WTI (Jan) $68.72 -5c, Brent (Jan) $72.83 +2c, Diff -$4.11 +7c
USNG (Jan)* $3.21 -26c, UKNG (Dec) 118.0p +0.67p, TTF (Jan)* €47.0 +€0.49

Oil price

I wish all my American readers a. very happy Thanksgiving. Oil will be shut effectively until Monday and the last couple of days have seen trading books flattened to avoid any risk. 

Like USNG which expired the December contract on Tuesday the TTF expired yesterday, both January contracts opened well. Inventory stats were mixed but crude drew more than forecast while gasoline added more than the whisper.

Arrow Exploration

Arrow has provided an update on operational activity and announce the filing of its Interim Condensed Consolidated Financial Statements and Management’s Discussion and Analysis for the three and nine months ended September 30, 2024 which are available on SEDAR (www.sedar.com) and will also  be available shortly on Arrow’s website at www.arrowexploration.ca.

Q3 2024 Highlights:

• The strongest quarter in Arrow’s history for production, revenue, EBITDA and cash flow.
• Successfully drilled the first three horizontal development wells in the Carrizales Norte (CN) field.
• Recorded $21.3 million of total oil and natural gas revenue, net of royalties, representing a 53% increase when compared to the same period in 2023 (Q3 2023: $13.9 million).
• Net income of $6.7 million.
• Adjusted EBITDA(1) of $15.9 million, a 62% increase when compared to 2023 (Q3 2023: $9.8 million) and a 79% increase compared to Q2 2024 ($8.9 million).
• Average corporate production of 4,124 boe/d (Q3 2023: 2,518 boe/d).
• Realized corporate oil operating netbacks(1) of $50.76/bbl. 
• Cash position of $16.5 million at the end of Q3 2024.
• Generated operating cashflows of $29.2 million for the nine months ended September 30, 2024 (2023: $13.9 million).

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

Post Period End Highlights:

• Drilled three additional successful CN horizontal wells.
• Currently mobilizing rig to the Alberta Llanos pad (formerly known as Baquiano) in the Tapir block to spud the exploratory Alberta-1 well in early December.

CNB HZ-7

The sixth horizontal well on the Carrizales Norte “B” pad (CNB HZ-7) is now on production.  The well initially flowed at a rate of approximately 800 BOPD gross (400 BOPD net to Arrow) with a 60% water cut.  Currently the well has a 65% water cut and gross production of 700 BOPD gross (350 BOPD net).   

HZ-7 was drilled lower in the structure than the other horizontal wells and expectations were that the water cut would be higher on this well with lower production.  Nevertheless, the HZ7 well is expected to pay out in approximately four months.  As pump frequency is increased production should increase as well.

The results of HZ7 and the other horizontal wells have derisked further horizontal development to the north and south of the current horizontal wells at Carrizales Norte.

CNB HZ-7 was spud on October 22, 2024, and reached a target depth of 8,448 feet (true vertical depth) on November 7, 2024.  The well was drilled to a total measured depth of 13,893 feet with a horizontal section of approximately 3,612 feet. CNB HZ-7 came on production on November 14, 2024, with the use of an electric submersible pump (ESP).

Please note initial production flows are not necessarily indicative of long-term performance or ultimate recovery and a stabilized production rate will be determined in the first few weeks of operations, in keeping with conservative reservoir management. Further updates will be provided in due course.

Corporate Update

Current net corporate production is approximately 5,500 BOE/D, inclusive of CNB HZ-7. Optimization continues. 

Arrow’s cash position was approximately $19 million on November 1, 2024.  Arrow has maintained a healthy balance sheet with no debt while growing the production base. 

Upcoming Drilling

The rig is mobilizing to the Alberta Llanos prospect where Arrow plans to drill a low risk, vertical exploration well with multiple targets including the C7, Gacheta and Ubaque. Thereafter, the Company expects to drill two more vertical wells on the Alberta Llanos pad.

Arrow plans another year of growth in 2025, expecting to drill up to 23 wells utilizing two rigs.  Rig 1 will drill the Alberta Llanos prospect and will also be used at the Carrizales Norte development area and the Mateguafa Oeste and Capullo prospects.  Rig 2 will drill development wells at RCE and from a new pad, called Carrizales Norte C, which will be positioned to drill horizontal wells in the northern section of Carrizales Norte field and the Alberta Llanos prospect. The Company is also planning a 3D seismic project over the southern area of the Tapir block which will further develop the Icaco and Macoya prospects.  Total budgeted capital expenditures planned for 2025 is approximately $50 million, net to Arrow, which is expected to result in production for 2025 being significantly higher than current levels.

Marshall Abbott, CEO of Arrow Exploration Corp., commented:
“The third quarter of 2024 was the best quarter on record for Arrow. Compared to the same quarter last year, corporate production grew by 64% and revenue grew by 53%. Operating income and EBITDA grew by 54% and 62% respectively despite Brent and AECO prices being less than in 2023.”

“The highly successful horizontal well program at Carrizales Norte is ongoing with the completion of HZ-7. This program has also demonstrated that the Carrizales Norte reservoir extends further than originally thought and the plan is to exploit the reservoir extension with additional horizontal wells. The Ubaque reservoir has proven to be productive and very economic with the average wells paying out in less than three months. Declines from CNB HZ1, the longest producing horizontal well, were 50% in the first 3 months and 27% from day 90 until now. Individual well performance will vary, but HZ-1 is indicative of declines across the Company’s horizontal wells thus far. Expectations are that these horizontal wells will continue to produce for many years to come.”

“Arrow is looking forward to 2025 with an approved budget that will see up to 23 wells drilled on the Tapir block. The 2025 budget will be focused on production growth in development areas and low risk exploration. Arrow plans to test the Mateguafa Oeste and Capullo prospects and to develop further the Carrizales Norte and Rio Cravo Este areas using both vertical and horizontal technology.” 

“Arrow’s focus for the remainder of 2024 will be the low-risk exploration well at the Alberta Llanos prospect. The Alberta Llanos prospect is a continuation of the fault from the Carrizales and Carrizales Norte fields and the 3D seismic shows 3-way closure with multi zone potential including the C7, Gacheta and Ubaque.  Arrow expects to have drilling and log results before the end of 2024.  “

This is another excellent report from Arrow as it goes into the end of a highly successful year with the drilling of Alberta-1 prospect and has excellent geological potential in what used to be called Baquiano. The results are unsurprisingly first rate and 2024 will go down as a blue riband year after the strongest quarter ever for Arrow.

Production has recently tipped over the 5/- bopd number giving cash in the bank of some $19m and the HZ-7 well on production. It will be producing 700 bopd, 350 net and was drilled at the lower end of the structure with an expected a higher water cut and slightly lower production but and it is an extremely important but, the well will pay out in c. 4 months. Like the other Arrow wells the short and long term for these wells is remarkably profitable as I have explained before, it is known as the tail and the process accumulates assets and profits. 

Next year Arrow has started to filter its news into the market that it plans 23 wells with 2 rigs as well as a 3D seismic project over the southern area of the Tapir block hoping to develop the Icaco and Macoya prospects. This is a substantial programme and at a budget of c.$50m net to Arrow shows a huge amount of confidence in the area, the investment is expected to ‘result in production for 2025 being significantly higher than current levels. 

So Arrow remains in a very strong position after an excellent year, however the shares have remained subdued for a while as the market judges the incredible drilling success, those payback figures have amazing length and will return substantial sums for many years, the further investment for next year can only add to that, the shares are thus incredibly cheap.

Beacon Energy

Beacon has provided the following corporate update.

• Reservoir performance from the SCHB-2 well continues to disappoint with current production of approximately 45 bopd, a decline of approximately 20% since the installation of a rod pump in early September 2024
• Notwithstanding the material cost reduction initiatives previously disclosed, production at these levels places doubt on the future financial viability of Rhein Petroleum, absent material capital investment
• As previously disclosed, Beacon Energy had put forward a fully financed restructuring plan to the Rhein Petroleum creditors aimed at maximising cash generation from the Rhein Petroleum business and delivering value for creditors
• Given the production declines seen at the SCHB-2 well, Beacon Energy has been unable to put forward a restructuring offer which is agreeable to the Rhein Petroleum creditors
• The Company has now been informed by Rhein Petroleum’s creditor representative that it has agreed to sell certain assets of Rhein Petroleum to a third party (with completion expected in early January 2025), following which Rhein Petroleum would be expected to be liquidated (the “Proposed Liquidation”)
• As previously disclosed, Beacon Energy has not provided any parent company guarantees related to the debts of Rhein Petroleum (approximately €7.5 million)
• As a consequence of the Proposed Liquidation of Rhein Petroleum, Beacon Energy is expected to become an AIM Rule 15 cash shell in early January 2025
• As a result of material cost reduction initiatives previously announced and assuming the Proposed Liquidation proceeds as expected, the Board believes it has sufficient liquidity to progress new business development through to end Q2 2025
• The Company’s strategy continues to be the creation a self-funding oil & gas production company taking advantage of growth opportunities resulting from industry players as they reshape their portfolios
• By concentrating on cash-generative assets and capitalising on the current deal pipeline, the Company aims to lever the time and cost expended in assessing potential new ventures over the last year built on the Board’s extensive industry relationships. The opportunities the Company is assessing across Europe, Africa and the Far East are suitable for debt or vendor financing, and the Company will continue its efforts to mature these options
• The Board is presently in discussions on a range of opportunities and is confident that it will enter into an agreement on at least one opportunity before mid-year 2025

Stewart MacDonald, CEO of the Company, said:
“The performance of the SCHB-2 well continues to disappoint to the extent that it calls into question the ongoing financial viability of Rhein Petroleum. We are disappointed that agreement could not be reached with the creditors of Rhein Petroleum and that their preferred course of action is a sale of certain assets and the ultimate liquidation. Whilst Erfelden remains a potentially material oil discovery, very significant capital will be required in order to deliver its potential.

The ring-fencing of Rhein Petroleum’s liabilities ensures Beacon has no further financial exposure to the subsidiary and can utilise remaining cash to progress the compelling value accretive opportunities currently being assessed by our experienced Board. 

“Beacon Energy has an exciting set of opportunities in the business development pipeline and a motivated and high-quality Board focused on growing the Company and creating long term sustainable value for shareholders. Reducing the cost base leaves the Company with sufficient cash, and importantly allows more time, to assess and progress this pipeline. We will provide further updates to the market as appropriate.”

Not much I can add to this really, it does what it says on the tin. To be honest I was expecting some sort of deal with the creditors but if it can’t be done then best to see off the operationally dismal Rhein Petroleum and start afresh. 

What it has got is a good management team and as I understand it the backing of the shareholders who will support them as they examine the ‘exciting set of opportunities in the business development pipeline’. Until I get to sit down with Stewart MacDonald in the new year nothing is certain but at least for now I would back them after the unfortunate events in Germany.

Original article   l   KeyFacts Energy Industry Directory: Malcy's Blog