CALGARY, April 30, 2019 /CNW/ - ARROW Exploration Corp.
("Arrow" or the "Company") (TSXV: AXL) is pleased to announce the
filing of its 2018 year-end audited Financial Statements and
MD&A and to provide an operational and management update. The
Company's Financial Statements and Annual Information Form ("AIF")
are available on SEDAR (www.sedar.com). All numbers are expressed
in US dollars unless otherwise noted.
Financial
|
Three months
ended, December 31
|
Year ended,
December 31
|
|
2018
|
2017
|
Change
|
2018
|
2017
|
Change
|
Total natural gas and
crude oil
revenues, net of royalties
|
$
5,911,425
|
-
|
n/a
|
$
6,077,423
|
-
|
n/a
|
|
|
|
|
|
|
|
Funds from (used in)
from operations 1)
|
922,280
|
(2,887)
|
n/a
|
(971,986)
|
(3,987)
|
n/a
|
Per share – basic ($)
and diluted ($)
|
0.01
|
(0.00)
|
n/a
|
(0.01)
|
(0.00)
|
n/a
|
|
|
|
|
|
|
|
Net income
(loss)
|
1,242,936
|
(3,078)
|
n/a
|
(665,123)
|
(4,228)
|
n/a
|
Per share – basic ($)
and diluted ($)
|
$0.02
|
($0.00)
|
n/a
|
($0.01)
|
($0.00)
|
n/a
|
|
|
|
|
|
|
|
EBITDA
(1)
|
1,170,678
|
(2,887)
|
n/a
|
(719,478)
|
(3,987)
|
n/a
|
|
|
|
|
|
|
|
Weighted average
shares
outstanding – basic and diluted
|
68,674,602
|
61,591,065
|
11%
|
64,056,032
|
61,591,065
|
4%
|
Common shares end of
year
|
|
|
|
68,674,602
|
61,591,065
|
11%
|
|
|
|
|
|
|
|
Capital
expenditures
|
7,007,580
|
-
|
n/a
|
7,007,580
|
-
|
n/a
|
Net proceeds on
disposal
|
4,875,000
|
-
|
n/a
|
4,875,000
|
-
|
n/a
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
|
$1,994,233
|
7,966
|
n/a
|
Restricted
cash
|
|
|
|
3,154,839
|
-
|
n/a
|
Working
capital
|
|
|
|
(8,558,782)
|
3,598
|
n/a
|
Total current
debt
|
|
|
|
17,157,942
|
4,368
|
n/a
|
Total
assets
|
|
|
|
76,962,315
|
7,966
|
n/a
|
|
|
|
|
|
|
|
Operating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas and
crude oil
production, before royalties
|
|
|
|
|
|
|
Natural gas
(Mcf/d)
|
733
|
-
|
|
734
|
-
|
|
Natural gas liquids
(bbl/d)
|
7
|
-
|
|
7
|
-
|
|
Crude oil
(bbl/d)
|
1,553
|
-
|
|
1,547
|
-
|
|
Total
(boepd)
|
1,682
|
-
|
|
1,676
|
-
|
|
|
|
|
|
|
|
|
Operating netbacks
($/boe) (1)
|
|
|
|
|
|
|
Natural gas
($/Mcf)
|
($1.97)
|
-
|
|
($ 1.92)
|
-
|
|
Crude oil
($/bbl)
|
$19.15
|
-
|
|
$19.22
|
-
|
|
Total
($/boe)
|
$16.88
|
-
|
|
$16.96
|
-
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Non-IFRS Measures – see "Non-IFRS Measures"
section within MD&A
|
John Newman, CFO of Arrow
commented, "The fourth quarter of 2018 represented the first full
quarter of operations for Arrow and we're pleased to have
meaningfully grown our production in the quarter while reducing
corporate operational commitments in Colombia and protecting our balance sheet. The
fourth quarter saw higher G&A costs than we would expect going
forward given significant one time legal and transaction costs
associated with the new management team taking over the
Company."
Operational Update
As announced on April 26, 2019,
Arrow spud its Rio Cravo Este-1 ("RCE-1") exploration well with the
Weatherford 839 rig on the Tapir Block in the Llanos Basin of
Colombia. Drilling is on schedule
with the well expected to reach total depth near the end of May,
2019.
Arrow's current corporate production, after accounting for the
asset sales announced on April 26,
2019, is approximately 1,700 boe/d matching first quarter
average corporate production. Arrow is pleased to provide 2019
corporate guidance of 1,600 – 1,700 boe/d average production and
$14 - $15
million capital spending without accounting for any
potential success at RCE-1. Following completion of RCE-1,
production and capital guidance numbers will be adjusted
accordingly.
The Company is pleased to announce that its Danes-1 well, which
was brought on production in December
2018, is currently producing 400 – 450 bbl/d of oil which is
in-line to slightly better than management's expectations as
outlined in the Llanos Basin type curve in Arrow's corporate
presentation available on its website at
www.arrowexploration.ca . The Company is encouraged with
recent developments which have seen pressure and production rates
begin to stabilize with no material water production to date.
Given the challenging commodity environment in the first quarter
of 2019, Arrow chose to redirect capital towards low risk pump
changes and away from relatively higher risk recompletions. Arrow
completed a total of three new pump changes and two recompletions
at a cost of $3.3 million.
Additionally, Arrow has undertaken several cost reduction
initiatives focused on reducing operating and G&A costs within
the Company.
Jack Scott, COO of Arrow
commented, "Our operational focus remains on the following: growing
production at a targeted cost of US $10,000 per flowing barrel while maintaining a
healthy balance sheet, reducing costs by creating efficiencies
throughout the Company, reducing future drilling commitments by
selling non-core blocks, and increasing drilling inventory through
advancing our 3-D seismic programs."
Asset Sale Update
Arrow is pleased to confirm that on April
29, 2019, it closed the sale of its remaining 20% interest
in the VMM-2 Block located in the Middle Magdalena Basin in
Colombia for cash proceeds of
$3.5 million, subject to adjustments
(the "VMM-2 Transaction"). The formal transfer of legal
ownership of the working interests pursuant to the VMM-2
Transaction is subject to ultimate approval by the Agencia Nacional
de Hidrocarburos ("ANH"), Colombia's regulator in respect of oil and gas
activities. This follows Arrow's previous April 26, 2019 announcement that it had entered
into definitive agreements to sell two non-core interests in
Colombia for a total sum of
$5 million prior to
adjustments. The second of the previously announced non-core
interest sales, for proceeds of $1.5
million prior to adjustments, is expected to close by the
end of the Company's second quarter. The combination of the
$5 million in non-core interest sales
and cash set aside (restricted cash on the balance sheet) for
drilling is expected to fully fund the drilling of RCE-1.
Bruce McDonald, Executive
Chairman commented, "At the time we closed the reverse takeover
transaction in September 2018, Arrow
was producing approximately 1,300 boe/d. Since that time, we've
announced three non-core asset sales with associated production of
160 bbl/d and grown corporate production by almost 50% net of sales
over the past seven months. Most importantly, we've achieved this
growth without materially increasing our debt or diluting our
shareholders."
Liquidity and Facility Update
On April 29, 2019, Arrow and
Canacol Energy Ltd. ("Canacol") entered into an Amended and
Restated Promissory Note (the "Amended Note") to revise the
terms of the original $5 million
promissory note issued upon Arrow Exploration Ltd.'s acquisition of
Carrao Energy S.A. from Canacol in September
2018, the day prior to the reverse takeover by Arrow
Exploration Ltd. of the Company. The amendments provide for
repayment of the obligation commencing on July 1, 2019 at $500,000 per month until payout. The Amended
Note, which still bears interest at 15%, also contains an
accelerated payment feature whereby Canacol will receive 50% of
Arrow's working interest cash flow from the Rio Cravo Este-1 well,
calculated on a two-month trailing basis with immediate effect, up
to a maximum of $500,000, such that
the monthly payment to Canacol will not exceed $1 million. The balance of the obligation is also
accelerated under the Amended Note in the event Arrow closes a
credit facility or other financing structure, or closes a sale of
assets pursuant to a definitive agreement entered into after
April 29, 2019, in either case for
net proceeds to Arrow in a minimum amount of $5 million.
Arrow has also made significant progress in terms of reducing
its corporate commitments. Once it closes the remaining non-core
interest sale for which a definitive agreement was recently
announced on April 26, 2019, Arrow
will remove approximately $7 million
from its future capital spending commitments in Colombia. Furthermore, the drilling of Danes-1
(completed in the fourth quarter of 2018) and the drilling of RCE-1
(currently underway) will reduce Arrow's corporate commitments by
an additional $11 million for a total
reduction in operational commitments of approximately $18 million since the reverse takeover in
September of 2018.
As previously disclosed, Arrow has been working to secure a
credit facility since closing the reverse takeover. Arrow continues
to engage in discussions with various potential credit facility
providers and is evaluating alternative debt solutions in the event
the Company is unable to close the credit facility as originally
contemplated.
Management Update
Arrow also announces that Gary
Wine will be retiring on or about May
31, 2019 and that, in order to accommodate his retirement,
the Board of Directors of Arrow (the "Board") has accepted Mr.
Wine's resignation from his role as President & Chief Executive
Officer effective May 1, 2019. Mr.
Wine has agreed to assist the transition process and will act as a
Special Advisor to the Company until his retirement and at the same
time continue to serve on the Board on an interim basis until a new
director is appointed. "It has been a pleasure leading Arrow since
acquiring its suite of Colombian assets and completing its reverse
takeover transaction. The Company has undergone tremendous change
and I look forward to advising the Company through the drilling of
the RCE-1 well." said Mr. Wine.
The Board has approved the appointment of Mr. Bruce McDonald, Arrow's Executive Chairman, as
interim President & Chief Executive Officer effective
May 1, 2019.
Mr. Bruce McDonald, Executive
Chairman, said "the Board is grateful for the valuable contribution
that Gary has made during his time with us and the success of
Arrow's first exploration well in Colombia in Q4 2018. We are pleased that he
will stay on as a special advisor in the coming month and lead the
team while we drill the Rio Cravo Este well. We wish Gary the best
in his retirement and know that he is looking forward to spending
more time with his family."
About ARROW Exploration
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 under-exploited,
under-explored and offer high potential growth. The Company's
business plan is to rapidly 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 seasoned team is led by a hands-on and in-country executive
team supported by an experienced board. Arrow is listed on
the TSX Venture Exchange under the symbol "AXL".
Neither the TSX Venture Exchange (TSXV) nor its regulation
services provider (as that term is defined in the policies of the
TSXV) accepts responsibility for the adequacy or accuracy of this
release.
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 "expect", "future", "guidance", "will" and similar
expressions. In particular, but without limiting the foregoing,
this news release contains forward-looking statements pertaining to
the following: RCE-1; production guidance; capital spending
guidance; non-core interest sales; capital and operational
commitments; Gary Wine's retirement;
and the Company's officers, directors and advisors.
The forward-looking statements contained in this news release
reflect several material factors and expectations and assumptions
of Arrow including, without limitation: current and anticipated
commodity prices and royalty regimes; 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; 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 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 including, without limitation: 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;
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
annual information form, copies of which are 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.
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.
Non-IFRS Measures
Two of the benchmarks the Company uses to evaluate its
performance are funds from operations and EBITDA, which are
measures not defined in IFRS. Funds from operations represents cash
flow provided by operating activities before settlement of
decommissioning obligations and changes in non-cash working
capital. EBITDA is calculated on a rolling 12-month basis and is
defined as net income (loss) and comprehensive income (loss)
adjusted for interest, income taxes, depreciation, depletion,
amortization and other similar non-recurring or non-cash charges.
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, pay dividend and to repay its
debt. These measures should not be considered as an alternative to,
or more meaningful than, cash provided by operating activities or
net income (loss) and comprehensive income (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.
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
(loss) and comprehensive income (loss) per share.
Working capital and operating netback 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. Working capital is calculated by subtracting
current liabilities from current assets. Operating netback is
calculated by subtracting operating costs and royalties from
revenue.
Oil and Gas Metrics
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 6,000 cubic feet of
natural gas to one barrel of oil 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.
SOURCE ARROW Exploration Corp.