TIDMAXL
RNS Number : 8969A
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.
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 $0.1 million).
-- Drilled three successful wells at Rio Cravo Este (RCE)
resulting in material production additions.
Post Period End Highlights:
-- The Carrizales Norte-1 (CN-1) well has been drilled and
reached its target depth, and is currently under production
testing.
Outlook
-- Arrow anticipates two additional wells to be drilled at Carrizales Norte by year-end.
-- Arrow anticipates two additional wells at RCE by year-end to
target the Gacheta formation which was successfully tested at
commercial rates in RCE-2.
-- Arrow plans to drill two development wells at the Oso Pardo
Block in the Middle Magdalena Basin.
Marshall Abbott, CEO of Arrow Exploration Corp., commented:
" Arrow has had a strong start to 2023, including the drilling
of three RCE wells and the CN-1 well, which is expected to have a
significant impact on the Company's production and reserves, as
well as establishing a new core area. The 3D seismic West Tapir
project has completed shooting, is currently being processed and is
expected to further evaluate the 2D recognized fault prospects. The
Arrow Team continues to strive towards excellence and increasing
shareholder value."
FINANCIAL AND OPERATING HIGHLIGHTS
Three months Three months
ended March ended March
(in United States dollars, except as otherwise 31, 2023 31, 2022
noted)
-------------------------------------------------- ---------------------------- ----------------------------
Total natural gas and crude oil revenues,
net of royalties 6,992,860 3,402,962
Funds flow from operations (1) 4,240,603 312,951
Funds flow from operations (1) per share
-
Basic($) 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 km(2) 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, December 31,
2023 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 Notes 2023 2022
31,
--------------------------------------- ------ ------------ ---------------
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)
Accumulated
Contributed other
Share Surplus comprehensive Deficit Total
Capital loss 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
Accumulated
Contributed other
Share Surplus comprehensive Deficit Total
Capital loss 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 December
, 31, 2022
2023
-------------------------------- ---------- ---------------- -------- ----------------
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, December
31, 2022
2023
--------------------------------- ---------- ----------------- -------- ----------------
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, December
31, 2022
2023
------------------------------------- ---------- ----------------- -------- ----------------
Value-added tax (VAT) credits 643,469 $ -
recoverable $
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, December
31, 2022
2023
----------------------------- ---------------------------------------- ------------------
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
Oil and Right of
Cost Gas Properties Use and Total
Other Assets
---------------------------- --------------------- ------------------- ------------------
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, December
31, 2022
2023
----------------- -------- ----------------
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
================= ======== ================
T he 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, December 31,
2023 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 GBP0.09 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,
December
2023 31, 2022
------------------------------ ----------------- -----------------
Number outstanding
re-valued warrants 57,259,508 67,837,418
Fair value of warrants
outstanding GBP 0.0948 GBP 0.1157
Risk free interest
rate 3.75% 3.41%
Expected life 0.65 years 0.82 years
Expected volatility 138% 147%
------------------------------ ----------------- -----------------
The following table summarizes the warrants outstanding and
exercisable at March 31, 2023:
Number
of Exercise Expiry date
warrants price
----------- ----------- --------------
GBP 0.09 October 24,
56,606,859 2023
GBP 0.09 November 22,
652,649 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
------------------------------------ ------------------------------------
Weighted Weighted
average average
exercise exercise
Number Price Number price
Stock Options of options (CAD $) of options (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 $0.31 3,395,000 $0.42
================== ================ ================== ================
Weighted
Exercise Average Number
Price Remaining Exercisable
Date of Number (CAD Contractual Date of March 31,
Grant Outstanding $) Life Expiry 2023
------------- ------------- --------- ------------- ------------ -------------
October Oct. 22,
22, 2018 750,000 $1.15 2028 750,000
May 3, 2019 270,000 $0.31 May 3, 2029 270,000
March 20, March 20,
2020 1,200,000 $0.05 2030 1,200,000
April 13, April 13,
2020 2,000,000 $0.05 2030 1,200,000
December June 13,
13, 2021 2,983,332 $0.13 2024 -
December June 13,
13, 2021 2,983,336 $0.13 2025 -
June 9, December
2022 766,665 $0.28 9, 2023 -
June 9, December
2022 766,667 $0.28 9, 2024 -
June 9, December
2022 766,668 $0.28 9, 2025 -
September March 7,
7, 2022 416,666 $0.26 2024 -
September March 7,
7, 2022 416,666 $0.26 2025 -
September March 7,
7, 2022 416,668 $0.26 2026 -
December June 13,
21, 2022 1,826,110 $0.28 2023 -
December June 13,
21, 2022 1,826,110 $0.28 2024 -
December June 13,
21, 2022 1,826,112 $0.28 2025 -
January July 23,
23, 2023 216,667 $0.32 2024 -
January July 23,
23, 2023 216,667 $0.32 2025 -
January July 23,
23, 2023 216,666 $0.32 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. T he Company have made
applications to cancel its commitments on the COR-39, Macaya and
Los Picachos blocks.
Less
than
Block 1 year 1-3 years Thereafter Total
--------------------- ------------------ ------------------------ ---------------------- ----------------------
COR-39 - 12,000,000 - 12,000,000
Los
Picachos - 1,970,000 - 1,970,000
Macaya - 3,830,000 - 3,830,000
----------------- ------------------------ ---------------------- ----------------------
Total - 17,800,000 - 17,800,000
================= ======================== ====================== ======================
Contingencies
From time to time, the Company may be involved in litigation or
has claims sought against it in the normal course of business
operations. Management of the Company is not currently aware of any
claims or actions that would materially affect the Company's
reported financial position or results from operations. Under the
terms of certain agreements and the Company's by-laws the Company
indemnifies individuals who have acted at the Company's request to
be a director and/or officer of the Company, to the extent
permitted by law, against any and all damages, liabilities, costs,
charges or expenses suffered by or incurred by the individuals as a
result of their service.
Letters of Credit
At March 31, 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 April 14,
ANH Carrao Energy Abandonment $563,894 2024
Financial December
ANH Carrao Energy Capacity $1,672,162 31, 2023
CORE - June 30,
39 ANH Carrao Energy Compliance $100,000 2023
Financial April 14,
OMBU ANH Carrao Energy Capacity $436,300 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, December 31,
2023 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 Colombia Canada Total
March 31, 2023
--------------------- ----------------- ------- --------------------------- ------
Revenue:
Oil Sales $ 7,473,836 $ - $ 7,473,836
Natural gas and
liquid
sales - 491,021 491,021
Royalties (929,033) (42,964) (971,997)
Expenses (3,190,316) (812,809) (4,003,125)
Net income (loss) $ 3,354,487 $ (364,752) $ 2,989,735
---------------------- --- ------------ ------- --------------------------- ------ -------------------
As at March 31, 2023 Colombia Canada Total
------------------------------- ---- ----------- --------------------------- --- -----------
Current assets $ 14,119,230 $ 1,815,983 $ 15,935,213
Non-current:
Deferred income taxes 872,286 - 872,286
Restricted cash 37,808 573,888 611,696
Exploration and evaluation 972,692 - 972,692
Property, plant and equipment 30,678,708 4,649,349 35,328,057
------------------------------------- ----------- --------------------------- --- -----------
Total Assets $ 46,680,724 $ 7,039,220 $ 53,719,944
------------------------------- ---- ----------- --------------------------- --- -----------
Current liabilities $ 3,755,781 $ 9,559,718 $ 13,315,499
Non-current liabilities:
Deferred income taxes 5,066,684 - 5,066,684
Other liabilities 80,484 - 80,484
Lease obligation - 11,307 11,307
Decommissioning liability 2,869,359 741,000 3,610,359
Total liabilities $ 13,189,670 $ 14,104,006 $ 22,084,333
------------------------------- ---- ----------- --------------------------- --- -----------
Three months ended March Colombia Canada Total
31, 2022
-------------------------- --- ------------ ------------ ------------
Revenue:
Oil Sales $ 2,480,797 $ - $ 2,480,797
Natural gas and liquid
sales 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:
Deferred income taxes - 4,839,785 4,839,785
Restricted cash 53,726 689,007 742,733
Exploration and evaluation 6,954,506 6,954,506
Property, plant and equipment 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:
Long-term debt - 32,012 32,012
Lease obligation 58,292 - 58,292
Other liabilities - 177,500 177,500
Deferred income taxes 3,371,935 - 3,371,935
Decommissioning liability 1,863,626 569,298 2,432,924
Promissory note - 1,718,071 1,718,071
Derivative liability - 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 MONTHSED 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:
Three months Three months
ended March ended March
(in United States dollars) 31, 2023 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
Three months Three months
ended March ended March
(in United States dollars, except as otherwise 31, 2023 31, 2022
noted)
-------------------------------------------------- ---------------------------- ----------------------------
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 Operated (1) 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.
(1) The 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 km(2)
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)
Crude oil production 1,222 434
Inventory movements and other (89) (61)
---------------------------------------- ---------- ---------
Crude Oil Sales 1,133 373
---------------------------------------- ---------- ---------
Corporate
Natural gas production (boe/d) 410 703
Natural gas liquids(bbl/d) 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 3(rd) 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 April 14,
ANH Carrao Energy Abandonment $563,894 2024
Financial December
ANH Carrao Energy Capacity $1,672,162 31, 2023
CORE - June 30,
39 ANH Carrao Energy Compliance $100,000 2023
Financial April 14,
OMBU ANH Carrao Energy Capacity $436,300 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 0.01 0.01 0.02 0.00 (0.03) 0.04 (0.00) (0.01)
diluted 0.01 0.01 0.00 0.00 (0.02) 0.04 (0.00) (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:
Exercise
Number 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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END
QRFUKUKROVUVUAR
(END) Dow Jones Newswires
May 30, 2023 02:00 ET (06:00 GMT)
Arrow Exploration (LSE:AXL)
過去 株価チャート
から 4 2024 まで 5 2024
Arrow Exploration (LSE:AXL)
過去 株価チャート
から 5 2023 まで 5 2024
