Q1 2023 INTERIM RESULTS

Arrow Exploration Corp.
30 May 2023
 

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.

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ARROW ANNOUNCES Q1 2023 INTERIM RESULTS

            

CALGARY, May 30, 2023 - 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 Consolidated Financial Statements and Management's Discussion and Analysis ("MD&A") for the quarter ended March 31, 2023 which are available on SEDAR (www.sedar.com) and will also shortly be available on Arrow's website at www.arrowexploration.ca.

 

Q1 2023 Highlights:

·    Recorded $6.9 million of total oil and natural gas revenue, net of royalties, more than double compared to 2022 (Q1 2022: $3.4 million).

·    Adjusted EBITDA of $4.3 million, more than seven times compared to 2022 (Q1 2022: $0.6 million).

·    Average corporate production up 43% to 1,635 boe/d (Q1 2022: 1,144 boe/d).

·    Realized corporate oil operating netbacks of $58.31/bbl due to increased production allowing operating cost to be spread over more barrels.

·    Cash position of $12.3 million at the end of Q1 2023.

·    Generated positive operating cashflows of $2.4 million (Q1 2022: negative $0.1 million).

·    Drilled three successful wells at Rio Cravo Este (RCE) resulting in material production additions.

Post Period End Highlights:

·    The Carrizales Norte-1 (CN-1) well has been drilled and reached its target depth, and is currently under production testing.

 

Outlook

·    Arrow anticipates two additional wells to be drilled at Carrizales Norte by year-end.

·    Arrow anticipates two additional wells at RCE by year-end to target the Gacheta formation which was successfully tested at commercial rates in RCE-2.

·    Arrow plans to drill two development wells at the Oso Pardo Block in the Middle Magdalena Basin.

 

Marshall Abbott, CEO of Arrow Exploration Corp., commented:

 

"Arrow has had a strong start to 2023, including the drilling of three RCE wells and the CN-1 well, which is expected to have a significant impact on the Company's production and reserves, as well as establishing a new core area. The 3D seismic West Tapir project has completed shooting, is currently being processed and is expected to further evaluate the 2D recognized fault prospects. The Arrow Team continues to strive towards excellence and increasing shareholder value."

FINANCIAL AND OPERATING HIGHLIGHTS

 

 

(in United States dollars, except as otherwise noted)

Three months ended March 31, 2023

Three months ended March 31, 2022

Total natural gas and crude oil revenues, net of royalties

               6,992,860

3,402,962

Funds flow from operations (1)

               4,240,603

312,951

Funds flow from operations (1) per share -

 


    Basic($)

                        0.02

0.00

    Diluted ($)

                        0.01

                        0.00

Net income (loss)

               2,989,735

 (5,431,865)

Net income (loss) per share -

 


   Basic ($)

                        0.01

                      (0.03)

   Diluted ($)

                        0.01

                      (0.02)

Adjusted EBITDA (1)

               4,271,726

                562,284

Weighted average shares outstanding -

 


   Basic ($)

222,717,847

213,577,686

   Diluted ($)

288,639,348

250,941,120

Common shares end of period

228,979,841

213,814,643

Capital expenditures

               4,271,693

                  725,665

Cash and cash equivalents

             12,354,424

               8,967,197

Current Assets

             15,849,150

             11,538,944

Current liabilities

             13,315,499

               3,881,006

Adjusted working capital (1)

               9,325,680

               7,657,938

Long-term portion of restricted cash (2)

                  831,048

                  742,733

Total assets

             53,719,944

             39,914,240




Operating






Natural gas and crude oil production, before royalties



Natural gas (Mcf/d)

2,459

4,221

Natural gas liquids (bbl/d)

4

6

Crude oil (bbl/d)

1,222

434

Total (boe/d)

1,635

1,144

 

 


Operating netbacks ($/boe) (1)

 


Natural gas ($/Mcf)

($0.42)

$0.73

Crude oil ($/bbl)

$58.31

$48.94

Total ($/boe)

$42.21

$20.16

(1)Non-IFRS measures - see "Non-IFRS Measures" section of the  MD&A

(2)Long term restricted cash not included in working capital

 

 

 

Discussion of Operating Results

The Company maintained its overall production and continued improving its operations. This has allowed the Company to continue to improve its balance sheet and its business profile.  In early 2023, the Company increased production on its Tapir block through drilling the RCE-3, RCE-4 and RCE-5 wells, offset by the current production shut in at its Ombu block. 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 2023

Q4 2022

Q3 2022

Q2 2022

Q1 2022

Oso Pardo

138

115

104

112

121

Ombu (Capella)

80

238

215

97

177

Rio Cravo Este (Tapir)

1,004

832

860

366

136

Total Colombia

1,222

1,185

1,179

575

434

Fir, Alberta

74

79

82

86

73

Pepper, Alberta

340

472

242

319

636

TOTAL (Boe/d)

1,635

1,736

1,503

980

1,144

For the three months ended March 31, 2023, the Company's average production was 1,635 boe/d, which consisted of crude oil production in Colombia of 1,222 bbl/d, natural gas production of 2,459 Mcf/d and minor amounts of natural gas liquids from the Company's Canadian properties. The Company's Q1 2023 total production was 43% higher than its total production for the same period in 2022.

 

Discussion of Financial Results

During Q1 2023 the Company continued to realize strong oil prices, offset by decreased gas prices, as summarized below:


Three months ended March 31

2023

2022

Change

Benchmark Prices

 



AECO ($/Mcf)

$2.43

$3.68

-34%

Brent ($/bbl)

$79.21

$97.90

-19%

West Texas Intermediate ($/bbl)

$76.10

$94.94

-20%

Realized Prices

 



Natural gas, net of transportation ($/Mcf)

$2.11

$3.65

-42%

Natural gas liquids ($/bbl)

$66.13

$76.89

-14%

Crude oil, net of transportation ($/bbl)

$73.31

$73.87

-1%

Corporate average, net of transport ($/boe)

$57.23

$40.13

43%

   (1)Non-IFRS measure

Operating Netbacks

The Company also continued to realize positive operating netbacks, as summarized below.

 

 

 

 

Three months ended

March 31

 

2023

2022

Natural Gas ($/Mcf)



Revenue, net of transportation expense

$2.11

$3.65

Royalties

(0.19)

(0.79)

Operating expenses

(2.34)

(2.13)

Natural gas operating netback(1)

($0.42)

$0.73

Crude oil ($/bbl)

 


Revenue, net of transportation expense

$73.31

$73.87

Royalties

(9.11)

(6.24)

Operating expenses

(5.88)

(18.69)

Crude oil operating netback(1)

$58.31

$48.94

Corporate ($/boe)

 


Revenue, net of transportation expense

$57.23

$40.13

Royalties

(6.98)

(5.22)

Operating expenses

(8.03)

(14.76)

Corporate operating netback(1)

$42.21

$20.16

 (1)Non-IFRS measure

The operating netbacks of the Company continued improving in 2023 due to increasing production from its Colombian assets, and consistent crude oil prices, which were offset by decreases in natural gas prices and increases in royalties and operating expenses for natural gas.

During Q1 2023, the Company incurred in $4.3 million of capital expenditures, primarily in connection with the drilling of the three RCE wells, civil works completed in Rio Cravo and shooting 100 km2 of 3D seismic in the Tapir block to highlight existing leads and prospects for drilling. This acceleration in operational tempo is expected throughout 2023, funded by cash on hand and cashflow.

ARROW PARTICIPATING INTEREST IN THE TAPIR BLOCK

By way of a private commercial contract with the recognized interest holder before Ecopetrol S.A., Arrow is entitled to receive 50% of the production from the Tapir block. The formal assignment to the Company is subject to Ecopetrol's consent.

 

For further Information, contact:

Arrow Exploration


Marshall Abbott, CEO

+1 403 651 5995

Joe McFarlane, CFO

+1 403 818 1033



Brookline Public Relations, Inc.

Shauna MacDonald                                                   

 

+1 403 538 5645

 


Canaccord Genuity (Nominated Advisor and Joint Broker)


Henry Fitzgerald-O'Connor

James Asensio

Gordon Hamilton                         

+44 (0)20 7523 8000

 

Auctus Advisors (Joint Broker)

 

Jonathan Wright

+44 (0)7711 627449

Rupert Holdsworth Hunt


 

Camarco (Financial PR)


Georgia Edmonds

+44 (0)20 3781 8331

Rebecca Waterworth


Billy Clegg

 


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

 

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, 2023 AND 2022

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, 2023

 

 

Under National Instrument 51-102, Part 4, subsection 4.3 (3)(a), if an auditor has not performed a review of the interim condensed consolidated financial statements, they must be accompanied by a notice indicating that an auditor has not reviewed the financial statements.

 

The accompanying unaudited interim condensed consolidated financial statements of the Company have been prepared by and are the responsibility of the Company's management.

 

The Company's independent auditor has not performed a review of these financial statements in accordance with standards established by the Chartered Professional Accountants of Canada for a review of interim financial statements by an entity's auditor.


Arrow Exploration Corp.

Interim Condensed Consolidated Statements of Financial Position

In United States Dollars

(Unaudited)

 

As at

Notes

 

March 31, 2023


December 31, 2022

ASSETS

 

 

 

 


Current assets

 

 

 

 


Cash


$

12,354,424

$

13,060,968

Restricted cash and deposits

3

 

219,352


210,654

Trade and other receivables

4

 

863,345


2,568,290

Taxes receivable

5

 

1,403,546


801,177

Deposits and prepaid expenses

 

 

271,071


157,459

Inventory

 

 

823,475


705,677


 

 

15,935,213


17,504,225

Non-current assets

 

 

 



Deferred income taxes

 

 

872,286


872,286

Restricted cash and deposits

3

 

611,696


608,127

Exploration and evaluation

6

 

972,692


-

Property and equipment

7

 

35,328,057


34,205,610

Total Assets


$

53,719,944

$

53,190,248

 

 

 

 



LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 



Current Liabilities

 

 

 



Accounts payable and accrued liabilities


$

3,356,144

$

5,850,823

Lease obligation

9

 

42,513


41,434

Promissory note

8

 

1,958,603


1,899,294

Derivative liability

11

 

6,705,966


9,540,423

Income taxes

 

 

1,252,273


1,488,916

 

 

 

13,315,499


18,820,890

Non-current liabilities

 

 

 



Lease obligations

9

 

11,307


22,317

Other liabilities

 

 

80,484


80,484

Deferred income taxes

14

 

5,066,684


5,066,684

Decommissioning liability

10

 

3,610,359


3,303,301

Total liabilities

 

 

22,084,333


27,293,676

 

 

 

 



Shareholders' equity

 

 

 



Share capital

12

 

60,446,219

 

57,810,735

Contributed surplus

 

 

1,702,731


1,570,491

Deficit

 

 

(29,849,547)


(32,839,282)

Accumulated other comprehensive loss

 

 

(663,792)


(645,372)

Total shareholders' equity

 

 

31,635,611

 

25,896,572

Total liabilities and shareholders' equity


$

53,719,944

$

53,190,248

Commitments and contingencies (Note 13)

 

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

 

On behalf of the Board:

                                                               

 signed "Gage Jull"   Director                                                                 signed "Anthony Zaidi"     Director

Gage Jull                                                                                                 Anthony Zaidi

 

 

 

Arrow Exploration Corp.

Interim Condensed Consolidated Statements of Operations and Comprehensive Loss

In United States Dollars

(Unaudited)

 

 

For the three months ended March 31,

Notes

2023


2022

 


 

 

 



 

Revenue

 

 

 



 

Oil and natural gas

15

$       7,964,857


$         3,911,329

 

Royalties

 

(971,997)


(508,366)

 

Total oil and natural gas revenue, net of royalties

 

6,992,860


3,402,963

 


 

 



 

Expenses

 

 



 

Operating

 

1,117,590


1,438,482

 

Administrative

 

1,618,748


1,353,106

 

Listing costs

 

722


31,365

 

Share based payments

12

132,240


62,919

 

Financing costs:

 

 



 

Accretion

10

29,156


44,331

 

Interest

8

60,887


120,778

 

Other

 

45,682


109,048

 

(Gain) loss on derivative liability

11

(1,354,275)


4,787,835

 

Foreign exchange loss (gain)

 

(40,816)


25,835

 

Depletion and depreciation

7

2,454,364


869,239

 

Other income

 

(61,173)


(8,110)

 


 

4,003,125


8,834,828

 

 

 

 



 

Net income (loss)

 

2,989,735


(5,431,865)

 

 

 

 



 

Other comprehensive (loss) income:

 

 



 

Foreign exchange

 

(18,420)


44,652

 

    Total other comprehensive income (loss)

 

(18,420)


44,652

 


 

 



 

Total comprehensive income (loss)

 

2,971,315


$  (5,387,213)

 


 

 



 

Net income (loss) per share:

 

 



 

Basic

 

$         0.01


$             (0.03)

 

Diluted

 

$         0.01


$             (0.02)

 


 

 





 

 




Weighted average shares outstanding:

 

 




Basic

 

222,717,847


213,577,686

 

Diluted

 

288,639,348


250,941,120

 


 













 

The accompanying notes are an integral part of these interim condensed consolidated financial statements.



 

Arrow Exploration Corp.

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, 2023

$

57,810,735

$

1,570,491

$

(645,372)

$

(32,839,282)

$

25,896,572












Issuances of common shares, net


2,635,484


-


-


-


2,635,484












Net income for the period


-


-


-


2,989,735


2,989,735












Comprehensive loss for the period


-


-


(18,420)


-


(18,420)












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












 

 

 

 

 

 

 

 

 

Share Capital

 

 

 

 

 

Contributed Surplus

 

 

 

 

Accumulated other comprehensive loss

 

 

 

 

 

 

 Deficit

 

 

 

 

 

 

Total Equity

 












Balance January 1, 2022

$

56,698,237

$

1,249,418

$

(803,736)

$

(33,185,806)

$

23,958,113












Subscription of common shares, net


6,489


-


-


-


6,489












Options settled in cash


-


(6,622)


-


-


(6,622)












Net loss for the period


-


-


-


(5,431,865)


(5,431,865)












Comprehensive income for the period


-


-


44,652


-


44,652












Share-based compensation


-


62,919


-


-


62,919












Balance March 31, 2022

$

56,704,726

$

1,305,715

$

(759,084)

$

(38,617,671)

$

18,633,686












 

 

 

 

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

 

 

 

 

 

 



Arrow Exploration Corp.

Interim Condensed Consolidated Statements of Cash Flows

In United States Dollars

(Unaudited)

 


For the three months ended March 31,

2023

2022

 

 

 


 

Cash flows provided by (used in) operating activities

 

 

 

Net income (loss)

$    2,989,735

$   (5,431,865)

 

Items not involving cash:

 


 

 Share based payment

132,240

62,919

 

 Depletion and depreciation

2,454,364

869,239

 

 Interest on leases

1,596

2,158

 

 Interest on promissory note, net of forgiveness

60,887

118,620

 

 Accretion

29,156

44,331

 

 Foreign exchange gain

(73,101)

(50,351)

 

 (Gain) loss on derivative liability

(1,354,275)

4,787,835

 

   Payment of asset decommissioning obligations

-

(89,933)

 

Changes in non‑cash working capital balances:

 


 

Restricted cash

(12,266)

-

 

Trade and other receivables

1,704,944

(165,185)

 

Taxes receivable

(602,369)

(307,563)

 

Deposits and prepaid expenses

(113,612)

(92,688)

 

Inventory

(117,798)

(78,317)

 

Accounts payable and accrued liabilities

(2,482,665)

233,092

 

Income tax payable

(236,642)

-

 

Cash provided by (used in) operating activities

2,380,195

(97,708)

 


 


 

Cash flows used in investing activities

 


 

Additions to exploration and evaluation assets

(972,692)

-

 

Additions to property and equipment

(3,299,001)

(725,665)

 

Changes in non-cash working capital

(11,916)

(1,225,935)

 

Cash flows used in investing activities

(4,283,609)

(1,951,600)

 


 


 

Cash flows provided by (used in) financing activities

 


 

Issuance of common shares

1,147,827

6,489

 

Lease payments

(11,586)

(9,186)

 

Cash flows provided by (used in) financing activities

1,136,241

(2,697)

 


 


 

Effect of changes in the exchange rate on cash

60,628

140,694

 

 

 


 

Decrease in cash

(706,545)

(1,911,311)

 


 


 

Cash, beginning of period

13,060,969

10,878,508

 


 


 

Cash, end of period

12,354,424

8,967,197

 

 

 

 

 

 

 

 

 

Supplemental information

 

 

 

Interest paid

$                    -

$                -

 

Taxes paid

 $                   -

 $                  -





 

The accompanying notes are an integral part of these interim condensed consolidated financial statements.


 

1.    Corporate Information

 

 

Arrow Exploration Corp. ("Arrow" or "the Company") is a public junior oil and gas company engaged in the acquisition, exploration and development of oil and gas properties in Colombia and in Western Canada. The Company's shares trade on the TSX Venture Exchange and the AIM Market of the London Stock Exchange plc under the symbol AXL. The head office of Arrow is located at 550, 333 - 11th Ave SW, Calgary, Alberta, Canada, T2R 1L9 and the registered office is located at 1600, 421 - 7th Avenue SW, Calgary, Alberta, Canada, T2P 4K9.

 

 

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, 2023. 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, 2022.

 

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, 2022, except for the adoption of new accounting standards effective January 1, 2023. 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, 2022.

 

Adoption of New Accounting Standards

The Company adopted amendments published by IASB to IAS 8 Changes in Estimates vs Changes in Accounting Policies and to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements. These amendments were adopted by the Company from January 1, 2023 but they did not have a material impact on the Consolidated Financial Statements.

 

 

3.    Restricted Cash and deposits

 

 


 

March 31,

2023


December 31, 2022


 

 



Colombia (i)

$

257,160

$

248,462

Canada (ii)

 

573,888


570,319

Sub-total

 

831,048


818,781

  Long-term portion

 

(611,696)


(608,127)

  Current portion of restricted cash and deposits

$

219,352

$

210,654

 

(i)   Balance comprised of deposits held as collateral to guarantee abandonment expenditures in the Tapir and Santa Isabel blocks.

(ii)  Pursuant to Alberta government regulations, the Company was required to keep a $317,123 (CAD $429,182; 2022: $424,398) deposit for the Company's liability rating management ("LMR"), which is held by a bank with interest paid to the Company. The remaining $256,765 pertain to commercial deposits with customers, lease and other deposits held in Canada.

 

 

4.    Trade and other receivables

 

 


 

March 31,

2023


December 31, 2022


 

 



Trade receivables, net of advances

$

198,531

$

847,432

Other accounts receivable

 

664,814


1,720,858


$

863,345

$

2,568,290

 

As at December 31, 2022, other accounts receivable included a $1,070,825 receivable from a partner in the Tapir block and corresponds to reimbursable capital expenditures incurred on the Tapir block.

 

 

5.    Taxes receivable

 

 


 

March 31,

2023


December 31, 2022


 

 



Value-added tax (VAT) credits recoverable

$

643,469

$

-

Income tax withholdings and advances, net

 

760,077


801,177


$

1,403,546

$

801,177

 

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,

2023


December 31, 2022


 

 



Balance, beginning of the period

$

-

$

6,964,506

Additions, net

 

972,692


-

Reclassification to Property and Equipment

 

-


(6,964,506)

Balance, end of the period

$

972,692

$

-

 

 


 

 

 

 

7.    Property and Equipment

 

 

 

Cost

Oil and Gas Properties

Right of Use and Other Assets

 

Total

Balance, December 31, 2021

$ 32,160,917

$     183,485

$     32,344,402

Additions

7,663,062

50,671

7,713,733

Transfers from exploration and evaluation assets

6,964,506

-

6,964,506

Decommissioning adjustment

756,541

-

756,541

Balance, December 31, 2022

$ 47,545,026

$     234,156

$     47,779,182

Additions

3,299,001

-

3,299,001

Decommissioning adjustment

277,309

-

277,309

Balance, December 31, 2023

$ 51,121,336

$     234,156

$     51,355,492

 

Accumulated depletion and depreciation and impairment

 

 

 

 

Balance, December 31, 2021

$ 16,692,145    

$   114,965

$     16,807,110

 

Depletion and depreciation

5,482,218

46,271

5,528,489

 

Reversals net of impairment loss

(9,020,654)

-

(9,020,654)

 

Balance, December 31, 2022

$ 13,153,709

$   161,236  

$     13,314,945

 

Depletion and depreciation

2,441,790

12,573

2,454,363

 

Balance, December 31, 2023

$ 15,595,499

$   173,809

$     15,769,308

 

 

Foreign exchange




 

Balance December 31, 2021

$       318,617

     $   (3,457)     

$           315,160

Effects of movements in foreign

       exchange rates

 

(568,525)

 

(5,262)

 

(573,787)

Balance December 31, 2022

$    (249,908)     

     $   (8,719)     

$        (258,627)

Effects of movements in foreign

       exchange rates

 

448

 

52

 

500

Balance, December 31, 2023

$    (249,460)

$   (8,667)

$        (258,127)














 

Net Book Value




Balance December 31, 2022

$     34,141,409

$       64,201

$    34,205,610

Balance, December 31, 2023

$     35,276,377

$       51,680

$    35,328,057

 

Effective February 9, 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 is for an initial term of three months and the Company, together with its partner and the ANH, is monitoring this suspension to define next steps.

 

 

 

8.      Promissory Note

 

 

The promissory note was issued to Canacol Energy Ltd. ("Canacol"), a related party to the Company, as partial consideration in the acquisition of Carrao Energy S.A. from Canacol. The promissory note bears interest at 15% per annum, and, on October 18, 2021, Arrow and Canacol entered into a Seventh Amended and Restated Promissory Note agreement with a current balance payable of $ 1,958,603 as at March 31, 2023 which shall be paid no later than June 30, 2023. The Company has granted a general security interest to Canacol for the obligations under the Promissory Note.

 

9.      Lease Obligations

 

 

A reconciliation of the discounted lease obligation is set forth below:

 

 


2023

2022

Obligation, beginning of the period

 


$         63,751

$         54,692

Changes in existing lease

 


-

44,701

Lease payments

 


(11,586)

(39,697)

Interest

 


1,596

9,696

Effects of movements in foreign exchange rates

 


59

(5,641)

Obligation, end of the period

 


$         53,820

$         63,751

Current portion

 


         (42,513)

         (41,434)

Long-term portion

 


11,307

$         22,317

 

As at March 31, 2023, the Company has the following future lease obligations:

 

Less than one year

 


$          45,982

2 - 5 years

 


11,495

Total lease payments

 


57,477

Amounts representing interest over the term

 


(3,657)

Present value of the net obligation

 


$          53,820

 

 

10.    Decommissioning Liability

 

 

The following table presents the reconciliation of the beginning and ending aggregate carrying amount of the obligation associated with the decommissioning of oil and gas properties.

 

 

March 31,

2023


December 31, 2022

Obligation, beginning of the period

$      3,303,301


$      2,470,239

Change in estimated cash flows

277,309


756,541

Payments or settlements

-


(76,131)

Accretion expense

29,156


199,521

Effects of movements in foreign exchange rates

593


(46,869)

 

Obligation, end of the period

 

$      3,610,359


 

$      3,303,301

 

The obligation was calculated using a risk-free discount rate range of 2.50% to 3.75% in Canada (2022: 2.50% to 3.75%) and between 3.55% and 4.13% in Colombia (2022: 3.55% and 4.13%) with an inflation rate of 3.0% and 3.5%, respectively (2022: 3.0% and 3.5%). The majority of costs are expected to occur between 2023 and 2033. 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 $5,006,281 (2022: $4,480,074).

 

 

 

 

 

 

 

 

 

 

 

 

11.    Derivative liability

 

 

Derivative liability includes warrants issued and outstanding as follows:

 

 

March 31,

2023

December 31,

2022

Warrants

Number

Amounts

Number

Amounts

Balance beginning of the period

67,837,418

$       9,540,423

 72,474,706

$  4,692,303

   Exercised

(10,577,910)

(1,487,657)

(4,637,288)

(598,509)

   Fair value adjustment

-

(1,354,275)

-

5,974,674

   Foreign exchange

-

7,475

-

(528,045)

Balance end of the period

57,259,508

$       6,705,966

67,837,418

$       9,540,423

 

Each warrant is exercisable at £0.09 per new common share for 24 months from the issuance date and are measured at fair value quarterly using the Black-Scholes options pricing model. The fair value of warrants at March 31, 2023 and December 31, 2022 was estimated using the following assumptions:

       


March 31,

2023

December 31, 2022

re-valued warrants

57,259,508

67,837,418

£0.0948

£0.1157

3.75%

3.41%

0.65 years

0.82 years

138%

147%

 

The following table summarizes the warrants outstanding and exercisable at March 31, 2023:

Number of

warrants

 

Exercise price

 

Expiry date

56,606,859

£0.09

October 24, 2023

652,649

£0.09

November 22, 2023

57,259,508

 

 

 

 

12.  Share Capital

 

 

(a)   Authorized: Unlimited number of common shares without par value

 

(b)   Issued:

 

March 31, 2023

December 31, 2022

Common shares

Shares

Amounts

Shares

Amounts

Balance beginning of the year

218,401,931

57,810,735

213,389,643

56,698,237

   Issued from warrants exercised

10,577,910

2,635,483

4,637,288

1,094,574

   Issued from options exercised

-

-

375,000

17,924

Balance at end of the period

228,979,841

60,446,219

218,401,931

57,810,735

 

 

 

 

 

(c)   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 status of the Company stock option plan as at March 31, 2023 and December 31, 2022 and changes during the respective periods ended on those dates is presented below:

 

 

March 31, 2023

December 31, 2022

Stock Options

Number of options

Weighted average

exercise Price

(CAD $)

Number of options

Weighted average

exercise price

(CAD $)

Beginning of period

20,590,000

$0.24

17,114,000

$0.18

Granted

650,000

$0.32

10,028,332

$0.27

Expired/Forfeited

(1,375,000)

$0.46

(2,794,000)

$0.12

Exercised

-

-

(3,758,332)

$0.11

End of period

19,865,000

$0.23

20,590,000

$0.24

Exercisable, end of period

3,420,000

3,395,000

$0.42

 

Date of Grant

Number Outstanding

Exercise Price

(CAD $)

Weighted

Average Remaining Contractual Life

Date of

Expiry

Number

Exercisable

March 31, 2023

750,000

$1.15


Oct. 22, 2028

750,000

270,000

$0.31


May 3, 2029

270,000

1,200,000

$0.05


March 20, 2030

1,200,000

2,000,000

$0.05


April 13, 2030

1,200,000

2,983,332

$0.13


June 13, 2024

-

2,983,336

$0.13


June 13, 2025

-

766,665

$0.28


December 9, 2023

-

766,667

$0.28


December 9, 2024

-

766,668

$0.28


December 9, 2025

-

416,666

$0.26


March 7, 2024

-

416,666

$0.26


March 7, 2025

-

416,668

$0.26


March 7, 2026

-

1,826,110

$0.28


June 13, 2023

-

1,826,110

$0.28


June 13, 2024

-

1,826,112

$0.28


June 13, 2025

-

216,667

$0.32


July 23, 2024

-

216,667

$0.32


July 23, 2025

-

216,666

$0.32


July 23, 2026

-

Total

19,865,000

$0.23

2.94 years

 

3,420,000

 

The Company recognized $132,240 as share-based compensation expense (2022 - recovery of $62,919) for the three months ended March 31, 2023, with a corresponding effect in the contributed surplus account.

 

 

13.    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 of $17.8 million as at March 31, 2023. The Company have made applications to cancel its commitments on the COR-39, Macaya and Los Picachos blocks.

 

Block

COR-39


-

12,000,000

-

12,000,000

Los Picachos


-

1,970,000

-

1,970,000

Macaya


-

3,830,000

-

3,830,000

Total

 

 

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, 2023, 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, 2024

ANH

Carrao Energy

Financial Capacity

$1,672,162

December 31, 2023

CORE - 39

ANH

Carrao Energy

Compliance

$100,000

June 30, 2023

OMBU

ANH

Carrao Energy

Financial Capacity

$436,300

April 14, 2024

Total

 



$2,772,356

 

 

 

14.    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.  From time to time the Company may attempt to mitigate commodity price risk through the use of financial derivatives. There were no derivative contracts during 2023 and 2022.

 

 

 

(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 and balances receivables with partners in areas operated by the Company.  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 under an existing sale/offtake agreement 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 advance (in Colombia) of 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 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 as it borrows funds at a fixed coupon rate of 15% on the promissory notes.

 

(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 less than market value; 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.  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. The Company monitors leverage and 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.  In order to facilitate the management of its net debt, the Company prepares annual budgets, which are updated as necessary depending on varying factors 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 and updates are prepared and reviewed as required. The Company's capital includes the following:

 


March 31, 2023

December 31, 2022

Working capital

$ 2,619,715       

$        (1,316,665)

Derivative liability

6,705,966

9,540,423


 $        9,325,681

 $        8,223,758

 

 

15.    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, 2023


Colombia

 

Canada

 

Total

 

 







 

Revenue:







 

$

7,473,836

$

                          -  

$

7,473,836


-  


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:

 

 

 

 

 

 


872,286


                          -  


872,286


37,808


573,888


611,696


972,692


                          -  


972,692


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:








5,066,684


                          -  


5,066,684


80,484


                          -  


80,484


-  


11,307


11,307


2,869,359


741,000


3,610,359

Total liabilities

$

13,189,670

$

14,104,006

$

22,084,333

 

 

 

 

Three months ended March 31, 2022


Colombia


Canada


Total

Revenue:







$

2,480,797

$

-

$

2,480,797




1,430,532


1,430,532

Royalties


(209,492)


(298,874)


(508,366)

Expenses


(1,616,403)


(7,218,425)


(8,834,828)

Net income (loss)

$

654,901

$

(6,086,767)

$

(5,431,865)

 

As at March 31, 2022


Colombia


Canada


Total

Current assets

$

5,086,336

$

6,452,608

$

11,538,944

Non-current:








-


4,839,785


4,839,785


53,726


689,007


742,733


6,954,506




6,954,506


10,120,646


5,707,626


15,828,272

Total Assets

$

27,064,998

$

12,849,241

$

39,914,240








Current liabilities

$

986,650

$

2,894,356

$

3,881,006

Non-current liabilities:








-


32,012


32,012


58,292


-


58,292


-


177,500


177,500


3,371,935


-


3,371,935


1,863,626


569,298


2,432,924


-


1,718,071


1,718,071


-


9,608,814


9,608,814

Total liabilities

$

6,399,711

$

14,880,843

$

21,280,554

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Arrow Exploration Corp.

 

MANAGEMENT's DISCUSSION AND ANALYSIS

THREE MONTHS ENDED MARCH 31, 2023

 

 

 

 

 

 

 


 

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, 2023 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, 2023 and 2022. Additional information relating to Arrow, including its annual consolidated financial statements and related notes for the years ended December 31, 2022 and 2021 (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 the COVID-19 pandemic; 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 from (used in) 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, 2023

Three months ended March 31, 2022

Net income (loss)

2,989,735

 (5,431,865)

Add/(subtract):

 


   Share based payments

132,240

62,919

   Financing costs:

 


      Accretion on decommissioning obligations

29,156

44,331

      Interest

60,887

120,778

      Other

45,682

109,048

   Depreciation and depletion

2,454,364

869,239

   Derivative loss

 (1,354,275)

4,787,835

Adjusted EBITDA (1)

4,357,790

562,284


 


Cash flows provided by (used in) operating activities

2,380,195

 (97,708)

Minus - Changes in non‑cash working capital balances:

 


Trade and other receivables

 (1,704,944)

165,185

Restricted cash

12,266

-  

Taxes receivable

602,369

307,563

Deposits and prepaid expenses

113,612

92,688

Inventory

117,798

78,317

Accounts payable and accrued liabilities

2,482,665

 (233,092)

Income tax payable

236,642

-

Funds flow from operations (1)

4,240,603

312,951

 (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, 2023

Three months ended March 31, 2022

Total natural gas and crude oil revenues, net of royalties

               6,992,860

3,402,962


 


Funds flow from operations (1)

               4,240,603

312,951

Funds flow from operations (1) per share -

 


    Basic($)

                        0.02

0.00

    Diluted ($)

                        0.01

                        0.00

Net income (loss)

               2,989,735

 (5,431,865)

Net income (loss) per share -

 


   Basic ($)

                        0.01

                      (0.03)

   Diluted ($)

                        0.01

                      (0.02)

Adjusted EBITDA (1)

               4,271,726

                562,284

Weighted average shares outstanding -

 


   Basic ($)

222,717,847

213,577,686

   Diluted ($)

288,639,348

250,941,120

Common shares end of period

228,979,841

213,814,643

Capital expenditures

               4,271,693

                  725,665

Cash and cash equivalents

             12,354,424

               8,967,197

Current Assets

             15,849,150

             11,538,944

Current liabilities

             13,315,499

               3,881,006

Adjusted working capital (1)

               9,325,680

               7,657,938

Long-term portion of restricted cash (2)

                  831,048

                  742,733

Total assets

             53,719,944

             39,914,240




Operating






Natural gas and crude oil production, before royalties



Natural gas (Mcf/d)

2,459

4,221

Natural gas liquids (bbl/d)

4

6

Crude oil (bbl/d)

1,222

434

Total (boe/d)

1,635

1,144

 

 


Operating netbacks ($/boe) (1)

 


Natural gas ($/Mcf)

($0.42)

$0.73

Crude oil ($/bbl)

$58.31

$48.94

Total ($/boe)

$42.21

$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 March 31, 2023 the Company held an interest in six oil blocks in Colombia and oil and natural gas leases in seven 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

Los Picachos

Non-operated

52,772

37.5%

19,790

Macaya

Non-operated

195,255

37.5%

73,221

Total Colombia

 

465,417

 

227,005

CANADA





Ansell

Operated

640

100%

640

Fir

Non operated

7,680

32%

2,457

Penhold

Non-operated

480

13%

61

Pepper

Operated

23,680

100%

23,680

Wapiti

Non-operated

1,280

13%

160

Total Canada

 

33,760

 

26,998

TOTAL

 

499,177

 

254,003

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.

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, 2023 Financial and Operational Highlights

·      Arrow recorded $6,992,960 in revenues, net of royalties, on crude oil sales of 101,951bbls, 350 bbls of natural gas liquids ("NGL's") and 221,296 Mcf of natural gas sales;

·      Funds flow from operations of $4,240,603;

·      Net income of $2,989,735 and adjusted EBITDA was $4,357,790;

Results of Operations

The Company maintained its overall production and continued improving its operations overall. These have allowed the Company to continue improving its balance sheet and its business profile.  In early 2023, the Company increased its production in its Tapir block from drilling of the RCE-3 and RCE-4 wells, offset by the current production shut in at its Ombu block. Also, there has been a decrease in the Company's natural gas production in Canada.

 

Average Production by Property

Average Production Boe/d

Q1 2023

Q4 2022

Q3 2022

Q2 2022

Q1 2022

Oso Pardo

138

115

104

112

121

Ombu (Capella)

80

238

215

97

177

Rio Cravo Este (Tapir)

1,004

832

860

366

136

Total Colombia

1,222

1,185

1,179

575

434

Fir, Alberta

74

79

82

86

73

Pepper, Alberta

340

472

242

319

636

TOTAL (Boe/d)

1,635

1,736

1,503

980

1,144

For the three months ended March 31, 2023, the Company's average production was 1,635 boe/d, which consisted of crude oil production in Colombia at 1,222 bbl/d, natural gas production of 2,459 Mcf/d and minor amounts of natural gas liquids from the Company's Canadian properties. The Company's Q1 2023 total production was 43% higher than its total production for the same period in 2022.

Average Daily Natural Gas and Oil Production and Sales Volumes

 

 

Three months ended

March 31

2023

2022

Natural Gas (Mcf/d)

 


Natural gas production

2,459

4,221

Natural gas sales

2,459

4,221

Realized Contractual Natural Gas Sales

2,459

4,221

Crude Oil (bbl/d)



1,222

434

Inventory movements and other

 (89)

 (61)

Crude Oil Sales

1,133

373

Corporate



Natural gas production (boe/d)

410

703

4

6

Crude oil production (bbl/d)

1,222

434

Total production (boe/d)

1,635

1,144

Inventory movements and other (boe/d)

 (89)

 (61)

Total Corporate Sales (boe/d)

1,546

1,083

During the three months ended March 31, 2023 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

 

2023

2022

Natural Gas



Natural gas revenues

 $    467,876

$ 1,386,738

NGL revenues

23,145

43,794

Royalties

 (42,964)

 (298,874)

Revenues, net of royalties

448,057

1,131,658

Oil



Oil revenues

$ 7,473,836

$ 2,480,797

Royalties

 (929,033)

 (209,492)

Revenues, net of royalties

6,544,803

2,271,304

Corporate



Natural gas revenues

$    467,876

$ 1,386,738

NGL revenues

23,145

43,794

Oil revenues

7,473,836

2,480,797

Total revenues

7,964,857

3,911,329

Royalties

 (971,997)

 (508,367)

Natural gas and crude oil revenues, net of royalties, as reported

$ 6,992,860

$ 3,402,962





Natural gas and crude oil revenues, net of royalties, for the three months ended March 31, 2023 was $6,992,860 (2022: $3,402,962), which represents an increase of 105%. This significant increase is mainly due to increased oil production in Colombia, offset by decrease in production and natural gas prices in Canada.

Average Benchmark and Realized Prices 


Three months ended March 31

2023

2022

Change

Benchmark Prices

 



AECO ($/Mcf)

$2.43

$3.68

-34%

Brent ($/bbl)

$79.21

$97.90

-19%

West Texas Intermediate ($/bbl)

$76.10

$94.94

-20%

Realized Prices

 



Natural gas, net of transportation ($/Mcf)

$2.11

$3.65

-42%

Natural gas liquids ($/bbl)

$66.13

$76.89

-14%

Crude oil, net of transportation ($/bbl)

$73.31

$73.87

-1%

Corporate average, net of transport ($/boe)

$57.23

$40.13

43%

   (1)Non-IFRS measure

The Company realized a price of $57.23 per boe during the three months ended March 31, 2023 (2022: $40.13) as commodity prices decreased in 2023 compared with 2022.

Operating Expenses


Three months ended

March 31

2023

2022

Natural gas & NGL's

517,653

810,845

Crude oil

599,937

627,637

 Total operating expenses

1,117,590

1,438,482

Natural gas ($/Mcf)

$2.34

$2.13

Crude oil ($/bbl)

$5.88

$18.69

Corporate ($/boe)(1)

$8.03

$14.76

(1)Non-IFRS measure

During the three months ended March 31, 2023, Arrow incurred operating expenses of $1,117,590 (2022: $1,438,482), at an average cost of $8.03 per boe (2022: $14.76) which is reflective of the Company's increase in production volumes and decrease on a per barrel basis when compared to 2022 levels.

Operating Netbacks

 

Three months ended

March 31

 

2023

2022

Natural Gas ($/Mcf)



Revenue, net of transportation expense

$2.11

$3.65

Royalties

(0.19)

(0.79)

Operating expenses

(2.34)

(2.13)

Natural gas operating netback(1)

($0.42)

$0.73

Crude oil ($/bbl)

 


Revenue, net of transportation expense

$73.31

$73.87

Royalties

(9.11)

(6.24)

Operating expenses

(5.88)

(18.69)

Crude oil operating netback(1)

$58.31

$48.94

Corporate ($/boe)

 


Revenue, net of transportation expense

$57.23

$40.13

Royalties

(6.98)

(5.22)

Operating expenses

(8.03)

(14.76)

Corporate operating netback(1)

$42.21

$20.16

 (1)Non-IFRS measure

The operating netbacks of the Company continued improving in 2023 due to several factors, mostly increasing production from its Colombian assets, and consistent crude oil prices, which were offset by decreases in natural gas prices and increases in royalties and operating expenses for natural gas.

 

General and Administrative Expenses (G&A)

 

Three months ended

March 31

 

2023

2022

General & administrative expenses

 1,752,947

 1,373,106

G&A recovered from 3rd parties

 (134,199)

 (20,000)

Total G&A

1,618,748

 1,353,106

Total G&A per boe

$11.63

$37.97

For the three months ended March 31, 2023, G&A expenses before recoveries totaled $1,752,647 (2022: $1,373,106), which represents an increase when compared to the same period in 2022. This increase is mainly due to increased in personnel and professional services during 2023, as well as increase in marketing and legal expenses. Despite these increased expenses, and due to the Company's increased production, there is a decrease in G&A expenses on a per barrel basis to $11.63 p/boe when compared to $37.97 in 2022.

Share-based Compensation

 

Three months ended

March 31

 

2023

2022

Share-based Compensation expense

132,240

62,919

Share-based compensation expense for the three months ended March 31, 2023 totaled $132,240 (2022: $62,919). During 2023, the Company granted 650,000 options (2022: nil) to its personnel, which was offset by reversal of expenses from cancelled options due to resignations of option holders. The share-based compensation expense is the result of the progressive vesting of the options granted to the Company's employees, plus the effect of cashless exercising, and net of cancellations and forfeitures, according to the company's stock-based compensation plan.

Financing Costs

 

Three months ended

March 31

 

2023

2022

Financing expense paid or payable

106,570

 229,826

Non-cash financing costs

29,156

44,331

Net financing costs

135,726

 274,157

The finance expense paid or payable represents mostly interest on the promissory note due to Canacol, as partial payment for the acquisition of Carrao Energy SA and have decreased due to partial payment of the outstanding balance. 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

 

2023

2022

Depletion and depreciation

2,454,364

869,239

Depletion and depreciation expense for the three months ended March 31, 2023 totaled $2,454,364 (2022: $869,239). The increases is due to increased carrying value of depletable property, plant and equipment and increased production. Company uses the unit of production method and proved plus probable reserves to calculate its depletion and depreciation expense.

(Gain) loss on Derivative Liability

 

Three months ended

March 31

 

2023

2022

(Gain) Loss on Derivative Liability

(1,354,275)

4,787,835

During the three months ended March 31, 2023, the Company recorded a gain in derivative liability of $1,354,275 and (2022: loss of $4,787,835) related to the valuation of its outstanding warrants issued during its AIM listing and private placement completed in 2021. These warrants provide the right to holders to convert them into common shares at a fixed price set in a currency different to the Company's functional currency and, therefore, they are considered a liability and measured at fair value with changes recognized in the statements of operations and comprehensive income.

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, 2023, the Company has an adjusted working capital of $9,325,680. The Company has continued improving its working capital, using its operational cash flows to continue growing its operations. The overall improvement in energy commodity prices has also positively impacted the Company's capacity to generate sufficient financial resources to sustain its operations and growth.

As at March 31, 2023 the Company's net debt (net cash) was calculated as follows:

 

 

March 31, 2023


 

 



Current assets

 

 

$

15,935,213

Less:

 

 



Accounts payable and accrued liabilities

 

 


3,356,144

Promissory Note

 

 


1,958,603

Income taxes

 

 


1,252,273

Net debt (Net cash) (1)

 

 

$

(9,368,193)

(1)Non-IFRS measure

Adjusted Working Capital

As at March 31, 2023 the Company's adjusted working capital was calculated as follows:

 

 

March 31, 2023

Current assets:

 

 



   Cash and restricted cash

 

 

$

12,354,424

   Restricted cash and deposits

 

 


219,352

   Trade and other receivables

 

 


863,345

   Taxes receivable

 

 


1,403,546

   Other current assets

 

 


1,094,546

Less:

 

 



  Accounts payable and accrued liabilities

 

 


3,356,144

  Lease obligation

 

 


42,513

   Promissory note

 

 

 

1,958,603

   Income tax payable

 

 

 

1,252,273

Adjusted Working capital(1)

 

 

$

9,325,681

(1)Non-IFRS measure

Debt Capital

As at March 31, 2023, the Company currently has $1.9 million in outstanding debt in the form of a promissory note payable to Canacol and its final payment is due no later than June 30, 2023.

 


Letters of Credit

As at March 31, 2023, 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, 2024

ANH

Carrao Energy

Financial Capacity

$1,672,162

December 31, 2023

CORE - 39

ANH

Carrao Energy

Compliance

$100,000

June 30, 2023

OMBU

ANH

Carrao Energy

Financial Capacity

$436,300

April 14, 2024

Total

 



$2,772,356

 

 

Share Capital

As at March 31, 2023, the Company had 228,979,841 common shares, 57,259,508 warrants and 19,865,000 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, 2023:

 

 

 

Less than 1 year

1-3 years

Thereafter

Total






Promissory Note

$

1,958,603


-


-


1,958,603

Exploration and production contracts


-


17,800,000


-


17,800,000

 

$

1,958,603

 

17,800,000

 

-

 

19,758,603

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 of $17.8 million. The Company, in conjunction with its partners, have made applications to cancel its commitments on the COR-39, Macaya and Los Picachos blocks.

SUMMARY OF THREE MONTHS RESULTS

 

2023

2022

2021

 

Q1

Q4

Q3

Q2

Q1

Q4

Q3

Q2

Oil and natural gas sales, net of royalties

 

6,992,860

 

8,931,562

 

7,614,336

 

5,024,604

3,911,329

 

3,038,832

 

1,684,609

 

941,620

Net income (loss)

2,989,735

2,968,117

2,041,955

768,318

(5,431,865)

6,960,035

(21,782)

(734,317)

Income (loss) per share -

   basic

   diluted

 

0.01

0.01

 

0.01

0.01

 

0.02

0.00

 

0.00

0.00

 

(0.03)

(0.02)

 

0.04

0.04

 

(0.00)

(0.00)

 

(0.01)

(0.01)

Working capital (deficit)

2,619,715

(1,316,665)

7,392,310

5,594,027

7,657,938

8,006,074

783,707

3,141,217

Total assets

53,719,944

53,190,248

46,979,259

42,670,153

39,914,240

41,195,798

25,362,323

25,948,551

Net capital expenditures

4,271,693

2,106,463

4,836,860

2,777,611

725,665

1,991,163

148,528

(15,378)

Average daily production (boe/d)

1,635

1,736

1,503

980

1,144

712

575

331

 

The Company's oil and natural gas sales have increased in 2023 when compared to Q1 2022 due to increased production in its existing assets, improved oil and gas prices and positive fluctuations in realized oil price differentials. The Company's production levels in Colombia have progressively improved 2022. 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, 2023, the Company had the following securities issued and outstanding:

 

Number

Exercise Price

Expiry Date

Common shares


229,479,841


n/a

             

n/a

Warrants


56,844,455


GBP 0.09


Oct. and Nov, 2023

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


2,000,000


CAD$ 0.05


April 13, 2030

Stock options


2,983,332


GBP 0.07625


June 13, 2024

Stock options


2,983,336


GBP 0.07625


June 13, 2025

Stock options


766,665


CAD$0.28


December 9, 2023

Stock options


766,667


CAD$0.28


December 9, 2024

Stock options


766,668


CAD$0.28


December 9, 2025

Stock options


416,666


CAD$0.26


March 7, 2024

Stock options


416,666


CAD$0.26


March 7, 2025

Stock options


416,668


CAD$0.26


March 7, 2026

Stock options


1,826,110


GBP 0.1675


June 13, 2023

Stock options


1,826,111


GBP 0.1675


June 13, 2024

Stock options


1,826,111


GBP 0.1675


June 13, 2025

Stock options


216,667


GBP 0.1925


July 23, 2024

Stock options


216,667


GBP 0.1925


July 23, 2025

Stock options


216,666


GBP 0.1925


July 23, 2026

OUTLOOK

During 2022, the Company deployed a portion of the capital raised at the time of the Admission to AIM on a successful two well drilling campaign at Rio Cravo on the Tapir Block. These results, and the subsequent generation of positive cashflows in Q3 and Q4 2022, provide Arrow with the funds required for its $32 million capital program for 2023, including drilling of 10 wells, seismic acquisition and the development of production facilities.

 

To date, the Company has already drilled the first four wells of the 2023 budget, three at Rio Cravo and its first Carrizales Norte well, which have added production to the Tapir Block, confirming Arrow's commitment to increase production and shareholder value. The Company is able to support the remaining planned 2023 CAPEX program with current cash on hand and cashflow from operations. 

 

Arrow continues to focus on growth and improving its balance sheet and free cash flow.

CRITICAL ACCOUNTING ESTIMATES

A summary of the Company's critical accounting estimates is contained in Note 3 of the 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 SIGNIFICANT ACCOUNTING POLICIES

A summary of the Company's significant accounting policies is included in 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

 

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