tax laws or changes in tax laws and incentive
programs; future operating costs; effects of regulation by governmental
agencies; uninterrupted access to areas of Arrow's operations and
infrastructure; recoverability of reserves; future production rates; timing of
drilling and completion of wells; pipeline capacity; that Arrow will have
sufficient cash flow, debt or equity sources or other financial resources
required to fund its capital and operating expenditures and requirements as
needed; that Arrow's conduct and results of operations will be consistent with
its expectations; that Arrow will have the ability to develop its oil and gas
properties in the manner currently contemplated; current or, where applicable,
proposed industry conditions, laws and regulations will continue in effect or
as anticipated; that the estimates of Arrow's reserves and production volumes
and the assumptions related thereto (including commodity prices and
development costs) are accurate in all material respects; that Arrow will be
able to obtain contract extensions or fulfil the contractual obligations
required to retain its rights to explore, develop and exploit any of its
undeveloped properties; and other matters.
Arrow believes the material factors, 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 MD&A 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 including, without
limitation: the impact of general economic conditions; volatility in commodity
prices; industry conditions including changes in laws and regulations
including adoption of new environmental laws and regulations, and changes in
how they are interpreted and enforced; competition; lack of availability of
qualified personnel; the results of exploration and development drilling and
related activities; obtaining required approvals of regulatory authorities;
counterparty risk; risks associated with negotiating with foreign governments
as well as country risk associated with conducting international activities;
commodity price volatility; fluctuations in foreign exchange or interest
rates; environmental risks; changes in income tax laws or changes in tax laws
and incentive programs; changes to pipeline capacity; ability to secure a
credit facility; ability to access sufficient capital from internal and
external sources; risk that Arrow's evaluation of its existing portfolio of
development and exploration opportunities is not consistent with future
results; that production may not necessarily be indicative of long term
performance or of ultimate recovery; and certain other risks detailed from
time to time in Arrow's public disclosure documents including, without
limitation, those risks identified in Arrow's 2018 AIF, a copy of which is
available on Arrow's SEDAR profile at www.sedar.com. Readers are cautioned
that the foregoing list of factors is not exhaustive and are cautioned not to
place undue reliance on these forward-looking statements.
Non‐IFRS Measures
The Company uses non-IFRS measures to evaluate its performance which are
measures not defined in IFRS. Working capital, funds flow from operations,
realized prices, operating netback, adjusted EBITDA, and net debt as presented
do not have any standardized meaning prescribed by IFRS and therefore may not
be comparable with the calculation of similar measures for other entities. The
Company considers these measures as key measures to demonstrate its ability to
generate the cash flow necessary to fund future growth through capital
investment, and to repay its debt, as the case may be. These measures should
not be considered as an alternative to, or more meaningful than net income or
cash provided by (used in) operating activities or net income and
comprehensive income as determined in accordance with IFRS as an indicator of
the Company's performance. The Company's determination of these measures may
not be comparable to that reported by other companies.
Adjusted working capital is calculated as current assets minus current
liabilities, excluding non-cash liabilities; funds from operations is
calculated as cash flows provided by operating activities adjusted to exclude
changes in non-cash working capital balances; realized price is calculated by
dividing gross revenue by gross production, by product, in the applicable
period; operating netback is calculated as total natural gas and crude
revenues minus royalties, transportation costs and operating expenditures;
adjusted EBITDA is calculated as net income adjusted for interest, income
taxes, depreciation, depletion, amortization and other similar non-recurring
or non-cash charges; and net debt (net cash) is defined as the principal
amount of its outstanding debt, less working capital items excluding non-cash
liabilities.
The Company also presents funds from operations per share, whereby per share
amounts are calculated using weighted- average shares outstanding consistent
with the calculation of net income per share.
A reconciliation of the non-IFRS measures is included as follows:
Three months ended March 31, 2025 Three months ended March 31, 2024
(in United States dollars)
Net income 2,663,764 3,176,727
Add/(subtract):
Share based payments (1,101,470) 101,278
Financing costs:
Accretion on decommissioning obligations 68,277 37,376
Interest 7,168 9,769
Other - 199,065
Depreciation and depletion 6,520,968 3,531,772
Income tax expense 3,372,842 2,965,152
Adjusted EBITDA ((1)) 11,531,548 10,021,139
Cash flows provided by operating activities 14,430,184 8,582,288
Minus - Changes in non‑cash working capital balances:
Trade and other receivables (1,792,957) (299,554)
Restricted cash 8,136 (343,746)
Taxes receivable (71,920) 164,078
Deposits and prepaid expenses 22,238 152,963
Inventory 3,268 (92)
Accounts payable and accrued liabilities (2,523,014) 297,211
Income tax payable (330,382) (1,342,465)
Funds flow from operations ((1)) 9,745,553 7,210,683
((1))Non-IFRS measures
The term barrel of oil equivalent ("boe") is used in this MD&A. Boe may
be misleading, particularly if used in isolation. A boe conversion ratio of
6 thousand cubic feet ("Mcf") of natural gas to one barrel of oil ("bbl") is
used in the MD&A. This conversion ratio of 6:1 is based on an energy
equivalency conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead.
FINANCIAL AND OPERATING HIGHLIGHTS
Three months ended March 31, 2025 Three months ended March 31, 2024
(in United States dollars, except as otherwise noted)
Total natural gas and crude oil revenues, net of royalties 19,506,125 14,404,921
Funds flow from operations ((1)) 9,745,553 7,210,683
Funds flow from operations ((1)) per share -
Basic($) 0.03 0.03
Diluted ($) 0.03 0.02
Net income 2,663,764 3,176,727
Net income per share -
Basic ($) 0.01 0.01
Diluted ($) 0.01 0.01
Adjusted EBITDA ((1)) 11,531,548 10,021,139
Weighted average shares outstanding -
Basic ($) 285,864,348 285,864,348
Diluted ($) 294,094,348 292,791,385
Common shares end of period 285,864,348 285,864,348
Capital expenditures 11,379,180 6,281,328
Cash and cash equivalents 24,946,934 11,606,342
Current Assets 30,288,808 20,779,081
Current liabilities 19,252,474 11,258,252
Adjusted working capital ((1)) 11,036,334 9,520,829
Long-term portion of restricted cash and deposits ((2)) 129,849 237,814
Total assets 90,532,063 64,579,940
Operating
Natural gas and crude oil production, before royalties
Natural gas (Mcf/d) 1,851 1,760
Natural gas liquids (bbl/d) 6 4
Crude oil (bbl/d) 3,770 2,432
Total (boe/d) 4,085 2,730
Operating netbacks ($/boe) ((1))
Natural gas ($/Mcf) ($1.00) ($0.14)
Crude oil ($/bbl) $42.29 $56.27
Total ($/boe) $38.66 $50.10
((1))Non-IFRS measures - see "Non-IFRS Measures" section within this MD&A
((2)Long term restricted cash not included in working capital)
The Company
Arrow is a junior oil and gas company engaged in the acquisition, exploration
and development of oil and gas properties in Colombia and Western Canada. The
Company's shares trade on the TSX Venture Exchange and the London AIM exchange
under the symbol AXL.
The Company and Arrow Exploration Ltd. entered into an arrangement agreement
dated June 1, 2018, as amended, whereby the parties completed a business
combination pursuant to a plan of arrangement under the Business Corporations
Act (Alberta) ("ABCA") on September 28, 2018. Arrow Exploration Ltd. and Front
Range's then wholly-owned subsidiary, 2118295 Alberta Ltd., were amalgamated
to form Arrow Holdings Ltd., a wholly-owned subsidiary of the Company (the
"Arrangement"). On May 31, 2018, Arrow Exploration Ltd. entered in a share
purchase agreement, as amended, with Canacol Energy Ltd. ("Canacol"), to
acquire Canacol's Colombian oil properties held by its wholly-owned subsidiary
Carrao Energy S.A. ("Carrao"). On September 27, 2018, Arrow Exploration Ltd.
closed the agreement with Canacol, and during 2024 Carrao changed its name to
Arrow Exploration Switzerland GmbH.
On May 31, 2018, Arrow Exploration Ltd., entered into a purchase and sale
agreement to acquire a 50% beneficial interest in a contract entered into with
Ecopetrol S.A. pertaining to the exploration and production of hydrocarbons in
the Tapir block from Samaria Exploration & Production S.A. ("Samaria"). On
September 27, 2018, Arrow Exploration Ltd. closed the agreement with Samaria.
As at March 31, 2025 the Company held an interest in four oil blocks in
Colombia and oil and natural gas leases in five areas in Canada as follows:
Gross Acres Working Interest Net Acres
COLOMBIA
Tapir Operated(1) 65,125 50% 32,563
Oso Pardo Operated 672 100% 672
Ombu Non-operated 56,482 10% 5,648
COR-39 Operated 95,111 100% 95,111
Total Colombia 217,390 133,994
CANADA
Fir Non operated 7,680 32% 2,458
Penhold Non-operated 480 13% 61
Pepper Operated 19,200 100% 19,200
Wapiti Non-operated 1,280 13% 160
Ante Creek Operated 2,560 100% 2,560
KEHO Operated 8,163 100% 8,163
Total Canada 39,363 32,602
TOTAL 256,753 166,596
The Company's primary producing assets are located in Colombia in the Tapir,
Oso Pardo and Ombu blocks, with natural gas production in Canada at Fir and
Pepper, Alberta.
Llanos Basin
Within the Llanos Basin, the Company is engaged in the exploration,
development and production of oil within the Tapir block. In the Llanos Basin
most oil accumulations are associated with three-way dip closure against
NNE-SSW trending normal faults and can have pay within multiple reservoirs.
The Tapir block contain large areas not yet covered by 3D seismic, and in
Management's opinion offer substantial exploration upside.
(1)The Company's interest in the Tapir block is held through a private
contract with Petrolco, who holds a 50% participating interest in, and is the
named operator of, the Tapir contract with Ecopetrol. The formal assignment to
the Company is subject to Ecopetrol's consent. The Company is the de facto
operator pursuant to certain agreements with Petrolco (details of which are
set out in Paragraph 16.13 of the Company's AIM Admission Document dated
October 20, 2021).
Middle Magdalena Valley ("MMV") Basin
Oso Pardo Field
The Oso Pardo Field is located in the Santa Isabel Block in the MMV Basin.
It is a 100% owned property operated by the Company. The Oso Pardo field is
located within a Production Licence covering 672 acres. Three wells have been
drilled to date within the licensed area.
Ombu E&P Contract - Capella Conventional Heavy Oil Discovery
The Caguan Basin covers an area of approximately 60,000 km(2) and lies between
the Putumayo and Llanos Basins. The primary reservoir target is the Upper
Eocene aged Mirador formation. The Capella structure is a large, elongated
northeast-southwest fault-related anticline, with approximately 17,500 acres
in closure at the Mirador level. The field is located approximately 250 km
away from the nearest offloading station at Neiva, where production from
Capella is trucked.
The Capella No. 1 discovery well was drilled in July 2008 and was followed by
a series of development wells. The Company earned a 10% working interest in
the Ombu E&P Contract by paying 100% of all activities associated with the
drilling, completion, and testing of the Capella No. 1 well. The Capella field
is currently suspended and temporarily shut in.
Fir, Alberta
The Company has an average non-operated 32% WI in 12 gross (3.84 net) sections
of oil and natural gas rights and 17 gross (4.5 net) producing natural gas
wells at Fir. The wells produce raw natural gas into the Cecilia natural gas
plant where it is processed.
Pepper, Alberta
The Company holds a 100% operated WI in 37 sections of Montney P&NG rights
on its Pepper asset in West Central Alberta. The 6-26-53-23W5M Montney gas
well (West Pepper) is tied into the Galloway gas plant for processing. The
3-21-52-22W5M Montney gas well (East Pepper) is currently tied into the
Sundance gas plant for processing. The majority of lands have tenure extending
into 2025.
Three Months Ended March 31, 2025 Financial and Operational Highlights
· Arrow recorded $19,506,125 in revenues, net of royalties, on
crude oil sales of 337,697 bbls, 554 bbls of natural gas liquids ("NGL's") and
166,590 Mcf of natural gas sales;
· Funds flow from operations of $9,745,553;
· Net income of $2,663,764 and adjusted EBITDA was $11,531,548;
Results of Operations
During Q1 2025, the Company's production has decreased due to natural declines
and increasing water cuts across its fields in the Tapir block. Production
growth is expected once the Company develops water handling capability and
executes on the 2025 budget. Nevertheless, the Company has maintained good
operating results and healthy EBITDA.
Average Production by Property
Average Production Boe/d Q1 2025 Year 2024 Q4 2024 Q3 2024 Q2 2024 Q1 2024
Oso Pardo 126 153 154 180 113 166
Ombu (Capella) - - - - - -
Rio Cravo Este (Tapir) 1,118 1,294 1,178 1,078 1,283 1,644
Carrizales Norte (Tapir) 2,321 1,897 3,153 2,784 991 622
Alberta Llanos 205 7 26 - - -
Total Colombia 3,770 3,351 4,511 4,042 2,387 2,432
Fir, Alberta 105 81 88 82 77 78
Pepper, Alberta 210 110 139 - 82 220
TOTAL (Boe/d) 4,085 3,542 4,738 4,124 2,546 2,730
The Company's average production for the three months ended March 31, 2025 was
4,085 boe/d which consisted of crude oil production in Colombia of 3,770
bbl/d, natural gas production of 1,851 Mcf/d, and minor amounts of natural gas
liquids. The Company's Q1 2025 production was 50% higher than its Q1 2024
production and 14% lower than Q4 2024 due to natural declines and water
handling capability.
Average Daily Natural Gas and Oil Production and Sales Volumes
Three months ended
March 31
2025 2024
Natural Gas (Mcf/d)
Natural gas production 1,851 1,760
Natural gas sales 1,851 1,760
Realized Contractual Natural Gas Sales 1,851 1,760
Crude Oil (bbl/d)
Crude oil production 3,770 2,432
Inventory movements and other (18) 3
Crude Oil Sales 3,752 2,435
Corporate
Natural gas production (boe/d) 309 294
Natural gas liquids(bbl/d) 6 4
Crude oil production (bbl/d) 3,770 2,432
Total production (boe/d) 4,085 2,730
Inventory movements and other (boe/d) (18) 3
Total Corporate Sales (boe/d) 4,067 2,733
((1) Royalties paid in kind reduce the Company's crude oil sales volumes)
During the three months ended March 31, 2025 the majority of production was
attributed to Colombia, where all of Company's blocks were producing, except
for Capella.
Natural Gas and Oil Revenues
Three months ended
March 31
2025 2024
Natural Gas
Natural gas revenues $ 251,517 $ 300,224
NGL revenues 34,354 26,127
Royalties (9,363) (16,342)
Revenues, net of royalties 276,508 310,009
Oil
Oil revenues $ 21,850,288 $ 16,067,291
Royalties (2,620,671) (1,972,379)
Revenues, net of royalties 19,229,617 14,094,912
Corporate
Natural gas revenues $ 251,517 $ 300,224
NGL revenues 34,354 26,127
Oil revenues 21,850,288 16,067,291
Total revenues 22,136,159 16,393,642
Royalties (2,630,034) (1,988,721)
Natural gas and crude oil revenues, net of royalties, as reported $ 19,506,125 $ 14,404,921
Natural gas and crude oil revenues, net of royalties, for the three months
ended March 31, 2025 were $19,506,125 (2024: $14,404,921), which represents an
increase of 35% when compared to Q1 2024, and 16% lower than Q4 2024. The
increase is mainly due to increased oil production in Colombia from 2024 to
2025, offset by decrease in revenue in Canada, and the decrease from Q4 2024
is mainly due to natural declines and increased water cut in some wells
located in the Tapir block.
Average Benchmark and Realized Prices
Three months ended March 31
2025 2024 Change
Benchmark Prices
AECO (C$/Mcf) $2.19 $2.55 (14%)
Brent ($/bbl) $71.47 $84.67 (16%)
West Texas Intermediate ($/bbl) $71.40 $76.95 (7%)
Realized Prices
Natural gas, net of transportation ($/Mcf) $1.51 $1.87 (19%)
Natural gas liquids ($/bbl) $62.02 $66.20 (61%)
Crude oil, net of transportation ($/bbl) $64.70 $73.31 (12%)
Corporate average, net of transport ($/boe) $60.48 $66.58 (9%)
((1)Non-IFRS measure)
The Company realized prices of $60.48 per boe during the three months ended
March 31, 2025 (2024: $66.58), due to overall decrease in oil and natural gas
prices during 2025 and increase production of heavier oil which is sold at
larger discounts when compared to lighter oil.
Operating Expenses
Three months ended
March 31
2025 2024
Natural gas & NGL's 408,878 306,224
Crude oil 4,947,721 1,762,787
Total operating expenses 5,356,599 2,069,011
Natural gas ($/Mcf) $2.45 $1.91
Crude oil ($/bbl) $14.65 $8.04
Corporate ($/boe)((1)) $14.63 $8.40
((1)Non-IFRS measure)
During the three months ended March 31, 2025, Arrow incurred operating
expenses of $5,356,599 (2024: $2,069,011). This increase in operating costs is
mainly due to increased production in the Company's Carrizales Norte and
Alberta Llanos fields, including trucking water production to disposal wells
at Company owned disposal wells or third-party disposal facilities. The
Company is developing water pipelines additional disposal wells and fields to
bring down costs associated with water disposal.
Operating Netbacks
Three months ended
March 31
2025 2024
Natural Gas ($/Mcf)
Revenue, net of transportation expense $1.51 $1.87
Royalties ($0.06) ($0.10)
Operating expenses ($2.45) ($1.91)
Natural gas operating netback((1)) ($1.00) ($0.14)
Crude oil ($/bbl)
Revenue, net of transportation expense $64.70 $73.31
Royalties ($7.76) ($9.00)
Operating expenses ($14.65) ($8.04)
Crude oil operating netback((1)) $42.29 $56.27
Corporate ($/boe)
Revenue, net of transportation expense $60.48 $66.58
Royalties ($7.19) ($8.08)
Operating expenses ($14.63) ($8.40)
Corporate operating netback((1)) $38.66 $50.10
((1))Non-IFRS measure
( )
The operating netbacks of the Company for the three months ended March 31,
2025 have been affected by decreases in crude oil and natural gas prices,
and increasing operating costs from its Tapir fields, which have experienced
increased water production. The Company is developing alternatives to
dispose of trucking water for disposal with both disposal wells and fields to
address the increase in water handling costs.
General and Administrative Expenses (G&A)
Three months ended
March 31
2025 2024
General and Administrative expenses, gross 2,984,975 2,937,113
G&A recovered from 3(rd) parties (102,985) (255,191)
Total G&A 2,881,990 2,681,922
Total G&A per boe $7.87 $10.89
For the three months ended March 31, 2025, G&A expenses before recoveries
totaled $2,984,975 (2024: $2,937,113). G&A expenses were steady when
compared to Q1 2024 and, due to the Company's increased production, G&A
expenses were reduced, on a per barrel basis, when compared to 2024.
Share-based Compensation
Three months ended
March 31
2025 2024
Share-based Compensation (income) expense (1,101,470) 101,278
Share-based compensation income for the three months ended March 31, 2025
totaled $1,101,470 (2024: expense of $101,278) due to fair market valuation of
this obligation with a corresponding effect in stock based compensation
liability.
Financing Costs
Three months ended
March 31
2025 2024
Financing expense paid or payable 7,168 130,422
Non-cash financing costs 68,277 37,376
Net financing costs $75,445 167,798
The finance expense for 2025 is mostly related to lease obligation interest
and financial transactions tax paid in Colombia. The non-cash finance cost
represents the accretion in the present value of the decommissioning
obligation for the period. The amount of this expense will fluctuate
commensurate with the asset retirement obligation as new wells are drilled or
properties are acquired or disposed.
Depletion and Depreciation
Three months ended
March 31
2025 2024
Depletion and depreciation 6,520,968 3,531,772
Depletion and depreciation expense for the three months ended March 31, 2025
totaled $6,520,968 (2024: $3,531,772). This increase is due to higher carrying
value of depletable property and equipment, and increased production. The
Company uses the unit of production method and proved plus probable reserves
to calculate its depletion and depreciation expense.
Income Tax Expense
Three months ended
March 31
2025 2024
Current income tax 1,877,917 2,505,285
Deferred income tax 1,494,925 459,867
Net income tax expense 3,372,842 2,965,152
The Company recognized a net income tax expense of $3,372,842 (2024:
$2,965,152) which consisted on $1,877,917 of current income tax expense (2024:
$2,505,285) and an expense of $1,494,925 of deferred income tax (2024:
$459,867). This increase is mainly caused by the continuous increase of the
Company's net taxable income, especially in Colombia.
LIQUIDITY AND CAPITAL RESOURCES
Capital Management
The Company's objective is to maintain a capital base sufficient to provide
flexibility in the future development of the business and maintain investor,
creditor and market confidence. The Company manages its capital structure
and makes adjustments in response to changes in economic conditions and the
risk characteristics of the underlying assets. The Company considers its
capital structure to include share capital, debt and adjusted working capital.
From time to time the Company may issue common shares or other securities,
sell assets or adjust its capital spending to manage current and projected
debt levels.
As at March 31, 2025 the Company has a working capital of $11,036,334 which
has been maintained at healthy levels for several reporting periods and has
allowed the company to use its operational cash flows to settle its
obligations and to continue growing in part due to the relative stability in
energy commodity prices. As at March 31, 2025 the Company's net debt (net
cash) was calculated as follows:
March 31, 2025
Current assets $ 30,288,808
Less:
Accounts payable and accrued liabilities (11,992,570)
Income taxes payable (6,817,123)
Net debt (Net cash) ((1)) $ (11,479,115)
((1))Non-IFRS measure
Working Capital
As at March 31, 2025 the Company's adjusted working capital was calculated as
follows:
March 31, 2025
Current assets:
Cash $ 24,946,934
Restricted cash and deposits 283,973
Trade and other receivables 2,037,258
Taxes receivable 2,585,007
Other current assets 435,636
Less:
Accounts payable and accrued liabilities (11,992,570)
Lease obligation (57,125)
Income tax payable (6,817,123)
Stock based compensation liability (385,656)
Working capital((1)) $ 11,036,334
((1))Non-IFRS measure
Debt Capital
As at March 31, 2025 the Company does not have any outstanding debt balance.
Letters of Credit
As at March 31, 2025, the Company had obligations under Letters of Credit
("LC's") outstanding totaling $3 million to guarantee work commitments on
exploration blocks and other contractual commitments. In the event the Company
fails to secure the renewal of the letters of credit underlying the ANH
guarantees, or any of them, the ANH could decide to cancel the underlying
exploration and production contract for a particular block, as applicable.
Current Outstanding Letters of Credit
Contract Beneficiary Issuer Type Amount Renewal Date
(US $)
SANTA ISABEL ANH Carrao Energy Abandonment 621,158 April 14, 2026
ANH Carrao Energy Financial Capacity 1,672,162 June 30, 2025
CORE - 39 ANH Carrao Energy Compliance 100,000 June 30, 2025
OMBU ANH Carrao Energy Financial Capacity 436,300 October 14, 2025
ANH Carrao Energy Abandonment 265,782 August 28, 2025
Total $3,095,402
Share Capital
As at March 31, 2025, the Company had 285,864,348 common shares and 25,795,002
stock options outstanding.
CONTRACTUAL OBLIGATIONS
The following table provides a summary of the Company's cash requirements to
meet its financial liabilities and contractual obligations existing at March
31, 2025:
Less than 1 year 1-3 years Thereafter Total
Exploration and production contracts - 12,000,000 - 12,000,000
The Company has entered into a number of exploration contracts in Colombia
which require the Company to fulfill work program commitments. In aggregate,
the Company has outstanding commitments of $12 million. The Company have made
an application to cancel its commitments on the COR-39, which represents the
totality of the Company's current commitments.
SUMMARY OF THREE MONTHS RESULTS
2025 2024 2023
Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2
Oil and natural gas sales, net of royalties
19,506,125 22,873,626 21,300,115 15,146,366 14,404,921 13,406,513 13,990,353 10,280,280
Net income (loss) 2,663,764 2,081,956 6,668,493 1,247,825 3,176,727 (10,492,053) 7,153,120 (757,416)
Income (loss) per share -
basic 0.01 0.01 0.02 0.00 0.01 (0.04) 0.03 (0.00)
diluted 0.01 0.01 0.02 0.00 0.01 (0.04) 0.02 (0.00)
Working capital (deficit) 11,036,334 11,646,169 9,622,125 6,657,117 9,520,829 8,669,114 10,822,475 (2,363,388)
Total assets 90,532,063 81,268,734 73,535,397 67,864,633 64,579,940 62,275,023 62,755,250 56,305,530
Net capital expenditures 11,379,180 8,928,725 6,945,779 8,965,408 6,281,329 10,471,447 5,471,561 6,870,258
Average daily production (boe/d) 4,085 4,738 4,124 2,638 2,730 2,666 2,518 2,169
The Company's oil and natural gas sales have increased 35% in Q1 2025 when
compared to Q1 2024 due to increased production in its existing assets and
stable commodity prices, but decreased 16% when compared to Q4 2024 due to
declines and increase in water cuts. Trends in the Company's net income are
also impacted most significantly by operating expenses, financing costs,
income taxes, depletion, depreciation and impairment of oil and gas
properties, and other income.
OUTSTANDING SHARE DATA
At May 29, 2025 the Company had the following securities issued and
outstanding:
Number Exercise Price Expiry Date
Common shares 285,864,348 n/a n/a
Stock options 250,000 CAD$ 1.15 October 22, 2028
Stock options 100,000 CAD$ 0.31 May 3, 2029
Stock options 1,200,000 CAD$ 0.05 March 20, 2030
Stock options 1,200,000 CAD$ 0.05 April 13, 2030
Stock options 2,983,336 GBP 0.07625 June 13, 2024 and 2025
Stock options 600,001 CAD$0.28 Dec. 9, 2024 and 2025
Stock options 833,334 CAD$0.26 Mar. 7, 2025 and 2026
Stock options 3,652,222 GBP 0.1675 June 21, 2024, 2025 and 2026
Stock options 100,000 GBP 0.1925 July 23, 2024, 2025 and 2026
Stock options 1,000,000 CAD $0.33 Mar. 21, 2025, 2026 and 2027
Stock options 8,543,888 CAD $0.375 Oct. 29 2025, 2026 and 2027
Stock options 4,332,221 CAD $0.475 Mar. 11 2026, 2027 and 2028
OUTLOOK
The Company has efficiently deployed the capital generated on successful
drilling campaigns at Rio Cravo, Carrizales Norte and Alberta Llanos on the
Tapir Block. These successful campaigns have translated into production growth
and positive cashflows, providing Arrow with the funds required to expand
its capital program. In 2025, the Company plans another year of production
growth with a balanced program of both development and low risk exploration
drilling on the Tapir Block. The Company has a strong balance sheet, with no
debt and cash flow from operations which will fund the 2025 program.
SUBSEQUENT EVENTS
The Company has entered into a two-year crude prepayment agreement with an
integrated energy major to market its oil production in Colombia. The
agreement provides access to $20 million US in funding in year one and $15
million in funding in year two. The interest rate is SOFR + 4% for the first
$10 million and SOFR + 5% for amounts exceeding $10 million.
CRITICAL ACCOUNTING ESTIMATES
A summary of the Company's critical accounting estimates is contained in Note
3 Annual Financial Statements. These accounting policies are subject to
estimates and key judgements about future events, many of which are beyond
Arrow's control.
SUMMARY OF MATERIAL ACCOUNTING POLICIES
A summary of the Company's material accounting policies is included in note 3
of the Annual Financial Statements. These accounting policies are consistent
with those of the previous financial year.
RISKS AND UNCERTAINTIES
The Company is subject to financial, business and other risks, many of which
are beyond its control and which could have a material adverse effect on the
business and operations of the Company. Please refer to "Risk Factors" in the
MD&A for the year ended December 31, 2024 for a description of the
financial, business and other risk factors affecting the Company which are
available on SEDAR at www.sedar.com
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