Arrow Announces Q1 2026 Interim Results
Summary by AI BETAClose X
NOT FOR RELEASE, DISTRIBUTION, PUBLICATION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO OR FROM THE UNITED STATES, AUSTRALIA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.
ARROW ANNOUNCES Q1 2026 INTERIM RESULTS
CALGARY, May 27, 2026 - Arrow Exploration Corp. (AIM: AXL; TSXV: AXL) ("Arrow" or the "Company"), the high-growth operator with a portfolio of assets across key Colombian hydrocarbon basins, is pleased to announce the filing of its Interim Condensed (unaudited) Consolidated Financial Statements and Management's Discussion and Analysis ("MD&A") for the three months ended March 31, 2026, which are available on SEDAR (www.sedar.com) and will also be available shortly on Arrow's website at www.arrowexploration.ca.
Q1 2026 Highlights:
· Average corporate production of 4,715 boe/d (Q1 2025: 4,085 boe/d).
· Recorded $23.5 million of total oil and natural gas revenue, net of royalties, representing a 21% increase when compared to the same period in 2025 (Q1 2025: $19.5 million).
· Adjusted EBITDA(1) of $14.1 million, a 22% increase when compared to the same period in 2025 (Q1 2025: $11.5 million).
· Realized corporate oil operating netbacks(1) of $41.05/bbl.
· Cash position of $14.2 million at the end of Q1 2026.
· Q1 2026 operating cashflows of $13.6 million.
· Drilled three additional development wells in the Mateguafa Attic (M) field in the Tapir block
· Net income of $5.2 million.
(1)Non-IFRS measures - see "Non-IFRS Measures" section below
Post Period End Highlights:
· Drilled the Icaco-1 (IC-1) exploration well, which has resulted in a discovery of three oil bearing sands
· Spud the Icaco-2 (IC-2) appraisal well which will help delineate the pool and determine initial volumes and areal extent of each individual oil producing zone
· Drilled one additional Mateguafa Attic well (M-HZ12)
Cash Balance:
On May 1, 2026, the Company's cash balance was US$24 million. Arrow increased its cash balance while continuing capital expenditures and drilling activity demonstrating strong operating leverage and self-funded growth capability. This balance reflects a significant improvement in netbacks, due to higher crude oil prices and increases in the Company's production, even with continued capital expenditures.
Tapir Extension
The Company continues constructive engagement with authorities regarding the Tapir block extension and believes it is well positioned to secure the extension based on satisfaction all of the relevant requirements. Arrowwill keep the market updated on progress with its license extension discussions in future releases.
Upcoming Drilling
The Company has spud the IC-2 well, which is expected to be put on production over the coming weeks. Thereafter, the Company expects to continue drilling additional development wells at its Icaco field and recompletions in several Mateguafa Attic wells during Q2 2026.
Marshall Abbott, CEO of Arrow Exploration Corp., commented:
"The first quarter of 2026 has been very busy for Arrow. We completed additional development wells in the Mateguafa Attic and planned for the drilling the Icaco-1 exploration well, which proved very successful post period end. We are excited by the Icaco discovery and believe it could become a major production platform with a material impact on the Company."
"The focus for the remainder of 2026 will be to drill additional wells at the Icaco pad, drilling development wells on the Alberta Llanos and Carrizales Norte pads and numerous well recompletions to improve productivity in our currently most prolific fields."
FINANCIAL AND OPERATING HIGHLIGHTS
|
(in United States dollars, except as otherwise noted) |
Three months ended March 31, 2026 |
Three months ended March 31, 2025 |
|
Total natural gas and crude oil revenues, net of royalties |
23,498,316 |
19,506,125 |
|
|
|
|
|
Funds flow from operations (1) |
11,557,223 |
9,745,553 |
|
Funds flow from operations (1) per share - |
|
|
|
Basic($) |
0.04 |
0.03 |
|
Diluted ($) |
0.04 |
0.03 |
|
Net income |
5,221,470 |
2,663,764 |
|
Net income per share - |
|
|
|
Basic ($) |
0.02 |
0.01 |
|
Diluted ($) |
0.02 |
0.01 |
|
Adjusted EBITDA (1) |
14,060,456 |
11,531,548 |
|
Weighted average shares outstanding - |
|
|
|
Basic ($) |
285,864,348 |
285,864,348 |
|
Diluted ($) |
288,231,960 |
294,094,348 |
|
Common shares end of period |
285,864,348 |
285,864,348 |
|
Capital expenditures |
7,882,335 |
11,379,180 |
|
Cash and cash equivalents |
14,215,687 |
24,946,934 |
|
Current Assets |
37,870,075 |
30,288,808 |
|
Current liabilities |
32,608,044 |
19,252,474 |
|
Adjusted working capital (1) |
5,262,031 |
11,036,334 |
|
Long-term portion of restricted cash and deposits (2) |
249,840 |
129,849 |
|
Total assets |
111,547,344 |
90,532,063 |
|
|
|
|
|
Operating |
|
|
|
|
|
|
|
Natural gas and crude oil production, before royalties |
|
|
|
Natural gas (Mcf/d) |
1,078 |
1,851 |
|
Natural gas liquids (bbl/d) |
5 |
6 |
|
Crude oil (bbl/d) |
4,530 |
3,770 |
|
Total (boe/d) |
4,715 |
4,085 |
|
|
|
|
|
Operating netbacks ($/boe) (1) |
|
|
|
Natural gas ($/Mcf) |
($0.73) |
($1.00) |
|
Crude oil ($/bbl) |
$42.82 |
$42.29 |
|
Total ($/boe) |
$41.05 |
$38.66 |
(1)Non-IFRS measures
Discussion of Operating Results
During Q1 2026, the Company's production increased due to additional volumes of oil crude production from the Mateguafa Attic field in the Tapir block, offset by decreased production in other fields due to natural declines. This has allowed the Company to continue its healthy level of operating results and EBITDA.
Average Production by Property
|
Average Production Boe/d |
Q1 2026 |
FY 2025 |
Q4 2025 |
Q3 2025 |
Q2 2025 |
Q1 2025 |
|
Oso Pardo |
98 |
114 |
95 |
103 |
131 |
126 |
|
Rio Cravo Este (Tapir) |
881 |
1,043 |
996 |
1,065 |
996 |
1,118 |
|
Carrizales Norte (Tapir) |
1,424 |
1,991 |
1,702 |
1,879 |
2,070 |
2,321 |
|
Alberta Llanos (Tapir) |
294 |
474 |
446 |
943 |
296 |
205 |
|
Mateguafa (Tapir) |
1,833 |
127 |
500 |
- |
- |
- |
|
Total Colombia |
4,530 |
3,749 |
3,739 |
3,990 |
3,493 |
3,770 |
|
Fir, Alberta |
67 |
100 |
107 |
85 |
100 |
105 |
|
Pepper, Alberta |
118 |
162 |
129 |
139 |
170 |
210 |
|
KEHO, Alberta |
- |
1 |
- |
- |
5 |
- |
|
TOTAL (Boe/d) |
4,715 |
4,012 |
3,975 |
4,214 |
3,768 |
4,085 |
The Company's average production for the three months ended March 31, 2026 was 4,715 boe/d which consisted of crude oil production in Colombia of 4,530 bbl/d, natural gas production of 1,078 Mcf/d, and minor amounts of natural gas liquids. The Company's Q1 2026 production was 15% higher than its Q1 2025 production and 19% higher than Q4 2025 due to the Mateguafa Attic additional volumes.
Discussion of Financial Results
During Q1 2026, the Company realized prices of $63.77 per boe (2025: $60.48), due to overall increases in oil and natural gas prices during 2026 and increased production of lighter oil which is sold at a higher realized price than heavy oil.
|
|
Three months ended March 31 |
||
|
2026 |
2025 |
Change |
|
|
Benchmark Prices |
|
|
|
|
AECO (C$/Mcf) |
$1.90 |
$2.19 |
(13%) |
|
Brent ($/bbl) |
$80.95 |
$71.47 |
13% |
|
West Texas Intermediate ($/bbl) |
$72.15 |
$71.40 |
1% |
|
Realized Prices |
|
|
|
|
Natural gas, net of transportation ($/Mcf) |
$1.74 |
$1.51 |
15% |
|
Natural gas liquids ($/bbl) |
$111.74 |
$62.02 |
80% |
|
Crude oil, net of transportation ($/bbl) |
$65.89 |
$64.70 |
2% |
|
Corporate average, net of transport ($/boe) |
$63.77 |
$60.48 |
5% |
(1)Non-IFRS measure
Operating Netbacks
The Company also continued to realize good oil operating netbacks, as summarized below:
|
|
Three months ended March 31 |
|
|
|
2026 |
2025 |
|
Natural Gas ($/Mcf) |
|
|
|
Revenue, net of transportation expense |
$1.74 |
$1.51 |
|
Royalties |
($0.10) |
($0.06) |
|
Operating expenses |
($2.36) |
($2.45) |
|
Natural gas operating netback(1) |
($0.73) |
($1.00) |
|
Crude oil ($/bbl) |
|
|
|
Revenue, net of transportation expense |
$65.89 |
$64.70 |
|
Royalties |
($8.20) |
($7.76) |
|
Operating expenses |
($14.87) |
($14.65) |
|
Crude oil operating netback(1) |
$42.82 |
$42.29 |
|
Corporate ($/boe) |
|
|
|
Revenue, net of transportation expense |
$63.77 |
$60.48 |
|
Royalties |
($7.90) |
($7.19) |
|
Operating expenses |
($14.83) |
($14.63) |
|
Corporate operating netback(1) |
$41.05 |
$38.66 |
(1)Non-IFRS measure
The operating netbacks of the Company for the three months ended March 31, 2026 have improved due to the overall improvement in crude oil. The Company continues to develop alternatives to trucking water for disposal in order to improve operating costs. During Q1 2026, the Company incurred $7.8 million of capital expenditure, primarily in connection with the drilling of additional development wells in the Tapir block. This tempo is expected to continue during the remainder of 2026, funded by cash on hand and cashflow.
For further Information, contact:
|
Arrow Exploration |
|
|
Marshall Abbott, CEO |
+1 403 651 5995 |
|
Joe McFarlane, CFO |
+1 403 818 1033 |
|
|
|
|
Canaccord Genuity (Nominated Advisor and Joint Broker) |
|
|
Henry Fitzgerald-O'Connor James Asensio George Grainger |
+44 (0)20 7523 8000 |
|
Auctus Advisors (Joint Broker) |
|
|
Jonathan Wright |
+44 (0)7711 627449 |
|
Rupert Holdsworth Hunt |
|
|
|
|
|
Hannam & Partners (Joint Broker) |
|
|
Leif Powis |
+44 20 7907 8500 |
|
Samuel Merlin |
|
|
Camarco (Financial PR) |
|
|
Owen Roberts |
+44 (0)20 3781 8331 |
|
Rebecca Waterworth |
|
|
|
|
About Arrow Exploration Corp.
Arrow Exploration Corp. (operating in Colombia via a branches of its 100% owned subsidiary Arrow Exploration Switzerland GmbH) is a publicly traded company with a portfolio of premier Colombian oil assets that are underexploited, under-explored and offer high potential growth. The Company's business plan is to expand oil production from some of Colombia's most active basins, including the Llanos, Middle Magdalena Valley (MMV) and Putumayo Basin. The asset base is predominantly operated with high working interests, and the Brent-linked light oil pricing exposure combines with low royalties to yield attractive potential operating margins. Pursuant to certain private agreements entered between Arrow and its partner, Arrow is entitled to receive 50% of the production from the Tapir block and has the right to request approval to Ecopetrol S.A. for the assignment of 50% of all rights, interests and obligations under the Tapir Association Contract. Arrow is listed on the AIM market of the London Stock Exchange and on TSX Venture Exchange under the symbol "AXL".
Forward-looking Statements
This news release contains certain statements or disclosures relating to Arrow that are based on the expectations of its management as well as assumptions made by and information currently available to Arrow which may constitute forward-looking statements or information ("forward-looking statements") under applicable securities laws. All such statements and disclosures, other than those of historical fact, which address activities, events, outcomes, results or developments that Arrow anticipates or expects may, could or will occur in the future (in whole or in part) should be considered forward-looking statements. In some cases, forward-looking statements can be identified by the use of the words "continue", "expect", "opportunity", "plan", "potential" and "will" and similar expressions. The forward-looking statements contained in this news release reflect several material factors and expectations and assumptions of Arrow, including without limitation, Arrow's evaluation of the impacts of global pandemics, the potential of Arrow's Colombian and/or Canadian assets (or any of them individually), the prices of oil and/or natural gas, and Arrow's business plan to expand oil and gas production and achieve attractive potential operating margins. Arrow believes the expectations and assumptions reflected in the forward-looking statements are reasonable at this time, but no assurance can be given that these factors, expectations, and assumptions will prove to be correct.
The forward-looking statements included in this news release are not guarantees of future performance and should not be unduly relied upon. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The forward-looking statements contained in this news release are made as of the date hereof and the Company undertakes no obligations to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Glossary
Bbl/d or bop/d: Barrels per day
$/Bbl: Dollars per barrel
Mcf/d: Thousand cubic feet of gas per day
Mmcf/d: Million cubic feet of gas per day
$/Mcf: Dollars per thousand cubic feet of gas
Mboe: Thousands of barrels of oil equivalent
Boe/d: Barrels of oil equivalent per day
$/Boe: Dollars per barrel of oil equivalent
MMbbls: Million of barrels
BOE's may be misleading particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1 bblis based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
This Announcement contains inside information for the purposes of the UK version of the market abuse regulation (EU No. 596/2014) as it forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018 ("UK MAR").
Non‐IFRS Measures
The Company uses non-IFRS measures to evaluate its performance which are measures not defined in IFRS. Working capital, funds flow from operations, realized prices, operating netback, adjusted EBITDA, and net debt as presented do not have any standardized meaning prescribed by IFRS and therefore may not be comparable with the calculation of similar measures for other entities. The Company considers these measures as key measures to demonstrate its ability to generate the cash flow necessary to fund future growth through capital investment, and to repay its debt, as the case may be. These measures should not be considered as an alternative to, or more meaningful than net income (loss) or cash provided by operating activities or net loss and comprehensive loss as determined in accordance with IFRS as an indicator of the Company's performance. The Company's determination of these measures may not be comparable to that reported by other companies.
Arrow Exploration Corp.
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ended MARCH 31, 2026 AND 2025
IN UNITED STATES DOLLARS
(UNAUDITED)
Notice of No Auditor Review of the Interim Condensed Consolidated Financial Statements
as at and for the three months ended March 31, 2026
Under National Instrument 51-102, Part 4, subsection 4.3 (3)(a), if an auditor has not performed a review of the interim condensed consolidated financial statements, they must be accompanied by a notice indicating that an auditor has not reviewed the financial statements.
The accompanying unaudited interim condensed consolidated financial statements of the Company have been prepared by and are the responsibility of the Company's management.
The Company's independent auditor has not performed a review of these financial statements in accordance with standards established by the Chartered Professional Accountants of Canada for a review of interim financial statements by an entity's auditor.
Arrow Exploration Corp.
Interim Consolidated Statements of Financial Position
In United States Dollars
(Unaudited)
|
As at |
Notes |
|
March 31, 2026 |
|
December 31, 2025 |
ASSETS |
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Cash |
|
$ |
14,215,687 |
$ |
11,208,824 |
|
Restricted cash and deposits |
3 |
|
286,106 |
|
258,006 |
|
Trade and other receivables |
4 |
|
14,237,298 |
|
14,533,377 |
|
Taxes receivable |
5 |
|
8,745,770 |
|
7,637,342 |
|
Deposits and prepaid expenses |
|
|
284,827 |
|
135,221 |
|
Inventory |
|
|
100,387 |
|
108,533 |
|
|
|
|
37,870,075 |
|
33,881,303 |
|
Non-current assets |
|
|
|
|
|
|
Restricted cash and deposits |
3 |
|
249,840 |
|
273,257 |
|
Exploration and evaluation assets |
6 |
|
4,454,522 |
|
3,437,965 |
|
Property and equipment |
7 |
|
68,972,907 |
|
67,810,032 |
|
Total Assets |
|
$ |
111,547,344 |
$ |
105,402,557 |
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
Accounts payable and accrued liabilities |
|
$ |
31,871,164 |
$ |
31,494,615 |
|
Lease obligation |
8 |
|
46,504 |
|
67,734 |
|
Income taxes |
|
|
80,146 |
|
- |
|
Stock based compensation liability |
10 |
|
610,230 |
|
495,619 |
|
|
|
|
32,608,044 |
|
32,057,968 |
|
Non-current liabilities |
|
|
|
|
|
|
Lease obligations |
8 |
|
103,674 |
|
132,952 |
|
Stock based compensation liability |
10 |
|
374,434 |
|
116,350 |
|
Other liabilities |
|
|
851,364 |
|
855,363 |
|
Deferred income taxes |
|
|
8,156,187 |
|
7,930,871 |
|
Decommissioning liability |
9 |
|
10,489,649 |
|
9,863,781 |
|
Total liabilities |
|
|
52,583,352 |
|
50,957,285 |
|
|
|
|
|
|
|
|
Shareholders' equity |
|
|
|
|
|
Share capital |
10 |
|
73,829,795 |
|
73,829,795 |
|
Contributed surplus |
|
|
856,093 |
|
856,093 |
|
Deficit |
|
|
(14,106,826) |
|
(19,328,296) |
|
Accumulated other comprehensive loss |
|
|
(1,615,070) |
|
(912,320) |
|
Total shareholders' equity |
|
|
58,963,992 |
|
54,445,272 |
|
Total liabilities and shareholders' equity |
|
$ |
111,547,344 |
$ |
105,402,557 |
Commitments and contingencies (Note 11)
The accompanying notes are an integral part of these interim consolidated financial statements.
On behalf of the Board:
signed "Gage Jull" Director signed "Ian Langley" Director
Gage Jull Ian Langley
Arrow Exploration Corp.
Interim Condensed Consolidated Statements of Operations and Comprehensive Income
In United States Dollars
(Unaudited)
|
For the three months ended March 31, |
Notes |
|
2026 |
|
2025 |
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
Oil and natural gas |
13 |
|
26,819,632 |
|
22,136,159 |
|
Royalties |
13 |
|
(3,321,316) |
|
(2,630,034) |
|
Total oil and natural gas revenue, net of royalties |
|
|
23,498,316 |
|
19,506,125 |
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
Operating |
|
|
6,235,033 |
|
5,356,599 |
|
Administrative |
|
|
3,249,483 |
|
2,881,990 |
|
Share-based compensation (recovery) expense |
10 |
|
922,796 |
|
(1,101,470) |
|
Financing costs: |
|
|
|
|
|
|
Accretion |
9 |
|
88,429 |
|
68,277 |
|
Interest |
8 |
|
5,638 |
|
7,168 |
|
Foreign exchange (gain) loss |
|
|
6,244 |
|
(244,212) |
|
Depletion and depreciation |
7 |
|
6,176,288 |
|
6,520,968 |
|
Other income, net |
|
|
(52,900) |
|
(19,801) |
|
Total expenses, net |
|
|
16,631,011 |
|
13,469,519 |
|
|
|
|
|
|
|
|
Income before income tax |
|
|
6,867,305 |
|
6,036,606 |
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
Current |
|
|
1,420,519 |
|
1,877,917 |
|
Deferred |
|
|
225,316 |
|
1,494,925 |
|
|
|
|
1,645,835 |
|
3,372,842 |
|
|
|
|
|
|
|
|
Net income |
|
|
5,221,470 |
|
2,663,764 |
|
|
|
|
|
|
|
|
Other comprehensive income (loss) |
|
|
|
|
|
|
Foreign exchange |
|
|
(702,750) |
|
462 |
|
Total other comprehensive income (loss) |
|
|
(702,750) |
|
462 |
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
4,518,720 |
|
2,664,226 |
|
|
|
|
|
|
|
|
Net income per share: |
|
|
|
|
|
|
Basic |
|
|
$ 0.02 |
|
$ 0.01 |
|
Diluted |
|
|
$ 0.02 |
|
$ 0.01 |
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
|
|
|
|
Basic |
|
|
285,864,348 |
|
285,864,348 |
|
Diluted |
|
|
288,231,960 |
|
294,094,348 |
The accompanying notes are an integral part of these interim consolidated financial statements.
Arrow Exploration Corp.
Interim Condensed Statements of Changes in Shareholders' Equity
In United States Dollars
(Unaudited)
|
|
|
Share Capital |
|
Contributed Surplus |
|
Accumulated other comprehensive loss |
|
Deficit |
|
Total Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1, 2026 |
$ |
73,829,795 |
$ |
856,093 |
$ |
(912,320) |
$ |
(19,328,296) |
$ |
54,445,272 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the period |
|
- |
|
- |
|
- |
|
5,221,470 |
|
5,221,470 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss |
|
- |
|
- |
|
(702,750) |
|
- |
|
(702,750) |
|
Total comprehensive income |
|
- |
|
- |
|
(702,750) |
|
5,221,470 |
|
4,518,720 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2026 |
$ |
73,829,795 |
$ |
856,093 |
$ |
(1,615,070) |
$ |
(14,106,826) |
$ |
58,963,992 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Capital |
|
Contributed Surplus |
|
Accumulated other comprehensive loss |
|
Deficit |
|
Total Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1, 2025 |
$ |
73,829,795 |
$ |
856,093 |
$ |
(898,001) |
$ |
(20,770,894) |
$ |
53,016,993 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the period |
|
- |
|
- |
|
- |
|
2,663,764 |
|
2,663,764 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
- |
|
- |
|
462 |
|
- |
|
462 |
|
Total comprehensive income |
|
- |
|
- |
|
462 |
|
2,663,764 |
|
2,664,226 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2025 |
$ |
73,829,795 |
$ |
856,093 |
$ |
(897,539) |
$ |
(18,107,130) |
$ |
55,681,219 |
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these interim consolidated financial statements.
Arrow Exploration Corp.
Interim Condensed Consolidated Statements of Cash Flows
In United States Dollars
(Unaudited)
|
|
|
|
||
|
For the three months ended March 31, |
Notes |
2026 |
2025 |
|
|
|
|
|
|
|
|
|
Cash flows provided by operating activities: |
|
|
|
|
|
Net income |
|
$ 5,221,470 |
$ 2,663,764 |
|
|
Items not involving cash: |
|
|
|
|
|
Deferred taxes |
|
225,316 |
1,494,925 |
|
|
Share-based compensation (recovery) expense |
10 |
922,796 |
(1,101,470) |
|
|
Depletion and depreciation |
7 |
6,176,288 |
6,520,968 |
|
|
Interest on leases |
8 |
5,638 |
7,168 |
|
|
Accretion |
9 |
88,429 |
68,277 |
|
|
Unrealized foreign exchange (gain) loss |
|
(543,316) |
91,921 |
|
|
Payment of asset decommissioning obligations |
9 |
(1,723) |
- |
|
|
Settlement of other liabilities |
|
(3,999) |
- |
|
|
Payment of share based compensation |
|
(533,676) |
- |
|
|
Changes in non‑cash working capital balances: |
|
|
|
|
|
Restricted cash and deposits |
|
(4,683) |
(8,136) |
|
|
Trade and other receivables |
|
296,080 |
1,792,957 |
|
|
Taxes receivable |
|
(1,108,427) |
71,920 |
|
|
Deposits and prepaid expenses |
|
(149,606) |
(22,238) |
|
|
Inventory |
|
8,146 |
(3,268) |
|
|
Income tax payable |
|
80,146 |
2,523,014 |
|
|
Accounts payable and accrued liabilities |
|
2,984,687 |
330,382 |
|
|
Cash provided by operating activities |
|
13,663,566 |
14,430,184 |
|
|
|
|
|
|
|
|
Cash flows used in investing activities: |
|
|
|
|
|
Additions to exploration and evaluation assets |
6 |
(1,016,557) |
(2,582,854) |
|
|
Additions to property and equipment |
7 |
(6,865,778) |
(8,796,326) |
|
|
Changes in non-cash working capital |
|
(2,608,138) |
3,157,859 |
|
|
Cash flows used in investing activities |
|
(10,490,473) |
(8,221,321) |
|
|
|
|
|
|
|
|
Cash flows used in financing activities: |
|
|
|
|
|
Lease payments |
8 |
(22,559) |
(8,327) |
|
|
Cash flows used in financing activities |
|
(22,559) |
(8,327) |
|
|
|
|
|
|
|
|
Effect of changes in the exchange rate on cash |
|
(143,671) |
(91,386) |
|
|
Increase in cash |
|
3,006,863 |
6,109,150 |
|
|
Cash, beginning of period |
|
11,208,824 |
18,837,784 |
|
|
Cash, end of period |
|
14,215,687 |
24,946,934 |
|
|
|
|
|
|
|
|
Supplemental information |
|
|
|
|
|
Interest paid |
|
$ - |
$ - |
|
|
Taxes paid |
|
$ - |
$ - |
The accompanying notes are an integral part of these interim consolidated financial statements.
Arrow Exploration Corp.
Notes to the Interim Condensed Consolidated Financial Statements
In United States Dollars
(Unaudited)
March 31, 2026
1. Corporate Information
Arrow Exploration Corp. ("Arrow" or "the Company") is a public junior oil and gas company engaged in the acquisition, exploration and development of oil and gas properties in Colombia and in Western Canada. The Company's shares trade on the TSX Venture Exchange and the AIM Market of the London Stock Exchange plc under the symbol AXL. The head office of Arrow is located at 203, 2303 - 4th Street SW, Calgary, Alberta, Canada, T2S 2S7 and the registered office is located at 600, 815 8th Avenue SW, Calgary, Alberta, Canada, T2P 3P2.
2. Basis of Presentation
Statement of compliance
These interim condensed consolidated financial statements (the "Financial Statements") have been prepared in accordance with International Accounting Standard ("IAS") 34 Interim Financial Reporting. These Financial Statements were authorized for issue by the board of directors of the Company on May 26, 2026. They do not contain all disclosures required by International Financial Reporting Standards ("IFRS") for annual financial statements and, accordingly, should be read in conjunction with the audited consolidated financial statements as at December 31, 2025.
These Financial Statements have been prepared on the historical cost basis, except for derivative financial instruments (when applicable) that are measured at fair value and specifically noted within the notes to these Financial Statements, which have been prepared using the same accounting policies and methods as the consolidated financial statements for the year ended December 31, 2025, except as noted below. In preparing these condensed consolidated financial statements, the significant judgements made by management in applying the group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended December 31, 2025.
Adoption of amendments to accounts standards
On May 30, 2024, the IASB issued amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures that clarify the recognition and derecognition of certain financial assets and liabilities, including an exception for those settled via electronic cash transfer systems. New disclosure requirements are introduced for instruments with terms that can change cash flows and for equity instruments designated at fair value through other comprehensive income. The amendments are effective for reporting periods beginning on or after January 1, 2026 and had no material impact on the Company's Financial Statements.
3. Restricted Cash and deposits
|
|
|
March 31, 2026 |
|
December 31, 2025 |
|
|
|
|
|
|
|
Colombia (i) |
$ |
406,515 |
$ |
399,174 |
|
Canada |
|
129,431 |
|
132,089 |
|
Sub-total |
|
535,946 |
|
531,263 |
|
Long-term portion |
|
(249,840) |
|
(273,257) |
|
Current portion of restricted cash and deposits |
$ |
286,106 |
$ |
258,006 |
(i) This balance is comprised of a deposit held as collateral to guarantee abandonment expenditures related to its Colombian blocks.
4. Trade and other receivables
|
|
|
March 31, 2026 |
|
December 31, 2025 |
|
|
|
|
|
|
|
Trade receivables, net of advances |
$ |
520,468 |
$ |
190,485 |
|
Joint venture receivable |
|
12,447,774 |
|
12,237,489 |
|
Other accounts receivable |
|
1,269,056 |
|
2,105,403 |
|
|
$ |
14,237,298 |
$ |
14,533,377 |
As at March 31, 2026, other accounts receivable include $738,147 (December 31, 2025 - $733,990) receivable from on demand loans with executives and directors.
5. Taxes receivable
|
|
|
March 31, 2026 |
|
December 31, 2025 |
|
|
|
|
|
|
|
Value-added tax (VAT) credits recoverable |
$ |
4,745,062 |
$ |
3,727,152 |
|
Income tax withholdings and advances, net |
|
4,000,708 |
|
3,910,190 |
|
|
$ |
8,745,770 |
$ |
7,637,342 |
The VAT recoverable balance pertains to non-compensated value-added tax credits originated in Colombia as operational and capital expenditures are incurred. The Company is entitled to compensate or claim for the reimbursement of these VAT credits.
6. Exploration and Evaluation
|
|
|
March 31, 2026 |
|
December 31, 2025 |
|
|
|
|
|
|
|
Balance, beginning of the period |
$ |
3,437,965 |
$ |
142,995 |
|
Additions, net |
|
1,016,557 |
|
12,986,203 |
|
Reclassification to Property and Equipment (Note 7) |
|
- |
|
(6,775,054) |
|
Exploration expense and abandonment costs |
|
- |
|
(2,916,179) |
|
Balance, end of the period |
$ |
4,454,522 |
$ |
3,437,965 |
During 2026, the Company incurred exploration and development costs associated with its Icaco prospect in the Tapir block. During 2025, the Company incurred exploration and development costs associated with its Mateguafa Oeste, Mateguafa Attic, Icaco, Ardea and Capullo prospects, including seismic studies for other prospects in the Tapir block. Technical feasibility and commercial viability was determined on the Mateguafa Attic area, transferring $6,775,054 to its property and equipment. Likewise, no technical feasibility nor commercial viability was determined for the Mateguafa Oeste area and an exploration expense of $2,916,179 was recognized in the statement of operations and comprehensive income.
7. Property and Equipment
|
|
|
|
|
|
Cost |
Oil and Gas Properties |
Right of Use and Other Assets |
Total |
|
Balance, December 31, 2024 |
$108,966,163 |
$ 497,582 |
$ 109,463,745 |
|
Additions |
30,017,313 |
25,147 |
30,042,460 |
|
Decommissioning adjustment |
4,112,985 |
- |
4,112,985 |
|
Transfers from exploration and evaluation assets |
6,775,054 |
- |
6,775,054 |
|
Balance, December 31, 2025 |
$149,871,515 |
$ 522,729 |
$150,394,244 |
|
Additions |
6,865,778 |
- |
6,865,778 |
|
Dispositions |
- |
(117,607) |
(117,607) |
|
Decommissioning adjustment |
551,825 |
- |
551,825 |
|
Balance, March 31, 2026 |
$157,289,118 |
$ 405,122 |
$157,694,240 |
|
Accumulated depletion and depreciation and impairment |
Oil and Gas Properties |
Right of Use and Other Assets |
Total |
|
Balance, December 31, 2024 |
$ 53,860,447 |
$ 314,077 |
$ 54,174,524 |
|
Depletion and depreciation |
20,549,872 |
63,278 |
20,613,150 |
|
Impairment |
7,633,523 |
- |
7,633,523 |
|
Balance, December 31, 2025 |
$ 82,043,842 |
$ 377,355 |
$ 82,421,197 |
|
Dispositions |
- |
(83,307) |
(83,307) |
|
Depletion and depreciation |
6,161,983 |
14,305 |
6,176,288 |
|
Balance, March 31, 2026 |
$ 88,205,825 |
$ 308,353 |
$ 88,514,178 |
|
Foreign exchange |
Oil and Gas Properties |
Right of Use and Other Assets |
Total |
|
Balance, December 31, 2024 |
$ (283,569) |
$ (20,654) |
$ (304,223) |
|
Effects of movements in foreign exchange rates |
134,573 |
6,635 |
141,208 |
|
Balance, December 31, 2025 |
$ (148,996) |
$ (14,019) |
$ (163,015) |
|
Effects of movements in foreign exchange rates |
(43,041) |
(1,099) |
(44,140) |
|
Balance, March 31, 2026 |
(192,037) |
(15,118) |
(207,155) |
|
Net Book Value |
|
|
|
|
Balance December 31, 2025 |
$67,678,677
|
$ 131,355 |
$67,810,032 |
|
Balance March 31, 2026 |
$ 68,891,256 |
$ 81,651 |
$68,972,907 |
As at March 31, 2026, no indicators of impairment were identified in the Company's property and equipment.
Canada
As at December 31, 2025, the Company determined there were indicators of impairment in its Keho CGU,
mainly due to unsuccessful drilling, and recognized an impairment loss of $1,781,467 was included in the consolidated statements of operations and comprehensive income for the year ended December 31, 2025 corresponding to the totality of costs incurred on this Keho CGU.
Colombia
As at December 31, 2025, the Company determined there were indicators of impairment in its Santa Isabel CGU, mainly due to negative reserves revision primarily arising from declines in forecast commodity prices, and prepared an estimate of the fair value less costs of disposal of this CGU. It was determined that carrying value of its Santa Isabel CGU exceeded its recoverable amount and, therefore, an impairment loss of $5,852,056, corresponding to the full carrying value of this CGU, was included in the consolidated statements of operations and comprehensive income for the year ended December 31, 2025.
8. Lease Obligations
A reconciliation of the discounted lease obligation is set forth below:
|
|
|
|
March 31, 2026 |
December 31, 2025 |
|
Obligation, beginning of the period |
|
|
$ 200,686 |
$ 219,406 |
|
Additions |
|
|
- |
17,484 |
|
Dispositions |
|
|
(30,993) |
- |
|
Lease payments |
|
|
(22,559) |
(76,048) |
|
Interest |
|
|
5,638 |
28,676 |
|
Effects of movements in foreign exchange rates |
|
|
(2,594) |
11,168 |
|
Obligation, end of the period |
|
|
150,178 |
200,686 |
|
Current portion |
|
|
(46,504) |
(67,734) |
|
Long-term portion |
|
|
$ 103,674 |
$ 132,952 |
In 2026, the Company disposed of two leased vehicles for a net reduction of its lease commitments of $30,993. As at March 31, 2026, the Company has the following future lease obligations:
|
Less than one year |
|
|
$ 49,612 |
|
2 - 5 years |
|
|
127,826 |
|
Total lease payments |
|
|
177,438 |
|
Amounts representing interest over the term |
|
|
(27,260) |
|
Present value of the net obligation |
|
|
$ 150,178 |
9. Decommissioning Liability
The following table presents the reconciliation of the beginning and ending aggregate carrying amount of the obligation associated with the decommissioning of oil and gas properties:
|
|
March 31, 2026 |
|
December 31, 2025 |
|
Obligation, beginning of the period |
$ 9,863,781 |
|
$ 6,307,659 |
|
Additions |
551,824 |
|
1,999,904 |
|
Change in estimated cash flows |
- |
|
1,791,305 |
|
Payments or settlements |
(1,723) |
|
(536,919) |
|
Accretion expense |
88,429 |
|
274,423 |
|
Effects of movements in foreign exchange rates |
(12,662) |
|
27,409 |
|
Obligation, end of the period |
$ 10,489,649 |
|
$ 9,863,781 |
The obligation was calculated using a risk-free discount rate range of 2.50% to 3.75% in Canada (2025: 2.50% to 3.75%) and between 4.43% and 4.60% in Colombia (2025: 4.43% and 4.60%) with an inflation rate of 2.0% and 1.90%, respectively (2025: 2.0% and 1.9%). The majority of costs are expected to occur between 2027 and 2038. The undiscounted amount of cash flows, required over the estimated reserve life of the underlying assets, to settle the obligation, adjusted for inflation, is estimated at $12,879,395 (2025: $12,033,788).
10. Share Capital
(a) Authorized: Unlimited number of common shares without par value
(b) Issued:
|
|
March 31, 2026 |
December 31, 2025 |
||
|
Common shares |
Shares |
Amounts |
Shares |
Amounts |
|
Balance at beginning and end of the period |
285,864,348 |
73,829,795 |
285,864,348 |
73,829,795 |
(c) Stock options:
The Company has a stock option plan that provides for the issuance to its directors, officers and employees options to purchase non-transferable common shares not exceeding 10% of the outstanding common shares. The exercise price is based on the closing price of the Company's common shares on the day prior to the day of the grant. A summary of the Company stock option plan as at March 31, 2026 and December 31, 2025 and changes during the periods ended on those dates is presented below:
|
|
March 31, 2026 |
December 31, 2025 |
|
|||||
|
Stock Options |
Number of options |
Weighted average exercise price (CAD $) |
Number of options |
Weighted average exercise price (CAD $) |
|
|||
|
Beginning of period |
20,513,706 |
$0.32 |
24,795,002 |
$0.32 |
|
|||
|
Granted |
2,753,518 |
$0.35 |
6,198,334 |
$0.23 |
|
|||
|
Expired/Forfeited |
(1,284,819) |
$0.48 |
(3,803,518) |
- |
|
|||
|
Exercised |
(2,550,001) |
$0.12 |
(6,676,112) |
$0.19 |
|
|||
|
End of period |
19,432,405 |
$0.34 |
20,513,706 |
$0.32 |
|
|||
|
Exercisable, end of period |
2,081,667 |
$0.39 |
5,866,486 |
$0.29 |
|
|||
|
|
|
|
|
|
|
|||
|
Date of Grant |
Number Outstanding |
Exercise Price (CAD $) |
Weighted Average Remaining Contractual Life |
Date of Expiry |
Number Exercisable March 31, 2026 |
|||
|
October 22, 2018 |
250,000 |
$1.15 |
2.81 |
Oct. 22, 2028 |
250,000 |
|||
|
May 3, 2019 |
100,000 |
$0.31 |
3.34 |
May 3, 2029 |
100,000 |
|||
|
December 21, 2022 |
1,681,667 |
$0.28 |
0.47 |
Jun. 21, 2024, 2025 and 2026 |
1,681,667 |
|||
|
January 23, 2023 |
50,000 |
$0.32 |
0.56 |
Jul. 23, 2024, 2025 and 2026 |
50,000 |
|||
|
September 21, 2023 |
333,334 |
$0.33 |
1.22 |
Mar. 21, 2025, 2026 and 2027 |
- |
|||
|
April 29, 2024 |
5,495,926 |
$0.38 |
1.83 |
Oct.29 2025, 2026 and 2027 |
- |
|||
|
September 11, 2024 |
2,569,626 |
$0.48 |
2.19 |
Mar.11 2026, 2027 and 2028 |
, |
|||
|
October 8, 2025 |
6,198,334 |
$0.23 |
3.33 |
Apr. 8, 2027, 2028 and 2029 |
- |
|||
|
March 23, 2026 |
2,753,518 |
$0.38 |
3.48 |
Sept. 23, 2027, 2028 and 2029 |
- |
|||
|
Total |
19,432,405 |
$0.34 |
1.58 years |
|
2,081,667 |
|||
For the three months ended March 31, 2026, the Company has recognized shared-based compensation expense of $922,796 (2025: recovery of $1,101,470) corresponding to the progressive vesting and fair market value of options.
11. Commitments and Contingencies
Exploration and Production Contracts
The Company has entered into a number of exploration contracts in Colombia which require the Company to fulfill work program commitments and issue financial guarantees related thereto (see Letters of Credit section below). During 2026, the Company received confirmation that its COR-39 exploration and production contract has been terminated by mutual agreement with the ANH and, therefore, its $12,000,000 exploration commitment related to this contract has been canceled at no additional costs to the Company. As a result, the Company has no outstanding exploration commitments.
Contingencies
From time to time, the Company may be involved in litigation or has claims sought against it in the normal course of business operations. Management of the Company is not currently aware of any claims or actions that would materially affect the Company's reported financial position or results from operations. Under the terms of certain agreements and the Company's by-laws the Company indemnifies individuals who have acted at the Company's request to be a director and/or officer of the Company, to the extent permitted by law, against any and all damages, liabilities, costs, charges or expenses suffered by or incurred by those individuals.
Letters of Credit
At March 31, 2026, the Company had obligations under Letters of Credit ("LC's") outstanding totaling $3.6 million to guarantee work commitments on exploration blocks and other contractual commitments. In the event the Company fails to secure the renewal of the letters of credit underlying the ANH guarantees, the ANH could decide to cancel the underlying exploration and production contract, as applicable.
|
Current Outstanding Letters of Credit |
|||||
|
Contract |
Beneficiary |
Issuer |
Type |
Amount (US $) |
Renewal Date |
|
SANTA ISABEL |
ANH |
Carrao Energy |
Abandonment |
685,296 |
April 14, 2027 |
|
ANH |
Carrao Energy |
Financial Capacity |
1,672,162 |
June 30, 2026 |
|
|
COR - 39 |
ANH |
Carrao Energy |
Compliance |
100,000 |
June 30, 2026 |
|
OMBU |
ANH |
Carrao Energy |
Financial Capacity |
436,300 |
October 14, 2026 |
|
ANH |
Carrao Energy |
Abandonment |
708,119 |
August 28, 2026 |
|
|
Total |
|
|
|
3,601,878 |
|
12. Risk Management
The Company holds various forms of financial instruments. The nature of these instruments and the Company's operations expose the Company to commodity price, credit and foreign exchange risks. The Company manages its exposure to these risks by operating in a manner that minimizes its exposure to the extent practical.
(a) Commodity price risk
The Company's principal operation is the production and sale of crude oil and natural gas. Fluctuations in prices of these commodities directly impact the Company's financial performance. Commodity price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result of changes in commodity prices. Lower commodity prices can also impact the Company's ability to raise capital. Commodity prices for crude oil are impacted by world economic events that dictate the levels of supply and demand. There were no derivative contracts during 2026 or 2025.
(b) Credit Risk
Credit risk reflects the risk of financial loss to the Company if a customer or counterparty to a contract fails to fulfill their contractual obligations. It arises mostly from the Company's cash balances and accounts receivable. The Company's cash balances are held with five large reputable financial institutions, and management has therefore concluded that associated credit risk is low. The majority of the Company's trade accounts receivable balances relate to petroleum and natural gas sales, which are normally collected within 25 days (in Canada) and up to 15 days (in Colombia) after the month of production. The Company's policy is to enter into agreements with customers that are well established entities in the oil and gas industry such that the level of risk is mitigated. In Colombia, all of the Company's revenue (2025: 73%) is with a group of producing and trading companies, under existing agreements, with prepayment provisions and priced using the Brent benchmark. Other accounts receivable mainly relate to balances owed by the Company's partner in one of its blocks, and are mainly recoverable through joint billings. The Company has historically not experienced any significant collection issues with its customers and partners.
(c) Market Risk
Market risk is comprised of two components: foreign currency exchange risk and interest rate risk.
i) Foreign Currency Exchange Risk
The Company operates on an international basis and therefore foreign exchange risk exposures arise from transactions denominated in currencies other than the United States dollar. The Company is exposed to foreign currency fluctuations as it holds cash and incurs expenditures in exploration and evaluation and administrative costs in foreign currencies. The Company incurs expenditures in Canadian dollars, United States dollars, British Pounds and the Colombian peso and is exposed to fluctuations in exchange rates in these currencies. There were no exchange rate derivative contracts in place.
ii) Interest Rate Risk
Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. The Company is not currently exposed to interest rate risk on financial assets or liabilities.
(d) Liquidity Risk
Liquidity risk includes the risk that, as a result of the Company's operational liquidity requirements:
· The Company will not have sufficient funds to settle a transaction on the due date;
· The Company will be forced to sell financial assets at a value which is less than what they are worth; or
· The Company may be unable to settle or recover a financial asset.
The Company's approach to managing its liquidity risk is to ensure, within reasonable means, sufficient liquidity to meet its liabilities when due, under both normal and unusual conditions, without incurring unacceptable losses or jeopardizing the Company's business objectives. The Company prepares annual capital expenditure budgets which are monitored regularly and updated as considered necessary. Petroleum and natural gas production is monitored daily to provide current cash flow estimates and the Company utilizes authorizations for expenditures on projects to manage capital expenditures.
Any funding shortfall may be met in a number of ways, including, but not limited to, the issuance of new debt or equity instruments, further expenditure reductions and/or the introduction of joint venture partners. During 2025, the Company entered into a two-year crude oil prepayment agreement with an integrated energy major to market its oil production in Colombia. The agreement provides access to $20 million in a revolving line of credit until June 2026 and $15 million until June 2027. The interest rate is SOFR + 4% for the first $10 million and SOFR + 5% for amounts exceeding $10 million. As at March 31, 2026, no funds have been withdrawn from this line of credit.
(e) Capital Management
The Company's objective is to maintain a capital base sufficient to provide flexibility in the future development of the business and maintain investor, creditor and market confidence. The Company manages its capital structure and makes adjustments in response to changes in economic conditions and the risk characteristics of the underlying assets. The Company considers its capital structure to include share capital, bank debt (when available), and working capital, defined as current assets less current liabilities. From time to time the Company may issue common shares or other securities, sell assets or adjust its capital spending to manage current and projected debt levels. The Company adjusts its capital structure based on its net debt level. The Company prepares annual budgets, which are updated as necessary including current and forecast crude oil prices, changes in capital structure, execution of the Company's business plan and general industry conditions. The annual budget is approved by the Board of Directors. The Company's capital includes the following:
|
|
March 31, 2026 |
December 31, 2025 |
|
Working capital |
5,262,031 |
1,823,335 |
|
Share capital |
73,829,795 |
73,829,795 |
|
|
79,091,826 |
75,653,130 |
13. Segmented Information
The Company has two reportable operating segments: Colombia and Canada. The Canada segment is also considered the corporate segment. The following tables show information regarding the Company's segments for the three months ended as at March 31:
|
Three months ended March 31, 2026 |
|
Colombia |
|
Canada |
|
Total |
|
Revenue from oil and natural gas |
$ |
26,615,230 |
$ |
204,402 |
$ |
26,819,632 |
|
Royalties |
|
(3,311,398) |
|
(9,918) |
|
(3,321,316) |
|
Expenses |
|
(18,602,672) |
|
1,971,661 |
|
(16,631,011) |
|
Income taxes |
|
(1,645,835) |
|
- |
|
(1,645,835) |
|
Net income |
$ |
3,055,325 |
$ |
2,166,145 |
$ |
5,221,470 |
|
Capital expenditures for the period |
$ |
7,880,540 |
$ |
1,795 |
$ |
7,882,335 |
|
Total Assets as at March 31, 2026 |
$ |
107,557,061 |
$ |
3,990,283 |
$ |
111,547,344 |
|
Total liabilities as at March 31, 2026 |
$ |
48,957,701 |
$ |
3,625,651 |
$ |
52,583,352 |
|
Three months ended March 31, 2025 |
|
Colombia |
|
Canada |
|
Total |
|
Revenue from oil and natural gas |
$ |
21,850,288 |
$ |
285,871 |
$ |
22,136,159 |
|
Royalties |
|
(2,620,671) |
|
(9,363) |
|
(2,630,034) |
|
Expenses |
|
(11,911,128) |
|
(1,558,391) |
|
(13,469,519) |
|
Income taxes |
|
(3,732,842) |
|
- |
|
(3,732,842) |
|
Net income (loss) |
$ |
3,945,647 |
$ |
(1,281,883) |
$ |
2,663,764 |
|
Capital expenditures for the period |
$ |
9,895,072 |
$ |
1,484,108 |
$ |
11,379,180 |
|
Total Assets as at March 31, 2025 |
$ |
83,377,874 |
$ |
7,154,189 |
$ |
90,532,063 |
|
Total liabilities as at March 31, 2025 |
$ |
30,422,878 |
$ |
4,427,966 |
$ |
34,850,844 |
Arrow Exploration Corp.
MANAGEMENT's DISCUSSION AND ANALYSIS
THREE MONTHS ENDED MARCH 31, 2026
MANAGEMENT'S DISCUSSION AND ANALYSIS
This Management's Discussion and Analysis ("MD&A") as provided by the management of Arrow Exploration Corp. ("Arrow" or the "Company"), is dated as of May 26, 2026 and should be read in conjunction with Arrow's interim condensed (unaudited) consolidated financial statements and related notes as at and for the three months ended March 31, 2026 and 2025. Additional information relating to Arrow, including its annual consolidated financial statements and related notes as at and for years ended December 31, 2025 and 2024 (the "Annual Financial Statements"), is available under Arrow's profile on www.sedar.com.
Advisories
Basis of Presentation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"), and all amounts herein are expressed in United States dollars, unless otherwise noted, and all tabular amounts are expressed in United States dollars, unless otherwise noted. Additional information for the Company may be found on SEDAR at www.sedar.com.
Advisory Regarding Forward‐Looking Statements
This MD&A contains certain statements or disclosures relating to Arrow that are based on the expectations of its management as well as assumptions made by and information currently available to Arrow which may constitute forward-looking statements or information ("forward-looking statements") under applicable securities laws. All such statements and disclosures, other than those of historical fact, which address activities, events, outcomes, results or developments that Arrow anticipates or expects may, could or will occur in the future (in whole or in part) should be considered forward-looking statements. In some cases, forward-looking statements can be identified by the use of the words "believe", "continue", "could", "expect", "likely", "may", "outlook", "plan", "potential", "will", "would" and similar expressions. In particular, but without limiting the foregoing, this MD&A contains forward-looking statements pertaining to the following: global pandemics and their impact; tax liability; capital management strategy; capital structure; credit facilities and other debt; letters of credit; Arrow's costless collar structure; cost reduction initiatives; potential drilling on the Tapir block; capital requirements; expenditures associated with asset retirement obligations; future drilling activity and the development of the Rio Cravo Este, Carrizales Norte and Alberta Llanos structures on the Tapir Block. Statements relating to "reserves" and "resources" are deemed to be forward-looking information, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and resources described exist in the quantities predicted or estimated and can be profitably produced in the future.
The forward-looking statements contained in this MD&A reflect several material factors and expectations and assumptions of Arrow including, without limitation: current and anticipated commodity prices and royalty regimes; the impact of the global pandemics; the financial impact of Arrow's costless collar structure; availability of skilled labour; timing and amount of capital expenditures; future exchange rates; commodity prices; the impact of increasing competition; general economic conditions; availability of drilling and related equipment; receipt of partner, regulatory and community approvals; royalty rates; changes in income tax laws or changes in tax laws and incentive programs; future operating costs; effects of regulation by governmental agencies; uninterrupted access to areas of Arrow's operations and infrastructure; recoverability of reserves; future production rates; timing of drilling and completion of wells; pipeline capacity; that Arrow will have sufficient cash flow, debt or equity sources or other financial resources required to fund its capital and operating expenditures and requirements as needed; that Arrow's conduct and results of operations will be consistent with its expectations; that Arrow will have the ability to develop its oil and gas properties in the manner currently contemplated; current or, where applicable, proposed industry conditions, laws and regulations will continue in effect or as anticipated; that the estimates of Arrow's reserves and production volumes and the assumptions related thereto (including commodity prices and development costs) are accurate in all material respects; that Arrow will be able to obtain contract extensions or fulfil the contractual obligations required to retain its rights to explore, develop and exploit any of its undeveloped properties; and other matters.
Arrow believes the material factors, expectations and assumptions reflected in the forward-looking statements are reasonable at this time but no assurance can be given that these factors, expectations and assumptions will prove to be correct. The forward-looking statements included in this MD&A are not guarantees of future performance and should not be unduly relied upon.
Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements including, without limitation: the impact of general economic conditions; volatility in commodity prices; industry conditions including changes in laws and regulations including adoption of new environmental laws and regulations, and changes in how they are interpreted and enforced; competition; lack of availability of qualified personnel; the results of exploration and development drilling and related activities; obtaining required approvals of regulatory authorities; counterparty risk; risks associated with negotiating with foreign governments as well as country risk associated with conducting international activities; commodity price volatility; fluctuations in foreign exchange or interest rates; environmental risks; changes in income tax laws or changes in tax laws and incentive programs; changes to pipeline capacity; ability to secure a credit facility; ability to access sufficient capital from internal and external sources; risk that Arrow's evaluation of its existing portfolio of development and exploration opportunities is not consistent with future results; that production may not necessarily be indicative of long term performance or of ultimate recovery; and certain other risks detailed from time to time in Arrow's public disclosure documents including, without limitation, those risks identified in Arrow's 2018 AIF, a copy of which is available on Arrow's SEDAR profile at www.sedar.com. Readers are cautioned that the foregoing list of factors is not exhaustive and are cautioned not to place undue reliance on these forward-looking statements.
Non‐IFRS Measures
The Company uses non-IFRS measures to evaluate its performance which are measures not defined in IFRS. Adjusted working capital, funds flow from operations, realized prices, operating netback, and adjusted EBITDA as presented do not have any standardized meaning prescribed by IFRS and therefore may not be comparable with the calculation of similar measures for other entities. The Company considers these measures as key measures to demonstrate its ability to generate the cash flow necessary to fund future growth through capital investment, and to repay its debt, as the case may be. These measures should not be considered as an alternative to, or more meaningful than net income or cash provided by (used in) operating activities as determined in accordance with IFRS as an indicator of the Company's performance. The Company's determination of these measures may not be comparable to that reported by other companies.
Adjusted working capital is calculated as current assets minus current liabilities, excluding non-cash liabilities; funds flow from operations is calculated as cash flows provided by operating activities adjusted to exclude changes in non-cash working capital balances; realized price is calculated by dividing gross revenue by gross production, by product, in the applicable period; operating netback is calculated as total natural gas and crude revenues minus royalties, and operating expenditures; and adjusted EBITDA is calculated as net income adjusted for interest, income taxes, depreciation, depletion, amortization and other similar non-recurring or non-cash charges.
The Company also presents funds flow from operations per share, whereby per share amounts are calculated using weighted- average shares outstanding consistent with the calculation of net income per share.
A reconciliation of the non-IFRS measures is included as follows:
|
(in United States dollars) |
Three months ended March 31, 2026 |
Three months ended March 31, 2025 |
|
Net income |
5,221,470 |
2,663,764 |
|
Add/(subtract): |
|
|
|
Share based payments |
922,796 |
(1,101,470) |
|
Financing costs: |
|
|
|
Accretion on decommissioning obligations |
88,429 |
68,277 |
|
Interest |
5,638 |
7,168 |
|
Other |
- |
- |
|
Depreciation and depletion |
6,176,288 |
6,520,968 |
|
Income tax expense |
1,645,835 |
3,372,842 |
|
Adjusted EBITDA (1) |
14,060,456 |
11,531,548 |
|
|
|
|
|
Cash flows provided by operating activities |
13,663,566 |
14,430,184 |
|
Minus - Changes in non‑cash working capital balances: |
|
|
|
Trade and other receivables |
(296,080) |
(1,792,957) |
|
Restricted cash |
4,683 |
8,136 |
|
Taxes receivable |
1,108,427 |
(71,920) |
|
Deposits and prepaid expenses |
149,606 |
22,238 |
|
Inventory |
(8,146) |
3,268 |
|
Accounts payable and accrued liabilities |
(2,984,687) |
(2,523,014) |
|
Income tax payable |
(80,146) |
(330,382) |
|
Funds flow from operations (1) |
11,557,223 |
9,745,553 |
(1)Non-IFRS measures
The term barrel of oil equivalent ("boe") is used in this MD&A. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 thousand cubic feet ("Mcf") of natural gas to one barrel of oil ("bbl") is used in the MD&A. This conversion ratio of 6:1 is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
FINANCIAL AND OPERATING HIGHLIGHTS
|
(in United States dollars, except as otherwise noted) |
Three months ended March 31, 2026 |
Three months ended March 31, 2025 |
|
Total natural gas and crude oil revenues, net of royalties |
23,498,316 |
19,506,125 |
|
|
|
|
|
Funds flow from operations (1) |
11,557,223 |
9,745,553 |
|
Funds flow from operations (1) per share - |
|
|
|
Basic($) |
0.04 |
0.03 |
|
Diluted ($) |
0.04 |
0.03 |
|
Net income |
5,221,470 |
2,663,764 |
|
Net income per share - |
|
|
|
Basic ($) |
0.02 |
0.01 |
|
Diluted ($) |
0.02 |
0.01 |
|
Adjusted EBITDA (1) |
14,060,456 |
11,531,548 |
|
Weighted average shares outstanding - |
|
|
|
Basic ($) |
285,864,348 |
285,864,348 |
|
Diluted ($) |
288,231,960 |
294,094,348 |
|
Common shares end of period |
285,864,348 |
285,864,348 |
|
Capital expenditures |
7,882,335 |
11,379,180 |
|
Cash and cash equivalents |
14,215,687 |
24,946,934 |
|
Current Assets |
37,870,075 |
30,288,808 |
|
Current liabilities |
32,608,044 |
19,252,474 |
|
Adjusted working capital (1) |
5,262,031 |
11,036,334 |
|
Long-term portion of restricted cash and deposits (2) |
249,840 |
129,849 |
|
Total assets |
111,547,344 |
90,532,063 |
|
|
|
|
|
Operating |
|
|
|
|
|
|
|
Natural gas and crude oil production, before royalties |
|
|
|
Natural gas (Mcf/d) |
1,078 |
1,851 |
|
Natural gas liquids (bbl/d) |
5 |
6 |
|
Crude oil (bbl/d) |
4,530 |
3,770 |
|
Total (boe/d) |
4,715 |
4,085 |
|
|
|
|
|
Operating netbacks ($/boe) (1) |
|
|
|
Natural gas ($/Mcf) |
($0.73) |
($1.00) |
|
Crude oil ($/bbl) |
$42.82 |
$42.29 |
|
Total ($/boe) |
$41.05 |
$38.66 |
(1)Non-IFRS measures - see "Non-IFRS Measures" section within this MD&A
(2) Long term restricted cash not included in working capital
The Company
Arrow is a junior oil and gas company engaged in the acquisition, exploration and development of oil and gas properties in Colombia and Western Canada. The Company's shares trade on the TSX Venture Exchange and the London AIM exchange under the symbol AXL.
On May 31, 2018, Arrow Exploration Ltd. entered in a share purchase agreement, as amended, with Canacol Energy Ltd. ("Canacol"), to acquire Canacol's Colombian oil properties held by its wholly-owned subsidiary Carrao Energy S.A. ("Carrao"). On September 27, 2018, Arrow Exploration Ltd. closed the agreement with Canacol, and during 2025 Carrao changed its name to Arrow Exploration Switzerland GmbH. The Company and Arrow Exploration Ltd. entered into an arrangement agreement dated June 1, 2018, as amended, whereby the parties completed a business combination pursuant to a plan of arrangement under the Business Corporations Act (Alberta) ("ABCA") on September 28, 2018. Arrow Exploration Ltd. and 2118295 Alberta Ltd. were amalgamated to form Arrow Holdings Ltd., a wholly-owned subsidiary of the Company.
On May 31, 2018, Arrow Exploration Ltd., entered into a purchase and sale agreement to acquire a 50% beneficial interest in a contract entered into with Ecopetrol S.A. pertaining to the exploration and production of hydrocarbons in the Tapir block from Samaria Exploration & Production S.A. ("Samaria"). On September 27, 2018, Arrow Exploration Ltd. closed the agreement with Samaria. As at March 31, 2026 the Company held an interest in four oil blocks in Colombia and oil and natural gas leases in five areas in Canada as follows:
|
|
|
Gross Acres |
Working Interest |
Net Acres |
|
COLOMBIA |
|
|
|
|
|
Tapir |
Operated1 |
65,125 |
50% |
32,563 |
|
Oso Pardo |
Operated |
672 |
100% |
672 |
|
Ombu |
Non-operated |
56,482 |
10% |
5,648 |
|
COR-39 |
Operated |
95,111 |
100% |
95,111 |
|
Total Colombia |
|
217,390 |
|
133,994 |
|
CANADA |
|
|
|
|
|
Fir |
Non operated |
7,680 |
32% |
2,458 |
|
Penhold |
Non-operated |
480 |
13% |
61 |
|
Pepper |
Operated |
8,960 |
100% |
8,960 |
|
Ansell |
Operated |
640 |
100% |
640 |
|
Wapiti |
Non-operated |
1,280 |
13% |
160 |
|
Ante Creek |
Operated |
2,560 |
100% |
2,560 |
|
KEHO |
Operated |
7,358 |
100% |
7,358 |
|
Total Canada |
|
28,958 |
|
22,197 |
|
TOTAL |
|
246,348 |
|
156,191 |
1 The Company's interest in the Tapir block is held through a private contract with Petrolco, who holds a 50% participating interest in, and is the named operator of, the Tapir contract with Ecopetrol. The formal assignment to the Company is subject to Ecopetrol's consent. The Company is the de facto operator pursuant to certain agreements with Petrolco (details of which are set out in Paragraph 16.13 of the Company's AIM Admission Document dated October 20, 2021).
The Company's producing assets are located in Colombia in the Tapir, Oso Pardo and Ombu blocks, with natural gas production in Canada at Fir and Pepper, Alberta.
Llanos Basin
Within the Llanos Basin, the Company is engaged in the exploration, development and production of oil within the Tapir block. In the Llanos Basin most oil accumulations are associated with three-way dip closure against NNE-SSW trending normal faults and can have pay within multiple reservoirs. The Tapir block, in Management's opinion, continues to offer substantial exploration upside.
Middle Magdalena Valley ("MMV") Basin
Oso Pardo Field
The Oso Pardo Field is located in the Santa Isabel Block in the MMV Basin. It is a 100% owned property operated by the Company. The Oso Pardo field is located within a Production Licence covering 672 acres. Three wells have been drilled to date within the licensed area.
Ombu E&P Contract - Capella Conventional Heavy Oil
The Caguan Basin covers an area of approximately 60,000 km2 and lies between the Putumayo and Llanos Basins. The primary reservoir target is the Upper Eocene aged Mirador formation. The Capella structure is a large, elongated northeast-southwest fault-related anticline, with approximately 17,500 acres in closure at the Mirador level. The field is located approximately 250 km away from the nearest offloading station at Neiva, where production from Capella is trucked. The Capella field is currently suspended and temporarily shut in.
Fir, Alberta
The Company has an average non-operated 32% WI in 12 gross (3.84 net) sections of oil and natural gas rights and 17 gross (4.5 net) producing natural gas wells at Fir. The wells produce raw natural gas into the Cecilia natural gas plant where it is processed.
Pepper, Alberta
The Company holds a 100% operated WI in 37 sections of Montney P&NG rights on its Pepper asset in West Central Alberta. The 6-26-53-23W5M Montney gas well (West Pepper) is tied into the Galloway gas plant for processing. The 3-21-52-22W5M Montney gas well (East Pepper) is currently tied into the Sundance gas plant for processing. The majority of lands have indefinite tenure. Both West Pepper and East Pepper have been producing during 2026.
KEHO, Alberta
A land package of 7,357 acres was purchased in January 2025 and a single multi-zone exploration well was drilled on the acreage in Q2 2025. The well was drilled to a total measured depth of 2,095 feet of measured and true vertical depth and encountered recoverable oil in the cretaceous glauconitic formation. The well was subsequently put on production, but after a short period of uneconomic flow rates it was suspended in that quarter. Additional low risk exploration opportunities exist on the acreage.
Three Months Ended March 31, 2026 Financial and Operational Highlights
· Arrow reported $23,498,316 in revenues, net of royalties, on crude oil sales of 403,933 bbls, 442 bbls of natural gas liquids ("NGL's") and 97,000 Mcf of natural gas sales;
· Net income of $5,221,470 and adjusted EBITDA was $14,060,456;
· Funds flow from operations of $11,557,223;
Results of Operations
During Q1 2026, the Company's production increased due to additional volumes of oil crude production from the Mateguafa Attic field in the Tapir block, offset by decreased production in other fields due to natural declines. This has allowed the Company to continue its healthy level of operating results and EBITDA.
Average Production by Property
|
Average Production Boe/d |
Q1 2026 |
YTD 2025 |
Q4 2025 |
Q3 2025 |
Q2 2025 |
Q1 2025 |
|
Oso Pardo |
98 |
114 |
95 |
103 |
131 |
126 |
|
Rio Cravo Este (Tapir) |
881 |
1,043 |
996 |
1,065 |
996 |
1,118 |
|
Carrizales Norte (Tapir) |
1,424 |
1,991 |
1,702 |
1,879 |
2,070 |
2,321 |
|
Alberta Llanos (Tapir) |
294 |
474 |
446 |
943 |
296 |
205 |
|
Mateguafa (Tapir) |
1,833 |
127 |
500 |
- |
- |
- |
|
Total Colombia |
4,530 |
3,749 |
3,739 |
3,990 |
3,493 |
3,770 |
|
Fir, Alberta |
67 |
100 |
107 |
85 |
100 |
105 |
|
Pepper, Alberta |
118 |
162 |
129 |
139 |
170 |
210 |
|
KEHO, Alberta |
- |
1 |
- |
- |
5 |
- |
|
TOTAL (Boe/d) |
4,715 |
4,012 |
3,975 |
4,214 |
3,768 |
4,085 |
The Company's average production for the three months ended March 31, 2026 was 4,715 boe/d which consisted of crude oil production in Colombia of 4,530 bbl/d, natural gas production of 1,078 Mcf/d, and minor amounts of natural gas liquids. The Company's Q1 2026 production was 15% higher than its Q1 2025 production and 19% higher than Q4 2025 due to the Mateguafa Attic additional volumes.
Average Daily Natural Gas and Oil Production and Sales Volumes
|
|
Three months ended March 31 |
|
|
2026 |
2025 |
|
|
Natural Gas (Mcf/d) |
|
|
|
Natural gas production |
1,078 |
1,851 |
|
Natural gas sales |
1,078 |
1,851 |
|
Realized Contractual Natural Gas Sales |
1,078 |
1,851 |
|
Crude Oil (bbl/d) |
|
|
|
Crude oil production |
4,530 |
3,770 |
|
Inventory movements and other |
(42) |
(18) |
|
Crude Oil Sales |
4,488 |
3,752 |
|
Corporate |
|
|
|
Natural gas production (boe/d) |
180 |
309 |
|
Natural gas liquids(bbl/d) |
5 |
6 |
|
Crude oil production (bbl/d) |
4,530 |
3,770 |
|
Total production (boe/d) |
4,715 |
4,085 |
|
Inventory movements and other (boe/d) |
(42) |
(18) |
|
Total Corporate Sales (boe/d) |
4,673 |
4,067 |
(1) Royalties paid in kind reduce the Company's crude oil sales volumes
During the three months ended March 31, 2026 the majority of production was attributed to Colombia, where all of Company's blocks were producing, except for Capella.
Natural Gas and Oil Revenues
|
|
Three months ended March 31 |
|
|
|
2026 |
2025 |
||
|
Natural Gas |
|
|
|
|
Natural gas revenues |
$ 168,417 |
$ 251,517 |
|
|
NGL revenues |
35,985 |
34,354 |
|
|
Royalties |
(9,918) |
(9,363) |
|
|
Revenues, net of royalties |
194,484 |
276,508 |
|
|
Oil |
|
|
|
|
Oil revenues |
$ 26,615,230 |
$ 21,850,288 |
|
|
Royalties |
(3,311,398) |
(2,620,671) |
|
|
Revenues, net of royalties |
23,303,832 |
19,229,617 |
|
|
Corporate |
|
|
|
|
Natural gas revenues |
$ 168,417 |
$ 251,517 |
|
|
NGL revenues |
35,985 |
34,354 |
|
|
Oil revenues |
26,615,230 |
21,850,288 |
|
|
Total revenues |
26,819,632 |
22,136,159 |
|
|
Royalties |
(3,321,316) |
(2,630,034) |
|
|
Natural gas and crude oil revenues, net of royalties, as reported |
$ 23,498,316 |
$ 19,506,125 |
|
Natural gas and crude oil revenues, net of royalties, for the three months ended March 31, 2026 were $23,498,316 (2025: $19,506,125), which represents an increase of 20% when compared to Q1 2025, and 42% higher than Q4 2025. The increase is mainly due to improved commodity prices and increased oil production from the Mateguafa Attic field in the Tapir block.
Average Benchmark and Realized Prices
|
|
Three months ended March 31 |
||
|
2026 |
2025 |
Change |
|
|
Benchmark Prices |
|
|
|
|
AECO (C$/Mcf) |
$1.90 |
$2.19 |
(13%) |
|
Brent ($/bbl) |
$80.95 |
$71.47 |
13% |
|
West Texas Intermediate ($/bbl) |
$72.15 |
$71.40 |
1% |
|
Realized Prices |
|
|
|
|
Natural gas, net of transportation ($/Mcf) |
$1.74 |
$1.51 |
15% |
|
Natural gas liquids ($/bbl) |
$111.74 |
$62.02 |
80% |
|
Crude oil, net of transportation ($/bbl) |
$65.89 |
$64.70 |
2% |
|
Corporate average, net of transport ($/boe) |
$63.77 |
$60.48 |
5% |
(1)Non-IFRS measure
The Company realized prices of $63.77 per boe during the three months ended March 31, 2026 (2025: $60.48), due to overall increase in oil and natural gas prices during 2026 and increase production of lighter oil which is sold at increased realized price when compared to heavy oil.
Operating Expenses
|
|
Three months ended March 31 |
|
|
2026 |
2025 |
|
|
Natural gas & NGL's |
228,957 |
408,878 |
|
Crude oil |
6,006,076 |
4,947,721 |
|
Total operating expenses |
6,235,033 |
5,356,599 |
|
Natural gas ($/Mcf) |
$2.36 |
2.45 |
|
Crude oil ($/bbl) |
$14.87 |
14.65 |
|
Corporate ($/boe)(1) |
$14.83 |
14.63 |
(1)Non-IFRS measure
During the three months ended March 31, 2026, Arrow incurred operating expenses of $6,235,033 (2025: 5,356,599). This increase in operating costs is mainly due to workovers performed in the Company's Santa Isabel field and increased production in the Mateguafa Attic field, which has contributed to the overall increase in production.
Operating Netbacks
|
|
Three months ended March 31 |
|
|
|
2026 |
2025 |
|
Natural Gas ($/Mcf) |
|
|
|
Revenue, net of transportation expense |
$1.74 |
$1.51 |
|
Royalties |
($0.10) |
($0.06) |
|
Operating expenses |
($2.36) |
($2.45) |
|
Natural gas operating netback(1) |
($0.73) |
($1.00) |
|
Crude oil ($/bbl) |
|
|
|
Revenue, net of transportation expense |
$65.89 |
$64.70 |
|
Royalties |
($8.20) |
($7.76) |
|
Operating expenses |
($14.87) |
($14.65) |
|
Crude oil operating netback(1) |
$42.82 |
$42.29 |
|
Corporate ($/boe) |
|
|
|
Revenue, net of transportation expense |
$63.77 |
$60.48 |
|
Royalties |
($7.90) |
($7.19) |
|
Operating expenses |
($14.83) |
($14.63) |
|
Corporate operating netback(1) |
$41.05 |
$38.66 |
(1)Non-IFRS measure
The operating netbacks of the Company for the three months ended March 31, 2026 have improved due to the overall improvement in crude oil and natural gas prices. The Company continues to develop alternatives to trucking water for disposal in order to improve operating costs.
General and Administrative Expenses (G&A)
|
|
Three months ended March 31 |
|
|
|
2026 |
2025 |
|
General and Administrative expenses, gross |
3,500,272 |
2,984,975 |
|
G&A recovered from 3rd parties |
(250,789) |
(102,985) |
|
Total G&A |
3,249,483 |
2,881,990 |
|
Total G&A per boe |
$7.73 |
$7.87 |
For the three months ended March 31, 2026, G&A expenses before recoveries totaled $3,500,272 (2025: $2,984,975). G&A expenses were increased when compared to Q1 2025 and, but due to the Company's increased production, G&A expenses were reduced, on a per barrel basis, when compared to 2025.
Share-based Compensation
|
|
Three months ended March 31 |
|
|
|
2026 |
2025 |
|
Share-based Compensation expense (income) |
922,796 |
(1,101,470) |
Share-based compensation expense for the three months ended March 31, 2026 totaled $922,796 (2025: income of $1,101,470) due to fair market valuation of this obligation with a corresponding effect in stock based compensation liability.
Financing Costs
|
|
Three months ended March 31 |
|
|
|
2026 |
2025 |
|
Financing expense paid or payable |
5,638 |
7,168 |
|
Non-cash financing costs |
88,429 |
68,277 |
|
Net financing costs |
94,067 |
75,445 |
The finance expense for 2026 is mostly related to lease obligation interest and the non-cash finance cost represents the accretion in the present value of the decommissioning obligation for the period. The amount of this expense will fluctuate commensurate with the asset retirement obligation as new wells are drilled or properties are acquired or disposed.
Depletion and Depreciation
|
|
Three months ended March 31 |
|
|
|
2026 |
2025 |
|
Depletion and depreciation |
6,176,288 |
6,520,968 |
Depletion and depreciation expense for the three months ended March 31, 2026 totaled $6,176,288 (2025: $6,520,968). This decrease is due to lower carrying value of depletable property and equipment, offset by increased production. The Company uses the unit of production method and proved plus probable reserves to calculate its depletion and depreciation expense.
Income Tax Expense
|
|
Three months ended March 31 |
|
|
|
2026 |
2025 |
|
Current income tax |
1,420,519 |
1,877,917 |
|
Deferred income tax |
225,316 |
1,494,925 |
|
Net income tax expense |
1,645,835 |
3,372,842 |
The Company recognized a net income tax expense of $1,645,835 (2025: $3,372,842) which consisted of $1,420,519 of current income tax expense (2025: $1,877,917) and an expense of $225,316 of deferred income tax (2024: $1,494,925). This decrease is mainly caused by using a lower taxable rate in Colombia when compared to Q1 2025.
LIQUIDITY AND CAPITAL RESOURCES
Capital Management
The Company's objective is to maintain a capital base sufficient to provide flexibility in the future development of the business and maintain investor, creditor and market confidence. The Company manages its capital structure and makes adjustments in response to changes in economic conditions and the risk characteristics of the underlying assets. The Company considers its capital structure to include share capital, debt and adjusted working capital. In order to maintain or adjust the capital structure, from time to time the Company may issue common shares or other securities, sell assets or adjust its capital spending to manage current and projected debt levels. As at March 31, 2026 the Company has a working capital of $5,262,031. The Company has maintained a healthy working capital, using its operational cash flows to settle its obligations and to continue growing its operations.
Adjusted Working Capital
As at March 31, 2026 the Company's adjusted working capital was calculated as follows:
|
|
|
March 31, 2026 |
||
|
Current assets: |
|
|
|
|
|
Cash |
|
|
$ |
14,215,687 |
|
Restricted cash |
|
|
|
286,106 |
|
Trade and other receivables |
|
|
|
14,237,298 |
|
Taxes receivable |
|
|
|
8,745,770 |
|
Other current assets |
|
|
|
385,214 |
|
|
|
|
|
|
|
Less: |
|
|
|
|
|
Accounts payable and accrued liabilities |
|
|
|
31,871,164 |
|
Lease obligation |
|
|
|
46,504 |
|
Income tax payable |
|
|
|
80,146 |
|
Stock based compensation liability |
|
|
|
610,230 |
|
Adjusted working capital(1) |
|
|
$ |
5,262,031 |
(1)Non-IFRS measure
Debt Capital
As at March 31, 2026 the Company does not have any outstanding debt balance. The Company has a crude oil prepayment agreement with an integrated energy major to market its oil production in Colombia. This agreement provides access to $20 million in a revolving line of credit until June 2026 and $15 million until June 2027. The interest rate is SOFR + 4% for the first $10 million and SOFR + 5% for amounts exceeding $10 million. As at March 31, 2026, no funds have been withdrawn from this line of credit.
CONTRACTUAL OBLIGATIONS
Exploration and Production Contracts
The Company has entered into a number of exploration contracts in Colombia which require the Company to fulfill work program commitments and issue financial guarantees related thereto (see Letters of Credit section below). During 2026, the Company received confirmation that its COR-39 exploration and production contract has been terminated by mutual agreement with the ANH and, therefore, its $12,000,000 exploration commitment related to this contract has been canceled at no additional costs to the Company. As a result, the Company has no outstanding exploration commitments.
Letters of Credit
At March 31, 2026, the Company had obligations under Letters of Credit ("LC's") outstanding totaling $3.6 million to guarantee work commitments on exploration blocks and other contractual commitments. In the event the Company fails to secure the renewal of the letters of credit underlying the ANH guarantees, the ANH could decide to cancel the underlying exploration and production contract, as applicable.
|
Current Outstanding Letters of Credit |
|||||
|
|
|
|
|
|
|
|
Contract |
Beneficiary |
Issuer |
Type |
Amount (US $) |
Renewal Date |
|
SANTA ISABEL |
ANH |
Carrao Energy |
Abandonment |
685,296 |
April 14, 2027 |
|
ANH |
Carrao Energy |
Financial Capacity |
1,672,162 |
June 30, 2026 |
|
|
CORE - 39 |
ANH |
Carrao Energy |
Compliance |
100,000 |
June 30, 2026 |
|
OMBU |
ANH |
Carrao Energy |
Financial Capacity |
436,300 |
October 14, 2026 |
|
ANH |
Carrao Energy |
Abandonment |
708,119 |
August 28, 2026 |
|
|
Total |
|
|
|
$3,601,878 |
|
Share Capital
As at March 31, 2026, the Company had 285,864,348 common shares and 19,432,405 stock options outstanding.
SUMMARY OF THREE MONTHS RESULTS
|
|
2026 |
2025 |
2024 |
|||||
|
|
Q1 |
Q4 |
Q3 |
Q2 |
Q1 |
Q4 |
Q3 |
Q2 |
|
Oil and natural gas sales, net of royalties |
23,498,316 |
16,535,583 |
18,543,974 |
15,868,938 |
19,506,125 |
22,873,626 |
21,300,115 |
15,146,366 |
|
Net income (loss) |
5,221,470 |
(3,910,602) |
3,089,683 |
(934,735) |
2,663,764 |
2,081,956 |
6,668,493 |
1,247,825 |
|
Income (loss) per share - basic diluted |
0.02 0.02 |
(0.03) (0.03) |
0.01 0.01 |
(0.00) (0.00) |
0.01 0.01 |
0.01 0.01 |
0.02 0.02 |
0.00 0.00 |
|
Working capital (deficit) |
5,262,031 |
1,172,147 |
173,863 |
393,211 |
11,036,334 |
11,646,169 |
9,622,125 |
6,657,117 |
|
Total assets |
111,547,344 |
106,017,624 |
93,684,265 |
92,729,950 |
90,532,063 |
81,268,734 |
73,535,397 |
67,864,633 |
|
Net capital expenditures |
7,882,335 |
7,752,239 |
9,287,571 |
14,771,206 |
11,379,180 |
8,928,725 |
6,945,779 |
8,965,408 |
|
Average daily production (boe/d) |
4,715 |
4,096 |
4,214 |
3,767 |
4,085 |
4,738 |
4,124 |
2,638 |
The Company's oil and natural gas sales in Q1 2026 have increased 42% and 20% when compared to Q4 2025 and Q1 2025 due to increased production on its existing assets and increased overall commodity prices. The Company's production levels in Colombia remain consistent. Trends in the Company's net income are also impacted most significantly by operating expenses, financing costs, income taxes, depletion, depreciation and impairment of oil and gas properties, and other income.
OUTSTANDING SHARE DATA
At May 26, 2026 the Company had the following securities issued and outstanding:
|
|
Number |
Exercise Price |
Expiry Date |
|||
|
Common shares |
|
285,864,348 |
|
n/a |
|
n/a |
|
Stock options |
|
250,000 |
|
CAD$ 1.15 |
|
October 22, 2028 |
|
Stock options |
|
100,000 |
|
CAD$ 0.31 |
|
May 3, 2029 |
|
Stock options |
|
1,681,667 |
|
GBP 0.1675 |
|
Jun. 21, 2024, 2025 and 2026 |
|
Stock options |
|
50,000 |
|
GBP 0.1925 |
|
Jul. 23, 2024, 2025 and 2026 |
|
Stock options |
|
333,334 |
|
CAD $0.330 |
|
Mar. 21, 2025, 2026 and 2027 |
|
Stock options |
|
5,495,926 |
|
CAD $0.375 |
|
Oct. 29 2025, 2026 and 2027 |
|
Stock options |
|
2,569,626 |
|
CAD $0.475 |
|
Mar. 11 2026, 2027 and 2028 |
|
Stock options |
|
6,198,334 |
|
CAD $0.280 |
|
Apr. 8, 2027, 2028 and 2029 |
|
Stock options |
|
2,753,518 |
|
CAD $0.375 |
|
Sept. 23, 2027, 2028 and 2029 |
OUTLOOK
The Company has efficiently deployed its resources on successful drilling campaigns at Rio Cravo, Carrizales Norte, Alberta Llanos and more recently Mateguafa on the Tapir Block. These successful campaigns have translated into production growth and positive cashflows, providing Arrow with the funds required to expand its capital program in 2026. In 2026, the Company plans another year of production growth with a balanced program of both development and low risk exploration drilling on the Tapir Block. The Company has a strong balance sheet with no debt, access to financing and cash flow from operations which will fund the 2026 program.
CRITICAL ACCOUNTING ESTIMATES
A summary of the Company's critical accounting estimates is contained in Note 3 Annual Financial Statements. These accounting policies are subject to estimates and key judgements about future events, many of which are beyond Arrow's control.
SUMMARY OF MATERIAL ACCOUNTING POLICIES
A summary of the Company's material accounting policies is included in note 3 of the Annual Financial Statements. These accounting policies are consistent with those of the previous financial year.
RISKS AND UNCERTAINTIES
The Company is subject to financial, business and other risks, many of which are beyond its control and which could have a material adverse effect on the business and operations of the Company. Please refer to "Risk Factors" in the MD&A for the year ended December 31, 2025 for a description of the financial, business and other risk factors affecting the Company which are available on SEDAR at www.sedar.com
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