Auctus Advisors analyst Stephane Foucaud, in a research report published on June 19, 2024, provided an update on Arrow Exploration Corp. (AXL:TSX.V; AXL:LSE) following the company's announcement of a higher-than-expected flow rate from its first CN Horizontal well (CNB HZ-1) at the Carrizales Norte B pad. The analyst reiterated a target price of £0.65 per share, implying a total return of 225% from the share price at the time of the report of £0.20.
"The first CN Horizontal well (CNB HZ-1) from the Carrizales Norte B pad has been on production since June 14 at a rate of 3,150 bbl/d (~1.6 mbbl/d net) with less than 1% water cut while still recovering load fluid. The flow rate is currently constrained with the ESP operating on the minimum setting," Foucaud noted.
The analyst emphasized that the flow rate is above expectations and represents twice what Auctus Advisors carries in its model for the well in Q3 2024 (1.5 mbbl/d gross or 0.75 mbbl/d net). "The flow rate is very important for Arrow's growth story as horizontal drilling will form the basis of the development of the Carrizales Norte field," Foucaud stated.
Arrow Exploration plans to drill a water injector before three further horizontal wells at the Carrizales Norte B pad, which is expected to have a material impact on production. "Pending confirmation of the stabilized rate, we have not changed our forecasts with production reaching 5.6 mboe/d in 4Q24 (assuming 1.5 mbbl/d gross production per new horizontal well)," the analyst added.
Foucaud noted that Arrow Exploration holds approximately US$12.1 million in cash, which is in line with Auctus Advisors' expectations.
The analyst also discussed the company's current production levels, which stand at approximately 3.6 mboe/d, reflecting 250 boe/d shut-in in Canada due to low natural gas prices and 250 bbl/d shut-in due to water handling restrictions at Carrizales Norte. Arrow Exploration is awaiting regulatory approval to use the CN-4 well as a water injector and plans to drill a second injector well (CNB-2) at Carrizales Norte to ensure adequate water disposal volumes for the entire development.
Auctus Advisors has slightly adjusted its production forecast for Arrow Exploration, now assuming approximately 3.8 mboe/d production in 2024 (previously 3.9 mboe/d) due to the temporary shut-in of 250 boe/d of production in Canada.
"Booking 4.35 mmbbl net reserves at Carrizales Noroeste and CN-8 (Carbonera) could add a further £0.11/sh," Foucaud wrote.
The analyst's valuation of Arrow Exploration assumes a Brent crude oil price of US$85/bbl until year-end 2025. "Assuming US$85/bbl for Brent until YE25, we forecast that the company will hold >US$60 mm at YE25," Foucaud stated.
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Disclosures for Auctus Advisors, Arrow Exploration Corp., June 19, 2024
Arrow Exploration Corp. (“Arrow” or the “Company”) is a corporate client of Auctus Advisors LLP (“Auctus”). Auctus receives, and has received in the past 12 months, compensation for providing corporate broking and/or investment banking services to the Company, including the publication and dissemination of marketing material from time to time.
MiFID II Disclosures This document, being paid for by a corporate issuer, is believed by Auctus to be an ‘acceptable minor non-monetary benefit’ as set out in Article 12 (3) of the Commission Delegated Act C(2016) 2031 which is part of UK law by virtue of the European Union (Withdrawal) Act 2018. It is produced solely in support of our corporate broking and corporate finance business. Auctus does not offer a secondary execution service in the UK. This note is a marketing communication and NOT independent research. As such, it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and this note is NOT subject to the prohibition on dealing ahead of the dissemination of investment research.
Author The research analyst who prepared this research report was Stephane Foucaud, a partner of Auctus.
Not an offer to buy or sell Under no circumstances is this note to be construed to be an offer to buy or sell or deal in any security and/or derivative instruments. It is not an initiation or an inducement to engage in investment activity under section 21 of the Financial Services and Markets Act 2000.
Note prepared in good faith and in reliance on publicly available information Comments made in this note have been arrived at in good faith and are based, at least in part, on current public information that Auctus considers reliable, but which it does not represent to be accurate or complete, and it should not be relied on as such. The information, opinions, forecasts and estimates contained in this document are current as of the date of this document and are subject to change without prior notification. No representation or warranty either actual or implied is made as to the accuracy, precision, completeness or correctness of the statements, opinions and judgements contained in this document.
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Information purposes only This document is intended to be for background information purposes only and should be treated as such. This note is furnished on the basis and understanding that Auctus is under no responsibility or liability whatsoever in respect thereof, whether to the Company or any other person.
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Disclaimer This note has been forwarded to you solely for information purposes only and should not be considered as an offer or solicitation of an offer to sell, buy or subscribe to any securities or any derivative instrument or any other rights pertaining thereto (“financial instruments”). This note is intended for use by professional and business investors only. This note may not be reproduced without the prior written consent of Auctus. The information and opinions expressed in this note have been compiled from sources believed to be reliable but, neither Auctus, nor any of its partners, officers, or employees accept liability from any loss arising from the use hereof or makes any representations as to its accuracy and completeness. Any opinions, forecasts or estimates herein constitute a judgement as at the date of this note. There can be no assurance that future results or events will be consistent with any such opinions, forecasts or estimates. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied is made regarding future performance. This information is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company and its subsidiaries. Auctus is not agreeing to nor is it required to update the opinions, forecasts or estimates contained herein. The value of any securities or financial instruments mentioned in this note can fall as well as rise. Foreign currency denominated securities and financial instruments are subject to fluctuations in exchange rates that may have a positive or adverse effect on the value, price or income of such securities or financial instruments. Certain transactions, including those involving futures, options and other derivative instruments, can give rise to substantial risk and are not suitable for all investors. This note does not have regard to the specific instrument objectives, financial situation and the particular needs of any specific person who may receive this note. Auctus (or its partners, officers or employees) may, to the extent permitted by law, own or have a position in the securities or financial instruments (including derivative instruments or any other rights pertaining thereto) of the Company or any related or other company referred to herein, and may add to or dispose of any such position or may make a market or act as principle in any transaction in such securities or financial instruments. Partners of Auctus may also be directors of the Company or any other of the companies mentioned in this note. Auctus may, from time to time, provide or solicit investment banking or other financial services to, for or from the Company or any other company referred to herein. Auctus (or its partners, officers or employees) may, to the extent permitted by law, act upon or use the information or opinions presented herein, or research or analysis on which they are based prior to the material being published.
Further Disclosures for the United Kingdom This note has been issued by Auctus Advisors LLP, which is authorised and regulated by the Financial Conduct Authority. This note is not intended for use by, or distribution to, US corporations that do not meet the definition of a major US institutional investor in the United States or for use by any citizen or resident of the United States. This publication is confidential and may not be reproduced in whole or in part or disclosed to another party, without the prior written consent of Auctus. Securities referred to in this note may not be eligible for sale in those jurisdictions where Auctus is not authorised or permitted by local law to do so. In particular, Auctus does not permit the distribution or redistribution of this note to non-professional investors or other persons to whom disclosure would contravene local securities laws. Auctus expressly disclaims and will not be held responsible in any way, for third parties who affect such redistribution. © Auctus Advisors LLP All rights reserved 2024
