Marshall Abbott, CEO of Arrow Exploration Corp (TSX-V:AXL, AIM:AXL, OTC:CSTPF), shared an optimistic outlook on the company's onshore oil operations in Colombia at a recent One2One Investor Forum in London.
Describing it as a "Klondike" environment for nimble operators, with increasing production, a focus on horizontal drilling, and substantial reserves, Abbott told attendees that the company is well-positioned for growth in Colombia.
Arrow's business plan focuses on expanding oil production in Colombia's Llanos, Middle Magdalena Valley, and Putumayo Basins, where high working interests and Brent-linked light oil pricing, coupled with low royalties, offer strong operating margins.
The group’s operations in two key Colombian basins are "opportunity-rich," Abbott said. Arrow currently produces 5,400 barrels of oil per day, with plans to nearly double output to 10,000 barrels a day over the next three years.
“Our wells in Colombia reach depths of 10,000 feet, and we typically encounter up to six hydrocarbon-bearing zones, which makes it hard to drill a dry well,” said Abbott.
Speaking of their horizontal drilling programs, Abbott said the firm’s recently introduced new concept for onshore Colombia is “working beyond expectations.”
Arrow has 12 million barrels of proven and probable reserves, valued at approximately $280 million at a 10% discount. Abbott expressed confidence that this figure will see a significant increase by year-end due to the company's recent drilling success.
"We're trading at two and a half times cash flow and have a compelling valuation compared to peers in both the UK and Latin America," Abbott said, adding that Arrow’s production growth has aligned with its rising share price, a trend he believes will continue.
The CEO also noted that the company’s net asset value is approximately US$1 per share, with a $54 netback per barrel based on an $80 Brent price. He emphasized that Arrow’s financial strength allows it to fund its aggressive drilling program through internal cash flow. "We’re cash flowing $3.5 million a month and have $15 million in the bank," he said.
Abbott also outlined Arrow’s plans to drill three more horizontal wells by year-end, with the first already producing above expectations. The company also plans to install new infrastructure, including a pipeline to streamline crude delivery.
As the company continues to market itself aggressively, Abbott remains confident in achieving its production targets. "We’ve got the prospect inventory and the cash flow to get us to 10,000 barrels a day within three years," he said.
“We've got the experience in the basin. We're low-cost operators. The oil comes out fast and is very profitable. These wells pay out very quickly.”