Arrow Exploration Corp V.AXL

Feom Auctus Advisors' report - All good!

[Rob0012]

No change in target price but still all good!

CN-2 flows at up to 1 mbbl/d. Focusing on developping the Ubaque at Carrizales Norte
• The Carrizales Norte-2 well (CN-2) encountered 60’ of net pay in the Ubaque formation.
• The well has been put on production in the Ubaque with initial flow rates of 1,012 barrels of fluid per day. The water cut stabilized at 3% and the oil gravity is 13.6 API.
• The CN-2 well is currently producing 680 bbl/d gross (340 bbl/d net) as the company has set the ESP at the minimum optimum rate to maximize recovery factor. The build-up analysis indicates the well can produce at 1,400 bbl/d gross at a consistent producible rate. 
 • The net pay encountered in the Ubaque at CN-2, the oil quality and the achieved flow rate are consistent with the Ubaque at CN-1. The water cut is however much lower at CN-2 than at CN-1 (3% vs ~28%); which is a positive.
• The C7 sands were also tested but there was an immediate water breakthrough (the water cut reached 50%) that would require large water handling facilities. It is not clear where the water came from as the perforation were 15’ higher than at CN-1. It could be associated with a cementing issue.
• Over 30’ of pay was encountered at the Gacheta. That formation was not tested as it would have a required different completion equipment.
• Pending further visibility on an estimate on the reserves and resources at Carrizales Norte (particularly in the Ubaque that is expected to be very material to Arrow) expected after the CN-3 well, we re-iterate our target price of £0.50 per share (~our ReNAV).  
 
Production growth
Including production from the CN-2 well, overall corporate production should be ~3 mboe/d. The Carrizales Norte-3 well has been spud. The rig will then move back to the RCE field to drill two dedicated Gacheta wells and the RCS-2 well targeting the C7 formation. The focus for the Carrizales Norte initial development will be the Ubaque formation where the rig will return to drill additional wells once the RCS-2 well is completed. Before taking into consideration natural decline and the future Ubaque wells, the four new upcoming wells could add 1,600 bbl/d net to Arrow, assuming 400 bbl/d per well (net to Arrow).
Valuation and cashflow
Our ReNAV is unchanged £0.53 per share. Assuming US$75/bbl for Brent until YE24, we continue to forecast that the company will hold >US$15 mm in net cash at YE23 and >US$50 mm at YE24.
 

[EagleHasLanded]

It seems to me they produce from the easiest formations first, then drill the secondary later. It is the way to go of course. By easiest I mean good constant flow with as high API possible if viable, it is just a numbers game to the mgt. very wise. Obviously they ran into some trouble but they may come back later. I will think some and then ask Joe

[EagleHasLanded]

Questions asked for Joe: Thanks Joe! Regarding the ubaque oil, will you sell and truck it as is or possibly dilute it from oil from C7 at CN-1? What kind of troubles did you get into at CN-2? Auctus research suggests possible cementing issues at C7. Also if I may, what kind of troubles at Gacheta? Do you think it would be resolved into a future producer? I refer to Auctus: “Over 30

[EagleHasLanded]

We have a few options to sell the Ubaque crude at Carrizales Norte, blending the crude is one of the options, however, it will take some time to get the proper blending equipment in place.  We are running the economics to determine if that is the most advantageous to Arrow.     Currently we are selling the Ubaque crude by truck on its own.  We have negotiated a very good

[Rob0012]

`wow!  That is a detailed response!  Great job Ron!  That is so important for us investors (not traders) to maintain communication with the Co so we understand what the plans and the actions are.  I've been impressed with Marshall at first.  Joe is also very knowledgeable and accessible, good qualities for us investors, again. I find the TP from Canaccord and zeus a