Arrow Exploration Share Discussion Threads

[jacks13] 20/6/2024 15:13

I don't believe that dividend payments feature in their plans, at least for the time being. And neither should they given what they are sitting on. MA was talking about ten horizontals only yesterday. Then there are the other licences to develop. The name of the game is reserves development.

[rockyride] 20/6/2024 15:02

MT - from what they've said in the past, I'd be expecting net backs to be around $190k per day at the moment. And although the first horizontal will be declining, that could be possibly cancelled out as other production increases as well disposals complete.If 3,600boepd could be maintained that would generate $70m PA FCF with all future 2024 drilled wells bolting on top of that.How much cash will they want to sit on before initiating distributions? Every $10m paid out would equate to 2.75p dividend, a 10.5% yield.

[mount teide] 20/6/2024 14:49

Brent back up to circa $86 has coincided perfectly with first production from HZ-1 coming on-stream. At 3,600 bopd the current net-backs and cash flow generation should be very healthy.

[jungmana] 20/6/2024 13:24

should test the all time high this week if not today. been a brilliant week with AXL and my largest holding LBE.
50p (GBP150 million market cap) target here for me by end of year.

[someuwin] 20/6/2024 12:34

Can't even buy £2k now.

[rockyride] 20/6/2024 12:24

I think we will see a gradual sustained rise now, similar to AET moving from 20's to 60p. Have never been a chart man but gaps quite often get filled. Hope not on this occasion.

[78steve] 20/6/2024 12:00

Could we see a breakout in short order

[king suarez] 20/6/2024 11:14

It seems clear AXL could hit 10k+ bopd by drilling out another 10 x horizontals fast, but then what happens?

Is the reservoir then 'full' of pipes and production just gradually (or not so gradually) drops back to a more sustainable level? Or can they sink even more horizontals in? Can they stimulate them at some point?

It's hard to model/value what it's all worth, other than to say - a few times what we're currently valued at?

Is something like 5-6k annual production 'long-term' a more realistic figure to assume? That'd be about $100m operating cash flow, with minimal sustaining capex if all wells are in the plateau phase - can that go on for 10 years or so? If so, worth a few hundred million in today's money? Thoughts?

[mount teide] 20/6/2024 10:28

Swan & H&T

'The improved recovery from the horizontal well drilling campaign and waterflooding projects in the Llanos 34 Block (GeoPark operated, 45% WI) also added 2P reserves.'

'Q4/2023 Results / 17th Jan 2024 - llanos Basin: Five horizontal wells were drilled and put on production in 2023. They are currently producing 10,060 bopd gross in aggregate.'

'Well now/initial year end 2024

CNZ-1 1500 500
CNZ-2 1500 700
CNZ-3 1500 900
CNZ-4 1500 1100'

Medium/Heavy oil has been produced from the equally thick Oso Pardo Field reservoir for nearly a decade without experiencing any water cut......across the Llanos basin heavy oil reservoirs tend to produce at materially lower production rates from vertical wells compared to light oil reservoirs like the C7, and decline at materially lower rates.

Geopark - Horizontal Well Production for 2023

They drilled five wells - the average initial production rate for the three wells that results figures were released for were 2,750 bopd.

Lets assume the other two came on at the same average production.

During 2023, the 5 wells produced for an average of circa 6 months - by which time their average production was reported as 2,012 bopd (10,060 / 6). This is equivalent to an average decline rate of 29.4% over 6 months - compared with H&T's 6 month conservative estimated decline rate of 66.7% for CNZ-1.

By the end of 2024, in light of AXL's initial learning experience drilling and operating horizontal wells, I suspect the average decline rate for AXL wells will likely fall somewhere in between, but closer to Geoparks's decline figures. Why?

It would have been very challenging for GeoPark to add Field 2P reserves so early from the performance of the horizontal wells if the average decline rate was significantly greater than that achieved from producing vertical wells on the same field.

However, as posted previously, the economics of each AXL horizontal well producing at an initial stabilised rate of 500 bopd net, and experiencing the same decline rate as Arrow's light oil producing Tapir Block wells, would still produce a very large step change improvement in cash flow generation at $75 Brent compared to the vertical wells AXL has drilled to date on the Tapir Block.

It also worth bearing in mind that CNZ-1 came on 41% higher than AXL's modelling - and 65% higher than the modelled rate for CNZ-2....and that AXL's modelled production rate for CN Horizontal wells drilled in 2023 is circa 500 bopd gross by 2028.

AIMHO/DYOR

[oakville] 20/6/2024 08:34

As it was an all time high RNS yesterday you would think so but just keep hold of your shares and it will hit highs in its own time.

[upwego] 20/6/2024 08:32

Should break the all time high today. :)

[swanvesta] 20/6/2024 08:08

H&T, I think your numbers are close to reality. Thank you.

[swanvesta] 20/6/2024 08:05

MT, that's interesting evidence from Geopark, thank you. I note initial production from the first well was over 3,000 bopd, and the other four I presume were superior (due to longer lateral lengths.) So a notional total initial production would have been at least 15,000 bopd? Then in less than a year (less than 6 months on average) production had dropped to about 10,000 bopd.

This suggests to me that initial production drops very quickly in the early months and then declines more gradually after that. I note the well simulation on p22 of the presentation shows an initial rate of near 6000 bopd, dropping to 700 or so within a year.

I'm afraid I can't see how it comports with an "initial production performance of a stable 2,000 - 2,250 bopd gross and first year circa 20% decline rate". Can you explain?

[oakville] 20/6/2024 07:03

There are not many of these companies about with so much potential. I have spoke to a few work colleagues who are looking to invest.

[here and there] 20/6/2024 06:35

The Geopark horizontal drilling data MT posted is a really interesting comparitive. Obviously it is a different field and reservoir so CN Ubaque will produce differently.

I always try to 'model' thse things conservatively so I am looking at it like this for a 'low case'

Well now/initial year end 2024


CNZ-1 1500 500
CNZ-2 1500 700
CNZ-3 1500 900
CNZ-4 1500 1100

Existing production 2100 (assuming declines and production behind pipe back on stream so neutral overall)

5300 bopd year end base case and a Q4 average production 4500 +

I'm assuming CNZ-2 and CNZ-3 get in production in Q3 and CNZ-4 in Q4.

5000 bopd at $60 produces $300 000 p/d
$2 100 000 p/w

$100m p/a of free cash flow. The MC is about $80m

Our annualised free cash flow as we stand is circa $75m

I have assumed v aggresive declines on the horizontals over the first 6 months. After that the rate of decline slows right down.
The pay out in 6 weeks is sensational. Every BOE after that is pure profit with all the capex having been retrieved.
From what I can gather (reading between the lines) The plans to take on a second and third rig were postponed whilst income was curtailed dealing with the water disposal issues and waiting to see what was the result of CNZ-1. I expect them to wait a month or so to see how CNZ-1 flows over time, then hire a second rig to do the exploration wells. Keeping the present rig at CN. Looks like they want to keep $10m plus in the bank for contingencies etc.

As for share price performance, there are always profit takers and fresh buyers on news and volume. I added yesterday, topped up 100k shares at 23.08p. Why? The fundamentals have completely changed. The production, reserves and cashflow growth story has just grown apace. I believe we the share price will grind up over the next few weeks as the market appreciates the significance of the well result. Management are in London next week, meeting their investor base. Expect to see some more in depth interviews.

[mount teide] 20/6/2024 01:26

Malcy - 'This horizontal well into the Ubaque has been waited for with tremendous excitement and the fact that it has exceeded expectations is about as good as it could have got for Arrow and its band of followers of which I am a very keen one.

I will put it all together tomorrow, but this is worth considering for potential valuation purposes as the group production is now c.3,600 b/d and with three more horizontal wells on this pad to be followed by the Baquiano-1 exploration well, which is on trend with the Carrizales Norte field, the world is indeed the company’s lobster with apologies to Arthur Daley.

I have pointed out several times that these horizontals are of increasing value a number of times, indeed pre-drill estimates of, say, 2/- b/d at a cost of $5-7m per well totally change the economics but at this early stage this drill looks even better. Next time they will be longer, produce higher flow rates and exceed ultimate recovery and there is the Baquiano to dream about.

As I say I will add more tomorrow but think doubling production, at better economics and as the company reminds us the balance sheet is very strong, there is no debt and the extensive drilling campaign is fully funded. More tomorrow…'

[dicko80] 19/6/2024 20:31

Yes payback was 3months based on 1kbopdnet, todays confirmed c50% higher so payback 50% less , so 1.5months /6weeks

Tremendous!

Personally i think it would have been better to drill the 2nd HZ now to keep the momentum going before the water well , could do with another rig 🤣

As confirmed, length does matter

[royalalbert] 19/6/2024 20:11

4-6 weeks that's phenomenal.

[eaglehaslanded] 19/6/2024 18:09

Informative interview as always. 3 more horizontal wells, but room for 10 more after that. So excellent prospects the next years.Payout for this well is 4-6 weeks!

[thomas11] 19/6/2024 17:52

New MA presentation

[pastybap] 19/6/2024 17:33

Thanks both. Fully understand it now!

[eaglehaslanded] 19/6/2024 17:22

PastyThink of it as a straw perforated with holes, the more holes the more can be sucked in, so the length matters.Hope this helps

[jacks13] 19/6/2024 17:12

This might help:

[pastybap] 19/6/2024 16:43

Can someone with technical knowledge explain to someone without technical knowledge (me) why does drilling a longer horizontal improve output?