"The success of this well could open a new area of development and add reserves," Foucaud wrote.
264% Return Implied
Auctus' new target price on Arrow is £0.80 per share, up from £0.75. Compared to the new target, this Canadian oil and gas junior was trading at the time of the report at about £0.22 per share.
The difference between these two prices suggests a potential return for investors of 264%.
Results Beat Expectations
Foucaud reported that the AB-1 well encountered four main hydrocarbon-bearing reservoirs with a 121-foot true vertical depth: C7, Gacheta, Guadalupe, and Ubaque.
The goal going in was to hit the C7 and Ubaque formations only because the Gacheta and Guadalupe carried a higher risk, and thus, the chances of hitting them were lower than with the others. So AB-1, having encountered Gacheta and Guadalupe, is an unexpected achievement.
"Initial log interpretation shows very strong potential for the Guadalupe," Foucaud noted.
The analyst pointed out that horizontal drilling likely would be the preferred method for the Ubaque and the Guadalupe because they are thick reservoirs. This bodes well for production.
Estimates Increased
The success of AB-1 led Auctus and Arrow to revise their respective expectations for Alberta Llanos, Stephane reported.
Auctus increased its forecasted chance of success for Alberta Llanos to 75% from 50%. The financial advisory firm also upwardly revised its estimate of the amount the discovery holds to 1,800,000 barrels (1.8 MMbbl) net from 1.2 MMbbl.
Similarly, before it drilled AB-1, Arrow also estimated net prospective resources from three producing Alberta Llanos wells to be 1.2 MMbbl. Now, however, it believes "there could be in excess of five wells in the Alberta Llanos area," noted Foucaud.
Coming Up Next
Next, for AB-1, Arrow will test the well and put it on production in the Ubaque formation, reported Foucaud. Then, the company will drill its next Alberta Llanos well, AB-2, to further assess the discovery.
With its full-year 2025 exploration program, Arrow is targeting prospective resources, excluding from Alberta Llanos, of about 10,000,000 barrels of oil equivalent, which has an aggregate unrisked net asset value of £0.38 per share.
"We anticipate production will exceed 7,000 barrels per day by year-end 2025," Foucaud wrote.
