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Arrow Exploration Corp.
Earnings Release • Aug 28, 2025
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Earnings Release
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National Storage Mechanism | Additional information 
RNS Number : 9528W
Arrow Exploration Corp.
28 August 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 Q2 2025 INTERIM RESULTS
CALGARY, August 28, 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 six months ended June 30, 2025, which are available on SEDAR ( www.sedar.com ) and will also be available shortly on Arrow's website at www.arrowexploration.ca .
Q2 2025 Highlights:
· Average corporate production of 3,768 boe/d (Q2 2024: 2,546 boe/d), representing a 48% increase when compared to the same period in 2024.
· Recorded $15.9 million of total oil and natural gas revenue, net of royalties, representing a 5% increase when compared to the same period in 2024 (Q2 2024: $15.1 million).
· Realized corporate oil operating netbacks(1) of $27.36/bbl.
· Cash position of $13.2 million at the end of Q2 2025.
· YTD generated operating cashflows of $13.9 million (YTD 2024: $18.9 million).
· Drilled five (5) additional development wells in the Alberta Llanos (AB), Carrizales Norte (CN) and Rio Cravo Este (RCE) fields in the Tapir block. RCE HZ10 was also spud in Q2.
· Invested in road and pad infrastructure from CN to Mateguafa Attic at a net cost of $2 million to the Company
· Completed acquisition and processing of a 90 square km 3D seismic program over the southern part of the Tapir block at a cost of $3 million.
· Entered into a $20 million prepayment agreement with an integrated energy company.
· Net YTD income of $1.7 million (YTD 2024 $1.2 million)
(1) Non-IFRS measures - see "Non-IFRS Measures" section within the MD&A
Post Period End Highlights:
· Spud the first horizontal well, RCE HZ-10, in the Rio Cravo Este (RCE) field in the Tapir block.
· RCE HZ-10, CN HZ12 and AB HZ5 were brought on production.
Current Production
The Company is currently producing approximately 4,200 boe/d with two additional wells expected to be brought on production in the next two weeks, CN HZ13 targeting the Ubaque formation and a recompletion at AB3 targeting the C7 formation.
Tapir Water Disposal Infrastructure
In Q2, the Company paid $0.8 million on trucking water. During Q2 the Company invested significantly in water disposal infrastructure, of which $1.7 million is included in operating costs for the quarter. This investment includes conversion work and stimulation of the AB-2, CN-4 and CN-5 water disposal wells. The water handling infrastructure is now operational and expected to deliver a significant reduction in water handling costs and support higher production rates. The Tapir block water disposal capability is now over 130,000 barrels of water per day. W ith the water handling infrastructure in place, the Company is turning up production in current wells.
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 licence obligations. Discussions with authorities are going well and Arrow will keep the market updated in future releases.
Upcoming Drilling
At this time, Arrow is operating one rig and has dismissed the second rig. The Company has spud the CN HZ 13 well, which is expected to be on production in the beginning of September. Thereafter, the Company expects to drill its first exploration well at Mateguafa Oeste. If the vertical exploration well at Mateguafa Oeste is successful, the Company plans to drill four additional horizonal wells on the prospect. If the Mateguafa Oeste 1 well is not successful, the rig will move to Mateguafa Attic to drill three low risk vertical wells targeting the C7. The Company has the option to engage a second rig to drill the other prospects if Mateguafa Oeste 1 is successful. The total budgeted capital expenditure planned for 2025 is approximately $50 million, net to Arrow, of which $24 million was spent in H1 2025.
Marshall Abbott, CEO of Arrow Exploration Corp., commented:
"The second quarter of 2025 has been very busy for Arrow. The two horizontal development wells at Alberta Llanos have highlighted the potential for horizontal development in the Ubaque in other areas of the Tapir block. The Company plans to further test this potential with an exploration well at Mateguafa Oeste in Q3 and is putting the infrastructure in place for exploration wells at Mateguafa Attic, Capullo and Icaco, all of which could have a material impact on the Company."
"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."
"In Q2, Arrow made large investments in the future drilling programs of the Company. The Tapir South 3D seismic program was completed during the quarter, at a net cost of $3 million, showing additional prospects and drilling opportunities. The Company is expected to test one of these prospects, Icaco, in early 2026. During Q2 the company also completed the road joining the CN pad with the Mateguafa Oeste, Capullo and Mateguafa Attic prospects at a net cost of approximately $2 million."
"The focus for the remainder of 2025 will be to explore low risk new prospects in the Tapir block, starting with Mateguafa Oeste, which has the potential to be larger than the Carrizales Norte field. The pad and cellars for Mateguafa Oeste have been completed and the first well is expected to be spud in late Q3. Arrow looks forward to updating the market post drilling the first well at Mateguafa Oeste."
FINANCIAL AND OPERATING HIGHLIGHTS
| (in United States dollars, except as otherwise noted) | Three months ended June 30, 2025 | Six months ended June 30, 2025 |
Three months ended June 30, 2024 |
| Total natural gas and crude oil revenues, net of royalties | 15,868,938 | 35,375,063 | 15,146,366 |
| Funds flow from operations (1) | 3,994,525 | 13,740,079 | 6,655,696 |
| Funds flow from operations (1) per share - | |||
| Basic($) | 0.01 | 0.05 | 0.02 |
| Diluted ($) | 0.01 | 0.05 | 0.02 |
| Net income (loss) | (934,735) | 1,729,029 | 1,247,825 |
| Net income (loss) per share - | |||
| Basic ($) | (0.00) | 0.01 | 0.00 |
| Diluted ($) | (0.00) | 0.01 | 0.00 |
| Adjusted EBITDA (1) | 6,269,979 | 17,801,527 | 8,884,099 |
| Weighted average shares outstanding - | |||
| Basic ($) | 285,864,348 | 285,864,348 | 285,864,348 |
| Diluted ($) | 295,209,883 | 294,655,197 | 292,536,147 |
| Common shares end of period | 285,864,348 | 285,864,348 | 285,864,348 |
| Capital expenditures | 14,771,206 | 26,150,386 | 8,965,408 |
| Cash and cash equivalents | 13,212,417 | 13,212,417 | 10,826,380 |
| Current Assets | 20,213,917 | 20,213,917 | 19,975,633 |
| Current liabilities | 19,820,706 | 19,820,706 | 13,318,516 |
| Adjusted working capital (1) | 393,211 | 393,211 | 6,657,117 |
| Long-term portion of restricted cash (2) | 154,849 | 154,849 | 174,190 |
| Total assets | 92,729,950 | 92,729,950 | 67,864,633 |
| Operating | |||
| Natural gas and crude oil production, before royalties | |||
| Natural gas (Mcf/d) | 1,587 | 1,718 | 926 |
| Natural gas liquids (bbl/d) | 10 | 8 | 4 |
| Crude oil (bbl/d) | 3,493 | 3,631 | 2,387 |
| Total (boe/d) | 3,768 | 3,925 | 2,546 |
| Operating netbacks ($/boe) (1) | |||
| Natural gas ($/Mcf) | ($1.45) | ($1.21) | ($1.25) |
| Crude oil ($/bbl) | $30.08 | $36.42 | $54.54 |
| Total ($/boe) | $27.36 | $33.24 | $51.21 |
Discussion of Operating Results
During Q2 2025, the Company's production has decreased due to natural declines and increasing water cuts across its fields in the Tapir block. Production growth is expected to resume since the Company has developed water handling capacity and executes on the 2025 budget. Nevertheless, the Company has maintained good operating results and healthy EBITDA.
Average Production by Property
| Average Production Boe/d | Q2 2025 | Q1 2025 | FY 2024 | Q4 2024 | Q3 2024 | Q2 2024 | Q1 2024 |
| Oso Pardo | 131 | 126 | 153 | 154 | 180 | 113 | 166 |
| Ombu (Capella) | - | - | - | - | - | - | - |
| Rio Cravo Este (Tapir) | 996 | 1,118 | 1,294 | 1,178 | 1,078 | 1,283 | 1,644 |
| Carrizales Norte (Tapir) | 2,070 | 2,321 | 1,897 | 3,153 | 2,784 | 991 | 622 |
| Alberta Llanos | 296 | 205 | 7 | 26 | - | - | - |
| Total Colombia | 3,493 | 3,770 | 3,351 | 4,511 | 4,042 | 2,387 | 2,432 |
| Fir, Alberta | 100 | 105 | 81 | 88 | 82 | 77 | 78 |
| Pepper, Alberta | 170 | 210 | 110 | 139 | - | 82 | 220 |
| Keho, Alberta | 5 | - | - | - | - | - | - |
| TOTAL (Boe/d) | 3,768 | 4,085 | 3,542 | 4,738 | 4,124 | 2,546 | 2,730 |
The Company's average production for the three months ended June 30, 2025 was 3,768 boe/d which consisted of crude oil production in Colombia of 3,493 bbl/d, natural gas production of 1,587 Mcf/d, and minor amounts of natural gas liquids. The Company's Q2 2025 production was 48% higher than its Q2 2024 production and 7% lower than Q1 2025 due to natural declines and water handling capacity.
Discussion of Financial Results
During Q2 2025 the Company experienced a reduction in both crude oil and gas prices, as summarized below:
| Three months ended June 30 | |||
| 2025 | 2024 | Change | |
| Benchmark Prices | |||
| AECO (C$/Mcf) | $1.72 | $1.20 | 43% |
| Brent ($/bbl) | $69.80 | $83.00 | (16%) |
| West Texas Intermediate ($/bbl) | $63.70 | $80.55 | (21%) |
| Realized Prices | |||
| Natural gas, net of transportation ($/Mcf) | $1.27 | $0.94 | 35% |
| Natural gas liquids ($/bbl) | $51.76 | $69.96 | (26%) |
| Crude oil, net of transportation ($/bbl) | $56.87 | $72.99 | (22%) |
| Corporate average, net of transport ($/boe)(1) | $53.33 | $69.39 | (23%) |
Operating Netbacks
The Company also continued to realize good oil operating netbacks, as summarized below:
| Three months ended June 30 | ||
| 2025 | 2024 | |
| Natural Gas ($/Mcf) | ||
| Revenue, net of transportation expense | $1.27 | $0.94 |
| Royalties | ($0.10) | $0.23 |
| Operating expenses | ($2.61) | ($2.42) |
| Natural Gas operating netback(1) | ($1.44) | ($1.25) |
| Crude oil ($/bbl) | ||
| Revenue, net of transportation expense | $56.87 | $72.99 |
| Royalties | ($6.63) | ($8.73) |
| Operating expenses | ($20.17) | ($9.72) |
| Crude Oil operating netback(1) | $30.07 | $54.54 |
| Corporate ($/boe) | ||
| Revenue, net of transportation expense | $53.33 | $69.39 |
| Royalties | ($6.18) | ($8.17) |
| Operating expenses | ($19.79) | ($10.01) |
| Corporate Operating netback (1) | $27.36 | $51.21 |
(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 prices. During Q2 2025, the Company incurred $15 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 | |
| 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 SIX MONTHS ended JUNE 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 six months ended June 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 | June 30, 2025 | December 31, 2024 | ||
| ##### ASSETS | |||||
| ##### Current assets | |||||
| Cash | $ | 13,212,417 | $ | 18,837,784 | |
| Restricted cash and deposits | 3 | 283,973 | 238,141 | ||
| Trade and other receivables | 4 | 2,775,757 | 3,830,215 | ||
| Taxes receivable | 5 | 3,555,155 | 2,656,926 | ||
| Deposits and prepaid expenses | 192,254 | 232,730 | |||
| Inventory | 194,361 | 177,400 | |||
| 20,213,917 | 25,973,196 | ||||
| Non-current assets | |||||
| Restricted cash and deposits | 3 | 154,849 | 167,545 | ||
| Exploration and evaluation assets | 6 | 5,691,837 | 142,995 | ||
| Property and equipment | 7 | 66,669,347 | 54,984,998 | ||
| Total Assets | $ | 92,729,950 | $ | 81,268,734 | |
| ##### LIABILITIES AND SHAREHOLDERS' EQUITY | |||||
| Current Liabilities | |||||
| Accounts payable and accrued liabilities | $ | 17,249,293 | $ | 8,504,332 | |
| Lease obligation | 8 | 59,298 | 44,639 | ||
| Income taxes | 2,319,559 | 4,294,109 | |||
| Stock based compensation liability | 10 | 192,556 | 1,483,947 | ||
| 19,820,706 | 14,327,027 | ||||
| Non-current liabilities | |||||
| Lease obligations | 8 | 155,159 | 174,767 | ||
| Other liabilities | 603,310 | 610,059 | |||
| Deferred income taxes | 10,393,836 | 6,832,229 | |||
| Decommissioning liability | 9 | 7,023,637 | 6,307,659 | ||
| Total liabilities | 37,996,648 | 28,251,741 | |||
| Shareholders' equity | |||||
| #### Share capital | #### 10 | #### 73,829,795 | #### 73,829,795 | ||
| Contributed surplus | 856,093 | 856,093 | |||
| Deficit | (19,041,865) | (20,770,894) | |||
| Accumulated other comprehensive loss | (910,721) | (898,001) | |||
| Total shareholders' equity | 54,733,302 | 53,016,993 | |||
| Total liabilities and shareholders' equity | $ | 92,729,950 | $ | 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 "Ian Langley" Director
Gage Jull Ian Langley
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 | 2025 | 2024 | 2025 | 2024 | ||||
| Revenue | ||||||||
| Oil and natural gas | $ 17,949,268 | $ 17,167,143 | $ 40,085,427 | $ 33,560,785 | ||||
| Royalties | (2,080,330) | (2,020,777) | (4,710,364) | (4,009,498) | ||||
| 15,868,938 | 15,146,366 | 35,375,063 | 29,551,287 | |||||
| Expenses | ||||||||
| Operating | 6,660,847 | 2,475,582 | 12,017,446 | 4,544,593 | ||||
| Administrative | 3,771,368 | 3,713,577 | 6,653,358 | 6,395,499 | ||||
| Share based payments | 10 | 857,840 | 309,845 | (243,630) | 411,123 | |||
| Financing costs: | ||||||||
| Accretion | 9 | 72,769 | 41,363 | 141,046 | 78,739 | |||
| Interest | 8 | 7,368 | 7,501 | 14,535 | 17,271 | |||
| Other | 3,197 | 108,773 | 3,197 | 307,837 | ||||
| Foreign exchange (gain) loss | (854,503) | 161,351 | (1,098,714) | (127,387) | ||||
| Depletion and depreciation | 7 | 3,179,694 | 3,261,894 | 9,700,662 | 6,793,668 | |||
| Impairment loss | 7 | - | 1,542,000 | - | 1,542,000 | |||
| Other expense (income) | 21,247 | (88,243) | 1,446 | (166,658) | ||||
| 13,719,827 | 11,533,643 | 27,189,346 | 19,796,685 | |||||
| Income before taxes | 2,149,111 | 3,612,723 | 8,185,717 | 9,754,602 | ||||
| Income taxes | ||||||||
| Current | 1,017,164 | 2,713,664 | 2,895,081 | 5,218,949 | ||||
| Deferred | 2,066,682 | (348,766) | 3,561,607 | 111,102 | ||||
| 3,083,846 | 2,364,898 | 6,456,688 | 5,330,051 | |||||
| Net income (loss) for the period | (934,735) | 1,247,825 | 1,729,029 | 4,424,551 | ||||
| Other comprehensive loss | ||||||||
| Foreign exchange | (13,182) | (82,608) | (12,720) | (225,925) | ||||
| Total other comprehensive loss | (13,182) | (82,608) | (12,720) | (225,925) | ||||
| Total comprehensive income (loss) for the period | $ (947,917) | $ 1,165,217 | $ 1,716,309 | $ 4,198,626 | ||||
| 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 | 285,864,348 | 285,864,348 | 285,864,348 | 285,864,348 | ||||
| - Diluted | 295,209,883 | 292,536,147 | 294,655,197 | 292,867,527 | ||||
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 | - | - | - | 1,729,029 | 1,729,029 | |||||
| Other comprehensive loss | - | - | (12,720) | - | (12,720) | |||||
| Total comprehensive income | - | - | (12,720) | 1,729,029 | 1,716,309 | |||||
| Balance June 30, 2025 | $ | 73,829,795 | 856,093 | (910,721) | (19,041,865) | 54,733,302 | ||||
| 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 | - | - | - | 4,424,551 | 4,424,551 | |||||
| Other comprehensive loss | - | - | (225,925) | - | (225,925) | |||||
| Total comprehensive income | - | - | (225,925) | 4,424,551 | 4,198,626 | |||||
| Share-based compensation | - | 411,123 | - | - | 411,123 | |||||
| Balance June 30, 2024 | $ | 73,829,795 | $ | 2,573,068 | $ | (762,247) | $ | (29,521,344) | $ | 46,119,272 |
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 six months ended June 30, | Notes | 2025 | 2024 | |
| Cash flows provided by operating activities: | ||||
| Net income | $ 1,729,029 | $ 4,424,551 | ||
| Items not involving cash: | ||||
| Deferred taxes | 3,561,607 | 111,102 | ||
| Share-based compensation (income) expense | 10 | (243,630) | 411,123 | |
| Depletion and depreciation | 7 | 9,700,662 | 6,793,668 | |
| Interest on leases | 8 | 14,535 | 17,271 | |
| Accretion | 9 | 141,046 | 78,739 | |
| Unrealized foreign exchange (gain)loss | (77,714) | 593,659 | ||
| Impairment loss | - | 1,542,000 | ||
| Changes in non‑cash working capital balances: | ||||
| Restricted cash and deposits | (33,136) | 427,512 | ||
| Trade and other receivables | 1,054,458 | (411,317) | ||
| Taxes receivable | (898,229) | 66,453 | ||
| Deposits and prepaid expenses | 40,477 | (114,972) | ||
| Inventory | (16,962) | 445,785 | ||
| Income tax payable | (1,974,550) | 1,742,632 | ||
| Accounts payable and accrued liabilities | 2,045,957 | (305,814) | ||
| Stock based payments | 10 | (1,085,457) | - | |
| Settlement of decommissioning obligations | 9 | - | (105,734) | |
| Cash provided by operating activities | 13,958,094 | 15,716,658 | ||
| Cash flows used in investing activities: | ||||
| Additions to exploration and evaluation assets | 6 | (5,548,842) | (1,059,825) | |
| Additions to property and equipment | 7 | (20,601,544) | (14,186,910) | |
| Changes in non-cash working capital | 6,699,005 | (1,024,027) | ||
| Cash flows used in investing activities | (19,451,381) | (16,270,762) | ||
| Cash flows used in financing activities: | ||||
| Lease payments | 8 | (30,945) | (55,266) | |
| Cash flows used in financing activities | (30,945) | (55,266) | ||
| Effect of changes in the exchange rate on cash | (101,135) | (699,627) | ||
| Increase (decrease) in cash | (5,625,367) | (1,308,997) | ||
| Cash, beginning of period | 18,837,784 | 12,135,377 | ||
| #### Cash, end of period | 13,212,417 | 10,826,380 | ||
| 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 August 27, 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
| June 30, 2025 |
December 31, 2024 | |||
| Colombia (i) | $ | 303,186 | $ | 275,949 |
| Canada | 135,636 | 129,737 | ||
| Sub-total | 438,822 | 405,686 | ||
| Long-term portion | (154,849) | (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 the Tapir, OMBU and Santa Isabel blocks.
4. Trade and other receivables
| June 30, 2025 |
December 31, 2024 | |||
| Trade receivables, net of advances | $ | 569,338 | $ | 1,926,176 |
| Other accounts receivable | 2,206,419 | 1,904,039 | ||
| $ | 2,775,757 | $ | 3,830,215 |
As at June 30, 2025, other accounts receivable include $724,659 (December 31, 2024 - $699,880) receivable from on demand loans with executives and directors.
5. Taxes receivable
| June 30, 2025 |
December 31, 2024 | |||
| Value-added tax (VAT) credits recoverable | $ | 2,999,432 | $ | 1,738,536 |
| Income tax withholdings and advances, net | 555,723 | 918,390 | ||
| $ | 3,555,155 | $ | 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
| June 30, 2025 |
December 31, 2024 |
|||
| Balance, beginning of the period | $ | 142,995 | $ | - |
| Additions | 5,548,842 | 3,818,279 | ||
| Reclassification to Property and Equipment (Note 8) | - | (3,675,284) | ||
| Balance, end of the period | $ | 5,691,837 | $ | 142,995 |
As at June 30, 2025, no indicators of impairment were identified in the Company's exploration and evaluation assets. During 2024, the Company incurred in exploration and development costs associated to its Alberta Llanos prospect in the Tapir block, 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 | 20,601,544 | - | 20,601,544 |
| Decommissioning adjustment | 574,536 | - | 574,536 |
| Balance, June 30, 2025 | $130,142,243 | $ 497,582 | $ 130,639,825 |
| 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 | 9,668,033 | 31,629 | 9,700,662 | ||
| Balance, June 30, 2025 | $ 63,528,480 | $ 346,706 | $ 63,875,186 | ||
| 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 |
201,733 | 7,198 | 208,931 | ||
| Balance, June 30, 2025 | $ (81,836) | $ (13,456) | $ (95,292) | ||
| Net Book Value | |||
| Balance December 31, 2024 | $ 54,822,147 | $ 162,851 | $ 54,984,998 |
| Balance June 30, 2025 | $ 66,531,927 | $ 137,420 | $ 66,669,347 |
Canada
As at June 30, 2025, 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 current and forward 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 three and six months ended June 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 | (30,945) | (57,807) | |
| Interest | 14,535 | 31,846 | |
| Effects of movements in foreign exchange rates | 11,460 | (21,683) | |
| Obligation, end of the period | 214,457 | 219,406 | |
| Current portion | (59,298) | (44,639) | |
| Long-term portion | 155,159 | 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 $ 53,543. As at June 30, 2025, the Company has the following future lease obligations:
| Less than one year | 84,737 | ||
| 2 - 5 years | 191,240 | ||
| Total lease payments | 275,977 | ||
| Amounts representing interest over the term | (61,520) | ||
| Present value of the net obligation | 214,457 |
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:
| June 30, 2025 |
December 31, 2024 |
||
| Obligation, beginning of the period | 6,307,659 | 3,973,075 | |
| Additions | 853,596 | 1,467,282 | |
| Change in estimated cash flows | (279,060) | 843,978 | |
| Payments or settlements | - | (110,263) | |
| Accretion expense | 141,046 | 178,296 | |
| Effects of movements in foreign exchange rates | 396 | (44,709) | |
| Obligation, end of the period | 7,023,637 | 6,307,659 |
T he 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 $8,830,428 (2024: $8,155,704) .
10. Share Capital
(a) Authorized: Unlimited number of common shares without par value
(b) Issued:
| June 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 June 30, 2025 and December 31, 2024 and changes during the periods ended on those dates is presented below:
| June 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 | - | - | (2,433,333) | $0.12 |
| Exercised | (6,676,112) | $0.19 | (7,479,441) | $0.11 |
| End of period | 18,118,890 | $0.36 | 24,795,002 | $0.32 |
| Exercisable, end of period | 5,131,296 | $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 June 30, 2025 |
| October 22, 2018 | 250,000 | $1.15 | 3.31 | Oct. 22, 2028 | 250,000 |
| May 3, 2019 | 100,000 | $0.31 | 3.84 | May 3, 2029 | 100,000 |
| March 20, 2020 | 900,000 | $0.05 | 4.72 | Mar. 20, 2030 | 900,000 |
| April 13, 2020 | 900,000 | $0.05 | 4.78 | April 13, 2030 | 900,000 |
| June 9, 2022 | 133,334 | $0.28 | 0.44 | Dec. 9, 2023, 2024 and 2025 | 133,334 |
| September 7, 2022 | 416,668 | $0.26 | 0.68 | Mar. 7, 2024, 2025 and 2026 | - |
| December 21, 2022 | 1,826,112 | $0.28 | 0.97 | June 21, 2024, 2025 and 2026 | - |
| January 23, 2023 | 50,000 | $0.32 | 1.06 | July 23, 2024, 2025 and 2026 | - |
| September 21, 2023 | 666,667 | $0.33 | 1.22 | Mar. 21, 2025, 2026 and 2027 | - |
| April 29, 2024 | 8,543,888 | $0.38 | 1.33 | Oct.29 2025, 2026 and 2027 | 2,847,962 |
| September 11, 2024 | 4,332,221 | $0.48 | 1.70 | Mar.11 2026, 2027 and 2028 | - |
| Total | 18,118,890 | $0.36 | 1.74 years | 5,131,296 |
For the six months ended June 30, 2025, the Company has recognized shared-based compensation income of $243,630 (2024: expense of $101,278) corresponding to the progressive vesting and fair market value of options, reducing its stock based compensation liability in the same amount (2024: increasing contributed surplus), and paid $ 1,085,457 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). Presented below are the Company's exploration and production contractual commitments at June 30, 2025:
| 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 June 30, 2025, the Company had obligations under Letters of Credit ("LC's") outstanding totaling $3.1 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 | 621,158 | 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 | October 14, 2025 |
| ANH | AESC | Abandonment | 265,782 | August 28, 2025 | |
| Total | 3,095,402 |
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.
(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:
| June 30, 2025 | December 31, 2024 | |
| Working capital | $393,211 | $ 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 six months ended as at June 30:
| Three months ended June 30, 2025 | Colombia | Canada | Total | |||
| Revenue: | ||||||
| Oil Sales | $ | 17,718,580 | $ | - | $ | 17,718,580 |
| Natural gas and liquid sales | - | 230,688 | 230,688 | |||
| Royalties | (2,065,186) | (15,144) | (2,080,330) | |||
| Expenses | (9,123,780) | (4,596,047) | (13,719,827) | |||
| Income taxes | (3,083,846) | - | (3,083,846) | |||
| Net income (loss) | $ | 3,445,768 | $ | (4,380,503) | $ | (934,735) |
| Six months ended June 30, 2025 | Colombia | Canada | Total | |||
| Revenue: | ||||||
| Oil Sales | $ | 39,568,868 | $ | - | $ | 39,568,868 |
| Natural gas and liquid sales | - | 516,559 | 516,559 | |||
| Royalties | (4,685,857) | (24,507) | (4,710,364) | |||
| Expenses | (21,034,908) | (6,154,438) | (27,189,346) | |||
| Income taxes | (6,456,688) | - | (6,456,688) | |||
| Net income (loss) | $ | 7,391,415 | $ | (5,662,386) | $ | 1,729,029 |
| Capital expenditures for the period | $ | 24,425,024 | $ | 1,725,362 | $ | 26,150,386 |
| Total Assets as at June 30, 2025 | $ | 86,231,596 | $ | 6,198,354 | $ | 92,729,950 |
| Total liabilities as at June 30, 2025 | $ | 35,330,832 | $ | 2,665,816 | $ | 37,996,648 |
| Three months ended June 30, 2024 | Colombia | Canada | Total | |||
| Revenue: | ||||||
| Oil Sales | $ | 17,062,022 | $ | - | $ | 17,062,022 |
| Natural gas and liquid sales | - | 105,121 | 105,121 | |||
| Royalties | (2,040,580) | 19,803 | (2,020,777) | |||
| Expenses | (6,258,927) | (3,732,716) | (9,991,643) | |||
| Impairment loss | - | (1,542,000) | (1,542,000) | |||
| Income taxes | (2,364,898) | - | (2,364,898) | |||
| Net income (loss) | $ | 6,397,617 | $ | (5,149,792) | $ | 1,247,825 |
| Six months ended June 30, 2024 | Colombia | Canada | Total | |||
| Revenue: | ||||||
| Oil Sales | $ | 33,129,313 | $ | - | $ | 33,129,313 |
| Natural gas and liquid sales | - | 431,472 | 431,472 | |||
| Royalties | (4,012,959) | 3,461 | (4,009,498) | |||
| Expenses | (11,845,635) | (6,409,050) | (18,254,685) | |||
| Impairment loss | - | (1,542,000) | (1,542,000) | |||
| Income taxes | (5,330,051) | - | (5,330,051) | |||
| Net income (loss) | $ | 11,940,668 | $ | (7,516,117) | $ | 4,424,551 |
| Capital expenditures for the period | $ | 15,240,088 | $ | 6,648 | $ | 15,246,736 |
| Total Assets as at June 30, 2024 | $ | 64,290,350 | $ | 3,574,283 | $ | 67,864,633 |
| Total liabilities as at June 30, 2024 | $ | 19,192,784 | $ | 2,552,577 | $ | 21,745,391 |
Arrow Exploration Corp.
MANAGEMENT's DISCUSSION AND ANALYSIS
THREE AND SIX MONTHS ENDED JUNE 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 August 27, 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 six months ended June 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 June 30, 2025 | Six months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2024 |
| Net income (loss) | (934,735) | 1,729,029 | 1,770,825 | 4,947,551 |
| Add/(subtract): | ||||
| Share based payments | 857,840 | (243,630) | 309,845 | 411,123 |
| Financing costs: | ||||
| Accretion on decommissioning obligations | 72,769 | 141,046 | 41,363 | 78,739 |
| Interest | 7,368 | 14,535 | 7,501 | 17,271 |
| Other | 3,197 | 3,197 | 108,773 | 307,837 |
| Depreciation and depletion | 3,179,694 | 9,700,662 | 2,738,894 | 6,270,668 |
| Impairment loss | - | - | 1,542,000 | 1,542,000 |
| Income taxes, current and deferred | 3,083,846 | 6,456,688 | 2,364,898 | 5,330,051 |
| Adjusted EBITDA (1) | 6,269,979 | 17,801,527 | 8,884,099 | 18,905,240 |
| Cash flows provided by (used in) operating activities | (472,090) | 13,958,094 | 7,134,370 | 15,716,658 |
| Minus - Changes in non‑cash working capital balances: | ||||
| Trade and other receivables | 738,499 | (1,054,458) | 710,871 | 411,317 |
| Restricted cash | 25,000 | 33,136 | (83,766) | (427,512) |
| Taxes receivable | 970,149 | 898,229 | (230,531) | (66,453) |
| Deposits and prepaid expenses | (62,715) | (40,477) | (37,991) | 114,972 |
| Inventory | 13,694 | 16,962 | (445,693) | (445,785) |
| Accounts payable and accrued liabilities | 4,497,564 | 1,974,550 | 8,603 | 305,814 |
| Income taxes | (1,715,575) | (2,045,957) | (400,167) | (1,742,632) |
| Funds flow from operations (1) | 3,994,525 | 13,740,079 | 6,655,696 | 13,866,379 |
(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, 2025 | Six months ended June 30, 2025 |
Three months ended June 30, 2024 |
| Total natural gas and crude oil revenues, net of royalties | 15,868,938 | 35,375,063 | 15,146,366 |
| Funds flow from operations (1) | 3,994,525 | 13,740,079 | 6,655,696 |
| Funds flow from operations (1) per share - | |||
| Basic($) | 0.01 | 0.05 | 0.02 |
| Diluted ($) | 0.01 | 0.05 | 0.02 |
| Net income (loss) | (934,735) | 1,729,029 | 1,247,825 |
| Net income (loss) per share - | |||
| Basic ($) | (0.00) | 0.01 | 0.00 |
| Diluted ($) | (0.00) | 0.01 | 0.00 |
| Adjusted EBITDA (1) | 6,269,979 | 17,801,527 | 8,884,099 |
| Weighted average shares outstanding - | |||
| Basic ($) | 285,864,348 | 285,864,348 | 285,864,348 |
| Diluted ($) | 295,209,883 | 294,655,197 | 292,536,147 |
| Common shares end of period | 285,864,348 | 285,864,348 | 285,864,348 |
| Capital expenditures | 14,771,206 | 26,150,386 | 8,965,408 |
| Cash and cash equivalents | 13,212,417 | 13,212,417 | 10,826,380 |
| Current Assets | 20,213,917 | 20,213,917 | 19,975,633 |
| Current liabilities | 19,820,706 | 19,820,706 | 13,318,516 |
| Adjusted working capital(1) | 393,211 | 393,211 | 6,657,117 |
| Long-term portion of restricted cash(2) | 154,849 | 154,849 | 174,190 |
| Total assets | 92,729,950 | 92,729,950 | 67,864,633 |
| Operating | |||
| Natural gas and crude oil production, before royalties | |||
| Natural gas (Mcf/d) | 1,587 | 1,718 | 926 |
| Natural gas liquids (bbl/d) | 10 | 8 | 4 |
| Crude oil (bbl/d) | 3,493 | 3,631 | 2,387 |
| Total (boe/d) | 3,767 | 3,925 | 2,546 |
| Operating netbacks ($/boe) (1) | |||
| Natural gas ($/Mcf) | ($1.45) | ($1.21) | ($1.25) |
| Crude oil ($/bbl) | $30.08 | $36.42 | $54.54 |
| Total ($/boe) | $27.36 | $33.24 | $51.21 |
(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, 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 June 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 | Operated 1 | 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 | 19,200 | 100% | 19,200 |
| Wapiti | Non-operated | 1,280 | 13% | 160 |
| Ante Creek | Operated | 2,560 | 100% | 2,560 |
| KEHO | Operated | 8,163 | 100% | 8,163 |
| Total Canada | 39,363 | 32,602 | ||
| TOTAL | 256,753 | 166,596 |
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.
1 The Company's interest in the Tapir block is held through a private contract with Petrolco, who holds a 50% participating interest in, and is the named operator of, the Tapir contract with Ecopetrol. The formal assignment to the Company is subject to Ecopetrol's consent. The Company is the de facto operator pursuant to certain agreements with Petrolco (details of which are set out in Paragraph 16.13 of the Company's AIM Admission Document dated October 20, 2021).
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, 2025 Financial and Operational Highlights
· Arrow recorded $15,868,938 in revenues, net of royalties, on crude oil sales of 311,843 bbls, 916 bbls of natural gas liquids ("NGL's") and 144,417 Mcf of natural gas sales;
· Funds flow from operations of $3,994,5276;
· Net loss of $934,735 and adjusted EBITDA was $6,269,979;
Results of Operations
During Q2 2025, the Company's production has decreased due to natural declines and increasing water cuts across its fields in the Tapir block. 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 | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | Q1 2024 |
| Oso Pardo | 131 | 126 | 154 | 180 | 113 | 166 |
| Ombu (Capella) | - | - | - | - | - | - |
| Rio Cravo Este (Tapir) | 996 | 1,118 | 1,178 | 1,078 | 1,283 | 1,644 |
| Carrizales Norte (Tapir) | 2,070 | 2,321 | 3,153 | 2,784 | 991 | 622 |
| Alberta Llanos | 296 | 205 | 26 | - | - | - |
| Total Colombia | 3,493 | 3,770 | 4,511 | 4,042 | 2,387 | 2,432 |
| Fir, Alberta | 100 | 105 | 88 | 82 | 77 | 78 |
| Pepper, Alberta | 170 | 210 | 139 | - | 82 | 220 |
| KEHO, Alberta | 5 | - | - | - | - | - |
| TOTAL (Boe/d) | 3,768 | 4,085 | 4,738 | 4,124 | 2,546 | 2,730 |
The Company's average production for the three months ended June 30, 2025 was 3,768 boe/d which consisted of crude oil production in Colombia of 3,493 bbl/d, natural gas production of 1,587 Mcf/d, and minor amounts of natural gas liquids. The Company's Q2 2025 production was 48% higher than its Q2 2024 production and 7% lower than Q1 2025 due to natural declines and water handling capability.
Average Daily Natural Gas and Oil Production and Sales Volumes
| Three months ended June 30 |
Six months ended June 30 |
||||
| 2025 | 2024 | 2025 | 2024 | ||
| Natural Gas (Mcf/d) | |||||
| Natural gas production | 1,587 | 926 | 1,718 | 1,343 | |
| Natural gas sales | 1,587 | 926 | 1,718 | 1,343 | |
| Realized Contractual Natural Gas Sales | 1,587 | 926 | 1,718 | 1,343 | |
| Crude Oil (bbl/d) | |||||
| Crude oil production | 3,493 | 2,387 | 3,631 | 2,409 | |
| Inventory movements and other | (66) | 181 | (44) | 93 | |
| Crude Oil Sales | 3,427 | 2,569 | 3,587 | 2,502 | |
| Corporate | |||||
| Natural gas production (boe/d) | 264 | 155 | 286 | 224 | |
| Natural gas liquids(bbl/d) | 10 | 4 | 8 | 4 | |
| Crude oil production (bbl/d) | 3,493 | 2,387 | 3,631 | 2,409 | |
| Total production (boe/d) | 3,767 | 2,546 | 3,925 | 2,638 | |
| Inventory movements and other (boe/d) | (66) | 181 | (44) | 93 | |
| Total Corporate Sales (boe/d) | 3,701 | 2,728 | 3,881 | 2,731 |
(1) Royalties paid in kind reduce the Company's crude oil sales volumes
During the three and six months ended June 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 June 30 |
Six months ended June 30 |
||||
| 2025 | 2024 | 2025 | 2024 | ||
| Natural Gas | |||||
| Natural gas revenues | 183,267 | 79,226 | 434,784 | 379,450 | |
| NGL revenues | 47,421 | 25,894 | 81,775 | 52,022 | |
| Royalties | (15,144) | 19,803 | (24,507) | 3,461 | |
| Revenues, net of royalties | 215,544 | 124,924 | 492,052 | 434,933 | |
| Oil | |||||
| Oil revenues | 17,718,580 | 17,062,022 | 39,568,868 | 33,129,313 | |
| Royalties | (2,065,186) | (2,040,580) | (4,685,857) | (4,012,959) | |
| Revenues, net of royalties | 15,653,394 | 15,021,442 | 34,883,011 | 29,116,354 | |
| Corporate | |||||
| Natural gas revenues | 183,267 | 79,226 | 434,784 | 379,450 | |
| NGL revenues | 47,421 | 25,894 | 81,775 | 52,022 | |
| Oil revenues | 17,718,580 | 17,062,022 | 39,568,868 | 33,129,313 | |
| Total revenues | 17,949,268 | 17,167,143 | 40,085,427 | 33,560,785 | |
| Royalties | (2,080,330) | (2,020,777) | (4,710,364) | (4,009,498) | |
| Natural gas and crude oil revenues, net of royalties | 15,868,938 | 15,146,366 | 35,375,063 | 29,551,287 |
Natural gas and crude oil revenues, net of royalties, for the three and six months ended June 30, 2025 were $15,868,938 and $35,375,063 (2024: $15,146,366 and $29,551,287), respectively, which represents an increase of 5% and 20 % when compared to 2024, respectively. The increase is mainly due to increased oil production in Colombia during 2025 when compared to 2024, increase in revenue in Canada, and the decrease from Q1 2025 is mainly due to natural declines and increased water cut in some wells located in the Tapir block.
Average Benchmark and Realized Prices
| Three months ended June 30 | Six months ended June 30 | |||||
| 2025 | 2024 | Change | 2025 | 2024 | Change | |
| Benchmark Prices | ||||||
| AECO (C$/Mcf) | $1.72 | $1.20 | 43% | $1.95 | $1.87 | 4% |
| Brent ($/bbl) | $69.80 | $83.00 | (16%) | $70.64 | $83.84 | (16%) |
| West Texas Intermediate ($/bbl) | $63.70 | $80.55 | (21%) | $67.55 | $78.75 | (14%) |
| Realized Prices | ||||||
| Natural gas, net of transportation ($/Mcf) | $1.27 | $0.94 | 35% | $1.40 | $1.55 | (10%) |
| Natural gas liquids ($/bbl) | $51.76 | $69.96 | (26%) | $55.63 | $68.02 | (18%) |
| Crude oil, net of transportation ($/bbl) | $56.87 | $72.99 | (22%) | $60.94 | $73.15 | (17%) |
| Corporate average, net of transport ($/boe)(1) | $53.33 | $69.39 | (23%) | $57.05 | $67.99 | (16%) |
(1)Non-IFRS measure
The Company realized prices of $53.33 and $57.05 per boe during the three and six months ended June 30, 2025 (2024: $69.39 and $67.99), due to overall decrease in oil prices during 2025 when compared to 2024, offset by increase in and natural gas prices, and increased production of heavier oil which is sold at larger discounts when compared to lighter oil.
Operating Expenses
| Three months ended June 30 | Six months ended June 30 | |||
| 2025 | 2024 | 2025 | 2024 | |
| Natural gas & NGL's | 377,245 | 204,106 | 786,123 | 510,330 |
| Crude oil | 6,283,602 | 2,271,476 | 11,231,323 | 4,034,263 |
| Total operating expenses | 6,660,847 | 2,475,582 | 12,017,446 | 4,544,593 |
| Natural gas ($/Mcf) | $2.61 | $2.42 | $2.53 | $2.09 |
| Crude oil ($/bbl) | $20.17 | $9.72 | $17.30 | $8.91 |
| Corporate ($/boe)(1) | $19.79 | $10.01 | $17.10 | $9.21 |
(1)Non-IFRS measure
During the three and six months ended June 30, 2025, Arrow incurred operating expenses of $6,660,847 and $12,017,446 (2024: $2,475,582 and $4,544,593), respectively. This increase in operating costs is mainly due to increased production in the Company's Carrizales Norte and Alberta Llanos fields, including trucking water production to disposal wells or third-party disposal facilities, and stimulation workovers. The Company has developed additional disposal wells and fields to bring down costs associated with water disposal.
Operating Netbacks
| Three months ended June 30 | Six months ended June 30 | |||
| 2025 | 2024 | 2025 | 2024 | |
| Natural Gas ($/Mcf) | ||||
| Revenue, net of transportation expense | $1.27 | $0.94 | $1.40 | $1.55 |
| Royalties | ($0.10) | $0.23 | ($0.08) | $0.01 |
| Operating expenses | ($2.61) | ($2.42) | ($2.53) | ($2.09) |
| Natural Gas operating netback(1) | ($1.44) | ($1.25) | ($1.21) | ($0.52) |
| Crude oil ($/bbl) | ||||
| Revenue, net of transportation expense | $56.87 | $72.99 | $60.94 | $73.15 |
| Royalties | ($6.63) | ($8.73) | ($7.22) | ($8.86) |
| Operating expenses | ($20.17) | ($9.72) | ($17.30) | ($8.91) |
| Crude Oil operating netback(1) | $30.07 | $54.54 | $36.42 | $55.38 |
| Corporate ($/boe) | ||||
| Revenue, net of transportation expense | $53.33 | $69.39 | $57.05 | $67.99 |
| Royalties | ($6.18) | ($8.17) | ($6.70) | ($8.12) |
| Operating expenses | ($19.79) | ($10.01) | ($17.10) | ($9.21) |
| Corporate Operating netback (1) | $27.36 | $51.21 | $33.24 | $50.66 |
(1) Non-IFRS measure
The operating netbacks of the Company for the three and six months ended June 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 June 30 | Six months ended June 30 | |||
| 2025 | 2024 | 2025 | 2024 | |
| General & administrative expenses | 4,275,419 | 3,875,274 | 7,260,394 | 6,812,387 |
| G&A recovered from 3rd parties | (504,051) | (161,697) | (607,036) | (416,888) |
| Total G&A | 3,771,368 | 3,713,577 | 6,653,358 | 6,395,499 |
| Cost per boe | $11.21 | $15.01 | $9.47 | $12.96 |
For the three and six months ended June 30, 2025, G&A expenses before recoveries totaled $4,275,419 and $7,260,394 (2024: $6,812,387 and $3,875,274), respectively. G&A expenses were marginally increased when compared to Q2 2024 and, due to the Company's increased production, G&A expenses were reduced, on a per barrel basis, when compared to 2024.
Share-based Compensation
| Three months ended June 30 | Six months ended June 30 | |||
| 2025 | 2024 | 2025 | 2024 | |
| Share-based payments | 857,840 | 309,845 | (243,630) | 411,123 |
Share-based compensation for the three and six months ended June 30, 2025 totaled an expense of $857,840 and an income of $243,630 (2024: expense of $309,845 and $411,123), respectively due to fair market valuation of this obligation with a corresponding effect in stock based compensation liability.
Financing Costs
| Three months ended June 30 | Six months ended June 30 | |||
| 2025 | 2024 | 2025 | 2024 | |
| Financing expense paid or payable | 10,565 | 116,274 | 17,732 | 325,108 |
| Non-cash financing costs | 72,769 | 41,363 | 141,046 | 78,739 |
| Net financing costs | 83,334 | 157,637 | 158,778 | 403,847 |
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. 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 |
|||
| 2025 | 2024 | 2025 | 2024 | |
| Depletion and depreciation | 3,179,694 | 3,261,894 | 9,700,662 | 6,793,668 |
Depletion and depreciation expense for the three and six months ended June 30, 2025 totaled $3,179,694 and $9,700,662 (2024: $3,261,894 and $6,793,668), respectively. The Company uses the unit of production method and proved plus probable reserves to calculate its depletion and depreciation expense.
Income Tax Expense
| Three months ended June 30 | Six months ended June 30 | |||
| 2025 | 2024 | 2025 | 2024 | |
| Current | 1,017,164 | 2,713,664 | 2,895,081 | 5,218,949 |
| Deferred | 2,066,682 | (348,766) | 3,561,607 | 111,101 |
| Total income tax expense | 3,083,846 | 2,364,898 | 6,456,688 | 5,330,050 |
The Company recognized a net income tax expense of $3,083,846 and $6,456,688 (2024: $2,364,898 and $5,330,050). This increase is mainly caused by the continuous increase of the Company's net taxable income, especially in Colombia.
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 June 30, 2025 the Company has a working capital of $393,211 which has allowed the company to use its operational cash flows to continue growing, despite volatility in energy commodity prices. As at June 30, 2025 the Company's net debt (net cash) was calculated as follows:
| June 30, 2025 | ||||
| Current assets | $ | 20,213,917 | ||
| Less: | ||||
| Accounts payable and accrued liabilities | (17,249,293) | |||
| Income taxes payable | (2,319,559) | |||
| Net debt (Net cash) (1) | $ | (645,065) |
(1) Non-IFRS measure
Working Capital
As at June 30, 2025 the Company's adjusted working capital was calculated as follows:
| June 30, 2025 | ||||
| Current assets: | ||||
| Cash | $ | 13,212,417 | ||
| Restricted cash and deposits | 283,973 | |||
| Trade and other receivables | 2,775,757 | |||
| Taxes receivable | 3,555,155 | |||
| Other current assets | 386,615 | |||
| Less: | ||||
| Accounts payable and accrued liabilities | (17,249,293) | |||
| Lease obligation | (59,298) | |||
| Income tax payable | (2,319,559) | |||
| Stock based compensation liability | (192,556) | |||
| Working capital(1) | $ | 393,211 |
(1) Non-IFRS measure
Debt Capital
As at June 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 $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 June 30, 2025, no funds have been withdrawn from
Letters of Credit
As at June 30, 2025 , the Company had obligations under Letters of Credit ("LC's") outstanding totaling $3.1 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 | 621,158 | April 14, 2026 |
| ANH | AESC | Financial Capacity | 1,672,162 | December 30, 2025 | |
| CORE - 39 | ANH | AESC | Compliance | 100,000 | December 30, 2025 |
| OMBU | ANH | AESC | Financial Capacity | 436,300 | October 14, 2025 |
| ANH | AESC | Abandonment | 265,782 | August 28, 2025 | |
| Total | $3,095,402 |
Share Capital
As at June 30, 2025 , the Company had 285,864,348 common shares and 18,118,890 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, 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 $12 million. The Company have made an application to cancel its commitments on the COR-39, which represents the totality of the Company's current commitments.
SUMMARY OF THREE MONTHS RESULTS
| 2025 | 2024 | 2023 | ||||||
| Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | |
| Oil and natural gas sales, net of royalties | 15,868,938 | 19,506,125 | 22,873,626 | 21,300,115 | 15,146,366 | 14,404,921 | 13,406,513 | 13,990,353 |
| Net income (loss) | (934,735) | 2,663,764 | 2,081,956 | 6,668,493 | 1,247,825 | 3,176,727 | (10,492,053) | 7,153,120 |
| Income (loss) per share - basic diluted |
(0.00) (0.00) |
0.01 0.01 |
0.01 0.01 |
0.02 0.02 |
0.00 0.00 |
0.01 0.01 |
(0.04) (0.04) |
0.03 0.02 |
| Working capital (deficit) | 393,211 | 11,036,334 | 11,646,169 | 9,622,125 | 6,657,117 | 9,520,829 | 8,669,114 | 10,822,475 |
| Total assets | 92,729,950 | 90,532,063 | 81,268,734 | 73,535,397 | 67,864,633 | 64,579,940 | 62,275,023 | 62,755,250 |
| Net capital expenditures | 14,771,206 | 11,379,180 | 8,928,725 | 6,945,779 | 8,965,408 | 6,281,329 | 10,471,447 | 5,471,561 |
| Average daily production (boe/d) | 3,767 | 4,085 | 4,738 | 4,124 | 2,638 | 2,730 | 2,666 | 2,518 |
The Company's oil and natural gas sales have increased 5% in Q2 2025 when compared to Q2 2024 due to increased production in its existing assets, despite decreased commodity prices, but decreased 19% when compared to Q1 2025 due to declines and increase in water cuts.
Trends in the Company's net income are also impacted most significantly by operating expenses, financing costs, income taxes, depletion, depreciation and impairment of oil and gas properties, and other income.
OUTSTANDING SHARE DATA
At August 28, 2025 the Company had the following securities issued and outstanding:
| Number | Exercise Price | Expiry Date | ||||
| Common shares | 285,864,348 | n/a | n/a | |||
| Stock options | 250,000 | CAD$ 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 | Dec. 9, 2024 and 2025 | |||
| Stock options | 416,668 | CAD$0.26 | Mar. 7, 2025 and 2026 | |||
| Stock options | 1,826,112 | GBP 0.1675 | June 21, 2024, 2025 and 2026 | |||
| Stock options | 50,000 | GBP 0.1925 | July 23, 2024, 2025 and 2026 | |||
| Stock options | 666,667 | CAD $0.33 | Mar. 21, 2025, 2026 and 2027 | |||
| Stock options | 8,543,888 | CAD $0.375 | Oct. 29 2025, 2026 and 2027 | |||
| Stock options | 4,332,221 | CAD $0.475 | Mar. 11 2026, 2027 and 2028 |
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 plans another year of production growth with a balanced program of both development and low risk exploration drilling on the Tapir Block. The Company has a strong balance sheet, with no debt and cash flow from operations which will fund the 2025 program.
CRITICAL ACCOUNTING ESTIMATES
A summary of the Company's critical accounting estimates is contained in Note 3 Annual Financial Statements. These accounting policies are subject to estimates and key judgements about future events, many of which are beyond Arrow's control.
SUMMARY OF MATERIAL ACCOUNTING POLICIES
A summary of the Company's material accounting policies is included in Note 3 of the Annual Financial Statements. These accounting policies are consistent with those of the previous financial year.
RISKS AND UNCERTAINTIES
The Company is subject to financial, business and other risks, many of which are beyond its control and which could have a material adverse effect on the business and operations of the Company. Please refer to "Risk Factors" in the MD&A for the year ended December 31, 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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