Arrow Exploration Corp. Announces Year-end Audited Financial Statements, Md&a and Operational and Management Update

Source Press Release
Company Arrow Energy 
Tags Strategy - Upstream, Capital Spending, People, Guidance, Strategy - Corporate, Financial & Operating Data
Date April 30, 2019

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 (). 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        $1,994,233  7,966  n/a 
Restricted cash        3,154,839  n/a 
Working capital        (8,558,782)  3,598  n/a 
Total current debt        17,157,942  4,368  n/a 
Total assets        76,962,315  7,966  n/a 
Natural gas and crude oil 
production, before royalties 
Natural gas (Mcf/d)  733    734   
Natural gas liquids (bbl/d)     
Crude oil (bbl/d)  1,553    1,547   
Total (boepd)  1,682    1,676   
Operating netbacks ($/boe) (1)             
Natural gas ($/Mcf)  ($1.97)    ($ 1.92)   
Crude oil ($/bbl)  $19.15    $19.22   
Total ($/boe)  $16.88    $16.96 

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 2019corporate 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 capitalguidance 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  . 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 drillingcommitments 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 ExplorationLtd. 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 capitalspending 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."

Source: EvaluateEnergy® ©2019 EvaluateEnergy Ltd