ARROW EXPLORATION CORP. ARROW EXPLORATION CORP.
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 2024 AND 2023
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, 2024
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, 2024 | December 31, 2023 | |
ASSETS | ||||
Current assets | ||||
Cash | $ | 11,606,342 | $ | 12,135,376 |
Restricted cash and deposits | 3 | 273,274 | 611,753 | |
Trade and other receivables | 4 | 3,237,382 | 3,536,936 | |
Taxes receivable | 5 | 4,819,478 | 4,655,399 | |
Deposits and prepaid expenses | 350,365 | 197,402 | ||
Inventory | 492,240 | 492,332 | ||
20,779,081 | 21,629,198 | |||
Non-current assets | ||||
Deferred income taxes | 2,157,575 | 2,031,383 | ||
Restricted cash and deposits | 3 | 237,814 | 243,081 | |
Exploration and evaluation assets | 6 | 578,082 | - | |
Property and equipment | 7 | 40,827,388 | 38,371,361 | |
Total Assets | $ | 64,579,940 | $ | 62,275,023 |
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
Current Liabilities | ||||
Accounts payable and accrued liabilities | $ | 6,698,702 | $ | 9,747,906 |
Lease obligation | 8 | 108,583 | 103,674 | |
Income taxes | 4,450,967 | 3,108,504 | ||
11,258,252 | 12,960,084 | |||
Non-current liabilities | ||||
Lease obligations | 8 | 193,136 | 216,919 | |
Other liabilities | 345,528 | 345,528 | ||
Deferred income taxes | 3,855,953 | 3,269,894 | ||
Decommissioning liability | 9 | 4,282,861 | 3,973,075 | |
Total liabilities | 19,935,730 | 20,765,500 | ||
Shareholders' equity | ||||
Share capital | 11 | 73,829,795 | 73,829,795 | |
Contributed surplus | 2,263,223 | 2,161,945 | ||
Deficit | (30,769,168) | (33,945,895) | ||
Accumulated other comprehensive loss | (679,640) | (536,322) | ||
Total shareholders' equity | 44,644,210 | 41,509,523 | ||
Total liabilities and shareholders' equity | $ | 64,579,940 | $ | 62,275,023 |
Commitments and contingencies (Note 12)
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 |
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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 | 2024 | 2023 | |||||
Revenue | ||||||||
Oil and natural gas | 14 | $ 16,393,642 | $ | 7,964,857 | ||||
Royalties | 14 | (1,988,721) | (971,997) | |||||
Total oil and natural gas revenue, net of royalties | 14,404,921 | 6,992,860 | ||||||
Expenses | ||||||||
Operating | 2,069,011 | 1,117,590 | ||||||
Administrative | 2,681,922 | 1,619,470 | ||||||
Share-based compensation expense | 11 | 101,278 | 132,240 | |||||
Financing costs: | ||||||||
Accretion | 9 | 37,376 | 29,156 | |||||
Interest | 8 | 9,769 | 60,887 | |||||
Other | 199,065 | 45,682 | ||||||
Foreign exchange (gain) loss | (288,739) | (40,816) | ||||||
Depletion and depreciation | 7 | 3,531,772 | 2,454,364 | |||||
Gain on derivative liability | 10 | - | (1,354,275) | |||||
Other expenses (income) | (78,412) | (61,173) | ||||||
Total expenses, net | 8,263,042 | 4,003,125 | ||||||
Income before income tax | 6,141,879 | 2,989,735 | ||||||
Income tax expense | ||||||||
Current | 14 | 2,505,285 | - | |||||
Deferred | 14 | 459,867 | - | |||||
2,965,152 | - | |||||||
Net income | 3,176,727 | 2,989,735 | ||||||
Other comprehensive income (loss) | ||||||||
Foreign exchange | (143,318) | (18,420) | ||||||
Total other comprehensive income (loss) | (143,318) | (18,420) | ||||||
Total comprehensive income | $ | 3,033,409 | $ | 2,971,315 | ||||
Net income per share: | ||||||||
Basic | $ | 0.01 | $ | 0.01 | ||||
Diluted | $ | 0.01 | $ | 0.01 | ||||
Weighted average shares outstanding | ||||||||
Basic | 285,864,348 | 222,717,847 | ||||||
Diluted | 292,791,385 | 288,639,348 |
The accompanying notes are an integral part of these consolidated financial statements.
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Arrow Exploration Corp.
Interim Condensed Statements of Changes in Shareholders' Equity
In United States Dollars
(Unaudited)
Accumulated | ||||||||||
Contributed | other | |||||||||
Share Capital | Surplus | comprehensive | Deficit | Total Equity | ||||||
loss | ||||||||||
Balance January 1, 2024 | $ | 73,829,795 | $ | 2,161,945 | $ | (536,322) | $ | (33,945,895) | $ | 41,509,523 |
Net income for the period | - | - | - | 3,176,727 | 3,176,7`27 | |||||
Other comprehensive income | - | - | (143,318) | - | (143,318) | |||||
Total comprehensive income | - | - | (143,318) | 3,176,727 | 3,033,409 | |||||
Share-based compensation | - | 101,278 | - | - | 101,278 | |||||
Balance March 31, 2024 | $ | 73,829,795 | $ | 2,263,223 | $ | (679,640) | $ | (30,769,168) | $ | 44,644,210 |
Accumulated | ||||||||||
Contributed | other | |||||||||
Share Capital | Surplus | comprehensive | Deficit | Total Equity | ||||||
loss | ||||||||||
Balance January 1, 2023 | $ | 57,810,735 | $ | 1,570,491 | $ | (645,372) | $ | (32,839,282) | $ | 25,896,572 |
Net income for the period | - | - | - | 2,989,735 | 2,989,735 | |||||
Other comprehensive loss | - | - | (18,420) | - | (18,420) | |||||
Total comprehensive income | - | - | (18,420) | 2,989,735 | 2,971,315 | |||||
Issuances of common shares, net | 2,635,484 | - | - | - | 2,635,484 | |||||
Share-based compensation | - | 132,240 | - | - | 132,240 | |||||
Balance March 31, 2023 | $ | 60,446,219 | $ | 1,702,731 | $ | (663,792) | $ | (29,849,547) | $ | 31,635,611 |
The accompanying notes are an integral part of these consolidated financial statements.
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Arrow Exploration Corp.
Interim Condensed Consolidated Statements of Cash Flows In United States Dollars
(Unaudited)
For the three months ended March 31, | 2024 | 2023 | |
Cash flows provided by operating activities: | |||
Net income | $ | 3,176,727 | $ 2,989,735 |
Items not involving cash: | |||
Deferred taxes | 459,867 | - | |
Share-based compensation | 11 | 101,278 | 132,240 |
Depletion and depreciation | 7 | 3,531,772 | 2,454,364 |
Interest on leases | 8 | 9,769 | 1,596 |
Interest on promissory note | - | 60,887 | |
Accretion | 9 | 37,376 | 29,156 |
Unrealized foreign exchange loss | (35,877) | (73,101) | |
Gain on derivative liability | 10 | - | (1,354,275) |
Payment of asset decommissioning obligations | 9 | (70,229) | - |
Changes in non-cash working capital balances: | |||
Restricted cash and deposits | 343,746 | (12,266) | |
Trade and other receivables | 299,554 | 1,704,944 | |
Taxes receivable | (164,078) | (602,369) | |
Deposits and prepaid expenses | (152,963) | (113,612) | |
Inventory | 92 | (117,798) | |
Income tax payable | 1,342,465 | (2,482,665) | |
Accounts payable and accrued liabilities | (297,211) | (236,642) | |
Cash provided by operating activities | 8,582,288 | 2,380,195 | |
Cash flows used in investing activities: | |||
Additions to exploration and evaluation assets | 6 | (578,082) | (972,692) |
Additions to property and equipment | 7 | (5,703,246) | (3,299,001) |
Changes in non-cash working capital | (2,751,994) | (11,916) | |
Cash flows used in investing activities | (9,033,322) | (4,283,609) | |
Cash flows provided by (used in) financing activities: | |||
Issuances of common shares | 11 | - | 1,147,827 |
Lease payments | 8 | (20,486) | (11,586) |
Cash flows provided by (used in) financing activities | (20,486) | 1,136,241 | |
Effect of changes in the exchange rate on cash | (57,514) | 60,628 | |
(Decrease) increase in cash | (529,034) | (706,545) | |
Cash, beginning of period | 12,135,377 | 13,060,969 | |
Cash, end of period | 11,606,342 | 12,354,424 | |
Supplemental information | ||||
Interest paid | $ | - | $ | - |
Taxes paid | $ | - | $ | - |
The accompanying notes are an integral part of these consolidated financial statements. |
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Arrow Exploration Corp.
Notes to the Interim Condensed Consolidated Financial Statements In United States Dollars
(Unaudited)
March 31, 2024
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 29, 2024. 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, 2023.
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, 2023, except for the adoption of new accounting standards effective January 1, 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, 2023.
Adoption of New Accounting Standards
The Company adopted amendments to IAS 1 Presentation of Financial Statements, issued by the IASB, related to the presentation of liabilities as current or non-current and classification and disclosure of liabilities with covenants. These amendments were adopted by the Company from January 1, 2024 but they did not have a material impact on the interim consolidated financial statements.
3. Restricted Cash and deposits
March 31, | December 31, | |||
2024 | 2023 | |||
Colombia (i) | $ | 311,082 | $ | 312,530 |
Canada (ii) | 200,006 | 542,304 | ||
Sub-total | 511,088 | 854,834 | ||
Long-term portion | (237,814) | (243,081) | ||
Current portion of restricted cash and deposits | $ | 273,274 | $ | 611,753 |
- This balance is comprised of a deposit held as collateral to guarantee abandonment expenditures related to the Tapir and Santa Isabel blocks.
- During Q1 2024, the Company was able to recover its $337,031 (CAD $445,749) deposit related to the Company's liability rating management ("LMR"). This deposit was held by a Canadian chartered bank with interest paid to the Company on
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Arrow Exploration Corp.
Notes to the Interim Condensed Consolidated Financial Statements In United States Dollars
(Unaudited)
March 31, 2024
a monthly basis based on the bank's deposit rate. The remaining $200,006 (2023: $205,273) pertain to commercial deposits with customers, lease and other deposits held in Canada.
4. Trade and other receivables
March 31, | December 31, | |||
2024 | 2023 | |||
Trade receivables, net of advances | $ | 2,394,419 | $ | 2,238,918 |
Other accounts receivable | 842,963 | 1,298,018 | ||
$ | 3,237,382 | $ | 3,536,936 |
As at March 31, 2024, other accounts receivable include $680,976 (December 31, 2023 - $682,197) receivable from on demand loans with executives and directors.
5. Taxes receivable
March 31, | December 31, | |||
2024 | 2023 | |||
Value-added tax (VAT) credits recoverable | $ | 2,087,691 | $ | 1,703,260 |
Income tax withholdings and advances, net | 2,731,787 | 2,952,139 | ||
$ | 4,819,478 | $ | 4,655,399 |
The VAT recoverable balance pertains to non-compensatedvalue-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, | |||
2024 | 2023 | |||
Balance, beginning of the period | $ | - | $ | - |
Additions, net | 578,082 | 3,212,808 | ||
Reclassification to Property and Equipment (Note 8) | - | (3,212,808) | ||
Balance, end of the period | $ | 578,082 | $ | - |
During 2023, the Company incurred in geological and geophysical costs in its Carrizales Norte prospect located in its Tapir block, and determined the technical feasibility and commercial viability of these assets, transferring $3,212,808 to its property and equipment. An impairment test on these assets was prepared and no losses were identified as a result of such tests.
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Arrow Exploration Corp.
Notes to the Interim Condensed Consolidated Financial Statements In United States Dollars
(Unaudited)
March 31, 2024
7. Property and Equipment
Oil and Gas | Right of Use and | |||||||
Cost | Properties | Other Assets | Total | |||||
Balance, December 31, 2022 | $ | 47,545,026 | $ | 234,156 | $ | 47,779,182 | ||
Additions | 23,907,357 | 310,061 | 24,217,418 | |||||
Dispositions | (111,151) | - | (111,151) | |||||
Transfers from exploration and evaluation assets | 3,212,808 | - | 3,212,808 | |||||
Decommissioning adjustment | 738,825 | - | 738,825 | |||||
Balance, December 31, 2023 | $ | 75,292,865 | $ | 544,217 | $ | 75,837,082 | ||
Additions | 5,703,481 | - | 5,703,481 | |||||
Decommissioning adjustment | 368,679 | - | 368,679 | |||||
Balance, March 31, 2024 | $ | 81,365,025 | $ | 544,217 | $ | 81,909,242 | ||
Accumulated depletion and depreciation and | ||||||||
impairment | ||||||||
Balance, December 31, 2022 | $ | 13,153,709 | $ | 161,236 | $ | 13,314,945 | ||
Depletion and depreciation | 12,120,871 | 65,906 | 12,186,777 | |||||
Impairment loss of oil and gas properties | 11,799,740 | - | 11,799,740 | |||||
Balance, December 31, 2023 | $ | 37,074,320 | $ | 227,142 | $ | 37,301,462 | ||
Depletion and depreciation | 3,503,305 | 28,267 | 3,531,772 | |||||
Balance, March 31, 2024 | $ | 40,577,825 | $ | 255,409 | $ | 40,833,234 | ||
Foreign exchange | ||||||||
Balance December 31, 2022 | $ | (249,908) | $ | (8,719) | $ | (258,627) | ||
Effects of movements in foreign | ||||||||
exchange rates | 88,671 | 5,697 | 94,368 | |||||
Balance December 31, 2023 | $ | (161,237) | $ | (3,022) | $ | (164,259) | ||
Effects of movements in foreign | ||||||||
exchange rates | (76,781) | (7,580) | (84,361) | |||||
Balance March 31, 2024 | $ | (238,018) | $ | (10,602) | $ | (248,620) | ||
Net Book Value | ||||||||
Balance December 31, 2023 | $ | 38,057,308 | $ | 314,053 | $ | 37,371,361 | ||
Balance March 31, 2024 | $ | 40,459,183 | $ | 278,206 | $ | 40,827,388 |
Canada
As at December 31, 2023, the Company determined there were indicators of impairment in its Canada CGU, mainly due to decreases in forward gas prices and revision of reserves, 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 $1,248,400 was included in the consolidated statements of operations and comprehensive (loss) income for the three months and year ended December 31, 2023.
Colombia
During 2023, the Agencia Nacional de Hidrocarburos ("ANH") approved the suspension of the obligations and operations of the OMBU contract due to force majeure circumstances generated by the blockades and social unrest around the Capella field. The suspension was for an initial term of three months and has been extended until August 2024. At December 31, 2023, the Company determined there were indicators of impairment in the Capella CGU based on updates from the operator once access to the field was restored in late 2023 causing
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Arrow Exploration Corp.
Notes to the Interim Condensed Consolidated Financial Statements In United States Dollars
(Unaudited)
March 31, 2024
uncertainty in timing and resources required to resume operations, as well as the extent of which operations may be able to be resumed. The Company has recorded an impairment loss of $10,551,340 corresponding to the full carrying value of the Capella CGU as at December 31, 2023.
8. Lease Obligations
A reconciliation of the discounted lease obligation is set forth below: | ||||||
2024 | 2023 | |||||
Obligation, beginning of the year | 320,593 | $ | 63,751 | |||
Additions | - | 302,930 | ||||
Lease payments | (20,486) | (74,211) | ||||
Interest | 9,769 | 22,011 | ||||
Effects of movements in foreign exchange rates | (8,157) | 6,112 | ||||
Obligation, end of the year | 301,719 | 320,593 | ||||
Current portion | (108,583) | (103,674) | ||||
Long-term portion | 193,316 | 216,919 | ||||
As at March 31, 2024, the Company has the following future lease obligations: | ||||||
Less than one year | 108,771 | |||||
2 - 5 years | 291,186 | |||||
Total lease payments | 399,957 | |||||
Amounts representing interest over the term | (98,238) | |||||
Present value of the net obligation | 301,719 | |||||
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:
December 31, | December 31, | ||
2023 | 2023 | ||
Obligation, beginning of the year | 3,973,075 | $ | 3,303,301 |
Additions | 368,679 | 1,000,889 | |
Change in estimated cash flows | - | (262,066) | |
Payments or settlements | (70,229) | (19,545) | |
Dispositions | - | (191,081) | |
Accretion expense | 37,376 | 127,478 | |
Effects of movements in foreign exchange rates | (26,040) | 14,099 | |
Obligation, end of the year | 4,282,861 | 3,973,075 |
The obligation was calculated using a risk-free discount rate range of 1.25% to 4.50% in Canada (2023: 1.25%
to 4.50%) and between 4.00% and 4.29% in Colombia (2022: 4.00% and 4.29%) with an inflation rate of 2.5%
and 2.6%, respectively (2023: 2.5% and 2.6%). The majority of costs are expected to occur between 2024 and 2038.
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Arrow Exploration Corp. published this content on 30 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 May 2024 18:23:10 UTC.
