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 2024
INTERIM RESULTS
CALGARY, May 30, 2024 - 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,
announces 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, 2024
which are available on SEDAR (www.sedar.com)
and will also be available shortly
on Arrow's website at www.arrowexploration.ca.
Q1 2024
Highlights:
·
Recorded $14.4 million of total oil and natural
gas revenue, net of royalties, more than double compared to the
same period in 2023 (Q1 2023: $6.9 million).
·
Net income of $3.2 million (Q1 2023: $3.0
million).
·
Adjusted EBITDA(1) of $10 million more
than double compared to 2023 (Q1 2023: $4.4 million).
·
Average corporate production up 139% to 2,730
boe/d (Q1 2023: 1,144 boe/d).
·
Realized corporate oil operating
netbacks(1) of
$56.27/bbl.
·
Cash position of $11.6 million at the end of Q1 2024.
·
Generated operating cashflows of $8.6 million (Q1
2023: $2.4 million).
·
Successfully drilled four development Carrizales
Norte (CN) wells, resulting in additional production and reserves
additions.
(1)Non-IFRS measures - see
"Non-IFRS Measures" section
Post Period End
Highlights:
·
Drilled two additional CN development
wells.
·
Spud the first CN Horizontal well ("CNB HZ-1") from the Carrizales Norte B
("CNB") pad. The
Company expects to be able to provide an update on the production
figures for CNB HZ-1 in the coming weeks. Subject to
successful completion, CNB HZ-1, in conjunction with the other
three planned CNB HZ wells, are expected to result in a positive
increase in Arrow's production rates.
Outlook:
·
Continued monitoring of the drilling of the
horizontal wells at Carrizales Norte B pad.
·
Completing stimulation efforts at the Oso Pardo-3
and 4 wells in the Middle Magdalena Basin.
·
Continuing with the balance of the 2024 capital
program, the majority of which will be focused on the Carrizales
Norte field and will include three horizontal wells. Low risk
step-out and exploration wells are also planned at the Mateguafa
Attic and Baquiano prospects. The 2024 capital program will
be self-funded by a combination of cash flow from operations and
cash reserves.
Marshall Abbott, CEO of Arrow Exploration Corp.,
commented:
"In Q1 2024, Arrow experienced its strongest quarter to date
for production and EBITDA. The Q1 2024 wells drilled, at the
Carrizales Norte discovery, explored the extent of the C7 and
Ubaque reservoir and gathered further data for the horizontal
drilling program. Horizontal wells have been determined as
the best way to develop the Ubaque reservoir and are expected to
thrust Arrow to the next level for production and stability.
The water disposal plan has also made great strides forward with
the first disposal well at RCE being brough on production and the
CN-4 well's conversion currently waiting on regulatory
approval. Management remains confident in the Arrow
team to execute on the planned exploitation campaign pursuing our
opportunity rich portfolio and getting shareholder value to the
next level."
FINANCIAL AND OPERATING
HIGHLIGHTS
|
(in
United States dollars, except as otherwise noted)
|
Three months ended March 31,
2024
|
Three
months ended March 31, 2023
|
|
Total natural gas and crude oil
revenues, net of royalties
|
14,404,921
|
6,992,860
|
|
|
|
|
|
Funds flow from operations
(1)
|
7,210,683
|
4,240,603
|
|
Funds flow from operations
(1) per share -
|
|
|
|
Basic($)
|
0.03
|
0.02
|
|
Diluted
($)
|
0.02
|
0.01
|
|
Net income
|
3,176,727
|
2,989,735
|
|
Net income per share -
|
|
|
|
Basic ($)
|
0.01
|
0.01
|
|
Diluted ($)
|
0.01
|
0.01
|
|
Adjusted EBITDA
(1)
|
10,021,140
|
4,271,726
|
|
Weighted average shares outstanding
-
|
|
|
|
Basic ($)
|
285,864,348
|
222,717,847
|
|
Diluted ($)
|
292,791,385
|
288,639,348
|
|
Common shares end of
period
|
285,864,348
|
228,979,841
|
|
Capital expenditures
|
6,281,328
|
4,271,693
|
|
Cash and cash equivalents
|
11,606,343
|
12,354,424
|
|
Current Assets
|
20,779,081
|
15,849,150
|
|
Current liabilities
|
11,258,252
|
13,315,499
|
|
Adjusted working capital
(1)
|
9,520,829
|
9,325,680
|
|
Long-term portion of restricted cash
(2)
|
237,814
|
831,048
|
|
Total assets
|
64,579,940
|
53,719,944
|
|
|
|
|
|
Operating
|
|
|
|
|
|
|
|
Natural gas and crude oil production, before
royalties
|
|
|
|
Natural gas (Mcf/d)
|
1,760
|
4,221
|
|
Natural gas liquids
(bbl/d)
|
4
|
6
|
|
Crude oil (bbl/d)
|
2,432
|
434
|
|
Total (boe/d)
|
2,730
|
1,144
|
|
|
|
|
|
Operating netbacks ($/boe) (1)
|
|
|
|
Natural gas ($/Mcf)
|
($0.14)
|
$0.73
|
|
Crude oil ($/bbl)
|
$56.27
|
$48.94
|
|
Total ($/boe)
|
$50.10
|
$20.16
|
(1)Non-IFRS measures - see
"Non-IFRS Measures" section within this MD&A
(2)Long term restricted cash
not included in working capital
Discussion of Operating Results
The Company increased its
production from new wells at CN which allowed the Company to
continue to improve its operating results and EBITDA. There
has been a decrease in the Company's natural gas production in
Canada due to natural declines.
Average Production by Property
|
Average Production Boe/d
|
Q1 2024
|
Q4 2023
|
Q3
2023
|
Q2
2023
|
Q1
2023
|
Q4
2022
|
|
Oso Pardo
|
166
|
80
|
93
|
130
|
138
|
115
|
|
Ombu (Capella)
|
-
|
-
|
-
|
-
|
80
|
238
|
|
Rio Cravo Este (Tapir)
|
1,644
|
1,326
|
1,443
|
1,592
|
1,004
|
832
|
|
Carrizales Norte (Tapir)
|
622
|
621
|
642
|
57
|
-
|
-
|
|
Total Colombia
|
2,432
|
2,027
|
2,178
|
1,779
|
1,222
|
1,185
|
|
Fir, Alberta
|
78
|
80
|
81
|
77
|
74
|
79
|
|
Pepper, Alberta
|
220
|
228
|
259
|
313
|
340
|
472
|
|
TOTAL (Boe/d)
|
2,730
|
2,335
|
2,518
|
2,169
|
1,635
|
1,736
|
For the three months ended March
31, 2024, the Company's average production was 2,730 boe/d, which
consisted of crude oil production in Colombia of 2,432 bbl/d,
natural gas production of 1,760 Mcf/d and minor amounts of natural
gas liquids from the Company's Canadian properties. The Company's
Q1 2024 total production was 138% higher than its total production
for the same period in 2023.
Discussion of Financial Results
During Q1 2024 the Company continued to realize good
oil prices, offset by lower gas prices, as summarized below:
|
|
Three months ended March
31
|
|
2024
|
2023
|
Change
|
|
Benchmark Prices
|
|
|
|
|
AECO ($/Mcf)
|
$2.55
|
$3.28
|
(22%)
|
|
Brent ($/bbl)
|
$84.67
|
$79.21
|
7%
|
|
West Texas Intermediate
($/bbl)
|
$76.95
|
$76.10
|
1%
|
|
Realized Prices
|
|
|
|
|
Natural gas, net of transportation
($/Mcf)
|
$1.87
|
$2.11
|
(11%)
|
|
Natural gas liquids
($/bbl)
|
$66.20
|
$66.13
|
0%
|
|
Crude oil, net of transportation
($/bbl)
|
$73.31
|
$73.31
|
0%
|
|
Corporate average, net of transport ($/boe)
|
$66.58
|
$57.23
|
16%
|
(1)Non-IFRS measure
Operating Netbacks
The Company also continued to realize strong oil
operating netbacks, as summarized below:
|
|
Three months
ended
March 31
|
|
|
2024
|
2023
|
|
Natural Gas ($/Mcf)
|
|
|
|
Revenue, net of transportation
expense
|
$1.87
|
$2.11
|
|
Royalties
|
($0.10)
|
(0.19)
|
|
Operating expenses
|
($1.91)
|
(2.34)
|
|
Natural gas operating netback(1)
|
($0.14)
|
($0.42)
|
|
Crude oil ($/bbl)
|
|
|
|
Revenue, net of transportation
expense
|
$73.31
|
$73.31
|
|
Royalties
|
($9.00)
|
(9.11)
|
|
Operating expenses
|
($8.04)
|
(5.88)
|
|
Crude oil operating netback(1)
|
$56.27
|
$58.31
|
|
Corporate ($/boe)
|
|
|
|
Revenue, net of transportation
expense
|
$66.58
|
$57.23
|
|
Royalties
|
($8.08)
|
(6.98)
|
|
Operating expenses
|
($8.40)
|
(8.03)
|
|
Corporate operating netback(1)
|
$50.10
|
$42.21
|
(1)Non-IFRS
measure
The operating netbacks of the
Company remained strong in Q1 2024 due to several factors,
principally the increase in production from its Colombian assets
and increased crude oil prices. In Cananda, decreases in
natural gas prices were offset by reduced operating expenses for
natural gas.
During the first three months of
2024, the Company incurred $6.3 million of capital expenditures,
primarily in connection with the drilling of four CN wells and
civil works completed in the Baquiano pad in the Tapir block to get
it ready for drilling. This accelerated tempo is expected to
continue during the remainder of 2024, funded by cash on hand and
cashflow.
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
James Asensio
George
Grainger
|
+44 (0)20 7523 8000
|
|
Auctus Advisors (Joint Broker)
|
|
|
Jonathan Wright
|
+44
(0)7711 627449
|
|
Rupert Holdsworth Hunt
|
|
|
Camarco (Financial PR)
|
|
|
Andrew Turner
|
+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 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 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.
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, 2024
AND 2023
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, 2024
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.
Interim Consolidated Statements of Financial
Position
In
United States Dollars
(Unaudited)
|
As
at
|
Notes
|
|
March 31,
2024
|
|
December 31, 2023
|
ASSETS
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Cash
|
|
$
|
11,606,342
|
$
|
12,135,376
|
|
Restricted cash and
deposits
|
3
|
|
273,274
|
|
611,753
|
|
Trade and other
receivables
|
4
|
|
3,237,382
|
|
3,536,936
|
|
Taxes receivable
|
5
|
|
4,819,478
|
|
4,655,399
|
|
Deposits and prepaid
expenses
|
|
|
350,365
|
|
197,402
|
|
Inventory
|
|
|
492,240
|
|
492,332
|
|
|
|
|
20,779,081
|
|
21,629,198
|
|
Non-current assets
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
2,157,575
|
|
2,031,383
|
|
Restricted cash and
deposits
|
3
|
|
237,814
|
|
243,081
|
|
Exploration and evaluation
assets
|
6
|
|
578,082
|
|
-
|
|
Property and equipment
|
7
|
|
40,827,388
|
|
38,371,361
|
|
Total Assets
|
|
$
|
64,579,940
|
$
|
62,275,023
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
Accounts payable and accrued
liabilities
|
|
$
|
6,698,702
|
$
|
9,747,906
|
|
Lease obligation
|
8
|
|
108,583
|
|
103,674
|
|
Income taxes
|
|
|
4,450,967
|
|
3,108,504
|
|
|
|
|
11,258,252
|
|
12,960,084
|
|
Non-current liabilities
|
|
|
|
|
|
|
Lease obligations
|
8
|
|
193,136
|
|
216,919
|
|
Other liabilities
|
|
|
345,528
|
|
345,528
|
|
Deferred income taxes
|
|
|
3,855,953
|
|
3,269,894
|
|
Decommissioning liability
|
9
|
|
4,282,861
|
|
3,973,075
|
|
Total liabilities
|
|
|
19,935,730
|
|
20,765,500
|
|
|
|
|
|
|
|
|
Shareholders' equity
|
|
|
|
|
|
Share capital
|
11
|
|
73,829,795
|
|
73,829,795
|
|
Contributed surplus
|
|
|
2,263,223
|
|
2,161,945
|
|
Deficit
|
|
|
(30,769,168)
|
|
(33,945,895)
|
|
Accumulated other comprehensive
loss
|
|
|
(679,640)
|
|
(536,322)
|
|
Total shareholders' equity
|
|
|
44,644,210
|
|
41,509,523
|
|
Total liabilities and shareholders' equity
|
|
$
|
64,579,940
|
$
|
62,275,023
|
Commitments and contingencies (Note 12)
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
Interim Condensed Consolidated Statements of Operations and
Comprehensive Income
In
United States Dollars
(Unaudited)
|
For the three months ended March 31,
|
Notes
|
|
2024
|
|
2023
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
Oil and natural gas
|
14
|
|
$
16,393,642
|
|
$ 7,964,857
|
|
|
Royalties
|
14
|
|
(1,988,721)
|
|
(971,997)
|
|
|
Total oil and natural gas revenue,
net of royalties
|
|
|
14,404,921
|
|
6,992,860
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
Operating
|
|
|
2,069,011
|
|
1,117,590
|
|
|
Administrative
|
|
|
2,681,922
|
|
1,619,470
|
|
|
Share-based compensation
expense
|
11
|
|
101,278
|
|
132,240
|
|
|
Financing costs:
|
|
|
|
|
|
|
|
Accretion
|
9
|
|
37,376
|
|
29,156
|
|
|
Interest
|
8
|
|
9,769
|
|
60,887
|
|
|
Other
|
|
|
199,065
|
|
45,682
|
|
|
Foreign exchange (gain)
loss
|
|
|
(288,739)
|
|
(40,816)
|
|
|
Depletion and
depreciation
|
7
|
|
3,531,772
|
|
2,454,364
|
|
|
Gain on derivative
liability
|
10
|
|
-
|
|
(1,354,275)
|
|
|
Other expenses (income)
|
|
|
(78,412)
|
|
(61,173)
|
|
|
Total expenses,
net
|
|
|
8,263,042
|
|
4,003,125
|
|
|
|
|
|
|
|
|
|
|
Income before income tax
|
|
|
6,141,879
|
|
2,989,735
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
|
|
|
|
|
Current
|
14
|
|
2,505,285
|
|
-
|
|
|
Deferred
|
14
|
|
459,867
|
|
-
|
|
|
|
|
|
2,965,152
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
3,176,727
|
|
2,989,735
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
Foreign exchange
|
|
|
(143,318)
|
|
(18,420)
|
|
|
Total other comprehensive income
(loss)
|
|
|
(143,318)
|
|
(18,420)
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
$
3,033,409
|
|
$
2,971,315
|
|
|
|
|
|
|
|
|
|
|
Net
income per share:
|
|
|
|
|
|
|
|
Basic
|
|
|
$
0.01
|
|
$
0.01
|
|
|
Diluted
|
|
|
$
0.01
|
|
$
0.01
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
Basic
|
|
|
285,864,348
|
|
222,717,847
|
|
|
Diluted
|
|
|
292,791,385
|
|
288,639,348
|
|
The
accompanying notes are an integral part of these consolidated
financial statements.
Interim Condensed Statements of Changes in Shareholders'
Equity
In
United States Dollars
(Unaudited)
|
|
|
Share
Capital
|
|
Contributed
Surplus
|
|
Accumulated other
comprehensive loss
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
Capital
|
|
Contributed
Surplus
|
|
Accumulated other
comprehensive loss
|
|
Deficit
|
|
Total
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1, 2023
|
$
|
57,810,735
|
$
|
1,570,491
|
$
|
(645,372)
|
$
|
(32,839,282)
|
$
|
25,896,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the period
|
|
-
|
|
-
|
|
-
|
|
2,989,735
|
|
2,989,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
-
|
|
-
|
|
(18,420)
|
|
-
|
|
(18,420)
|
|
Total
comprehensive income
|
|
-
|
|
-
|
|
(18,420)
|
|
2,989,735
|
|
2,971,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuances of common shares,
net
|
|
2,635,484
|
|
-
|
|
-
|
|
-
|
|
2,635,484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
-
|
|
132,240
|
|
-
|
|
-
|
|
132,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2023
|
$
|
60,446,219
|
$
|
1,702,731
|
$
|
(663,792)
|
$
|
(29,849,547)
|
$
|
31,635,611
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated
financial statements.
Interim Condensed Consolidated Statements of Cash
Flows
In
United States Dollars
(Unaudited)
|
|
|
|
|
For
the three months ended March 31,
|
2024
|
2023
|
|
|
|
|
|
|
|
|
Cash flows provided by operating
activities:
|
|
|
|
|
|
Net income
|
|
$
3,176,727
|
$
2,989,735
|
|
|
Items not involving
cash:
|
|
|
|
|
|
Deferred taxes
|
|
459,867
|
-
|
|
|
Share-based
compensation
|
11
|
101,278
|
132,240
|
|
|
Depletion and
depreciation
|
7
|
3,531,772
|
2,454,364
|
|
|
Interest on
leases
|
8
|
9,769
|
1,596
|
|
|
Interest on promissory
note
|
|
-
|
60,887
|
|
|
Accretion
|
9
|
37,376
|
29,156
|
|
|
Unrealized foreign exchange
loss
|
|
(35,877)
|
(73,101)
|
|
|
Gain on
derivative liability
|
10
|
-
|
(1,354,275)
|
|
|
Payment of asset decommissioning
obligations
|
9
|
(70,229)
|
-
|
|
|
Changes in non‑cash working
capital balances:
|
|
|
|
|
|
Restricted cash and
deposits
|
|
343,746
|
(12,266)
|
|
|
Trade and other
receivables
|
|
299,554
|
1,704,944
|
|
|
Taxes receivable
|
|
(164,078)
|
(602,369)
|
|
|
Deposits and prepaid
expenses
|
|
(152,963)
|
(113,612)
|
|
|
Inventory
|
|
92
|
(117,798)
|
|
|
Income tax payable
|
|
1,342,465
|
(2,482,665)
|
|
|
Accounts payable and accrued
liabilities
|
|
(297,211)
|
(236,642)
|
|
|
Cash provided by operating
activities
|
|
8,582,288
|
2,380,195
|
|
|
|
|
|
|
|
|
Cash flows used in investing activities:
|
|
|
|
|
|
Additions to exploration and
evaluation assets
|
6
|
(578,082)
|
(972,692)
|
|
|
Additions to property and
equipment
|
7
|
(5,703,246)
|
(3,299,001)
|
|
|
Changes in non-cash working
capital
|
|
(2,751,994)
|
(11,916)
|
|
|
Cash flows used in investing
activities
|
|
(9,033,322)
|
(4,283,609)
|
|
|
|
|
|
|
|
|
Cash flows provided by (used in) financing
activities:
|
|
|
|
|
|
Issuances of common
shares
|
11
|
-
|
1,147,827
|
|
|
Lease payments
|
8
|
(20,486)
|
(11,586)
|
|
|
Cash flows provided by (used in)
financing activities
|
|
(20,486)
|
1,136,241
|
|
|
|
|
|
|
|
|
Effect of changes in the exchange rate on
cash
|
|
(57,514)
|
60,628
|
|
|
(Decrease) increase in cash
|
|
(529,034)
|
(706,545)
|
|
|
Cash, beginning of period
|
|
12,135,377
|
13,060,969
|
|
|
Cash, end of period
|
|
11,606,342
|
12,354,424
|
|
|
|
|
|
|
|
|
Supplemental information
|
|
|
|
|
|
Interest paid
|
|
$
-
|
$
-
|
|
|
Taxes paid
|
|
$
-
|
$
-
|
|
|
|
|
|
|
| |
The
accompanying notes are an integral part of these consolidated
financial statements.
Arrow
Exploration Corp.
Notes
to the Interim Condensed Consolidated Financial
Statements
In
United States Dollars
(Unaudited)
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, 2024. 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, 2023.
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, 2023, except for the adoption of new
accounting standards effective January 1, 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, 2023.
Adoption of New Accounting Standards
The Company adopted amendments to
IAS 1 Presentation of Financial Statements, issued by the IASB,
related to the presentation of liabilities as current or
non-current and classification and disclosure of liabilities with
covenants. These amendments were adopted by the Company from
January 1, 2024 but they did not have a material impact on the
interim consolidated financial statements.
3. Restricted
Cash and deposits
|
|
|
March
31,
2024
|
|
December 31, 2023
|
|
|
|
|
|
|
|
Colombia (i)
|
$
|
311,082
|
$
|
312,530
|
|
Canada (ii)
|
|
200,006
|
|
542,304
|
|
Sub-total
|
|
511,088
|
|
854,834
|
|
Long-term
portion
|
|
(237,814)
|
|
(243,081)
|
|
Current portion of
restricted cash and deposits
|
$
|
273,274
|
$
|
611,753
|
(i)
This balance is
comprised of a deposit held as collateral to guarantee abandonment
expenditures related to the Tapir and Santa Isabel
blocks.
(ii)
During Q1 2024,
the Company was able to recover its $337,031 (CAD $445,749) deposit
related to the Company's liability rating management ("LMR"). This
deposit was held by a Canadian chartered bank with interest paid to
the Company on a monthly basis based on the bank's deposit rate.
The remaining $200,006 (2023: $205,273) pertain to commercial
deposits with customers, lease and other deposits held in
Canada.
4. Trade and
other receivables
|
|
|
March
31,
2024
|
|
December 31, 2023
|
|
|
|
|
|
|
|
Trade receivables, net of
advances
|
$
|
2,394,419
|
$
|
2,238,918
|
|
Other accounts
receivable
|
|
842,963
|
|
1,298,018
|
|
|
$
|
3,237,382
|
$
|
3,536,936
|
As at March 31, 2024, other
accounts receivable include $680,976 (December 31, 2023 - $682,197)
receivable from on demand loans with executives and
directors.
5. Taxes
receivable
|
|
|
March
31,
2024
|
|
December 31, 2023
|
|
|
|
|
|
|
|
Value-added tax (VAT) credits
recoverable
|
$
|
2,087,691
|
$
|
1,703,260
|
|
Income tax withholdings and
advances, net
|
|
2,731,787
|
|
2,952,139
|
|
|
$
|
4,819,478
|
$
|
4,655,399
|
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,
2024
|
|
December 31,
2023
|
|
|
|
|
|
|
|
Balance, beginning of the
period
|
$
|
-
|
$
|
-
|
|
Additions, net
|
|
578,082
|
|
3,212,808
|
|
Reclassification to Property and
Equipment (Note 8)
|
|
-
|
|
(3,212,808)
|
|
Balance, end of the
period
|
$
|
578,082
|
$
|
-
|
During 2023, the Company incurred
in geological and geophysical costs in its Carrizales Norte
prospect located in its Tapir block, and determined the technical
feasibility and commercial viability of these assets, transferring
$3,212,808 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
|
Cost
|
Oil and Gas
Properties
|
Right of Use and Other
Assets
|
Total
|
|
Balance, December 31,
2022
|
$
47,545,026
|
$ 234,156
|
$ 47,779,182
|
|
Additions
|
23,907,357
|
310,061
|
24,217,418
|
|
Dispositions
|
(111,151)
|
-
|
(111,151)
|
|
Transfers
from exploration and evaluation assets
|
3,212,808
|
-
|
3,212,808
|
|
Decommissioning
adjustment
|
738,825
|
-
|
738,825
|
|
Balance, December 31,
2023
|
$
75,292,865
|
$ 544,217
|
$ 75,837,082
|
|
Additions
|
5,703,481
|
-
|
5,703,481
|
|
Decommissioning
adjustment
|
368,679
|
-
|
368,679
|
|
Balance, March 31, 2024
|
$
81,365,025
|
$ 544,217
|
$ 81,909,242
|
|
Accumulated depletion and
depreciation and impairment
|
|
|
|
|
|
Balance, December 31,
2022
|
$
13,153,709
|
$ 161,236
|
$ 13,314,945
|
|
|
Depletion and
depreciation
|
12,120,871
|
65,906
|
12,186,777
|
|
|
Impairment loss of oil and gas
properties
|
11,799,740
|
-
|
11,799,740
|
|
|
Balance, December 31,
2023
|
$
37,074,320
|
$ 227,142
|
$ 37,301,462
|
|
|
Depletion and
depreciation
|
3,503,305
|
28,267
|
3,531,772
|
|
|
Balance, March 31, 2024
|
$
40,577,825
|
$ 255,409
|
$ 40,833,234
|
|
|
Foreign exchange
|
|
|
|
|
|
Balance December 31,
2022
|
$
(249,908)
|
$
(8,719)
|
$ (258,627)
|
|
Effects of movements in
foreign
exchange
rates
|
88,671
|
5,697
|
94,368
|
|
Balance December 31,
2023
|
$
(161,237)
|
$
(3,022)
|
$ (164,259)
|
|
Effects of movements in
foreign
exchange
rates
|
(76,781)
|
(7,580)
|
(84,361)
|
|
Balance March 31, 2024
|
$ (238,018)
|
$
(10,602)
|
$ (248,620)
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Net Book Value
|
|
|
|
|
Balance December 31,
2023
|
$ 38,057,308
|
$ 314,053
|
$ 37,371,361
|
|
Balance March 31, 2024
|
$ 40,459,183
|
$ 278,206
|
$ 40,827,388
|
Canada
As at December 31, 2023, the
Company determined there were indicators of impairment in its
Canada CGU, mainly due to decreases in forward gas prices and
revision of reserves, and prepared estimates of its fair value less
costs of disposal of its Canada CGU. It was determined
that carrying value of its Canada CGU exceeded
its recoverable amount and, therefore, an impairment loss of
$1,248,400 was included in the consolidated statements of
operations and comprehensive (loss) income
for the three months and year ended December 31, 2023.
Colombia
During 2023, the Agencia Nacional
de Hidrocarburos ("ANH") approved the suspension of the obligations
and operations of the OMBU contract due to force majeure circumstances generated
by the blockades and social unrest around the Capella field. The
suspension was for an initial term of three months and has been
extended until August 2024. At December 31, 2023, the Company
determined there were indicators of impairment in the Capella CGU
based on updates from the operator once access to the field was
restored in late 2023 causing uncertainty in timing and resources
required to resume operations, as well as the extent of which
operations may be able to be resumed. The Company has recorded an
impairment loss of $10,551,340 corresponding to the full carrying
value of the Capella CGU as at December 31, 2023.
8. Lease
Obligations
A reconciliation of the discounted
lease obligation is set forth below:
|
|
|
|
2024
|
2023
|
|
Obligation, beginning of the
year
|
|
|
320,593
|
$
63,751
|
|
Additions
|
|
|
-
|
302,930
|
|
Lease payments
|
|
|
(20,486)
|
(74,211)
|
|
Interest
|
|
|
9,769
|
22,011
|
|
Effects of movements in foreign
exchange rates
|
|
|
(8,157)
|
6,112
|
|
Obligation, end of the
year
|
|
|
301,719
|
320,593
|
|
Current portion
|
|
|
(108,583)
|
(103,674)
|
|
Long-term portion
|
|
|
193,316
|
216,919
|
As at March 31, 2024, the Company
has the following future lease obligations:
|
Less than one year
|
|
|
108,771
|
|
2 - 5 years
|
|
|
291,186
|
|
Total lease payments
|
|
|
399,957
|
|
Amounts representing interest over
the term
|
|
|
(98,238)
|
|
Present value of the net
obligation
|
|
|
301,719
|
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:
|
|
December
31,
2023
|
|
December
31,
2023
|
|
Obligation, beginning of the
year
|
3,973,075
|
|
$ 3,303,301
|
|
Additions
|
368,679
|
|
1,000,889
|
|
Change in estimated cash
flows
|
-
|
|
(262,066)
|
|
Payments or settlements
|
(70,229)
|
|
(19,545)
|
|
Dispositions
|
-
|
|
(191,081)
|
|
Accretion expense
|
37,376
|
|
127,478
|
|
Effects of movements in foreign
exchange rates
|
(26,040)
|
|
14,099
|
|
Obligation, end of the
year
|
4,282,861
|
|
3,973,075
|
The
obligation was calculated using a risk-free discount rate range of
1.25% to 4.50% in Canada (2023: 1.25% to 4.50%) and between 4.00%
and 4.29% in Colombia (2022: 4.00% and 4.29%) with an inflation
rate of 2.5% and 2.6%, respectively (2023: 2.5% and 2.6%). The
majority of costs are expected to occur between 2024 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 $6,092,913 (2023: $5,686,938).
10. Derivative liability
Derivative liability includes
warrants issued and outstanding as follows:
|
|
March 31,
2024
|
December 31,
2023
|
|
Warrants
|
Number
|
Amounts
|
Number
|
Amounts
|
|
Balance beginning of the
period
|
-
|
$
-
|
67,837,418
|
$ 9,540,423
|
|
Exercised
|
-
|
-
|
(67,462,418)
|
(8,539,257)
|
|
Expired
|
-
|
-
|
(375,000)
|
(50,589)
|
|
Fair value
adjustment
|
-
|
-
|
-
|
(1,041,992)
|
|
Foreign
exchange
|
-
|
-
|
-
|
91,415
|
|
Balance end of the period
|
-
|
$
-
|
-
|
$
-
|
There are no warrants outstanding
nor exercisable at March 31, 2024 or December 31, 203.
11. Share Capital
(a)
Authorized: Unlimited
number of common shares without par value
(b)
Issued:
|
|
March 31,
2024
|
December 31, 2023
|
|
Common shares
|
Shares
|
Amounts
|
Shares
|
Amounts
|
|
Balance beginning of the
period
|
285,864,348
|
73,829,795
|
218,401,931
|
57,810,735
|
|
Issued from warrants
exercised
|
-
|
-
|
67,462,417
|
16,019,060
|
|
Balance at end of the
period
|
285,864,348
|
73,829,795
|
285,864,348
|
73,829,795
|
(b)
Stock options:
The Company has a stock option
plan that provides for the issuance to its directors, officers,
employees and consultants options to purchase a number of
non-transferable common shares not exceeding 10% of the common
shares that are outstanding. 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, 2024 and December 31, 2023 and changes during the
periods ended on those dates is presented below:
|
|
March 31,
2024
|
December 31, 2023
|
|
Stock
Options
|
Number of
options
|
Weighted average
exercise price
(CAD
$)
|
Number
of options
|
Weighted average
exercise price
(CAD
$)
|
|
Beginning of period
|
20,531,668
|
$0.24
|
20,590,000
|
$0.18
|
|
Granted
|
-
|
-
|
1,650,000
|
$0.27
|
|
Expired/Forfeited
|
-
|
-
|
(1,375,000)
|
$0.12
|
|
Exercised
|
3,177,221
|
$18.32
|
(333,332)
|
$0.11
|
|
End of period
|
17,354,447
|
$0.24
|
20,531,668
|
$0.24
|
|
Exercisable, end of
period
|
6,918,887
|
$0.25
|
9,879,441
|
$0.42
|
|
Date of
Grant
|
Number
Outstanding
|
Exercise
Price
(CAD $)
|
Weighted
Average Remaining
Contractual Life
|
Date of
Expiry
|
Number
Exercisable
March 31,
2024
|
|
October 22, 2018
|
750,000
|
$1.15
|
|
Oct.
22, 2028
|
750,000
|
|
May 3, 2019
|
270,000
|
$0.31
|
|
May 3,
2029
|
270,000
|
|
March 20, 2020
|
1,200,000
|
$0.05
|
|
Mar.
20, 2030
|
1,200,000
|
|
April 13, 2020
|
1,200,000
|
$0.05
|
|
April
13, 2030
|
1,200,000
|
|
December 13, 2021
|
5,150,002
|
$0.13
|
|
June
13, 2024 and 2025
|
2,166,666
|
|
June 9, 2022
|
1,533,335
|
$0.28
|
|
Dec. 9,
2023, 2024 and 2025
|
-
|
|
September 7, 2022
|
833,334
|
$0.26
|
|
Mar. 7,
2024, 2025 and 2026
|
-
|
|
December 21, 2022
|
4,951,110
|
$0.28
|
|
June
21, 2024, 2025 and 2026
|
1,298,888
|
|
January 23, 2023
|
466,666
|
$0.32
|
|
July
23, 2024, 2025 and 2026
|
33,333
|
|
September 21, 2023
|
1,000,000
|
$0.33
|
|
Mar.
21, 2025, 2026 and 2027
|
-
|
|
Total
|
17,354,447
|
$0.23
|
2.05 years
|
|
6,918,887
|
During the three months ended
March 31, 2024, the Company recognized $101,278 (2023: $132,240)
as share-based compensation expense, with a corresponding
effect in the contributed surplus account.
12. 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. In aggregate, the Company has
outstanding exploration commitments at March 31, 2024 of $12
million. The Company has made an
application to the ANH to mutually cancel its COR-39
contract. Presented below are the
Company's exploration and production contractual commitments at
December 31, 2023:
|
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 the individuals as a result of their
service.
Letters of Credit
At March 31, 2024, the Company had
obligations under Letters of Credit ("LC's") outstanding totaling
$2.8 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
(US $)
|
Renewal
Date
|
|
SANTA ISABEL
|
ANH
|
Carrao
Energy
|
Abandonment
|
$563,894
|
April
14, 2025
|
|
ANH
|
Carrao
Energy
|
Financial Capacity
|
$1,672,162
|
June 30,
2024
|
|
CORE - 39
|
ANH
|
Carrao
Energy
|
Compliance
|
$100,000
|
June 30,
2024
|
|
OMBU
|
ANH
|
Carrao
Energy
|
Financial Capacity
|
$436,300
|
October
14, 2024
|
|
Total
|
|
|
|
$2,772,356
|
|
13. 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
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 2024 and
2023.
(b)
Credit Risk
Credit risk reflects the risk of
loss if counterparties do not fulfill their contractual
obligations. 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 and well financed 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 a producing company and a
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 join billings. The
Company has historically not experienced any 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 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,
2024
|
December 31, 2023
|
|
Working capital
|
$
9,520,829
|
$
8,669,114
|
14. Segmented Information
The Company has two reportable
operating segments: Colombia and Canada. The Company, through its
operating segments, is engaged primarily in oil exploration,
development and production, and the acquisition of oil and gas
properties. The Canada segment is also considered the corporate
segment. The following tables show information regarding the
Company's segments for the three months ended and as at March
31:
|
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
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
As
at March 31, 2024
|
|
Colombia
|
|
Canada
|
|
Total
|
|
Current assets
|
$
|
17,668,035
|
$
|
3,111,046
|
$
|
20,779,081
|
|
Non-current:
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
2,157,575
|
|
-
|
|
2,157,575
|
|
Restricted cash
|
|
37,808
|
|
200,006
|
|
237,814
|
|
Exploration and
evaluation
|
|
578,082
|
|
-
|
|
578,082
|
|
Property, plant and
equipment
|
|
38,083,385
|
|
2,744,003
|
|
40,827,388
|
|
Total Assets
|
$
|
58,524,885
|
$
|
6,055,055
|
$
|
64,579,940
|
|
Current liabilities
|
$
|
9,414,634
|
$
|
1,843,618
|
$
|
11,258,252
|
|
Non-current liabilities:
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
3,855,953
|
|
-
|
|
3,855,953
|
|
Other liabilities
|
|
345,528
|
|
-
|
|
345,528
|
|
Lease obligation
|
|
-
|
|
193,136
|
|
193,136
|
|
Decommissioning
liability
|
|
3,708,821
|
|
574,040
|
|
4,282,861
|
|
Total liabilities
|
$
|
17,234,936
|
$
|
2,610,794
|
$
|
19,935,730
|
|
Three months ended March 31,
2023
|
|
Colombia
|
|
Canada
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
Oil Sales
|
$
|
7,473,836
|
$
|
-
|
$
|
7,473,836
|
|
Natural gas and liquid
sales
|
|
-
|
|
491,021
|
|
491,021
|
|
Royalties
|
|
(929,033)
|
|
(42,964)
|
|
(971,997)
|
|
Expenses
|
|
(3,190,316)
|
|
(812,809)
|
|
(4,003,125)
|
|
Net income (loss)
|
$
|
3,354,487
|
$
|
(364,752)
|
$
|
2,989,735
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
As at March 31, 2023
|
|
Colombia
|
|
Canada
|
|
Total
|
|
|
|
|
|
|
|
|
|
Current assets
|
$
|
14,119,230
|
$
|
1,815,983
|
$
|
15,935,213
|
|
Non-current:
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
872,286
|
|
-
|
|
872,286
|
|
Restricted cash
|
|
37,808
|
|
573,888
|
|
611,696
|
|
Exploration and
evaluation
|
|
972,692
|
|
-
|
|
972,692
|
|
Property, plant and
equipment
|
|
30,678,708
|
|
4,649,349
|
|
35,328,057
|
|
Total Assets
|
$
|
46,680,724
|
$
|
7,039,220
|
$
|
53,719,944
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
$
|
3,755,781
|
$
|
9,559,718
|
$
|
13,315,499
|
|
Non-current liabilities:
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
5,066,684
|
|
-
|
|
5,066,684
|
|
Other liabilities
|
|
80,484
|
|
-
|
|
80,484
|
|
Lease obligation
|
|
-
|
|
11,307
|
|
11,307
|
|
Decommissioning
liability
|
|
2,869,359
|
|
741,000
|
|
3,610,359
|
|
Total liabilities
|
$
|
13,189,670
|
$
|
14,104,006
|
$
|
22,084,333
|
Arrow Exploration Corp.
MANAGEMENT's DISCUSSION AND
ANALYSIS
THREE MONTHS ENDED MARCH 31,
2024
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, 2024 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, 2024 and 2023.
Additional information relating to Arrow, including its annual
consolidated financial statements and related notes for the year
ended December 31, 2023 and 2022 (the "Annual Financial
Statements"), is available under Arrow's profile on
www.sedar.com.
Advisories
Basis of Presentation
The condensed 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: the COVID-19 pandemic and its impact; tax liability;
capital management strategy; capital structure; credit facilities
and other debt; performance by Canacol (as defined herein) and the
Company in connection with the Note (as defined herein) and 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 structure 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 COVID-19
pandemic; 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:
|
(in
United States dollars)
|
Three months ended March 31,
2024
|
Three
months ended March 31, 2023
|
|
Net
income
|
3,176,727
|
2,989,735
|
|
Add/(subtract):
|
|
|
|
Share based
payments
|
101,278
|
132,240
|
|
Financing
costs:
|
|
|
|
Accretion on decommissioning obligations
|
37,376
|
29,156
|
|
Interest
|
9,769
|
60,887
|
|
Other
|
199,065
|
45,682
|
|
Depreciation and
depletion
|
3,531,772
|
2,454,364
|
|
Derivative
loss
|
-
|
(1,354,275)
|
|
Income tax
expense
|
2,965,152
|
-
|
|
Adjusted EBITDA (1)
|
10,021,139
|
4,357,790
|
|
|
|
|
|
Cash flows provided by operating activities
|
8,582,288
|
2,380,195
|
|
Minus - Changes in non‑cash working capital
balances:
|
|
|
|
Trade and other
receivables
|
(299,554)
|
(1,704,944)
|
|
Restricted cash
|
(343,746)
|
12,266
|
|
Taxes receivable
|
164,078
|
602,369
|
|
Deposits and prepaid
expenses
|
152,963
|
113,612
|
|
Inventory
|
(92)
|
117,798
|
|
Accounts payable and accrued
liabilities
|
297,211
|
2,482,665
|
|
Income tax payable
|
(1,342,465)
|
236,642
|
|
Funds flow from operations (1)
|
7,210,683
|
4,240,603
|
(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
|
(in
United States dollars, except as otherwise noted)
|
Three months ended March 31,
2024
|
Three
months ended March 31, 2023
|
|
Total natural gas and crude oil
revenues, net of royalties
|
14,404,921
|
6,992,860
|
|
|
|
|
|
Funds flow from operations
(1)
|
7,210,683
|
4,240,603
|
|
Funds flow from operations
(1) per share -
|
|
|
|
Basic($)
|
0.03
|
0.02
|
|
Diluted
($)
|
0.02
|
0.01
|
|
Net income
|
3,176,727
|
2,989,735
|
|
Net income per share -
|
|
|
|
Basic ($)
|
0.01
|
0.01
|
|
Diluted ($)
|
0.01
|
0.01
|
|
Adjusted EBITDA
(1)
|
10,021,139
|
4,271,726
|
|
Weighted average shares outstanding
-
|
|
|
|
Basic ($)
|
285,864,348
|
222,717,847
|
|
Diluted ($)
|
292,791,385
|
288,639,348
|
|
Common shares end of
period
|
285,864,348
|
228,979,841
|
|
Capital expenditures
|
6,281,328
|
4,271,693
|
|
Cash and cash equivalents
|
11,606,342
|
12,354,424
|
|
Current Assets
|
20,779,081
|
15,849,150
|
|
Current liabilities
|
11,258,252
|
13,315,499
|
|
Adjusted working capital
(1)
|
9,520,829
|
9,325,680
|
|
Long-term portion of restricted cash
(2)
|
237,814
|
831,048
|
|
Total assets
|
64,579,940
|
53,719,944
|
|
|
|
|
|
Operating
|
|
|
|
|
|
|
|
Natural gas and crude oil production, before
royalties
|
|
|
|
Natural gas (Mcf/d)
|
1,760
|
4,221
|
|
Natural gas liquids
(bbl/d)
|
4
|
6
|
|
Crude oil (bbl/d)
|
2,432
|
434
|
|
Total (boe/d)
|
2,730
|
1,144
|
|
|
|
|
|
Operating netbacks ($/boe) (1)
|
|
|
|
Natural gas ($/Mcf)
|
($0.14)
|
$0.73
|
|
Crude oil ($/bbl)
|
$56.27
|
$48.94
|
|
Total ($/boe)
|
$50.10
|
$20.16
|
(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.
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 December 31, 2023 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
|
Operated1
|
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
|
|
|
|
|
|
Ansell
|
Operated
|
640
|
100%
|
640
|
|
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
|
|
Total Canada
|
|
29,280
|
|
22,519
|
|
TOTAL
|
|
246,670
|
|
156,513
|
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.
1The 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 km2 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,
2024 Financial and Operational Highlights
· Arrow
recorded $14,404,921 in revenues, net of royalties, on crude oil
sales of 219,160 bbls, 395 bbls of natural gas liquids ("NGL's")
and 160,119 Mcf of natural gas sales;
· Funds
flow from operations of $7,210,683;
· Net
income of $3,176,727 and adjusted EBITDA was
$10,021,139;
· Drilled four development wells at its Carrizales Norte
field
Results of
Operations
The Company increased its
production from new wells at both Rio Cravo Este and Carrizales
Norte fields in the Tapir block. These have allowed the Company to
continue to improve its operating results and EBITDA. There
has also been a decrease in the Company's natural gas production in
Canada due to natural declines.
Average Production by Property
|
Average Production Boe/d
|
Q1 2024
|
Q4 2023
|
Q3
2023
|
Q2
2023
|
Q1
2023
|
Q4
2022
|
|
Oso Pardo
|
166
|
80
|
93
|
130
|
138
|
115
|
|
Ombu (Capella)
|
-
|
-
|
-
|
-
|
80
|
238
|
|
Rio Cravo Este (Tapir)
|
1,644
|
1,326
|
1,443
|
1,592
|
1,004
|
832
|
|
Carrizales Norte (Tapir)
|
622
|
621
|
642
|
57
|
-
|
-
|
|
Total Colombia
|
2,432
|
2,027
|
2,178
|
1,779
|
1,222
|
1,185
|
|
Fir, Alberta
|
78
|
80
|
81
|
77
|
74
|
79
|
|
Pepper, Alberta
|
220
|
228
|
259
|
313
|
340
|
472
|
|
TOTAL (Boe/d)
|
2,730
|
2,335
|
2,518
|
2,169
|
1,635
|
1,736
|
The Company's average production
for the three months ended March 31, 2024 was 2,730 boe/d, which
consisted of crude oil production in Colombia of 2,432 bbl/d,
natural gas production of 1,760 Mcf/d, and minor amounts of natural
gas liquids from the Company's Canadian properties. The Company's
Q1 2024 production was 17% higher than its Q4 2023 production and
67% higher when compared to Q1 2023.
Average Daily Natural Gas and Oil Production and Sales
Volumes
|
|
Three months
ended
March 31
|
|
2024
|
2023
|
|
Natural Gas (Mcf/d)
|
|
|
|
Natural gas production
|
1,760
|
2,459
|
|
Natural gas sales
|
1,760
|
2,459
|
|
Realized Contractual Natural Gas Sales
|
1,760
|
2,459
|
|
Crude Oil (bbl/d)
|
|
|
|
Crude oil production
|
2,432
|
1,222
|
|
Inventory movements and
other
|
3
|
(89)
|
|
Crude Oil Sales
|
2,435
|
1,133
|
|
Corporate
|
|
|
|
Natural gas production
(boe/d)
|
294
|
410
|
|
Natural gas
liquids(bbl/d)
|
4
|
4
|
|
Crude oil production
(bbl/d)
|
2,432
|
1,222
|
|
Total production (boe/d)
|
2,730
|
1,635
|
|
Inventory movements and other
(boe/d)
|
3
|
(89)
|
|
Total Corporate Sales (boe/d)
|
2,733
|
1,546
|
During the three months ended
March 31, 2024 the majority of production was attributed to
Colombia, where most of Company's blocks were producing. In Canada,
the Company has two operated and two non-operated properties
located in the province of Alberta at Fir, Pepper, Harley and
Wapiti.
Natural Gas and Oil Revenues
|
|
Three months
ended
March 31
|
|
|
2024
|
2023
|
|
Natural Gas
|
|
|
|
Natural gas revenues
|
$ 300,224
|
$ 467,876
|
|
NGL revenues
|
26,127
|
23,145
|
|
Royalties
|
(16,342)
|
(42,964)
|
|
Revenues, net of royalties
|
310,009
|
448,057
|
|
Oil
|
|
|
|
Oil revenues
|
$
16,067,291
|
$
7,473,836
|
|
Royalties
|
(1,972,379)
|
(929,033)
|
|
Revenues, net of royalties
|
14,094,912
|
6,544,803
|
|
Corporate
|
|
|
|
Natural gas revenues
|
$ 300,224
|
$ 467,876
|
|
NGL revenues
|
26,127
|
23,145
|
|
Oil revenues
|
16,067,291
|
7,473,836
|
|
Total revenues
|
16,393,642
|
7,964,857
|
|
Royalties
|
(1,988,721)
|
(971,997)
|
|
Natural gas and crude oil revenues, net of royalties, as
reported
|
$
14,404,921
|
$
6,992,860
|
|
|
|
| |
Natural gas and crude oil
revenues, net of royalties, for the three months ended March 31,
2024 was $14,404,921 (2023: $6,992,860) which represents an
increase of 106% when compared to the same 2023 period, and 7%
higher than Q4 2023. These significant increases are mainly due to
increased oil production in Colombia, offset by decrease in revenue
in Canada.
Average Benchmark and Realized Prices
|
|
Three months ended March
31
|
|
2024
|
2023
|
Change
|
|
Benchmark Prices
|
|
|
|
|
AECO ($/Mcf)
|
$2.55
|
$3.28
|
(22%)
|
|
Brent ($/bbl)
|
$84.67
|
$79.21
|
7%
|
|
West Texas Intermediate
($/bbl)
|
$76.95
|
$76.10
|
1%
|
|
Realized Prices
|
|
|
|
|
Natural gas, net of transportation
($/Mcf)
|
$1.87
|
$2.11
|
(11%)
|
|
Natural gas liquids
($/bbl)
|
$66.20
|
$66.13
|
0%
|
|
Crude oil, net of transportation
($/bbl)
|
$73.31
|
$73.31
|
0%
|
|
Corporate average, net of transport ($/boe)
|
$66.58
|
$57.23
|
16%
|
(1)Non-IFRS measure
The Company realized prices of
$66.58 per boe during the three months ended March 31, 2024 (2023:
$57.23) due to small increases in oil
prices during 2024, except for natural gas
prices which decreased during this period.
Operating Expenses
|
|
Three months
ended
March 31
|
|
2024
|
2023
|
|
Natural gas & NGL's
|
306,224
|
517,653
|
|
Crude oil
|
1,762,787
|
599,937
|
|
Total operating expenses
|
2,069,011
|
1,117,590
|
|
Natural gas ($/Mcf)
|
$1.91
|
$2.34
|
|
Crude oil ($/bbl)
|
$8.04
|
$5.88
|
|
Corporate ($/boe)(1)
|
$8.40
|
$8.03
|
(1)Non-IFRS measure
During the three months ended
March 31, 2024, Arrow incurred in operating expenses of $2,069,011
(2023: $1,117,590). This increase is mainly due to increase in
production in the Company's Carrizales Norte field in the Tapir
block and higher costs of producing heavier oil. The Company's
corporate operating expense of $8.40 per boe (2023: $8.03) which is
slightly higher than Q1 2023.
Operating Netbacks
|
|
Three months
ended
March 31
|
|
|
2024
|
2023
|
|
Natural Gas ($/Mcf)
|
|
|
|
Revenue, net of transportation
expense
|
$1.87
|
$2.11
|
|
Royalties
|
($0.10)
|
(0.19)
|
|
Operating expenses
|
($1.91)
|
(2.34)
|
|
Natural gas operating netback(1)
|
($0.14)
|
($0.42)
|
|
Crude oil ($/bbl)
|
|
|
|
Revenue, net of transportation
expense
|
$73.31
|
$73.31
|
|
Royalties
|
($9.00)
|
(9.11)
|
|
Operating expenses
|
($8.04)
|
(5.88)
|
|
Crude oil operating netback(1)
|
$56.27
|
$58.31
|
|
Corporate ($/boe)
|
|
|
|
Revenue, net of transportation
expense
|
$66.58
|
$57.23
|
|
Royalties
|
($8.08)
|
(6.98)
|
|
Operating expenses
|
($8.40)
|
(8.03)
|
|
Corporate operating netback(1)
|
$50.10
|
$42.21
|
(1)Non-IFRS
measure
The operating netbacks of the
Company continued within healthy levels during 2024 due increasing
production from its Colombian assets and improved crude oil prices,
which were offset by decreases in natural gas prices.
General and Administrative Expenses
(G&A)
|
|
Three months
ended
March 31
|
|
|
2024
|
2023
|
|
General & administrative
expenses
|
2,937,113
|
1,752,947
|
|
G&A recovered from
3rd parties
|
(255,191)
|
(134,199)
|
|
Total G&A
|
2,681,922
|
1,618,748
|
|
Total G&A per boe
|
$10.89
|
$11.63
|
For the three months ended March
31, 2024, G&A expenses before recoveries totaled $2,937,113
(2023: $1,752,947), which represent an increase when compared to
the same period in 2023, but a decrease when compared with Q4 2023.
This variance is mainly due to additional personnel and payment of
performance bonuses to employees. Despite these increased expenses,
due to the Company's increased production, G&A expenses were
reduced, on a per barrel basis, when compared to 2023.
Share-based Compensation
|
|
Three months
ended
March 31
|
|
|
2024
|
2023
|
|
Share-based Compensation expense
|
101,278
|
132,240
|
Share-based compensation
expense for the three months ended March
31, 2024 totaled $101,278 (2023: $132,240). During 2023, the
Company granted 1,650,000 options to its personnel and Directors,
which was offset by reversal of expenses from cancelled options due
to resignations of option holders. No options were granted during
Q1 2024.
Financing Costs
|
|
Three months
ended
March 31
|
|
|
2024
|
2023
|
|
Financing expense paid or
payable
|
208,834
|
106,570
|
|
Non-cash financing costs
|
37,376
|
29,156
|
|
Net
financing costs
|
246,210
|
135,726
|
The finance expense for 2023
represents mostly interest on the promissory note due to Canacol.
The non-cash finance cost represents an increase in the present
value of the decommissioning obligation for the current periods.
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
|
|
|
2024
|
2023
|
|
Depletion and depreciation
|
3,531,772
|
2,454,364
|
Depletion and depreciation expense
for the three months ended March 31, 2024 totaled $3,531,772 (2023:
$2,454,364). The 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.
Gain on Derivative Liability
|
|
Three months
ended
March 31
|
|
|
2024
|
2023
|
|
Gain on Derivative Liability
|
-
|
(1,354,275)
|
During the three months ended
March 31, 2024, the Company recorded no gain or loss in derivative
liability (2023: gain of $1,354,275) related to the valuation of
its outstanding warrants issued during its AIM listing and private
placement completed in 2021, which were
mostly settled or expired during 2023.
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. In order to maintain or
adjust the capital structure, 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, 2024 the Company
has a working capital of $9,520,829. The Company has maintained a
healthy working capital, using its operational cash flows to settle
its obligations and to continue growing its operations. The
stability in energy commodity prices has allowed the Company's
capacity to generate sufficient financial resources to sustain its
operations and growth. As at March 31, 2024 the Company's net debt
(net cash) was calculated as follows:
|
|
|
March 31,
2024
|
|
|
|
|
|
|
|
Current assets
|
|
|
$
|
20,779,081
|
|
Less:
|
|
|
|
|
|
Accounts payable and accrued
liabilities
|
|
|
|
6,698,702
|
|
Income taxes payable
|
|
|
|
4,450,967
|
|
Net debt (Net cash) (1)
|
|
|
$
|
(9,629,412)
|
(1)Non-IFRS
measure
Working Capital
As at March 31, 2024 the Company's
adjusted working capital was calculated as follows:
|
|
|
March 31,
2024
|
|
Current assets:
|
|
|
|
|
|
Cash
|
|
|
$
|
11,606,342
|
|
Restricted cash and
deposits
|
|
|
|
273,274
|
|
Trade and other
receivables
|
|
|
|
3,237,382
|
|
Taxes
receivable
|
|
|
|
4,819,478
|
|
Other current
assets
|
|
|
|
842,605
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
Accounts payable and
accrued liabilities
|
|
|
|
6,698,702
|
|
Lease obligation
|
|
|
|
108,583
|
|
Income tax
payable
|
|
|
|
4,450,967
|
|
Working capital(1)
|
|
|
$
|
9,520,829
|
(1)Non-IFRS
measure
Debt Capital
As at March 31, 2024 the Company
does not have any outstanding debt balance.
Letters of
Credit
As at March 31, 2024, the Company
had obligations under Letters of Credit ("LC's") outstanding
totaling $2.7 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. In this instance, the Company could risk
losing its entire interest in the applicable block, including all
capital expended to date and could possibly also incur additional
abandonment and reclamation costs if applied by the ANH.
|
Current Outstanding Letters
of Credit
|
|
|
|
|
|
|
|
|
Contract
|
Beneficiary
|
Issuer
|
Type
|
Amount
(US $)
|
Renewal
Date
|
|
SANTA ISABEL
|
ANH
|
Carrao
Energy
|
Abandonment
|
$563,894
|
April
14, 2025
|
|
ANH
|
Carrao
Energy
|
Financial Capacity
|
$1,672,162
|
June 30,
2024
|
|
CORE - 39
|
ANH
|
Carrao
Energy
|
Compliance
|
$100,000
|
June 30,
2024
|
|
OMBU
|
ANH
|
Carrao
Energy
|
Financial Capacity
|
$436,300
|
October
14, 2024
|
|
Total
|
|
|
|
$2,772,356
|
|
Share Capital
As at March 31, 2024, the Company
had 285,864,348 common shares and 17,354,447 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,
2024:
|
|
Less than 1
year
|
1-3 years
|
Thereafter
|
Total
|
|
|
|
|
|
|
|
Exploration and production contracts
|
|
-
|
|
12,000,000
|
|
-
|
|
12,000,000
|
|
|
|
|
|
|
|
|
| |
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. In aggregate, the
Company has outstanding commitments of $12 million. The Company
have made an application to cancel its commitments on the
COR-39.
SUMMARY OF THREE MONTHS RESULTS
|
|
2024
|
2023
|
2022
|
|
|
Q1
|
Q4
|
Q3
|
Q2
|
Q1
|
Q4
|
Q3
|
Q2
|
|
Oil and natural gas sales, net of
royalties
|
14,404,921
|
13,406,513
|
13,990,353
|
11,637,968
|
6,992,860
|
8,931,562
|
7,614,336
|
5,024,604
|
|
Net income (loss)
|
3,176,727
|
(10,492,053)
|
7,153,120
|
(757,416)
|
2,989,735
|
2,968,117
|
2,041,955
|
768,318
|
|
Income (loss) per share
-
basic
diluted
|
0.01
0.01
|
(0.04)
(0.04)
|
0.03
0.02
|
(0.00)
(0.00)
|
0.01
0.01
|
0.01
0.01
|
0.02
0.00
|
0.00
0.00
|
|
Working capital
(deficit)
|
9,520,829
|
8,669,114
|
10,822,475
|
(2,363,388)
|
2,619,715
|
(1,316,665)
|
7,392,310
|
5,594,027
|
|
Total assets
|
64,579,940
|
62,275,023
|
62,755,250
|
56,305,530
|
53,719,944
|
53,190,248
|
46,979,259
|
42,670,153
|
|
Net capital
expenditures
|
6,281,329
|
10,471,447
|
5,471,561
|
6,870,258
|
4,271,693
|
2,106,463
|
4,836,860
|
2,777,611
|
|
Average daily production
(boe/d)
|
2,730
|
2,666
|
2,518
|
2,169
|
1,635
|
1,736
|
1,503
|
980
|
The Company's oil and natural gas
sales have increased 106% in Q1 2024 when compared to Q1 2023 due
to increased production in its existing assets and stable commodity
prices. The Company's production levels in Colombia continue
growing. Trends in the Company's net income are also impacted most
significantly by operating expenses, financing costs, income taxes,
depletion, depreciation and impairment of oil and gas properties,
and other income.
OUTSTANDING SHARE DATA
At May 29, 2024 the Company had
the following securities issued and outstanding:
|
|
Number
|
Exercise
Price
|
Expiry Date
|
|
Common shares
|
|
285,864,348
|
|
n/a
|
|
n/a
|
|
Stock options
|
|
750,000
|
|
CAD$
1.15
|
|
October
22, 2028
|
|
Stock options
|
|
270,000
|
|
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
|
|
5,150,002
|
|
GBP
0.07625
|
|
June
13, 2024 and 2025
|
|
Stock options
|
|
1,533,335
|
|
CAD$0.28
|
|
Dec. 9,
2024 and 2025
|
|
Stock options
|
|
833,334
|
|
CAD$0.26
|
|
Mar. 7,
2025 and 2026
|
|
Stock options
|
|
4,951,110
|
|
GBP
0.1675
|
|
June
21, 2024, 2025 and 2026
|
|
Stock options
|
|
466,666
|
|
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
|
|
9,843,887
|
|
CAD
$0.375
|
|
Oct. 29
2025, 2026 and 2027
|
OUTLOOK
The Company has deployed the
capital raised at the time of the Admission to AIM on
a successful drilling campaigns at Rio Cravo and Carrizales
Norte on the Tapir Block. These successful campaigns have
translated into production growth and in positive cashflows during
2023 and 2022, providing Arrow with the funds required to continue
with its capital program for 2024.
During 2024, the Company has
drilled six wells at Carrizales Norte, which have increased overall
production, and has spud its first horizontal well. This confirms
Arrow's commitment to increase production and shareholder value.
The Company is able to support its 2024 capital program with
current cash on hand and cash flow from
operations.
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, 2022 for a
description of the financial, business and other risk factors
affecting the Company which are available on SEDAR at www.sedar.com