Arrow Exploration Corp. (AXL) Earnings Call Transcript & Summary

Hello, and welcome to the Annual General and Special Meeting of Shareholders of Arrow Exploration Corp. Please note that today's meeting is being recorded. If you participate in today's meeting and disclose personal information, you will be deemed to consent to the recording, transfer and use of same. If you disclose personal information of another person in today's meeting, you will be deemed to represent and warrant the Computershare and the corporation that you first obtained all required consents for the disclosure, recording, transfer and use of such personal information from all appropriate persons before your disclosure. [Operator Instructions] It is now my pleasure to turn today's meeting over to Gage Jull, Chairman, the floor is yours.

Good morning, ladies and gentlemen. Thank you for joining us today for the Annual Meeting of Shareholders of Arrow Exploration Corp. My name is Gage Jull. I'm the Chair of the Board of the Corporation, and it is my pleasure to chair this meeting. Attending the meeting with me are Marshall Abbott, Director of the Corporation and our Chief Executive Officer; and Joe McFarlane, Chief Financial Officer. Certain of our other directors, officers and employees are attending the meeting in person or remotely, and I would like to thank and acknowledge their contribution to Arrow over the past year. Before proceeding with the meeting, I note that this will be a hybrid meeting. Arrow is permitting its shareholders to participate in a virtual manner via a live audio cast in addition to meeting formally being held at the offices of Gowling WLG (Canada) LLP. We note the following procedures for the orderly conduct of the meeting. One, questions in respect of a motion can be submitted by any registered shareholder or duly appointed proxy holder using the instant messaging service of the virtual interface for the audio cast. Please note that there will be a slight delay in the publication of the communications received. In addition, Arrow will be providing all participants, including beneficial shareholders and guests, with an opportunity to ask questions regarding the company and its business following the formal portion of the meeting and management presentation. Two, questions will generally appear shortly after they are submitted, but will only be addressed during the question period at the end of the presentation. Although questions regarding procedural matters or directly related to the motions before the meeting may be addressed during the meeting. Three, for those attending the meeting by virtual audiocast, voting on all matters will be conducted by electronic ballot. For those attending the meeting in person, voting will be conducted by ballot. Registered shareholders and duly appointed proxy holders will be asked to vote on each business item after the presentation of all business items. Four, when you are asked to vote for those shareholders participating virtually, resolutions will be put forward for voting in the Vote tab. To vote, simply select your voting direction from the options shown. Be sure to vote on all resolutions using the numbered link if one appears within the voting tab -- within the vote tab, pardon me. Your vote has been cast when the checkmark appears. If you've already voted, there is not a need to vote again. If you choose to vote again during the meeting, this will revoke your previous vote. Other instructions and audio cast access information were provided in Arrow's notice of Meeting and Management Information Circular dated August 7, 2024. I now propose to proceed with the formal part of the meeting. Those present in person and virtually via live audio cast are reminded that only registered shareholders and their duly appointed proxy holders are entitled to participate in the formal part of the meeting. After the formal meeting, Mr. Abbott will be providing a presentation regarding the corporation's business, and we'll take any questions after that. I now call the meeting to order. I will ask [ John Hunter ] to act as Secretary of the meeting. And with the consent of the meeting, I appoint representatives of Computershare Trust Company of Canada to active scrutineers. Notice of this Meeting and Special Meeting of Shareholders of Arrow Exploration Corp was sent to all shareholders of record as of the close of business on August 6, 2024. The notice of Annual and Special Meeting is available on SEDAR+ and Arrow's website. I direct that proof of mailing of the notice and the other documents sent to the shareholders as well as proof of filing of the notice be kept with the minutes of this meeting. Those shareholders and proxy holders attending the meeting virtually via live audio cast will vote by completing an online ballot. Once again, registered shareholders and duly appointed proxy holders will be asked to vote on each business item after the presentation of all business items. All votes will be conducted by ballot. The scrutineers will count all of the ballots, and we will read the results of the voting on each matter once all of the meeting matters to be voted on have been voted on accordingly. The Secretary has confirmed that a quorum of shareholders is present, either represented in person or by proxy. I now declare this meeting to be duly called and properly constituted for the transaction of business. The first item of business is to receive the audited consolidated financial statements of the corporation for the year ended December 31, 2023, which have been approved by the Board of Directors, together with the auditor's report thereon and have been sent to the registered shareholders and supplemental mailing lists, and it is not proposed to read them to the meeting. Additional copies of the financial statements are available upon request or can be accessed online in the company's portal. No action is required to be taken by the shareholders on these financial statements. I now declare that the audited consolidated financial statements of Arrow Exploration Corp for the fiscal year ended December 31, 2023, and the auditor's report thereon have been received by the shareholders as submitted to this meeting. The second item of business is to approve and adopt an ordinary resolution to fix the number of directors to be elected at the meeting at 6 members. I will now ask someone to make a motion in this regard.

Mr. Chairman, I so move.

Thank you, Joe.

Mr. Chairman, I second the motion.

Thank you, Marshall. Is there any discussion of the motion? There being no discussion, I will move on to the next item of business. It is now in order to proceed with the election of directors. In accordance with our articles and bylaws, the Board of Directors has determined that the Board shall consist of 6 members this year. The names of those persons who have been nominated for election as Directors of Arrow Exploration Corp. until the date of the next Annual Meeting of Shareholders or until their successors are elected or appointed are myself, Gage Jull, G. Marshall Abbott, Grant M. Carnie, Ian Langley, Ravi Sharma, Anthony Zaidi. I will now entertain a motion nominating these persons as directors of the corporation for the ensuing year.

I move that G. Marshall Abbott, Grant M. Carnie, Gage Jull, Ian Langley, Ravi Sharma, and Anthony Zaidi be elected as directors of the corporation to hold office until the close of business of the next annual meeting of shareholders or until their successors are duly elected or appointed.

Thank you, Joe.

Mr. Chairman, I second the motion.

Thank you, Marshall. As voting on the election of the nominees will occur together with the other matters, I will now move on to the next item of business. The next item of business is the appointment of auditors. May I now have a motion to appoint Ernst & Young LLP as auditor of the corporation until the close of the next Annual General Meeting of shareholders at such remuneration as may be fixed by the Board of Directors and that the Board of Directors be and are hereby authorized to fix such remuneration.

Mr. Chairman, I so move.

Thank you, Joe.

I second the motion.

Thank you, Marshall. Is there any discussion of the motion? Hearing no further discussion, I will move on to the next item of business. The next item of business is the approval of an ordinary resolution approving the corporation's amended and restated stock option plan. Shareholders are asked to consider, and if thought fit, to approve with or without variation, an ordinary resolution approving the corporation's amended and restated stock option plan. The full text of the resolution is set out on Page 14 of the corporation's management information circular. May I now have a motion to approve the corporation's amended and restated stock option plan as set out on Page 14 of the corporation's Management Information Circular?

Mr. Chairman, I so move.

Thank you, Joe.

I second the motion.

Thank you, Marshall. Is there any further discussion on the motion? Hearing no further discussion, we will now move on -- move to vote on the matters today. As mentioned earlier, voting for all of the matters before the meeting today will be conducted by ballot. I will now take a moment to ask that the balloting be opened to registered holders and appointed proxy holders. I will once again ask Computershare to provide instructions on voting through the electronic platform. The polls are now open. And at this point, all registered shareholders and duly appointed proxy holders attending by virtual audio cast who have properly logged in with their control numbers or user name and wish to vote will be able to see on the screen all motions being brought forth at this meeting. Please register your votes by accessing the Voting tab and selecting your voting direction from the options shown. We will provide registered holders and duly appointed proxy holders approximately one more minute to complete the ballots. Once electronic balloting closes, the voting page will disappear and your votes will automatically be submitted. [Voting]

I would ask that the scrutineers compile the report regarding the results of voting on all business matters. Okay. I have been advised by the scrutineers that the ballots and proxies deposited for the meeting have been voted in favor of all resolutions. One, the number of directors to be elected at the meeting was fixed at 6. Each of the 6 nominees have been elected as directors of the company and all nominees received more for votes than withhold votes. The appointment of Ernst & Young LLP as auditors of the company has been approved. Arrow's amended and restated option plan has been approved. I therefore declare that all motions have been carried and direct that the results of the poll be included with the minutes of this meeting. The formal items of business as set out in the notice of meeting have now been dealt with. As there is no further business to come before the meeting, I declare the formal part of the meeting to be concluded, and thank you for attending. I will now turn the meeting over to Mr. Abbott to provide a presentation regarding Arrow's business and answer any questions you may have. [Operator Instructions]. Take it away, Marshall.

Thank you, Mr. Chairman. I will be expeditious in this presentation, but cover all the salient points, especially with perspective on recent events at Arrow exploration. So Arrow was active in 2 of the basins in Colombia, and they're the more prolific basins in Colombia to be sure. We're through 5,000 barrels a day, we're closer to 5,500 today, I think. We have just under 12 million barrels 2P reserves worth about $280 million based on year-end 2023. We're committed to ESG, of course. We have a compelling valuation. We have a seasoned staff both in Calgary. We've got 10 individuals in Calgary and upwards of 40 individuals in Bogota, and we're very proud of the Colombian nationals who have done a great job in leading our way through the bureaucracy that has added value to all shareholders. So here's a snapshot of where we are today. Share price, as you can see, has had an exponential climb. We're quite proud of that based on the horizontal results that we've enjoyed in the Llanos Basin on Tapir block in Colombia. From comparing the FTSE 100 and the Oil and Gas index, we've outperformed, in fact, we've outperformed 2 years in a row. And in fact, this year, we're in the top 50 of the TSE, we're 1 of only 2 companies that have done that 3 years in a row. We're sitting on about $15 million of cash in the bank as of today. Our NAV per share 2P is just over USD 1. We're undervalued by almost every metric, and we're seeking to change that. From a shareholding position, we've got institutional following in the U.K. We've got high net worth individual, Askar Alshinbayev who is a Kazakh National. He has taken out recently the Canacol 20% interest. We welcome his participation within the company itself. We've got a very strong retail component and high net worth individuals in the U.K. where we initially raised our $15 million IPO over 2 years ago. So here's a comparison of production versus share price. It tracks rather nicely. So we've had some luck in the field, a testament to our technical staff, both in Calgary and Bogota. And we are hopeful that this will continue to grow. Based on the inventory we've got in-house, we're fairly confident that this is going to keep tracking share price. By every metric compared to U.K. selected peers, we're cheap. By every metric, against Latin American oil and gas companies, we're cheap. And we are actively getting the word out there. We just returned from a 5-day road show in the U.K. We were received quite well, of course, happy shareholders. So for the balance of 2024, we have 3 additional horizontal wells. One has actually been drilled and is on stream, 6 in total at Carrizales Norte. We have additional horizontals that we're going to be drilling there, and I'll show you that in a minute. We have an exploration well along the same structure that exists with Carrizales Norte, we're calling the Baquiano Prospect. That name is going to change. But for now, we're calling it the Baquiano Prospect. We've also got infrastructure going into place. We're putting a pipeline in place from Carrizales Norte to the RCE pad. And that is an oil-focused pipeline, the 10-inch pipeline. It will go under the river, and certainly streamline some of our operations. And it prevents having to drive an extra 45 kilometers on all-weather roads to deliver oil and water, in some cases, to the facility that exists in RCE. We also are looking to get one optional well drilled at the RCE platform before year-end. From a leadership perspective, we have a very strong independent Board, technically very strong. From a leadership perspective, some of these guys we've been in business with for over 30 years. So I think we are well represented on the Board. We're also well represented with respect to our technical expertise. And this is a photo of the fourth generation Abbott in the oil business. Talking about fiscal regimes in Colombia and comparing it to Latin American peers, Colombia has one of the more attractive fiscal regimes on balance. On oil we produce, we're getting an 8% to 12% royalty, depending on the quality of the crude. From a taxable perspective, we're also very competitive. So the only fiscal regime that outpaces us is West Texas Permian. We're drilling vertical wells that can produce in excess of 1,000 barrels a day. We're drilling horizontal wells that can produce in excess of 3,000 barrels a day. And were that to be in Canada, which conventionally don't exist anymore, we'd be paying a 40% royalty, so the fiscal regimes are very attractive. So here's a quick snapshot of Colombia. We're, of course, focused in the Llanos Basin with our 50% working interest operatorship property on the Tapir block, and we'll talk about that in more detail. We've got a small oil-producing region in the Middle Magdalena Valley that we're looking to expand. And then we have 10% working interest on a nonproducing asset in the Putumayo Basin. And on balance, we're through 5,500 barrels a day today, and we're looking to grow that very quickly. From a reserve value perspective on a 2P basis, we've got $280 million of 2P reserves. That's going to be changing, of course, with year-end approaching. And this gives us a net asset value 2P of over USD 1 a share, and we're trading at less than USD 0.40 per share. Quick snapshot of some of the terrain we have to navigate in the Llanos Basin. For the most part, they're very large cattle farms or [ finkas ] and we deal with the landowners. It's a good working relationship. We've appreciated some of the roads we have built and the maintenance that we perform on these roads. Here's a block map of Llanos Basin with respect to ownership. Ecopetrol is the biggest producer in the Llanos Basin, they're about 600,000 barrels a day and a host of Canadian companies who are very active and produce in aggregate of about 300,000 barrels a day. The overall rainy trend of trapping mechanisms in the Llanos Basin is Southwest and Northeast, these are normal faults that extend all the way from southwest to northeast. And on balance, most of these intersect only one fault trend. As you can see, our block, which is 102 square miles is at right angle to the prevailing trend, and we intersect 6 separate faults. We've only explored about 1.5 of them. So with the recent 3D that we shot on the bulk of this block, we're pretty excited with the prospect inventory that we're facing as we proceed. These are photographs of the terrain. As you can see, it's very accessible. It's not jungle, very large finkas, relatively easy to move around. Just from a cartoon perspective, here's the block outlined in the shape of the Canadian hockey stick, of course. Our initial success in the Tapir block was at the RCE pad, which is Rio Cravo Este. We've got 8 producing wells there now. We have been subsequently moved up to the Carrizales Norte fault, where we've had significant success, not only in the upper C7 Carbonera member, but in the Ubaque zone and drilling these wells down to 10,000 feet and intersect up to 6 separate hydrocarbon bearing zones. So there's significant hydrocarbon density. It's a very fertile part of the basin. And you can see the 3D that we shot last year, $6 million 3D. We've got another 3D planning to shoot early next year. It's going to highlight and high grade 2 of the more exciting structures that we've seen on the block. There's still lots to do on the Tapir block. This is really meant to show the outline of the Ubaque reservoir within the block. We can actually directly image this on the 3D seismic. It can get up to 80 feet thick and paved all the way to base. So we're pretty excited with the development of the Ubaque channel trend. So it extends off the block to the northeast and to the northwest. To the northwest, there is a competitor. To the northeast, it's an open block that ultimately we would like to control. You can see the proximity of we've got to the RCE fault trend, the Carrizales Norte fault trend. And this is the Baquiano prospect just to the north. I'll show you a much better map. But on balance, we've got scope and repeatability on every prospect we're pursuing. These horizontal wells can be rather seductive on their initial rates. We're certainly mindful of that. We have the prospect inventory developed in-house that will outpace any kind of declines we're going to see on the horizontal wells. And I'll touch on that in a little more detail. So from a vertical well perspective, these are very economic wells. They cost us about $1.3 million net. We have drilled now 18 wells in aggregate. The cost on a per well basis has come down significantly. We're fairly -- we're quite proud of the results we've seen the on the vertical wells. The horizontal wells outpace those significantly. They come on in excess of 3,000 barrels a day. Our initial horizontal well paid out in 30 days. And really, the key to sustaining production in the Llanos Basin is being able to deal with the water. There's a very strong aquifer that drives the reservoir mechanism on all of the zones within the Tapir block. It's freshwater. And the strength of that aquifer gives us 30% to 35% recovery of the original oil in place. And on the conventional basis, you would really only receive 10% to 15% recovery of the original oil in place. So the strength of that aquifer is our friend. And at the same time, we have to be able to put it away. And ultimately, we're going to have 50,000 barrels a day of injection or disposal capacity with respect to where we're at today. You can see that we're utilizing sprinklers for a portion of our water disposal. This is a cooling tower -- power, pardon me, and that oil -- or that water comes out quite hotter at about 200 degrees Fahrenheit. So it cools up nicely in the tower. We're on top of the water production issue. And really, that's the key to moving production ahead in the coming months. So here's a quick photograph of the Carrizales Norte pad, where the discovery was made on the Carrizales Norte. We had a multi-zone discovery in Ubaque, the C7 and the Gacheta. This really highlights how busy we are. Here is the drilling portion of that pad, the modular production facilities that we have on that pad, and the cash facilities that we have on that pad. About 130 people on that pad. And we've got takeaway capacity that's significant. We're getting 8 to 10 trucks a day hauling crude out. So it's a very busy place. This is a horizontal pad that is quite proximal. And again, we've got drilling activities ongoing, cap facilities, and a modular production facility that's able to handle all the oil and water that we produce. So here is a structural map of the Ubaque reservoir and the horizontal well program we've been pursuing up against this fault. So the key to the trapping mechanism in the Llanos Basin is 3-way closure up against the fault, and that is 80% of the success that is seen in the Llanos Basin. So we certainly identified that early on. We drilled a number of vertical wells to really define the Ubaque reservoir. And as you can see, we've got 6 wells planned by year-end. The fifth well is on stream. The 6 wells are about to be drilled. And we've had fabulous results in the initial 4 wells. And that's just on the southern portion of the block that is within the trapping mechanism of that Carrizales Norte fault. Further to the north, we have activity planned ultimately to penetrate the thinner part of the reservoir. It's 20 to 30 feet thick. And so we'll have a horizontal program there probably in the second or third quarter next year. So again, there's scope and repeatability to the whole trapping mechanism that we see on our block, and I'll give you a much more detailed picture of the scope and repeatability we've got here. So showing the same fault trend and looking at the uphole portion in the C7 reservoir, the Carbonera, we drilled a series of wells that penetrated the Carbonera and the Ubaque reservoir. We've got 13 development locations that we can drill vertically. We're certainly contemplating drilling this up horizontally. And you can see the lineation up against that fault. And interestingly, on the downthrown side of that fault, on the right side of that fault, we were drilling a horizontal that crossed that fault to exploit the Ubaque reservoir. And within the upper portions of that horizontal, there were log indications that we had hydrocarbon-bearing sands within the C7 on the downturn side of the fault. And so it's perplexing a little bit. We don't see any trap, but we certainly see oil-bearing reservoir. This could be a rather substantial stratigraphic trap that we're going to test early next year to see if it is liable on the downturn side. So it's a very exciting prospect on its own. From a geological perspective, looking at a cross-section from north to south, you can see how thick the reservoir is. In this particular wellbore, it's 80 feet thick, and it pinches out to the south, right up against the block boundary. And so there's a competitor that owns the acreage to south and our stratigraphic trap with a pinch out and erosional subcrop shows that they have really no Ubaque potential on their part of the block. It's interesting how that boundary really defines a limit of the Ubaque reservoir. So it's thick, it's heavy production at 13.7 API, but we get a good netback on that. It's about $16 off of Brent that we enjoy on the netback on the heavy production. On the light, our netbacks are about $55 a barrel. So it's very competitive from a fiscal regime perspective, not only in Colombia but worldwide. This is how we exploit the reservoir. So the initial horizontals have been drilled from north to south. And using advanced sensor technology, we're able to navigate that horizontal wellbore within 15 feet at the top of the reservoir. And that's really part of the entire exploitation program. So we have room to drill halfway through that very thick zone. And that's another prospect that we can pursue later next year. And then as I outlined initially, the northern part of the block, it's thinner pay, but we still have the ability to stay within 15 feet at the top of that reservoir, again, during scope and repeatability. This is the sensor technology that we utilize. So this is a Halliburton tool that is directly behind the bit. And what this shows is the reservoir in red, that particular tool can read 5 feet in front of where the bit is to ensure that you don't pop out at the top of the reservoir. Purposing is a bad thing on horizontal legs and we've been able to stay in zone 100% of the time on every horizontal we've drilled. So we're using the latest and greatest of sensory technology. Horizontal production profile perspective. This is the first well that came on. This well came on in excess of 3,000 barrels a day. You can see the initial decline where there is really contribution from the heel of the reservoir, of the horizontal. And then the toe of that reservoir started to kick in as well. So what we're looking at here is a 50% decline in the first 90 days. That has since started to flatten out. We're looking at 24% decline annually. So certainly, as I mentioned, these are seductive production rates, and we're certainly cognizant of the decline profile. We're very confident that with the prospect inventory we've got, we're going to outpace any kind of declines that we're going to experience on the horizontal wells. And again, the first horizontal well paid out in 30 days. So what this is showing is the green is oil, this is total fluid and the blue is water cutting percent. Again, you've got to show that you have injection or disposal capacity to get rid of that water, which again, is the power behind the reservoir. We had an independent analysis done by the reservoir modeling entity called CMG, they're world-renowned, and we fed them the 3D, all the vertical wells that we have drilled. And they came back with an evaluation that showed we could produce these horizontal wells upwards of 6,000 barrels a day. Being stewards of the reservoir where you have opted to produce these only at 3,000 barrels a day have a much shallower production decline. On an individual well basis, these wells are going to recover about 2.1 million barrels each. So there's quite a bit of development room left on this particular part of the reservoir. But again, we're stewards of the reservoir. And at the same time, we want to ensure that we've got disposal capacity on dealing with the water, which is the drive mechanism for the oil in the reservoir. So again, this is a potential perspective on how we may deploy horizontal wells in the northern part of that block, and that will be drilled up later next year. A nerdy perspective. Of course, we have to throw in a seismic line just to show the trapping mechanism. So the blue line is the fault. And then we like to snuggle up to that fault as best we can to take advantage of these rollover structures again, when you've got 3-way closure up against the fault in the Llanos Basin, 80% of the time, it will be filled with oil. Another interesting note on the seismic line is this very broad, white reflector. That is a direct image of the sandstone reservoir in the Ubaque. So we can track that reservoir quite aways to the west. This is the Baquiano Prospect. This is the same fault that penetrates the Carrizales Norte field just to the south, which would be just off this map sheet. So again, we've got 3-way closure up against the fault. You can see the extreme offset from the up-thrown side of the fault to the downthrown side of the fault. So this is a much broader structure than we encountered at Carrizales Norte. And we're very excited to get this drilled before year-end. The pad is ready and waiting. So that pad has been constructive. We've got 5 sellers that we can drill right away in aggregate, one after the other. Ultimately, we would look at building this horizontally, of course, in both the Ubaque reservoir and in the C7 Carbonera reservoir. Once again, scope and repeatability. So it is a very exciting prospect as we move further in time. So as I mentioned, it was called the Baquiano Prospect. That name has been used elsewhere in the basin. So we're going to call it the Alberta prospect, just to confuse everybody. This is, again, just an indication, further up in the basin on our block, the Mateguafa Attic oil prospect. There are 2 wells that were drilled in the '90s on 2D data that produced 630,000 barrels. We've got 3-way closure showing significant structural advantage over and above those 2. So again, very low risk, probably 80% to 90% chance of success, and you can see how broad that structure is up against the fault. Scope and repeatability once again. Another example of that is halfway up the block. We've got the Capullo and the Mateguafa Oeste prospects. And these are fault blocks that we have not tested yet, but we will test next year. Three-way closure up against the fault, scope and repeatability. So there's quite a bit of growth prospect for the company moving forward next year. And this is just a regional seismic line that shows the compressional tectonics that we enjoy. So these are very simple structures. It's not complex seismic. And as mentioned, we've only penetrated 1.5 of these faults. We have 6 of them coursing through the entire acreage position. And from a seismic perspective, on the blade of the hockey stick at the south end, we're going to shoot this 3D in the first quarter next year. We do have a significant grid of 2D seismic data. You can't drill these blocks on 2D data. You need 3D and you need high frequency resolution on the 3D, but we have indications of 2 very large structures. This is called the Icaco structure, and this is the Macoya structure. In aggregate, each of these could be 10 million barrels of recoverable crude. So we're very excited to get this shot and drilled next year. You can see on the seismic itself, there's a very broad plateau. So extensive aerial extent on these 2 prospects. From a prospect inventory perspective, we're not done at RCE where we had our initial success. There are still reserves to be exploited at the north end of this block of the trapping mechanism as well, there's Ubaque reservoir down at the south end of the block that we've tested. It's thinner. It's 20 to 30 feet thick, but it is pay to base. And we're looking at exploiting that horizontally again next year. And from a scope and repeatability perspective, this chart really shows the prospect inventory that we have in-house, and this is a tool that we use to really tell us where to deploy our cash first. So if you look at the horizontal wells and the cost that we attribute to these wells, just as an aside, we're drilling the cheapest wells in the basin in Colombia. We're the lowest cost operator by far. So we're drilling these horizontal wells, 4.1 million to 4.3 million gross. We're half of that, of course. And you can see the returns that we enjoy on getting these things on stream, especially when they pay out in a month. So we've got a string of prospects, both horizontals and verticals, that we're going to pursue over the next 12 to 18 months. In fact, if we brought in an additional 2 rigs, we could get all of this drilled next year. But again, this really highlights the scope and repeatability of the asset base that we've got in the Llanos Basin. So let's move quickly and talk about Oso Pardo, that's been on the company's radar for the last 3 years. We produce about 200 barrels a day at Oso Pardo and we're in a rather fertile part of the Middle Magdalena Valley. Just as an indication of the address, the Accordionero field is Gran Tierra's flagship asset at about 20,000 barrels a day. You can see our little sliver of acreage up to the north. We have a couple of hundred barrels a day that we're producing at modular production facilities. We have approached the national regulator to get this block expanded. And we feel that there's upwards of 20 locations that we could drill up against 2 faults. So there again, it's fault bounded. We've got closure up against the 2 faults. So there's room for 20 verticals or 7 horizontals, and there's been quite a bit of movement now on this block being made available to us. Right now, it's not a part of any of our cash flow forecast, but we've had some productive and constructive mediums with both the ANH and with Canacol that owns shallow rights on this block. So that's where we've come from and where we're going to. So next year, we're looking forward to getting a lot of these prospects drilled. At the same time, we always structure ourselves to a high standard from an ESG perspective. We're proud of our operating standards. We operate to a Canadian standard, I think, which is probably in the top 2 in the world. We have employed upwards of 2,000 Colombian nationals over the last 2.5 years. We're proud of that. We're very proud of our Colombian staff, and their ability to weave their way through the bureaucracy. So I think on balance, we have a very moderate profile on production additions through the balance of 2025 as well as being able to handle that water and being able to streamline our operating costs with respect to getting infrastructure in place, additional pads, additional roads and of course, the pipeline to move our crude from Carrizales Norte down to RCE, that's really going to have a significant impact on our operating costs moving forward. And as mentioned, we've got $15 million in the bank, we look to adding significantly to that if we're going to still retain drilling with one drilling rig. And so moving forward, we're going to be cash flowing about $3.5 million a month. We're going to have a very healthy cash position through the balance of the year next year. And from a cash flow model forecast, we're healthy and we intend to protect that balance sheet and carry on with absolute no debt. So that's a sample of what we intend to do for the balance of the year and for all of next year. We certainly appreciate the support of our Colombian staff and their families and of our Canadian staff and their families, working hard to make this one of the top performers, not only on the TSX, but on the AIM change in London. So thanks for your attention. I'd be happy to take any questions.

Marshall, online, I have 3 questions from [ Douglas Hewlett ]. First question, do any other oil-bearing zones, C7, the Gacheta are using horizontal drilling.

From the perspective of the C7, yes, it's 20 to 30 feet thick. And based on our success using the sensory technology, we feel we can drill them effectively and stay in zone. The Gacheta is a little thinner. I don't see us pursuing it in a horizontal sense.

The Umir?

The Umir at Oso Pardo. We have pay sections upwards of 60 feet thick of sands that aren't entirely consistent, but to really exploit that effectively, horizontals with frac or stimulation technology are going to be the key.

Second question, has the drill rig mentioned in the press release for use at RCE been ordered and the arrival date.

So the drilling rig has left RCE and is at the Carrizales Norte pad to finish off the horizontal drilling as well as potentially exploiting the C7. At RCE, we are not going to have a drilling rig back there until early next year.

Great. Last question, how long will it be from the anticipated approval of Oso Pardo to obtain a drilling rig on site.

So if we get approval at Oso Pardo, which we expect to get, hopefully, later this year, first quarter next year, to get approval and get a rig on site, keeping in mind that we drilled 2 wells there last year, it would take about 6 weeks to get the approval and 3 weeks to get a rig mobilized in there. Mobilization of rigs in Colombia is expensive. It's about $1 million [ move ] cost. So we want to be sure that we've got all the land rights held with some of the private landowners in that area. Next question.

That's all the questions online for now.

Just to go back to the second question and make a comment. At the moment, we have not contracted a second rig. There is not, at this point in time, a shortage of rigs in Colombia. There are rigs available that would be suitable for our use. One of them is quite nearby, and we've inspected it. So we don't anticipate that being a critical step or problem in terms of moving forward with some of these opportunities. Any other questions, Joe?

Not online. James, did you have any questions?

One question that a $1.1 million impairment in Q2 in Canada, is that a onetime thing or...

Onetime thing based on gas price. Gas price today in Alberta, I think, was $0.25 an Mcf.

Yes, $0.22 this morning.

So if we see gas price move through $2, we'll bring that back online.

Are there any other further questions either in the room, online or anywhere else?

Not online.

There being no additional questions, I would like to thank everyone for attending the meeting today, and I will now ask the operator to terminate the meeting. This concludes the meeting. Thank you so much.

Ladies and gentlemen, this concludes the meeting. Thank you for your participation. You may now disconnect.