ARROW Exploration Corp. (“
Arrow” or the
“
Company”) (TSXV: AXL) is pleased to report the
appointment of a new leadership team, an update on its board of
directors, and its 2019 year-end reserves in Colombia and Canada.
New Leadership and Board
Update
The Company is pleased to report the appointment
of Marshall Abbott as Chief Executive Officer and Director, Joe
McFarlane as Vice President, Finance, and P. Gage Jull as
Executive Chairman.
The new leadership team and board members bring
significant expertise and a track record of success in oil &
gas exploration and production, capital & cost management,
equity & debt financing, and corporate governance, all of which
will be critical to preserving and building shareholder value
during the current challenging market conditions and over the
long-run.
The Company also wishes to announce the
resignation of Felix Betancourt as Interim Chief Executive Officer,
and the resignation of Juan-Carlos Salazar as a Director of the
Company. Arrow wishes to thank both Messrs. Betancourt
and Salazar for their services.
The profiles of the new additions to the team
and the Board of Directors are as follows:
Marshall Abbott, Chief Executive Officer and
Director
Mr. Abbott is a highly accomplished oil &
gas executive, having successfully built and sold several companies
throughout his 37-year career in the industry.
Most recently, Mr. Abbott was the CEO &
Chairman of Rampart Oil Inc., a company he co-founded and built to
3,500 bbls/d of production. Previously, Mr. Abbott was the CEO
& Chairman of Bernum Petroleum Inc., a company he co-founded
and built to 3,000 bbls/d of production until its sale to Caltex
Resources Ltd. Mr. Abbott has also been the Co-Founder, CEO &
Chairman of numerous other oil & gas companies in Canada and
internationally, including Sabretooth Energy Inc. (sold to Cequence
Energy Ltd.), Cougar Hydrocarbons Ltd. (sold to Starpoint Energy),
and Equatorial Energy Ltd. (sold to Resolute Energy Corp.).
Mr. Abbott has also held senior management roles
with Stampeder Exploration Ltd., Morrison Petroleums Ltd., and
Texaco Canada Resources Ltd. He is a past director of Voyager
Energy Inc. and Iron Bridge Resources Inc, both of which were sold
following significant growth through successful exploration.
Mr. Abbott holds a B.Sc. degree (Honours
Geology) from the University of Alberta.
Joe McFarlane, VP Finance
Mr. McFarlane is a highly accomplished oil &
gas finance executive, having helped to successfully build and sell
several companies throughout his 27-year professional career. He
has both domestic Canadian as well as international experience.
Most recently, Mr. McFarlane was the CFO of
Rampart Oil Inc., a company he co-founded and helped build to 3,500
bbls/d of production. Previously, Mr. McFarlane was the CFO of
Bernum Petroleum Inc., a company he co-founded and helped build to
3,000 bbls/d of production until its sale to Caltex Resources Ltd.
Mr. McFarlane was also the Co-Founder and CFO of Sabretooth Energy
Inc. (sold to Cequence Energy Ltd.).
Mr. McFarlane previously held various senior
finance roles with NAV Energy Trust, EnCana Corporation (now
Ovintiv Inc.) and its predecessor, PanCanadian Energy Corp., among
others. Mr. McFarlane began his career in the Audit & Advisory
Services Group of Ernst & Young LLP.
Mr. McFarlane holds a B.Comm. degree from the
University of Calgary. He is a registered CPA and CA.
P. Gage Jull, Executive
Chairman
Mr. Jull is a Co-founder and Chairman of
Bordeaux Capital Inc., a Toronto-based mergers & acquisitions
advisory firm focused on emerging companies in the natural
resources sector. Prior to Bordeaux Capital, Mr. Jull was a
Managing Director, Corporate Finance at Mackie Research Capital
Corp., an investment banking and securities brokerage services firm
from August 2004 to November 2015.
Throughout his career, Mr. Jull has acted
as lead underwriter on numerous cross border equity and debt
offerings involving energy assets around the world, with capital
sourced in Canada, the U.S. and the U.K. He has also
worked at international firms including Merrill Lynch
and Prudential Bache, as well as Canadian domestic firms
including Burns Fry and Taurus Capital. He has completed over 200
financings and M&A transactions in the course of his
career.
Mr. Jull holds a B.Sc. degree from the
University of Toronto, an MBA from the University of Western
Ontario, and holds both P.Eng. and CFA designations.
The appointments of Messrs. Abbott, McFarlane
and Jull are subject to the approval of the TSX Venture
Exchange.
Reserves
The Company is pleased to report its year-end
2019 reserves in Colombia and Canada as evaluated by Boury Global
Energy Consultants (“BGEC”) of Calgary, Alberta in
its report dated March 27, 2020 and effective as of December 31,
2019 (the “Reserves Report”). This evaluation was
prepared using the guidelines outlined in the Canadian Oil and Gas
Evaluation Handbook (“COGE Handbook”) and is in
accordance with National Instrument 51-101 – Standards of
Disclosure for Oil and Gas Activities (“NI
51-101”).
In accordance with the requirements of NI
51-101, the Company expects to file more detailed disclosure
relating to its oil and gas activities for the year ended December
31, 2019 concurrently with its audited annual financial statements
and management’s discussion and analysis.
Year-End 2019 Company Gross Reserves
Highlights
- 4.10 MMboe of Proved Reserves
- 10.32 MMboe of Proved plus Probable Reserves
- Proved Reserves estimated net present value before income taxes
of US $34.7 million calculated at a 10% discount rate
- Proved plus Probable Reserves estimated net present value
before income taxes of US $86.7 million calculated at a 10%
discount rate
- Reserve Life Index of 7.0 for Proved Reserves and 17.7 for
Proved plus Probable Reserves based on average fourth quarter 2019
corporate production of 1,595 boe/d
- Proved plus Probable Reserve Replacement Ratio of 154% and
F&D costs of US $9.47/boe
Mr. Felix Betancourt, the outgoing Interim Chief
Executive Officer of Arrow, commented, “We’re pleased with the
additions made to our reserves in 2019. Having drilled only one
well during the year, through its success we were able to nearly
offset production and dispositions on a 2P Reserves basis. Our
continued long Reserve Life Index and large under-developed land
position in Colombia positions the Company well for future
growth.”
Summaries of the Company’s Gross Reserves
volumes according to reserve category and the net present value of
the Company’s estimated future net revenues associated with those
volumes as at December 31, 2019 is provided in the following table.
The net present values are estimated on a before tax basis using a
10% discount rate and based on the forecast prices set out below.
Readers should not assume that the net present values estimated
represent the fair market value of the Company’s Gross Reserves.
Numbers in this table may not add exactly due to rounding.
2019 Year-End Company Gross Reserves
Volumes (1) and
Values (2)
Reserve
Category |
Light & Medium Crude
Oil(Mbbl) |
HeavyOil
(Mbbl) |
Sales Gas (MMcf) |
NGL(Mbbl) |
Total Oil Equivalent(Mboe) |
BITNPV10(3)(MM US
$) |
Proved Developed Producing |
772 |
120 |
743 |
7 |
1,023 |
13.3 |
Proved Developed
Non-Producing |
755 |
42 |
3,293 |
66 |
1,412 |
13.0 |
Proved Undeveloped |
149 |
1,511 |
0 |
0 |
1,660 |
8.4 |
Total
Proved |
1,676 |
1,673 |
4,036 |
73 |
4,095 |
34.7 |
Probable |
3,088 |
2,862 |
1,136 |
26 |
6,165 |
52.0 |
Total Proved plus
Probable |
4,764 |
4,535 |
5,521 |
99 |
10,318 |
86.7 |
Note:
- See Oil and Gas Advisories and Reserves Definitions below.
- The forecast prices used in the calculations of the present
value of future net revenue for year-end 2019 are shown below.
- Net present value of future revenues before tax using a 10%
discount rate.
Forecast Prices, Cost Escalation Rates
and Exchange Rates
Year |
WTI Reference Price |
AECO Gas
Price |
EdmontonCondensate Price |
EdmontonPropane Price |
Edmonton Butane Price |
Inflation Rates |
Exchange Rate |
|
(US $/bbl) |
(CDN$/MMBtu) |
(CDN $/bbl) |
(CDN$/bbl) |
(CDN$/bbl) |
(%/year) |
(US $/CDN $) |
Forecast |
|
|
|
|
|
|
|
2020 |
60.50 |
2.04 |
76.56 |
28.27 |
36.25 |
0.0 |
0.760 |
2021 |
64.00 |
2.30 |
79.64 |
29.44 |
38.76 |
2.0 |
0.770 |
2022 |
67.00 |
2.70 |
82.12 |
31.98 |
45.68 |
2.0 |
0.780 |
2023 |
68.50 |
2.80 |
85.20 |
33.21 |
50.40 |
2.0 |
0.780 |
2024 |
70.00 |
2.90 |
86.79 |
33.83 |
51.38 |
2.0 |
0.780 |
2025 |
71.50 |
3.00 |
87.85 |
34.23 |
52.00 |
2.0 |
0.800 |
2026 |
73.50 |
3.10 |
91.02 |
35.46 |
53.91 |
2.0 |
0.800 |
2027 |
75.00 |
3.20 |
93.14 |
36.29 |
55.10 |
2.0 |
0.800 |
2028 |
77.00 |
3.30 |
94.73 |
36.90 |
56.01 |
2.0 |
0.800 |
2029 + |
+2% / yr |
+2% / yr |
+2% / yr |
+2% / yr |
+2% / yr |
2.0 |
0.800 |
On October 1, 2018, the Company announced it had closed its
acquisition of Carrao Energy S.A. from Canacol Energy Ltd. as well
as the purchase of a right to earn by farm-in a 50% beneficial
interest (the terms of which were satisfied in 2019 with the
drilling of the Rio Cravo Este-1 well) in the under-developed Tapir
Block (collectively, the “Colombian Assets”), and
completed the reverse takeover transaction with Arrow Exploration
Ltd.
During the year ended December 31, 2019, the
Company recorded decreases in all categories of reserves due
primarily to: (i) limited drilling activity during the year, (ii)
an increase in production when compared to 2018, (iii) the sale of
a non-core property, and (iv) the year-over-year decrease in
forecast oil and gas prices. The satisfaction of the farm-in
obligations at Tapir noted above resulted in the addition of proved
reserves equal to nearly half of the Company’s annual production,
while adding more than twice the annual production volume in proved
plus probable reserves. The Rio Cravo Este-1 well resulted in
recognition of 304 Mbbl of Company Gross Proved Reserves and 1,381
Mbbl of Company Gross Proved Plus Probable Reserves as discoveries
in the Reserves Report, of which 45 Mbbl were produced as of the
effective date. Future price forecast decreases for both oil and
gas were particularly detrimental to the Company’s gas reserves in
Canada and its heavy oil reserves in Colombia, both from a
standpoint of value and volume.
About ARROW Exploration
Arrow Exploration Corp. (operating in Colombia
via branches of its 100% owned subsidiaries Carrao Energy S.A. and
Samaria Llanos Exploration S.A.) is a publicly traded company with
a portfolio of Colombian oil assets that are underexploited,
underexplored and may 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 and Putumayo Basin. The Company’s asset base is
predominantly operated with high working interests and typically
realizes Brent-linked pricing exposure. Arrow’s management 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”.
RESERVES DEFINITIONS
With respect to the reserves data contained
herein, the following terms have the meanings indicated:
“Company Gross Reserves” are
the Company’s operated or non-operated working interest share (or
interest equivalent thereto) before deduction of royalties and
without including any royalty interests of the Company.
“reserves” are those quantities
of oil or gas anticipated to be economically recoverable from known
accumulations.
“proved” reserves are those
reserves that can be estimated with a high degree of certainty to
be recoverable. It is likely the actual remaining quantities
recovered will exceed the estimated Proved Reserves.
“probable” reserves are those
additional reserves that are less certain to be recovered than
proved reserves. It is equally likely that the actual remaining
quantities recovered will be greater or less than the sum of the
estimated Proved + Probable Reserves. P50 is a statistical median
and may differ from a mean. In early stage discoveries,
unconventional Resources, or frontier areas, there may be a
significant difference between P50 and mean estimates.
“possible” reserves are those
additional Reserves that are less certain to be recovered than
Probable Reserves. It is unlikely the actual remaining quantities
recovered will exceed the sum of the estimated Proved + Probable+
Possible Reserves.
“developed” reserves are those
reserves that are expected to be recovered from existing wells and
installed facilities or, if facilities have not been installed,
that would involve a low expenditure (e.g. when compared to the
cost of drilling a well) to put the reserves on production.
“developed producing” reserves
are those reserves that are expected to be recovered from
completion intervals open at the time of the estimate. These
reserves may be currently producing or, if shut-in, they must have
previously been on production, and the date of resumption of
production must be known with reasonable certainty.
“developed non-producing”
reserves are those reserves that either have not been on production
or have previously been on production but are shutin and the date
of resumption of production is unknown.
“undeveloped” reserves are
those reserves expected to be recovered from known accumulations
where a significant expenditure (e.g., when compared to the cost of
drilling and completing a well) is required to render them capable
of production. They must fully meet the requirements of the
reserves category (Proved, Probable, Possible) to which they are
assigned and expected to be developed within a limited time.
OTHER DEFINITIONS
bbl means barrel.
boe means barrel of oil
equivalent. A boe is determined by converting a volume of natural
gas to barrels using the ratio of 6 Mcf to one barrel. Boes may be
misleading, particularly if used in isolation. A boe conversion
ratio of 6 Mcf:1 boe is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not
represent a value equivalency at the wellhead. Further, a
conversion ratio of 6 Mcf:1 boe assumes that the gas is very dry
without significant natural gas liquids. Given that the value ratio
based on the current price of oil as compared to natural gas is
significantly different from the energy equivalency of 6:1,
utilizing a conversion on a 6:1 basis may be misleading as an
indication of value.
boe/d means barrel of oil
equivalent per day.
CDN $ means Canadian
dollars.
Finding and Development (F&D)
Costs are calculated by dividing the sum of unproved
property costs, exploration costs and development costs by the sum
of reserves changes from discoveries, extensions and revisions,
expressed in $US/boe
Mbbl means thousand
barrels.
Mboe means thousand barrels of
oil equivalent.
Mcf means thousand cubic
feet.
MMboe means million barrels of
oil equivalent.
MMcf means million cubic
feet.
MM US $ means million United
States dollars.
M US $ means thousand United
States dollars.
Reserve Life Index is calculated by dividing
the Company’s Gross Reserves by working interest production for the
fourth quarter of 2019, which was 1,595 boe/d. This metric
expresses how long a company’s reserves will last at the current
production rate with no additions to reserves.
Reserve Replacement Ratio is calculated by
dividing the sum of reserves changes from discoveries, extensions
and revisions by total annual production, expressed as a
percentage.
US $ means United States
dollars.
For further information
contact:
Marshall AbbottChief Executive OfficerP: (403)
651-5995E:
info@arrowexploration.ca mailto:fbetancourt@arrowexploration.ca
Jack ScottChief Operating
OfficerP: +507 6679 1943E: jscott@arrowexploration.ca
FORWARD-LOOKING STATEMENTS
This press release contains certain
forward-looking statements within the meaning of applicable
securities laws. Forward-looking statements are frequently
characterized by words such as “plan”, “expect”, “project”,
“target”, “intend”, “believe”, “anticipate”, “estimate” and other
similar words, or statements that certain events or conditions
“may”, “should” or “will” occur. In particular, this press release
contains forward-looking statements pertaining to, among other
things, the following: the timing of the release, and filing (as
applicable), of Arrow’s Form 51-101F1, comprehensive operational
update and year-end financial statements; Arrow’s business plan;
and Arrow’s asset base and price exposure.
Statements relating to “reserves” are also
deemed to be forward-looking statements, as they involve the
implied assessment, based on certain estimates and assumptions,
that the reserves described exist in the quantities predicted or
estimated and that the reserves can be profitably produced in the
future. Actual reserve values may be greater than or less than the
estimates provided herein.
All forward-looking statements are based on
Arrow’s beliefs and assumptions based on information available at
the time the assumption was made. Arrow believes that the
expectations reflected in these forward-looking statements are
reasonable but no assurance can be given that these expectations
will prove to be correct and such forward-looking statements
included in this press release should not be unduly relied upon. By
their nature, such forward-looking statements are subject to a
number of risks, uncertainties and assumptions, which could cause
actual results or other expectations to differ materially from
those anticipated, expressed or implied by such statements,
including those material risks and assumptions discussed in the
Company’s Management’s Discussion and Analysis for the three months
ended September 30, 2019, under the headings “Risks and
Uncertainties” and “Forward-Looking Statements”. The impact of any
one risk, uncertainty or factor on a particular forward-looking
statement is not determinable with certainty as these are
interdependent and Arrow’s future course of action depends on
management’s assessment of all information available at the
relevant time.
Any “financial outlook” or “future oriented
financial information” in this press release, as defined by
applicable securities legislation has been approved by management
of Arrow. Such financial outlook or future oriented financial
information is provided for the purpose of providing information
about management’s current expectations and plans relating to the
future. Readers are cautioned that reliance on such information may
not be appropriate for other purposes.
Additional information on these and other
factors that could affect Arrow’s operations or financial results
are included in Arrow’s reports on file with Canadian securities
regulatory authorities. Readers are cautioned not to place undue
reliance on this forward-looking information, which is given as of
the date it is expressed herein or otherwise. Arrow undertakes no
obligation to update publicly or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise, unless required to do so pursuant to applicable law.
All subsequent forward-looking statements, whether written or oral,
attributable to Arrow or persons acting on the Company’s behalf are
expressly qualified in their entirety by these cautionary
statements.
RESERVES AND DRILLING DATA
This press release contains oil and gas metrics
that are commonly used in the oil and gas industry such as “reserve
life index”. These metrics have been prepared by management of the
Company and do not have standardized meanings or standardized
methods of calculation and therefore such measures may not be
comparable to similar measures presented by other companies and
should not be used to make comparisons. Such metrics have been
included herein to provide readers with additional measures to
evaluate the Company’s performance; however, such measures are not
reliable indicators of the future performance of the Company, and
future performance may not compare to the performance in prior
periods and therefore such metrics should not be unduly relied
upon. The Company uses these oil and gas metrics for its own
performance measurements and to provide shareholders with measures
to compare the Company’s operations over time. Readers are
cautioned that the information provided by these metrics, or that
can be derived from the metrics presented herein, should not be
relied upon for investment purposes.
There are numerous uncertainties inherent in
estimating quantities of crude oil, natural gas and NGL reserves
and the future cash flows attributed to such reserves. The reserves
and associated cash flow information set forth above are estimates
only. In general, estimates of economically recoverable crude oil,
natural gas and NGL reserves and the future net cash flows
therefrom are based upon a number of variable factors and
assumptions, such as historical production from the properties,
production rates, ultimate reserve recovery, timing and amount of
capital expenditures, marketability of oil and natural gas, royalty
rates, the assumed effects of regulation by governmental agencies
and future operating costs, all of which may vary materially. For
these reasons, estimates of the economically recoverable crude oil,
natural gas and NGL reserves attributable to any particular group
of properties, classification of such reserves based on risk of
recovery and estimates of future net revenues associated with
reserves prepared by different engineers, or by the same engineers
at different times, may vary. The Company’s actual production,
revenues, taxes and development and operating expenditures with
respect to its reserves will vary from estimates thereof and such
variations could be material.
Individual properties may not reflect the same
confidence level as estimates of reserves for all properties due to
the effects of aggregation. This press release contains estimates
of the net present value of the Company’s future net revenue from
our reserves. Such amounts do not represent the fair market value
of the Company’s reserves. The recovery and reserve estimates of
the Company’s reserves provided herein are estimates only and there
is no guarantee that the estimated reserves will be recovered.
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.
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