REG - Arrow Exploration - Arrow Announces Q1 2026 Interim Results
27/05/2026 07:00
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RNS Number : 7829F Arrow Exploration Corp. 27 May 2026
NOT FOR RELEASE, DISTRIBUTION, PUBLICATION, DIRECTLY OR INDIRECTLY, IN WHOLE
OR IN PART, IN OR INTO OR FROM THE UNITED STATES, AUSTRALIA, JAPAN, THE
REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE TO DO SO MIGHT
CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH
JURISDICTION.
ARROW ANNOUNCES Q1 2026 INTERIM RESULTS
CALGARY, May 27, 2026 - Arrow Exploration Corp. (AIM: AXL; TSXV: AXL) ("Arrow"
or the "Company"), the high-growth operator with a portfolio of assets across
key Colombian hydrocarbon basins, is pleased to announce the filing of its
Interim Condensed (unaudited) Consolidated Financial Statements and
Management's Discussion and Analysis ("MD&A") for the three months ended
March 31, 2026, which are available on SEDAR (www.sedar.com
(http://www.sedar.com) ) and will also be available shortly on Arrow's website
at www.arrowexploration.ca (http://www.arrowexploration.ca) .
Q1 2026 Highlights:
· Average corporate production of 4,715 boe/d (Q1 2025: 4,085 boe/d).
· Recorded $23.5 million of total oil and natural gas revenue, net of
royalties, representing a 21% increase when compared to the same period in
2025 (Q1 2025: $19.5 million).
· Adjusted EBITDA((1)) of $14.1 million, a 22% increase when compared
to the same period in 2025 (Q1 2025: $11.5 million).
· Realized corporate oil operating netbacks((1)) of $41.05/bbl.
· Cash position of $14.2 million at the end of Q1 2026.
· Q1 2026 operating cashflows of $13.6 million.
· Drilled three additional development wells in the Mateguafa Attic (M)
field in the Tapir block
· Net income of $5.2 million.
((1))Non-IFRS measures - see "Non-IFRS Measures" section below
Post Period End Highlights:
· Drilled the Icaco-1 (IC-1) exploration well, which has resulted in a
discovery of three oil bearing sands
· Spud the Icaco-2 (IC-2) appraisal well which will help delineate the
pool and determine initial volumes and areal extent of each individual oil
producing zone
· Drilled one additional Mateguafa Attic well (M-HZ12)
Cash Balance:
On May 1, 2026, the Company's cash balance was US$24 million. Arrow increased
its cash balance while continuing capital expenditures and drilling activity
demonstrating strong operating leverage and self-funded growth capability.
This balance reflects a significant improvement in netbacks, due to higher
crude oil prices and increases in the Company's production, even with
continued capital expenditures.
Tapir Extension
The Company continues constructive engagement with authorities regarding the
Tapir block extension and believes it is well positioned to secure the
extension based on satisfaction all of the relevant requirements.
Arrowwill keep the market updated on progress with its license extension
discussions in future releases.
Upcoming Drilling
The Company has spud the IC-2 well, which is expected to be put on production
over the coming weeks. Thereafter, the Company expects to continue drilling
additional development wells at its Icaco field and recompletions in several
Mateguafa Attic wells during Q2 2026.
Marshall Abbott, CEO of Arrow Exploration Corp., commented:
"The first quarter of 2026 has been very busy for Arrow. We completed
additional development wells in the Mateguafa Attic and planned for the
drilling the Icaco-1 exploration well, which proved very successful post
period end. We are excited by the Icaco discovery and believe it could become
a major production platform with a material impact on the Company."
"The focus for the remainder of 2026 will be to drill additional wells at the
Icaco pad, drilling development wells on the Alberta Llanos and Carrizales
Norte pads and numerous well recompletions to improve productivity in our
currently most prolific fields."
FINANCIAL AND OPERATING HIGHLIGHTS
Three months ended March 31, 2026 Three months ended March 31, 2025
(in United States dollars, except as otherwise noted)
Total natural gas and crude oil revenues, net of royalties 23,498,316 19,506,125
Funds flow from operations ((1)) 11,557,223 9,745,553
Funds flow from operations ((1)) per share -
Basic($) 0.04 0.03
Diluted ($) 0.04 0.03
Net income 5,221,470 2,663,764
Net income per share -
Basic ($) 0.02 0.01
Diluted ($) 0.02 0.01
Adjusted EBITDA ((1)) 14,060,456 11,531,548
Weighted average shares outstanding -
Basic ($) 285,864,348 285,864,348
Diluted ($) 288,231,960 294,094,348
Common shares end of period 285,864,348 285,864,348
Capital expenditures 7,882,335 11,379,180
Cash and cash equivalents 14,215,687 24,946,934
Current Assets 37,870,075 30,288,808
Current liabilities 32,608,044 19,252,474
Adjusted working capital ((1)) 5,262,031 11,036,334
Long-term portion of restricted cash and deposits ((2)) 249,840 129,849
Total assets 111,547,344 90,532,063
Operating
Natural gas and crude oil production, before royalties
Natural gas (Mcf/d) 1,078 1,851
Natural gas liquids (bbl/d) 5 6
Crude oil (bbl/d) 4,530 3,770
Total (boe/d) 4,715 4,085
Operating netbacks ($/boe) ((1))
Natural gas ($/Mcf) ($0.73) ($1.00)
Crude oil ($/bbl) $42.82 $42.29
Total ($/boe) $41.05 $38.66
((1))Non-IFRS measures
Discussion of Operating Results
During Q1 2026, the Company's production increased due to additional volumes
of oil crude production from the Mateguafa Attic field in the Tapir block,
offset by decreased production in other fields due to natural declines. This
has allowed the Company to continue its healthy level of operating results and
EBITDA.
Average Production by Property
Average Production Boe/d Q1 2026 FY 2025 Q4 2025 Q3 2025 Q2 2025 Q1 2025
Oso Pardo 98 114 95 103 131 126
Rio Cravo Este (Tapir) 881 1,043 996 1,065 996 1,118
Carrizales Norte (Tapir) 1,424 1,991 1,702 1,879 2,070 2,321
Alberta Llanos (Tapir) 294 474 446 943 296 205
Mateguafa (Tapir) 1,833 127 500 - - -
Total Colombia 4,530 3,749 3,739 3,990 3,493 3,770
Fir, Alberta 67 100 107 85 100 105
Pepper, Alberta 118 162 129 139 170 210
KEHO, Alberta - 1 - - 5 -
TOTAL (Boe/d) 4,715 4,012 3,975 4,214 3,768 4,085
The Company's average production for the three months ended March 31, 2026 was
4,715 boe/d which consisted of crude oil production in Colombia of 4,530
bbl/d, natural gas production of 1,078 Mcf/d, and minor amounts of natural gas
liquids. The Company's Q1 2026 production was 15% higher than its Q1 2025
production and 19% higher than Q4 2025 due to the Mateguafa Attic additional
volumes.
Discussion of Financial Results
During Q1 2026, the Company realized prices of $63.77 per boe (2025: $60.48),
due to overall increases in oil and natural gas prices during 2026 and
increased production of lighter oil which is sold at a higher realized price
than heavy oil.
Three months ended March 31
2026 2025 Change
Benchmark Prices
AECO (C$/Mcf) $1.90 $2.19 (13%)
Brent ($/bbl) $80.95 $71.47 13%
West Texas Intermediate ($/bbl) $72.15 $71.40 1%
Realized Prices
Natural gas, net of transportation ($/Mcf) $1.74 $1.51 15%
Natural gas liquids ($/bbl) $111.74 $62.02 80%
Crude oil, net of transportation ($/bbl) $65.89 $64.70 2%
Corporate average, net of transport ($/boe) $63.77 $60.48 5%
((1))Non-IFRS measure
Operating Netbacks
The Company also continued to realize good oil operating netbacks, as
summarized below:
Three months ended
March 31
2026 2025
Natural Gas ($/Mcf)
Revenue, net of transportation expense $1.74 $1.51
Royalties ($0.10) ($0.06)
Operating expenses ($2.36) ($2.45)
Natural gas operating netback((1)) ($0.73) ($1.00)
Crude oil ($/bbl)
Revenue, net of transportation expense $65.89 $64.70
Royalties ($8.20) ($7.76)
Operating expenses ($14.87) ($14.65)
Crude oil operating netback((1)) $42.82 $42.29
Corporate ($/boe)
Revenue, net of transportation expense $63.77 $60.48
Royalties ($7.90) ($7.19)
Operating expenses ($14.83) ($14.63)
Corporate operating netback((1)) $41.05 $38.66
((1))Non-IFRS measure
The operating netbacks of the Company for the three months ended March 31,
2026 have improved due to the overall improvement in crude oil. The Company
continues to develop alternatives to trucking water for disposal in order to
improve operating costs. During Q1 2026, the Company incurred $7.8 million of
capital expenditure, primarily in connection with the drilling of additional
development wells in the Tapir block. This tempo is expected to continue
during the remainder of 2026, funded by cash on hand and cashflow.
For further Information, contact:
Arrow Exploration
Marshall Abbott, CEO +1 403 651 5995
Joe McFarlane, CFO +1 403 818 1033
Canaccord Genuity (Nominated Advisor and Joint Broker)
Henry Fitzgerald-O'Connor +44 (0)20 7523 8000
James Asensio
George Grainger
Auctus Advisors (Joint Broker)
Jonathan Wright +44 (0)7711 627449
Rupert Holdsworth Hunt
Hannam & Partners (Joint Broker)
Leif Powis +44 20 7907 8500
Samuel Merlin
Camarco (Financial PR)
Owen Roberts +44 (0)20 3781 8331
Rebecca Waterworth
About Arrow Exploration Corp.
Arrow Exploration Corp. (operating in Colombia via a branches of its 100%
owned subsidiary Arrow Exploration Switzerland GmbH) is a publicly traded
company with a portfolio of premier Colombian oil assets that are
underexploited, under-explored and offer high potential growth. The Company's
business plan is to expand oil production from some of Colombia's most active
basins, including the Llanos, Middle Magdalena Valley (MMV) and Putumayo
Basin. The asset base is predominantly operated with high working interests,
and the Brent-linked light oil pricing exposure combines with low royalties to
yield attractive potential operating margins. Pursuant to certain private
agreements entered between Arrow and its partner, Arrow is entitled to receive
50% of the production from the Tapir block and has the right to request
approval to Ecopetrol S.A. for the assignment of 50% of all rights, interests
and obligations under the Tapir Association Contract. Arrow is listed on the
AIM market of the London Stock Exchange and on TSX Venture Exchange under the
symbol "AXL".
Forward-looking Statements
This news release contains certain statements or disclosures relating to Arrow
that are based on the expectations of its management as well as assumptions
made by and information currently available to Arrow which may constitute
forward-looking statements or information ("forward-looking statements") under
applicable securities laws. All such statements and disclosures, other than
those of historical fact, which address activities, events, outcomes, results
or developments that Arrow anticipates or expects may, could or will occur in
the future (in whole or in part) should be considered forward-looking
statements. In some cases, forward-looking statements can be identified by the
use of the words "continue", "expect", "opportunity", "plan", "potential" and
"will" and similar expressions. The forward-looking statements contained in
this news release reflect several material factors and expectations and
assumptions of Arrow, including without limitation, Arrow's evaluation of the
impacts of global pandemics, the potential of Arrow's Colombian and/or
Canadian assets (or any of them individually), the prices of oil and/or
natural gas, and Arrow's business plan to expand oil and gas production and
achieve attractive potential operating margins. Arrow believes the
expectations and assumptions reflected in the forward-looking statements are
reasonable at this time, but no assurance can be given that these factors,
expectations, and assumptions will prove to be correct.
The forward-looking statements included in this news release are not
guarantees of future performance and should not be unduly relied upon. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause actual results or events to differ materially
from those anticipated in such forward-looking statements. The forward-looking
statements contained in this news release are made as of the date hereof and
the Company undertakes no obligations to update publicly or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise, unless so required by applicable securities laws.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that
term is defined in policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release.
Glossary
Bbl/d or bop/d: Barrels per day
$/Bbl: Dollars per barrel
Mcf/d: Thousand cubic feet of gas per day
Mmcf/d: Million cubic feet of gas per day
$/Mcf: Dollars per thousand cubic feet of gas
Mboe: Thousands of barrels of oil equivalent
Boe/d: Barrels of oil equivalent per day
$/Boe: Dollars per barrel of oil equivalent
MMbbls: Million of barrels
BOE's may be misleading particularly if used in isolation. A BOE conversion
ratio of 6 Mcf: 1 bblis based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead.
This Announcement contains inside information for the purposes of the UK
version of the market abuse regulation (EU No. 596/2014) as it forms part of
United Kingdom domestic law by virtue of the European Union (Withdrawal) Act
2018 ("UK MAR").
Non‐IFRS Measures
The Company uses non-IFRS measures to evaluate its performance which are
measures not defined in IFRS. Working capital, funds flow from operations,
realized prices, operating netback, adjusted EBITDA, and net debt as presented
do not have any standardized meaning prescribed by IFRS and therefore may not
be comparable with the calculation of similar measures for other entities. The
Company considers these measures as key measures to demonstrate its ability to
generate the cash flow necessary to fund future growth through capital
investment, and to repay its debt, as the case may be. These measures should
not be considered as an alternative to, or more meaningful than net income
(loss) or cash provided by operating activities or net loss and comprehensive
loss as determined in accordance with IFRS as an indicator of the Company's
performance. The Company's determination of these measures may not be
comparable to that reported by other companies.
Arrow Exploration Corp.
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ended MARCH 31, 2026 AND 2025
IN UNITED STATES DOLLARS
(UNAUDITED)
Notice of No Auditor Review of the Interim Condensed Consolidated Financial
Statements
as at and for the three months ended March 31, 2026
Under National Instrument 51-102, Part 4, subsection 4.3 (3)(a), if an auditor
has not performed a review of the interim condensed consolidated financial
statements, they must be accompanied by a notice indicating that an auditor
has not reviewed the financial statements.
The accompanying unaudited interim condensed consolidated financial statements
of the Company have been prepared by and are the responsibility of the
Company's management.
The Company's independent auditor has not performed a review of these
financial statements in accordance with standards established by the Chartered
Professional Accountants of Canada for a review of interim financial
statements by an entity's auditor.
Arrow Exploration Corp.
Interim Consolidated Statements of Financial Position
In United States Dollars
(Unaudited)
As at Notes March 31, 2026 December 31, 2025
ASSETS
Current assets
Cash $ 14,215,687 $ 11,208,824
Restricted cash and deposits 3 286,106 258,006
Trade and other receivables 4 14,237,298 14,533,377
Taxes receivable 5 8,745,770 7,637,342
Deposits and prepaid expenses 284,827 135,221
Inventory 100,387 108,533
37,870,075 33,881,303
Non-current assets
Restricted cash and deposits 3 249,840 273,257
Exploration and evaluation assets 6 4,454,522 3,437,965
Property and equipment 7 68,972,907 67,810,032
Total Assets $ 111,547,344 $ 105,402,557
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 31,871,164 $ 31,494,615
Lease obligation 8 46,504 67,734
Income taxes 80,146 -
Stock based compensation liability 10 610,230 495,619
32,608,044 32,057,968
Non-current liabilities
Lease obligations 8 103,674 132,952
Stock based compensation liability 10 374,434 116,350
Other liabilities 851,364 855,363
Deferred income taxes 8,156,187 7,930,871
Decommissioning liability 9 10,489,649 9,863,781
Total liabilities 52,583,352 50,957,285
Shareholders' equity
Share capital 10 73,829,795 73,829,795
Contributed surplus 856,093 856,093
Deficit (14,106,826) (19,328,296)
Accumulated other comprehensive loss (1,615,070) (912,320)
Total shareholders' equity 58,963,992 54,445,272
Total liabilities and shareholders' equity $ 111,547,344 $ 105,402,557
Commitments and contingencies (Note 11)
The accompanying notes are an integral part of these interim consolidated
financial statements.
On behalf of the Board:
signed "Gage Jull"
Director
signed "Ian Langley" Director
Gage
Jull
Ian Langley
Arrow Exploration Corp.
Interim Condensed Consolidated Statements of Operations and Comprehensive
Income
In United States Dollars
(Unaudited)
For the three months ended March 31, Notes 2026 2025
Revenue
Oil and natural gas 13 26,819,632 22,136,159
Royalties 13 (3,321,316) (2,630,034)
Total oil and natural gas revenue, net of royalties 23,498,316 19,506,125
Expenses
Operating 6,235,033 5,356,599
Administrative 3,249,483 2,881,990
Share-based compensation (recovery) expense 10 922,796 (1,101,470)
Financing costs:
Accretion 9 88,429 68,277
Interest 8 5,638 7,168
Foreign exchange (gain) loss 6,244 (244,212)
Depletion and depreciation 7 6,176,288 6,520,968
Other income, net (52,900) (19,801)
Total expenses, net 16,631,011 13,469,519
Income before income tax 6,867,305 6,036,606
Income tax expense
Current 1,420,519 1,877,917
Deferred 225,316 1,494,925
1,645,835 3,372,842
Net income 5,221,470 2,663,764
Other comprehensive income (loss)
Foreign exchange (702,750) 462
Total other comprehensive income (loss) (702,750) 462
Total comprehensive income 4,518,720 2,664,226
Net income per share:
Basic $ 0.02 $ 0.01
Diluted $ 0.02 $ 0.01
Weighted average shares outstanding
Basic 285,864,348 285,864,348
Diluted 288,231,960 294,094,348
The accompanying notes are an integral part of these interim consolidated
financial statements.
Arrow Exploration Corp.
Interim Condensed Statements of Changes in Shareholders' Equity
In United States Dollars
(Unaudited)
Accumulated other comprehensive loss
Contributed Surplus
Share Capital Deficit Total Equity
Balance January 1, 2026 $ 73,829,795 $ 856,093 $ (912,320) $ (19,328,296) $ 54,445,272
Net income for the period - - - 5,221,470 5,221,470
Other comprehensive loss - - (702,750) - (702,750)
Total comprehensive income - - (702,750) 5,221,470 4,518,720
Balance March 31, 2026 $ 73,829,795 $ 856,093 $ (1,615,070) $ (14,106,826) $ 58,963,992
Accumulated other comprehensive loss
Contributed Surplus
Share Capital Deficit Total Equity
Balance January 1, 2025 $ 73,829,795 $ 856,093 $ (898,001) $ (20,770,894) $ 53,016,993
Net income for the period - - - 2,663,764 2,663,764
Other comprehensive income - - 462 - 462
Total comprehensive income - - 462 2,663,764 2,664,226
Balance March 31, 2025 $ 73,829,795 $ 856,093 $ (897,539) $ (18,107,130) $ 55,681,219
The accompanying notes are an integral part of these interim consolidated
financial statements.
Arrow Exploration Corp.
Interim Condensed Consolidated Statements of Cash Flows
In United States Dollars
(Unaudited)
For the three months ended March 31, Notes 2026 2025
Cash flows provided by operating activities:
Net income $ 5,221,470 $ 2,663,764
Items not involving cash:
Deferred taxes 225,316 1,494,925
Share-based compensation (recovery) expense 10 922,796 (1,101,470)
Depletion and depreciation 7 6,176,288 6,520,968
Interest on leases 8 5,638 7,168
Accretion 9 88,429 68,277
Unrealized foreign exchange (gain) loss (543,316) 91,921
Payment of asset decommissioning obligations 9 (1,723) -
Settlement of other liabilities (3,999) -
Payment of share based compensation (533,676) -
Changes in non‑cash working capital balances:
Restricted cash and deposits (4,683) (8,136)
Trade and other receivables 296,080 1,792,957
Taxes receivable (1,108,427) 71,920
Deposits and prepaid expenses (149,606) (22,238)
Inventory 8,146 (3,268)
Income tax payable 80,146 2,523,014
Accounts payable and accrued liabilities 2,984,687 330,382
Cash provided by operating activities 13,663,566 14,430,184
Cash flows used in investing activities:
Additions to exploration and evaluation assets 6 (1,016,557) (2,582,854)
Additions to property and equipment 7 (6,865,778) (8,796,326)
Changes in non-cash working capital (2,608,138) 3,157,859
Cash flows used in investing activities (10,490,473) (8,221,321)
Cash flows used in financing activities:
Lease payments 8 (22,559) (8,327)
Cash flows used in financing activities (22,559) (8,327)
Effect of changes in the exchange rate on cash (143,671) (91,386)
Increase in cash 3,006,863 6,109,150
Cash, beginning of period 11,208,824 18,837,784
Cash, end of period 14,215,687 24,946,934
Supplemental information
Interest paid $ - $ -
Taxes paid $ - $ -
The accompanying notes are an integral part of these interim consolidated
financial statements.
Arrow Exploration Corp.
Notes to the Interim Condensed Consolidated Financial Statements
In United States Dollars
(Unaudited)
March 31, 2026
1. Corporate Information
Arrow Exploration Corp. ("Arrow" or "the Company") is a public junior oil and
gas company engaged in the acquisition, exploration and development of oil and
gas properties in Colombia and in Western Canada. The Company's shares trade
on the TSX Venture Exchange and the AIM Market of the London Stock Exchange
plc under the symbol AXL. The head office of Arrow is located at 203, 2303 -
4th Street SW, Calgary, Alberta, Canada, T2S 2S7 and the registered office is
located at 600, 815 8th Avenue SW, Calgary, Alberta, Canada, T2P 3P2.
2. Basis of Presentation
Statement of compliance
These interim condensed consolidated financial statements (the "Financial
Statements") have been prepared in accordance with International Accounting
Standard ("IAS") 34 Interim Financial Reporting. These Financial Statements
were authorized for issue by the board of directors of the Company on May 26,
2026. They do not contain all disclosures required by International Financial
Reporting Standards ("IFRS") for annual financial statements and, accordingly,
should be read in conjunction with the audited consolidated financial
statements as at December 31, 2025.
These Financial Statements have been prepared on the historical cost basis,
except for derivative financial instruments (when applicable) that are
measured at fair value and specifically noted within the notes to these
Financial Statements, which have been prepared using the same accounting
policies and methods as the consolidated financial statements for the year
ended December 31, 2025, except as noted below. In preparing these condensed
consolidated financial statements, the significant judgements made by
management in applying the group's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the consolidated
financial statements for the year ended December 31, 2025.
Adoption of amendments to accounts standards
On May 30, 2024, the IASB issued amendments to IFRS 9 Financial Instruments
and IFRS 7 Financial Instruments: Disclosures that clarify the recognition and
derecognition of certain financial assets and liabilities, including an
exception for those settled via electronic cash transfer systems. New
disclosure requirements are introduced for instruments with terms that can
change cash flows and for equity instruments designated at fair value through
other comprehensive income. The amendments are effective for reporting periods
beginning on or after January 1, 2026 and had no material impact on the
Company's Financial Statements.
3. Restricted Cash and deposits
March 31, December 31, 2025
2026
Colombia (i) $ 406,515 $ 399,174
Canada 129,431 132,089
Sub-total 535,946 531,263
Long-term portion (249,840) (273,257)
Current portion of restricted cash and deposits $ 286,106 $ 258,006
(i) This balance is comprised of a deposit held as collateral
to guarantee abandonment expenditures related to its Colombian blocks.
4. Trade and other receivables
March 31, December 31, 2025
2026
Trade receivables, net of advances $ 520,468 $ 190,485
Joint venture receivable 12,447,774 12,237,489
Other accounts receivable 1,269,056 2,105,403
$ 14,237,298 $ 14,533,377
As at March 31, 2026, other accounts receivable include $738,147 (December 31,
2025 - $733,990) receivable from on demand loans with executives and
directors.
5. Taxes receivable
March 31, December 31, 2025
2026
Value-added tax (VAT) credits recoverable $ 4,745,062 $ 3,727,152
Income tax withholdings and advances, net 4,000,708 3,910,190
$ 8,745,770 $ 7,637,342
The VAT recoverable balance pertains to non-compensated value-added tax
credits originated in Colombia as operational and capital expenditures are
incurred. The Company is entitled to compensate or claim for the reimbursement
of these VAT credits.
6. Exploration and Evaluation
March 31, December 31,
2026 2025
Balance, beginning of the period $ 3,437,965 $ 142,995
Additions, net 1,016,557 12,986,203
Reclassification to Property and Equipment (Note 7) - (6,775,054)
Exploration expense and abandonment costs - (2,916,179)
Balance, end of the period $ 4,454,522 $ 3,437,965
During 2026, the Company incurred exploration and development costs associated
with its Icaco prospect in the Tapir block. During 2025, the Company incurred
exploration and development costs associated with its Mateguafa Oeste,
Mateguafa Attic, Icaco, Ardea and Capullo prospects, including seismic studies
for other prospects in the Tapir block. Technical feasibility and commercial
viability was determined on the Mateguafa Attic area, transferring $6,775,054
to its property and equipment. Likewise, no technical feasibility nor
commercial viability was determined for the Mateguafa Oeste area and an
exploration expense of $2,916,179 was recognized in the statement of
operations and comprehensive income.
7. Property and Equipment
Oil and Gas Properties Right of Use and Other Assets
Cost Total
Balance, December 31, 2024 $108,966,163 $ 497,582 $ 109,463,745
Additions 30,017,313 25,147 30,042,460
Decommissioning adjustment 4,112,985 - 4,112,985
Transfers from exploration and evaluation assets 6,775,054 - 6,775,054
Balance, December 31, 2025 $149,871,515 $ 522,729 $150,394,244
Additions 6,865,778 - 6,865,778
Dispositions - (117,607) (117,607)
Decommissioning adjustment 551,825 - 551,825
Balance, March 31, 2026 $157,289,118 $ 405,122 $157,694,240
Accumulated depletion and depreciation and impairment Oil and Gas Properties Right of Use and Other Assets
Total
Balance, December 31, 2024 $ 53,860,447 $ 314,077 $ 54,174,524
Depletion and depreciation 20,549,872 63,278 20,613,150
Impairment 7,633,523 - 7,633,523
Balance, December 31, 2025 $ 82,043,842 $ 377,355 $ 82,421,197
Dispositions - (83,307) (83,307)
Depletion and depreciation 6,161,983 14,305 6,176,288
Balance, March 31, 2026 $ 88,205,825 $ 308,353 $ 88,514,178
Oil and Gas Properties Right of Use and Other Assets
Foreign exchange Total
Balance, December 31, 2024 $ (283,569) $ (20,654) $ (304,223)
Effects of movements in foreign
exchange rates 134,573 6,635 141,208
Balance, December 31, 2025 $ (148,996) $ (14,019) $ (163,015)
Effects of movements in foreign (43,041) (1,099) (44,140)
exchange rates
Balance, March 31, 2026 (192,037) (15,118) (207,155)
Net Book Value
Balance December 31, 2025 $67,678,677 $ 131,355 $67,810,032
Balance March 31, 2026 $ 68,891,256 $ 81,651 $68,972,907
As at March 31, 2026, no indicators of impairment were identified in the
Company's property and equipment.
Canada
As at December 31, 2025, the Company determined there were indicators of
impairment in its Keho CGU,
mainly due to unsuccessful drilling, and recognized an impairment loss of
$1,781,467 was included in the consolidated statements of operations and
comprehensive income for the year ended December 31, 2025 corresponding to the
totality of costs incurred on this Keho CGU.
Colombia
As at December 31, 2025, the Company determined there were indicators of
impairment in its Santa Isabel CGU, mainly due to negative reserves revision
primarily arising from declines in forecast commodity prices, and prepared an
estimate of the fair value less costs of disposal of this CGU. It was
determined that carrying value of its Santa Isabel CGU exceeded its
recoverable amount and, therefore, an impairment loss of $5,852,056,
corresponding to the full carrying value of this CGU, was included in the
consolidated statements of operations and comprehensive income for the year
ended December 31, 2025.
8. Lease Obligations
A reconciliation of the discounted lease obligation is set forth below:
March 31, December 31,
2026 2025
Obligation, beginning of the period $ 200,686 $ 219,406
Additions - 17,484
Dispositions (30,993) -
Lease payments (22,559) (76,048)
Interest 5,638 28,676
Effects of movements in foreign exchange rates (2,594) 11,168
Obligation, end of the period 150,178 200,686
Current portion (46,504) (67,734)
Long-term portion $ 103,674 $ 132,952
In 2026, the Company disposed of two leased vehicles for a net reduction of
its lease commitments of $30,993. As at March 31, 2026, the Company has the
following future lease obligations:
Less than one year $ 49,612
2 - 5 years 127,826
Total lease payments 177,438
Amounts representing interest over the term (27,260)
Present value of the net obligation $ 150,178
9. Decommissioning Liability
The following table presents the reconciliation of the beginning and ending
aggregate carrying amount of the obligation associated with the
decommissioning of oil and gas properties:
March 31, December 31,
2026 2025
Obligation, beginning of the period $ 9,863,781 $ 6,307,659
Additions 551,824 1,999,904
Change in estimated cash flows - 1,791,305
Payments or settlements (1,723) (536,919)
Accretion expense 88,429 274,423
Effects of movements in foreign exchange rates (12,662) 27,409
$ 10,489,649 $ 9,863,781
Obligation, end of the period
The obligation was calculated using a risk-free discount rate range of 2.50%
to 3.75% in Canada (2025: 2.50% to 3.75%) and between 4.43% and 4.60% in
Colombia (2025: 4.43% and 4.60%) with an inflation rate of 2.0% and 1.90%,
respectively (2025: 2.0% and 1.9%). The majority of costs are expected to
occur between 2027 and 2038. The undiscounted amount of cash flows, required
over the estimated reserve life of the underlying assets, to settle the
obligation, adjusted for inflation, is estimated at $12,879,395 (2025:
$12,033,788).
10. Share Capital
(a) Authorized: Unlimited number of common shares without par value
(b) Issued:
March 31, 2026 December 31, 2025
Common shares Shares Amounts Shares Amounts
Balance at beginning and end of the period 285,864,348 73,829,795 285,864,348 73,829,795
(c) Stock options:
The Company has a stock option plan that provides for the issuance to its
directors, officers and employees options to purchase non-transferable common
shares not exceeding 10% of the outstanding common shares. The exercise price
is based on the closing price of the Company's common shares on the day prior
to the day of the grant. A summary of the Company stock option plan as at
March 31, 2026 and December 31, 2025 and changes during the periods ended on
those dates is presented below:
March 31, 2026 December 31, 2025
Stock Options Number of options Weighted average Number of options Weighted average
exercise price exercise price
(CAD $) (CAD $)
Beginning of period 20,513,706 $0.32 24,795,002 $0.32
Granted 2,753,518 $0.35 6,198,334 $0.23
Expired/Forfeited (1,284,819) $0.48 (3,803,518) -
Exercised (2,550,001) $0.12 (6,676,112) $0.19
End of period 19,432,405 $0.34 20,513,706 $0.32
Exercisable, end of period 2,081,667 $0.39 5,866,486 $0.29
Date of Grant Number Outstanding Exercise Price Weighted Date of Number
(CAD $) Average Remaining Contractual Life Expiry Exercisable
March 31, 2026
October 22, 2018 250,000 $1.15 2.81 Oct. 22, 2028 250,000
May 3, 2019 100,000 $0.31 3.34 May 3, 2029 100,000
December 21, 2022 1,681,667 $0.28 0.47 Jun. 21, 2024, 2025 and 2026 1,681,667
January 23, 2023 50,000 $0.32 0.56 Jul. 23, 2024, 2025 and 2026 50,000
September 21, 2023 333,334 $0.33 1.22 Mar. 21, 2025, 2026 and 2027 -
April 29, 2024 5,495,926 $0.38 1.83 Oct.29 2025, 2026 and 2027 -
September 11, 2024 2,569,626 $0.48 2.19 Mar.11 2026, 2027 and 2028 ,
October 8, 2025 6,198,334 $0.23 3.33 Apr. 8, 2027, 2028 and 2029 -
March 23, 2026 2,753,518 $0.38 3.48 Sept. 23, 2027, 2028 and 2029 -
Total 19,432,405 $0.34 1.58 years 2,081,667
For the three months ended March 31, 2026, the Company has recognized
shared-based compensation expense of $922,796 (2025: recovery of $1,101,470)
corresponding to the progressive vesting and fair market value of options.
11. Commitments and Contingencies
Exploration and Production Contracts
The Company has entered into a number of exploration contracts in Colombia
which require the Company to fulfill work program commitments and issue
financial guarantees related thereto (see Letters of Credit section below).
During 2026, the Company received confirmation that its COR-39 exploration and
production contract has been terminated by mutual agreement with the ANH and,
therefore, its $12,000,000 exploration commitment related to this contract has
been canceled at no additional costs to the Company. As a result, the Company
has no outstanding exploration commitments.
Contingencies
From time to time, the Company may be involved in litigation or has claims
sought against it in the normal course of business operations. Management of
the Company is not currently aware of any claims or actions that would
materially affect the Company's reported financial position or results from
operations. Under the terms of certain agreements and the Company's by-laws
the Company indemnifies individuals who have acted at the Company's request to
be a director and/or officer of the Company, to the extent permitted by law,
against any and all damages, liabilities, costs, charges or expenses suffered
by or incurred by those individuals.
Letters of Credit
At March 31, 2026, the Company had obligations under Letters of Credit
("LC's") outstanding totaling $3.6 million to guarantee work commitments on
exploration blocks and other contractual commitments. In the event the Company
fails to secure the renewal of the letters of credit underlying the ANH
guarantees, the ANH could decide to cancel the underlying exploration and
production contract, as applicable.
Current Outstanding Letters of Credit
Contract Beneficiary Issuer Type Amount Renewal Date
(US $)
SANTA ISABEL ANH Carrao Energy Abandonment 685,296 April 14, 2027
ANH Carrao Energy Financial Capacity 1,672,162 June 30, 2026
COR - 39 ANH Carrao Energy Compliance 100,000 June 30, 2026
OMBU ANH Carrao Energy Financial Capacity 436,300 October 14, 2026
ANH Carrao Energy Abandonment 708,119 August 28, 2026
Total 3,601,878
12. Risk Management
The Company holds various forms of financial instruments. The nature of these
instruments and the Company's operations expose the Company to commodity
price, credit and foreign exchange risks. The Company manages its exposure to
these risks by operating in a manner that minimizes its exposure to the extent
practical.
(a) Commodity price risk
The Company's principal operation is the production and sale of crude oil and
natural gas. Fluctuations in prices of these commodities directly impact the
Company's financial performance. Commodity price risk is the risk that the
fair value or future cash flows of a financial instrument will fluctuate as a
result of changes in commodity prices. Lower commodity prices can also
impact the Company's ability to raise capital. Commodity prices for crude
oil are impacted by world economic events that dictate the levels of supply
and demand. There were no derivative contracts during 2026 or 2025.
(b) Credit Risk
Credit risk reflects the risk of financial loss to the Company if a customer
or counterparty to a contract fails to fulfill their contractual obligations.
It arises mostly from the Company's cash balances and accounts receivable. The
Company's cash balances are held with five large reputable financial
institutions, and management has therefore concluded that associated credit
risk is low. The majority of the Company's trade accounts receivable balances
relate to petroleum and natural gas sales, which are normally collected within
25 days (in Canada) and up to 15 days (in Colombia) after the month of
production. The Company's policy is to enter into agreements with customers
that are well established entities in the oil and gas industry such that the
level of risk is mitigated. In Colombia, all of the Company's revenue (2025:
73%) is with a group of producing and trading companies, under existing
agreements, with prepayment provisions and priced using the Brent benchmark.
Other accounts receivable mainly relate to balances owed by the Company's
partner in one of its blocks, and are mainly recoverable through joint
billings. The Company has historically not experienced any significant
collection issues with its customers and partners.
(c) Market Risk
Market risk is comprised of two components: foreign currency exchange risk and
interest rate risk.
i) Foreign Currency Exchange Risk
The Company operates on an international basis and therefore foreign exchange
risk exposures arise from transactions denominated in currencies other than
the United States dollar. The Company is exposed to foreign currency
fluctuations as it holds cash and incurs expenditures in exploration and
evaluation and administrative costs in foreign currencies. The Company incurs
expenditures in Canadian dollars, United States dollars, British Pounds and
the Colombian peso and is exposed to fluctuations in exchange rates in these
currencies. There were no exchange rate derivative contracts in place.
ii) Interest Rate Risk
Interest rate risk is the risk that future cash flows will
fluctuate as a result of changes in market interest rates. The Company is not
currently exposed to interest rate risk on financial assets or liabilities.
(d) Liquidity Risk
Liquidity risk includes the risk that, as a result of the Company's
operational liquidity requirements:
· The Company will not have sufficient funds to settle a
transaction on the due date;
· The Company will be forced to sell financial assets at a value
which is less than what they are worth; or
· The Company may be unable to settle or recover a financial asset.
The Company's approach to managing its liquidity risk is to ensure, within
reasonable means, sufficient liquidity to meet its liabilities when due, under
both normal and unusual conditions, without incurring unacceptable losses or
jeopardizing the Company's business objectives. The Company prepares annual
capital expenditure budgets which are monitored regularly and updated as
considered necessary. Petroleum and natural gas production is monitored
daily to provide current cash flow estimates and the Company utilizes
authorizations for expenditures on projects to manage capital expenditures.
Any funding shortfall may be met in a number of ways, including, but not
limited to, the issuance of new debt or equity instruments, further
expenditure reductions and/or the introduction of joint venture partners.
During 2025, the Company entered into a two-year crude oil prepayment
agreement with an integrated energy major to market its oil production in
Colombia. The agreement provides access to $20 million in a revolving line
of credit until June 2026 and $15 million until June 2027. The interest rate
is SOFR + 4% for the first $10 million and SOFR + 5% for amounts exceeding $10
million. As at March 31, 2026, no funds have been withdrawn from this line of
credit.
(e) Capital Management
The Company's objective is to maintain a capital base sufficient to provide
flexibility in the future development of the business and maintain investor,
creditor and market confidence. The Company manages its capital structure
and makes adjustments in response to changes in economic conditions and the
risk characteristics of the underlying assets. The Company considers its
capital structure to include share capital, bank debt (when available), and
working capital, defined as current assets less current liabilities. From
time to time the Company may issue common shares or other securities, sell
assets or adjust its capital spending to manage current and projected debt
levels. The Company adjusts its capital structure based on its net debt
level. The Company prepares annual budgets, which are updated as necessary
including current and forecast crude oil prices, changes in capital structure,
execution of the Company's business plan and general industry conditions.
The annual budget is approved by the Board of Directors. The Company's capital
includes the following:
March 31, 2026 December 31, 2025
Working capital 5,262,031 1,823,335
Share capital 73,829,795 73,829,795
79,091,826 75,653,130
13. Segmented Information
The Company has two reportable operating segments: Colombia and Canada. The
Canada segment is also considered the corporate segment. The following tables
show information regarding the Company's segments for the three months ended
as at March 31:
Three months ended March 31, 2026 Colombia Canada Total
Revenue from oil and natural gas $ 26,615,230 $ 204,402 $ 26,819,632
Royalties (3,311,398) (9,918) (3,321,316)
Expenses (18,602,672) 1,971,661 (16,631,011)
Income taxes (1,645,835) - (1,645,835)
Net income $ 3,055,325 $ 2,166,145 $ 5,221,470
Capital expenditures for the period $ 7,880,540 $ 1,795 $ 7,882,335
Total Assets as at March 31, 2026 $ 107,557,061 $ 3,990,283 $ 111,547,344
Total liabilities as at March 31, 2026 $ 48,957,701 $ 3,625,651 $ 52,583,352
Three months ended March 31, 2025 Colombia Canada Total
Revenue from oil and natural gas $ 21,850,288 $ 285,871 $ 22,136,159
Royalties (2,620,671) (9,363) (2,630,034)
Expenses (11,911,128) (1,558,391) (13,469,519)
Income taxes (3,732,842) - (3,732,842)
Net income (loss) $ 3,945,647 $ (1,281,883) $ 2,663,764
Capital expenditures for the period $ 9,895,072 $ 1,484,108 $ 11,379,180
Total Assets as at March 31, 2025 $ 83,377,874 $ 7,154,189 $ 90,532,063
Total liabilities as at March 31, 2025 $ 30,422,878 $ 4,427,966 $ 34,850,844
Arrow Exploration Corp.
MANAGEMENT's DISCUSSION AND ANALYSIS
THREE MONTHS ENDED MARCH 31, 2026
MANAGEMENT'S DISCUSSION AND ANALYSIS
This Management's Discussion and Analysis ("MD&A") as provided by the
management of Arrow Exploration Corp. ("Arrow" or the "Company"), is dated as
of May 26, 2026 and should be read in conjunction with Arrow's interim
condensed (unaudited) consolidated financial statements and related notes as
at and for the three months ended March 31, 2026 and 2025. Additional
information relating to Arrow, including its annual consolidated financial
statements and related notes as at and for years ended December 31, 2025 and
2024 (the "Annual Financial Statements"), is available under Arrow's profile
on www.sedar.com (http://www.sedar.com) .
Advisories
Basis of Presentation
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS"), and all amounts herein
are expressed in United States dollars, unless otherwise noted, and all
tabular amounts are expressed in United States dollars, unless otherwise
noted. Additional information for the Company may be found on SEDAR at
www.sedar.com.
Advisory Regarding Forward‐Looking Statements
This MD&A contains certain statements or disclosures relating to Arrow
that are based on the expectations of its management as well as assumptions
made by and information currently available to Arrow which may constitute
forward-looking statements or information ("forward-looking statements") under
applicable securities laws. All such statements and disclosures, other than
those of historical fact, which address activities, events, outcomes, results
or developments that Arrow anticipates or expects may, could or will occur in
the future (in whole or in part) should be considered forward-looking
statements. In some cases, forward-looking statements can be identified by the
use of the words "believe", "continue", "could", "expect", "likely", "may",
"outlook", "plan", "potential", "will", "would" and similar expressions. In
particular, but without limiting the foregoing, this MD&A contains
forward-looking statements pertaining to the following: global pandemics and
their impact; tax liability; capital management strategy; capital structure;
credit facilities and other debt; letters of credit; Arrow's costless collar
structure; cost reduction initiatives; potential drilling on the Tapir block;
capital requirements; expenditures associated with asset retirement
obligations; future drilling activity and the development of the Rio Cravo
Este, Carrizales Norte and Alberta Llanos structures on the Tapir Block.
Statements relating to "reserves" and "resources" are deemed to be
forward-looking information, as they involve the implied assessment, based on
certain estimates and assumptions, that the reserves and resources described
exist in the quantities predicted or estimated and can be profitably produced
in the future.
The forward-looking statements contained in this MD&A reflect several
material factors and expectations and assumptions of Arrow including, without
limitation: current and anticipated commodity prices and royalty regimes; the
impact of the global pandemics; the financial impact of Arrow's costless
collar structure; availability of skilled labour; timing and amount of capital
expenditures; future exchange rates; commodity prices; the impact of
increasing competition; general economic conditions; availability of drilling
and related equipment; receipt of partner, regulatory and community approvals;
royalty rates; changes in income tax laws or changes in tax laws and incentive
programs; future operating costs; effects of regulation by governmental
agencies; uninterrupted access to areas of Arrow's operations and
infrastructure; recoverability of reserves; future production rates; timing of
drilling and completion of wells; pipeline capacity; that Arrow will have
sufficient cash flow, debt or equity sources or other financial resources
required to fund its capital and operating expenditures and requirements as
needed; that Arrow's conduct and results of operations will be consistent with
its expectations; that Arrow will have the ability to develop its oil and gas
properties in the manner currently contemplated; current or, where applicable,
proposed industry conditions, laws and regulations will continue in effect or
as anticipated; that the estimates of Arrow's reserves and production volumes
and the assumptions related thereto (including commodity prices and
development costs) are accurate in all material respects; that Arrow will be
able to obtain contract extensions or fulfil the contractual obligations
required to retain its rights to explore, develop and exploit any of its
undeveloped properties; and other matters.
Arrow believes the material factors, expectations and assumptions reflected in
the forward-looking statements are reasonable at this time but no assurance
can be given that these factors, expectations and assumptions will prove to be
correct. The forward-looking statements included in this MD&A are not
guarantees of future performance and should not be unduly relied upon.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause actual results or events to differ materially
from those anticipated in such forward-looking statements including, without
limitation: the impact of general economic conditions; volatility in commodity
prices; industry conditions including changes in laws and regulations
including adoption of new environmental laws and regulations, and changes in
how they are interpreted and enforced; competition; lack of availability of
qualified personnel; the results of exploration and development drilling and
related activities; obtaining required approvals of regulatory authorities;
counterparty risk; risks associated with negotiating with foreign governments
as well as country risk associated with conducting international activities;
commodity price volatility; fluctuations in foreign exchange or interest
rates; environmental risks; changes in income tax laws or changes in tax laws
and incentive programs; changes to pipeline capacity; ability to secure a
credit facility; ability to access sufficient capital from internal and
external sources; risk that Arrow's evaluation of its existing portfolio of
development and exploration opportunities is not consistent with future
results; that production may not necessarily be indicative of long term
performance or of ultimate recovery; and certain other risks detailed from
time to time in Arrow's public disclosure documents including, without
limitation, those risks identified in Arrow's 2018 AIF, a copy of which is
available on Arrow's SEDAR profile at www.sedar.com. Readers are cautioned
that the foregoing list of factors is not exhaustive and are cautioned not to
place undue reliance on these forward-looking statements.
Non‐IFRS Measures
The Company uses non-IFRS measures to evaluate its performance which are
measures not defined in IFRS. Adjusted working capital, funds flow from
operations, realized prices, operating netback, and adjusted EBITDA as
presented do not have any standardized meaning prescribed by IFRS and
therefore may not be comparable with the calculation of similar measures for
other entities. The Company considers these measures as key measures to
demonstrate its ability to generate the cash flow necessary to fund future
growth through capital investment, and to repay its debt, as the case may be.
These measures should not be considered as an alternative to, or more
meaningful than net income or cash provided by (used in) operating activities
as determined in accordance with IFRS as an indicator of the Company's
performance. The Company's determination of these measures may not be
comparable to that reported by other companies.
Adjusted working capital is calculated as current assets minus current
liabilities, excluding non-cash liabilities; funds flow from operations is
calculated as cash flows provided by operating activities adjusted to exclude
changes in non-cash working capital balances; realized price is calculated by
dividing gross revenue by gross production, by product, in the applicable
period; operating netback is calculated as total natural gas and crude
revenues minus royalties, and operating expenditures; and adjusted EBITDA is
calculated as net income adjusted for interest, income taxes, depreciation,
depletion, amortization and other similar non-recurring or non-cash charges.
The Company also presents funds flow from operations per share, whereby per
share amounts are calculated using weighted- average shares outstanding
consistent with the calculation of net income per share.
A reconciliation of the non-IFRS measures is included as follows:
Three months ended March 31, 2026 Three months ended March 31, 2025
(in United States dollars)
Net income 5,221,470 2,663,764
Add/(subtract):
Share based payments 922,796 (1,101,470)
Financing costs:
Accretion on decommissioning obligations 88,429 68,277
Interest 5,638 7,168
Other - -
Depreciation and depletion 6,176,288 6,520,968
Income tax expense 1,645,835 3,372,842
Adjusted EBITDA ((1)) 14,060,456 11,531,548
Cash flows provided by operating activities 13,663,566 14,430,184
Minus - Changes in non‑cash working capital balances:
Trade and other receivables (296,080) (1,792,957)
Restricted cash 4,683 8,136
Taxes receivable 1,108,427 (71,920)
Deposits and prepaid expenses 149,606 22,238
Inventory (8,146) 3,268
Accounts payable and accrued liabilities (2,984,687) (2,523,014)
Income tax payable (80,146) (330,382)
Funds flow from operations ((1)) 11,557,223 9,745,553
((1))Non-IFRS measures
The term barrel of oil equivalent ("boe") is used in this MD&A. Boe may
be misleading, particularly if used in isolation. A boe conversion ratio of
6 thousand cubic feet ("Mcf") of natural gas to one barrel of oil ("bbl") is
used in the MD&A. This conversion ratio of 6:1 is based on an energy
equivalency conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead.
FINANCIAL AND OPERATING HIGHLIGHTS
Three months ended March 31, 2026 Three months ended March 31, 2025
(in United States dollars, except as otherwise noted)
Total natural gas and crude oil revenues, net of royalties 23,498,316 19,506,125
Funds flow from operations ((1)) 11,557,223 9,745,553
Funds flow from operations ((1)) per share -
Basic($) 0.04 0.03
Diluted ($) 0.04 0.03
Net income 5,221,470 2,663,764
Net income per share -
Basic ($) 0.02 0.01
Diluted ($) 0.02 0.01
Adjusted EBITDA ((1)) 14,060,456 11,531,548
Weighted average shares outstanding -
Basic ($) 285,864,348 285,864,348
Diluted ($) 288,231,960 294,094,348
Common shares end of period 285,864,348 285,864,348
Capital expenditures 7,882,335 11,379,180
Cash and cash equivalents 14,215,687 24,946,934
Current Assets 37,870,075 30,288,808
Current liabilities 32,608,044 19,252,474
Adjusted working capital ((1)) 5,262,031 11,036,334
Long-term portion of restricted cash and deposits ((2)) 249,840 129,849
Total assets 111,547,344 90,532,063
Operating
Natural gas and crude oil production, before royalties
Natural gas (Mcf/d) 1,078 1,851
Natural gas liquids (bbl/d) 5 6
Crude oil (bbl/d) 4,530 3,770
Total (boe/d) 4,715 4,085
Operating netbacks ($/boe) ((1))
Natural gas ($/Mcf) ($0.73) ($1.00)
Crude oil ($/bbl) $42.82 $42.29
Total ($/boe) $41.05 $38.66
((1))Non-IFRS measures - see "Non-IFRS Measures" section within this MD&A
((2)) Long term restricted cash not included in working capital
The Company
Arrow is a junior oil and gas company engaged in the acquisition, exploration
and development of oil and gas properties in Colombia and Western Canada. The
Company's shares trade on the TSX Venture Exchange and the London AIM exchange
under the symbol AXL.
On May 31, 2018, Arrow Exploration Ltd. entered in a share purchase agreement,
as amended, with Canacol Energy Ltd. ("Canacol"), to acquire Canacol's
Colombian oil properties held by its wholly-owned subsidiary Carrao Energy
S.A. ("Carrao"). On September 27, 2018, Arrow Exploration Ltd. closed the
agreement with Canacol, and during 2025 Carrao changed its name to Arrow
Exploration Switzerland GmbH. The Company and Arrow Exploration Ltd. entered
into an arrangement agreement dated June 1, 2018, as amended, whereby the
parties completed a business combination pursuant to a plan of arrangement
under the Business Corporations Act (Alberta) ("ABCA") on September 28, 2018.
Arrow Exploration Ltd. and 2118295 Alberta Ltd. were amalgamated to form Arrow
Holdings Ltd., a wholly-owned subsidiary of the Company.
On May 31, 2018, Arrow Exploration Ltd., entered into a purchase and sale
agreement to acquire a 50% beneficial interest in a contract entered into with
Ecopetrol S.A. pertaining to the exploration and production of hydrocarbons in
the Tapir block from Samaria Exploration & Production S.A. ("Samaria"). On
September 27, 2018, Arrow Exploration Ltd. closed the agreement with Samaria.
As at March 31, 2026 the Company held an interest in four oil blocks in
Colombia and oil and natural gas leases in five areas in Canada as follows:
Gross Acres Working Interest Net Acres
COLOMBIA
Tapir 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 8,960 100% 8,960
Ansell Operated 640 100% 640
Wapiti Non-operated 1,280 13% 160
Ante Creek Operated 2,560 100% 2,560
KEHO Operated 7,358 100% 7,358
Total Canada 28,958 22,197
TOTAL 246,348 156,191
(1) The Company's interest in the Tapir block is held through a private
contract with Petrolco, who holds a 50% participating interest in, and is the
named operator of, the Tapir contract with Ecopetrol. The formal assignment to
the Company is subject to Ecopetrol's consent. The Company is the de facto
operator pursuant to certain agreements with Petrolco (details of which are
set out in Paragraph 16.13 of the Company's AIM Admission Document dated
October 20, 2021).
The Company's producing assets are located in Colombia in the Tapir, Oso Pardo
and Ombu blocks, with natural gas production in Canada at Fir and Pepper,
Alberta.
Llanos Basin
Within the Llanos Basin, the Company is engaged in the exploration,
development and production of oil within the Tapir block. In the Llanos Basin
most oil accumulations are associated with three-way dip closure against
NNE-SSW trending normal faults and can have pay within multiple reservoirs.
The Tapir block, in Management's opinion, continues to offer substantial
exploration upside.
Middle Magdalena Valley ("MMV") Basin
Oso Pardo Field
The Oso Pardo Field is located in the Santa Isabel Block in the MMV Basin.
It is a 100% owned property operated by the Company. The Oso Pardo field is
located within a Production Licence covering 672 acres. Three wells have been
drilled to date within the licensed area.
Ombu E&P Contract - Capella Conventional Heavy Oil
The Caguan Basin covers an area of approximately 60,000 km(2) and lies between
the Putumayo and Llanos Basins. The primary reservoir target is the Upper
Eocene aged Mirador formation. The Capella structure is a large, elongated
northeast-southwest fault-related anticline, with approximately 17,500 acres
in closure at the Mirador level. The field is located approximately 250 km
away from the nearest offloading station at Neiva, where production from
Capella is trucked. The Capella field is currently suspended and temporarily
shut in.
Fir, Alberta
The Company has an average non-operated 32% WI in 12 gross (3.84 net) sections
of oil and natural gas rights and 17 gross (4.5 net) producing natural gas
wells at Fir. The wells produce raw natural gas into the Cecilia natural gas
plant where it is processed.
Pepper, Alberta
The Company holds a 100% operated WI in 37 sections of Montney P&NG rights
on its Pepper asset in West Central Alberta. The 6-26-53-23W5M Montney gas
well (West Pepper) is tied into the Galloway gas plant for processing. The
3-21-52-22W5M Montney gas well (East Pepper) is currently tied into the
Sundance gas plant for processing. The majority of lands have indefinite
tenure. Both West Pepper and East Pepper have been producing during 2026.
KEHO, Alberta
A land package of 7,357 acres was purchased in January 2025 and a single
multi-zone exploration well was drilled on the acreage in Q2 2025. The well
was drilled to a total measured depth of 2,095 feet of measured and true
vertical depth and encountered recoverable oil in the cretaceous glauconitic
formation. The well was subsequently put on production, but after a short
period of uneconomic flow rates it was suspended in that quarter. Additional
low risk exploration opportunities exist on the acreage.
Three Months Ended March 31, 2026 Financial and Operational Highlights
· Arrow reported $23,498,316 in revenues, net of royalties, on
crude oil sales of 403,933 bbls, 442 bbls of natural gas liquids ("NGL's") and
97,000 Mcf of natural gas sales;
· Net income of $5,221,470 and adjusted EBITDA was $14,060,456;
· Funds flow from operations of $11,557,223;
Results of Operations
During Q1 2026, the Company's production increased due to additional volumes
of oil crude production from the Mateguafa Attic field in the Tapir block,
offset by decreased production in other fields due to natural declines. This
has allowed the Company to continue its healthy level of operating results and
EBITDA.
Average Production by Property
Average Production Boe/d Q1 2026 YTD 2025 Q4 2025 Q3 2025 Q2 2025 Q1 2025
Oso Pardo 98 114 95 103 131 126
Rio Cravo Este (Tapir) 881 1,043 996 1,065 996 1,118
Carrizales Norte (Tapir) 1,424 1,991 1,702 1,879 2,070 2,321
Alberta Llanos (Tapir) 294 474 446 943 296 205
Mateguafa (Tapir) 1,833 127 500 - - -
Total Colombia 4,530 3,749 3,739 3,990 3,493 3,770
Fir, Alberta 67 100 107 85 100 105
Pepper, Alberta 118 162 129 139 170 210
KEHO, Alberta - 1 - - 5 -
TOTAL (Boe/d) 4,715 4,012 3,975 4,214 3,768 4,085
The Company's average production for the three months ended March 31, 2026 was
4,715 boe/d which consisted of crude oil production in Colombia of 4,530
bbl/d, natural gas production of 1,078 Mcf/d, and minor amounts of natural gas
liquids. The Company's Q1 2026 production was 15% higher than its Q1 2025
production and 19% higher than Q4 2025 due to the Mateguafa Attic additional
volumes.
Average Daily Natural Gas and Oil Production and Sales Volumes
Three months ended
March 31
2026 2025
Natural Gas (Mcf/d)
Natural gas production 1,078 1,851
Natural gas sales 1,078 1,851
Realized Contractual Natural Gas Sales 1,078 1,851
Crude Oil (bbl/d)
Crude oil production 4,530 3,770
Inventory movements and other (42) (18)
Crude Oil Sales 4,488 3,752
Corporate
Natural gas production (boe/d) 180 309
Natural gas liquids(bbl/d) 5 6
Crude oil production (bbl/d) 4,530 3,770
Total production (boe/d) 4,715 4,085
Inventory movements and other (boe/d) (42) (18)
Total Corporate Sales (boe/d) 4,673 4,067
((1) Royalties paid in kind reduce the Company's crude oil sales volumes)
During the three months ended March 31, 2026 the majority of production was
attributed to Colombia, where all of Company's blocks were producing, except
for Capella.
Natural Gas and Oil Revenues
Three months ended
March 31
2026 2025
Natural Gas
Natural gas revenues $ 168,417 $ 251,517
NGL revenues 35,985 34,354
Royalties (9,918) (9,363)
Revenues, net of royalties 194,484 276,508
Oil
Oil revenues $ 26,615,230 $ 21,850,288
Royalties (3,311,398) (2,620,671)
Revenues, net of royalties 23,303,832 19,229,617
Corporate
Natural gas revenues $ 168,417 $ 251,517
NGL revenues 35,985 34,354
Oil revenues 26,615,230 21,850,288
Total revenues 26,819,632 22,136,159
Royalties (3,321,316) (2,630,034)
Natural gas and crude oil revenues, net of royalties, as reported $ 23,498,316 $ 19,506,125
Natural gas and crude oil revenues, net of royalties, for the three months
ended March 31, 2026 were $23,498,316 (2025: $19,506,125), which represents an
increase of 20% when compared to Q1 2025, and 42% higher than Q4 2025. The
increase is mainly due to improved commodity prices and increased oil
production from the Mateguafa Attic field in the Tapir block.
Average Benchmark and Realized Prices
Three months ended March 31
2026 2025 Change
Benchmark Prices
AECO (C$/Mcf) $1.90 $2.19 (13%)
Brent ($/bbl) $80.95 $71.47 13%
West Texas Intermediate ($/bbl) $72.15 $71.40 1%
Realized Prices
Natural gas, net of transportation ($/Mcf) $1.74 $1.51 15%
Natural gas liquids ($/bbl) $111.74 $62.02 80%
Crude oil, net of transportation ($/bbl) $65.89 $64.70 2%
Corporate average, net of transport ($/boe) $63.77 $60.48 5%
((1)Non-IFRS measure)
The Company realized prices of $63.77 per boe during the three months ended
March 31, 2026 (2025: $60.48), due to overall increase in oil and natural gas
prices during 2026 and increase production of lighter oil which is sold at
increased realized price when compared to heavy oil.
Operating Expenses
Three months ended
March 31
2026 2025
Natural gas & NGL's 228,957 408,878
Crude oil 6,006,076 4,947,721
Total operating expenses 6,235,033 5,356,599
Natural gas ($/Mcf) $2.36 2.45
Crude oil ($/bbl) $14.87 14.65
Corporate ($/boe)((1)) $14.83 14.63
((1)Non-IFRS measure)
During the three months ended March 31, 2026, Arrow incurred operating
expenses of $6,235,033 (2025: 5,356,599). This increase in operating costs is
mainly due to workovers performed in the Company's Santa Isabel field and
increased production in the Mateguafa Attic field, which has contributed to
the overall increase in production.
Operating Netbacks
Three months ended
March 31
2026 2025
Natural Gas ($/Mcf)
Revenue, net of transportation expense $1.74 $1.51
Royalties ($0.10) ($0.06)
Operating expenses ($2.36) ($2.45)
Natural gas operating netback((1)) ($0.73) ($1.00)
Crude oil ($/bbl)
Revenue, net of transportation expense $65.89 $64.70
Royalties ($8.20) ($7.76)
Operating expenses ($14.87) ($14.65)
Crude oil operating netback((1)) $42.82 $42.29
Corporate ($/boe)
Revenue, net of transportation expense $63.77 $60.48
Royalties ($7.90) ($7.19)
Operating expenses ($14.83) ($14.63)
Corporate operating netback((1)) $41.05 $38.66
((1))Non-IFRS measure
The operating netbacks of the Company for the three months ended March 31,
2026 have improved due to the overall improvement in crude oil and natural gas
prices. The Company continues to develop alternatives to trucking water for
disposal in order to improve operating costs.
General and Administrative Expenses (G&A)
Three months ended
March 31
2026 2025
General and Administrative expenses, gross 3,500,272 2,984,975
G&A recovered from 3(rd) parties (250,789) (102,985)
Total G&A 3,249,483 2,881,990
Total G&A per boe $7.73 $7.87
For the three months ended March 31, 2026, G&A expenses before recoveries
totaled $3,500,272 (2025: $2,984,975). G&A expenses were increased when
compared to Q1 2025 and, but due to the Company's increased production,
G&A expenses were reduced, on a per barrel basis, when compared to 2025.
Share-based Compensation
Three months ended
March 31
2026 2025
Share-based Compensation expense (income) 922,796 (1,101,470)
Share-based compensation expense for the three months ended March 31, 2026
totaled $922,796 (2025: income of $1,101,470) due to fair market valuation of
this obligation with a corresponding effect in stock based compensation
liability.
Financing Costs
Three months ended
March 31
2026 2025
Financing expense paid or payable 5,638 7,168
Non-cash financing costs 88,429 68,277
Net financing costs 94,067 75,445
The finance expense for 2026 is mostly related to lease obligation interest
and the non-cash finance cost represents the accretion in the present value of
the decommissioning obligation for the period. The amount of this expense will
fluctuate commensurate with the asset retirement obligation as new wells are
drilled or properties are acquired or disposed.
Depletion and Depreciation
Three months ended
March 31
2026 2025
Depletion and depreciation 6,176,288 6,520,968
Depletion and depreciation expense for the three months ended March 31, 2026
totaled $6,176,288 (2025: $6,520,968). This decrease is due to lower carrying
value of depletable property and equipment, offset by increased production.
The Company uses the unit of production method and proved plus probable
reserves to calculate its depletion and depreciation expense.
Income Tax Expense
Three months ended
March 31
2026 2025
Current income tax 1,420,519 1,877,917
Deferred income tax 225,316 1,494,925
Net income tax expense 1,645,835 3,372,842
The Company recognized a net income tax expense of $1,645,835 (2025:
$3,372,842) which consisted of $1,420,519 of current income tax expense (2025:
$1,877,917) and an expense of $225,316 of deferred income tax (2024:
$1,494,925). This decrease is mainly caused by using a lower taxable rate in
Colombia when compared to Q1 2025.
LIQUIDITY AND CAPITAL RESOURCES
Capital Management
The Company's objective is to maintain a capital base sufficient to provide
flexibility in the future development of the business and maintain investor,
creditor and market confidence. The Company manages its capital structure
and makes adjustments in response to changes in economic conditions and the
risk characteristics of the underlying assets. The Company considers its
capital structure to include share capital, debt and adjusted working capital.
In order to maintain or adjust the capital structure, from time to time the
Company may issue common shares or other securities, sell assets or adjust its
capital spending to manage current and projected debt levels. As at March 31,
2026 the Company has a working capital of $5,262,031. The Company has
maintained a healthy working capital, using its operational cash flows to
settle its obligations and to continue growing its operations.
Adjusted Working Capital
As at March 31, 2026 the Company's adjusted working capital was calculated as
follows:
March 31, 2026
Current assets:
Cash $ 14,215,687
Restricted cash 286,106
Trade and other receivables 14,237,298
Taxes receivable 8,745,770
Other current assets 385,214
Less:
Accounts payable and accrued liabilities 31,871,164
Lease obligation 46,504
Income tax payable 80,146
Stock based compensation liability 610,230
Adjusted working capital((1)) $ 5,262,031
((1))Non-IFRS measure
Debt Capital
As at March 31, 2026 the Company does not have any outstanding debt balance.
The Company has a crude oil prepayment agreement with an integrated energy
major to market its oil production in Colombia. This agreement provides
access to $20 million in a revolving line of credit until June 2026 and $15
million until June 2027. The interest rate is SOFR + 4% for the first $10
million and SOFR + 5% for amounts exceeding $10 million. As at March 31, 2026,
no funds have been withdrawn from this line of credit.
CONTRACTUAL OBLIGATIONS
Exploration and Production Contracts
The Company has entered into a number of exploration contracts in Colombia
which require the Company to fulfill work program commitments and issue
financial guarantees related thereto (see Letters of Credit section below).
During 2026, the Company received confirmation that its COR-39 exploration and
production contract has been terminated by mutual agreement with the ANH and,
therefore, its $12,000,000 exploration commitment related to this contract has
been canceled at no additional costs to the Company. As a result, the Company
has no outstanding exploration commitments.
Letters of Credit
At March 31, 2026, the Company had obligations under Letters of Credit
("LC's") outstanding totaling $3.6 million to guarantee work commitments on
exploration blocks and other contractual commitments. In the event the Company
fails to secure the renewal of the letters of credit underlying the ANH
guarantees, the ANH could decide to cancel the underlying exploration and
production contract, as applicable.
Current Outstanding Letters of Credit
Contract Beneficiary Issuer Type Amount Renewal Date
(US $)
SANTA ISABEL ANH Carrao Energy Abandonment 685,296 April 14, 2027
ANH Carrao Energy Financial Capacity 1,672,162 June 30, 2026
CORE - 39 ANH Carrao Energy Compliance 100,000 June 30, 2026
OMBU ANH Carrao Energy Financial Capacity 436,300 October 14, 2026
ANH Carrao Energy Abandonment 708,119 August 28, 2026
Total $3,601,878
Share Capital
As at March 31, 2026, the Company had 285,864,348 common shares and 19,432,405
stock options outstanding.
SUMMARY OF THREE MONTHS RESULTS
2026 2025 2024
Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2
Oil and natural gas sales, net of royalties
23,498,316 16,535,583 18,543,974 15,868,938 19,506,125 22,873,626 21,300,115 15,146,366
Net income (loss) 5,221,470 (3,910,602) 3,089,683 (934,735) 2,663,764 2,081,956 6,668,493 1,247,825
Income (loss) per share -
basic 0.02 (0.03)
(0.00)
0.01 0.02 0.00
0.01
0.01
diluted 0.02 (0.03)
(0.00)
0.01 0.02 0.00
0.01 0.01
Working capital (deficit) 5,262,031 1,172,147 173,863 393,211 11,036,334 11,646,169 9,622,125 6,657,117
Total assets 111,547,344 106,017,624 93,684,265 92,729,950 90,532,063 81,268,734 73,535,397 67,864,633
Net capital expenditures 7,882,335 7,752,239 9,287,571 14,771,206 11,379,180 8,928,725 6,945,779 8,965,408
Average daily production (boe/d) 4,715 4,096 4,214 3,767 4,085 4,738 4,124 2,638
The Company's oil and natural gas sales in Q1 2026 have increased 42% and 20%
when compared to Q4 2025 and Q1 2025 due to increased production on its
existing assets and increased overall commodity prices. The Company's
production levels in Colombia remain consistent. Trends in the Company's net
income are also impacted most significantly by operating expenses, financing
costs, income taxes, depletion, depreciation and impairment of oil and gas
properties, and other income.
OUTSTANDING SHARE DATA
At May 26, 2026 the Company had the following securities issued and
outstanding:
Number Exercise Price Expiry Date
Common shares 285,864,348 n/a n/a
Stock options 250,000 CAD$ 1.15 October 22, 2028
Stock options 100,000 CAD$ 0.31 May 3, 2029
Stock options 1,681,667 GBP 0.1675 Jun. 21, 2024, 2025 and 2026
Stock options 50,000 GBP 0.1925 Jul. 23, 2024, 2025 and 2026
Stock options 333,334 CAD $0.330 Mar. 21, 2025, 2026 and 2027
Stock options 5,495,926 CAD $0.375 Oct. 29 2025, 2026 and 2027
Stock options 2,569,626 CAD $0.475 Mar. 11 2026, 2027 and 2028
Stock options 6,198,334 CAD $0.280 Apr. 8, 2027, 2028 and 2029
Stock options 2,753,518 CAD $0.375 Sept. 23, 2027, 2028 and 2029
OUTLOOK
The Company has efficiently deployed its resources on successful drilling
campaigns at Rio Cravo, Carrizales Norte, Alberta Llanos and more recently
Mateguafa on the Tapir Block. These successful campaigns have translated into
production growth and positive cashflows, providing Arrow with the funds
required to expand its capital program in 2026. In 2026, the Company plans
another year of production growth with a balanced program of both development
and low risk exploration drilling on the Tapir Block. The Company has a
strong balance sheet with no debt, access to financing and cash flow from
operations which will fund the 2026 program.
CRITICAL ACCOUNTING ESTIMATES
A summary of the Company's critical accounting estimates is contained in Note
3 Annual Financial Statements. These accounting policies are subject to
estimates and key judgements about future events, many of which are beyond
Arrow's control.
SUMMARY OF MATERIAL ACCOUNTING POLICIES
A summary of the Company's material accounting policies is included in note 3
of the Annual Financial Statements. These accounting policies are consistent
with those of the previous financial year.
RISKS AND UNCERTAINTIES
The Company is subject to financial, business and other risks, many of which
are beyond its control and which could have a material adverse effect on the
business and operations of the Company. Please refer to "Risk Factors" in the
MD&A for the year ended December 31, 2025 for a description of the
financial, business and other risk factors affecting the Company which are
available on SEDAR at www.sedar.com
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