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Arrow Exploration Corp.
Quarterly Report • Nov 27, 2025
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Quarterly Report
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National Storage Mechanism | Additional information 
RNS Number : 1778J
Arrow Exploration Corp.
27 November 2025
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 Q3 2025 INTERIM RESULTS
CALGARY, November 27, 2025 - 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 and nine months ended September 30, 2025, which are available on SEDAR (www.sedar.com) and will also be available shortly on Arrow's website at www.arrowexploration.ca.
Q3 2025 Highlights:
· Average corporate production of 4,214 boe/d (Q3 2024: 4,124 boe/d).
· Recorded $18.5 million of total oil and natural gas revenue, net of royalties.
· Realized corporate oil operating netbacks(1) of $38.21/bbl.
· Cash position of $6.3 million at the end of Q3 2025.
· YTD generated operating cashflows of $25 million.
· Drilled two additional development wells in the Carrizales Norte (CN) field in the Tapir block, and an exploration well in Mateguafa Oeste (MO).
· Net YTD income of $4.8 million.
(1)Non-IFRS measures - see "Non-IFRS Measures" section within the MD&A
Post Period End Highlights:
· Drilled the Mateguafa Attic wells: Mateguafa-5 (M-5) and Mateguafa-6 (M-6), and spud the Mateguafa-7 Horizontal well (M-HZ7)
Cash Balance:
On November 1, 2025, the Company's cash balance was US$8.2 million. This reflects an intensive period of capital outlay as the Company contracted a second rig during Q2 and Q3 and built access roads and drill pads at Carrizales Norte, Mataguafa Oeste, Mataguafa Attic and preliminary works at the highly prospective Icaco project. The Company has now reverted to operating one rig, and the site preparation and seismic costs are largely met, this provides a foundation for future development and exploration activities., Both production and net backs remain robust at current market prices.
Tapir Extension and COR-39 Block
The Company is engaged in continuing discussions with authorities on the Tapir block extension. Arrow considers that all requirements for the extension have been met. Furthermore, the Company is in discussions with regulatory bodies on the termination of COR-39 Block license obligations (where activity has been suspended since November 2017). Discussions with authorities are going well and Arrow will keep the market updated in future releases.
Upcoming Drilling
The Company has spud the M-HZ7 well, which is expected to be put on production in mid-December 2025. Thereafter, the Company expects to drill another well at its Mateguafa Attic field and initiate civil works in preparation to drill its first exploration well in the Icaco prospect in Q1 2026.
Marshall Abbott, CEO of Arrow Exploration Corp., commented:
"The third quarter of 2025 has been very busy for Arrow. We completed two development wells in Carrizales Norte and drilled the Mateguafa Oeste exploration well as well as setting up infrastructure for the discovery at Mateguafa Attic and the upcoming exploration well at Icaco. The Mateguafa Attic discovery could become a major production platform and have a material impact on the Company, and the Icaco prospect is another near term catalyst that we expect will be drilled in the first quarter of 2026."
"The Company continues to work with regulatory authorities on the extension of the Tapir block. The Company considers it has met all of the requirements for an extension and discussions with regulatory officials continue to progress."
"Arrow has invested heavily into roads, pads and water infrastructure in both Q2 and Q3 and the results can be seen with a significant decrease in the Company's operating cost in Q3 when compared to Q2 2025. This investment will continue to payback over the life of the Tapir pads."
"The focus for the remainder of 2025 will be to drill low risk wells at the Mateguafa Attic pad in the Tapir block and to get all preliminary works in place to drill our first exploratory well at the Icaco prospect."
FINANCIAL AND OPERATING HIGHLIGHTS
| (in United States dollars, except as otherwise noted) | Three months ended September 30, 2025 | Nine months ended September 30, 2025 |
Three months ended September 30, 2024 |
| Total natural gas and crude oil revenues, net of royalties | 18,543,974 | 53,919,037 | 21,300,115 |
| Funds flow from operations | 9,374,301 | 23,114,380 | 9,233,972 |
| Funds flow from operations per share - | |||
| Basic($) | 0.02 | 0.07 | 0.03 |
| Diluted ($) | 0.02 | 0.07 | 0.03 |
| Net income | 3,089,684 | 4,818,714 | 6,668,493 |
| Net income per share - | |||
| Basic ($) | 0.01 | 0.02 | 0.02 |
| Diluted ($) | 0.01 | 0.02 | 0.02 |
| Adjusted EBITDA (1) | 10,843,377 | 28,644,904 | 15,961,900 |
| Weighted average shares outstanding - | |||
| Basic ($) | 285,864,348 | 285,864,348 | 285,864,348 |
| Diluted ($) | 289,719,564 | 292,991,907 | 288,921,950 |
| Common shares end of period | 285,864,348 | 285,864,348 | 285,864,348 |
| Capital expenditures | 9,287,571 | 35,437,959 | 6,945,779 |
| Cash and cash equivalents | 6,370,539 | 6,370,539 | 16,536,801 |
| Current Assets | 17,259,451 | 17,259,451 | 23,230,243 |
| Current liabilities | 17,085,588 | 17,085,588 | 13,608,118 |
| Adjusted working capital(1) | 173,863 | 173,863 | 9,622,125 |
| Long-term portion of restricted cash | 152,617 | 152,617 | 176,094 |
| Total assets | 93,684,265 | 93,684,265 | 73,535,397 |
| Operating | |||
| Natural gas and crude oil production, before royalties | |||
| Natural gas (Mcf/d) | 1,306 | 1,579 | 461 |
| Natural gas liquids (bbl/d) | 6 | 8 | 5 |
| Crude oil (bbl/d) | 3,990 | 3,752 | 4,042 |
| Total (boe/d) | 4,214 | 4,023 | 4,124 |
| Operating netbacks ($/boe) | |||
| Natural gas ($/Mcf) | ($1.76) | ($1.36) | ($1.48) |
| Crude oil ($/bbl) | $38.21 | $37.08 | $52.00 |
| Total ($/boe) | $35.72 | $34.13 | $50.76 |
Discussion of Operating Results
During Q3 2025, the Company's production has increased, compared to the previous two quarters, due to wells drilled in the Alberta Llanos and Rio Cravo Este fields coming on production. Production growth is expected to continue as the Company executes on the 2025 budget. During the quarter, the Company maintained good operating results and healthy EBITDA.
Average Production by Property
| Average Production Boe/d | Q3 2025 | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | Q1 2024 |
| Oso Pardo | 103 | 131 | 126 | 154 | 180 | 113 | 166 |
| Ombu (Capella) | - | - | - | - | - | - | - |
| Rio Cravo Este (Tapir) | 1,065 | 996 | 1,118 | 1,178 | 1,078 | 1,283 | 1,644 |
| Carrizales Norte (Tapir) | 1,879 | 2,070 | 2,321 | 3,153 | 2,784 | 991 | 622 |
| Alberta Llanos | 943 | 296 | 205 | 26 | - | - | - |
| Total Colombia | 3,990 | 3,493 | 3,770 | 4,511 | 4,042 | 2,387 | 2,432 |
| Fir, Alberta | 85 | 100 | 105 | 88 | 82 | 77 | 78 |
| Pepper, Alberta | 139 | 170 | 210 | 139 | - | 82 | 220 |
| KEHO, Alberta | - | 5 | - | - | - | - | - |
| TOTAL (Boe/d) | 4,214 | 3,768 | 4,085 | 4,738 | 4,124 | 2,546 | 2,730 |
The Company's average production for the three months ended September 30, 2025 was 4,214 boe/d which consisted of crude oil production in Colombia of 3,990 bbl/d, natural gas production of 1,306 Mcf/d, and minor amounts of natural gas liquids. The Company's Q3 2025 production was marginally higher than its Q3 2024 production and 12% higher than Q2 2025 due to increase in production in the Alberta Llanos field.
Discussion of Financial Results
During Q3 2025,the Company has experienced a reduction in realized crude oil and gas prices compared with the same period in 2024, as summarized below:
| Three months ended September 30 | |||
| 2025 | 2024 | Change | |
| Benchmark Prices | |||
| AECO (C$/Mcf) | $0.64 | $0.70 | 146% |
| Brent ($/bbl) | $69.80 | $72.87 | (4%) |
| West Texas Intermediate ($/bbl) | $64.95 | $75.15 | (15%) |
| Realized Prices | |||
| Natural gas, net of transportation ($/Mcf) | $0.50 | $0.56 | (72%) |
| Natural gas liquids ($/bbl) | $45.69 | $61.24 | (19%) |
| Crude oil, net of transportation ($/bbl) | $56.67 | $65.35 | (13%) |
| Corporate average, net of transport ($/boe)(1) | $53.90 | $64.04 | (6%) |
(1)Non-IFRS measure
Operating Netbacks
The Company also continued to realize good oil operating netbacks, as summarized below:
| Three months ended September 30 | ||
| 2025 | 2024 | |
| Natural Gas ($/Mcf) | ||
| Revenue, net of transportation expense | $0.50 | $0.56 |
| Royalties | ($0.05) | ($0.09) |
| Operating expenses | ($2.22) | ($1.95) |
| Natural Gas operating netback(1) | ($1.76) | ($1.48) |
| Crude oil ($/bbl) | ||
| Revenue, net of transportation expense | $56.67 | $65.35 |
| Royalties | ($6.57) | ($7.44) |
| Operating expenses | ($11.88) | ($5.91) |
| Crude Oil operating netback(1) | $38.21 | $52.00 |
| Corporate ($/boe) | ||
| Revenue, net of transportation expense | $53.90 | $64.04 |
| Royalties | ($6.24) | ($7.28) |
| Operating expenses | ($11.94) | ($6.00) |
| Corporate Operating netback(1) | $35.72 | $50.76 |
(1)Non-IFRS measure
The operating netbacks of the Company have been affected in 2025 due to increased water production from its Colombian assets and decreased crude oil and natural gas prices. During Q3 2025, the Company incurred $9 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 2025, 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 AND NINE MONTHS ended SEPTEMBER 30, 2025 AND 2024
IN UNITED STATES DOLLARS
(UNAUDITED)
Notice of No Auditor Review of the Interim Condensed Consolidated Financial Statements
as at and for the three and nine months ended September 30, 2025
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 | September 30, 2025 | December 31, 2024 | ||
| ##### ASSETS | |||||
| ##### Current assets | |||||
| Cash | $ | 6,370,539 | $ | 18,837,784 | |
| Restricted cash and deposits | 3 | 283,973 | 238,141 | ||
| Trade and other receivables | 4 | 3,719,990 | 3,830,215 | ||
| Taxes receivable | 5 | 6,565,898 | 2,656,926 | ||
| Deposits and prepaid expenses | 261,935 | 232,730 | |||
| Inventory | 57,116 | 177,400 | |||
| 17,259,451 | 25,973,196 | ||||
| Non-current assets | |||||
| Restricted cash and deposits | 3 | 152,617 | 167,545 | ||
| Exploration and evaluation assets | 6 | 6,526,028 | 142,995 | ||
| Property and equipment | 7 | 69,746,169 | 54,984,998 | ||
| Total Assets | $ | 93,684,265 | $ | 81,268,734 | |
| ##### LIABILITIES AND SHAREHOLDERS' EQUITY | |||||
| Current Liabilities | |||||
| Accounts payable and accrued liabilities | $ | 15,789,606 | $ | 8,504,332 | |
| Lease obligation | 8 | 57,185 | 44,639 | ||
| Income taxes | 595,239 | 4,294,109 | |||
| Stock based compensation liability | 10 | 643,558 | 1,483,947 | ||
| 17,085,588 | 14,327,027 | ||||
| Non-current liabilities | |||||
| Lease obligations | 8 | 137,132 | 174,767 | ||
| Other liabilities | 546,349 | 610,059 | |||
| Deferred income taxes | 10,511,892 | 6,832,229 | |||
| Decommissioning liability | 9 | 7,519,075 | 6,307,659 | ||
| Total liabilities | 35,800,036 | 28,251,741 | |||
| Shareholders' equity | |||||
| #### Share capital | #### 10 | #### 73,829,795 | #### 73,829,795 | ||
| Contributed surplus | 856,093 | 856,093 | |||
| Deficit | (15,952,180) | (20,770,894) | |||
| Accumulated other comprehensive loss | (849,479) | (898,001) | |||
| Total shareholders' equity | 57,884,229 | 53,016,993 | |||
| Total liabilities and shareholders' equity | $ | 93,684,265 | $ | 81,268,734 |
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 "Grant Carnie" Director
Gage Jull Grant Carnie
Arrow Exploration Corp.
Interim Condensed Consolidated Statements of Operations and Comprehensive Income
In United States Dollars
(Unaudited)
| For the three months ended September 30 | For the nine months ended September 30 | |||||||
| Notes | 2025 | 2024 | 2025 | 2024 | ||||
| Revenue | ||||||||
| Oil and natural gas | $ 20,971,892 | $ 24,031,829 | $ 61,057,319 | $ 57,592,614 | ||||
| Royalties | (2,427,918) | (2,731,714) | (7,138,282) | (6,741,212) | ||||
| 18,543,974 | 21,300,115 | 53,919,037 | 50,851,402 | |||||
| Expenses | ||||||||
| Operating | 4,645,076 | 2,252,602 | 16,662,522 | 6,797,194 | ||||
| Administrative | 2,834,708 | 2,862,620 | 9,488,066 | 9,258,119 | ||||
| Share based payments | 10 | 451,048 | 144,050 | 207,418 | 555,173 | |||
| Financing costs: | ||||||||
| Accretion | 9 | 78,139 | 46,144 | 219,185 | 124,883 | |||
| Interest | 8 | 6,974 | 7,333 | 21,509 | 24,604 | |||
| Other | 90,489 | 51,202 | 93,685 | 192,382 | ||||
| Foreign exchange (gain) loss | 222,258 | 277,204 | (876,455) | 149,817 | ||||
| Depletion and depreciation | 7 | 5,703,343 | 4,681,591 | 15,404,004 | 11,475,258 | |||
| Impairment loss | 7 | - | - | - | 1,542,000 | |||
| Other expense (income) | (1,446) | - | - | - | ||||
| 14,030,589 | 10,322,745 | 41,219,934 | 30,119,431 | |||||
| Income before taxes | 4,513,385 | 10,977,370 | 12,699,103 | 20,731,971 | ||||
| Income taxes | ||||||||
| Current | 1,305,646 | 5,927,455 | 4,200,727 | 11,146,403 | ||||
| Deferred | 118,055 | (1,618,578) | 3,679,662 | (1,507,477) | ||||
| 1,423,701 | 4,308,877 | 7,880,389 | 9,638,926 | |||||
| Net income for the period | 3,089,684 | 6,668,493 | 4,818,714 | 11,093,045 | ||||
| Other comprehensive gain (loss) | ||||||||
| Foreign currency translation | 61,242 | 95,203 | 48,522 | (130,721) | ||||
| Total other comprehensive gain (loss) | 61,242 | 95,203 | 48,522 | (130,721) | ||||
| Total comprehensive income for the period | $ 3,150,926 | $ 6,763,696 | $ 4,867,236 | $ 10,962,324 | ||||
| Net income per share | ||||||||
| - basic | $ 0.01 | $ 0.02 | $ 0.02 | $ 0.04 | ||||
| - Diluted | $ 0.01 | $ 0.02 | $ 0.02 | $ 0.03 | ||||
| Weighted average shares outstanding | ||||||||
| - Basic | 285,864,348 | 285,864,348 | 285,864,348 | 285,864,348 | ||||
| - Diluted | 289,719,564 | 292,536,147 | 292,991,907 | 291,542,735 | ||||
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, 2025 | $ | 73,829,795 | $ | 856,093 | $ | (898,001) | $ | (20,770,894) | $ | 53,016,993 |
| Net income for the period | - | - | - | 4,818,714 | 4,818,714 | |||||
| Other comprehensive income | - | - | 48,522 | - | 48,522 | |||||
| Total comprehensive income | - | - | 48,522 | 4,818,714 | 4,867,263 | |||||
| Balance September 30, 2025 | $ | 73,829,795 | 856,093 | (849,479) | (15,952,180) | 57,884,229 | ||||
| Share Capital | Contributed Surplus | Accumulated other comprehensive loss | Deficit | Total Equity | ||||||
| Balance January 1, 2024 | $ | 73,829,795 | $ | 2,161,945 | $ | (536,322) | $ | (33,945,895) | $ | 41,509,523 |
| Net income for the period | - | - | - | 11,093,045 | 11,093,045 | |||||
| Other comprehensive loss | - | - | (130,721) | - | (130,721) | |||||
| Total comprehensive loss | - | - | (130,721) | 11,093,045 | 10,962,324 | |||||
| Share-based compensation | - | 555,173 | - | - | 555,173 | |||||
| Balance September 30, 2024 | $ | 73,829,795 | $ | 2,717,118 | $ | (667,043) | $ | (22,852,850) | $ | 53,027,020 |
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 nine months ended September 30, | Notes | 2025 | 2024 | |
| Cash flows provided by operating activities: | ||||
| Net income | $ 4,818,714 | $ 11,093,045 | ||
| Items not involving cash: | ||||
| Deferred taxes | 3,679,662 | (1,507,477) | ||
| Share-based compensation expense | 10 | 207,418 | 555,173 | |
| Depletion and depreciation | 7 | 15,404,004 | 11,475,258 | |
| Interest on leases | 8 | 21,509 | 24,604 | |
| Accretion | 9 | 219,185 | 124,883 | |
| Unrealized foreign exchange (gain)/loss | (57,759) | (44,473) | ||
| Impairment loss | - | 1,542,000 | ||
| Changes in non‑cash working capital balances: | ||||
| Restricted cash and deposits | (30,904) | 426,591 | ||
| Trade and other receivables | 110,225 | (374,777) | ||
| Taxes receivable | (3,908,971) | 2,409,113 | ||
| Deposits and prepaid expenses | (29,205) | (35,274) | ||
| Inventory | 120,284 | 441,715 | ||
| Income tax payable | (3,698,869) | 2,633,943 | ||
| Accounts payable and accrued liabilities | 9,385,252 | 610,696 | ||
| Stock based payments | 10 | (1,093,715) | - | |
| Settlement of decommissioning obligations and other liabilities | 9 | (84,638) | (162,662) | |
| Cash provided by operating activities | 25,062,192 | 29,212,358 | ||
| Cash flows used in investing activities: | ||||
| Additions to exploration and evaluation assets | 6 | (6,383,033) | (1,442,094) | |
| Additions to property and equipment | 7 | (29,054,924) | (20,750,421) | |
| Changes in non-cash working capital | (2,099,977) | (2,529,254) | ||
| Cash flows used in investing activities | (37,537,934) | (24,721,769) | ||
| Cash flows used in financing activities: | ||||
| Lease payments | 8 | (53,814) | (49,411) | |
| Cash flows used in financing activities | (53,814) | (49,411) | ||
| Effect of changes in the exchange rate on cash | 62,311 | (39,753) | ||
| Increase (decrease) in cash | (12,467,245) | 4,401,425 | ||
| Cash, beginning of period | 18,837,784 | 12,135,376 | ||
| #### Cash, end of period | 6,370,539 | 16,536,801 | ||
| Supplemental information | ||||
| Interest paid | $ - | $ - | ||
| Taxes paid | $ 3,905,567 | $ 1,430,337 | ||
The accompanying notes are an integral part of these interim consolidated financial statements.
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 November 26, 2025. 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, 2024.
These Financial Statements have been prepared on the historical cost basis, except for financial assets and liabilities recorded in accordance with IFRS 9. The Financial Statements have been prepared using the same accounting policies and methods as the consolidated financial statements for the year ended December 31, 2024. 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, 2024.
3. Restricted Cash and deposits
| September 30, 2025 |
December 31, 2024 | |||
| Colombia (i) | $ | 303,674 | $ | 275,949 |
| Canada | 132,916 | 129,737 | ||
| Sub-total | 436,590 | 405,686 | ||
| Long-term portion | (152,617) | (167,545) | ||
| Current portion of restricted cash and deposits | $ | 283,973 | $ | 238,141 |
(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
| September 30, 2025 |
December 31, 2024 | |||
| Trade receivables, net of advances | $ | 105,049 | $ | 1,926,176 |
| Other accounts receivable | 3,614,940 | 1,904,039 | ||
| $ | 3,719,990 | $ | 3,830,215 |
As at September 30, 2025, other accounts receivable include $729,561 (December 31, 2024 - $699,880) receivable from on demand loans with executives and directors.
5. Taxes receivable
| September 30, 2025 |
December 31, 2024 | |||
| Value-added tax (VAT) credits recoverable | $ | 4,211,243 | $ | 1,738,536 |
| Income tax withholdings and advances, net | 2,354,655 | 918,390 | ||
| $ | 6,565,898 | $ | 2,656,926 |
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
| September 30, 2025 |
December 31, 2024 |
|||
| Balance, beginning of the period | $ | 142,995 | $ | - |
| Additions | 6,383,033 | 3,818,279 | ||
| Reclassification to Property and Equipment (Note 8) | - | (3,675,284) | ||
| Balance, end of the period | $ | 6,526,028 | $ | 142,995 |
As at September 30, 2025, no indicators of impairment were identified in the Company's exploration and evaluation assets. During 2024, the Company incurred in geological and geophysical costs in its Carrizales Norte prospect located, and determined the technical feasibility and commercial viability of these assets, transferring $3,675,284 to its property and equipment. An impairment test on these assets was prepared and no losses were identified as a result of such tests.
7. Property and Equipment
| Cost | Oil and Gas Properties | Right of Use and Other Assets | Total |
| Balance, December 31, 2023 | $ 75,292,865 | $ 544,217 | $ 75,837,082 |
| Additions | 27,295,956 | 6,908 | 27,302,864 |
| Adjustment to ROU assets | - | (53,543) | (53,543) |
| Transfers from exploration of evaluation assets | 3,675,284 | - | 3,675,284 |
| Decommissioning adjustment | 2,702,058 | - | 2,702,058 |
| Balance, December 31, 2024 | $108,966,163 | $ 497,582 | $ 109,463,745 |
| Additions | 29,054,924 | - | 29,054,924 |
| Decommissioning adjustment | 1,005,110 | - | 1,005,110 |
| Balance, September 30, 2025 | $139,026,197 | $ 497,582 | $ 139,523,779 |
| Accumulated depletion and depreciation and impairment | Oil and Gas Properties | Right of Use and Other Assets | Total | |
| Balance, December 31, 2023 | $ 37,074,320 | $ 227,142 | $ 37,301,462 | |
| Depletion and depreciation | 17,448,880 | 86,935 | 17,535,815 | |
| Impairment reversal | (662,753) | - | (662,753) | |
| Balance, December 31, 2024 | $ 53,860,447 | $ 314,077 | $ 54,174,524 | |
| Depletion and depreciation | 15,354,688 | 49,316 | 15,404,004 | |
| Balance, September 30, 2025 | $ 69,215,135 | $ 363,393 | $ 69,578,528 | |
| Foreign exchange | ||||
| Balance December 31, 2023 | $ (161,237) | $ (3,022) | $ (164,259) | |
| Effects of movements in foreign exchange rates |
(122,332) | (17,632) | (139,964) | |
| Balance, December 31, 2024 | $ (283,569) | $ (20,654) | $ (304,223) | |
| Effects of movements in foreign exchange rates |
100,288 | 4,853 | 105,141 | |
| Balance, September 30, 2025 | $ (183,281) | $ (15,801) | $ (199,082) | |
| Net Book Value | |||
| Balance December 31, 2024 | $ 54,822,147 | $ 162,851 | $ 54,984,998 |
| Balance September 30, 2025 | $ 69,627,781 | $ 118,388 | $ 69,746,169 |
Canada
As at September 30, 2025 and 2024, no indicators of impairment were identified in the Company's property and equipment. As at December 31, 2024, the Company determined there were indicators of impairment reversal in its Canada CGU. Management determined the recoverable amount of its Canada CGU using the fair value less costs of disposal approach. As at June 30, 2024, the Company determined there were indicators of impairment in its Canada CGU, mainly due to decreases in gas prices, and prepared estimates of its fair value less costs of disposal of its Canada CGU. It was determined that carrying value of its Canada CGU exceeded its recoverable amount and, therefore, an impairment loss of $1,542,000 was included in the interim consolidated statements of operations and comprehensive income for the nine months ended September 30, 2024.
8. Lease Obligations
A reconciliation of the discounted lease obligation is set forth below:
| 2025 | 2024 | ||
| Obligation, beginning of the period | 219,406 | 320,593 | |
| Changes to leases | - | (53,943) | |
| Lease payments | (53,814) | (57,807) | |
| Interest | 21,509 | 31,846 | |
| Effects of movements in foreign exchange rates | 7,216 | (21,683) | |
| Obligation, end of the period | 194,317 | 219,406 | |
| Current portion | (57,185) | (44,639) | |
| Long-term portion | 137,132 | 174,767 |
During 2024, the Company recognized the impact of a change in payment terms of its office lease and recognized a decrease in lease liabilities and ROU assets for $ 53,943. As at September 30, 2025, the Company has the following future lease obligations:
| Less than one year | 74,197 | ||
| 2 - 5 years | 222,255 | ||
| Total lease payments | 296,452 | ||
| Amounts representing interest over the term | (102,135) | ||
| Present value of the net obligation | 194,317 |
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:
| September 30, 2025 |
December 31, 2024 |
||
| Obligation, beginning of the period | 6,307,659 | 3,973,075 | |
| Additions | 1,232,560 | 1,467,282 | |
| Change in estimated cash flows | (227,451) | 843,978 | |
| Payments or settlements | (27,857) | (110,263) | |
| Accretion expense | 219,185 | 178,296 | |
| Effects of movements in foreign exchange rates | 14,979 | (44,709) | |
| Obligation, end of the period | 7,519,075 | 6,307,659 |
The obligation was calculated using a risk-free discount rate range of 2.50% to 3.75% in Canada (2024: 1.25% to 4.50%) and between 4.43% and 4.60% in Colombia (2024: 4.30% and 4.60%) with an inflation rate of 2.0% and 1.90%, respectively (2024: 2.0% and 1.9%). The majority of costs are expected to occur between 2026 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 $9,166,067 (2024: $8,155,704).
10. Share Capital
(a) Authorized: Unlimited number of common shares without par value
(b) Issued:
| September 30, 2025 | December 31, 2024 | |||
| 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 September 30, 2025 and December 31, 2024 and changes during the periods ended on those dates is presented below:
| September 30, 2025 | December 31, 2024 | |||
| Stock Options | Number of options | Weighted average exercise price (CAD $) |
Number of options | Weighted average exercise price (CAD $) |
| Beginning of period | 24,795,002 | $0.32 | 20,531,668 | $0.18 |
| Granted | - | - | 14,176,108 | $0.27 |
| Expired/Forfeited | (822,222) | $0.41 | (2,433,333) | $0.12 |
| Expired after vesting | (100,000) | $0.38 | - | - |
| Exercised | (6,676,112) | $0.19 | (7,479,441) | $0.11 |
| End of period | 17,196,668 | $0.36 | 24,795,002 | $0.32 |
| Exercisable, end of period | 7,066,115 | $0.29 | 8,442,778 | $0.42 |
| Date of Grant | Number Outstanding | Exercise Price (CAD $) |
Weighted Average Remaining Contractual Life |
Date of Expiry |
Number Exercisable September 30, 2025 |
| October 22, 2018 | 250,000 | $1.15 | 3.06 | Oct. 22, 2028 | 250,000 |
| May 3, 2019 | 100,000 | $0.31 | 3.57 | May 3, 2029 | 100,000 |
| March 20, 2020 | 900,000 | $0.05 | 4.47 | Mar. 20, 2030 | 900,000 |
| April 13, 2020 | 900,000 | $0.05 | 4.53 | April 13, 2030 | 900,000 |
| September 9, 2022 | 133,334 | $0.28 | 0..19 | Dec. 9, 2023, 2024 and 2025 | 133,334 |
| September 7, 2022 | 416,668 | $0.26 | 0.43 | Mar. 7, 2024, 2025 and 2026 | 416,668 |
| December 21, 2022 | 1,681,667 | $0.28 | 0.72 | Sept. 21, 2024, 2025 and 2026 | - |
| January 23, 2023 | 50,000 | $0.32 | 0.81 | July 23, 2024, 2025 and 2026 | - |
| September 21, 2023 | 666,667 | $0.33 | 0.47 | Mar. 21, 2025, 2026 and 2027 | 333,333 |
| April 29, 2024 | 8,243,888 | $0.28 | 0.08 | Oct.29 2025, 2026 and 2027 | 2,747,962 |
| September 11, 2024 | 3,854,444 | $0.48 | 0.44 | Mar.11 2026, 2027 and 2028 | 1,284,818 |
| Total | 17,196,668 | $0.36 | 1.50 years | 7,066,115 |
For the nine months ended September 30, 2025, the Company has recognized shared-based compensation expense of $207,418 (2024: $101,278) corresponding to the progressive vesting and fair market value of options, increasing the stock based compensation liability in the same amount (2024: increasing contributed surplus), and paid $1,093,715 from cashless exercising of vested options (2024: nil).
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). The Company's exploration and production contractual commitments as at September 30, 2025 are:
| Block | Less than 1 year | 1-3 years | Thereafter | Total | |
| COR-39 | - | 12,000,000 | - | 12,000,000 | |
| Total | - | 12,000,000 | - | 12,000,000 |
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 September 30, 2025, 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 | AESC | Abandonment | 685,297 | April 14, 2026 |
| ANH | AESC | Financial Capacity | 1,672,162 | December 30, 2025 | |
| COR - 39 | ANH | AESC | Compliance | 100,000 | December 30, 2025 |
| OMBU | ANH | AESC | Financial Capacity | 436,300 | April 14, 2026 |
| ANH | AESC | 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 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 six counterparties, large reputable financial institutions, and management has therefore concluded that credit associated is low. The majority of the Company's account receivable balances relate to petroleum and natural gas sales. 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, a significant portion of the sales is with producing companies and commodities trader under existing sale/offtake agreements with prepayment provisions and priced using the Brent benchmark. The Company's trade account receivables primarily relate to sales of crude oil and natural gas, which are normally collected within 25 days (in Canada) and up to 15 days (in Colombia) after the month of production. 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 are no exchange rate 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.
(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.
The Company has entered into a two-year crude prepayment agreement with an integrated energy major to market its oil production in Colombia. The agreement provides access to $20 million US in a revolving line of credit in year one and $15 million in year two. The interest rate is SOFR + 4% for the first $10 million and SOFR + 5% for amounts exceeding $10 million. As at September 30, 2025, no funds have been withdrawn from this agreement.
(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), promissory notes 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. Net debt is a non-GAAP measure and is defined as the principal amount of its outstanding debt, less working capital items. 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:
| September 30, 2025 | December 31, 2024 | |
| Working capital | $ 173,863 | $ 11,646,169 |
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 nine and three months ended and as at September 30:
| Three months ended September 30, 2025 | Colombia | Canada | Total | |||
| Revenue: | ||||||
| Oil Sales | $ | 20,884,803 | $ | - | $ | 20,884,803 |
| Natural gas and liquid sales | - | 87,089 | 87,089 | |||
| Royalties | (2,422,203) | (5,715) | (2,427,918) | |||
| Expenses | (11,237,619) | (2,792,970) | (14,030,589) | |||
| Income taxes | (1,423,701) | - | (1,423,701) | |||
| Net income (loss) | $ | 5,801,280 | $ | (2,711,596) | $ | 3,089,684 |
| Nine months ended September 30, 2025 | Colombia | Canada | Total | |||
| Revenue: | ||||||
| Oil Sales | $ | 60,453,671 | $ | - | $ | 60,453,671 |
| Natural gas and liquid sales | - | 603,648 | 603,648 | |||
| Royalties | (7,108,060) | (30,222) | (7,138,282) | |||
| Expenses | (32,272,527) | (8,947,407) | (41,219,934) | |||
| Income taxes | (7,880,389) | - | (7,880,389) | |||
| Net income (loss) | $ | 13,192,695 | $ | (8,373,981) | $ | 4,818,714 |
| Capital expenditures for the period | $ | 33,655,733 | $ | 1,782,226 | $ | 35,437,959 |
| Total Assets as at September 30, 2025 | $ | 87,484,799 | $ | 6,199,466 | $ | 93,684,265 |
| Total liabilities as at September 30, 2025 | $ | 32,282,753 | $ | 3,517,283 | $ | 35,800,036 |
| Three months ended September 30, 2024 | Colombia | Canada | Total | |||
| Revenue: | ||||||
| Oil Sales | $ | 23,981,362 | $ | - | $ | 23,981,362 |
| Natural gas and liquid sales | 50,467 | 50,467 | ||||
| Royalties | (2,727,862) | (3,852) | (2,731,714) | |||
| Expenses | (7,601,535) | (2,721,210) | (10,322,745) | |||
| Impairment loss | - | - | - | |||
| Income taxes | (4,308,877) | - | (4,308,877) | |||
| Net income (loss) | $ | 9,343,088 | $ | (2,674,595) | $ | 6,668,493 |
| Nine months ended September 30, 2024 | Colombia | Canada | Total | |||
| Revenue: | ||||||
| Oil Sales | $ | 57,110,675 | $ | - | $ | 57,110,675 |
| Natural gas and liquid sales | - | 481,939 | 481,939 | |||
| Royalties | (6,740,821) | (391) | (6,741,212) | |||
| Expenses | (19,447,170) | (9,130,261) | (28,577,431) | |||
| Impairment loss | - | (1,542,000) | (1,542,000) | |||
| Income taxes | (9,638,926) | - | (9,638,926) | |||
| Net income (loss) | $ | 21,283,758 | $ | (10,190,713) | $ | 11,093,045 |
| Capital expenditures for the period | $ | 21,310,910 | $ | 961,605 | $ | 22,192,515 |
| Total Assets as at September 30, 2024 | $ | 67,267,851 | $ | 6,267,546 | $ | 73,535,397 |
| Total liabilities as at September 30, 2024 | $ | 17,827,194 | $ | 2,681,183 | $ | 20,508,377 |
Arrow Exploration Corp.
MANAGEMENT's DISCUSSION AND ANALYSIS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025
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 November 26, 2025 and should be read in conjunction with Arrow's interim condensed (unaudited) consolidated financial statements and related notes as at and for the three and nine months ended September 30, 2025 and 2024. Additional information relating to Arrow, including its annual consolidated financial statements and related notes as at and for years ended December 31, 2024 and 2023 (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. 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 or cash provided by (used in) operating activities or net income and comprehensive income 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 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, transportation costs and operating expenditures; adjusted EBITDA is calculated as net income adjusted for interest, income taxes, depreciation, depletion, amortization and other similar non-recurring or non-cash charges; and net debt (net cash) is defined as the principal amount of its outstanding debt, less working capital items excluding non-cash liabilities.
The Company also presents funds 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 September 30, 2025 | Nine months ended September 30, 2025 | Three months ended September 30, 2024 | Nine months ended September 30, 2024 |
| Net income | 3,089,684 | 4,818,714 | 6,668,493 | 11,093,045 |
| Add/(subtract): | ||||
| Share based payments | 451,048 | 207,418 | 144,050 | 555,173 |
| Financing costs: | ||||
| Accretion on decommissioning obligations | 78,139 | 219,185 | 46,144 | 124,883 |
| Interest | 6,974 | 21,509 | 7,333 | 24,604 |
| Other | 90,489 | 93,686 | 51,202 | 192,382 |
| Depreciation and depletion | 5,703,343 | 15,404,004 | 4,681,591 | 11,475,258 |
| Impairment loss | - | - | - | 1,542,000 |
| Income taxes, current and deferred | 1,423,701 | 7,880,389 | 4,308,877 | 9,638,926 |
| Adjusted EBITDA (1) | 10,843,377 | 28,644,904 | 15,907,690 | 34,646,271 |
| Cash flows provided by operating activities | 11,104,098 | 25,062,192 | 13,495,700 | 29,212,358 |
| Minus - Changes in non‑cash working capital balances: | ||||
| Trade and other receivables | 944,233 | (110,225) | (36,540) | 374,777 |
| Restricted cash | (2,232) | 30,904 | 921 | (426,591) |
| Taxes receivable | 3,010,742 | 3,908,971 | (2,342,660) | (2,409,113) |
| Deposits and prepaid expenses | 69,682 | 29,205 | (79,698) | 35,274 |
| Inventory | (137,246) | (120,284) | 4,070 | (441,715) |
| Accounts payable and accrued liabilities | (11,359,802) | (9,385,252) | (916,510) | (610,696) |
| Income taxes | 5,744,826 | 3,698,869 | (891,311) | (2,633,943) |
| Funds flow from operations (1) | 9,374,301 | 23,114,380 | 9,233,972 | 23,100,351 |
(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 September 30, 2025 | Nine months ended September 30, 2025 |
Three months ended September 30, 2024 |
| Total natural gas and crude oil revenues, net of royalties | 18,543,974 | 53,919,037 | 21,300,115 |
| Funds flow from operations (1) | 9,374,301 | 23,114,380 | 9,233,972 |
| Funds flow from operations (1) per share - | |||
| Basic($) | 0.02 | 0.07 | 0.03 |
| Diluted ($) | 0.02 | 0.07 | 0.03 |
| Net income | 3,089,684 | 4,818,714 | 6,668,493 |
| Net income per share - | |||
| Basic ($) | 0.01 | 0.02 | 0.02 |
| Diluted ($) | 0.01 | 0.02 | 0.02 |
| Adjusted EBITDA (1) | 10,843,377 | 28,644,904 | 15,961,900 |
| Weighted average shares outstanding - | |||
| Basic ($) | 285,864,348 | 285,864,348 | 285,864,348 |
| Diluted ($) | 289,719,564 | 292,991,907 | 288,921,950 |
| Common shares end of period | 285,864,348 | 285,864,348 | 285,864,348 |
| Capital expenditures | 9,287,571 | 35,437,959 | 6,945,779 |
| Cash and cash equivalents | 6,370,539 | 6,370,539 | 16,536,801 |
| Current Assets | 17,259,451 | 17,259,451 | 23,230,243 |
| Current liabilities | 17,085,588 | 17,085,588 | 13,608,118 |
| Adjusted working capital(1) | 173,863 | 173,863 | 9,622,125 |
| Long-term portion of restricted cash(2) | 152,617 | 152,617 | 176,094 |
| Total assets | 93,684,265 | 93,684,265 | 73,535,397 |
| Operating | |||
| Natural gas and crude oil production, before royalties | |||
| Natural gas (Mcf/d) | 1,306 | 1,579 | 461 |
| Natural gas liquids (bbl/d) | 6 | 8 | 5 |
| Crude oil (bbl/d) | 3,990 | 3,752 | 4,042 |
| Total (boe/d) | 4,214 | 4,023 | 4,124 |
| Operating netbacks ($/boe) (1) | |||
| Natural gas ($/Mcf) | ($1.76) | ($1.36) | ($1.48) |
| Crude oil ($/bbl) | $38.21 | $37.08 | $52.00 |
| Total ($/boe) | $35.72 | $34.13 | $50.76 |
(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.
The Company and Arrow Exploration Ltd. entered into an arrangement agreement dated September 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 Front Range's then wholly-owned subsidiary, 2118295 Alberta Ltd., were amalgamated to form Arrow Holdings Ltd., a wholly-owned subsidiary of the Company (the "Arrangement"). 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 2024 Carrao changed its name to Arrow Exploration Switzerland GmbH.
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 September 30, 2025 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 | 17,280 | 100% | 17,280 |
| Wapiti | Non-operated | 1,280 | 13% | 160 |
| Ante Creek | Operated | 2,560 | 100% | 2,560 |
| KEHO | Operated | 7,358 | 100% | 7,358 |
| Total Canada | 36,638 | 29,876 | ||
| TOTAL | 254,028 | 163,870 |
1The 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 approval. 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 primary 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 contain large areas not yet covered by 3D seismic, and in Management's opinion 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 Discovery
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 No. 1 discovery well was drilled in July 2008 and was followed by a series of development wells. The Company earned a 10% working interest in the Ombu E&P Contract by paying 100% of all activities associated with the drilling, completion, and testing of the Capella No. 1 well. 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 tenure extending into 2026.
Three months ended September 30, 2025 Financial and Operational Highlights
· Arrow recorded $18,543,974 in revenues, net of royalties, on crude oil sales of 368,518 bbls, 583 bbls of natural gas liquids ("NGL's") and 120,132 Mcf of natural gas sales;
· Funds flow from operations of $9,374,301;
· Net income of $3,089,684 and adjusted EBITDA was $10,843,377;
Results of Operations
During Q3 2025, the Company's production has increased, compared to the previous two quarters, due to wells drilled in the Alberta Llanos and Rio Cravo Este fields coming on production. Production growth is expected since the Company has developed water handling capability and executes on the 2025 budget. Nevertheless, the Company has maintained good operating results and healthy EBITDA.
Average Production by Property
| Average Production Boe/d | Q3 2025 | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | Q1 2024 |
| Oso Pardo | 103 | 131 | 126 | 154 | 180 | 113 | 166 |
| Ombu (Capella) | - | - | - | - | - | - | - |
| Rio Cravo Este (Tapir) | 1,065 | 996 | 1,118 | 1,178 | 1,078 | 1,283 | 1,644 |
| Carrizales Norte (Tapir) | 1,879 | 2,070 | 2,321 | 3,153 | 2,784 | 991 | 622 |
| Alberta Llanos | 943 | 296 | 205 | 26 | - | - | - |
| Total Colombia | 3,990 | 3,493 | 3,770 | 4,511 | 4,042 | 2,387 | 2,432 |
| Fir, Alberta | 85 | 100 | 105 | 88 | 82 | 77 | 78 |
| Pepper, Alberta | 139 | 170 | 210 | 139 | - | 82 | 220 |
| KEHO, Alberta | - | 5 | - | - | - | - | - |
| TOTAL (Boe/d) | 4,214 | 3,768 | 4,085 | 4,738 | 4,124 | 2,546 | 2,730 |
The Company's average production for the three months ended September 30, 2025 was 4,214 boe/d which consisted of crude oil production in Colombia of 3,990 bbl/d, natural gas production of 1,306 Mcf/d, and minor amounts of natural gas liquids. The Company's Q3 2025 production was marginally higher than its Q3 2024 production and 12% higher than Q2 2025 due to increase in production in the Alberta Llanos field.
Average Daily Natural Gas and Oil Production and Sales Volumes
| Three months ended September 30 |
Nine months ended September 30 |
||||
| 2025 | 2024 | 2025 | 2024 | ||
| Natural Gas (Mcf/d) | |||||
| Natural gas production | 1,306 | 461 | 1,579 | 1,047 | |
| Natural gas sales | 1,306 | 461 | 1,579 | 1,047 | |
| Realized Contractual Natural Gas Sales | 1,306 | 461 | 1,579 | 1,047 | |
| Crude Oil (bbl/d) | |||||
| Crude oil production | 3,990 | 4,042 | 3,752 | 2,960 | |
| Inventory movements and other | 16 | (53) | (24) | 44 | |
| Crude Oil Sales | 4,006 | 3,989 | 3,728 | 3,003 | |
| Corporate | |||||
| Natural gas production (boe/d) | 218 | 77 | 263 | 175 | |
| Natural gas liquids(bbl/d) | 6 | 5 | 8 | 4 | |
| Crude oil production (bbl/d) | 3,990 | 4,042 | 3,752 | 2,960 | |
| Total production (boe/d) | 4,214 | 4,124 | 4,022 | 3,139 | |
| Inventory movements and other (boe/d) | 16 | (53) | (24) | 44 | |
| Total Corporate Sales (boe/d) | 4,230 | 4,071 | 3,999 | 3,183 | |
(1) Royalties paid in kind reduce the Company's crude oil sales volumes
During the three and nine months ended September 30, 2025, 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 September 30 |
Nine months ended September 30 |
||||
| 2025 | 2024 | 2025 | 2024 | ||
| Natural Gas | |||||
| Natural gas revenues | 60,435 | 23,714 | 495,219 | 403,164 | |
| NGL revenues | 26,654 | 26,753 | 108,429 | 78,775 | |
| Royalties | (5,714) | (3,852) | (30,221) | (391) | |
| Revenues, net of royalties | 81,375 | 46,615 | 573,427 | 481,548 | |
| Oil | |||||
| Oil revenues | 20,884,803 | 23,981,362 | 60,453,671 | 57,110,675 | |
| Royalties | (2,422,204) | (2,727,862) | (7,108,061) | (6,740,821) | |
| Revenues, net of royalties | 18,462,600 | 21,253,500 | 53,345,610 | 50,369,854 | |
| Corporate | |||||
| Natural gas revenues | 60,435 | 23,714 | 495,219 | 403,164 | |
| NGL revenues | 26,654 | 26,753 | 108,429 | 78,775 | |
| Oil revenues | 20,884,803 | 23,981,362 | 60,453,671 | 57,110,675 | |
| Total revenues | 20,971,892 | 24,031,829 | 61,057,319 | 57,592,614 | |
| Royalties | (2,427,918) | (2,731,714) | (7,138,282) | (6,741,212) | |
| Natural gas and crude oil revenues, net of royalties | 18,543,974 | 21,300,115 | 53,919,037 | 50,851,402 |
Natural gas and crude oil revenues, net of royalties, for the three and nine months ended September 30, 2025 were $18,543,974 and $53,919,037 (2024: $21,300,115 and $50,851,402), respectively, which represents a decrease of 13% and a 6% increase when compared to 2024, respectively. The decrease from Q3 2024 is mainly due to a decrease in commodity prices, whereas the increase in the nine months period is mainly due to increased oil production in Colombia during 2025.
Average Benchmark and Realized Prices
| Three months ended September 30 | Nine months ended September 30 | |||||
| 2025 | 2024 | Change | 2025 | 2024 | Change | |
| Benchmark Prices | ||||||
| AECO (C$/Mcf) | $0.64 | $0.70 | 146% | $1.51 | $1.48 | 32% |
| Brent ($/bbl) | $69.80 | $72.87 | (4%) | $70.64 | $80.18 | (12%) |
| West Texas Intermediate ($/bbl) | $64.95 | $75.15 | (15%) | $66.65 | $77.55 | (13%) |
| Realized Prices | ||||||
| Natural gas, net of transportation ($/Mcf) | $0.50 | $0.56 | (72%) | $1.15 | $1.41 | (49%) |
| Natural gas liquids ($/bbl) | $45.69 | $61.24 | (19%) | $52.81 | $65.56 | (20%) |
| Crude oil, net of transportation ($/bbl) | $56.67 | $65.35 | (13%) | $59.40 | $69.66 | (15%) |
| Corporate average, net of transport ($/boe)(1) | $53.90 | $64.04 | (6%) | $55.93 | $66.28 | (12%) |
(1)Non-IFRS measure
The Company realized prices of $53.90 and $55.93 per boe during the three and nine months ended September 30, 2025 (2024: $64.04 and $66.28), due to lower oil and natural gas prices during 2025, when compared to 2024.
Operating Expenses
| Three months ended September 30 | Nine months ended September 30 | |||
| 2025 | 2024 | 2025 | 2024 | |
| Natural gas & NGL's | 266,160 | 82,505 | 1,052,283 | 592,835 |
| Crude oil | 4,378,916 | 2,170,097 | 15,610,239 | 6,204,359 |
| Total operating expenses | 4,645,076 | 2,252,602 | 16,662,522 | 6,797,194 |
| Natural gas ($/Mcf) | $2.22 | $1.95 | $2.44 | $2.07 |
| Crude oil ($/bbl) | $11.88 | $5.91 | $15.34 | $7.57 |
| Corporate ($/boe)(1) | $11.94 | $6.00 | $15.26 | $7.82 |
(1)Non-IFRS measure
During the three and nine months ended September 30, 2025, Arrow incurred operating expenses of $4,645,075 and $16,662,522 (2024: $2,252,602 and $6,797,194), respectively. This increase in operating costs is mainly due to increased production in the Company's Carrizales Norte and Alberta Llanos fields, including trucking water production to disposal wells or third-party disposal facilities, and stimulation workovers. The Company has developed additional disposal wells and fields to bring down costs associated with water disposal.
Operating Netbacks
| Three months ended September 30 | Nine months ended September 30 | |||
| 2025 | 2024 | 2025 | 2024 | |
| Natural Gas ($/Mcf) | ||||
| Revenue, net of transportation expense | $0.50 | $0.56 | $1.15 | $1.41 |
| Royalties | ($0.05) | ($0.09) | ($0.07) | ($0.00) |
| Operating expenses | ($2.22) | ($1.95) | ($2.44) | ($2.07) |
| Natural Gas operating netback(1) | ($1.76) | ($1.48) | ($1.36) | ($0.66) |
| Crude oil ($/bbl) | ||||
| Revenue, net of transportation expense | $56.67 | $65.35 | $59.40 | $69.66 |
| Royalties | ($6.57) | ($7.44) | ($6.98) | ($8.22) |
| Operating expenses | ($11.88) | ($5.91) | ($15.34) | ($7.57) |
| Crude Oil operating netback(1) | $38.21 | $52.00 | $37.08 | $53.87 |
| Corporate ($/boe) | ||||
| Revenue, net of transportation expense | $53.90 | $64.04 | $55.93 | $66.28 |
| Royalties | ($6.24) | ($7.28) | ($6.54) | ($7.76) |
| Operating expenses | ($11.94) | ($6.00) | ($15.26) | ($7.82) |
| Corporate Operating netback(1) | $35.72 | $50.76 | $34.13 | $50.70 |
(1)Non-IFRS measure
The operating netbacks of the Company for the three and nine months ended September 30, 2025 have been affected by decreases in crude oil and natural gas prices, and increasing operating costs from its Tapir fields, which have experienced increased water production and workovers. The Company has developed alternatives to replace trucking water for disposal with both disposal wells and aspersion fields to address the increase in water handling costs.
General and Administrative Expenses (G&A)
| Three months ended September 30 | Nine months ended September 30 | |||
| 2025 | 2024 | 2025 | 2024 | |
| General & administrative expenses | 3,171,911 | 3,057,447 | 10,432,305 | 9,869,834 |
| G&A recovered from 3rd parties | (337,203) | (194,827) | (944,239) | (611,715) |
| Total G&A | 2,834,708 | 2,862,620 | 9,488,066 | 9,258,119 |
| Cost per boe | $7.28 | $7.63 | $8.69 | $10.65 |
For the three and nine months ended September 30, 2025, G&A expenses before recoveries totaled $3,171,911 and $10,432,305 (2024: $3,057,447 and $9,869,834), respectively. G&A expenses were marginally changed when compared to Q3 2024, due to the Company's increased production. On a year to date basis, G&A expenses were reduced, on a per barrel basis, when compared to 2024.
Share-based Compensation
| Three months ended September 30 | Nine months ended September 30 | |||
| 2025 | 2024 | 2025 | 2024 | |
| Share-based payments | 451,048 | 144,050 | 207,418 | 555,173 |
Share-based compensation for the three and nine months ended September 30, 2025 totaled an expense of $451,048 and $207,418 (2024: $144,050 and $555,173), respectively due to fair market valuation of this obligation with a corresponding effect in stock based compensation liability.
Financing Costs
| Three months ended September 30 | Nine months ended September 30 | |||
| 2025 | 2024 | 2025 | 2024 | |
| Financing expense paid or payable | 97,463 | 112,745 | 115,194 | 437,853 |
| Non-cash financing costs | 78,139 | 46,144 | 219,185 | 124,883 |
| Net financing costs | $175,602 | 158,889 | $334,379 | 562,736 |
The finance expense for 2025 is mostly related to lease obligation interest and financial transactions tax paid in Colombia. The non-cash finance cost represents the accretion in the present value of the decommissioning obligation for the period.
Depletion and Depreciation
| Three months ended September 30 |
Nine months ended September 30 |
|||
| 2025 | 2024 | 2025 | 2024 | |
| Depletion and depreciation | 5,703,343 | 4,681,591 | 15,404,005 | 11,475,258 |
Depletion and depreciation expense for the three and nine months ended September 30, 2025 totaled $5,703,343 and $15,404,005 (2024: $4,681,591 and $11,475,258), respectively. The Company uses the unit of production method and proved plus probable reserves to calculate its depletion and depreciation expense.
Impairment loss
| Three months ended September 30 |
Nine months ended September 30 |
|||
| 2025 | 2024 | 2025 | 2024 | |
| Impairment loss | - | - | 1,542,000 | - |
As at June 30, 2024, the Company reviewed its cash-generating units ("CGU") for property and equipment and determined that there were indicators of impairment in its Canada CGU and recognized a loss of $1,542,000.
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. 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 September 30, 2025 the Company has a working capital of $173,863 the Company's net debt (net cash) was calculated as follows:
| September 30, 2025 | ||||
| Current assets | $ | 17,259,451 | ||
| Less: | ||||
| Accounts payable and accrued liabilities | (15,789,606) | |||
| Income taxes payable | (595,239) | |||
| Net debt (Net cash) (1) | $ | (874,606) |
(1)Non-IFRS measure
Working Capital
As at September 30, 2025 the Company's adjusted working capital was calculated as follows:
| September 30, 2025 | ||||
| Current assets: | ||||
| Cash | $ | 6,370,539 | ||
| Restricted cash and deposits | 283,973 | |||
| Trade and other receivables | 3,719,990 | |||
| Taxes receivable | 6,565,898 | |||
| Other current assets | 319,051 | |||
| Less: | ||||
| Accounts payable and accrued liabilities | (15,789,606) | |||
| Lease obligation | (57,185) | |||
| Income tax payable | (595,240) | |||
| Stock based compensation liability | (643,558) | |||
| Working capital(1) | $ | 173,863 |
(1)Non-IFRS measure
Debt Capital
As at September 30, 2025 the Company does not have any outstanding debt balance. The Company has entered into a two-year crude prepayment agreement with an integrated energy major to market its oil production in Colombia. The agreement provides access to US$20 million in a revolving line of credit in year one and US$15 million in year two. The interest rate is SOFR + 4% for the first US$10 million and SOFR + 5% for amounts exceeding US$10 million. As at September 30, 2025, no funds have been withdrawn from this agreement.
Letters of Credit
As at September 30, 2025, 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, or any of them, the ANH could decide to cancel the underlying exploration and production contract for a particular block, as applicable.
| Current Outstanding Letters of Credit | |||||
| Contract | Beneficiary | Issuer | Type | Amount (US $) |
Renewal Date |
| SANTA ISABEL | ANH | AESC | Abandonment | 685,297 | April 14, 2026 |
| ANH | AESC | Financial Capacity | 1,672,162 | December 30, 2025 | |
| COR - 39 | ANH | AESC | Compliance | 100,000 | December 30, 2025 |
| OMBU | ANH | AESC | Financial Capacity | 436,300 | April 14, 2026 |
| ANH | AESC | Abandonment | 708,119 | August 28, 2026 | |
| Total | 3,601,878 |
Share Capital
As at September 30, 2025, the Company had 285,864,348 common shares and 17,196,668 stock options outstanding.
CONTRACTUAL OBLIGATIONS
The following table provides a summary of the Company's cash requirements to meet its financial liabilities and contractual obligations existing at September 30, 2025:
| Less than 1 year | 1-3 years | Thereafter | Total | |||||
| Exploration and production contracts | - | 12,000,000 | - | 12,000,000 | ||||
The Company has entered into a number of exploration contracts in Colombia which require the Company to fulfill work program commitments. In aggregate, the Company has outstanding commitments of $12 million. The Company have made an application to cancel its commitments on the COR-39, which represents the totality of the Company's current commitments.
SUMMARY OF THREE MONTHS RESULTS
| 2025 | 2024 | 2023 | |||||||
| Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | ||
| Oil and natural gas sales, net of royalties | 18,543,974 | 15,868,938 | 19,506,125 | 22,873,626 | 21,300,115 | 15,146,366 | 14,404,921 | 13,406,513 | |
| Net income (loss) | 3,089,683 | (934,735) | 2,663,764 | 2,081,956 | 6,668,493 | 1,247,825 | 3,176,727 | (10,492,053) | |
| Income (loss) per share - basic diluted |
0.01 0.01 |
(0.00) (0.00) |
0.01 0.01 |
0.01 0.01 |
0.02 0.02 |
0.00 0.00 |
0.01 0.01 |
(0.04) (0.04) |
|
| Working capital (deficit) | 173,863 | 393,211 | 11,036,334 | 11,646,169 | 9,622,125 | 6,657,117 | 9,520,829 | 8,669,114 | |
| Total assets | 93,684,265 | 92,729,950 | 90,532,063 | 81,268,734 | 73,535,397 | 67,864,633 | 64,579,940 | 62,275,023 | |
| Net capital expenditures | 9,287,571 | 14,771,206 | 11,379,180 | 8,928,725 | 6,945,779 | 8,965,408 | 6,281,329 | 10,471,447 | |
| Average daily production (boe/d) | 4,214 | 3,767 | 4,085 | 4,738 | 4,124 | 2,638 | 2,730 | 2,666 |
The Company's oil and natural gas sales have decreased 13% in Q3 2025 when compared to Q3 2024 due decreased commodity prices and increased when compared to Q2 2025 due to increased production in its existing assets.
Trends in the Company's net income are also impacted most significantly by operating expenses, financing costs, income taxes, depletion, depreciation and impairment of oil and gas properties, and other income.
OUTSTANDING SHARE DATA
At November 26, 2025 the Company had the following securities issued and outstanding:
| Number | Exercise Price | Expiry Date | ||||
| Common shares | 285,864,348 | n/a | n/a | |||
| Stock options | 250,000 | CAD$ 1.15 | October 22, 2028 | |||
| Stock options | 100,000 | CAD$ 0.31 | May 3, 2029 | |||
| Stock options | 900,000 | CAD$ 0.05 | March 20, 2030 | |||
| Stock options | 900,000 | CAD$ 0.05 | April 13, 2030 | |||
| Stock options | 133,334 | CAD$0.28 | December 9, 2025 | |||
| Stock options | 416,668 | CAD$0.26 | March 7, 2026 | |||
| Stock options | 1,681,667 | GBP 0.1675 | June 21, 2026 | |||
| Stock options | 50,000 | CAD$0.32 | July 23, 2026 | |||
| Stock options | 666,667 | CAD $0.33 | March 21, 2026 and 2027 | |||
| Stock options | 5,495,926 | CAD $0.375 | October 29, 2026 and 2027 | |||
| Stock options | 3,854,444 | CAD $0.475 | Mar. 11, 2026, 2027 and 2028 | |||
| Stock options | 6,198,334 | CAD $0.225 | April 8, 2027, 2028 and 2029 |
OUTLOOK
The Company has efficiently deployed the capital generated on successful drilling campaigns at Rio Cravo, Carrizales Norte and Alberta Llanos on the Tapir Block. These campaigns have translated into production growth and positive cashflows, providing Arrow with the funds required to expand its capital program. In 2025, the Company has been having 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 and cash flow from operations which will fund the remaining 2025 program.
CRITICAL ACCOUNTING ESTIMATES
A summary of the Company's critical accounting estimates is contained in Note 3 of the December 31, 2024 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, 2024 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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