WTI (July) $79.23 -60c, Brent (July) $83.60 -62c, Diff -4.37 -2c
USNG (July)* $2.66 -16.6c, UKNG (June) 81.29p -0.55p, TTF (July) €33.95 -€0.35
*Denotes USNG June contract expiry

Oil price

Oil has fallen slightly today, the fall yesterday which at one stage had looked like a decent up day until the IMF changed back a gear on its China guesses and economic confidence in the US was strong meaning rates would stay higher for longer as they say. 

After hours the API stats showed a decent draw in crude of some 6.49m barrels whilst he gasoline draw was only 452/- slightly low at the beginning of the driving season.  

The ConocoPhillips deal for Marathon turned out to be worth some $22.5bn and all in shares as the new group look to amalgamate the Eagle ford and Bakken acreage. 

Arrow Exploration Corp

Arrow has announced the filing of its Interim Condensed Consolidated Financial Statements and Management’s Discussion and Analysis for the three months ended March 31, 2024 which are available on SEDAR (www.sedar.com) and will also  be available shortly on Arrow’s website at www.arrowexploration.ca.

Q1 2024 Highlights:

• Recorded $14.4 million of total oil and natural gas revenue, net of royalties, more than double compared to the same period in 2023 (Q1 2023: $6.9 million).
• Net income of $3.2 million (Q1 2023: $3.0 million).
• Adjusted EBITDA(1) of $10 million more than double compared to 2023 (Q1 2023: $4.4 million).
• Average corporate production up 139% to 2,730 boe/d (Q1 2023: 1,144 boe/d).
• Realized corporate oil operating netbacks(1) of $56.27/bbl. 
• Cash position of $11.6 million at the end of Q1 2024.
• Generated operating cashflows of $8.6 million (Q1 2023: $2.4 million).
• Successfully drilled four development Carrizales Norte (CN) wells, resulting in additional production and reserves additions.

(1) Non-IFRS measures

Post Period End Highlights:

• Drilled two additional CN development wells.
• Spud the first CN Horizontal well (“CNB HZ-1”) from the Carrizales Norte B (“CNB”) pad.  The Company expects to be able to provide an update on the production figures for CNB HZ-1 in the coming weeks.  Subject to successful completion, CNB HZ-1, in conjunction with the other three planned CNB HZ wells, are expected to result in a positive increase in Arrow’s production rates.

Outlook:

• Continued monitoring of the drilling of the horizontal wells at Carrizales Norte B pad.
• Completing stimulation efforts at the Oso Pardo-3 and 4 wells in the Middle Magdalena Basin.
• Continuing with the balance of the 2024 capital program, the majority of which will be focused on the Carrizales Norte field and will include three horizontal wells.  Low risk step-out and exploration wells are also planned at the Mateguafa Attic and Baquiano prospects.  The 2024 capital program will be self-funded by a combination of cash flow from operations and cash reserves.

Marshall Abbott, CEO of Arrow Exploration Corp., commented:
“In Q1 2024, Arrow experienced its strongest quarter to date for production and EBITDA. The Q1 2024 wells drilled, at the Carrizales Norte discovery, explored the extent of the C7 and Ubaque reservoir and gathered further data for the horizontal drilling program.  Horizontal wells have been determined as the best way to develop the Ubaque reservoir and are expected to thrust Arrow to the next level for production and stability.  The water disposal plan has also made great strides forward with the first disposal well at RCE being brought on production and the CN-4 well’s conversion currently waiting on regulatory approval.   Management remains confident in the Arrow team to execute on the planned exploitation campaign pursuing our opportunity rich portfolio and getting shareholder value to the next level.”

This was a brilliant quarter for Arrow and one I was privileged to have spent some time with them in Bogota. I have written up my thoughts and will publish soon but their success rate and subsequent increase in production is enviable as is the outlook.

So revenue was indeed doubled over last 1Q to $14.4m and NI was $3.2m giving healthy EBITDA of $10m and production shot up by 139% to 2,730 boe/d giving netbacks of %56.27/bbl. Cash of $11.6m is very healthy on cash flow of $8.6m enabling them to have a really good drilling programme.

In the first quarter they drilled four CN wells exploring the C7 and Ubaque reservoir and post the period end they have drilled two additional CN development wells but maybe more importantly have spudded the first CN Horizontal well from the Carrizales Norte B pad (CNB) that I saw being constructed whilst I was out there.

The company expect to announce the result of the first horizontal well, CNB HZ-1 in ‘coming weeks’ and if it is successful can drill three more wells from the pad in the coming months which should significantly increase production. In addition to this the company are planning wells at  the Carrizales Norte field and the exciting Mateguafa Attic and Baquiano prospects later in the year.

The company is still totally self funding the drilling programme and as all the new wells come onto production the self fulfilment continues. During my visit I met most of the high quality staff in the office and the field, there is no doubt that Arrow has great team from top to bottom and the stock is remarkably cheap with so much to look forward to.

FINANCIAL AND OPERATING HIGHLIGHTS

(1) Non-IFRS measures – see “Non-IFRS Measures” section within this MD&A

(2) Long term restricted cash not included in working capital

DISCUSSION OF OPERATING RESULTS

The Company increased its production from new wells at CN which allowed the Company to continue to improve its operating results and EBITDA.  There has been a decrease in the Company’s natural gas production in Canada due to natural declines.

Average Production by Property

For the three months ended March 31, 2024, the Company’s average production was 2,730 boe/d, which consisted of crude oil production in Colombia of 2,432 bbl/d, natural gas production of 1,760 Mcf/d and minor amounts of natural gas liquids from the Company’s Canadian properties. The Company’s Q1 2024 total production was 138% higher than its total production for the same period in 2023.

DISCUSSION OF FINANCIAL RESULTS

During Q1 2024 the Company continued to realize good oil prices, offset by lower gas prices, as summarized below:

(1) Non-IFRS measure

OPERATING NETBACKS

The Company also continued to realize strong oil operating netbacks, as summarized below:

(1) Non-IFRS measure

The operating netbacks of the Company remained strong in Q1 2024 due to several factors, principally the increase in production from its Colombian assets and increased crude oil prices.  In Cananda, decreases in natural gas prices were offset by reduced operating expenses for natural gas.

During the first three months of 2024, the Company incurred $6.3 million of capital expenditures, primarily in connection with the drilling of four CN wells and civil works completed in the Baquiano pad in the Tapir block to get it ready for drilling. This accelerated tempo is expected to continue during the remainder of 2024, funded by cash on hand and cashflow.

Afentra 

Afentra has announced its unaudited annual results for the year ended 31 December 2023.

2023 SUMMARY

Overview

• During FY2023 and post period, successful completion of three acquisitions in Angola to acquire 30% non-operated interest in the producing Block 3/05 and a 21.33% non-operated interest in the adjacent development Block 3/05A:
• Completion of acquisition of interests from Sonangol (14% in Block 3/05 and 40% in Block 23).
• Completion of acquisition of interests from INA (4% in Block 3/05 and 5.33% in 3/05A).
• SPA signed with Azule to acquire further equity in Block 3/05 and 3/05A.
• Post year-end, completion of acquisition of interests from Azule (12% in Block 3/05 and 16% in 3/05A)
• Appointment of Thierry Tanoh as an Independent Non-Executive Director and Chairman of the Audit Committee.

Financial Highlights

• Cash resources at year end 2023 of $19.6 million (2022: $30.6 million), which includes restricted funds of $4.9 million (2022: $10.2 million).
• Reserve Based Lending Facility at year end of $31.7 million resulting in year end net debt of $12.3 million.
• First cargo of 300,000 bbls of crude oil sold in August 2023, at a sales price inclusive of the Brent premium of $88/bbl, generating pre-tax sales of $26.4 million net to Afentra.
• Crude oil stock as at year end 2023 of approximately 300,000 bbls[1].
• Net asset level cashflow generation related to 30% equity in Block 3/05 in 2023 was $67.4 million at an average weighted sales price of $90/bbl.
• Mauritius Commercial Bank became a lender by entering both the RBL and working capital facilities, Trafigura retains an interest in the RBL facility and will continue as an offtake provider.

Operations

• Combined 2023 gross production on Block 3/05 and Block 3/05A was 20,180 bopd (2022: 18,700bopd).
• Light well intervention campaigns successfully executed, leading to December 2023 gross production exceeding 23,000 bopd.
• Water injection upgrades doubled injection rates, with December rates of ~42,000 bwipd.
• Gazela field (Block 3/05A) production was restored in March 2023 leading to gross production rate of around 1,300 bopd.
• Future investment options progressed to unlock the significant resource base including review of electric submersible pumps (‘ESPs’), heavy workovers, infill drilling and development of Block 3/05A discoveries.
• Competent persons report (‘CPR’) with reserves replacement in the first half of 2023 in excess of 150%.

Post year-end Summary

• Selected as the preferred bidder for 45% non-operating equity in both KON15 and KON19 located in the Kwanza Basin onshore Angola.
• PSA for the onshore Block KON19 negotiated with Agência Nacional de Petróleo, Gás e Biocombustíveis (‘ANPG’) and now await the formal Government approval.
• Completion of the Azule acquisition resulting in Afentra holding non-operated interests of 30% in Block 3/05 and 21.33% in Block 3/05A.
• Government of Angola declared the Punja Development Area in Block 3/05A a marginal discovery with improved fiscal terms now applicable for the remainder of its term.
• Sold cargo of 450,000 bbls of crude oil in February 2024. The sales price inclusive of the Brent premium was $85/bbl, generating pre-tax sales of $38.2 million to Afentra.
• Net debt at Azule completion of around $46.2m with crude oil stock of around 840,000 bbls1.
• Combined gross production for the first four months of 2024 ending 30 April for Blocks 3/05 and 3/05A has averaged ~23,000 bopd (Net: ~6,800, bopd).

Commenting on the update, CEO Paul McDade said:
“Last year was another transformative period for the company as we completed our first two transactions in Angola.  The subsequent completion of the Azule transaction represented another key milestone for Afentra as we, alongside our partners, turn our attention to realising the significant organic growth opportunities that we see in the quality portfolio that we have assembled.  With these initial transactions, we have successfully proved our suitability as a credible counterparty for divesting IOCs/NOCs, our ability to deliver high value accretive deals, and to fund these types of deals through smart deal making.  The market dynamics in Africa continue to support our inorganic growth strategy and we are actively screening compelling opportunities that meet with our commercial criteria.  We look forward to updating the market through what will be an active year ahead for Afentra.”

Afentra has certainly showed a clean set of heels to many in the market with their strategy in Angola. Azule that recently announced completed showed that they haven’t lost their skills in dealing in Africa and with deals front loaded in their favour the length of time taken to complete is more than mitigated by cash inbound.

Given their success they are already up to more M&A and also working with the Government as preferred bidder they can expect to see some very special blocks for future development. The shares have more than doubled in a year and the board havec skin in the game, I expect much more in due course.

KeyFacts Energy Industry Directory: Malcy's Blog