Q1 2025 Interim Results and Operational Update

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 2025 INTERIM RESULTS AND PROVIDES OPERATIONAL UPDATE

CALGARY, May 30, 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 months ended March 31, 2025, which are available on SEDAR (www.sedar.com) and will also  be available shortly on Arrow's website at www.arrowexploration.ca, and to provide an update on operational activity.

Q1 2025 Highlights:

· Recorded $19.5 million of total oil and natural gas revenue, net of royalties, representing a 36% increase when compared to the same period in 2024 (Q1 2024: $14.4 million).

· Adjusted EBITDA(1) of $11.5 million, a 15% increase when compared to Q1 2024 (Q1 2024: $10 million).

· Average corporate production of 4,085 boe/d (Q1 2024: 2,730 boe/d).

· Realized corporate oil operating netbacks(1) of $38.66/bbl. 

· Cash position of $24.9 million at the end of Q1 2025.

· Generated operating cashflows of $14.4 million (Q1 2024: $8.6 million).

· Drilled two additional development wells (AB 2 and AB 3) in the Alberta Llanos field in the Tapir block.

· Net income of $2.7 million.

· Completed shooting 90 km2 of new seismic data on the southeast section of the Tapir Block to identify and confirm existing prospects.

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

Post Period End Highlights:

· Spud the first horizontal well, AB HZ4, in the Alberta Llanos field in the Tapir block.

· CN HZ 10 and CN 11 brought on production.

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

Upcoming Drilling

The rig has spud the AB HZ 4 well, the first horizontal well in the Alberta Llanos field, which is expected to be on production in June. Thereafter, the Company expects to drill another horizontal well on the Alberta Llanos pad.

Arrow has also secured a second rig that will mobilize to the Rio Cravo Este (RCE) field to drill up to four development wells in RCE and will then mobilize to the Carrizales Norte pad for further development drilling. The first RCE well is expected to spud in early June.

Total budgeted capital expenditures planned for 2025 is approximately $50 million, net to Arrow, of which $11.4 million was spent in Q1 2025. The capital program is expected to result in production for 2025 being significantly higher than current levels.

Prepayment Agreement

The Company has entered into a two-year crude prepayment agreement with an integrated energy major to market its oil production in Colombia. In exchange for the exclusive right to market the Company's oil production, the agreement provides access of up to US$20 million in prepaid crude sales in year one with the limit reducing to US$15 million in prepaid sales in year two at attractive interest rates.

As at May 1, the Company's cash balances were $24 million. 

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

"The first quarter of 2025 has been exciting for Arrow. The two wells, AB 2 and AB 3 at Alberta Llanos, have highlighted the potential for horizontal development in the Ubaque as well as follow up zones in the C7 and Guadalupe."

"During the dry summer months in the Llanos basin, the Company has developed a new road system from the Carrizales Norte pad to the Capullo pad, the Mateguafa Oeste pad and the Mateguafa Attic pad. These pads will be utilized in the Company's planned drilling program for the remainder of 2025. The Company has secured a second rig which is expected to spud the first of four wells at RCE in early June."

"The Company completed a 90 km2 3D seismic program in the southeast section of the Tapir block. The seismic has been processed and is now being analyzed to help develop prospects for the 2026 drilling program."

"In the first quarter of 2025, the Company put in place additional water disposal infrastructure in the form of the conversion of AB 2 into a water disposal well and the workover of RCE 1 and CN 4. We are also working towards the conversion of CN 5 into a water disposal well. AB 2 should be in operation in late Q2 and CN 5 in Q3. The wells at Carrizales Norte and Alberta Llanos have begun to produce more water than previously modeled, resulting in curtailment of production. The new water infrastructure is expected to create excess disposal capacity to allow for increases in pump speed on currently curtailed production and for the next development stage of 2025 budgeted projects."

"Arrow is pleased to announce that it has entered into a prepayment financing agreement with an integrated energy major. The two-year agreement provides Arrow with access to up to US$20 million in prepaid crude sales, with the limit reducing to US$15 million after the first year. This facility provides Arrow with significant financial flexibility, allowing Arrow to pursue growth opportunities from acquisitions to expanded capital programs. In conjunction with the financing, the integrated energy major, through its Colombian subsidiaries, will become the exclusive marketer for all of Arrow's oil production."

"Both Brent and AECO prices have been impacted by the volatility experienced in early 2025 but the Company still has very healthy netbacks from its Colombian oil production. Arrow's 2025 capital budget is expected to be paid for by available cash and cash flow from operations. Our focus for the remainder of 2025 will be to grow production, continue development at the Carrizales Norte, Rio Cravo Este and Alberta Llanos fields and explore low risk new prospects in the Tapir block." 

FINANCIAL AND OPERATING HIGHLIGHTS

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

(2)Long term restricted cash not included in working capital

Discussion of Operating Results

During Q1 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 once the Company develops additional 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 March 31, 2025 was 4,085 boe/d which consisted of crude oil production in Colombia of 3,770 bbl/d, natural gas production of 1,851 Mcf/d, and minor amounts of natural gas liquids. The Company's Q1 2025 production was 50% higher than its Q1 2024 production and 14% lower than Q4 2024 due to natural declines and water handling capability.

Discussion of Financial Results

During Q1 2025 the Company experienced a reduction in both crude oil and gas prices, as summarized below:

(1)Non-IFRS measure

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 increasing water production from its Colombian assets and decreased crude oil prices.

During Q1 2025, the Company incurred $11 million of capital expenditure, primarily in connection with the drilling of additional Alberta Llanos wells in the Tapir block. This tempo is expected to continue during the remainder of 2025, funded by cash on hand and cashflow.

The Company also confirms that its audited financial statements and MD&A for the year ended 31 December 2024 were posted to UK shareholders on May 29, 2025 and are also available on its website.

For further Information, contact:

About Arrow Exploration Corp.

Arrow Exploration Corp. (operating in Colombia via a branch of its 100% owned subsidiary Carrao Energy S.A.) 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. Arrow's 50% interest in the Tapir Block is contingent on the assignment by Ecopetrol SA of such interest to Arrow. Arrow's seasoned team is led by a hands-on executive team supported by an experienced board. 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, 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 months ended March 31, 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

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 May 29, 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 March 31, 2025, other accounts receivable include $699,851 (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

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 March 31, 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.

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 March 31, 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 $8,204,727 (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 March 31, 2025 and December 31, 2024 and changes during the periods ended on those dates is presented below:

For the three months ended March 31, 2025, the Company has recognized shared-based compensation income of $1,101,470 (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).

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 March 31, 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 March 31, 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

· The Company may be unable to settle or recover a financial asset.

The Company's approach to managing its liquidity risk is to ensure, within reasonable means, sufficient liquidity to meet its liabilities when due, under both normal and unusual conditions, without incurring unacceptable losses or jeopardizing the Company's business objectives. The Company prepares annual capital expenditure budgets which are monitored regularly and updated as considered necessary. Petroleum and natural gas production is monitored daily to provide current cash flow estimates and the Company utilizes authorizations for expenditures on projects to manage capital expenditures. Any funding shortfall may be met in a number of ways, including, but not limited to, the issuance of new debt or equity instruments, further expenditure reductions and/or the introduction of joint venture partners.

(e) Capital Management

The Company's objective is to maintain a capital base sufficient to provide flexibility in the future development of the business and maintain investor, creditor and market confidence. The Company manages its capital structure and makes adjustments in response to changes in economic conditions and the risk characteristics of the underlying assets. The Company considers its capital structure to include share capital, bank debt (when available), promissory notes and working capital, defined as current assets less current liabilities. From time to time the Company may issue common shares or other securities, sell assets or adjust its capital spending to manage current and projected debt levels. The Company adjusts its capital structure based on its net debt level. Net debt is a non-GAAP measure and is defined as the principal amount of its outstanding debt, less working capital items. The Company prepares annual budgets, which are updated as necessary including current and forecast crude oil prices, changes in capital structure, execution of the Company's business plan and general industry conditions. The annual budget is approved by the Board of Directors. The Company's capital includes the following:

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 years ended as at March 31: