Arrow Exploration Corp. (TSXV: AXL) has announced 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
Arrow Exploration’s Financial Statements and MD&A are available on SEDAR (www.sedar.com). All numbers are expressed in US dollars unless otherwise noted.
| (in United States dollars, except as otherwise noted) |
Three months ended September 30, 2019 |
Nine months ended September 30, 2019 |
Three months ended June 30, 2019 |
Three months ended March 31, 2019 |
| Total natural gas and crude oil revenues, net of royalties |
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 |
| Operating | ||||
| Natural gas and crude oil production, before royalties |
||||
| Natural gas (Mcf/d) | 598 | 657 | 677 | 696 |
| Natural gas liquids (bbl/d) | 6 | 6 | 5 | 6 |
| 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. Arrow Exploration’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 Arrow Exploration. 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 Arrow Exploration, 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 Arrow Exploration. Further cost reduction initiatives have been identified and will be implemented in future quarters in order to expand Arrow’s free cash flow, allowing Arrow Exploration to pay down debt.”
Strategic Alternatives Process
Arrow’s Board of Directors has formed a Special Committee to evaluate strategic alternatives for Arrow Exploration with a view to improving Arrow Exploration’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 Arrow Exploration; 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. Arrow Exploration 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.
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 Colombian oil assets that are under-exploited, under-explored and offer high potential growth. Arrow Exploration’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”
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