Arrow Announces Q2 2025 Interim Results

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ARROW ANNOUNCES Q2 2025 INTERIM RESULTS

CALGARY, August 28, 2025 - Arrow Exploration Corp. (AIM: AXL; TSXV: AXL) ("Arrow" or the "Company"), the high-growth operator with a portfolio of assets across key Colombian hydrocarbon basins, is pleased to announce the filing of its Interim Condensed (unaudited) Consolidated Financial Statements and Management's Discussion and Analysis ("MD&A") for the three and six months ended June 30, 2025, which are available on SEDAR (www.sedar.com) and will also  be available shortly on Arrow's website at www.arrowexploration.ca.

Q2 2025 Highlights:

· Average corporate production of 3,768 boe/d (Q2 2024: 2,546 boe/d), representing a 48% increase when compared to the same period in 2024.

· Recorded $15.9 million of total oil and natural gas revenue, net of royalties, representing a 5% increase when compared to the same period in 2024 (Q2 2024: $15.1 million).

· Realized corporate oil operating netbacks(1) of $27.36/bbl. 

· Cash position of $13.2 million at the end of Q2 2025.

· YTD generated operating cashflows of $13.9 million (YTD 2024: $18.9 million).

· Drilled five (5) additional development wells in the Alberta Llanos (AB), Carrizales Norte (CN) and Rio Cravo Este (RCE) fields in the Tapir block. RCE HZ10 was also spud in Q2.

· Invested in road and pad infrastructure from CN to Mateguafa Attic at a net cost of $2 million to the Company

· Completed acquisition and processing of a 90 square km 3D seismic program over the southern part of the Tapir block at a cost of $3 million. 

· Entered into a $20 million prepayment agreement with an integrated energy company.

· Net YTD income of $1.7 million (YTD 2024 $1.2 million)

(1)Non-IFRS measures - see "Non-IFRS Measures" section within the MD&A

Post Period End Highlights:

· Spud the first horizontal well, RCE HZ-10, in the Rio Cravo Este (RCE) field in the Tapir block.

· RCE HZ-10, CN HZ12 and AB HZ5 were brought on production.

Current Production

The Company is currently producing approximately 4,200 boe/d with two additional wells expected to be brought on production in the next two weeks, CN HZ13 targeting the Ubaque formation and a recompletion at AB3 targeting the C7 formation. 

Tapir Water Disposal Infrastructure

In Q2, the Company paid $0.8 million on trucking water. During Q2 the Company invested significantly in water disposal infrastructure, of which $1.7 million is included in operating costs for the quarter. This investment includes conversion work and stimulation of the AB-2, CN-4 and CN-5 water disposal wells. The water handling infrastructure is now operational and expected to deliver a significant reduction in water handling costs and support higher production rates. The Tapir block water disposal capability is now over 130,000 barrels of water per day. With the water handling infrastructure in place, the Company is turning up production in current wells.

Tapir Extension and COR-39 Block

The Company is engaged in continuing discussions with authorities on the Tapir block extension. Arrow considers that all requirements for the extension have been met. Furthermore, the Company is in discussions with regulatory bodies on the termination of COR-39 Block licence obligations. Discussions with authorities are going well and Arrow will keep the market updated in future releases.

Upcoming Drilling

At this time, Arrow is operating one rig and has dismissed the second rig. The Company has spud the CN HZ 13 well, which is expected to be on production in the beginning of September. Thereafter, the Company expects to drill its first exploration well at Mateguafa Oeste. If the vertical exploration well at Mateguafa Oeste is successful, the Company plans to drill four additional horizonal wells on the prospect. If the Mateguafa Oeste 1 well is not successful, the rig will move to Mateguafa Attic to drill three low risk vertical wells targeting the C7. The Company has the option to engage a second rig to drill the other prospects if Mateguafa Oeste 1 is successful. The total budgeted capital expenditure planned for 2025 is approximately $50 million, net to Arrow, of which $24 million was spent in H1 2025. 

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

"The second quarter of 2025 has been very busy for Arrow. The two horizontal development wells at Alberta Llanos have highlighted the potential for horizontal development in the Ubaque in other areas of the Tapir block. The Company plans to further test this potential with an exploration well at Mateguafa Oeste in Q3 and is putting the infrastructure in place for exploration wells at Mateguafa Attic, Capullo and Icaco, all of which could have a material impact on the Company." 

"The Company continues to work with regulatory authorities on the extension of the Tapir block. The Company considers it has met all of the requirements for an extension and discussions with regulatory officials continue to progress." 

"In Q2, Arrow made large investments in the future drilling programs of the Company. The Tapir South 3D seismic program was completed during the quarter, at a net cost of $3 million, showing additional prospects and drilling opportunities. The Company is expected to test one of these prospects, Icaco, in early 2026. During Q2 the company also completed the road joining the CN pad with the Mateguafa Oeste, Capullo and Mateguafa Attic prospects at a net cost of approximately $2 million."

"The focus for the remainder of 2025 will be to explore low risk new prospects in the Tapir block, starting with Mateguafa Oeste, which has the potential to be larger than the Carrizales Norte field. The pad and cellars for Mateguafa Oeste have been completed and the first well is expected to be spud in late Q3. Arrow looks forward to updating the market post drilling the first well at Mateguafa Oeste."

FINANCIAL AND OPERATING HIGHLIGHTS

Discussion of Operating Results

During Q2 2025, the Company's production has decreased due to natural declines and increasing water cuts across its fields in the Tapir block. Production growth is expected to resume since the Company has developed water handling capacity and executes on the 2025 budget. Nevertheless, the Company has maintained good operating results and healthy EBITDA. 

Average Production by Property

The Company's average production for the three months ended June 30, 2025 was 3,768 boe/d which consisted of crude oil production in Colombia of 3,493 bbl/d, natural gas production of 1,587 Mcf/d, and minor amounts of natural gas liquids. The Company's Q2 2025 production was 48% higher than its Q2 2024 production and 7% lower than Q1 2025 due to natural declines and water handling capacity.

Discussion of Financial Results

During Q2 2025 the Company experienced a reduction in both crude oil and gas prices, as summarized below:

Operating Netbacks

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

 (1)Non-IFRS measure

The operating netbacks of the Company have been affected in 2025 due to increased water production from its Colombian assets and decreased crude oil prices. During Q2 2025, the Company incurred $15 million of capital expenditure, primarily in connection with the drilling of additional development wells in the Tapir block. This tempo is expected to continue during the remainder of 2025, funded by cash on hand and cashflow.

For further Information, contact:

About Arrow Exploration Corp.

Arrow Exploration Corp. (operating in Colombia via a branches of its 100% owned subsidiary Arrow Exploration Switzerland GmbH) is a publicly traded company with a portfolio of premier Colombian oil assets that are underexploited, under-explored and offer high potential growth. The Company's business plan is to expand oil production from some of Colombia's most active basins, including the Llanos, Middle Magdalena Valley (MMV) and Putumayo Basin. The asset base is predominantly operated with high working interests, and the Brent-linked light oil pricing exposure combines with low royalties to yield attractive potential operating margins. Pursuant to certain private agreements entered between Arrow and its partner, Arrow is entitled to receive 50% of the production from the Tapir block and has the right to request approval to Ecopetrol S.A. for the assignment of 50% of all rights, interests and obligations under the Tapir Association Contract. Arrow is listed on the AIM market of the London Stock Exchange and on TSX Venture Exchange under the symbol "AXL".

Forward-looking Statements

This news release contains certain statements or disclosures relating to Arrow that are based on the expectations of its management as well as assumptions made by and information currently available to Arrow which may constitute forward-looking statements or information ("forward-looking statements") under applicable securities laws. All such statements and disclosures, other than those of historical fact, which address activities, events, outcomes, results or developments that Arrow anticipates or expects may, could or will occur in the future (in whole or in part) should be considered forward-looking statements. In some cases, forward-looking statements can be identified by the use of the words "continue", "expect", "opportunity", "plan", "potential" and "will" and similar expressions. The forward-looking statements contained in this news release reflect several material factors and expectations and assumptions of Arrow, including without limitation, Arrow's evaluation of the impacts of global pandemics, the potential of Arrow's Colombian and/or Canadian assets (or any of them individually), the prices of oil and/or natural gas, and Arrow's business plan to expand oil and gas production and achieve attractive potential operating margins. Arrow believes the expectations and assumptions reflected in the forward-looking statements are reasonable at this time, but no assurance can be given that these factors, expectations, and assumptions will prove to be correct.

The forward-looking statements included in this news release are not guarantees of future performance and should not be unduly relied upon. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The forward-looking statements contained in this news release are made as of the date hereof and the Company undertakes no obligations to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Glossary

Bbl/d or bop/d: Barrels per day

$/Bbl: Dollars per barrel

Mcf/d: Thousand cubic feet of gas per day

Mmcf/d: Million cubic feet of gas per day

$/Mcf: Dollars per thousand cubic feet of gas

Mboe: Thousands of barrels of oil equivalent

Boe/d: Barrels of oil equivalent per day

$/Boe: Dollars per barrel of oil equivalent

MMbbls: Million of barrels

BOE's may be misleading particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1 bblis based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

This Announcement contains inside information for the purposes of the UK version of the market abuse regulation (EU No. 596/2014) as it forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018 ("UK MAR").

Non‐IFRS Measures

The Company uses non-IFRS measures to evaluate its performance which are measures not defined in IFRS. Working capital, funds flow from operations, realized prices, operating netback, adjusted EBITDA, and net debt as presented do not have any standardized meaning prescribed by IFRS and therefore may not be comparable with the calculation of similar measures for other entities. The Company considers these measures as key measures to demonstrate its ability to generate the cash flow necessary to fund future growth through capital investment, and to repay its debt, as the case may be. These measures should not be considered as an alternative to, or more meaningful than net income (loss) or cash provided by operating activities or net loss and comprehensive loss as determined in accordance with IFRS as an indicator of the Company's performance. The Company's determination of these measures may not be comparable to that reported by other companies.

Arrow Exploration Corp.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE AND SIX MONTHS ended JUNE 30, 2025 AND 2024

IN UNITED STATES DOLLARS

(UNAUDITED)

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

as at and for the three and six months ended June 30, 2025

Under National Instrument 51-102, Part 4, subsection 4.3 (3)(a), if an auditor has not performed a review of the interim condensed consolidated financial statements, they must be accompanied by a notice indicating that an auditor has not reviewed the financial statements.

The accompanying unaudited interim condensed consolidated financial statements of the Company have been prepared by and are the responsibility of the Company's management.

The Company's independent auditor has not performed a review of these financial statements in accordance with standards established by the Chartered Professional Accountants of Canada for a review of interim financial statements by an entity's auditor.

Interim Consolidated Statements of Financial Position

In United States Dollars

(Unaudited)

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

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

In United States Dollars

(Unaudited)

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

Interim Condensed Statements of Changes in Shareholders' Equity

In United States Dollars

(Unaudited)

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

Interim Condensed Consolidated Statements of Cash Flows

In United States Dollars

(Unaudited)

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

1. Corporate Information

Arrow Exploration Corp. ("Arrow" or "the Company") is a public junior oil and gas company engaged in the acquisition, exploration and development of oil and gas properties in Colombia and in Western Canada. The Company's shares trade on the TSX Venture Exchange and the AIM Market of the London Stock Exchange plc under the symbol AXL. The head office of Arrow is located at 203, 2303 - 4th Street SW, Calgary, Alberta, Canada, T2S 2S7 and the registered office is located at 600, 815 8th Avenue SW, Calgary, Alberta, Canada, T2P 3P2.

2. Basis of Presentation

Statement of compliance

These interim condensed consolidated financial statements (the "Financial Statements") have been prepared in accordance with International Accounting Standard ("IAS") 34 Interim Financial Reporting. These Financial Statements were authorized for issue by the board of directors of the Company on August 27, 2025. They do not contain all disclosures required by International Financial Reporting Standards ("IFRS") for annual financial statements and, accordingly, should be read in conjunction with the audited consolidated financial statements as at December 31, 2024.

These Financial Statements have been prepared on the historical cost basis, except for financial assets and liabilities recorded in accordance with IFRS 9. The Financial Statements have been prepared using the same accounting policies and methods as the consolidated financial statements for the year ended December 31, 2024. In preparing these condensed consolidated financial statements, the significant judgements made by management in applying the group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended December 31, 2024.

3. Restricted Cash and deposits

(i) This balance is comprised of a deposit held as collateral to guarantee abandonment expenditures related to the Tapir, OMBU and Santa Isabel blocks.

4. Trade and other receivables

As at June 30, 2025, other accounts receivable include $724,659 (December 31, 2024 - $699,880) receivable from on demand loans with executives and directors.

5. Taxes receivable

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

As at June 30, 2025, no indicators of impairment were identified in the Company's exploration and evaluation assets. During 2024, the Company incurred in exploration and development costs associated to its Alberta Llanos prospect in the Tapir block, and determined the technical feasibility and commercial viability of these assets, transferring $3,675,284 to its property and equipment. An impairment test on these assets was prepared and no losses were identified as a result of such tests.

7. Property and Equipment

Canada

As at June 30, 2025, no indicators of impairment were identified in the Company's property and equipment. As at December 31, 2024, the Company determined there were indicators of impairment reversal in its Canada CGU. Management determined the recoverable amount of its Canada CGU using the fair value less costs of disposal approach.

As at June 30, 2024, the Company determined there were indicators of impairment in its Canada CGU, mainly due to decreases in current and forward gas prices, and prepared estimates of its fair value less costs of disposal of its Canada CGU. It was determined that carrying value of its Canada CGU exceeded its recoverable amount and, therefore, an impairment loss of $1,542,000 was included in the interim consolidated statements of operations and comprehensive income for the three and six months ended June 30, 2024.

8. Lease Obligations

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

During 2024, the Company recognized the impact of a change in payment terms of its office lease and recognized a decrease in lease liabilities and ROU assets for $ 53,543. As at June 30, 2025, the Company has the following future lease obligations:

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:

The obligation was calculated using a risk-free discount rate range of 2.50% to 3.75% in Canada (2024: 1.25% to 4.50%) and between 4.43% and 4.60% in Colombia (2024: 4.30% and 4.60%) with an inflation rate of 2.0% and 1.90%, respectively (2024: 2.0% and 1.9%). The majority of costs are expected to occur between 2026 and 2038. The undiscounted amount of cash flows, required over the estimated reserve life of the underlying assets, to settle the obligation, adjusted for inflation, is estimated at $8,830,428 (2024: $8,155,704).

10. Share Capital

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

(b) Issued:

(c) Stock options:

The Company has a stock option plan that provides for the issuance to its directors, officers and employees options to purchase non-transferable common shares not exceeding 10% of the outstanding common shares. The exercise price is based on the closing price of the Company's common shares on the day prior to the day of the grant. A summary of the Company stock option plan as at June 30, 2025 and December 31, 2024 and changes during the periods ended on those dates is presented below:

For the six months ended June 30, 2025, the Company has recognized shared-based compensation income of $243,630 (2024: expense of $101,278) corresponding to the progressive vesting and fair market value of options, reducing its stock based compensation liability in the same amount (2024: increasing contributed surplus), and paid $1,085,457 from cashless exercising of vested options (2024: nil).

11. Commitments and Contingencies

Exploration and Production Contracts

The Company has entered into a number of exploration contracts in Colombia which require the Company to fulfill work program commitments and issue financial guarantees related thereto (see Letters of Credit section below). Presented below are the Company's exploration and production contractual commitments at June 30, 2025:

Contingencies

From time to time, the Company may be involved in litigation or has claims sought against it in the normal course of business operations. Management of the Company is not currently aware of any claims or actions that would materially affect the Company's reported financial position or results from operations. Under the terms of certain agreements and the Company's by-laws the Company indemnifies individuals who have acted at the Company's request to be a director and/or officer of the Company, to the extent permitted by law, against any and all damages, liabilities, costs, charges or expenses suffered by or incurred by those individuals.

Letters of Credit

At June 30, 2025, the Company had obligations under Letters of Credit ("LC's") outstanding totaling $3.1 million to guarantee work commitments on exploration blocks and other contractual commitments. In the event the Company fails to secure the renewal of the letters of credit underlying the ANH guarantees, the ANH could decide to cancel the underlying exploration and production contract, as applicable.

12. Risk Management

The Company holds various forms of financial instruments. The nature of these instruments and the Company's operations expose the Company to commodity price, credit and foreign exchange risks. The Company manages its exposure to these risks by operating in a manner that minimizes its exposure to the extent practical.

(a) Commodity price risk

The Company's principal operation is the production and sale of crude oil and natural gas. Fluctuations in prices of these commodities directly impact the Company's financial performance. Commodity price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result of changes in commodity prices. Lower commodity prices can also impact the Company's ability to raise capital. 

Commodity prices for crude oil are impacted by world economic events that dictate the levels of supply and demand. There were no derivative contracts during 2025.

(b) Credit Risk

Credit risk reflects the risk of financial loss to the Company if a customer or counterparty to a contract fails to fulfill their contractual obligations. It arises mostly from the Company's cash balances and accounts receivable. The Company's cash balances are held with six counterparties, large reputable financial institutions, and management has therefore concluded that credit associated is low. The majority of the Company's account receivable balances relate to petroleum and natural gas sales. The Company's policy is to enter into agreements with customers that are well established entities in the oil and gas industry such that the level of risk is mitigated. In Colombia, a significant portion of the sales is with producing companies and commodities trader under existing sale/offtake agreements with prepayment provisions and priced using the Brent benchmark. The Company's trade account receivables primarily relate to sales of crude oil and natural gas, which are normally collected within 25 days (in Canada) and up to 15 days (in Colombia) after the month of production. Other accounts receivable mainly relate to balances owed by the Company's partner in one of its blocks, and are mainly recoverable through joint billings. The Company has historically not experienced any significant collection issues with its customers and partners.

(c) Market Risk

Market risk is comprised of two components: foreign currency exchange risk and interest rate risk.

i) Foreign Currency Exchange Risk

The Company operates on an international basis and therefore foreign exchange risk exposures arise from transactions denominated in currencies other than the United States dollar. The Company is exposed to foreign currency fluctuations as it holds cash and incurs expenditures in exploration and evaluation and administrative costs in foreign currencies.

The Company incurs expenditures in Canadian dollars, United States dollars, British Pounds and the Colombian peso and is exposed to fluctuations in exchange rates in these currencies. There are no exchange rate contracts in place.

ii) Interest Rate Risk

Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. The Company is not currently exposed to interest rate risk.

(d) Liquidity Risk

Liquidity risk includes the risk that, as a result of the Company's operational liquidity requirements:

· The Company will not have sufficient funds to settle a transaction on the due date;

· The Company will be forced to sell financial assets at a value which is less than what they are worth; or