Arrow Exploration Corp.

National Storage Mechanism | Additional information

RNS Number : 5491K

29 August 2023

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.

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ARROW ANNOUNCES Q2 2023 INTERIM RESULTS

CALGARY, Aug 29, 2023 - 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, announces the filing of its Interim Condensed (unaudited) Consolidated Financial Statements and Management's Discussion and Analysis ("MD&A") for the three and six months ended June 30, 2023 which are available on SEDAR (www.sedar.com) and will also be available shortly on Arrow's website at www.arrowexploration.ca.

Q2 2023 Highlights:

· Recorded $10.3 million of total oil and natural gas revenue, net of royalties, more than double compared to the same period in 2022 (Q2 2022: $5 million).

· Adjusted EBITDA of $5.8 million, more than double compared to 2022 (Q2 2022: $2.8 million).

· Average corporate production up 120% to 2,169 boe/d (Q2 2022: 980 boe/d).

· Realized corporate oil operating netbacks of $44.21/bbl due to increased production allowing operating cost to be spread over more barrels.

· Cash position of $10.8 million at the end of Q2 2023.

· Generated positive operating cashflows of $4.9 million (Q2 2022: negative $0.1 million).

· Successfully drilled the Carrizales Norte-1 (CN-1) exploratory well at the Tapir block resulting in material production and reserves additions.

Post Period End Highlights:

· The Carrizales Norte-2 (CN-2) well has been successfully drilled encountering multiple hydrocarbon-bearing intervals and is currently on production. The Ubaque zone in CN-2 has produced at initial rates exceeding 600 BOPD (net) at low water cuts. Reservoir stewardship is in execution in voluntarily reducing high initial rates with the well currently producing at a managed rate of 500 BOPD net. Forecasted rates were 320 BOPD (net) per Ubaque well which is well below flow capability.

· The Carrizales Norte-3 (CN-3) well has been drilled and is currently undergoing production testing in the Upper Ubaque. Stabilized flow rates are expected to be reported in first week of September.

Outlook:

· The preliminary development plan at CN consists of 21 wells, the majority focusing on the Ubaque formation, to fully exploit the thick reservoir. The reservoir pay zone is consistently thick (100 feet) across the fault bounded structure. Gacheta targeted wells will also be part of the overall development plan at CN.

· Arrow anticipates drilling two additional wells at Rio Cravo Este (RCE) by year-end to target the Gacheta formation which was successfully tested at commercial rates in RCE-2.

· Arrow plans to drill two development wells at the Oso Pardo Block in the Middle Magdalena Basin. Existing wells at Osso Pardo demonstrated initial rates exceeding 400 BOPD of 23 API gravity crude. This is expected to be initiated prior to year-end utilizing a second rig.

Marshall Abbott, CEO of Arrow Exploration Corp., commented:

"Arrow continues to gain momentum with strong Q2 2023 results. Our exciting drilling program, including the drilling of three RCE wells and three CN wells, is adding significant production and reserves, as well as establishing a new core area. The 3D seismic West Tapir project is currently being processed and is expected to further evaluate the 2D recognized fault prospects. The Board remains confident in the Company's opportunity rich portfolio and the capability of the Arrow team to increase shareholder value."

FINANCIAL AND OPERATING HIGHLIGHTS


(in United States dollars, except as otherwise noted)	Three months ended June 30, 2023	Six months ended June 30, 2023	Three months ended June 30, 2022
Total natural gas and crude oil revenues, net of royalties	10,280,280	17,273,140	5,024,604

Funds flow from operations (1)	3,278,041	7,518,644	2,613,843
Funds flow from operations (1) per share -
Basic($)	0.01	0.03	0.01
Diluted ($)	0.01	0.03	0.00
Net income (loss)	(757,416)	2,232,319	768,318
Net income (loss) per share -
Basic ($)	(0.00)	0.01	0.00
Diluted ($)	(0.00)	0.01	0.00
Adjusted EBITDA (1)	5,839,960	10,197,751	2,809,713
Weighted average shares outstanding -
Basic ($)	230,808,547	226,785,547	214,367,388
Diluted ($)	295,446,047	294,694,399	288,231,900
Common shares end of period	234,274,893	234,274,893	214,667,143
Capital expenditures	6,870,258	11,141,951	2,777,611
Cash and cash equivalents	10,801,494	10,801,494	7,368,252
Current Assets	15,159,323	15,159,323	12,190,063
Current liabilities	17,522,710	17,522,710	6,596,035
Adjusted working capital(1)	6,341,935	6,341,935	5,594,028
Long-term portion of restricted cash(2)	703,683	703,683	867,047
Total assets	56,305,530	56,305,530	42,670,153
Operating

Natural gas and crude oil production, before royalties
Natural gas (Mcf/d)	2,318	2,388	2,398
Natural gas liquids (bbl/d)	3	4	5
Crude oil (bbl/d)	1,779	1,502	575
Total (boe/d)	2,169	1,904	980
Operating netbacks ($/boe) (1)
Natural gas ($/Mcf)	($0.05)	($0.24)	$2.18
Crude oil ($/bbl)	$53.64	$55.42	$80.04
Total ($/boe)	$44.21	$43.40	$49.18

(1)Non-IFRS measures

(2)Long term restricted cash not included in working capital

Discussion of Operating Results

The Company increased its production from new wells at RCE-3, RCE-4 and RCE-5 and CN-1. These have allowed the Company to continue to improve its operating results and EBITDA. There has been a decrease in the Company's natural gas production in Canada due to natural declines.

Average Production by Property


Average Production Boe/d	Q2 2023	Q1 2023	Q4 2022	Q3 2022	Q2 2022	Q1 2022
Oso Pardo	130	138	115	104	112	121
Ombu (Capella)	-	80	238	215	97	177
Rio Cravo Este (Tapir)	1,592	1,004	832	860	366	136
Carrizales Norte (Tapir)	57	-	-	-	-	-
Total Colombia	1,779	1,222	1,185	1,179	575	434
Fir, Alberta	77	74	79	82	86	73
Pepper, Alberta	313	340	472	242	319	636
TOTAL (Boe/d)	2,169	1,635	1,736	1,503	980	1,144

For the three months ended June 30, 2023, the Company's average production was 2,169 boe/d, which consisted of crude oil production in Colombia of 1,779 bbl/d, natural gas production of 2,318 Mcf/d and minor amounts of natural gas liquids from the Company's Canadian properties. The Company's Q2 2023 total production was 121% higher than in the same period in 2022.

Discussion of Financial Results

During Q2 2023 the Company continued to realize strong oil prices, offset by decreased gas prices, as summarized below:


	Three months ended June 30
2023	2022	Change
Benchmark Prices
AECO (C$/Mcf)	$2.46	$5.42	(55%)
Brent ($/bbl)	$74.98	$111.98	(33%)
West Texas Intermediate ($/bbl)	$73.75	$108.40	(32%)
Realized Prices
Natural gas, net of transportation ($/Mcf)	$1.96	$5.35	(63%)
Natural gas liquids ($/bbl)	$55.33	$90.94	(39%)
Crude oil, net of transportation ($/bbl)	$67.69	$104.66	(35%)
Corporate average, net of transport ($/boe)(1)	$57.89	$71.06	(19%)

(1)Non-IFRS measure

Operating Netbacks

The Company also continued to realize positive operating netbacks, as summarized below:


	Three months ended June 30		Six months ended June 30
	2023	2022	2023	2022
Natural Gas ($/Mcf)
Revenue, net of transportation expense	$1.96	$5.45	$2.03	$4.32
Royalties	$0.20	(0.62)	($0.00)	(0.72)
Operating expenses	($2.21)	(2.65)	($2.27)	(2.33)
Natural Gas operating netback(1)	($0.05)	$2.18	($0.24)	$1.26
Crude oil ($/bbl)
Revenue, net of transportation expense	$67.69	$104.66	$69.83	$91.12
Royalties	($8.46)	(13.31)	($8.70)	(10.20)
Operating expenses	($5.59)	(11.31)	($5.71)	(14.55)
Crude Oil operating netback(1)	$53.64	$80.04	$55.42	$66.37
Corporate ($/boe)
Revenue, net of transportation expense	$57.89	$71.35	$57.62	$54.23
Royalties	($6.76)	(8.80)	($6.85)	(6.83)
Operating expenses	($6.92)	(13.38)	($7.37)	(14.13)
Corporate Operating netback(1)	$44.21	$49.18	$43.40	$33.27

(1)Non-IFRS measure

The operating netbacks of the Company continued to improve in 2023 due to several factors, principally the increased production from its Colombian assets, even with decreased crude oil prices.

During 2023, the Company has incurred in $11 million of capital expenditures, primarily in connection with the drilling of the three RCE and CN wells, civil works completed in Rio Cravo and shooting 125 km2 of 3D seismic in the Tapir block to highlight existing leads and prospects for drilling. This acceleration in operational tempo is expected to continue during the remainder of 2023, 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

Brookline Public Relations, Inc. Shauna MacDonald	+1 403 538 5645

Canaccord Genuity (Nominated Advisor and Joint Broker)
Henry Fitzgerald-O'Connor James Asensio Gordon Hamilton	+44 (0)20 7523 8000
Auctus Advisors (Joint Broker)
Jonathan Wright	+44 (0)7711 627449
Rupert Holdsworth Hunt
Camarco (Financial PR)
Andrew Turner	+44 (0)20 3781 8331
Rebecca Waterworth
Billy Clegg

About Arrow Exploration Corp.

Arrow Exploration Corp. (operating in Colombia via a branch of its 100% owned subsidiary Carrao Energy S.A.) 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. Arrow's 50% interest in the Tapir Block is contingent on the assignment by Ecopetrol SA of such interest to Arrow. Arrow's seasoned team is led by a hands-on executive team supported by an experienced board. 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 COVID-19, 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

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.

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 SIX MONTHS ENDED JUNE 30, 2023 AND 2022

IN UNITED STATES DOLLARS

(UNAUDITED)

Notice of No Auditor Review of the Interim Condensed Consolidated Financial Statements

as at and for the three and six months ended June 30, 2023

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 Condensed Consolidated Statements of Financial Position

In United States Dollars

(Unaudited)


As at	Notes		June 30, 2023		December 31, 2022
##### ASSETS
##### Current assets
Cash		$	10,801,494	$	13,060,968
Restricted cash and deposits	3		218,178		210,654
Trade and other receivables	4		2,100,286		2,568,290
Taxes receivable	5		969,866		801,177
Deposits and prepaid expenses			193,007		157,459
Inventory			876,491		705,677
			15,159,322		17,504,225
Non-current assets
Deferred income taxes			533,558		872,286
Restricted cash and deposits	3		703,683		608,127
Exploration and evaluation	6		2,849,427		-
Property and equipment	7		37,059,540		34,205,610
Total Assets		$	56,305,530	$	53,190,248

##### LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities		$	7,944,326	$	5,850,823
Lease obligation	9		59,428		41,434
Promissory note	8		-		1,899,294
Derivative liability	11		8,705,321		9,540,423
Income taxes			813,635		1,488,916
			17,522,710		18,820,890
Non-current liabilities
Lease obligations	9		171,517		22,317
Other liabilities			264,881		80,484
Deferred income taxes	14		2,505,549		5,066,684
Decommissioning liability	10		3,644,646		3,303,301
Total liabilities			24,109,303		27,293,676

Shareholders' equity
#### Share capital	#### 12		#### 61,698,396		#### 57,810,735
Contributed surplus			1,861,750		1,570,491
Deficit			(30,606,963)		(32,839,282)
Accumulated other comprehensive loss			(756,956)		(645,372)
Total shareholders' equity			32,196,227		25,896,572
Total liabilities and shareholders' equity		$	56,305,530	$	53,190,248

Commitments and contingencies (Note 13)

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

On behalf of the Board:

signed "Gage Jull" Director signed "Anthony Zaidi" Director

Gage Jull Anthony Zaidi

Arrow Exploration Corp.

Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

In United States Dollars

(Unaudited)


		For the three months ended June 30		For the six months ended June 30
	Notes	2023	2022	2023	2022

Revenue
Oil and natural gas		$ 11,637,968	$ 5,731,109	$ 19,602,826	$ 9,642,438
Royalties		(1,357,688)	(706,505)	(2,329,686)	(1,214,872)
		10,280,280	5,024,604	17,273,140	8,427,566

Expenses
Operating		1,391,490	1,074,435	2,509,080	2,512,916
Administrative		3,248,127	1,128,885	4,866,875	2,481,991
Listing costs		(722)	44,958	-	76,323
Share based payments	14	159,018	40,917	291,259	103,836
Financing costs:
Accretion	13	32,139	45,644	61,295	89,975
Interest		61,349	123,741	122,237	244,519
Other		103,172	134,981	148,854	244,029
Derivative loss		2,436,047	724,758	1,081,772	5,512,593
Foreign exchange (gain) loss		(41,141)	(21,292)	(81,956)	4,543
Depletion and depreciation		3,640,189	971,353	6,094,553	1,840,592
Other income		(157,434)	(12,094)	(218,6010)	(20,204)
		10,872,234	4,256,286	14,875,359	13,091,113

Income (loss) before taxes		(591,954)	768,318	2,397,781	(4,663,547)

Income taxes (recovery)
Current		2,387,868	-	2,387,868	-
Deferred		(2,222,406)	-	(2,222,406)	-
		165,462	-	165,462	-

Net income (loss) for the period		(757,416)	768,318	2,232,319	(4,663,547)

Other comprehensive income (loss)
Foreign exchange		(93,164)	35,925	(111,584)	80,578

Total comprehensive income (loss) for the period		(850,580)	$ 804,243	$ 2,120,735	$(4,582,969)

Net income (loss) per share
- basic		$ (0.00)	$ 0.00	$ 0.01	$ (0.02)
- diluted		$ (0.00)	$ 0.00	$ 0.01	$ (0.02)


Weighted average shares outstanding
- basic		230,808,547	68,674,602	226,785,547	213,979,850
- diluted		295,446,047	68,674,602	294,694,399	270,189,255

The accompanying notes are an integral part of these interim condensed 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, 2023	$	57,810,735	$	1,570,491	$	(645,372)	$	(32,839,282)	$	25,896,572

Issuances of common shares, net		3,887,661		-		-		-		3,887,661

Net income for the period		-		-		-		2,232,319		2,232,319

Othe comprehensive loss for the period		-		-		(111,584)		-		(111,584)

Share-based compensation		-		291,259		-		-		291,259

Balance June 30, 2023	$	61,698,396	$	1,861,750	$	(756,956)	$	(30,606,963)	$	32,196,227


		Share Capital		Contributed Surplus		Accumulated other comprehensive loss		Deficit		Total Equity

Balance January 1, 2022	$	56,698,237	$	1,249,418	$	(803,736)	$	(33,185,806)	$	23,958,113

Subscription of common shares, net		234,433		-		-		-		234,433

Options settled in cash		-		(6,622)		-		-		(6,622)

Net loss for the period		-		-		-		(4,663,547)		(4,663,547)

Other comprehensive income for the period		-		-		80,578		-		80,578

Share based payments		-		103,837		-		-		103,837

Balance June 30, 2022	$	56,932,670	$	1,346,633	$	(723,158)	$	(37,849,353)	$	19,706,792

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

Arrow Exploration Corp.

Interim Condensed Consolidated Statements of Cash Flows

In United States Dollars

(Unaudited)



For six months ended June 30,		2023	2022
	Cash flows provided by (used in) operating activities
	Net income (loss)	$ 2,232,319	$ (4,663,547)
	Items not involving cash:
	Share based payment	291,259	103,836
	Deferred income tax	(2,222,406)	-
	Depletion and depreciation	6,094,553	1,840,592
	Interest on leases	2,954	5,946
	Interest on promissory note, net of forgiveness	119,283	238,573
	Accretion	61,295	89,975
	Foreign exchange loss (gain)	(138,235)	(111,604)
	Loss on derivative liability	1,081,772	5,512,593
	Changes in non‑cash working capital balances:
	Restricted cash	(103,080)	(157,481)
	Trade and other receivables	468,003	(2,350,855)
	Taxes receivable	(168,689)	(303,003)
	Deposits and prepaid expenses	(35,548)	(11,182)
	Inventory	(170,814)	(228,776)
	Accounts payable and accrued liabilities	537,898	(72,391)
	Income tax payable	(675,281)	-
	Settlement of decommissioning obligations	(4,150)	(89,569)
	Cash provided by (used in) operating activities	7,371,133	(196,893)

	Cash flows used in investing activities
	Additions to exploration and evaluation assets	(2,849,427)	-
	Additions to property and equipment	(8,292,524)	(3,503,276)
	Changes in non-cash working capital	1,740,101	(48,227)
	Cash flows used in investing activities	(9,401,850)	(3,551,503)

	Cash flows (used in) provided by financing activities
	Common shares issued	1,775,003	118,260
	Payment of promissory note, principal and interests	(2,018,577)	-
	Lease payments	(23,259)	(19,544)
	Cash flows (used in) provided by financing activities	(266,833)	98,716

	Effect of changes in the exchange rate on cash	38,075	139,424

	Decrease in cash	(2,259,475)	(3,510,256)

	Cash, beginning of period	13,060,969	10,878,508

	#### Cash, end of period	10,801,494	7,368,252


	Supplemental information
	Interest paid	$ 415,026	$ -
	Taxes paid	$ 1,119,208	$ -

The accompanying notes are an integral part of these interim condensed 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 August 25, 2023. 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, 2022.

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, 2022, except for the adoption of new accounting standards effective January 1, 2023. 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 financial statements for the year ended December 31, 2022.

Adoption of New Accounting Standards

The Company adopted amendments published by IASB to IAS 8 Changes in Estimates vs Changes in Accounting Policies and to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements. These amendments were adopted by the Company from January 1, 2023 but they did not have a material impact on the Consolidated Financial Statements.

3. Restricted Cash and deposits


		June 30, 2023		December 31, 2022

Colombia (i)	$	255,986	$	248,462
Canada (ii)		665,875		570,319
Sub-total		921,861		818,781
Long-term portion		(703,683)		(608,127)
Current portion of restricted cash and deposits	$	218,178	$	210,654

(i) Balance comprised of deposits held as collateral to guarantee abandonment expenditures in the Tapir and Santa Isabel blocks.

(ii) Pursuant to Alberta government regulations, the Company was required to keep a $328,058 (CAD $434,341; 2022: $424,398) deposit for the Company's liability rating management ("LMR"), which is held by a bank with interest paid to the Company. The remaining $337,818 pertain to commercial deposits with customers, lease and other deposits held in Canada.

4. Trade and other receivables


		June 30, 2023		December 31, 2022

Trade receivables, net of advances	$	1,536,092	$	847,432
Other accounts receivable		564,194		1,720,858
	$	2,100,286	$	2,568,290

As at December 31, 2022, other accounts receivable included a $1,070,825 receivable from a partner in the Tapir block and corresponds to reimbursable capital expenditures incurred on the Tapir block, which have been subsequently recovered.

5. Taxes receivable


		June 30, 2023		December 31, 2022

Value-added tax (VAT) credits recoverable	$	62,464	$	-
Income tax withholdings and advances, net		907,402		801,177
	$	969,866	$	801,177

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


		June 30, 2023		December 31, 2022

Balance, beginning of the period	$	-	$	6,964,506
Additions, net		2,849,427		-
Reclassification to Property and Equipment		-		(6,964,506)
Balance, end of the period	$	2,849,427	$	-

During 2023, the Company incurred in exploration and evaluation assets related to the acquisition and interpretation of 135 square kilometers of 3D seismic data in the Tapir block to confirm or identify leads to additional prospective areas within such block.

7. Property and Equipment


Cost	Oil and Gas Properties	Right of Use and Other Assets	Total
Balance, December 31, 2021	$ 32,160,917	$ 183,485	$ 32,344,402
Additions	7,663,062	50,671	7,713,733
Transfers from exploration and evaluation assets	6,964,506	-	6,964,506
Decommissioning adjustment	756,541	-	756,541
Balance, December 31, 2022	$ 47,545,026	$ 234,156	$ 47,779,182
Additions	8,302,444	190,266	8,492,710
Decommissioning adjustment	350,611	-	350,611
Balance, June 30, 2023	$ 56,198,081	$ 424,422	$ 56,622,503


Accumulated depletion and depreciation and impairment
Balance, December 31, 2021		$ 16,692,145	$ 114,965	$ 16,807,110
Depletion and depreciation		5,482,218	46,271	5,528,489
Reversals net of impairment loss		(9,020,654)	-	(9,020,654)
Balance, December 31, 2022		$ 13,153,709	$ 161,236	$ 13,314,945
Depletion and depreciation		6,068,960	25,502	6,094,462
Balance, June 30, 2023		$ 19,222,669	$ 186,738	$ 19,409,407
Foreign exchange
Balance December 31, 2021	$ 318,617		$ (3,457)		$ 315,160
Effects of movements in foreign exchange rates	(568,525)		(5,262)		(573,787)
Balance December 31, 2022	$ (249,908)		$ (8,719)		$ (258,627)
Effects of movements in foreign exchange rates	101,025		4,046		105,071
Balance, June 30, 2023	$ (148,883)		$ (4,673)		$ (153,556)


Net Book Value
Balance December 31, 2022	$ 34,141,409	$ 64,201	$ 34,205,610
Balance, June 30, 2023	$ 38,826,529	$ 233,011	$ 37,059,540

Effective February 9, 2023, the Agencia Nacional de Hidrocarburos ("ANH") approved the suspension of the obligations and operations of the OMBU contract due to force majeure circumstances generated by the blockades and social unrest around the Capella field. The suspension was for an initial term of three months, but it has been extended for nine additional months. The Company, together with its partner and the ANH, is monitoring this suspension to define next steps.

During the three months ended June 30, 2023, the Company entered in a new office lease for its corporate offices for $183,135 and has been recognized as a right-of-use assets (see note 9).

8. Promissory Note

The promissory note was issued to Canacol Energy Ltd. ("Canacol"), a related party to the Company, as partial consideration in the acquisition of Carrao Energy S.A. from Canacol. The promissory note bore interest at 15% per annum, and, on October 18, 2021, Arrow and Canacol entered into a Seventh Amended and Restated Promissory Note agreement. On June 30, 2023, the Company paid the remaining balance of $2,018,577, including interest, and no other obligation is pending with Canacol under the Promissory Note.

9. Lease Obligations

A reconciliation of the discounted lease obligation is set forth below:


	2023	2022
Obligation, beginning of the period	$ 63,751	$ 54,692
Additions	186,392	-
Changes in existing lease	-	44,701
Lease payments	(23,259)	(39,697)
Interest	2,953	9,696
Effects of movements in foreign exchange rates	1,108	(5,641)
Obligation, end of the period	$ 230,945	$ 63,751
Current portion	(59,428)	(41,434)
Long-term portion	171,517	$ 22,317

As at June 30, 2023, the Company has the following future lease obligations:


Less than one year			$ 61,879
2 - 5 years			282,651
Total lease payments			344,530
Amounts representing interest over the term			(113,585)
Present value of the net obligation			$ 230,945

10. 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.


	June 30, 2023	December 31, 2022
Obligation, beginning of the period	$ 3,303,301	$ 2,470,239
Change in estimated cash flows	461,927	756,541
Payments or settlements	(4,150)	(76,131)
Accretion expense	61,295	199,521
Disposals	(191,365)	-
Effects of movements in foreign exchange rates	13,638	(46,869)
Obligation, end of the period	$ 3,644,646	$ 3,303,301

The obligation was calculated using a risk-free discount rate range of 2.50% to 3.75% in Canada (2022: 2.50% to 3.75%) and between 3.55% and 4.13% in Colombia (2022: 3.55% and 4.13%) with an inflation rate of 3.0% and 3.5%, respectively (2022: 3.0% and 3.5%). The majority of costs are expected to occur between 2023 and 2033. 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 $4,855,989 (2022: $4,480,074).

11. Derivative liability

Derivative liability includes warrants issued and outstanding as follows:


	June 30, 2023		December 31, 2022
Warrants	Number	Amounts	Number	Amounts
Balance beginning of the period	67,837,418	$ 9,540,423	72,474,706	$ 4,692,303
Exercised	(15,872,962)	(2,112,658)	(4,637,288)	(598,509)
Fair value adjustment	-	1,081,772	-	5,974,674
Foreign exchange	-	195,784	-	(528,045)
Balance end of the period	51,964,456	$ 8,705,321	67,837,418	$ 9,540,423

Each warrant is exercisable at £0.09 per new common share for 24 months from the issuance date and are measured at fair value quarterly using the Black-Scholes options pricing model. The fair value of warrants at June 30, 2023 and December 31, 2022 was estimated using the following assumptions:


	June 30, 2023	December 31, 2022
Number outstanding re-valued warrants	51,964,456	67,837,418
Fair value of warrants outstanding	£0.1326	£0.1157
Risk free interest rate	4.88%	3.41%
Expected life	0.40 years	0.82 years
Expected volatility	136%	147%

The following table summarizes the warrants outstanding and exercisable at June 30, 2023:


Number of warrants	Exercise price	Expiry date
51,411,807	£0.09	October 24, 2023
552,649	£0.09	November 22, 2023
51,964,456

12. Share Capital

(a) Authorized: Unlimited number of common shares without par value

(b) Issued:


	June 30, 2023		December 31, 2022
Common shares	Shares	Amounts	Shares	Amounts
Balance beginning of the year	218,401,931	57,810,735	213,389,643	56,698,237
Issued from warrants exercised	15,872,962	3,887,661	4,637,288	1,094,574
Issued from options exercised	-	-	375,000	17,924
Balance at end of the period	234,274,893	61,698,396	218,401,931	57,810,735

The Company has a stock option plan that provides for the issuance to its directors, officers, employees and consultants options to purchase a number of non-transferable common shares not exceeding 10% of the common shares that are outstanding. 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 status of the Company stock option plan as at June 30, 2023 and December 31, 2022 and changes during the respective periods ended on those dates is presented below:


	June 30, 2023		December 31, 2022
Stock Options	Number of options	Weighted average exercise Price (CAD $)	Number of options	Weighted average exercise price (CAD $)
Beginning of period	20,590,000	$0.24	17,114,000	$0.18
Granted	650,000	$0.32	10,028,332	$0.27
Expired/Forfeited	(1,375,000)	$0.46	(2,794,000)	$0.12
Exercised	-	-	(3,758,332)	$0.11
End of period	19,865,000	$0.23	20,590,000	$0.24
Exercisable, end of period	4,986,665	$0.26	3,395,000	$0.42


Date of Grant	Number Outstanding	Exercise Price (CAD $)	Weighted Average Remaining Contractual Life	Date of Expiry	Number Exercisable June 30, 2023
October 22, 2018	750,000	$1.15		Oct. 22, 2028	750,000
May 3, 2019	270,000	$0.31		May 3, 2029	270,000
March 20, 2020	1,200,000	$0.05		March 20, 2030	1,200,000
April 13, 2020	2,000,000	$0.05		April 13, 2030	2,000,000
December 13, 2021	2,983,332	$0.13		June 13, 2024	-
December 13, 2021	2,983,336	$0.13		June 13, 2025	-
June 9, 2022	766,665	$0.28		December 9, 2023	766,665
June 9, 2022	766,667	$0.28		December 9, 2024	-
June 9, 2022	766,668	$0.28		December 9, 2025	-
September 7, 2022	416,666	$0.26		March 7, 2024	-
September 7, 2022	416,666	$0.26		March 7, 2025	-
September 7, 2022	416,668	$0.26		March 7, 2026	-
December 21, 2022	1,826,110	$0.28		June 13, 2023	-
December 21, 2022	1,826,110	$0.28		June 13, 2024	-
December 21, 2022	1,826,112	$0.28		June 13, 2025	-
January 23, 2023	216,667	$0.32		July 23, 2024	-
January 23, 2023	216,667	$0.32		July 23, 2025	-
January 23, 2023	216,666	$0.32		July 23, 2026	-
Total	19,865,000	$0.23	2.69 years		4,986,665

The Company recognized $159,018 and $291,258 as share-based compensation expense for the three and six months ended June 30, 2023 (2022: $40,917 and $103,836), with a corresponding effect in the contributed surplus account.

13. 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. In aggregate, the Company has outstanding exploration commitments of $17.8 million as at June 30, 2023. The Company have made applications to cancel its commitments on the COR-39, Macaya and Los Picachos blocks.


Block	Less than 1 year	1-3 years	Thereafter	Total
COR-39	-	12,000,000	-	12,000,000
Los Picachos	-	1,970,000	-	1,970,000
Macaya	-	3,830,000	-	3,830,000
Total	-	17,800,000	-	17,800,000

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 the individuals as a result of their service.

Letters of Credit

At June 30, 2023, the Company had obligations under Letters of Credit ("LC's") outstanding totaling $2.8 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	Carrao Energy	Abandonment	$563,894	April 14, 2024
ANH	Carrao Energy	Financial Capacity	$1,672,162	December 31, 2023
CORE - 39	ANH	Carrao Energy	Compliance	$100,000	December 31, 2023
OMBU	ANH	Carrao Energy	Financial Capacity	$436,300	April 14, 2024
Total				$2,772,356

14. 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

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. From time to time the Company may attempt to mitigate commodity price risk through the use of financial derivatives. There were no derivative contracts during 2023 and 2022.

(b) Credit Risk

Credit risk reflects the risk of loss if counterparties do not fulfill their contractual obligations. The majority of the Company's account receivable balances relate to petroleum and natural gas sales and balances receivables with partners in areas operated by the Company. The Company's policy is to enter into agreements with customers that are well established and well financed 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 a producing company under an existing sale/offtake agreement 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 advance (in Colombia) of 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 join billings. The Company has historically not experienced any collection issues with its customers and partners.

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 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 as it borrows funds at a fixed coupon rate of 15% on the promissory notes.

(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 less than market value; 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.

(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.

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. The Company monitors leverage and adjusts its capital structure based on its net debt level. Net debt is defined as the principal amount of its outstanding debt, less working capital items. In order to facilitate the management of its net debt, the Company prepares annual budgets, which are updated as necessary depending on varying factors 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 and updates are prepared and reviewed as required. The Company's capital includes the following:


	June 30, 2023	December 31, 2022
Working capital deficit	$ (2,363,388)	$ (1,316,665)
Derivative liability	8,705,321	9,540,423
	$ 6,341,933	$ 8,223,758

15. Segmented Information

The Company has two reportable operating segments: Colombia and Canada. The Company, through its operating segments, is engaged primarily in oil exploration, development and production, and the acquisition of oil and gas properties. The Canada segment is also considered the corporate segment. The following tables show information regarding the Company's segments for the three months ended and as at June 30:


Three months ended June 30, 2023		Colombia		Canada		Total

Revenue:
Oil Sales	$	11,206,886	$	-	$	11,206,886
Natural gas and liquid sales		-		431,082		431,082
Royalties		(1,399,621)		41,933		(1,357,688)
Expenses		(5,270,072)		(5,502,162)		(10,872,234)
Income taxes		(165,462)		-		(165,462)
Net income (loss)	$	4,371,731	$	(5,129,147)	$	(757,416)

Six months ended June 30, 2023		Colombia		Canada		Total

Revenue:
Oil Sales	$	18,680,723	$	-	$	18,680,723
Natural gas and liquid sales		-		922,103		922,103
Royalties		(2,328,654)		(1,032)		(2,329,686)
Expenses		(8,460,388)		(6,414,971)		(14,875,359)
Income taxes		(165,462)		-		(165,462)
Net income (loss)	$	7,726,219	$	(5,493,900)	$	2,232,319


As at June 30, 2023		Colombia		Canada		Total

Current assets	$	13,847,131	$	1,312,191	$	15,159,322
Non-current:
Deferred income taxes		533,558		-		533,558
Restricted cash		37,808		665,875		703,683
Exploration and evaluation		2,849,427		-		2,849,427
Property, plant and equipment		32,495,634		4,563,906		37,059,540
Total Assets	$	49,763,558	$	6,541,972	$	56,305,530




Current liabilities	$	8,150,721	$	9,371,989	$	17,522,710
Non-current liabilities:
Deferred income taxes		2,505,549		-		2,505,549
Other liabilities		264,881		-		264,881
Lease obligation		-		171,517		171,517
Decommissioning liability		3,080,832		563,814		3,644,646
Total liabilities	$	14,001,983	$	10,107,320	$	24,109,303


Three months ended June 30, 2022		Colombia		Canada		Total

Revenue:
Oil Sales	$	4,475,645	$	-	$	4,475,645
Natural gas and liquid sales				1,255,464		1,255,464
Royalties		(569,224)		(137,281)		(706,505)
Expenses		(1,541,018)		(2,715,267)		(4,256,286)
Net loss	$	2,365,403	$	(1,597,084)	$	768,318

Six months ended June 30, 2022		Colombia		Canada		Total

Revenue:
Oil Sales	$	6,956,442	$	-	$	6,956,442
Natural gas and liquid sales		-		2,685,996		2,685,996
Royalties		(778,717)		(436,155)		(1,214,872)
Expenses		3,157,421		9,933,692		(13,091,113)
Net income (loss)	$	3,020,304	$	(7,683,851)	$	(4,663,547)


As at June 30, 2022		Colombia		Canada		Total
Current assets	$	6,491,047	$	5,699,016	$	12,190,063
Non-current:
Deferred income taxes		4,839,785		-		4,839,785
Restricted cash		195,289		671,758		867,047
Exploration and evaluation		6,964,506		-		6,964,506
Property and equipment		12,530,568		5,278,184		17,808,752
Total Assets	$	31,021,195	$	11,648,958	$	42,670,153

Current liabilities	$	2,196,394	$	4,399,641	$	6,596,035
Non-current liabilities:
Other liabilities		177,500		-		177,500
Deferred income taxes		3,371,935		-		3,371,935
Lease obligation		-		45,773		45,773
Decommissioning liability		2,244,675		554,904		2,799,579
Long-term debt		-		31,040		31,040
Derivative liability		-		9,941,499		9,941,499
Total liabilities	$	7,990,505	$	14,972,857	$	22,963,362

Arrow Exploration Corp.

MANAGEMENT's DISCUSSION AND ANALYSIS

THREE AND SIX MONTHS ENDED JUNE 30, 2023

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 August 25, 2023 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 six months ended June 30, 2023 and 2022. Additional information relating to Arrow, including its annual consolidated financial statements and related notes for the years ended December 31, 2022 and 2021 (the "Annual Financial Statements"), is available under Arrow's profile on www.sedar.com.

Advisories

Basis of Presentation

The condensed 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: the COVID-19 pandemic and its impact; tax liability; capital management strategy; capital structure; credit facilities and other debt; performance by Canacol (as defined herein) and the Company in connection with the Note (as defined herein) and 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 structure 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 COVID-19 pandemic; 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 the COVID-19 pandemic; 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 from (used in) 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 June 30, 2023	Six months ended June 30, 2023	Three months ended June 30, 2022
Net income (loss)	(757,416)	2,232,319	768,318
Add/(subtract):
Share based payments	159,018	291,259	40,917
Financing costs:
Accretion on decommissioning obligations	32,139	61,295	45,644
Interest	61,349	122,237	123,741
Other	103,172	148,854	134,981
Depreciation and depletion	3,640,189	6,094,553	971,353
Derivative loss	2,436,047	1,081,772	724,758
Income taxes, current and deferred	165,462	165,462	-
Adjusted EBITDA (1)	5,839,960	10,197,751	2,809,713

Cash flows provided by (used in) operating activities	4,990,938	7,371,133	(99,185)
Minus - Changes in non‑cash working capital balances:
Trade and other receivables	1,236,941	(468,003)	2,185,670
Restricted cash	90,814	103,080	157,481
Taxes receivable	(433,680)	168,689	(4,560)
Deposits and prepaid expenses	(78,064)	35,548	(81,506)
Inventory	53,016	170,814	150,459
Accounts payable and accrued liabilities	(3,020,563)	(537,898)	305,484
Income taxes	438,639	675,281	-
Funds flow from operations (1)	3,278,041	7,518,644	2,613,843

(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 June 30, 2023	Six months ended June 30, 2023	Three months ended June 30, 2022
Total natural gas and crude oil revenues, net of royalties	10,280,280	17,273,140	5,024,604

Funds flow from operations (1)	3,278,041	7,518,644	2,613,843
Funds flow from operations (1) per share -
Basic($)	0.01	0.03	0.01
Diluted ($)	0.01	0.03	0.00
Net income (loss)	(757,416)	2,232,319	768,318
Net income (loss) per share -
Basic ($)	(0.00)	0.01	0.00
Diluted ($)	(0.00)	0.01	0.00
Adjusted EBITDA (1)	5,839,960	10,197,751	2,809,713
Weighted average shares outstanding -
Basic ($)	230,808,547	226,785,547	214,367,388
Diluted ($)	295,446,047	294,694,399	288,231,900
Common shares end of period	234,274,893	234,274,893	214,667,143
Capital expenditures	6,870,258	11,141,951	2,777,611
Cash and cash equivalents	10,801,494	10,801,494	7,368,252
Current Assets	15,159,322	15,159,322	12,190,063
Current liabilities	17,522,710	17,522,710	6,596,035
Adjusted working capital(1)	6,341,935	6,341,935	5,594,028
Long-term portion of restricted cash(2)	703,683	703,683	867,047
Total assets	56,305,530	56,305,530	42,670,153

Operating

Natural gas and crude oil production, before royalties
Natural gas (Mcf/d)	2,318	2,388	2,398
Natural gas liquids (bbl/d)	3	4	5
Crude oil (bbl/d)	1,779	1,502	575
Total (boe/d)	2,169	1,904	980

Operating netbacks ($/boe) (1)
Natural gas ($/Mcf)	($0.05)	($0.24)	$2.18
Crude oil ($/bbl)	$53.64	$55.42	$80.04
Total ($/boe)	$44.21	$43.40	$49.18

(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 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 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.

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 June 30, 2023 the Company held an interest in six oil blocks in Colombia and oil and natural gas leases in seven 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
Los Picachos	Non-operated	52,772	37.5%	19,790
Macaya	Non-operated	195,255	37.5%	73,221
Total Colombia		465,417		227,005
CANADA
Ansell	Operated	640	100%	640
Fir	Non operated	7,680	32%	2,457
Penhold	Non-operated	480	13%	61
Pepper	Operated	23,680	100%	23,680
Wapiti	Non-operated	1,280	13%	160
Total Canada		33,760		26,998
TOTAL		499,177		254,003

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.

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 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).

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 2025.

Three Months Ended June 30, 2023 Financial and Operational Highlights

· Arrow recorded $10,280,280 in revenues, net of royalties, on crude oil sales of 165,565 bbls, 315 bbls of natural gas liquids ("NGL's") and 210,932 Mcf of natural gas sales;

· Funds flow from operations of $3,278,041;

· Net loss of $757,415 and adjusted EBITDA was $5,839,960;

· Completed acquisition of 125 km2 of 3D seismic in the Tapir block, currently under interpretation

· Completed drilling of the RCE-5 and Carrizales Norte-1 (CN-1) well

· Paid off outstanding balance on the Canacol Promissory Note

Results of Operations

The Company increased its production from new wells at Rio Cravo Este (RCE-3, RCE-4 and RCE-5) and CN-1. These have allowed the Company to continue to improve its operating results and EBITDA. There has also been a decrease in the Company's natural gas production in Canada due to natural declines.

Average Production by Property


Average Production Boe/d	Q2 2023	Q1 2023	Q4 2022	Q3 2022	Q2 2022	Q1 2022
Oso Pardo	130	138	115	104	112	121
Ombu (Capella)	-	80	238	215	97	177
Rio Cravo Este (Tapir)	1,592	1,004	832	860	366	136
Carrizales Norte (Tapir)	57	-	-	-	-	-
Total Colombia	1,779	1,222	1,185	1,179	575	434
Fir, Alberta	77	74	79	82	86	73
Pepper, Alberta	313	340	472	242	319	636
TOTAL (Boe/d)	2,169	1,635	1,736	1,503	980	1,144

For the three months ended June 30, 2023, the Company's average production was 2,169 boe/d, which consisted of crude oil production in Colombia at 1,779 bbl/d, natural gas production of 2,318 Mcf/d and minor amounts of natural gas liquids from the Company's Canadian properties. The Company's Q2 2023 total production was 121% higher than its total production for the same period in 2022.

Average Daily Natural Gas and Oil Production and Sales Volumes


	Three months ended June 30		Six months ended June 30
2023	2022	2023	2022
Natural Gas (Mcf/d)
Natural gas production	2,318	2,398	2,388	3,329
Natural gas sales	2,318	2,398	2,388	3,329
Realized Contractual Natural Gas Sales	2,318	2,398	2,388	3,329
Crude Oil (bbl/d)
Crude oil production	1,779	575	1,502	505
Inventory movements and other	40	(105)	(24)	(142)
Crude Oil Sales	1,819	470	1,478	364
Corporate
Natural gas production (boe/d)	386	400	398	555
Natural gas liquids(bbl/d)	4	5	4	6
Crude oil production (bbl/d)	1,779	575	1,502	505
Total production (boe/d)	2,169	980	1,904	1,066
Inventory movements and other (boe/d)	40	(105)	(24)	(142)
Total Corporate Sales (boe/d)	2,209	874	1,880	924

During the three and six months ended June 30, 2023 the majority of production was attributed to Colombia, where most of Company's blocks were producing. In Canada, the Company has two operated and two non-operated properties located in the province of Alberta at Fir, Pepper, Harley and Wapiti.

Natural Gas and Oil Revenues


	Three months ended June 30		Six months ended June 30
2023	2022	2023	2022
Natural Gas
Natural gas revenues	413,632	1,218,731	881,508	2,599,851
NGL revenues	17,450	42,528	40,595	86,145
Royalties	41,933	(138,491)	(1,032)	(436,155)
Revenues, net of royalties	473,015	1,122,768	921,071	2,249,841
Oil
Oil revenues	11,206,886	4,475,645	18,680,723	6,956,442
Royalties	(1,399,621)	(569,224)	(2,328,654)	(778,717)
Revenues, net of royalties	9,807,265	3,906,421	16,352,069	6,177,725
Corporate
Natural gas revenues	413,632	1,218,731	881,508	2,599,851
NGL revenues	17,450	42,528	40,595	86,145
Oil revenues	11,206,886	4,475,645	18,680,723	6,956,442
Total revenues	11,637,968	5,736,905	19,602,826	9,642,438
Royalties	(1,357,688)	(707,716)	(2,329,686)	(1,214,871)
Natural gas and crude oil revenues, net of royalties	10,280,280	5,029,189	17,273,140	8,427,566

Natural gas and crude oil revenues, net of royalties, for the three and six months ended June 30, 2023 was $10,280,280 (2022: $5,029,189) and $17,273,140 (2022: $8,427,566), respectively, which represents an increase of 105%. This significant increase is mainly due to increased oil production in Colombia, offset by decrease in oil prices and revenue in Canada.

Average Benchmark and Realized Prices


	Three months ended June 30			Six months ended June 30
2023	2022	Change	2023	2022	Change
Benchmark Prices
AECO (C$/Mcf)	$2.46	$5.42	(55%)	$2.85	$4.55	(37%)
Brent ($/bbl)	$74.98	$111.98	(33%)	$77.10	$104.59	(26%)
West Texas Intermediate ($/bbl)	$73.75	$108.40	(32%)	$74.90	$101.45	(26%)
Realized Prices
Natural gas, net of transportation ($/Mcf)	$1.96	$5.35	(63%)	$2.03	$4.28	(52%)
Natural gas liquids ($/bbl)	$55.33	$90.94	(39%)	$61.01	$83.15	(27%)
Crude oil, net of transportation ($/bbl)	$67.69	$104.66	(35%)	$69.83	$91.12	(23%)
Corporate average, net of transport ($/boe)(1)	$57.89	$71.06	(19%)	$57.62	$54.10	6%

(1)Non-IFRS measure

The Company realized prices of $57.89 and $57.62 per boe during the three and six months ended June 30, 2023 (2022: $71.06 and $54.10), respectively, as commodity prices decreased in 2023 compared with 2022.

Operating Expenses


	Three months ended June 30		Six months ended June 30
2023	2022	2023	2022
Natural gas & NGL's	465,154	590,932	982,807	1,401,777
Crude oil	926,336	483,503	1,526,273	1,111,139
Total operating expenses	1,391,490	1,074,435	2,509,080	2,512,916
Natural gas ($/Mcf)	$2.21	$2.65	$2.27	$2.33
Crude oil ($/bbl)	$5.59	$11.31	$5.71	$14.55
Corporate ($/boe)(1)	$6.92	$13.38	$7.37	$14.13

(1)Non-IFRS measure

During the three and six months ended June 30, 2023, Arrow incurred operating expenses of $1,391,490 and $2,509,080 (2022: $1,074,435 and $2,512,916), respectively. This reflects the Company's growth in production volumes, especially in crude oil, and a significant decrease on a per barrel basis when compared to 2022 levels.

Operating Netbacks


	Three months ended June 30		Six months ended June 30
	2023	2022	2023	2022
Natural Gas ($/Mcf)
Revenue, net of transportation expense	$1.96	$5.45	$2.03	$4.32
Royalties	$0.20	(0.62)	($0.00)	(0.72)
Operating expenses	($2.21)	(2.65)	($2.27)	(2.33)
Natural Gas operating netback(1)	($0.05)	$2.18	($0.24)	$1.26
Crude oil ($/bbl)
Revenue, net of transportation expense	$67.69	$104.66	$69.83	$91.12
Royalties	($8.46)	(13.31)	($8.70)	(10.20)
Operating expenses	($5.59)	(11.31)	($5.71)	(14.55)
Crude Oil operating netback(1)	$53.64	$80.04	$55.42	$66.37
Corporate ($/boe)
Revenue, net of transportation expense	$57.89	$71.35	$57.62	$54.23
Royalties	($6.76)	(8.80)	($6.85)	(6.83)
Operating expenses	($6.92)	(13.38)	($7.37)	(14.13)
Corporate Operating netback(1)	$44.21	$49.18	$43.40	$33.27

(1)Non-IFRS measure

The operating netbacks of the Company continued improving in 2023 due to several factors, mostly increasing production from its Colombian assets, even with decreased crude oil prices, which were offset by decreases in natural gas prices and operating expenses for natural gas.

General and Administrative Expenses (G&A)


	Three months ended June 30		Six months ended June 30
	2023	2022	2023	2022
General & administrative expenses	3,437,678	1,275,915	5,190,625	2,649,021
G&A recovered from 3rd parties	(189,551)	(147,030)	(323,750)	(167,030)
Total operating overhead recovery	(189,551)	(147,030)	(323,750)	(167,030)
Total G&A	3,248,127	1,128,885	4,866,875	2,481,991
Cost per boe	$23.34	$15.30	$14.31	$13.96

For the three and six months ended June 30, 2023, G&A expenses before recoveries totaled $3,437,678 and $5,190,625 (2022: $1,275,915 and $2,649,021), respectively, which represent increases when compared to the same periods in 2022. These increases are mainly due to additional personnel and legal services during 2023, payment of performance bonuses to management and employees, as well as increase in marketing expenses. Despite these increased expenses, and due to the Company's increased production, G&A expenses remain consistent, on a per barrel basis, to $14.31/boe when compared to $13.96/boe for the six months ended June 30, 2022.

Share-based Compensation


	Three months ended June 30		Six months ended June 30
	2023	2022	2023	2022
Share-based Payments	159,018	40,917	291,259	103,836

Share-based compensation expense for the three and six months ended June 30, 2023 totaled $159,018 and $291,259 (2022: $40,917 and 103,836), respectively. During 2023, the Company granted 650,000 options to its personnel, which was offset by reversal of expenses from cancelled options due to resignations of option holders. The share-based compensation expense is the result of the progressive vesting of the options granted to the Company's employees, plus the effect of cashless exercising, and net of cancellations and forfeitures, according to the company's stock-based compensation plan.

Financing Costs


	Three months ended June 30		Six months ended June 30
	2023	2022	2023	2022
Financing expense paid or payable	164,521	258,723	271,091	488,549
Non-cash financing costs	32,139	45,644	61,295	89,975
Net financing costs	196,660	304,367	332,386	578,524

The finance expense paid or payable represents mostly interest on the promissory note due to Canacol, as partial payment for the acquisition of Carrao Energy SA, and have decreased due to partial payment of the outstanding balance. The non-cash finance cost represents an increase in the present value of the decommissioning obligation for the current periods. 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 June 30		Six months ended June 30
	2023	2022	2023	2022
Depletion and depreciation	3,640,189	371,353	6,094,553	1,840,592

Depletion and depreciation expense for the three and six months ended June 30, 2023 totaled $3,640,189 and $69,094,553 (2022: $371,353 and $1,840,592), respectively. The increase is due to higher carrying value of depletable property, plant and equipment and increased production. Company uses the unit of production method and proved plus probable reserves to calculate its depletion and depreciation expense.

Loss on Derivative Liability


	Three months ended June 30		Six months ended June 30
	2023	2022	2023	2022
Loss on Derivative Liability	2,436,047	724,758	1,081,772	5,512,593

During the three and six months ended June 30, 2023, the Company recorded a loss in derivative liability of $2,436,047 and $1,081,772 (2022: $724,758 and $5,512,593), respectively, related to the valuation of its outstanding warrants issued during its AIM listing and private placement completed in 2021. These warrants provide the right to holders to convert them into common shares at a fixed price set in a currency different to the Company's functional currency and, therefore, they are considered a liability and measured at fair value with changes recognized in the statements of operations and comprehensive income (loss).

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 June 30, 2023, the Company has an adjusted working capital of $6,341,933. The Company has continued improving its working capital, using its operational cash flows to settle its obligations and to continue growing its operations. The overall improvement in energy commodity prices has also positively impacted the Company's capacity to generate sufficient financial resources to sustain its operations and growth.

As at June 30, 2023 the Company's net debt (net cash) was calculated as follows:


	June 30, 2023

Current assets	$	15,159,323
Less:
Accounts payable and accrued liabilities		7,944,326
Income taxes		813,635
Net debt (Net cash) (1)	$	(6,401,362)

(1)Non-IFRS measure

Adjusted Working Capital

As at June 30, 2023 the Company's adjusted working capital was calculated as follows:


	June 30, 2023
Current assets:
Cash and restricted cash	$	10,801,494
Restricted cash and deposits		218,178
Trade and other receivables		2,100,286
Taxes receivable		969,866
Other current assets		1,069,498
Less:
Accounts payable and accrued liabilities		7,944,326
Lease obligation		59,428
Promissory note		-
Income tax payable		813,635
Adjusted Working capital(1)	$	6,341,933

(1)Non-IFRS measure

Debt Capital

As at June 30, 2023, the Company has paid off its a promissory note payable to Canacol.

Letters of Credit

As at June 30, 2023, the Company had obligations under Letters of Credit ("LC's") outstanding totaling $2.7 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. In this instance, the Company could risk losing its entire interest in the applicable block, including all capital expended to date and could possibly also incur additional abandonment and reclamation costs if applied by the ANH.


Current Outstanding Letters of Credit

Contract	Beneficiary	Issuer	Type	Amount (US $)	Renewal Date
SANTA ISABEL	ANH	Carrao Energy	Abandonment	$563,894	April 14, 2024
ANH	Carrao Energy	Financial Capacity	$1,672,162	December 31, 2023
CORE - 39	ANH	Carrao Energy	Compliance	$100,000	December 31, 2023
OMBU	ANH	Carrao Energy	Financial Capacity	$436,300	April 14, 2024
Total				$2,772,356

Share Capital

As at June 30, 2023, the Company had 234,274,893 common shares, 51,964,456 warrants and 19,865,000 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 June 30, 2023:


	Less than 1 year		1-3 years		Thereafter		Total

Exploration and production contracts		-		17,800,000		-		17,800,000

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. In aggregate, the Company has outstanding exploration commitments of $17.8 million. The Company, in conjunction with its partners, have made applications to cancel its commitments on the COR-39, Macaya and Los Picachos blocks.

SUMMARY OF THREE MONTHS RESULTS


	2023		2022				2021
	Q2	Q1	Q4	Q3	Q2	Q1	Q4	Q3
Oil and natural gas sales, net of royalties	11,637,968	6,992,860	8,931,562	7,614,336	5,024,604	3,911,329	3,038,832	1,684,609
Net income (loss)	(757,416)	2,989,735	2,968,117	2,041,955	768,318	(5,431,865)	6,960,035	(21,782)
Income (loss) per share - basic diluted	(0.00) (0.00)	0.01 0.01	0.01 0.01	0.02 0.00	0.00 0.00	(0.03) (0.02)	0.04 0.04	(0.00) (0.00)
Working capital (deficit)	(2,363,388)	2,619,715	(1,316,665)	7,392,310	5,594,027	7,657,938	8,006,074	783,707
Total assets	56,305,530	53,719,944	53,190,248	46,979,259	42,670,153	39,914,240	41,195,798	25,362,323
Net capital expenditures	6,870,258	4,271,693	2,106,463	4,836,860	2,777,611	725,665	1,991,163	148,528
Average daily production (boe/d)	2,169	1,635	1,736	1,503	980	1,144	712	575

The Company's oil and natural gas sales have increased 114% in 2023 when compared to Q2 2022 due to increased production in its existing assets, improved oil and gas prices and positive fluctuations in realized oil price differentials. The Company's production levels in Colombia have progressively improved since 2022. 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 August 25, 2023, the Company had the following securities issued and outstanding:


	Number		Exercise Price		Expiry Date
Common shares		239,531,097		n/a		n/a
Warrants		46,708,251		GBP 0.09		Oct. and Nov, 2023
Stock options		750,000		CAD$ 1.15		October 22, 2028
Stock options		270,000		CAD$ 0.31		May 3, 2029
Stock options		1,200,000		CAD$ 0.05		March 20, 2030
Stock options		2,000,000		CAD$ 0.05		April 13, 2030
Stock options		2,983,332		GBP 0.07625		June 13, 2024
Stock options		2,983,336		GBP 0.07625		June 13, 2025
Stock options		766,665		CAD$0.28		December 9, 2023
Stock options		766,667		CAD$0.28		December 9, 2024
Stock options		766,668		CAD$0.28		December 9, 2025
Stock options		416,666		CAD$0.26		March 7, 2024
Stock options		416,666		CAD$0.26		March 7, 2025
Stock options		416,668		CAD$0.26		March 7, 2026
Stock options		1,826,110		GBP 0.1675		June 13, 2023
Stock options		1,826,111		GBP 0.1675		June 13, 2024
Stock options		1,826,111		GBP 0.1675		June 13, 2025
Stock options		216,667		GBP 0.1925		July 23, 2024
Stock options		216,667		GBP 0.1925		July 23, 2025
Stock options		216,666		GBP 0.1925		July 23, 2026

OUTLOOK

The Company has deployed the capital raised at the time of the Admission to AIM on a successful drilling campaigns at Rio Cravo and Carrizales Norte on the Tapir Block. These successful campaigns have translated into production growth and in positive cashflows during 2022 and 2023, providing Arrow with the funds required to continue with its $32 million capital program for 2023.

To date, the Company has already drilled six wells of its 2023 budget, three at Rio Cravo and three at Carrizales Norte, which have added production to the Tapir Block, with more wells being added to the current campaign as drilling results are reviewed and interpreted. This confirms confirming Arrow's commitment to increase production and shareholder value. The Company is able to support the remaining planned 2023 CAPEX program with current cash on hand and cashflow from operations.

CRITICAL ACCOUNTING ESTIMATES

A summary of the Company's critical accounting estimates is contained in Note 3 of the 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 SIGNIFICANT ACCOUNTING POLICIES

A summary of the Company's significant accounting policies is included in 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, 2022 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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END

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