Arrow Exploration Corp. Announces Third Quarter 2019 Financial and Operating Results and Initiation of Strategic Alternatives Process

Source Press Release
Company Arrow Exploration Corp. 
Tags Capital Spending, Strategy - Corporate, Financial & Operating Data
Date November 28, 2019

ARROW Exploration Corp. (“Arrow” or the “Company”) (TSXV: AXL) is pleased to announce the filing of its 2019 third quarter unaudited Financial Statements and MD&A and the initiation of a strategic alternatives process.

Third Quarter Financial and Operating Results

The Company’s Financial Statements and MD&A are available on SEDAR (). All numbers are expressed in US dollars unless otherwise noted.

(in United States dollars, except as otherwise
Three months
ended September
30, 2019 
Nine months
September 30,
Three months
ended June 30,
Three months
ended March
31, 2019 
Total natural gas and crude oil revenues, net of
6,320,471  19,854,839  7,525,728  6,008,640 
Funds flow from operations (1)  1,500,573  3,447,095  965,570  980,952 
Per share – basic ($) and diluted ($)  0.02  0.05  0.01  0.02 
Net loss  (1,325,939)   (4,806,859)  (1,776,740)  (1,704,180) 
Per share – basic ($) and diluted ($)  (0.02)  (0.07)  (0.03)  (0.02) 
Adjusted EBITDA (1)  1,993,407  5,333,458  1,952,816  1,387,235 
Weighted average shares outstanding – basic
and diluted 
68,674,602   68,674,602  68,674,602  68,674,602 
Common shares end of period  68,674,602   68,674,602  68,674,602  68,674,602 
Capital expenditures  2,012,557  9,585,602  4,171,680  3,401,365 
Cash and cash equivalents  167,383  167,383  844,983  1,434,648 
Current Assets  8,771,087  8,771,087  10,725,489  10,553,677 
Current liabilities  12,002,329  12,002,329  18,800,186(2)  18,353,525(2) 
Working capital (deficit) (1)  (3,231,242)  (3,231,242)  (8,074,697)  (7,799,848) 
Long-term portion of restricted cash (3)  388,266  388,266  368,662  3,245,624 
Total assets  73,870,261  73,870,261  76,333,739  77,066,582 
Natural gas and crude oil production, before
Natural gas (Mcf/d)  598  657  677  696 
Natural gas liquids (bbl/d) 
Crude oil (bbl/d)  1,693  1,719  1,741  1,588 
Total (boe/d)  1,799  1,834  1,859  1,710 
Operating netbacks ($/boe) (1)         
Natural gas ($/Mcf)  ($0.72)  ($0.61)  ($1.19)  0.10 
Crude oil ($/bbl)  $23.26  $23.74  $27.50  18.43 
Total ($/boe)  $21.68  $22.20  $25.40  17.29 

(1) Non-IFRS Measures – see “Non-IFRS Measures” below
(2) Includes $5 million Canacol promissory note
(3) Long-term restricted cash not included in working capital

Third Quarter 2019 Highlights and Subsequent Events

  • For the three months ended September 30, 2019, Arrow recorded $6,320,471 in revenues (net of royalties) on crude oil sales of 151,313 barrels, 528 barrels of NGL’s and 55,037 Mcf of natural gas sales.
  • Adjusted EBITDA for the three months ended September 30, 2019 was $1,993,407.
  • Production averaged 1,799 boe/d, a decrease of 60 boe/d over the second quarter of 2019.
  • Revenue (net of royalties) of $6.32 million represented a decrease of approximately $1.2 million over the previous quarter. Brent oil prices averaged $62.03 for the third quarter of 2019 which represented a reduction of more than $6 per barrel relative to the second quarter. Lower Brent oil prices in the third quarter compared to the second quarter had a negative impact on operating netbacks which were $21.68 per boe vs. $25.40 per boe, respectively.
  • Operating costs were $2,828,585 or $17.56 per produced boe which represents a reduction of $376,552 (12%) versus the second quarter of 2019.
  • Working Capital deficit of approximately $3.2 million does not include the $5 million promissory note to Canacol Energy Ltd. (“Canacol”) which was included in the Working Capital deficit calculation in the second quarter due to amending and extending the promissory note in July, 2019. The Company’s net debt was calculated at $7,092,058 as of September 30, 2019 which is comprised of: Current Assets of $8,771,087, Accounts Payable and Accrued Liabilities of $11,935,993, Canacol promissory note of $5 million, and long-term receivables of $1,072,848.
  • Subsequent to quarter end, Arrow announced that Mr. Bruce McDonald resigned as President, Chief Executive Officer and Director of the Company. Mr. McDonald was entitled to severance payments totaling $485,000 that was paid subsequent to quarter end and will be reported in fourth quarter financial statements. Mr. Jack Scott, Chief Operating Officer of the Company, was appointed interim President and CEO.

Jack Scott, Interim CEO commented, “I’m pleased to report a record quarter from the perspective of EBITDA and funds flow from operations at $1,993,407 and $1,500,573 respectively. These record operating results were achieved despite a reduction in Brent Oil pricing of more than $6 per barrel and average production being reduced by 60 boe/d relative to the second quarter. Record results were driven by our continued focus on reducing both operating and G&A costs throughout the Company. Further cost reduction initiatives have been identified and will be implemented in future quarters in order to expand Arrow’s free cash flow, allowing the Company to pay down debt.”

Strategic Alternatives Process

Arrow’s Board of Directors has formed a Special Committee (the “Committee”) to evaluate strategic alternatives for the Company with a view to improving the Company’s balance sheet, including addressing its working capital deficit, long-dated payables and upcoming debt maturity in October 2020, and maximizing enterprise value. The strategic alternatives process is intended to explore a comprehensive range of strategic alternatives including: a sale, merger or other business combination; a disposition of all or certain assets of the Company; recapitalization and refinancing opportunities; sourcing new financing and equity capital; and other alternatives to maximize value. The Committee has been given a mandate by the Board to hire a strategic advisor(s) to support the evaluation of all potential alternatives. The Company will provide additional information regarding the strategic alternatives process once such advisor(s) has been selected. There can be no guarantees as to whether the strategic alternatives process will result in a transaction or the terms or timing of any resulting transaction.

Source: EvaluateEnergy® ©2020 EvaluateEnergy Ltd