Arrow Exploration set for upside as well schedule keeps delivering catalysts - analyst

Arrow Exploration Corp (TSX-V:AXL, AIM:AXL, OTC:CSTPF) shares will be driven higher by its ongoing and regular drill activity, that’s according to analysts at Zeus Capital.

The London-based stockbroker has repeated a ‘Buy’ recommendation with a price target pitched at 45p, compared to Arrow’s current market price of around 16.3p.

Earlier today, Arrow reported a 36% increase in total oil and gas revenue, reaching US$19.51 million.

First quarter earnings (EBITDA) climbed 15% to US$11.53 million, whilst net income amounted to US$2.66 million for the quarter. It comes as the growing oil and gas group continues to develop its fields in Colombia, with new horizontal wells unlocking higher volumes.

Production increased to 4,085 barrels of oil equivalent per day (boe/d), up 50% compared to the same period a year ago.

Operating cash flow totalled $14.43 million, and the company ended the quarter with $24.95 million in cash, after $11.38 million of capex in the three-month period.

Arrow drilled two development wells, AB 2 and AB 3, in the Alberta Llanos field. It also completed a 90 km² seismic survey on the southeast Tapir Block.

Post-quarter, Arrow spudded the AB HZ4 horizontal well and entered into a US$20 million prepayment agreement with an integrated energy firm to market its Colombian oil.

"The first quarter of 2025 has been exciting for Arrow,” chief executive Marshall Abbott said in a statement.

Regular drilling, regular news flow

Zeus Capital analyst Daniel Slater, in a note, highlighted that Arrow’s schedule of drilling will provide catalysts for the company to raise its valuation.

“Going forward, we look for ongoing execution of the 2025 work programme, and for this to support higher production rates to help underpin our full year forecasts,” Slater said.

The analyst added: “These results demonstrate the company’s ability to generate production cash flows to fund its significant ongoing 2025 drilling programme, while also building the balance sheet cash position.

“While we will need to see a ramp up in production over the rest of the year in order to make our forecasts, the company is well placed to do this given the increased drilling programme that is planned.”

Horizontal development

Arrow boss Marshall Abbott today told investors that recent well successes - AB 2 and AB 3 – in the Alberta Llanos field highlighted the potential for horizontal development in the Ubaque reservoir, as well as follow-up zones in the C7 and Guadalupe zones.

"During the dry summer months in the Llanos basin, the company has developed a new road system from the Carrizales Norte pad to the Capullo pad, the Mateguafa Oeste pad and the Mateguafa Attic pad,” Abbott said.

“These pads will be utilised in the company's planned drilling program for the remainder of 2025. The company has secured a second rig which is expected to spud the first of four wells at RCE in early June."

Abbott, meanwhile, highlighted that Arrow retains “very healthy netbacks” on its production, in spite of the oil price volatility seen in global markets through early 2025.

He noted that the focus is on growing production, continuing development at the Carrizales Norte, Rio Cravo Este and Alberta Llanos fields.