Arrow Exploration Corp. (AXL:TSX.V; AXL:LSE) just saw its two largest shareholders and management increase their stake in the company, reported Auctus Advisors analyst Stephane Foucaud in an Oct. 18 research note.
"We view the exercise of warrants and the resulting increase in interests in Arrow as a positive," Foucaud wrote.
205% return implied
Following the news, Auctus reiterated its £0.55 per share target price on the Canadian oil and gas company.
"We had already assumed the exercise of all the warrants," noted Foucaud, referring to its financial estimates on Arrow.
In comparison, Arrow is currently trading at about £0.18 per share. From this share price, the return to target reflects a potential return for investors that is significant: 205%.
Upside to transactions
Foucaud presented the two major benefits of the warrants being exercised. It increased Arrow's cash resources. Also, it dealt with the existing overhang on the company's stock.
"The concern of investors having to sell shares to exercise their warrants had created an overhang on the share price that should dissipate with this announcement," the analyst wrote.
New shareholder structure
Foucaud provided the details of the 34.3 million (34.3M) warrants exercised in exchange for common shares in the energy exploration firm.
Of these warrants, Arrow's largest shareholder, Canacol Energy, was behind exercising 18.4M of them, and now holds 60.1M shares in Arrow. This represents 21.2% of Arrow's issued share capital.
Similarly, Tim Leslie exercised warrants, 10.2M of them. This more than doubled his number of Arrow shares to 17.8M from 7.6M, and took his portion of issued share capital to 6.4%.
Together, members of Arrow's management exercised 5.7M warrants and now hold about 6% of the company's issued share capital.
"Management has taken aggregate loans of CA$675,000 with Arrow that we understand is to fund the exercise of the warrants," Foucaud wrote.
New well spudded early
In other news, Arrow just spudded the Rio Cravo Este (RCE)-6 well in Colombia, earlier than expected.
Plans call for two more wells to be drilled at RCE.
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