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

Mr. Chairman, I so move.

Thank you, Joe.

I second the motion.

Thank you, Marshall. Is there any discussion of the motion? There being no discussion, we will now move on to vote on the matters today. Number ten, opening the polls. 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 open to registered holders and appointed proxy holders. I will once again ask the operator 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 are 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 shareholders and duly appointed proxy holders approximately one more minute to complete the ballots. Once the 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.

So are we closing the poll now?

Yes, you can move upon to the next.

I've been advised that the polls are now closed, and the votes are completed. And I have the voting results in my hot little hands. I've been advised by the scrutineers that based on the proxies deposited for the meeting, all resolutions have passed and final voting results and percentages will be published on SEDAR+. The number of directors to be elected at the meeting was fixed at 5. Each of the 5 nominees have been elected as directors of the company and all nominees received more boats than with pods. The appointment of Ernst & Young LLP as auditors of the company has been approved, and Arrow's amended and restated option plan has been approved. I therefore declare that all these motions have been carried and direct that the results of the poll be included with the minutes of this meeting. Termination of the 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 this meeting, I declare the formal part of the meeting to be concluded. Thank you for attending. I will now turn the meeting over to Mr. Marshall Abbott to provide a presentation regarding the business and answer any questions you may have. I would like to add a parenthetical comment that the company is exceptionally healthy with a very strong balance sheet. This is largely due to the drilling success and careful management of the management team. And yes, the commodity prices have helped. I want to thank the Arrow Board and the entire Arrow team for their exceptionally hard work in this very challenging and very opportune environment. I ask that all shareholders who would like to ask a question use the instant messaging feature of the audio cast interface to do so. We will answer as many questions as time permits. When asking your question, please state your name, the entity you represent, if any. For each question we answer, we will summarize the question and read out loud the name of the person who has asked such question and if applicable, the entity such person represents. Thank you very much -- sorry, now over to you, Marshall.

Thank you, Mr. Chairman. I'll walk you through a rather involved are exploration presentation here will be expeditious is reasonable. Certainly, I invite any questions as we go. So Arrow has been on the track of [indiscernible] for the last 4 years, we built 5 discoveries on this per block, which resulted in 50 wells being [indiscernible] on those discoveries. It gives you a sense of the value of drilling that we've done [indiscernible]. With that, we spent $6 million on 250 square [indiscernible] of 3D [indiscernible], which is absolutely essential in pursuing the play type that has become the play type of today in [indiscernible] space and onshore also multi-zone exploiters. For the most part when we drill wells down to 10,000 feet, we can contract to 5 separate hydrocarbon bearing zones. We'll give you a sense about prolific each more of those zones are as we proceed. So as we sit right now, every well that we've got is producing out of one zone only, and we've made applications to regulators in Colombia. Coal mingle production [indiscernible] over out of 2 or more of the words capable of hydrogen [indiscernible]. So that's with the regulator. It's not uncommon. We're hopeful that we do get permission within the week. We've been very active in the [indiscernible] Basin, and we've grown 10% of all wells in Colombia in [indiscernible]. As well, we've been well noted that we grow the longest horizontal leg ever drilled on short [indiscernible], which we're really using Canadian expertise and transferring that down into onshore. We employed over 5,000 local community members. We're very active in the community of wood respect. We have multiple environmental initiatives with strong HS that [indiscernible] focused. These photographs give you a sense of how busy the pads are. So each one of the discoveries is on its own separate panel. So in any given pad, we could have up to 100 people, where we've got drilling operations, production operations at a very large cap and the cans casino or the [indiscernible] deals a day industry. So the market cap is September 14, USD 145 million, 6,000-plus barrels a day that's growing 21 million barrels of 2P reserves, our netback rent $87 or $52 per barrel. We're sitting on chat. Joe has been on over $21 million of cash as of September 1. We've got revenue net of royalties to the company is create [indiscernible], get a sense for individual contribution of each part of the fields that we've got. We'll talk more about each one of these individual [indiscernible] Quick snapshot of how the company's share price has performed quickly the leading edge of the rent price increase as well. So we're in the right laterite the wells that we drill on any one of these pads from a vertical well perspective, has the ability to pay out a $2 to $3 million. From a reserve perspective, we've had to success this year, not only from the drilling perspective and also from A&D activity notably, the Thorsby acquisition in Central Alberta. And I'll talk more about that in detail. But these numbers, we're very impressive. We're proud of it. Our F&D costs are very low comparison to our peers in Latin America, what's your hemisphere. This gives you a sense of the individual well performance that we have in every well we've drilled for quickly years. So this gives you a sense of the decline profile that in almost every one of these reservoirs. So the oil comes out very fast excellent reservoir drive from name water recharge out of the hand. So that aquifer is very strong. I prefer that to book upwards of 40% of the play. We've got a very solid platform in production where the heavy decline have already happened. I'll see that for the wells we drilled recently, including the [indiscernible]. I'll give you a sense for how that is a much bigger accumulation personal trend versus netback, very healthy operating costs are within reasonable grounds for doing whatever we can to reduce operating costs, which is ticked item. But from a revenue perspective, we're in great shape, $80 crude were cutting $55 a barrel. So here's a snapshot of some of the carousels [indiscernible] wells that we've drilled the initial vertical well defined. -- extended. In fact, it's much bigger than we had initially envisioned, and we often into drilling horizontally each one of these wells from a cumulative oil perspective, our mass of wells and kind these are conventional reservoirs. We're not having to frac any of these drill per and put in a pump. We're getting really good at it. We're probably the cheapest operator is onshore Columbia for reservoirs of this note. And we're exceeding 500% IRR. I don't care what jurisdiction you're in. This is up 5%. So here's the RCE pad. Give a sense for how fast is the cap casino, it's called that always get so hard. [indiscernible] has been called a can facilities in Colombia. So we have drilling operations. Obviously, we've got a 1,500 horsepower rate that we have kept busy last 4 years. And we have a pression operations on go ahead. is the careful to pay attention to at and health, of course, we're good operators. So here's a snapshot of the [indiscernible] space in Colombia, it is into the train that we're dealing with. It's really the prairies of Colombia, [indiscernible] and it is the heart of oil production onshore Colombia. The [indiscernible] itself is about 600,000 barrels a day. The National Oil Company Ecopetrol just under 800,000 rolls. So it gives you a sense of hydrocarbon density within the Yano but you get a sense for this is Yano block summary individual operators drilling up their blocks. Place [indiscernible] color is open. There has been no bid round in Colombia since the left is government came in place 4 years ago. Of course, they're gone now and we're going to see, I think, a high of activity occurring on the blocks in and around the [indiscernible]. I think in [ Bogota, ] there are no secrets. People are certainly aware of the success we've had in [indiscernible]. They're looking to replicate that success. So originally, the Tapir block itself is viewed that it's uneconomic or block 100 square miles [indiscernible]. The tectonic regime in Colombia is Southwest and Northeast. The plate of the day was drilling up against the fault, get 3-way closures against that fall, and it's going to be oil by oil bearing 90%. The nice thing about the block we have is that 90 degrees in [indiscernible] trend, but we actually intersect upwards as 6 to 8 [indiscernible] relative to full of the per block is where we've had our [indiscernible]. [indiscernible] block again, going to the discoveries that we've had an a [indiscernible] CAC, which we'll talk about [indiscernible] these in a little more detail as we all trends are well defined. [indiscernible] programs we fiberize the first guys onshore Colombia, they use [indiscernible], which is surprising to see that because how far behind Colombia Onshore is compared to the Canadian. So again, this is the RCP platform. We hope it is and the size of the rig we've got. The surface company structure is somewhat stressed. There's been very little investment into the service in country, but we're seeing that improve now of course with oil [indiscernible]. So let's go on to the [indiscernible] discovery. I won't labor one of the discoveries we've made, but we're talking about. So from a sizing perspective, this is what we look for. down around 10,000 feet down here, areas of fault rates, secondary [indiscernible]. And you can see this broad structural eye at reservoir level. So when we look at the discovery well at [indiscernible], we didn't really know what an aerial extent perspective that we expect it to move forward. From an oil water perspective, this is the closing contour, which shows quite a bit of drillable [indiscernible] active in one of these [indiscernible]. So very confident. At about 9,500 feet, we've got the carbon enters C7. Very politic back in surprises that sort of beginning selling that. And then we have the [indiscernible], which is very prolific as well. [indiscernible] we get down to the [indiscernible] reservoir contributing upwards of 90 feet of net sales and a quite a bit of exploitation on shore and capital. So this is the [indiscernible] the same thing in the [indiscernible] everything in between oil Berry. We drilled two very successful [indiscernible] well compared to one of them, the water disposal well. The mentioned wires your friend and you're at enemy. We you have to be able to put away upwards of 130,000 barrels of water. We're getting pretty good at it. The base we're seeing [indiscernible]. I'll tell you all a secret. And as we proceed south of the block boundary this accumulation extends quite a wise stuff. So one of the first things we'll do is apply to the national regulator for that block to come up. We'll have the upper hand because we've got pretty seismic over well control. That is something we would look to pursue aggressively to proceed. We'll talk more about the attention application as well as we proceed with [indiscernible]. The [indiscernible] C7 development plan, so here is the closing fault is the block boundary perils we've drilled back development wells. We've got upwards of 12 development wells drilled with have a 300-meter interval business. reservoir management is prudent, good operators, we know how to not play reservoir. We think that that oil water contact, it's quite a bit of very extensive to play. Full rigs were joining our [indiscernible] wells come on upwards of 1,500 barrels a day gross or 50% with our operator petrol. [indiscernible] added discovery, a very similar scenario. We were buying ourselves up with 2 wells that were drilled in the '90s [indiscernible] data. Improves to about 600,000 barrels. But we knew the reserve as explain the 3D showed this closing call. So we had a closing contour up against that bolt see those wells that we have drilled in the black of what that we're going to drill at quite a bit of exploitation potential, and this is just at the C7. We're pretty proud of this excess we had a [indiscernible]. From a development program, this is the Guadalupe map, very similar to closing contour. So this is again indicative of multiple zone potential that we see in every one of the wells from [indiscernible]. So drilling horizontals very successfully. There are more to drill. This is a century tool allows us to stay in reservoir. So this is the gamma ray detector and activity detector right at the vet level, where MSO 95% of the time in the Guadalupe. This is where we drove the longest orders to date a logical perspective, I won't belabor this particular technical cross-section. But here is the main land body [indiscernible] the C9. [indiscernible] to 17 [indiscernible]. Part of it was trust as we can see. So all of those wells have paid to base 100% database, which allows you to be a little more aggressive on the productivity [indiscernible] Yes, those field is uptrend on that per block in sort of morphology, 3-way closures against full, and you can see now buy we have our any given day, there's 100 people on lease. This is Alberta, would have 12 to 15 people [indiscernible]. So we're pretty proud of the amount of talent that we employ in 5,000 people so far. As I mentioned, freeway closure up against the full 1, 2, 3, 4 or 5 separate reservoirs producing the fault trade [indiscernible] structural gain we gained a in poultry. That's the 3-way motion that we look for. Private true guys are getting very good at typically within 25 feet of the target. Dallas Norte, very surprising discovery, but you can see as well the landscape that we enjoy drilling is. So this road extends all the way down to or CE. We have one single road that goes to every one of the blocks. So from the perspective of physical transfer, we sell our crude right at the wellhead and BP brings vendor trucks and truck or recruit through Panama, and that ultimately goes to Switzerland is tax efficiency. So there's very little transportation risk we have to horizontal program, again, we had very good sensory tools tracking as we had a couple of false end of these horizontals. These are 300-meter inter-well but wells are still performing well ahead of expectation. We're proud of that really put the company on a separate potential of Cereals North, not quite as prolific as we enjoyed on [indiscernible], but still at least wells come on at 320 barrels a day net to us [indiscernible] crude. Again the quality differential as well internally this default rates, although this is structurally higher on the west side of the fall. On the east side of the fall, we're in things to the model that drove through there that exhibit any from the development well potential there's quite a bit of room at [indiscernible] not only on the proper side of the fault in potentially on a downturn. That's something we would [indiscernible]. First [indiscernible] feels a little closer to the Big River. And you get a sense for how busy these are. This is one without the [indiscernible], but we do have additional sellers. So these are concrete boxes that we use to spend each individual well on. That well is finished drilling. You [indiscernible] 25 meters on rail, grown mobilization costs [indiscernible] in comparison. [indiscernible] development, similar story. We've been a little more aggressive in drilling this up and you can see that but additional wells. We can drill in the North [indiscernible] contour quite a bit of early sent this play as well. We intend to drill these wells to C7 and these wells in Gacheta, and outlining the multipotent space. So once again, we've had our share [indiscernible] north of [indiscernible] CE and [indiscernible] is panel. It's a bit of a different prospect that will drill later next year as the optical prospects. And what we're looking at here is not only seismic profile side, but also that is section looking down on the map, we can see this very strong channel trend with a direct hydrocarbon indicator. We think [indiscernible] technology attitude we offset that we've been using in Canada for 30 years. And it's an inciting prospect for us that we can actually drill to from the existing path on [indiscernible]. But let me give you a sense for some of the variability that we enjoy on the reservoirs in the space. Low-risk expectation shocks, again, up against the vault scheme, the closure that we really enjoy, but this is something a little higher risk. This is the on a limit of the bakery reservoirs. So part of that be backing everything south of that to the back [indiscernible] We look to this being more of the strategic traffic, essentially having much higher reserve capture, it greater risk polo is an extension of the [indiscernible] discovery [indiscernible], if you're looking at this map, you just off to the Southwest. This is an extension of that fault block, and well, again, that we would drill in probably third quarter. Little higher risk, but it's got morphology that we'd like to see, get a sense for structure we enjoy in that pulp. So when you look at the regional sideline, the focus is but basic press calls at affected trapping mechanism. We drive true trust fuller 2 and a couple of our wells. 2 is a little more of my thing you would like to, but we're able to get around that, but getting pretty good at remedial action with current as well that we're currently capital or were similar prenatal high potentially stenographic. This just gives you an idea of the prospect inventory that we're enjoying or disposal capacity as mentioned. This is very important. We're putting away over 100,000 barrels per day of freshwater, some of that will be used in a purification in offsetting the lease. It's batteries, elected [ 2 million parts ] per million, and most of it is injected disposed of the resort [indiscernible]. Joe is going to walk you through financial resources. Go ahead, Joe.

Well, I think, Marshall already mentioned September 1, we had about USD 22 million in the bank. That is after the Thorsby acquisition, roses about USD 9 million. In addition to that, we have a prepayment facility with VP. It was $20 million for year number 1 and $15 million for year number two. Number that has now been updated to $20 million per year #2 as well. That $20 million can be used for acquisitions can be used for acceleration that can really be used for anything in Canada or Colombia. It works very similar to a reserve-based lending course with the extension that we'll talk about, we look forward to also extending this prepay agreement. So what we've attention to display here is the scope and repeatability, the reservoirs that we're pecan we've had 5 very material discoveries to span development well management. We're having some fun on the opera that has been largely overlooked by industry. Let's jump over to store our West Central Alberta, this is we [indiscernible]. This is highlighting a spacious reservoir called the Spark fan, talk more about that technically this is erosion limit of [indiscernible]. But it has a very similar morphology to what we enjoy much on Colombia on the euro. We've got closure of the sand up against promotional limits. Again, the same sort of morphology. What we're seeing here is [indiscernible], some of the wells that you drilled horizontal Spark. I at for my first part reservoir, 1980 December have got some experience with its ability to perform this is the drilling a number of wells that we can drill on this part and stone RevPOR, relatively low permeability that we do have to track. So we'll be drilling each one of these wells. We will have or security separate quarters on a well in collateral lengths improvement up to the north end. We expect to do this as well. may extend even further to the Southwest. We're pretty proud of the acquisition reserve capture is fabulous, very accretive to the shareholders. We're proud of that. We intend to get it after this probably the first quarter. This is a quick math shot on the optionality we have at Thorsby. We proceed filling these three wells has relatively conservatively, getting this up to 3,000 barrels a day at its peak and has enjoyed the price as indicated. Fourth, [indiscernible], dedicate a rig and drill 21 wells to get the [indiscernible] 4,000 grills quite a bit of optionality here that we can pursue, and the oil comes out fast, these loans commodity above 500 drills. So that's a quick technical shot, and I'm going to let Joe now walk you through the primary perspective that we are looking at and getting an extension block. Go ahead.

Thanks, Jull. So the quarter while we've been talking with Ecopetrol who would be able to grant us the extension on the per block discussions have gone very well. They've said that they want us to continue running this block. There's two 5-year extension periods in our current contract that we're working on. it is a negotiation right now. The negotiation is centering around what sort of capital commitment we're willing to give. So how many exploration wells, how many development wells workovers we're going to do, really what is the capital funding that's going to go into that and jobs that we'll be giving to the community as well, there'll probably be an increase in royalty I would call it a minor increase in royalty, but those seem to be the two points that we're discussing right now. One of the concerns is that Ecopetrol. Obviously, we have a new President in Colombia and so Ecopetrol is going through a little bit of a change. There'll be a new President named for Ecopetrol in the next 10 days. That new President will probably come in with some new Vice Presidents as well. But the people who are looking at this, the legal departments, the technical departments, G&G, engineering communities, those people, they will be staying. They're the people that we've been working with and they will be the people making a recommendation to the VP and the President. So we might see a little bit of a delay as the president and new VP are put in place. Upside that, the discussions are going very, very well. Thanks, Joe. So that little Arrow growing, [indiscernible] spend Colombia $240 million net. Here exactly to come to the company. Welcome to enjoy that experience. We're very optimistic we're going to get this [indiscernible] still quite a bit to do on a notwithstanding the other opportunities we're looking at. So we have a dedicated A&P team in that position opportunities. I think we're pretty good at it that witness by [indiscernible] acquisition. And we're very active. We've looked at over 62 potentials in the last 12 months. So we're very active on [indiscernible], and we're picky. We're good at. Thanks for your attention. Thanks, Jull.

Any questions? I'm just looking on line gauge, and there's been no questions from the audience online. All right. Well, that being the case, operator, I think we can terminate. Thank you very much for attending the meeting today. And we're going to be here for a few minutes. So if anyone has any questions or also throw a dead cat or two, we're here.